Page |1

METROBANK vs.
RURAL BANK OF
GERONA, INC.
G.R. No.
159097, July 05,
2010
FACTS:
RBG is a rural
banking
corporation
organized under
Philippine laws
and located in
 Page |2

Gerona, Tarlac. In
the 1970s, the
Central Bank and
the RBG entered
into an agreement
providing that
RBG shall
facilitate the loan
applications of
farmers-borrowers
under the Central
Bank-International
Bank for
Reconstruction
 Page |3

and
Development’s
(IBRD’s) 4thRural
Credit Project. The
agreement
required RBG to
open a separate
bank account
where the IBRD
loan proceeds
shall be
deposited. The
RBG accordingly
opened a special
 Page |4

savings account
with
Metrobank’s
Tarlac Branch. As
the depository
bank of RBG,
Metrobank was
designated to
receive the credit
advice released
by the Central
Bank
representing the
proceeds of the
 Page |5

IBRD loan of the

farmers-
borrowers.
Metrobank, in
turn, credited the
proceeds to RBG’s
special savings
account for the
latter’s release to
the farmers-
borrowers.
On September
27, 1978, the
 Page |6

Central Bank
released a credit
advice in
Metrobank’s favor
and accordingly
credited
Metrobank’s
demand deposit
account in the
amount of
P178,652.00, for
the account of
RBG. The
amount, which
 Page |7

was credited to
RBG’s special
savings account
represented the
approved loan
application of
farmer-borrower
Dominador de
Jesus. RBG
withdrew the
P178,652.00 from
its account.
 Page |8

On the same
date, the Central
Bank approved
the loan
application of
another farmer-
borrower, Basilio
Panopio, for
P189,052.00, and
credited the
amount to
Metrobank’s
demand deposit
account.
 Page |9

Metrobank, in
turn, credited
RBG’s special
savings account.
Metrobank claims
that the RBG also
withdrew the
entire credited
amount from its
account.
On October 3,
1978, the Central
Bank approved
 P a g e | 10

Ponciano
Lagman’sloan
application for
P220,000.00. As
with the two other
IBRD loans, the
amount was
credited to
Metrobank’s
demand deposit
account, which
amount
Metrobank later
credited in favor
 P a g e | 11

of RBG’s special
savings account.
Of the
P220,000.00, RBG
only withdrew
P75,375.00.
In its July 7,
1994 decision, the
RTC ruled for
Metrobank,
finding that legal
subrogation had
ensued:
 P a g e | 12

Metrobank had
allowed releases
of the amounts in
the credit advices
it credited in favor
of RBG’s special
savings account
which credit
advices and
deposits were
under its
supervision.
 P a g e | 13

On appeal, the
CA noted that this
was not a case of
legal subrogation
under Article 1302
of the Civil Code.
Thus, the CA set
aside the RTC
decision, and
remanded the
case to the trial
court for further
proceedings after
the Central
 P a g e | 14

Bank is impleaded
as a necessary
party. After the
CA denied its
motion for
reconsideration,
Metrobank filed
the present
petition for review
on certiorari.

ISSUE:
 P a g e | 15

Who are the

liable parties on
the IBRD loans
that the Central
Bank extended?

HELD:
The Terms and
Conditions of the
IBRD 4thRural
Credit Project
(Project Terms and
 P a g e | 16

Conditions)
executed by the
Central Bank and
the RBG shows
that the farmers-
borrowers to
whom credits
have been
extended are
primarily liable for
the payment of
the borrowed
amounts. The
loans were
 P a g e | 17

extended through
the RBG which
also took care of
the collection and
of the remittance
of the collection
to the Central
Bank. RBG,
however, was not
a mere conduit
and collector.
While the farmers-
borrowers were
the principal
 P a g e | 18

debtors, RBG
assumed liability
under the Project
Terms and
Conditions by
solidarily binding
itself with the
principal debtors
to fulfill the
obligation.
Thus, we agree
with the CA’s
conclusion that
 P a g e | 19

the agreement
governed only the
parties involved –
the Central Bank
and the
RBG. Metrobank
was simply an
outsider to the
agreement. Our
disagreement with
the appellate
court is in its
conclusion that no
legal subrogation
 P a g e | 20

took place; the

present
case, in fact,
exemplifies the
circumstance
contemplated
under paragraph
2, of
Article 1302 of the
Civil Code which
provides:
Art. 1302. It is
presumed that
 P a g e | 21

there is legal
subrogation:
(1) When a
creditor pays
another creditor
who is preferred,
even without the

debtor’s
knowledge;
(2) When a third
person, not
interested in the
 P a g e | 22

obligation, pays
with the express
or tacit approval
of the debtor;
(3) (3) When,
even without the
knowledge of
the debtor, a
person
interested in the
fulfillment of the
obligation pays,
without
 P a g e | 23

prejudice to the
effects of
confusion as to
the latter’s
share.
As discussed,
Metrobank was a
third party to the
Central Bank-RBG
agreement, had
no interest except
as a conduit, and
was not legally
 P a g e | 24

answerable for
the IBRD loans.
Despite this, it
was Metrobank’s
demand deposit
account, instead
of RBG’s, which
the Central Bank
proceeded
against, on the
assumption
perhaps that this
was the most
convenient means
 P a g e | 25

of recovering the
cancelled loans.
That Metrobank’s
payment was
involuntarily
made does not
change the reality
that it was
Metrobank which
effectively
answered for
RBG’s
obligations.
 P a g e | 26

Article 1303 of
the Civil Code
states that
subrogation
transfers to the
person
subrogated the
credit with all the
rights thereto
appertaining,
either against the
debtor or against
third persons. As
the entity against
 P a g e | 27

which the
collection was
enforced,
Metrobank was
subrogated to the
rights of Central
Bank and has a
cause of action to
recover from RBG
the amounts it
paid to the
Central Bank, plus
14% per annum
interest.
 P a g e | 28

SOLAR
HARVEST, INC.
vs. DAVAO
CORRUGATED
CARTON CORP.
 P a g e | 29

G.R. No.
176868, July 26,
2010
FACTS:
In the first
quarter of 1998,
petitioner, Solar
Harvest, Inc.,
entered into an
agreement with
respondent,
Davao Corrugated
Carton
 P a g e | 30

Corporation, for
the purchase of
corrugated carton
boxes, specifically
designed for
petitioner’s
business of
exporting fresh
bananas, at
US$1.10 each.
The agreement
was not reduced
into writing. To get
the production
 P a g e | 31

underway,
petitioner
deposited, on 31
March 1998,
US$40,150.00 in
respondent’s US
Dollar Savings
Account with
Westmont Bank,
as full payment
for the ordered
boxes.
 P a g e | 32

Despite such
payment,
petitioner did not
receive any boxes
from respondent.
On 03 January
2001, petitioner
wrote a demand
letter for
reimbursement of
the amount paid.
On 19 February
2001, respondent
replied that the
 P a g e | 33

boxes had been

completed as
early as 03 April
1998 and that
petitioner failed to
pick them up from
the former’s
warehouse 30
days from
completion, as
agreed upon.
Respondent
mentioned that
petitioner even
 P a g e | 34

placed an
additional order of
24,000 boxes, out
of which, 14,000
had been
manufactured
without any
advanced
payment from
petitioner.
Respondent then
demanded
petitioner to
remove the boxes
 P a g e | 35

from the factory

and to pay the
balance of
US$15,400.00 for
the additional
boxes and
P132,000.00 as
storage fee.
On 17 August
2001, petitioner
filed a Complaint
for sum of money
and damages
 P a g e | 36

against
respondent. The
Regional Trial
Court (RTC) ruled
that respondent
did not commit
any breach of
faith that would
justify rescission
of the contract
and the
consequent
reimbursement of
the amount paid
 P a g e | 37

by petitioner.
Petitioner filed a
notice of appeal
with the CA. On
21 September
2006, the CA
denied the appeal
for lack of merit.
Petitioner moved
for
reconsideration,
but the motion
was denied by the
CA.
 P a g e | 38

ISSUE:
Whether or not
respondent did
not completely
manufacture the
boxes and that it
was respondent
which was obliged
to deliver the
boxes to TADECO.
HELD:
 P a g e | 39

We find no
reversible error in
the assailed
Decision that
would justify the
grant of this
petition.
Petitioner’s
claim for
reimbursement is
actually one for
rescission (or
resolution) of
 P a g e | 40

contract under
Article 1191 of the
Civil Code, which
reads:
Art. 1191. The
power to rescind
obligations is
implied in
reciprocal
ones, in case one
of the obligors
should not comply
with what is
 P a g e | 41

incumbent upon
him.
The injured party
may choose
between the
fulfillment and the

rescission of the
obligation, with
the payment of
damages in either
case. He
may also seek
 P a g e | 42

rescission, even
after he has
chosen fulfillment,
if the latter
should become
impossible.
The court shall
decree the
rescission
claimed, unless
there be just
cause authorizing
the fixing of a
 P a g e | 43

period. This is
understood to be
without prejudice
to the rights of
third persons who
have acquired the
thing, in
accordance with
Articles 1385 and
1388 and the
Mortgage Law.
The right to
rescind a contract
arises once the
 P a g e | 44

other party
defaults in the
performance of
his obligation. In
determining when
default occurs,
Art. 1191
should be taken in
conjunction with
Art. 1169 of the
same law, which
provides:
 P a g e | 45

Art. 1169. Those

obliged to deliver
or to do
something incur in
delay from the
time the obligee
judicially or
extrajudicially
demands from
them the
fulfillment
of their
obligation.
 P a g e | 46

In reciprocal
obligations,
neither party
incurs in delay if
the other does not

comply or is not
ready to comply in
a proper manner
with what is
incumbent upon
him. From the
moment one of
the parties fulfills
 P a g e | 47

his obligation,
delay by the
other begins. In
reciprocal
obligations, as in
a contract of sale,
the general rule is
that the fulfillment
of the parties’
respective
obligations should
be simultaneous.
Hence, no
demand is
 P a g e | 48

generally
necessary
because, once a
party fulfills his
obligation and the
other party does
not fulfill his, the
latter
automatically
incurs in delay.
But when different
dates for
performance of
the obligations
 P a g e | 49

are fixed, the

default for each
obligation must be
determined by the
rules given
in the first
paragraph of the
present article,
that is, the other
party would
incur in delay only
from the moment
the other party
demands
 P a g e | 50

fulfillment of the
former’s
obligation. Thus,
even in reciprocal
obligations, if the
period for the
fulfillment of the
obligation is fixed,
demand upon the
obligee is still
necessary before
the obligor can be
considered in
default and before
 P a g e | 51

a cause of
action for
rescission will
accrue.
Evident from the
records and even
from the
allegations in the
complaint was the
lack of demand by
petitioner upon
respondent to
fulfill its obligation
 P a g e | 52

to
manufacture and
deliver the boxes.
The Complaint
only alleged that
petitioner
made a “follow-
up” upon
respondent,
which, however,
would not qualify
as a
demand for the
fulfillment of the
 P a g e | 53

obligation.
Petitioner’s
witness also
testified that they
made a follow-up
of the boxes, but
not a demand.
Note is
taken of the fact
that, with respect
to their claim for
reimbursement,
the
Complaint alleged
 P a g e | 54

and the witness

testified that a
demand letter
was sent to
respondent.
Without a
previous demand
for the fulfillment
of the obligation,
petitioner would
not have a cause
of action for
rescission against
respondent as
 P a g e | 55

the latter would

not yet be
considered in
breach of its
contractual
obligation.
Even assuming
that a demand
had been
previously made
before filing the
present case,
petitioner’s claim
for
 P a g e | 56

reimbursement
would still fail, as
the circumstances
would show that
respondent was
not guilty of
breach of
contract.
 P a g e | 57

MINDANAO
SAVINGS AND
LOAN
ASSOCIATION,
INC.,
represented by
its Liquidator,
THE PHILIPPINE
DEPOSIT
INSURANCE
 P a g e | 58

CORPORATION
vs. EDWARD
WILLKOM;
GILDA GO;
REMEDIOS UY;
MALAYO
BANTUAS, in his
capacity as the
Deputy Sheriff
of Regional Trial
Court, Branch 3,
Iligan City; and
the REGISTER
OF DEEDS of
 P a g e | 59

Cagayan de Oro
City

G.R. No.
178618,
October 11,
2010
FACTS:
The First Iligan
Savings and Loan
Association, Inc.
(FISLAI) and the
Davao Savings
 P a g e | 60

and Loan
Association, Inc.
(DSLAI) are
entities duly
registered with
the Securities and
Exchange
Commission (SEC)
primarily engaged
in the business of
granting loans
and receiving
deposits from the
general public,
 P a g e | 61

and treated as
banks. Sometime
in 1985, FISLAI
and DSLAI
entered into a
merger, with
DSLAI as the
surviving
corporation. The
articles of merger
were
not registered
with the SEC due
to incomplete
 P a g e | 62

documentation.
On August 12,
1985, DSLAI
changed its
corporate name to
MSLAI.
Meanwhile, on
May 26, 1986, the
Board of Directors
of FISLAI passed
and approved
Board Resolution
No. 86-002,
 P a g e | 63

assigning its
assets in favor of
DSLAI which in
turn assumed the
former’s liabilities.
The business of
MSLAI, however,
failed. Hence, the
Monetary Board of
the Central Bank
of the Philippines
ordered its closure
and placed it
under
 P a g e | 64

receivership. The
Monetary Board
ordered the
liquidation of
MSLAI, with PDIC
as its
liquidator.
It appears that
prior to the
closure of MSLAI,
Uy filed with the
RTC, Branch 3 of
Iligan City, an
 P a g e | 65

action for
collection of sum
of money against
FISLAI, docketed
as Civil Case No.
111-697. On
October 19, 1989,
the RTC issued a
summary decision
in favor of Uy,
directing
defendants
therein (which
included FISLAI) to
 P a g e | 66

pay the former

the sum of
P136,801.70, plus
interest until full
payment, 25% as
attorney’s fees,
and the costs of
suit.
ISSUE:
Whether or not
there novation of
the obligation by
substituting the
 P a g e | 67

person of the
debtor.
Held:
Petitioner cannot
also anchor its
right to annul the
execution sale on
the principle of
novation. While it
is true that DSLAI
(now MSLAI)
assumed all the
liabilities of
 P a g e | 68

FISLAI, such
assumption did
not result in
novation as would
release the latter
from liability,
thereby
exempting its
properties from
execution.
Novation is the
extinguishment of
an obligation by
the substitution or
 P a g e | 69

change of the
obligation by a
subsequent one
which
extinguishes or
modifies the first,
either by
changing the
object or principal
conditions, by
substituting
another in place
of the debtor, or
by subrogating a
 P a g e | 70

third person in the

rights of the
creditor. It is a
rule that novation
by substitution of
debtor must
always be made
with the consent
of the creditor.
Article 1293 of
the Civil Code is
explicit, thus:
 P a g e | 71

Art. 1293.
Novation which
consists in
substituting a new
debtor in the
place of the
original one may
be made even
without the
knowledge or
against the will of
the latter, but not
without the
consent of the
 P a g e | 72

creditor. Payment
by the new debtor
gives him the
rights mentioned
in Articles 1236
and1237.
In this case,
there was no
showing that Uy,
the creditor, gave
her consent to the
agreement that
DSLAI (now
 P a g e | 73

MSLAI) would
assume the
liabilities of
FISLAI. Such
agreement cannot
prejudice Uy.
Thus, the assets
that FISLAI
transferred to
DSLAI remained
subject to
execution to
satisfy the
judgment claim of
 P a g e | 74

Uy against FISLAI.
The subsequent
sale of the
properties by Uy
to Willkom, and of
one of the
properties by
Willkom to Go,
cannot, therefore,
be questioned by
MSLAI.
The consent of
the creditor to a
 P a g e | 75

novation by
change of debtor
is as
indispensable as
the creditor’s
consent in
conventional
subrogation in
order that a
novation shall
legally take place.
Since novation
implies a waiver
of the right which
 P a g e | 76

the creditor had

before the
novation, such
waiver must be
express.
P a g e | 77
 P a g e | 78

ANAMER
SALAZAR vs. J.Y.
BROTHERS
MARKETING
CORPORATION

G.R. No.
171998,
 P a g e | 79

October 20,
2010
FACTS:

J.Y. Brothers
Marketing is a
corporation
engaged in the
business of selling
sugar, rice and
other
commodities. On
October 15, 1996,
Anamer Salazar, a
 P a g e | 80

freelance sales
agent,
accompanied
Isagani Calleja
and Jess Kallos to
J.Y. Bros. Salazar
with Calleja and
Kallos procured
from J. Y. Bros. 300
cavans of rice
worth
P214,000.00. As
payment, Salazar
negotiated and
 P a g e | 81

indorsed to J.Y.
Bros. Prudential
Bank Check No.
067481 dated
October 15, 1996
in the amount of
P214,000.00 with
the assurance
that the check is
good as cash. On
that assurance,
J.Y. Bros. parted
with 300 cavans
of rice to Salazar.
 P a g e | 82

However, upon
presentment, the
check was
dishonored due to
“closed account.”
Informed of the
dishonor of the
check, Calleja,
Kallos and Salazar
delivered to J.Y.
Bros. a
replacement cross
Solid Bank Check
No. PA365704
 P a g e | 83

dated October 29,

1996 in the
amount of
P214,000.00
which also
bounced due to
insufficient funds.
When despite the
demand letter
dated February
27, 1997, Salazar
failed to settle the
amount due J.Y.
Bros., the latter
 P a g e | 84

charged Salazar
and Timario with
the crime of
estafa before the
Regional Trial
Court of Legaspi
City.
The RTC ruled
that after the
Prudential Bank
check was
dishonored, it was
replaced by a
 P a g e | 85

Solid Bank check

which, however,
was also
subsequently
dishonored; that
since the Solid
Bank check was a
crossed check,
which meant that
such check was
only for deposit in
payee’s account,
a condition that
rendered such
 P a g e | 86

check non-
negotiable, the
substitution of a
non-negotiable
Solid Bank check
for a negotiable
Prudential Bank
check was an
essential change
which had the
effect of
discharging from
the obligation
whoever may be
 P a g e | 87

the endorser of
the negotiable
check. The RTC
concluded that
the absence of
negotiability
rendered nugatory
the obligation
arising from the
technical act of
indorsing a check
and, thus, had the
effect of novation;
and that the
 P a g e | 88

ultimate effect of
such substitution
was to extinguish
the obligation
arising from the
issuance of the
Prudential Bank
check.
ISSUE:
Whether or not a
check is a
contract which is
 P a g e | 89

susceptible to a
novation.
HELD:
Novation is
done by the
substitution or
change of the
obligation by a
subsequent one
which
extinguishes the
first, either by
changing the
 P a g e | 90

object or principal
conditions, or by
substituting the
person of the
debtor, or by
subrogating a
third person in the
rights of the
creditor. Novation
may either be
extinctive or
modificatory,
much being
dependent on the
 P a g e | 91

nature of the
change and the
intention of the
parties. Extinctive
novation is never
presumed; there
must be an
express intention
to novate; in
cases where it is
implied, the acts
of the parties
must clearly
demonstrate their
 P a g e | 92

intent to dissolve
the old obligation
as the moving
consideration for
the emergence of
the new one.
Implied novation
necessitates that
the
incompatibility
between the old
and new
obligation be total
on every point
 P a g e | 93

such that the old

obligation is
completely
superseded by the
new one. The test
of incompatibility
is whether they
can stand
together, each
one having an
independent
existence; if they
cannot and are
irreconcilable, the
 P a g e | 94

subsequent
obligation would
also extinguish
the first.
The obligation to
pay a sum of
money is not
novated by an
instrument that
expressly
recognizes the
old, changes only
the terms of
 P a g e | 95

payment, adds
other obligations
not incompatible
with the old ones
or the new
contract merely
supplements the
old one.
In this case,
respondent’s
acceptance of the
Solid Bank check,
which replaced
 P a g e | 96

the dishonored
Prudential Bank
check, did not
result to novation
as there was no
express
agreement to
establish that
petitioner was
already
discharged from
his liability to pay
respondent the
amount of
 P a g e | 97

P214,000.00 as
payment for the
300 bags of rice.
As we said,
novation is never
presumed, there
must be an
express intention
to novate. In fact,
when the Solid
Bank check was
delivered to
respondent, the
same was also
 P a g e | 98

indorsed by
petitioner which
shows petitioner’s
recognition of the
existing obligation
to respondent to
pay P214,000.00
subject of the
replaced
Prudential Bank
check.
Moreover,
respondent’s
 P a g e | 99

acceptance of the
Solid Bank check
did not result to
any
incompatibility,
since the two
checks
− Prudential and
Solid Bank checks
− were precisely
for the purpose of
paying the
amount of
P214,000.00, i.e.,
 P a g e | 100

the credit
obtained from the
purchase of the
300 bags of rice
from respondent.
Indeed, there was
no substantial
change in the
object or principal
condition of the
obligation of
petitioner as the
indorser of the
check to pay the
 P a g e | 101

amount of
P214,000.00. It
would appear that
respondent
accepted the Solid
Bank check to
give petitioner the
chance to pay her
obligation.
P a g e | 102
 P a g e | 103

LAND BANK OF
THE
and Evangeline
Sy secured a
assumption of
mortgage was not
approved by the
land bank. Land
bank foreclosed
the property.
 P a g e | 104

Alfredo said that

the said debts
were paid by Ong.
Landbank opposes
and said the bank
processes an
assumption of
mortgage as a
new loan, since
the new borrower
is considered a
new client. They
used character,
capacity, capital,
 P a g e | 105

collateral, and
conditions in
determining who
can qualify to
assume a loan.
Auction sale was
held. An action for
recovery of
property was filed.
ISSUE:
Whether the
Court of Appeals
erred in holding
 P a g e | 106

that Art. 1236 of

the Civil Code
does not apply
and in finding that
there is no
novation.

HELD:

Novation must
be expressly
consented to.
Moreover, the
conflicting
 P a g e | 107

intention and acts

of the parties
underscore the
absence of any
express disclosure
or circumstances
with which to
deduce a clear
and unequivocal
intent by the
parties to novate
the old
agreement. Land
Bank contends
 P a g e | 108

that Art. 1236 of

the Civil Code
backs their claim
that Alfredo
should have
sought recourse
against the
Spouses Sy
instead of Land
Bank. Art. 1236
provides the
creditor is not
bound to accept
payment or
 P a g e | 109

performance by a
third person who
has no interest in
the fulfillment of
the obligation,
unless there is a
stipulation to the
contrary. Whoever
pays for another
may demand from
the debtor what
he has paid,
except that if he
paid without the
 P a g e | 110

knowledge or
against the will of
the debtor, he can
recover only
insofar as the
payment has been
beneficial to the
debtor.
 P a g e | 111

VALENTIN
MOVIDO,
substituted by
MARGINITO
MOVIDO vs.
LUIS REYES
PASTOR
 P a g e | 112

GR No. 172279,
February 11,
2010
FACTS:
Respondent Luis
Reyes Pastor filed
a complaint for
specific
performance in
the Regional Trial
Court (RTC) of
Imus, Cavite,
 P a g e | 113

praying that
petitioner Valentin

Movido be
compelled to
cause the survey
of a parcel of land
subject of their
contract to sell. In
his complaint,
respondent
alleged that he
 P a g e | 114

and petitioner
executed a
kasunduan sa
bilihan ng lupa
where the latter
agreed to sell a
parcel of land
located in
Paliparan,
Dasmariñas,
Cavite with an
area of some
 P a g e | 115

21,000 sq. m. out

of the 22,731 sq.
m. covered by
Transfer
Certificate of Title
(TCT) No. 362995
at P400/sq. m.
Respondent
further alleged
that another
kasunduan was
later executed
 P a g e | 116

supplementing
the kasunduan sa
bilihan ng lupa. It
provided that, if a
Napocor power
line traversed the
subject lot, the
purchase price
would be lowered
to P200/sq. m.
beyond the
distance of 15
 P a g e | 117

meters on both
sides from the
center of the
power line while
the portion within
a distance of 15
meters on both
sides from the
center of the
power line would
not be paid.
Lastly, respondent
 P a g e | 118

alleged that he
already paid
petitioner P5
million out of the
original purchase
price of P8.4
million stated in
the kasunduan sa
bilihan ng lupa.
He was willing and
ready to pay the
balance of the
 P a g e | 119

purchase price
but due to
petitioner’s
refusal to have
the property
surveyed despite
incessant
demands, his
unpaid balance
could not be
determined with
certainty.
 P a g e | 120

In his answer,
petitioner alleged
that the original
negotiation for the
sale of
his property
involved the
entire area of
22,731 sq. m.
However, as
respondent
was not sure
 P a g e | 121

whether a
Napocor power
line traversed the
property, they
then
executed the
kasunduan. After
respondent
personally
inspected the
property, a
final agreement-
 P a g e | 122

the kasunduan sa
bilihan ng lupa-
was executed
where the area to
be sold was
21,000 sq. m. for
P400/sq. m. for a
total sum of P8.4
million. The final
agreement also
listed a schedule
of payments of
 P a g e | 123

the purchase price

and included a
penalty clause in
case of default.
After hearing,
the RTC ruled in
favor of petitioner
and held that the
kasunduan
preceded the
kasunduan sa
bilihan ng lupa.
 P a g e | 124

Thus, the RTC

dismissed the
complaint of
respondent for
lack of merit
and/or cause of
action.
On appeal, the
Court of Appeals
(CA) reversed the
RTC and held that
the
 P a g e | 125

kasunduan sa
bilihan ng lupa
was the first
document
executed by the
parties, not
the kasunduan.
Marginito
Movido’s motion
for
reconsideration
did not have its
 P a g e | 126

desired result.
Hence, this
petition for review
on certiorari.
ISSUE:
Whether or not
the failure of
respondent to pay
the 7,000 and
8,000 installments
of the purchase
price gave
 P a g e | 127

petitioner the
right to rescind
the contract.
HELD:
Indeed, a
reading of the
kasunduan sa
bilihan ng lupa
and the
kasunduan would
readily reveal that
payment of the
 P a g e | 128

purchase price
does not depend
on the survey of
the property. In
other words, the
purchase price
should be paid
whether or not the
property is
surveyed. The
survey of the
property is
 P a g e | 129

important only
insofar as the
right of
respondent to the
reduction of the
purchase price is
concerned.
Prudence
dictates that the
second option is
better as it will
prevent further
 P a g e | 130

conflict between
the parties. Thus,
we adopt the
second option.
Impropriety of
Rescission is only
allowed when the
breach is as
substantial and
fundamental as to
defeat the object
of the parties in
 P a g e | 131

entering into the

contract. We find
no such
substantial or
material breach.
It is true that
respondent failed
to pay the 7thand
8thinstallments of
the
purchase price.
However,
 P a g e | 132

considering the
circumstances of
the instant case,
particularly the
provisions of the
kasunduan,
respondent
cannot be
deemed to have
committed a
serious breach. In
the first place,
 P a g e | 133

respondent was
not in default as
petitioner never
made a demand
for payment.
Moreover, the
kasunduan sa
bilihan ng lupa
and the
kasunduan should
both be given
effect rather than
 P a g e | 134

be declared
conflicting, if
there is a way of
reconciling them.
Petitioner and
respondent would
not have entered
into either of the
agreements if
they did not
intend to be
bound or
 P a g e | 135

governed by
them. Indeed,
taken together,
the two
agreements
actually constitute
a single contract
pertaining to the
sale of a land to
respondent by
petitioner. Their
stipulations must
 P a g e | 136

therefore be
interpreted
together,
attributing to the
doubtful ones that
sense
that may result
from all of them
taken jointly. In
this connection,
the kasunduan sa
bilihan ng lupa
 P a g e | 137

contains the
general terms and
conditions of the
agreement of the
parties. As the
kasunduan
pertains to a
special area of the
agreement, it
constitutes an
exception to the
general provisions
 P a g e | 138

of the kasunduan
sa bilihan ng lupa,
particularly on the
purchase price for
that portion.
Specialibus
derogat
generalibus.
Under both the
kasunduan sa
bilihan ng lupa
and the
 P a g e | 139

kasunduan,
petitioner
undertook to
cause the survey
of the property in
order to
determine the
portion excluded
from the sale, as
well as the portion
traversed by the
Napocor power
 P a g e | 140

line. Despite
repeated
demands by
respondent,
however,
petitioner failed to
perform his
obligation. Thus,
considering that
there was a
breach on the part
of petitioner (and
 P a g e | 141

no material
breach on the part
of respondent), he
cannot properly
invoke his right to
rescind the
contract. Hence,
the petition was
denied and the
Court affirmed
with the CA
decision with
 P a g e | 142

modification that
Movido is ordered
to cause the
survey of the
subject lot within
a period of three
months in order to
determine the
excluded portion
of the sale and
the portion
traversed by the
 P a g e | 143

Napocor power
line. If he fails to
do so, Luis Reyes
Pastor is hereby
authorized to
have it done with
the cost of the
survey charged to
Marginito Movido.
 P a g e | 144

PAN PACIFIC
SERVICE
CONTRACTORS,
INC. vs.
EQUITABLE PCI
BANK
(FORMERLY THE
PHILIPPINE
COMMERCIAL
INTERNATIONAL
BANK)
 P a g e | 145

G.R. No.
169975, March
18, 2010
FACTS:
Pan Pacific
Service
Contractors, Inc.
(Pan Pacific) is
engaged in
contracting
mechanical works
on air conditioning
 P a g e | 146

system. On 24
November 1989,
Pan Pacific,
through its
President, Ricardo
F. Del Rosario (Del
Rosario), entered
into a contract of
mechanical works
(Contract) with
respondent for
P20,688,800. Pan
 P a g e | 147

Pacific and
respondent also
agreed on nine
change orders for
P2,622,610.30.
Thus, the total
consideration for
the whole project
was
P23,311,410.30.
The Contract
stipulated, among
 P a g e | 148

others, that Pan

Pacific shall be
entitled to a price
adjustment in
case of increase in
labor costs and
prices of materials
under paragraphs
70.1 and 70.2 of
the “General
Conditions for the
Construction of
 P a g e | 149

PCIB Tower II
Extension” (the
escalation clause).
Pursuant to the
contract, Pan
Pacific
commenced the
mechanical works
in the
project site, the
PCIB Tower II
extension building
 P a g e | 150

in Makati City. The

project
was completed in
June 1992.
Respondent
accepted the
project on 9 July
1992.
In 1990, labor
costs and prices
of materials
escalated. On 5
 P a g e | 151

April 1991, in
accordance with
the escalation
clause, Pan Pacific
claimed a price
adjustment of
P5,165,945.52.
Respondent’s
appointed project
engineer, TCGI
Engineers, asked
for a reduction in
 P a g e | 152

the price
adjustment. To
show goodwill,
Pan Pacific
reduced the price
adjustment to
P4,858,548.67.
Pan Pacific
refused to pay the
loan. Pan Pacific
insisted that it
would not have
 P a g e | 153

incurred the loan

if respondent
released the price
adjustment on
time. Pan
Pacific alleged
that the
promissory note
did not express
the true
agreement of
the parties. Pan
 P a g e | 154

Pacific maintained
that the P1.8
million was to be
considered
as an advance
payment on the
price adjustment.
Therefore, there
was really no
consideration for
the promissory
note; hence, it is
 P a g e | 155

null and void from

the
beginning.
Respondent
stood firm that it
would not release
any amount of the
price
adjustment to Pan
Pacific but it
would offset the
price adjustment
 P a g e | 156

with Pan
Pacific’s
outstanding
balance of
P3,226,186.01,
representing the
loan,
interests,
penalties and
collection
charges. Pan
Pacific refused the
 P a g e | 157

offsetting but
agreed to receive
the reduced
amount of
P3,730,957.07 as
recommended by
the TCGI
Engineers for the
purpose of
extrajudicial
settlement, less
P1.8 million and
 P a g e | 158

P414,942 as
advance
payments.
On 6 May 1994,
petitioners filed a
complaint for
declaration of
nullity/annulment
of the promissory
note, sum of
money, and
damages against
 P a g e | 159

the respondent
with the RTC of
Makati City,
Branch 59. On 12
April 1999, the
RTC rendered its
decision in favor
of plaintiffs. CA
modified the RTC
decision, with
respect to the
principal amount
 P a g e | 160

due to petitioners.
Petitioners filed a
Motion
for Partial
Reconsideration
seeking a
reconsideration of
the CA’s Decision
imposing the legal
rate of 12%.
Respondent
likewise filed a
 P a g e | 161

Motion for
Reconsideration of
the CA’s decision.
In a Resolution
dated 5 October
2005, the CA
denied both
motions.
ISSUE:
Whether the CA,
in awarding the
unpaid balance of
 P a g e | 162

the price
adjustment erred
in fixing the
interest rate at
12% instead of
the 18% bank
lending rate.
HELD:
It is settled that
the agreement or
the contract
between the
 P a g e | 163

parties is the
formal expression
of the parties’
rights, duties, and
obligations. It is
the best evidence
of the intention of
the parties. Thus,
when the terms of
an agreement
have been
reduced to
 P a g e | 164

writing, it is
considered as
containing all the
terms agreed
upon and there
can be, between
the parties and
their successors in
interest, no
evidence of such
terms other than
the contents of
 P a g e | 165

the written
agreement.
The escalation
clause must be
read in
conjunction with
Section 2.5 of the
Agreement and
Section 60.10 of
the General
Conditions which
pertain to the
 P a g e | 166

time of payment.
Under Section
60.10 of the
General
Conditions, the
respondent shall
pay such liability
to the petitioner
within 28 days
from issuance of
the interim
certificate. Upon
 P a g e | 167

respondent’s
failure to pay
within the time
provided (28
days), then it shall
be liable to pay
the stipulated
interest.
We agree with
petitioners’
interpretation that
in case of default,
 P a g e | 168

the consent of the

respondent is not
needed in order to
impose interest at
the current bank
lending rate.
Under Article
2209 of the Civil
Code, the
appropriate
measure for
damages in case
 P a g e | 169

of delay in
discharging an
obligation
consisting of the
payment of a sum
of money is the
payment of
penalty interest at
the rate agreed
upon in the
contract of the
parties. In the
 P a g e | 170

absence of a
stipulation of a
particular rate of
penalty interest,
payment of
additional interest
at a rate equal to
the regular
monetary interest
becomes due and
payable. Finally, if
no regular interest
 P a g e | 171

had been agreed

upon by the
contracting
parties, then the
damages payable
will consist of
payment of legal
interest which is
6%, or in the case
of loans or
forbearances of
money, 12% per
 P a g e | 172

annum. It is only
when the parties
to a contract have
failed to fix the
rate of interest or
when such
amount is
unwarranted that
the Court will
apply the 12%
interest per
annum on a loan
 P a g e | 173

or forbearance of
money.
The written
agreement
entered into
between
petitioners and
respondent
provides
for an interest at
the current bank
lending rate in
 P a g e | 174

case of delay in
payment and
the promissory
note charged an
interest of 18%.
To prove
petitioners’
entitlement to the
18% bank lending
rate of interest,
petitioners
presented the
 P a g e | 175

promissory note
prepared by
respondent bank
itself.
This promissory
note, although
declared void by
the lower courts
because it did
not express the
real intention of
the parties, is
 P a g e | 176

substantial proof
that the
bank lending rate
at the time of
default was 18%
per annum.
Absent any
evidence of fraud,
undue influence
or any vice of
consent exercised
by petitioners
 P a g e | 177

against the
respondent, the
interest rate
agreed upon is
binding on them.
ATTY. PEDRO
FERRER vs. SPS.
ALFREDO AND
IMELDA DIAZ,
REINA
COMANDANTE
AND SPS.
 P a g e | 178

BIENVENIDO
PANGAN AND
ELIZABETH
G.R. No.
165300, April
23, 2010
FACTS:
Atty. Pedro Ferrer
claimed in his
original Complaint
that on 07 May
 P a g e | 179

1999, the Diazes,

as represented by
their daughter
Comandante
obtained from him
a loan which was
secured by a Real
Estate Mortgage
Contract.
Comandante
issued to
petitioner
 P a g e | 180

postdated checks
to secure
payment of said
loan. Petitioner
claimed that prior
to this,
Comandante, for a
valuable
consideration of
P600,000.00,
which amount
formed part of the
 P a g e | 181

abovementioned
secured loan,
executed in his
favor an
instrument
entitled Waiver of
Hereditary Rights
and Interests Over
a Real Property.
The Diazes,
however, reneged
on their obligation
 P a g e | 182

as the checks
issued by
Comandante were
dishonored upon
presentment.
Despite repeated
demands, they
still failed and
refused to settle
the loan. Thus,
petitioner filed a
Complaint for
 P a g e | 183

Collection of Sum
of Money Secured
by Real Estate
Mortgage
Contract against
the Diazes and
Comandante in
the RTC of Quezon
City. The RTC
ruled in favor of
petitioner.
Respondents
 P a g e | 184

appealed to the
CA. However, the
CA merely
modified the
assailed judgment
of the trial court
by excluding the
Pangans among
those solidarily
liable to
petitioner, in
effect affirming in
 P a g e | 185

all other respects

the assailed
judgment.
ISSUE:
Whether or not
the waiver of
hereditary rights
and interest over
a real property
(still undivided)
executed by
Comandante is
 P a g e | 186

null and void for

being violative of
Article 1347 of the
Civil Code.
HELD:
Article 1347 of
the Civil Code
states that no
contract may be
entered into upon
a future
inheritance except
 P a g e | 187

in cases expressly
authorized by
law. For the
inheritance to be
considered
“future”, the
succession must
not have been
opened at the
time of the
contract. From the
foregoing, it is
 P a g e | 188

clear that
Comandante and
petitioner entered
into a contract
involving the
former’s future
inheritance as
embodied in the
Waiver of
Hereditary Rights
and Interest Over
a Real Property
 P a g e | 189

(Still Undivided)
executed by her in
petitioner’s favor.
Thus, the court as
guided by the
discussions in the
case of Tañedo vs.
Court of Appeals,
similarly declared
in this case that
the Waiver of
Hereditary Rights
 P a g e | 190

and Interest Over

a Real Property
(Still Undivided)
executed by
Comandante in
favor of petitioner
as not valid and
that same cannot
be the source of
any right or create
any obligation
between them for
 P a g e | 191

being violative of
the second
paragraph of
Article 1347 of the
Civil Code.

EUGENIO REYES
vs. LIBRANDA
MAURICIO
(deceased) and
LEONIDA F.
MAURICIO
 P a g e | 192

G.R. No.
175080,
November 24,
2010
FACTS:
Eugenio was a
registered owner
of parcel of land
at Turo, Bocaue,
Bulacan covered
by TCT No. T-
62290 registered
 P a g e | 193

in the name of
Eufracia and
Susana Reyes,
sibling of
petitioner. The
property was
adjudicated to
Eugenio by virtue
of an extrajudicial
settlement among
the heirs following
 P a g e | 194

the death of their

parents.
Libranda
Mauricio and
daughter Leonida
Mauricio filed a
complaint before
the DARAB of
Malolos, Bulacan
for annulment of
contract
denominated as
 P a g e | 195

Kasunduan
between Libranda
and Eugenio as
parties.
Respondents
alleged that they
are the legal heirs
of Godofredo
Mauricio who was
the lawful and
registered tenant
of Eugenio; that
 P a g e | 196

Godofredo had
been working on
the land and
introduced
improvements
thereon.; that
through fraud,
deceit, strategy,
and other
unlawful means
Eugenio caused
the preparation of
 P a g e | 197

the document
Kasunduan to
eject respondents
from the subject
property; that
Libranda was
illiterate and that
the contents of
the Kasunduan
were not read nor
explained to her;
that Eugenio took
 P a g e | 198

undue advantage
of the weakness,
age, illiteracy,
ignorance,
indigence and
other handicaps
of Libranda in the
execution of the
Kasunduan
rendering it void
for lack of consent
 P a g e | 199

Petitioner
averred that no
tenancy
relationship
existed between
him and
respondents. That
Godofredo’s
occupancy was
based on the
former’s mere
 P a g e | 200

tolerance and
accommodation.
The Provincial
Adjudicator
concluded that
Eugenio was a
tenant of Eugenio,
being the
surviving spouse,
should be
maintained in
peaceful
 P a g e | 201

possession of the
subject land.
DARAB held that
Mauricio’s are
former tenants of
Spouses Reyes,
when spouses
died; the children
inherited the
subject property.
Under the law,
they are
 P a g e | 202

subrogated to
rights and
obligations of
their late parents.
The Kasunduan
was declared void.
The CA affirmed
the decision and
resolution of the
DARAB. Hence,
this present
petition.
 P a g e | 203

ISSUE:
Whether or not
the Kasunduan
between Eugenio
and Libranda is
void.
HELD:
The court denied
the petition for
failure to show
that the CA
 P a g e | 204

committed
reversible error in
its challenged
decision and
resolution.
Question of fact is
beyond the
province of this
court. Absent any
of the obtaining
exceptions to this
rule, the findings
 P a g e | 205

of fact of the
Provincial
Adjudicator, as
affirmed by the
DARAB and
especially by the
Court of Appeals,
are binding on this
court.
The second
Kasunduan is the
subject of the
 P a g e | 206

instant complaint.
The DARAB
nullified the
second
Kasunduan, to wit:
Insofar as this
“Kasunduan” is
concerned, and
after reading the
transcript of the
testimony of the
old woman
 P a g e | 207

Librada Mauricio,
this Board is
convinced that
indeed the
purpose of the
document was
to eject her from
the farm holding
but that Librada
Mauricio wanted
to return the
money she
 P a g e | 208

received
because the
contents of the
document was
never explained
to her being
illiterate who
cannot even
read or write.
This Board is
even further
convinced after
 P a g e | 209

reading the
transcript of the
testimonies that
while the
document was
allegedly signed
by the parties in
Turo, Bocaue,
Bulacan, the
same document
was notarized in
Pasig, Metro
 P a g e | 210

Manila, thus, the

Notary Public
was not in a
position to
explain much
less ascertain
the veracity of
the contents of
the alleged
“Kasunduan” as
to whether or
not Plaintiff-
 P a g e | 211

Appellee Librada
Mauricio had
really
understood the
contents thereof.
This Board
further adheres
to the principle
that it cannot
substitute its
own evaluation
of the testimony
 P a g e | 212

of the witnesses
with that of the
personal
evaluation of the
Adjudicator a
quo who, in the
case at bar, had
the best
opportunity to
observe the
demeanor of the
witness Librada
 P a g e | 213

Mauricio while
testifying on the
circumstances
relevant to the
execution of the
alleged
“Kasunduan.”
Furthermore,
this Board
adheres to the
principle that in
all contractual,
 P a g e | 214

property or other
relations, when
one of the
parties is at a
disadvantage on
account of his
moral
dependence,
ignorance,
mental
weakness or
other handicap,
 P a g e | 215

the courts (and

in the case at
bar, this Board)
must be vigilant
for his protection
(Art. 24, New
Civil Code). In
the case at bar,
Plaintiff-Appellee
is already
eighty-one (81)
years old who
 P a g e | 216

can neither read

nor write, thus,
she just simply
signs her name
with her
thumbmark.
 P a g e | 217

DOMINGO vs.
CA
G.R. No.
169122,
 P a g e | 218

February 02,
2010
FACTS:
Before he died,
Julio Domingo
(Julio) allegedly
executed a Deed
of Absolute Sale
over a 4.1358-
hectare parcel of
land in favor of
Marcelino’s wife,
 P a g e | 219

Carmelita
Mananghaya
(Mananghaya).
Agapita and Ana
Domingo, and the
heirs of
Gaudencio, Julian,
Edilberta,
Modesta, Felipe,
and Geronimo
Domingo (the
Domingos) filed
 P a g e | 220

before RTC of
Nueva Ecija, a
complaint against
Marcelino and
Mananghaya for
the annulment of
the Deed of
Absolute Sale. The
Domingos alleged
that Julio’s
signature in the
deed was forged.
 P a g e | 221

In its 3 November
1993 Decision,
the RTC held that
Julio’s signature in
the Deed of
Absolute Sale was
forged; thus, the
deed was void.
The RTC ordered
Marcelino and
Mananghaya to
deliver possession
 P a g e | 222

of the property to
the Domingos.
Marcelino and
Mananghaya
appealed the
Decision to the
Court of Appeals.
The Court of
Appeals dismissed
the appeal. The
14 July 2000
Decision became
 P a g e | 223

final and
executory. Thus,
on 4 August 2003,
the RTC issued a
writ of execution.
On 25 August
2003, the
Domingos gained
possession of the
property.
Marcelino filed
with the
 P a g e | 224

Department of
Agrarian Reform
(DAR) a petition
dated 25 August
2003 praying that
he be declared
the tenant-
beneficiary of the
property. Around
April 2004,
Marcelino
reentered and
 P a g e | 225

retook possession
of the property.
The DAR granted
Marcelino’s petitio
n, placed 10.0108
hectares of land
including the
property under
the coverage of
Republic Act (RA)
No. 6657 and
named Marcelino
 P a g e | 226

as one of the
tenant-
beneficiaries.
ISSUE:
Whether or not
the Order of the
DARAB grant the
defendant title
over the
property as
against the
decision of the
 P a g e | 227

court which is
final and
executory.
HELD:
Actually even if
defendant
Marcelino had
been awarded
ownership of the
subject land by
the DARAB, still he
could not have
 P a g e | 228

taken the law in

his own hands by
simply taking over
thereof without
any judicial order
and thereby
ousting therefrom
the plaintiffs, this
Court, had given
legal possession
thereof
pursuant to a
 P a g e | 229

decision of the
Court of Appeals
which had already
long become final
and executory. But
the fact is the
Order of the
DARAB relied
upon by the
defendant
Marcelino did not
grant him any
 P a g e | 230

specific portion of
the land declared
to be within the
coverage of
PD27/RA 6657
because the same
was yet, by its
terms to be
distributed to the
qualified
beneficiaries
thereof and
 P a g e | 231

defendant
Marcelino being
only one of such
beneficiaries.

DE LEON vs.
ONG
G.R. No.
170405,
 P a g e | 232

February 02,
2010
FACTS:
On 10 March 10,
1993, petitioner
Raymundo S. de
Leon sold three
parcels of land
with
improvements
situated in
Antipolo, Rizal to
 P a g e | 233

respondent Benita
T. Ong. As these
properties were
mortgaged to Real
Savings and Loan
Association,
Incorporated
(RSLAI), petitioner
and respondent
executed a
notarized deed of
absolute sale with
 P a g e | 234

assumption of
mortgage, and
with a condition
that upon full
payment, the
petitioner shall
execute and sign
a deed of
assumption of
mortgage in favor
of respondent
without any
 P a g e | 235

further cost.
Thereafter,
respondent
undertook repairs
and made
improvements on
the properties.
Subsequently,
respondent
learned that
petitioner again
sold the same
 P a g e | 236

properties to one
Leona Viloria after
10 March 1993
and changed the
locks, rendering
the keys he gave
her useless.
Respondent thus
proceeded to
RSLAI to inquire
about the credit
investigation.
 P a g e | 237

However, she was

informed that
petitioner had
already paid the
amount due and
had taken back
the certificates of
title.

On 18 June
1993, respondent
filed a complaint
 P a g e | 238

for specific
performance,
declaration of
nullity of the
second sale and
damages against
petitioner and
Viloria. She
claimed that since
petitioner had
previously sold
the properties to
 P a g e | 239

her on 10 March
1993, he no
longer had the
right to sell the
same to Viloria.
Thus, petitioner
fraudulently
deprived her of
the properties.
Petitioner, on the
other hand,
insisted that
 P a g e | 240

respondent did
not have a cause
of
action against him
and consequently
prayed for the
dismissal of the
complaint.
He claimed that
since the
transaction was
subject to a
 P a g e | 241

condition (i.e.,
that
RSLAI approve the
assumption of
mortgage), they
only entered into
a contract to
sell. Inasmuch as
respondent did
apply for a loan
from RSLAI, the
condition did
 P a g e | 242

not arise.
Consequently, the
sale was not
perfected and he
could freely
dispose
of the properties.
Furthermore, he
made a counter-
claim for damages
as
respondent filed
 P a g e | 243

the complaint
allegedly with
gross and evident
bad faith.
ISSUE:
Whether the
contract entered
into by the parties
is a contract of
sale or
contract to sell.
 P a g e | 244

HELD:
Settled is the
rule that the seller
is obliged to
transfer title over
the
properties and
deliver the same
to the buyer. In
this regard, Article
1498 of
the Civil Code
 P a g e | 245

provides that, as a
rule, the
execution of a
notarized deed of
sale is equivalent
to the delivery of
a thing sold. In
this instance,
petitioner
executed a
notarized deed of
absolute sale in
 P a g e | 246

favor of
respondent.
Moreover, not
only did petitioner
turn over the keys
to the properties
to respondent, he
also authorized
RSLAI to receive
payment from
respondent and
release his
 P a g e | 247

certificates of title
to her. The totality
of petitioner’s
acts clearly
indicates that he
had unqualifiedly
delivered and
transferred
ownership of the
properties to
respondent.
Clearly, it was a
 P a g e | 248

contract of sale
the parties
entered into.
P a g e | 249
 P a g e | 250

METROBANK
 P a g e | 251

vs. EDGARDO
D. VIRAY
G.R. No.
162218,
February 25,
2010
FACTS:
On 7 July 1979,
Rico Shipping,
Inc., represented
by its President,
 P a g e | 252

Erlinda
Viray-Jarque,
together with
respondent
Edgardo D. Viray
(Viray), in their
own
personal capacity
and as solidary
obligors (the three
parties
collectively known
 P a g e | 253

as the debtors),
obtained two
separate loans
from petitioner
Metropolitan Bank

and Trust
Company (MBTC)
in the total
amount of
P250,000. The
 P a g e | 254

debtors executed
a promissory note
promising to pay
in four semi-
annual
installments of
P62,500 starting
on 23 January
1980, with 15%
interest and 2%
credit evaluation
and supervision
 P a g e | 255

fee per annum.

The two loans
were
subsequently
renewed and
secured by one
promissory note.
Under the note,
the debtors made
a total payment of
P134,054 leaving
a balance of
 P a g e | 256

P115,946 which
remained unpaid
despite demands
by MBTC.
On 5 June 1981,
the debtors
executed another
promissory note
and obtained a
loan from MBTC in
the amount of
P50,000, payable
 P a g e | 257

on 2 November
1981 with 16%
interest and 2%
credit evaluation
and supervision
fee per annum.
On the due date,
the debtors again
failed to pay the
loan despite
demands to pay
by MBTC.
 P a g e | 258

On 3 September
1981, the debtors
obtained a third
loan from MBTC in
the amount of
P50,000 payable
on 14 November
1981, with 16%
interest and 2%
credit evaluation
and supervision
fee per annum.
 P a g e | 259

Again, the debtors

failed and refused
to pay on due
date.
MBTC filed a
complaint for sum
of money against
the debtors with
the RTC of Manila,
Branch 4. On 28
April 1983, the
RTC of Manila
 P a g e | 260

rendered a
judgment in favor
of MBTC. On 21
September 1993,
the RTC of
Cagayan de Oro
City rendered its
decision in favor
of MBTC. Viray
filed an appeal
with the CA
alleging that the
 P a g e | 261

RTC of Cagayan
de Oro City
committed
reversible error in
ruling solely on
the issue of
redemption
instead of the
issue of validity of
the auction sale
being the lis mota
of the action.
 P a g e | 262

MBTC filed a
Motion for
Reconsideration
which was denied
in a Resolution
dated 13 February
2004. Hence, the
instant petition.
MBTC filed a
Motion for
Reconsideration
which was denied
 P a g e | 263

in a Resolution
dated 13 February
2004. Hence, the
instant petition.
ISSUE:
Whether or not
the five-year
prohibition period
against the
alienation or sale
of the property
provided in
 P a g e | 264

Section 118 of CA
141 does not
apply to an
obligation
contracted before
the grant or
issuance of the
free patent or
homestead.
HELD:
The law clearly
provides that
 P a g e | 265

lands which have

been acquired
under free patent
or homestead
shall not be
encumbered or
alienated within
five years from
the date of
issuance of the
patent or be liable
for the
 P a g e | 266

satisfaction of any
debt contracted
prior to the
expiration of the
period.
In the present
case, the three
loans were
obtained on
separate dates – 7
July 1979, 5 June
1981 and 3
 P a g e | 267

September 1981,
or several years
before the free
patents on the
lots were issued
by the
government to
respondent on 29
December 1982.
The RTC of Manila,
in a Decision
dated 28 April
 P a g e | 268

1983, ruled in
favor of petitioner
ordering the
debtors, including
respondent, to
pay jointly and
severally certain
amounts of
money. The
public auction
conducted by the
sheriff on the lots
 P a g e | 269

owned by
respondent
occurred on 12
October 1984.
For a period of
five years or from
29 December
1982 up to 28
December 1987,
Section 118 of CA
141 provides that
the lots
 P a g e | 270

comprising the
free patents shall
not be made liable
for the payment
of any debt until
the period of five
years
expires. In this
case, the
execution sale of
the lots occurred
less than two
 P a g e | 271

years after the

date of the
issuance of the
patents. This
clearly falls within
the five-year
prohibition period
provided in the
law, regardless of
the dates when
the loans were
incurred.
 P a g e | 272

In Artates v.
Urbi, we held that
a civil obligation
cannot be
enforced against
or satisfied out of,
the sale of the
homestead lot
acquired by the
patentee less than
five years before
the obligation
 P a g e | 273

accrued even if
the sale is
involuntary. For
purposes of
complying with
the law, it is
immaterial that
the satisfaction
of the debt by the
encumbrance or
alienation of the
land grant was
 P a g e | 274

made
voluntarily, as in
the case of an
ordinary sale, or
involuntarily, such
as that
effected through
levy on the
property and
consequent sale
at public auction.
In
 P a g e | 275

both instances,
the law would
have been
violated.
Section 118 of
CA 141, therefore,
is predicated on
public policy. Its
violation gives
rise to the
cancellation of the
grant and the
 P a g e | 276

reversion of the
land and its
improvements to
the government
at the instance of
the latter. The
provision that “nor
shall they become
liable to the
satisfaction of any
debt contracted
prior to the
 P a g e | 277

expiration of the
five-year period”
is mandatory and
any sale made in
violation of such
provision is void
and produces no
effect whatsoever
just like what
transpired in this
case. Clearly, it is
not within the
 P a g e | 278

competence of
any citizen to
barter away what
public policy by
law seeks to
preserve.
The Court
denied the
petition.
 P a g e | 279

CARMEN DEL
PRADO vs.
SPOUSES
ANTONIO L.
CABALLERO
 P a g e | 280

and
LEONARDA
CABALLERO
G.R. No.
148225, March
03, 2010
FACTS:
In a judgment
rendered on
February 1, 1985
in Cadastral Case
 P a g e | 281

No. N-6 (LRC Rec.

No. N-611), Judge
Juan Y. Reyes of
the Regional Trial
Court (RTC) of
Cebu City, Branch
14, adjudicated in
favor of Spouses
Antonio L.
Caballero and
Leonarda B.
Caballero several
 P a g e | 282

parcels of land
situated in Guba,
Cebu City, one of
which was
Cadastral Lot No.
11909, the
subject of this
controversy.
On May 21,
1987, Antonio
Caballero moved
for the issuance of
 P a g e | 283

the final decree of

registration for
their lots.
Consequently, on
May 25, 1987, the
same court,
through then
Presiding Judge
Renato C.
Dacudao, ordered
the National Land
Titles and Deeds
 P a g e | 284

Registration
Administration to
issue the decree
of registration and
the corresponding
titles of the lots in
favor of the
Caballeros.
On March 20,
1991, petitioner
filed in the same
cadastral
 P a g e | 285

proceedings a
“Petition for
Registration of
Document under
Presidential
Decree (P.D.)
1529” in
order that a
certificate of title
be issued in her
name, covering
the whole Lot
 P a g e | 286

No. 11909. In the

petition, petitioner
alleged that the
tenor of the
instrument
of sale indicated
that the sale was
for a lump sum or
cuerpo cierto, in
which
case, the vendor
was bound to
 P a g e | 287

deliver all that

was included
within said
boundaries even
when it exceeded
the area specified
in the contract.
Respondents
opposed, on the
main ground that
only 4,000 sq m of
Lot No. 11909 was
 P a g e | 288

sold to petitioner.
They claimed that
the sale was not
for a cuerpo
cierto. They
moved for the
outright dismissal
of the petition on
grounds of
prescription and
lack of
jurisdiction. After
 P a g e | 289

trial on the merits,

the court found
that petitioner
had established a
clear and positive
right to Lot No.
11909. The
intended sale
between the
parties was for a
lump sum, since
there was no
 P a g e | 290

evidence
presented that the
property was sold
for a price per
unit. It was
apparent that the
subject matter of
the sale was the
parcel of land,
known as
Cadastral Lot No.
11909, and not
 P a g e | 291

only a portion
thereof.
An appeal was
duly filed. On
September 26,
2000, the CA
promulgated the
assailed decision,
reversing and
setting aside the
decision of the
 P a g e | 292

RTC. Hence this

petition.
ISSUE:
Whether or not
the sale of the lot
is for a lump sum
or cuerpo cierto.
HELD:
In the instant
case, the deed of
sale is not one of
 P a g e | 293

a unit price
contract. The
parties agreed on
the purchase price
of P40,000.00 for
a predetermined
area of 4,000 sq
m, more or less,
bounded on the
North by Lot No.
11903, on the
East by Lot No.
 P a g e | 294

11908, on the
South by Lot Nos.
11858 & 11912,
and on the West
by Lot No. 11910.
In a contract of
sale of land in a
mass, the specific
boundaries stated
in the contract
must control over
any other
 P a g e | 295

statement, with
respect to the
area contained
within its
boundaries.
Black’s Law
Dictionary defines
the phrase “more
or less” to mean:
About;
substantially; or
approximately;
 P a g e | 296

implying that both

parties assume
the risk of any
ordinary
discrepancy. The
words are
intended to cover
slight or
unimportant in
accuracies in
quantity, Carter v.
Finch, 186 Ark.
 P a g e | 297

954, 57 S.W.2d
408; and are
ordinarily to be
interpreted as
taking care of
unsubstantial
differences or
differences of
small importance
compared to the
whole number of
items transferred.
 P a g e | 298

Clearly, the
discrepancy of
10,475 sq m
cannot be
considered a
slight difference in
quantity. The
difference in the
area is obviously
sizeable and too
substantial to be
overlooked. It is
 P a g e | 299

not a reasonable
excess or
deficiency that
should be deemed
included in the
deed of sale. We
take exception to
the avowed rule
that this Court is
not a trier of facts.
After an assiduous
scrutiny of the
 P a g e | 300

records, we lend
credence to
respondents’
claim that they
intended to sell
only 4,000 sq m of
the whole Lot No.
11909, contrary to
the findings of the
lower court. The
records reveal
that when the
 P a g e | 301

parties made an
ocular inspection,
petitioner
specifically
pointed to that
portion of the lot,
which she
preferred to
purchase, since
there were mango
trees planted and
a deep well
 P a g e | 302

thereon. After the

sale, respondents
delivered and
segregated the
area of 4,000 sq
m in favor of
petitioner by
fencing off the
area of 10,475 sq
m belonging to
them. Contracts
are the law
 P a g e | 303

between the
contracting
parties. Sale, by
its very nature is a
consensual
contract, because
it is perfected by
mere consent. The
essential
elements of a
contract of sale
are the following:
 P a g e | 304

(a) consent or
meeting of the
minds, that is,
consent to
transfer
ownership in
exchange for the
price; (b)
determinate
subject matter;
and (c) price
certain in money
 P a g e | 305

or its equivalent.
All these elements
are present in the
instant case.
More
importantly, we
find no reversible
error in the
decision of the CA.

Petitioner’s
recourse, by filing
 P a g e | 306

the petition for

registration in the
same
cadastral case,
was improper. It is
a fundamental
principle in land
registration
that a certificate
of title serves as
evidence of an
indefeasible and
 P a g e | 307

incontrovertible
title to the
property in favor
of the person
whose name
appears
therein. Such
indefeasibility
commences after
one year from the
date of entry of
the decree of
 P a g e | 308

registration.
Inasmuch as the
petition for
registration of
document did not
interrupt the
running of the
period to file the
appropriate
petition for review
and considering
that the
 P a g e | 309

prescribed one-
year period had
long
since expired, the
decree of
registration, as
well as the
certificate of title
issued in favor of
respondents, had
become
incontrovertible.
 P a g e | 310

Hence, the
petition is denied.

SEGUNDO G.
DIMARANAN vs.
HEIRS OF
 P a g e | 311

SPOUSES
ARAYATA
G.R. No.
184193, March
29, 2010
FACTS:
Respondents
Hermogenes Jr.,
Belen and Cecille
Arayata are the
legal heirs of
 P a g e | 312

Spouses
Hermogenes and
Flaviana Arayata
(Spouses
Arayata). They
claimed that on 5
September 1955,
Spouses Arayata
purchased a
28,496 square
meter lot in Tanza
(now known as
 P a g e | 313

Trece Martires
City), Cavite and
covered by TCT
No. (T-8718) RT-
7973 from
petitioner, by
virtue of a deed of
sale denominated
as “Bilihan ng
Lupa.” Evidence
of respondents
shows that as a
 P a g e | 314

result of the sale,

TCT No. T-8672 in
the name of
petitioner was
cancelled in favor
of Spouses
Arayata. Thus,
TCT No. T-8718
was issued. In
1959, all records
of the Register of
Deeds of Cavite
 P a g e | 315

were burned, thus

TCT No. T-8718
was reconstituted,
and as such,
became TCT No.
(T-8718) RT-7973.
In 1980,
respondents
learned that
petitioner was
able to secure TCT
No. T-115904
 P a g e | 316

under his name

from the Register
of Deeds of Cavite
covering the same
property.
Respondents
thereafter filed a
case before the
then Court of First
Instance of Cavite
against
petitioner. On 29
 P a g e | 317

December 1981,
the trial court
ordered the
cancellation of
TCT No. T-115904
under the name of
petitioner. A writ
of execution was
issued
accordingly.
However, records
are bereft of proof
 P a g e | 318

that the writ was

duly enforced.
Upon
investigation,
respondents
discovered that a
petition for
reconstitution was
filed by petitioner
in RTC, Branch 23
of Trece Martires
City
 P a g e | 319

on 18 March
1996. Two weeks
later or on 1 April
1996, the trial
court ordered
the reconstitution
of TCT No. T-
115904. The
claim of petitioner
based on his
reconstituted title
prompted
 P a g e | 320

respondents to file
a complaint for
Quieting of
Title and
Damages with
Prayer for TRO
and Writ of
Preliminary
Injunction before
the RTC of Trece
Martires City,
 P a g e | 321

docketed as Civil
Case No. TM-718.
Petitioner
countered that he
purchased the
subject property
from the
government and
paid in three (3)
installments, the
last of which was
in 15 September
 P a g e | 322

1954. He asserted
that TCT No. T-
115904 was
issued on 2
December 1980.
Petitioner
admitted that
when he found
out that his
original title in
custody of the
Register of Deeds
 P a g e | 323

of Cavite was
missing, he
sought the help of
a certain Abling
Lungkay to
reconstitute his
title, and as
reconstituted,
became TCT No.
(T-115904) RT-
004. Petitioner
maintained that
 P a g e | 324

the “Bilihan ng
Lupa” is a
spurious
document and
that TCT No. (T-
8718) RT-7973 is a
fake title having
no origin
whatsoever. He
pointed out that
he could not have
sold the property
 P a g e | 325

in 1955 because
he only legally
acquired the
property on 2
December 1980,
as reflected in TCT
No. T-115904. To
bolster his claim,
he averred that
TCT No. T 8672,
from which (T-
8718) RT-7973
 P a g e | 326

supposedly
emanated from,
was registered in
the names of
Maxima Timbang,
et. al., and not
that of
petitioner’s. In
sum, petitioner
argued that he is
the registered
owner of the
 P a g e | 327

subject land and

is in actual
possession
thereof until 7
February 1997
when
respondents,
aided by armed
men, invaded the
property.
Petitioner also
assailed the 29
 P a g e | 328

December 1981
Decision of the
trial court
nullifying TCT No.
T-115904 on the
ground that said
decision was
rendered without
proper service of
summons and
therefore, null and
void.
 P a g e | 329

On 21 February
2005, the trial
court rendered
judgment in favor
of respondents.
Aggrieved,
petitioner
appealed to the
Court of Appeals.
The appellate
court affirmed
with modification
 P a g e | 330

the trial court’s

decision by
deleting the
award of moral
damages and
attorney’s fees.
The Court of
Appeals sustained
the trial court’s
finding that the
sale between
Spouses Arayata
 P a g e | 331

and petitioner is
valid.
ISSUE:
Whether or not
the sale of the
disputed property
between
petitioner and
Spouses Arayata
was valid.
HELD:
 P a g e | 332

As a general
rule, factual
findings of the
trial court,
especially those
affirmed by the
Court of Appeals,
are conclusive on
this Court when
supported by
the evidence on
record. There are
 P a g e | 333

recognized
exceptions to this
rule, among
which are: (1) the
conclusion is
grounded on
speculations,
surmises or
conjectures; (2)
the inference is
manifestly
mistaken, absurd
 P a g e | 334

or impossible; (3)
there is grave
abuse of
discretion; (4) the
judgment is based
on a
misapprehension
of facts; (5) the
findings of facts
are conflicting; (6)
there
is no citation of
 P a g e | 335

specific evidence
on which the
factual findings
are based; (7)
the finding of
absence of facts is
contradicted by
the presence of
evidence on
record; (8) the
findings of the
Court of Appeals
 P a g e | 336

are contrary to
the findings of
the trial court; (9)
the Court of
Appeals
manifestly
overlooked certain
relevant
and undisputed
facts that, if
properly
considered, would
 P a g e | 337

justify a different
conclusion; (10)
the findings of the
Court of Appeals
are beyond the
issues of
the case; and (11)
such findings are
contrary to the
admissions of
both parties.
However, in the
 P a g e | 338

instant case,
petitioner failed to
demonstrate that
their
petition falls
under any one of
the above
exceptions. We
find no cogent
reason
to disturb the
findings of the
 P a g e | 339

RTC, which the

Court of Appeals
had affirmed.
Based on the
foregoing, it now
becomes
unnecessary to
dwell on the
issues raised by
petitioner, which
are a mere rehash
of their arguments
 P a g e | 340

before the
appellate court.
Such arguments
had in fact
already been
passed upon by
the Court of
Appeals.
We likewise
uphold the
deletion of the
award for moral
 P a g e | 341

damages and
attorney’s fees for
failure of
respondents to
substantiate their
claims. Hence, the

petition is denied.
 P a g e | 342

LYDIA L. ROA vs.

HEIRS OF
SANTIAGO
EBORA, et al.
G.R. No.
161137, March
15, 2010
FACTS:
On June 3, 1977,
during the
 P a g e | 343

pendency of G.R.
Nos.L-46418-19,
the heirs of Ebora
sold the entire Lot
18026-A to their
co-heir Josefa
Ebora Pacardo
(Josefa) and her
husband Rosalio
Pacardo for
P300,000. On the
same day, the
 P a g e | 344

spouses Pacardo
assigned the
property to Digno
Roa, married to
petitioner Lydia
Roa. The
corresponding
deeds of absolute
sale and
assignment were
inscribed on
original certificate
 P a g e | 345

of title (OCT) No.

P47 on July 5,
1977 under Entry
Nos. 55548 and
55549
respectively. On
August 11, 1977,
transfer certificate
of title (TCT) No. T-
24488 was issued
in the name of
Digno Roa. The
 P a g e | 346

issuance of TCT
No.T-24488 was
annotated in OCT
P-47 on the same
day under Entry
No. 56244.
Subsequently, the
heirs of Ebora,
including Josefa,
executed an
extrajudicial
settlement of the
 P a g e | 347

estate with
confirmation of
sale, assignment
and waiver of
rights, recognizing
the conveyance of
Lot 18026-A to
Josefa and
eventually to
Digno Roa.
On September
29, 1983, G.R.
 P a g e | 348

NosL-46418-19
was resolved
against Chacon
Enterprises and in
favor of the heirs
of Ebora. By
reason of this
decision, TCT
No.T-48097 was
issued in the
name of the heirs
of Ebora.
 P a g e | 349

Thereafter, or on
October 8, 1987,
the heirs of Ebora
again adjudicated
Lot
18026-A among
themselves, pro
indiviso. The
adjudication was
inscribed in TCT
No. T-48097 on
December 29,
 P a g e | 350

1987 under Entry

No. 126545.That
same day, a deed
of confirmation of
a prior
conveyance by
Josefa to
respondent
Samuel Sonnie
Lim of a 4,500 sq.
m. portion was
likewise inscribed
 P a g e | 351

on TCT No. T
48097. The
issuance of new
TCTs in the name
of Alejandro
Eborawas likewise
inscribed in TCT
No. T-48097 on
December 29,
1987. The lots
were thereafter
sold to various
 P a g e | 352

respondents
which resulted in
the issuance of
the following new
TCTs in the names
of the respective
vendees. All these
transactions
occurred without
petitioner’s
knowledge and
consent. In view
 P a g e | 353

of the death of
her husband,
Digno Roa,
petitioner filed a
petition for
annulment and
cancellation of
TCT No. 48097
and its derivative
titles in the RTC of
Misamis Oriental,
Cagayan de Oro
 P a g e | 354

City, Branch 23,

against
respondents. The
case was
docketed as Civil
Case No. 93492.
On June 27,
2003, the
Regional Trial
Court (RTC)
declared
respondents as
 P a g e | 355

innocent
purchasers for
value whose titles
to their respective
lots should be
respected, and
ordered the
cancellation of
petitioner’s title,
TCT No. T-24488.
Hence, this
petition for review
 P a g e | 356

on certiorari.
Petitioner imputes
error to the RTC
which declared
TCT No. T-48097
as void but upheld
the validity of its
derivative titles.
ISSUE:
Whether or not
respondents are
not innocent
 P a g e | 357

purchasers for
value.
HELD:
The Court
granted the
petition.
Petitioner’s title
was validly issued
and had
been undisturbed
for 10 years
before the title of
 P a g e | 358

respondents’
predecessor (the
Ebora heirs) was
issued. Petitioner
never relinquished
her title to
respondents
or to anybody
else. She
therefore
possessed a
superior right over
 P a g e | 359

those of
respondents,
notwithstanding
the fact that
respondents were
innocent
purchasers for
value. Moreover,
the heirs of Ebora
sold and
conveyed their
rights to and
 P a g e | 360

interests in Lot
18026-A to the
spouses Pacardo
who assigned the
property to the
husband of
petitioner as early
as June 3, 1977.
From then on, the
heirs of Ebora lost
all their rights and
interest over the
 P a g e | 361

property. Indeed,
the heirs of Ebora
even confirmed
the sale to Josefa
and the
assignment and
waiver of rights in
favor of
petitioner’s
husband in an
instrument dated
January 31, 1983.
 P a g e | 362

Thus, the heirs of

Ebora had nothing
to adjudicate
among
themselves on
October 8, 1987.
Neither did they
have anything to
transfer to the
vendees or
successors-in-
interest. As such,
 P a g e | 363

the transferees of
the heirs of Ebora
acquired no better
right than that of
the transferors.
The spring cannot
rise higher than
its source.
In this case, as
in Sanchez,
petitioner’s title
was validly issued
 P a g e | 364

and had been

undisturbed for 10
years before the
title of
respondents’
predecessor (the
Ebora heirs) was
issued. Petitioner
never relinquished
her title to
respondents
or to anybody
 P a g e | 365

else. She
therefore
possessed a
superior right over
those of
respondents,
notwithstanding
the fact that
respondents were
innocent
purchasers for
value. Moreover,
 P a g e | 366

the heirs of Ebora

sold and
conveyed their
rights to and
interests in Lot
18026-A to the
spouses Pacardo
who assigned the
property to the
husband of
petitioner as early
as June 3, 1977.
 P a g e | 367

From then on, the

heirs of Ebora lost
all their rights and
interest over the
property. Indeed,
the heirs of Ebora
even confirmed
the sale to Josefa
and the
assignment and
waiver of rights in
favor of
 P a g e | 368

petitioner’s
husband in an
instrument dated
January 31, 1983.
Thus, the heirs of
Ebora had nothing
to adjudicate
among
themselves on
October 8, 1987.
Neither did they
have anything to
 P a g e | 369

transfer to the
vendees or
successors-in-
interest. As such,
the transferees of
the heirs of Ebora
acquired no better
right than that of
the transferors.
The spring cannot
rise higher than
its source.
P a g e | 370
 P a g e | 371

MANUEL O.
FUENTES and
LETICIA L.
FUENTES,
CONRADO G.
ROCA,
ANNABELLE R.
vs. JOSON, ROSE
MARIE R.
CRISTOBAL and
 P a g e | 372

PILAR
MALCAMPO
G.R. No.
178902, April
21, 2010
FACTS:
On 11 October
1982, Sabina
Tarroza sold her
lot located in
Zamboanga City
 P a g e | 373

to her son,
Tarciano Roca,
under a deed of
absolute sale. In
1988, Tarciano
offered to sell the
lot to petitioner.
They signed an
agreement to sell,
but the parties left
their signed
agreement with
 P a g e | 374

Atty. Plagata who

allegedly went to
see Rosario,
Tarciano’s
estranged wife, in
one of his trips to
Manila and had
her sign an
affidavit of
consent. On 11
January 1989
Tarciano executed
 P a g e | 375

a deed of absolute
sale in favor of
the Fuentes
spouses. Tarciano
and Rosario
passed away.
In 1997, their
children, herein
respondents filed
an action for
annulment of
sale and
 P a g e | 376

reconveyance of
the land against
the Fuentes
spouses before
the RTC of
Zamboanga City.
The RTC, however,
dismissed the
case. It ruled that
the action had
already prescribed
since the ground
 P a g e | 377

cited by the Rocas

for annulling the
sale, forgery or
fraud, already
prescribed under
Article 1391 of the
Civil Code
four years after its
discovery. On
appeal, the Court
of Appeals
reversed the RTC
 P a g e | 378

decision. Hence,
this petition.
ISSUE:
Whether or not
the Rocas’ action
for the declaration
of nullity of that
sale to the
spouses already
prescribed.
HELD:
 P a g e | 379

The Fuentes
spouses of course
argue that the
RTC nullified the
sale to them
based on fraud
and that,
therefore, the
applicable
prescriptive
period should be
that which applies
 P a g e | 380

to fraudulent
transactions,
namely, four
years from its
discovery. Since
notice of the sale
may be deemed
given to the Rocas
when it was
registered with
the Registry of
Deeds in 1989,
 P a g e | 381

their right of
action already
prescribed in
1993. But, if there
had been a victim
of fraud in this
case, it would be
the Fuentes
spouses in that
they appeared to
have agreed to
buy the property
 P a g e | 382

upon an honest
belief that
Rosario’s written
consent to the
sale was genuine.
They had four
years then from
the time they
learned that her
signature had
been forged
within which to
 P a g e | 383

file an action to
annul the sale and
get back their
money plus
damages. They
never exercised
the right. Rosario
was not a victim
of fraud or
misrepresentation
. Her consent was
simply not
 P a g e | 384

obtained at all.
She lost nothing
since the sale
without her
written consent
was void.
Ultimately, the
Rocas ground for
annulment is not
forgery but the
lack of written
consent of their
 P a g e | 385

mother to the
sale. The forgery
is merely
evidence of lack
of consent.

SPS. FAUSTINO
AND JOSEFINA
GARCIA, et al.
vs. CA
 P a g e | 386

G.R. No.
172036, April
23, 2010
FACTS:
In 1993,
plaintiffs spouses
Faustino and
Josefina Garcia
and spouses
Meliton and Helen
Galvez and
defendant
 P a g e | 387

Emerlita dela Cruz

entered into a
Contract to Sell
wherein the latter
agreed to sell to
the former five (5)
parcels of land
situated at Tanza,
Cavite. At the
time of the
execution of the
said contract,
 P a g e | 388

three of the
subject lots,
namely, Lot Nos.
2776, 2767, and
2769 were
registered
in the name of
one Angel Abelida
from whom
defendant
allegedly acquired
said
 P a g e | 389

properties by
virtue of a Deed of
Absolute Sale
dated 31 March
1989. As agreed
upon, plaintiffs
shall make a down
payment upon
signing of the
contract. The
balance shall be
paid in three
 P a g e | 390

installments. On
its due date,
plaintiffs failed
to pay the last
installment.
Sometime in July
1995, plaintiffs
offered to pay
the unpaid
balance, which
had already been
delayed by one
 P a g e | 391

and a half year,

which defendant
refused to
accept. In 1995,
defendant sold
the same parcels
of land to
intervenor
Diogenes G.
Bartolome. In
order to compel
defendant to
 P a g e | 392

accept plaintiffs’
payment in full
satisfaction of the
purchase price
and, thereafter,
execute the
necessary
document of
transfer in their
favor, plaintiffs
filed
before the RTC a
 P a g e | 393

complaint for
specific
performance. The
trial court ruled
that
Dela Cruz’s
rescission of the
contract was not
valid. The trial
court applied
Republic Act No.
6552 (Maceda
 P a g e | 394

Law) and stated

that Dela Cruz is
not allowed to
unilaterally cancel
the Contract to
Sell. Dela Cruz
and Bartolome
appealed from
the judgment of
the trial court. The
appellate court
reversed the trial
 P a g e | 395

court’s
decision. Hence,
this petition.
ISSUE:
Whether or not
trial court erred in
applying Republic
Act 6552,
otherwise known
as the Maceda
Law.
 P a g e | 396

HELD:
The trial court
erred in applying
R.A. 6552, or the
Maceda Law, to
the present case.
The Maceda Law
applies to
contracts of sale
of real estate on
installment
payments,
 P a g e | 397

including
residential
condominium
apartments but
excluding
industrial lots,
commercial
buildings and
sales to tenants.
The subject lands,
comprising five
(5) parcels and
 P a g e | 398

aggregating
69,028 square
meters, do not
comprise
residential real
estate within the
contemplation of
the Maceda Law.
Moreover, even if
we apply the
Maceda Law to
the present case,
 P a g e | 399

petitioners’ offer
of payment to
Dela Cruz was
made a year and
a half after the
stipulated date.
This is beyond the
sixty-day grace
period under
Section 4 of the
Maceda Law.
Petitioners still
 P a g e | 400

cannot use the

second sentence
of Section 4 of the
Maceda Law
against Dela Cruz
for Dela Cruz’s
alleged failure to
give an effective
notice of
cancellation or
demand for
rescission
 P a g e | 401

because Dela Cruz

merely sent the
notice to the
address supplied
by petitioners in
the Contract to
Sell.

SPOUSES
ADOLFO
FERNANDEZ,
SR. vs.
 P a g e | 402

SPOUSES
MARTINES CO
G.R. No.
167390, July 26,
2010
FACTS:
The property
involved in this
case is Lot 978,
Cad. 439-D, with
an area of 1,209
 P a g e | 403

square meters,
located in Nalsian,
Calasiao,
Pangasinan.
Respondents’
predecessor-in-
interest, Emilio
Torres, married to
Pilar Torres,
applied for and
was granted a
free patent over
 P a g e | 404

the subject
property,
described as Lot
978, Cad. 439-D,
Calasiao Cadastre.
The said free
patent, issued on
June 10, 1996 by
President Fidel V.
Ramos, was
registered with
the Register of
 P a g e | 405

Deeds
for the Province of
Pangasinan, and
Katibayan ng
Orihinal na Titulo
Blg.P-35620
covering the
subject property
was issued in the
name of Emilio
Torres.
Petitioner Adolfo
 P a g e | 406

Fernandez filed an
Affidavit of
Adverse Claim
with the
Register of Deeds
of Pangasinan and
had the same
annotated on
Emilio Torres'
title on July 16,
1996.
 P a g e | 407

The adverse
claim was
eventually
cancelled when
Emilio Torres filed
an Affidavit of
Cancellation of
Adverse Claim
with the Register
of Deeds of
Pangasinan,
alleging, among
 P a g e | 408

others, that
adverse claimant
Adolfo Fernandez
failed to pursue
his claim in court,
and that he
executed an
Affidavit dated
March 20, 1996,
wherein
he admitted that
Emilio Torres is
 P a g e | 409

the actual
owner in
possession of the
subject property.
Thereafter, Emilio
Torres executed
an Affidavit of
Request for
Issuance of New
Transfer
Certificate of Title
dated September
 P a g e | 410

20, 1996 and filed

the same before
the Register of
Deeds of
Pangasinan.
On June 6, 1997,
the spouses
Emilio and Pilar
Torres sold the
subject property
to respondents
spouses Martines
 P a g e | 411

and Erlinda Co, as

evidenced by a
Deed of Absolute
Sale. TCT No. T-
216709 in the
name of Emilio
Torres was
cancelled and TCT
No. T-236032 was
issued in the
name of
respondents
 P a g e | 412

spouses Martines
and Erlinda Co.
Respondents took
actual physical
possession of the
property and
erected concrete
posts and barbed
wire fence
enclosing the
property.
 P a g e | 413

On August 14,
1997,
respondents
obtained a loan
from Solid Bank in
the amount of
P8,000,000.00,
and mortgaged
the subject
property to secure
the loan.
Subsequently, a
 P a g e | 414

portion of the
property,
denominated as
Lot 978-B, was
segregated and
made part of the
Judge Jose De
Venecia, Sr.
Highway covered
by TCT No. T-
236033 (Road
Lot). The
 P a g e | 415

remaining portion,
denominated as
Lot 978-A,
covered by TCT
No. T-236032, now
subject matter of
the controversy,
pertained to
respondents.
In order to
protect their
interest,
 P a g e | 416

respondents filed
a Complaint for
quieting
of title and
injunction with
damages before
the RTC of
Dagupan City, but
the
complaint was
dismissed for lack
of jurisdiction.
 P a g e | 417

On January 22,
2002,
respondents filed
a Complaint for
forcible
entry/ejectment
before the MTC in
Calasiao,
Pangasinan (trial
court). The trial
court rendered a
Decision in favor
 P a g e | 418

of respondents.
Respondents
appealed the
RTC’s Decision to
the Court of
Appeals via a
petition for
review.
ISSUE:
Who between
the parties is
entitled to the
 P a g e | 419

possession of Lot
978, Cad. 439-D
located in Nalsian,
Calasiao,
Pangasinan.
HELD:
The Court
upheld the
Decision of the
Court of Appeals,
reinstating the
decision of the
 P a g e | 420

trial court that

respondents are
entitled to the
possession of Lot
978, Cad. 439-D.
Upon the sale of
the subject
property by the
spouses Emilio
and Pilar Torres to
respondents,
respondents took
 P a g e | 421

possession of the
property, and a
new transfer
certificate of title
was issued in the
name of
respondents.
Hence,
respondents had
actual, physical
possession of the
subject property.
 P a g e | 422

Moreover, the
Court agrees with
the finding of the
trial court that
petitioners’
claim of being in
prior possession
of Lot 978 is
based on the false
assumption
that Lot 978 is
part of Lot No.
 P a g e | 423

661. Petitioners
claimed in their
Answer that
they have long
been in actual
possession of Lot
978 when the said
lot, including
Lot No. 661-A and
Lot No. 661-B
originally formed
part of an
 P a g e | 424

unirrigated
rice land recorded
as Cadastral Lot
No. 661 under Tax
Declaration No.
16357
issued in the
names of
petitioners.
P a g e | 425
 P a g e | 426

EVANGELINE D.
IMANI vs.
METROPOLITAN
BANK & TRUST
COMPANY
G.R. No.
187023,
November 17,
2010
 P a g e | 427

FACTS:
On August 24,
1981, Evangeline
D. Imani signed a
Continuing
Suretyship
Agreement in
favor of
respondent
Metropolitan Bank
& Trust Company
(Metrobank), with
 P a g e | 428

Cesar P. Dazo
Nieves Dazo,
Benedicto Dazo,
Cynthia Dazo,
Doroteo Fundales
Jr., and Nicolas
Ponce as her co-
sureties. As
sureties, they
bound themselves
to pay Metrobank
whatever
 P a g e | 429

indebtedness C.P.
Dazo Tannery Inc.
(CPDTI) incurs,
but not exceeding
six million pesos.
Later, CPDTI
obtained loans of
P100, 000 and
P63, 825.45. The
loans were
evidenced by
promissory notes
 P a g e | 430

signed by Cesar &

Nieves Dazo.
CPDTI defaulted in
the payment of its
loans. Metrobank
made several
demands but to
no avail. This
prompted
Metrobank to file
a collection suit
against CPDTI and
 P a g e | 431

its sureties
including
petitioner.
RTC rendered
decision in favour
of Metrobank.
CPDTI appealed to
the Court of
Appeals but it was
dismissed.
Metrobank then
filed Motion for
 P a g e | 432

Execution; it was
issued against
CPDTI and its co-
defendants. The
Sheriff levied on a
property covered
by TCT No. T-
27957 and
registered in the
name of the
petitioner. Public
auction was
 P a g e | 433

conducted and
the property was
awarded to
Metrobank as the
highest bidder.
Metrobank
undertook to
consolidate the
title, that spouses
Sin and
Evangeline Imani
be directed to
 P a g e | 434

surrender the
owner’s copy for
cancellation.
Petitioner
opposed the
motion arguing
that it belongs to
the conjugal
partnership and it
cannot be held
answerable to the
liabilities of CPDTI.
 P a g e | 435

Thus, petitioner
prayed for the
nullification of the
levy on execution
and the auction
sale as well as the
Certificate of Sale.
RTC declared the
property levied
upon as conjugal
which cannot be
held answerable
 P a g e | 436

for petitioner’s
personal liability.
The Court of
Appeals rendered
now the
challenged
decision declaring
sale by public
auction valid and
legal. Hence, this
recourse by the
petitioner,
 P a g e | 437

ISSUE:
Whether the
auction sale is
valid.
HELD:
We sustain the
ruling of the Court
of Appeals.
Indeed, all
property of
marriage is
 P a g e | 438

presumed to be
conjugal.
However, for this
presumption to
apply, the party
who invokes it
must first prove
that the property
was acquired
during the
marriage. Proof of
acquisition during
 P a g e | 439

the coverture is a
condition sine qua
non to the
operation of the
presumption in
favour of conjugal
partnership. Thus,
the time when the
property was
acquired is
material.
 P a g e | 440

The Certificate
of Title could not
support
petitioner’s
assertion. The fact
that the land was
registered in the
name of
Evangeline Dazo-
Imani married to
Sina Imani is no
proof that the
 P a g e | 441

property was
acquired during
the spouses’
coverture.
Acquisition of title
and registration
are two different
acts. It is well
settled that
registration does
not confer title
but merely
 P a g e | 442

confirms one
already existing.
Petitioner failed
to substantiate
her claim that the
property belongs
to conjugal
partnership. It
cannot rightfully
say that the Court
of Appeals
reversed the RTC
 P a g e | 443

ruling without
valid basis.

Petition is denied.
The decision of
the Court of
Appeals in
sustaining the
validity of Writ of
Execution, the
Auction Sale and
 P a g e | 444

the Certificate of
Sale are Affirmed.
P a g e | 445
 P a g e | 446

HYATT
ELEVATORS and
ESCALATORS
CORPORATION
vs. CATHEDRAL
HEIGHTS
BUILDING
COMPLEX
 P a g e | 447

ASSOCIATION,
INC.
G.R. No.
173881,
December 1,
2010
FACTS:
Petitioner Hyatt
Elevators and
Escalators
Corporation
 P a g e | 448

entered into an
"Agreement to
Service Elevators"
(Service
Agreement) with
respondent
Cathedral Heights
Building Complex
Association, Inc.,
where petitioner
was contracted to
maintain four
 P a g e | 449

passenger
elevators installed
in respondent's
building. Under
the Service
Agreement, the
duties and
obligations of
petitioner
included monthly
inspection,
adjustment and
 P a g e | 450

lubrication of
machinery,
motors, control
parts and
accessory
equipments,
including switches
and electrical
wirings. Section D
(2) of the Service
Agreement
provides that
 P a g e | 451

respondent shall
pay for the
additional charges
incurred in
connection with
the repair and
supply of parts.
Petitioner claims
that during the
period of April
1997 to July 1998
it had incurred
 P a g e | 452

expenses in the
maintenance and
repair of the
elevators and
demanded from
respondent the
payment of the
amount, however,
the latter refused
to pay.
Petitioner filed a
suit for collection
 P a g e | 453

of sum of money
before the RTC.
Respondent raised
the defense that
the elevator parts
were never
delivered and that
the repairs were
questionable. RTC
then ruled that
based on the
sales invoices
 P a g e | 454

presented by the
petitioner, a
contract of sale of
goods was
entered into
between the
parties and since
petitioner was
able to fulfill its
part, its
incumbent for the
respondent to
 P a g e | 455

perform its end of

the obligation and
that respondent’s
contention was a
mere
afterthought.
On appeal, CA
reversed RTC and
ruled that
respondent did
not give its
consent to the
 P a g e | 456

purchase of the
spare parts
allegedly installed
in the defective
elevators. Aside
from the absence
of consent, the CA
also held that
there was no
perfected contract
of sale because
there was no
 P a g e | 457

meeting of minds
upon the price. On
this note, the CA
ruled that the
Service
Agreement did not
give petitioner the
unbridled license
to purchase and
install any spare
parts and
demand, after the
 P a g e | 458

lapse of a
considerable
length of time,
payment of these
prices from
respondent
according to its
own dictated price
ISSUE:
Whether or not
there is a
perfected contract
 P a g e | 459

of sale between
the parties with
regards to the
spare parts
delivered and
installed on the
four elevators
under the parties’
agreement to
service elevators
as to render the
 P a g e | 460

respondent liable
for their prices.
HELD:
No. By the
contract of sale,
one of the
contracting
parties obligates
himself to transfer
the ownership of
and deliver a
determinate thing,
 P a g e | 461

and the other to

pay therefore a
price certain in
money or its
equivalent. The
absence of any of
the essential
elements will
negate the
existence of a
perfected contract
of sale. In the
 P a g e | 462

case at bar, the

CA ruled that
there was no
perfected contract
of sale between
petitioner and
respondent, to
wit: Aside from
the absence of
consent, there
was no perfected
contract of sale
 P a g e | 463

because there
was no meeting of
minds upon the
price. As the law
provides, the
fixing of the price
can never be left
to the discretion
of one of the
contracting
parties. In this
case, the absence
 P a g e | 464

of agreement as
to the price is
evidenced by the
lack of purchase
orders issued by
CHBCAI where the
quantity, quality
and price of the
spare parts
needed for the
repair of the
elevators are
 P a g e | 465

stated. In these
purchase orders,
it would show that
the quotation of
the cost of the
spare parts earlier
informed by Hyatt
is acceptable to
CHBCAI. However,
as revealed by the
records, it was
only Hyatt who
 P a g e | 466

determined the
price, without the
acceptance or
conformity of
CHBCAI. From the
moment the
determination of
the price is left to
the judgment of
one of the
contracting
parties, it cannot
 P a g e | 467

be said that there

has been an
arrangement on
the price since it
is not possible for
the other
contracting party
to agree on
something of
which he does not
know beforehand.
 P a g e | 468

Based on the
evidence
presented in the
RTC, it is clear to
this Court that
petitioner had
failed to secure
the necessary
purchase orders
from respondent's
Board of
Directors, or
 P a g e | 469

Finance Manager,
to signify their
assent to the
price of the parts
to be used in the
repair of the
elevators. In
Boston Bank of
the Philippines v.
Manalo, this Court
explained that the
fixing of the price
 P a g e | 470

can never be left

to the decision of
one of the
contracting
parties, to wit:
A definite
agreement as to
the price is an
essential element
of a binding
agreement to sell
personal or real
 P a g e | 471

property because
it seriously affects
the rights and
obligations of the
parties. Price is an
essential element
in the formation of
a binding and
enforceable
contract of sale.
The fixing of the
price can never be
 P a g e | 472

left to the decision

of one of the
contracting
parties. But a
price fixed by one
of the contracting
parties, if
accepted by the
other, gives rise
to a perfected
sale.
 P a g e | 473

There would
have been a
perfected contract
of sale had
respondent
accepted the price
dictated by
petitioner even if
such assent was
given after the
services were
rendered. There
 P a g e | 474

is, however, no
proof of such
acceptance on the
part of
respondent.
 P a g e | 475

CEBU BIONIC
BUILDERS
SUPPLY, INC.
and LYDIA SIA
vs.
DEVELOPMENT
BANK OF THE
PHILIPPINES, et
al.
G.R. No.
154366,
 P a g e | 476

November 17,
2010
FACTS:
On June 2, 1981,
the spouses Rudy
R. Robles, Jr. and
Elizabeth R.
Robles entered
into a mortgage
contract with DBP
in order to secure
a loan from the
 P a g e | 477

said bank in the

amount
of P500,000.00. T
he properties
mortgaged were a
parcel of land
situated in
Tabunoc, Talisay,
Cebu, which was
then covered by
Transfer
Certificate of Title
 P a g e | 478

(TCT) No. T- 47783

of the Register of
Deeds of Cebu,
together with all
the existing
improvements,
and the
commercial
building to be
constructed
thereon. On
October 28, 1981,
 P a g e | 479

Rudy Robles
executed
a contract of
lease in favor of
petitioner Cebu
Bionic Builders
Supply, Inc. with
no period as to its
expiration. The
above contract
was not registered
by the parties
 P a g e | 480

thereto with the

Registry of Deeds
of Cebu.
Subsequently, the
spouses Robles
failed to settle
their loan
obligation with
DBP. The latter
was, thus,
prompted to
effect extrajudicial
 P a g e | 481

foreclosure on the
subject properties.
DBP lone bidder in
the auction sale
and acquired the
same and a
certificate of sale
was then issued.
Petitioner notified
Cebu Bionic the
acquisition of DBP
and they
 P a g e | 482

requested the
latter to execute
another contract
of lease with DBP.
The rentals paid
by the latter were
remitted to DBP
even without the
new contract of
lease. Few months
later, DBP
announce its
 P a g e | 483

interest to sale
the said
properties and
also notify the
lease to its
invitation to
purchase the
property in
question.
However,
petitioners did not
submit any offer
 P a g e | 484

to purchase the
said properties.
Respondents Chip
Yap bought the
property and
informs the lessee
as to the transfer
of ownership and
ordering the latter
to vacate the
premises until the
end of 30 days.
 P a g e | 485

Despite the
notice, Cebu
Bionic continued
to pay rentals to
DBP. A final notice
of demand to
vacate was sent
to the petitioners
and then filed a
case for specific
performance,
cancellation of
 P a g e | 486

deed of sale with

damages with
prayer for TRO.
RTC rule in favor
of petitioner. CA
reverse, hence,
this petition.
ISSUE:
Whether or not
specific
performance may
prosper.
 P a g e | 487

HELD:
The well-
entrenched
principle is that a
lease from month-
to-month is with a
definite period
and expires at the
end of each
month upon the
demand to vacate
by the lessor. As
held by the Court
 P a g e | 488

of Appeals in the
assailed Amended
Decision, the
above-mentioned
lease contract
was duly
terminated by
DBP by virtue of
its letter dated
June 18, 1987.
We reiterate that
the letter
explicitly directed
the petitioners to
 P a g e | 489

come to the office

of the DBP if they
wished to enter
into a new lease
agreement with
the said bank.
Otherwise, if no
contract of lease
was executed
within 30 days
from the date of
the letter,
petitioners were
to be considered
 P a g e | 490

uninterested in
entering into a
new contract and
were thereby
ordered to vacate
the property. As
no new contract
was in fact
executed between
petitioners and
DBP within the 30-
day period, the
directive to
vacate, thus, took
 P a g e | 491

effect. DBP’s
letter dated June
18, 1987,
therefore,
constituted the
written notice that
was required to
terminate the
lease agreement
between
petitioners and
Rudy Robles.
From then on, the
petitioners’
 P a g e | 492

continued
possession of the
subject property
could be deemed
to be without the
consent of DBP.

Thusly,
petitioners’
assertion that
Article 1670 of the
Civil Code is not
applicable to the
instant case is
 P a g e | 493

correct. The
reason, however,
is not that the
existing contract
was continued by
DBP, but because
the lease was
terminated by
DBP, which
termination was
accompanied by a
demand to
petitioners to
vacate the
 P a g e | 494

premises of the
subject property.

Article 1670
states that “If at
the end of the
contract the
lessee should
continue enjoying
the thing leased
for fifteen days
with the
acquiescence of
the lessor, and
 P a g e | 495

unless a notice to
the contrary by
either party has
previously been
given, it is
understood that
there is an implied
new lease, not for
the period of the
original contract,
but for the time
established in
Articles 1682 and
1687. The other
 P a g e | 496

terms of the
original contract
shall be revived.”
In view of the
order to vacate
embodied in the
letter of DBP
dated June 18,
1987 in the event
that no new lease
contract is
entered into, the
petitioners’
continued
 P a g e | 497

possession of the
subject properties
was without the
acquiescence of
DBP, thereby
negating the
constitution of an
implied lease.
P a g e | 498
 P a g e | 499

SPOUSES
MARCOS R.
ESMAQUEL and
VICTORIA
SORDEVILLA vs.
MARIA
COPRADA
G.R. No.
152423,
December 15,
2010
 P a g e | 500

FACTS:
On February 24,
1997, petitioners,
spouses Marcos
Esmaquel and
Victoria Sordevilla
(Victoria) filed an
ejectment case
against
respondent Maria
V. Coprada
claiming that they
are the registered
 P a g e | 501

owners of a parcel
of land situated in
M.H. Del Pilar St.,
Barangay San
Miguel, Majayjay,
Laguna,
containing an area
of Two Hundred
Fifty-Three (253)
square meters
and covered by
Transfer
Certificate of Title
(TCT) No. T-93542.
 P a g e | 502

In 1945,
respondent was
able to persuade
the petitioners to
allow her and her
family to use and
occupy the land
for their
residence, under
the condition that
they will vacate
the premises
should petitioners
need to use the
 P a g e | 503

same. Since then,

the petitioners
never made an
attempt to drive
them away out of
pity, knowing that
respondent and
her eight children
have no other
place to live in.
Thus, petitioners
were forced to
send a demand
letter dated
 P a g e | 504

August 22, 1996,

giving respondent
until November
30, 1996 to
vacate the subject
premises.
However,
respondent still
ignored said
demand, which
prompted
petitioners to
bring a complaint
before the
 P a g e | 505

barangay
authorities. No
settlement was
reached, hence, a
certification to file
action in Court
was issued.
Petitioners were,
therefore,
constrained to
lodge an
ejectment case
against the
respondent before
 P a g e | 506

the MCTC. The

MCTC rendered
judgment
dismissing the
complaint. On
appeal, the
Regional Trial
Court (RTC)
reversed the
MCTC’s judgment.
Respondent filed a
Motion for
Reconsideration,
which was denied
 P a g e | 507

by the RTC.
Dissatisfied by the
Decision,
respondent filed
with the CA a
petition for review
with prayer for
temporary
restraining order
and preliminary
injunction where
the CA granted
respondent's
petition, reversed
 P a g e | 508

the Decision of
the RTC and
affirmed in toto
the Decision of
the MCTC.
Petitioners filed a
Motion for
Reconsideration,
which was denied
by the CA in a
Resolution.
ISSUE:
 P a g e | 509

Whether or not
the right to eject
the respondent by
the petitioners
over their
property is the
proper remedy
and such is barred
by laches.
HELD:
As decided in
the case of In
Bishop vs. Court
 P a g e | 510

of Appeals, as
registered owners
of the lots in
question, the
private
respondents have
a right to eject
any person
illegally occupying
their property.
This right is
imprescriptible.
Even if it be
supposed that
 P a g e | 511

they were aware

of the petitioners'
occupation of the
property, and
regardless of the
length of that
possession, the
lawful owners
have a right to
demand the
return of their
property at any
time as long as
the possession
 P a g e | 512

was unauthorized
or merely
tolerated, if at all.
This right is never
barred by laches.
Since
respondent's
occupation of the
subject lot is by
mere tolerance or
permission of the
petitioners,
without any
contract between
 P a g e | 513

them, respondent
is bound by an
implied promise
that she will
vacate the same
upon demand,
failing which a
summary action
for ejectment is
the proper
remedy against
her. It must be
stressed,
however, that the
 P a g e | 514

court's
adjudication of
ownership in an
ejectment case is
merely
provisional, and
affirmance of the
RTC's decision
would not bar or
prejudice an
action between
the same parties
involving title to
the property, if
 P a g e | 515

and when such

action is brought
seasonably before
the proper forum.
P a g e | 516
P a g e | 517
 P a g e | 518

EUGENE L. LIM
vs. BPI
AGRICULTURAL
DEVELOPMENT
BANK
G.R. No.179230,
March 09, 2010
FACTS:
The BPI
Agricultural
 P a g e | 519

Development
Bank (respondent)
granted Eugene L.
Lim (petitioner)
and his wife
Constancia a
revolving credit
line in the amount
of P7,000,000 on
account of which
they executed two
promissory notes:
 P a g e | 520

Promissory Note
No. 1000045-08
dated January 9,
1998 for
P2,000,000 which
matured on July 8,
1998, and
Promissory Note
No. 1000045-09
dated April 8,
1998 for
P5,000,000 which
 P a g e | 521

matured on
October 5, 1998.
Respondent also
granted petitioner
medium term
loans on account
of which he and
his wife executed
Promissory Note
No. 6000201-00
dated September
4, 1997 for
 P a g e | 522

P3,294,117.63
which matured on
August 19, 1999
and Promissory
Note No.
6000191-00 for
P2,000,000 dated
February 19, 1997
which matured on
February 19,
2002.
 P a g e | 523

To secure the
payment of their
loans, petitioner
and his wife
executed real
estate mortgages
covering
properties in
Ozamis
City. Petitioner
defaulted on the
first Promissory
 P a g e | 524

Note. And he had

an overdraft of
P16,000,000 with
respondent,
drawing
respondent to
send a final
demand letter
dated July 27,
1998 declaring
petitioner’s
availments under
 P a g e | 525

the revolving
credit line and
medium term
loans immediately
due and
payable and
demanding
settlement thereof
in five days.

Petitioner and
his wife failed to
 P a g e | 526

settle their
obligations,
hence, respondent
filed an
application for
extrajudicial
foreclosure of the
mortgages in
September 1999
before the Office
of the Sheriff of
the Regional Trial
 P a g e | 527

Court (RTC) of
Ozamis City.

By Order of
October 23, 1998,
Branch 15 of the
Ozamis City RTC
directed the
issuance of a
Temporary
Restraining Order.
After it conducted
 P a g e | 528

a hearing on
herein petitioner’s
application for a
writ of preliminary
injunction, the
trial court, by
Order of March
13, 2000, directed
the issuance of a
writ of preliminary
injunction, it
finding that “there
 P a g e | 529

are legal matters

to be looked into
with respect to
the application of
the acceleration
clause or default
provisions in the
promissory note
and great and
irreparable
damage will be
suffered by the
 P a g e | 530

plaintiff if the
mortgage will be
foreclosed and the
properties are
sold on public
auction.” Its
Motion for
Reconsideration
having been
denied,
respondent filed a
petition for
 P a g e | 531

certiorari before
the Court of
Appeals.

The Court of
Appeals, by
Decision of June
30, 2006, finding
that petitioner has
no clear right to
an injunctive
relief, lifted the
 P a g e | 532

preliminary
injunction issued
by the RTC,
hence, the
present petition
for review on
certiorari

ISSUE:
Whether or not
petitioner’s
availments under
 P a g e | 533

the revolving
credit line and
medium term
loans were
immediately due
and payable was
by virtue of the
cross-default
provision of
Promissory Note
No. 1000045-08 .
 P a g e | 534

HELD:
The Court
denied the
petition.

Respondent’s
declaration that
petitioner’s
availments under
the revolving
credit line and
medium term
 P a g e | 535

loans were
immediately due
and payable was
by virtue of the
cross-default
provision of
Promissory Note
No. 1000045-08.
Respondent’s
move to foreclose
the mortgages
after petitioner
 P a g e | 536

defaulted in his
obligation under
the promissory
note was thus in
accordance with
said provision
which petitioner
did not challenge.
The trial court
thus erred in
ordering the
issuance of the
 P a g e | 537

writ of preliminary
injunction on the
basis of its finding
that “there are
legal matters to
be looked into
with respect to
the application of
the acceleration
clause or default
provisions in the
 P a g e | 538

promissory
note.”
P a g e | 539
 P a g e | 540

PRISMA
CONSTRUCTION
&
DEVELOPMENT
CORPORATION
vs. MENCHAVEZ

G.R. No.
160545, March
09, 2010
FACTS:
 P a g e | 541

On December 8,
1993, Pantaleon,
the President and
Chairman of the
Board of PRISMA,
obtained a
P1,000,000.00
loan from the
respondent, with
a monthly interest
of P40,000.00
payable for six
 P a g e | 542

months, or a total
obligation of
P1,240,000.00 to
be paid within six
(6) months. To
secure the
payment of the
loan, Pantaleon
issued a
promissory
note. . Pantaleon
signed the
 P a g e | 543

promissory note in
his personal
capacity, and as
duly authorized by
the Board of
Directors of
PRISMA. The
petitioners failed
to completely pay
the loan within
the stipulated six
(6)-month period.
 P a g e | 544

As of January 4,
1997, the
petitioners had
already paid a
total of
P1,108,772.00.
However, the
respondent found
that the
petitioners still
had an
outstanding
 P a g e | 545

balance of
P1,364,151.00 as
of January 4,
1997, to which it
applied a 4%
monthly interest.
Thus, on August
28, 1997, the
respondent filed a
complaint for sum
of money with the
RTC to enforce the
 P a g e | 546

unpaid balance,
plus 4% monthly
interest,
P30,000.00 in
attorney’s fees,
P1,000.00 per
court appearance
and costs of suit.
In their Answer
dated October 6,
1998, the
petitioners
 P a g e | 547

admitted the loan

of P1,240,000.00,
but denied the
stipulation on the
4% monthly
interest, arguing
that the interest
was not provided
in the promissory
note. Pantaleon
also denied that
he made himself
 P a g e | 548

personally liable
and that he made
representations
that the loan
would be repaid
within six (6)
months.
The RTC
rendered a
Decision on
October 27, 2000
finding that the
 P a g e | 549

respondent issued
a check for
P1,000,000.00 in
favor of the
petitioners for a
loan that would
earn an interest
of 4% or
P40,000.00 per
month, or a total
of P240,000.00 for
a 6-month
 P a g e | 550

period.The
petitioners
elevated the case
to the CA via an
ordinary appeal
under Rule 41 of
the Rules of Court,
insisting that
there was no
express
stipulation on the
 P a g e | 551

4% monthly
interest.
The CA affirmed
the RTC’s finding
that PRISMA was a
mere
instrumentality of
Pantaleon that
justified the
piercing of the veil
of corporate
fiction. Thus, the
 P a g e | 552

CA modified the
RTC Decision by
imposing a 12%
per annum
interest,
computed from
the filing of the
complaint until
finality of
judgment, and
thereafter, 12%
 P a g e | 553

from finality until

fully paid.
ISSUE:
Whether or not
the parties agreed
to the 4% monthly
interest on the
loan. If so, does
the rate of
interest apply to
the 6-month
payment period
 P a g e | 554

only or until full

payment of the
loan?
HELD:
Obligations
arising from
contracts have
the force of law
between the
contracting
parties and should
be complied with
 P a g e | 555

in good faith.
When the terms of
a contract are
clear and leave no
doubt as to the
intention of the
contracting
parties, the literal
meaning of its
stipulations
governs. In such
cases, courts have
 P a g e | 556

no authority to
alter the contract
by construction or
to make a new
contract for the
parties; a court's
duty is confined to
the interpretation
of the contract the
parties made for
themselves
without regard to
 P a g e | 557

its wisdom or
folly, as the court
cannot supply
material
stipulations or
read into the
contract words
the contract does
not contain. It is
only when the
contract is vague
and ambiguous
 P a g e | 558

that courts are

permitted to
resort to the
interpretation of
its terms to
determine the
parties’ intent.
In the present
case, the
respondent issued
a check for
P1,000,000.00. In
 P a g e | 559

turn, Pantaleon, in
his personal
capacity and as
authorized by the
Board, executed
the promissory
note quoted
above. Thus,
the P1,000,000.00
loan shall be
payable within six
(6) months, or
 P a g e | 560

from January 8,
1994 up to June 8,
1994. During this
period, the loan
shall earn an
interest of
P40,000.00 per
month, for a total
obligation of
P1,240,000.00 for
the six-month
period. We note
 P a g e | 561

that this agreed

sum can be
computed at 4%
interest per
month, but no
such rate of
interest was
stipulated in the
promissory note;
rather a fixed sum
equivalent to this
 P a g e | 562

rate was agreed

upon.
Article 1956 of
the Civil Code
specifically
mandates that “no
interest shall be
due unless it has
been expressly
stipulated in
writing.” Under
this provision, the
 P a g e | 563

payment of
interest in loans or
forbearance of
money is allowed
only if: (1) there
was an express
stipulation for the
payment of
interest; and (2)
the agreement for
the payment of
interest was
 P a g e | 564

reduced in writing.
The concurrence
of the two
conditions is
required for the
payment of
interest at a
stipulated rate.
Thus, we held in
Tan v. Valdehueza
and Ching v.
Nicdao that
 P a g e | 565

collection of
interest without
any stipulation in
writing is
prohibited by law.
Applying this
provision, we find
that the interest
of P40,000.00 per
month
corresponds only
to the six (6)-
 P a g e | 566

month period of
the loan, or from
January 8, 1994 to
June 8, 1994, as
agreed upon by
the parties in the
promissory note.
Thereafter, the
interest on the
loan should be at
the legal interest
rate of 12% per
 P a g e | 567

annum, consistent
with our ruling in
Eastern Shipping
Lines, Inc. v. Court
of Appeals:

When the
obligation is
breached, and
it consists in
the payment of
a sum of
 P a g e | 568

money, i.e., a
loan or
forbearance of
money, the
interest due
should be that
which may
have been
stipulated in
writing.
Furthermore,
the interest
 P a g e | 569

due shall itself

earn legal
interest from
the time it is
judicially
demanded. In
the absence of
stipulation, the
rate of interest
shall be 12%
per annum to
be computed
 P a g e | 570

from default,
i.e., from
judicial or
extrajudicial
demand under
and subject to
the provisions
of Article 1169
of the Civil
Code.
 P a g e | 571

UNITED
PLANTERS
SUGAR MILLING
CO., INC.
(UPSUMCO) vs.
CA
G.R. No.
126890, March
09, 2010
FACTS:
 P a g e | 572

Petitioner,
engaged in the
business of milling
sugar, obtained
“takeoff loans”
from respondent
PNB to finance the
construction of a
sugar milling plant
which were
covered by a
Credit Agreement
 P a g e | 573

dated November
5, 1974. The said
loans were thrice
restructured
through
Restructuring
Agreements dated
June 24, 1982,
December 10,
1982, and May 9,
1984. The takeoff
loans were
 P a g e | 574

secured by a real
estate mortgage
over two parcels
of land where the
milling plant stood
and chattel
mortgages over
certain
machineries and
equipment. Also
included in the
condition for the
 P a g e | 575

takeoff loans,
petitioner agreed
to “open and/or
maintain a deposit
account with
[respondent PNB]
and the bank is
authorized at its
option to apply to
the payment of
any unpaid
obligations of the
 P a g e | 576

client any/and all

monies, securities
which may be in
its hands on
deposit.”
From 1984 to
1987, petitioner
contracted
another set of
loans from
respondent PNB,
denominated as
 P a g e | 577

“operational
loans,” for the
purpose of
financing its
operations, which
also contained
setoff clauses
relative to the
application of
payments from
petitioner’s bank
accounts. They
 P a g e | 578

were likewise
secured by pledge
contracts whereby
petitioner
assigned to
respondent PNB
all its sugar
produce for the
latter to sell and
apply the
proceeds to
satisfy the
 P a g e | 579

indebtedness
arising from the
operational loans.
Later,
respondent APT
and petitioner
agreed to an
“uncontested” or
“friendly
foreclosure” of the
mortgaged assets,
in exchange for
 P a g e | 580

petitioner’s waiver
of its right of
redemption. On
July 28, 1987,
respondent PNB
(as mortgagee)
and respondent
APT (as assignee
and transferee of
PNB’s rights, titles
and interests)
filed a Petition for
 P a g e | 581

Extrajudicial
Foreclosure Sale
with the Ex-Officio
Regional Sheriff of
Dumaguete City,
seeking to
foreclose on the
real estate and
chattel mortgages
which were
executed to
secure the takeoff
 P a g e | 582

loans. The
foreclosure sale
was conducted on
August 27, 1987
whereby
respondent APT
purchased the
auctioned
properties for
P450,000,000.00.
Seven (7) days
after the
 P a g e | 583

foreclosure sale,
or on September
3, 1987, petitioner
executed a Deed
of Assignment
assigned to
respondent APT
its right to redeem
the foreclosed
properties, in
exchange for or in
consideration of
 P a g e | 584

respondent APT
“condoning any
deficiency amount
it may be entitled
to recover from
the Petitioner
under the Credit
Agreement dated
November 5,
1974, and the
Restructuring
Agreements[s]
 P a g e | 585

dated June 24 and

December 10,
1982, and May 9,
1984,
respectively,
executed between
[UPSUMCO] and
PNB…” On the
same day, the
Board of Directors
of petitioner
approved the
 P a g e | 586

Board Resolution
authorizing
Joaquin
Montenegro, its
President, to enter
into said Deed of
Assignment.
Despite the
Deed of
Assignment,
petitioner filed a
complaint on
 P a g e | 587

March 10, 1989

for sum of money
and damages
against
respondents PNB
and APT before
the Regional Trial
Court (RTC) of
Bais City alleging
therein that
respondents had
illegally
 P a g e | 588

appropriated
funds belonging to
petitioner,
through the
following means:
(1) withdrawals
made from the
bank accounts
opened by
petitioner
beginning August
27, 1987 until
 P a g e | 589

February 12,
1990; (2) the
application of the
proceeds from the
sale of the sugar
of petitioner
beginning August
27, 1987 until
December 4,
1987; (3) the
payment from the
funds of petitioner
 P a g e | 590

with respondent
PNB for the
operating
expenses of the
sugar mill after
September 3,
1987, allegedly
upon the
instruction of
respondent APT
and with the
 P a g e | 591

consent of
respondent PNB.
The RTC
rendered
judgment in favor
of the petitioner.
On appeal, the CA
reversed and set
aside the RTC
Decision and ruled
that only the
“takeoff” loans
 P a g e | 592

and not the

operational loans
were condoned by
the Deed of
Assignment. In a
Decision dated
November 28,
2006 and
Resolution dated
July 11, 2007, the
Court (Third
Division) reversed
 P a g e | 593

and set aside the

CA Decision. The
case was
thereafter referred
to the Court en
banc which
reversed the
ruling of the Third
Division.
ISSUE:
Whether or not
only the “takeoff”
 P a g e | 594

loans and not the

operational loans
were condoned by
the Deed of
Assignment.

HELD:
After a careful
review of the
arguments in the
petitioner’s
motion for
reconsideration,
the Court finds
 P a g e | 595

the same to be
mere rehash of
the main points
already set forth
in the Court’s En
Banc Resolution of
April 2, 2009 and,
hence, denies the
same for lack of
merit.

In sum, the
Resolution of the
 P a g e | 596

Court En Banc
reinstating the
Decision of the CA
categorically ruled
that only its
takeoff loans, not
the operational
loans, were
condoned by the
Deed of
Assignment dated
September 3,
 P a g e | 597

1987. The Deed

of Assignment
expressly
stipulated the
particular loan
agreements which
were covered
therein. As such,
respondent APT
was entitled to
have the funds
from petitioner’s
 P a g e | 598

savings accounts
with respondent
PNB transferred to
its own account,
to the extent of
petitioner’s
remaining
obligations under
the operational
loans, less the
amount condoned
in the Deed of
 P a g e | 599

Assignment and
the
P450,000,000.00
proceeds of the
foreclosure. As
the En Banc
Resolution
explained,
respondent APT
had a right to go
after the bank
deposits of
 P a g e | 600

petitioner, in its
capacity as the
creditor of the
latter. Likewise,
respondent PNB
had the right to
apply the
proceeds of the
sale of petitioner’s
sugar and
molasses, in
satisfaction of
 P a g e | 601

petitioner’s
obligations.
Respondent PNB
never waived
these rights and
the same were
transferred to
respondent APT
(now PMO) by
virtue of the Deed
of Transfer
executed between
 P a g e | 602

them. Moreover,
there was no
conventional
subrogation since
such requires the
consent of the
original parties
and of the third
persons and there
was no evidence
that the consent
of petitioner (as
 P a g e | 603

debtor) was
secured when
respondent PNB
assigned its rights
to respondent
APT, and that the
assignment by
respondent PNB to
respondent APT
arose by mandate
of law and not by
the volition of the
 P a g e | 604

parties.
Accordingly, the
remand of the
case to the RTC
for computation of
the parties’
remaining
outstanding
balances was
proper.
The doctrine of
stare decisis et no
 P a g e | 605

quieta movere or
principle of
adherence to
precedents does
not apply to the
present case so as
to bar the Court
en banc from
taking cognizance
over the case
which rectified the
disposition of the
 P a g e | 606

case and reversed

and set aside the
Decision rendered
by a Division
thereof.
P a g e | 607
P a g e | 608
 P a g e | 609

ASIAN CATHAY
FINANCE AND
LEASING
CORPORATION
vs. SPOUSES DE
VERA
G.R. No.
186550, July 05,
2010
FACTS:
 P a g e | 610

On 22 October
1999, petitioner
Asian Cathay
Finance and
Leasing
Corporation
(ACFLC) extended
a loan of Eight
Hundred
Thousand Pesos
(P800,000.00) to
respondent
 P a g e | 611

Cesario Gravador,
with respondents
Norma de Vera
and Emma
Concepcion
Dumigpi as co-
makers. The loan
was payable in
sixty (60) monthly
installments of
P24,400.00 each.
To secure the
 P a g e | 612

loan, respondent
Cesario executed
a real estate
mortgage over his
property in Sta.
Maria, Bulacan,
covered by
Transfer
Certificate of Title
No. T-29234.
Respondents
paid the initial
 P a g e | 613

installment due in
November 1999.
However, they
were unable to
pay the
subsequent ones.
Consequently, on
February 1, 2000,
respondents
received a letter
demanding
payment of
 P a g e | 614

P1,871,480.00
within five (5)
days from receipt
thereof.
Respondents
requested for an
additional period
to settle their
account, but
ACFLC denied the
request. Petitioner
filed a petition for
 P a g e | 615

extrajudicial
foreclosure of
mortgage with the
Office of the
Deputy Sheriff of
Malolos, Bulacan.
On 07 April
2000,
respondents filed
a suit for
annulment of real
estate mortgage
 P a g e | 616

and promissory
note with
damages and
prayer for
issuance of a
temporary
restraining order
(TRO) and writ of
preliminary
injunction.
Respondents
claimed that the
 P a g e | 617

real estate
mortgage is null
and void. They
pointed out that
the mortgage
does not make
reference to the
promissory note
dated October 22,
1999. The
promissory note
does not specify
 P a g e | 618

the maturity date

of the loan, the
interest rate, and
the mode of
payment; and it
illegally imposed
liquidated
damages. The
real estate
mortgage, on the
other hand,
contains a
 P a g e | 619

provision on the
waiver of the
mortgagor’s right
of redemption, a
provision that is
contrary to law
and public policy.
Respondents
added that ACFLC
violated Republic
Act No. 3765, or
the Truth in
 P a g e | 620

Lending Act, in
the disclosure
statement that
should be issued
to the borrower.
Respondents,
thus, claimed that
ACFLC’s petition
for foreclosure
lacked factual and
legal basis, and
prayed that the
 P a g e | 621

promissory note,
real estate
mortgage, and
any certificate of
sale that might be
issued in
connection with
ACFLC’s petition
for extrajudicial
foreclosure be
declared null and
void. In the
 P a g e | 622

alternative,
respondents
prayed that the
court fix their
obligation at
P800,000.00 if the
mortgage could
not be annulled,
and declare as
null and void the
provisions on the
waiver of
 P a g e | 623

mortgagor’s right
of redemption and
imposition of the
liquidated
damages.
Respondents
further prayed for
moral and
exemplary
damages, as well
as attorney’s fees,
and for the
 P a g e | 624

issuance of a TRO
to enjoin ACFLC
from foreclosing
their property.
On 12 April
2000, the RTC
issued an Order,
denying
respondents’
application for
TRO, as the acts
sought to be
 P a g e | 625

enjoined were
already fait
accompli.
On 12 May 2000,
ACFLC filed its
Answer, denying
the material
allegations in the
complaint and
averring failure to
state a cause of
action and lack of
 P a g e | 626

cause of action,
as defenses.
ACFLC claimed
that it was merely
exercising its right
as mortgagor;
hence, it prayed
for the dismissal
of the complaint.
After trial, the
RTC rendered a
decision,
 P a g e | 627

dismissing the
complaint for lack
of cause of action.
Aggrieved,
respondents
appealed to the
CA. On 10 June
2008, the CA
rendered the
assailed Decision,
reversing the RTC.
It held that the
 P a g e | 628

amount of
P1,871,480.00
demanded by
ACFLC from
respondents is
unconscionable
and excessive.
ACFLC filed a
motion for
reconsideration,
but the CA denied
it.
 P a g e | 629

ISSUE:
Whether or not
the amount
claimed by ACFLC
is unconscionable.
HELD:
It is true that
parties to a loan
agreement have
wide latitude to
stipulate on any
 P a g e | 630

interest rate in
view of Central
Bank Circular No.
905, series of
1982, which
suspended the
Usury Law ceiling
on interest rate
effective January
1, 1983.
However, interest
rates, whenever
 P a g e | 631

unconscionable,
may be equitably
reduced or even
invalidated. In
several cases, this
Court had
declared as null
and void
stipulations on
interest and
charges that were
found excessive,
 P a g e | 632

iniquitous and
unconscionable.
Records show
that the amount
of loan obtained
by respondents on
October 22, 1999
was P800,000.00.
Respondents paid
the installment for
November 1999,
but failed to pay
 P a g e | 633

the subsequent
ones. On
February 1, 2000,
ACFLC demanded
payment of
P1,871,480.00. In
a span of three
months,
respondents’
obligation
ballooned by more
than
 P a g e | 634

P1,000,000.00.
ACFLC failed to
show any
computation on
how much interest
was imposed and
on the penalties
charged. Thus,
we fully agree
with the CA that
the amount
 P a g e | 635

claimed by ACFLC
is unconscionable.
 P a g e | 636

RIZAL
COMMERCIAL
BANKING
CORPORATION
vs. PEDRO P.
BUENAVENTURA
G.R. No.
176479,
October 6, 2010
 P a g e | 637

FACTS:
Respondent
Pedro P.
Buenaventura and
his first wife (now
deceased) owned
a townhouse unit
in Casa Nueva
Manila
Townhouse,
Quezon City. On
 P a g e | 638

December 27,
1994, they
obtained a loan
from petitioner. As
security for the
loan, they
mortgaged the
townhouse to
petitioner. Under
the loan
agreement,
respondent was to
 P a g e | 639

pay RCBC a fixed

monthly payment
with adjustable
interest for five
years. On April
19, 1999,
respondent
received a Notice
of Public Auction
of the mortgaged
townhouse unit.
He wrote Atty.
 P a g e | 640

Saturnino
Basconcillo, the
notary public
conducting the
auction sale,
demanding the
cancellation of the
auction sale.
However, the
notary public
proceeded with
the public sale on
 P a g e | 641

May 25, 1999,

where RCBC
emerged as the
highest bidder.
The Notary
Public’s Certificate
of Sale was
registered with
the Register of
Deeds on
September 28,
2000.
 P a g e | 642

On September
18, 2001,
respondent filed
with the Regional
Trial Court (RTC) of
Quezon City a
complaint for
Annulment of Sale
and Damages
against RCBC,
notary public
Saturnino
 P a g e | 643

Basconcillo, and
the Registrar of
Deeds of Quezon
City. RCBC failed
to timely file an
Answer and was
declared in
default.

ISSUE:
Whether or not
the respondents
 P a g e | 644

defaulted in the
payment of their
loan obligations.
HELD:
The RTC and the
CA both found
that respondent
was not in default
on the monthly
payments of his
loan obligation.
These findings are
 P a g e | 645

supported by the
evidence on
record.
Foreclosure is
valid only when
the debtor is in
default in the
payment of his
obligation. It is a
necessary
consequence of
non-payment of
 P a g e | 646

mortgage
indebtedness. As
a rule, the
mortgage can be
foreclosed only
when the debt
remains unpaid at
the time it is
due. In a real
estate mortgage,
when the principal
obligation is not
 P a g e | 647

paid when due,

the mortgagee
has the right to
foreclose on the
mortgage, to have
the property
seized and sold,
and to apply the
proceeds to the
obligation. RCBC’s
own Amortization
Schedule readily
 P a g e | 648

shows the
applicability of
Article 1176 of the
Civil Code, which
states:
Art. 1176. The
receipt of the
principal by the
creditor, without
reservation with
respect to the
interest, shall give
 P a g e | 649

rise to the
presumption that
the said interest
has been
paid.
Respondent’s
passbooks
indicate that RCBC
continued to
receive his
payments even
after it made
 P a g e | 650

demands for him

to pay his past
due accounts, and
even after the
auction sale.
RCBC cannot deny
receipt of the
payments, even
when it claims
that the deposits
were “not
withdrawn.” It is
 P a g e | 651

not respondent’s
fault that RCBC
did not withdraw
the money he
deposited. His
obligation under
the mortgage
agreement was to
deposit his
payment in the
savings account
he had opened for
 P a g e | 652

that purpose, in
order that RCBC
may debit the
amount of his
monthly liabilities
therefrom. He
complied with his
part of the
agreement.
This bolsters the
conclusion of the
CA that
 P a g e | 653

respondent had
no unpaid
installments and
was not in default
as would warrant
the application of
the acceleration
clause and the
subsequent
foreclosure and
auction sale of the
property.
P a g e | 654
P a g e | 655
 P a g e | 656

HONGKONG and
SHANGHAI
BANKING CORP.,
LTD. STAFF
RETIREMENT
PLAN vs. SPS.
BIENVENIDO
 P a g e | 657

and EDITHA
BROQUEZA
G.R. No.
178610,
November 17,
2010
FACTS:
Petitioners are
employees of
HSBC and also
one of the
 P a g e | 658

members under
the retirement
plan of the latter.
Loans were
granted through
automatic salary
deductions. a
labor dispute
arose between
HSBC and its
employees. Major
ity of HSBC’s
 P a g e | 659

employees were
terminated,
among whom are
petitioners Editha
Broqueza and Fe
Gerong. The
employees then
filed an illegal
dismissal case
before the
National Labor
Relations
 P a g e | 660

Commission
(NLRC) against
HSBC. Because of
their dismissal,
petitioners were
not able to pay
the monthly
amortizations of
their respective
loans. Thus,
respondent
HSBCL-SRP
 P a g e | 661

considered the
accounts of
petitioners
delinquent. Dema
nds to pay the
respective
obligations were
made upon
petitioners, but
they failed to pay.
Civil actions
against the
 P a g e | 662

petitioners were
filed. MTC ruled in
favor of HSBC
which the latter
appealed. RTC
affimed MeTc
decision in toto.
The RTC ruled that
Gerong and Editha
Broqueza’s
termination from
employment
 P a g e | 663

disqualified them
from availing of
benefits under
their retirement
plans. As a
consequence,
there is no longer
any security for
the loans. CA
reversed ruled
that the HSBCL-
SRP’s complaints
 P a g e | 664

for recovery of
sum of money
against Gerong
and the spouses
Broqueza are
premature as the
loan obligations
have not yet
matured. Thus,
no cause of action
accrued in favor
of HSBCL-SRP.
 P a g e | 665

ISSUE:
The Court of
Appeals has
decided a
question of
substance in a
way not in accord
with law and
applicable
decisions of this
Honorable Court
HELD:
 P a g e | 666

There is no date
of payment in the
promissory notes.
Accordingly, the
creditor has the
right to demand
immediate
payment. Article
1178 of the Civil
Code applies. The
fact that the
creditor was
 P a g e | 667

content with the

prior monthly
check-off from the
debtor’s salary is
of no moment.
Once the debot
defaulted, the
creditor could
make a demand
to enforce a pure
obligation. Thus,
HSBCL-SRP has a
 P a g e | 668

legal right to
demand
immediate
settlement of the
unpaid balance
because of
Gerong and Editha
Broqueza’s
continued default
in payment and
their failure to
provide new
 P a g e | 669

security for their

loans.

PCI LEASING
and FINANCE,
INC. vs. TROJAN
METAL
 P a g e | 670

INDUSTRIES
INCORPORATED,
WALFRIDO
DIZON,
ELEZABETH
DIZON, and
JOHN DOE
G.R. No.
176381,
December 15,
2010
FACTS:
 P a g e | 671

Sometime in
1997, respondent
Trojan Metal
Industries, Inc.
(TMI) came to
petitioner PCI
Leasing and
Finance, Inc.
(PCILF) to seek a
loan. PCILF and
TMI immediately
executed deeds of
sale evidencing
TMI’s sale to PCILF
 P a g e | 672

of the various
equipment in
consideration of
the total amount
of P 2,865,070.00.
PCILF and TMI
then entered into
a lease agreement
where TMI issued
postdated checks
representing 24
monthly
installments. The
lease agreement
 P a g e | 673

required TMI to
give PCILF a
guaranty deposit
of P1,030,350.00,
which would serve
as security for the
timely
performance of
TMI’s obligations
under the lease
agreement, to be
automatically
forfeited should
TMI return the
 P a g e | 674

leased equipment
before the
expiration of the
lease agreement.
PCILF filed in the
Regional Trial
Court (Branch 79)
of Quezon City a
complaint against
TMI, spouses
Dizon, and John
Doe (collectively
referred to as
"respondents"
 P a g e | 675

hereon) for
recovery of sum
of money and
personal property
with prayer for the
issuance of a writ
of replevin. The
RTC issued the
writ of replevin.
However, the
Court of Appeals
ruled that the sale
with lease
agreement was in
 P a g e | 676

fact a loan
secured by chattel
mortgage. The
Court of Appeals
set aside the
Decision of the
RTC.
ISSUE
Whether or not
the sale with
lease agreement
the parties
entered into was a
 P a g e | 677

financial lease or
a loan secured by
chattel mortgage.
HELD:
The petition
lacks merit. Had
the true
transaction
between the
parties been
expressed in a
proper
instrument, it
 P a g e | 678

would have been

a simple loan
secured by a
chattel mortgage,
instead of a
simulated
financial leasing.
Thus, upon TMI’s
default, PCILF was
entitled to seize
the mortgaged
equipment, not as
owner but as
creditor-
 P a g e | 679

mortgagee for the

purpose of
foreclosing the
chattel mortgage.
PCILF’s sale to a
third party of the
mortgaged
equipment and
collection of the
proceeds of the
sale can be
deemed in the
exercise of its
right to foreclose
 P a g e | 680

the chattel
mortgage as
creditor-
mortgagee. The
Court of Appeals
correctly ruled
that the
transaction
between the
parties was simply
a loan secured by
a chattel
mortgage.
However, in
 P a g e | 681

reckoning the
amount of the
principal
obligation, the
Court of Appeals
should have taken
into account the
proceeds of the
sale to PCILF less
the guaranty
deposit paid by
TMI. After
deducting
payments made
 P a g e | 682

by TMI to PCILF,
the balance plus
applicable interest
should then be
applied against
the aggregate
cash already in
PCILF’s hands.
 P a g e | 683

MAXWELL
HEAVY
EQUIPMENT
CORPORATION
vs. ERIC
UYCHIAOCO YU
G.R. No.
179395,
December 15,
2010
FACTS:
Maxwell
obtained loans
 P a g e | 684

from BPI, G.
Araneta Avenue
Branch, in the
total sum of
P8,800,000.00
covered by two
Promissory Notes
and secured by a
real estate
mortgage over
two lots registered
in Yu’s name.
Maxwell defaulted
in the payment of
 P a g e | 685

the loans, forcing

Yu to pay BPI
P8,888,932.33
representing the
principal loan
amounts with
interest, through
funds borrowed
from his mother,
Mina Yu, to
prevent the
foreclosure of his
real properties.
Thereafter, Yu
 P a g e | 686

demanded
reimbursement
from Maxwell of
the entire amount
paid to BPI.
However, Maxwell
failed to
reimburse Yu.
Consequently, Yu
filed with the trial
court a complaint
for sum of money
and damages. The
trial court ruled in
 P a g e | 687

favor of Yu. On
appeal, the Court
of Appeals
affirmed with
modification the
ruling of the trial
court, by deleting
the award of
attorney’s fees
and specifying the
rate of interest on
the allegedly
reimbursable
amount from
 P a g e | 688

Maxwell. Hence,
this petition.
ISSUE:
Whether or not
the transactions
with BPI were
accommodation
loans solely for
Yu’s benefit.
HELD:
The petition
lacks merit. The
appellate court
 P a g e | 689

concurred with
the trial court that
Maxwell is the
principal borrower
since it was
Maxwell which
paid interest on
the loans.
Additionally,
various
documents
designated
Maxwell as
borrower and
 P a g e | 690

communications
demanding
payment of the
loans sent by BPI
were addressed to
Maxwell as the
borrower, with Yu
indicated only as
the owner of the
real properties as
loan collateral.
Furthermore, we
affirm the finding
that Maxwell
 P a g e | 691

gravely failed to
substantiate its
claim that the
loans were purely
for Yu’s benefit.
Maxwell’s
evidence
consisting of the
testimony of
Caroline Yu, Yu’s
spouse and then
president of
Maxwell, was
uncorroborated.
 P a g e | 692

While Maxwell is
the real debtor, it
was Yu who paid
BPI the entire
amount of
Maxwell’s loans.
Hence, contrary to
Maxwell’s view,
Article 1236 of the
Civil Code applies.
This provision
reads:
 P a g e | 693

The creditor is
not bound to
accept payment
or performance by
a third person
who has no
interest in the
fulfillment of the
obligation, unless
there is a
stipulation to the
contrary. Whoever
pays for another
may demand from
 P a g e | 694

the debtor what

he has paid,
except that if he
paid without the
knowledge or
against the will of
the debtor, he can
recover only
insofar as the
payment has been
beneficial to the
debtor.
 P a g e | 695

The above
provision grants
the plaintiff (Yu)
the right to
recovery and
creates an
obligation on the
part of the
defendant
(Maxwell) to
reimburse the
plaintiff. In this
case, Yu paid BPI
P8,888,932.33,
 P a g e | 696

representing the
amount of the
principal loans
with interest,
thereby
extinguishing
Maxwell’s loan
obligation with
BPI. Pursuant to
Article 1236 of the
Civil Code,
Maxwell, which
was indisputably
benefited by Yu’s
 P a g e | 697

payment, must
reimburse Yu the
same amount of
P8,888,932.33

ASSET
BUILDERS
CORPORATION
vs.
STRONGHOLD
INSURANCE
COMPANY,
INCORPORATED
 P a g e | 698

G.R. No.
187116,
October 18,
2010

FACTS:

On April 28,
2006, Asset
Builders
Corporation (ABC)
entered into an
agreement with
 P a g e | 699

Lucky Star Drilling

& Construction
Corporation
(Lucky Star) as
part of the
completion of its
project to
construct the ACG
Commercial
Complex on “NHA
Avenue corner
Olalia Street,
Barangay Dela
Paz, Antipolo
 P a g e | 700

City.” Lucky Star

was to supply
labor, materials,
tools, and
equipment
including
technical
supervision to drill
one (1)
exploratory
production well on
the project site.
The total contract
price for the said
 P a g e | 701

project was
P1,150,000.00.

To guarantee
faithful
compliance with
their agreement,
Lucky Star
engaged
respondent
Stronghold which
issued two (2)
bonds in favor of
petitioner.
 P a g e | 702

On May 20,
2006, ABC paid
Lucky Star
P575,000.00 (with
2% withholding
tax) as advance
payment,
representing 50%
of the contract
price. Lucky Star,
thereafter,
commenced the
drilling work. By
July 18, 2006, just
 P a g e | 703

a few days before

the agreed
completion date,
Lucky Star
managed to
accomplish only
ten (10) % of the
drilling work. On
the same date,
petitioner sent a
demand letter to
Lucky Star for the
immediate
completion of the
 P a g e | 704

drilling work with

a threat to cancel
the agreement
and forfeit the
bonds should it
still fail to
complete said
project within the
agreed period. On
August 3, 2006,
ABC sent a Notice
of Rescission of
Contract with
Demand for
 P a g e | 705

Damages to Lucky
Star.
ISSUE:
Whether or not
respondent
insurance
company, as
surety, can be
held liable under
its bonds.
HELD:
The court held in
the affirmative.
 P a g e | 706

Respondent, along
with its principal,
Lucky Star, bound
itself to the
petitioner when it
executed in its
favor surety and
performance
bonds. The
contents of the
said contracts
clearly establish
that the parties
entered into a
 P a g e | 707

surety agreement
as defined under
Article 2047 of the
New Civil Code.
Thus:
Art. 2047. By
guaranty a
person, called the
guarantor, binds
himself to the
creditor to fulfill
the obligation of
the principal
 P a g e | 708

debtor in case the

latter should fail
to do so.
As provided in
Article 2047, the
surety undertakes
to be bound
solidarily with the
principal obligor.
That undertaking
makes a surety
agreement an
ancillary contract
 P a g e | 709

as it presupposes
the existence of a
principal
contract.
Although the
contract of a
surety is in
essence
secondary only to
a valid principal
obligation, the
surety becomes
liable for the debt
or duty of another
 P a g e | 710

although it
possesses no
direct or personal
interest over the
obligations nor
does it receive
any benefit
therefrom. Let it
be stressed that
notwithstanding
the fact that the
surety contract is
secondary to the
principal
 P a g e | 711

obligation, the
surety assumes
liability as a
regular party to
the undertaking.
In the case at
bench, when
Lucky Star failed
to finish the
drilling work
within the agreed
time frame
despite
 P a g e | 712

petitioner’s
demand for
completion, it was
already in delay.
Due to this
default, Lucky
Star’s liability
attached and, as a
necessary
consequence,
respondent’s
liability under the
surety agreement
arose.
P a g e | 713
P a g e | 714
 P a g e | 715

PNB vs.
CORPUZ
G.R. No.
180945,
February 12,
2010
FACTS:
Sometime in
October 1974
respondent
Mercedes Corpuz
 P a g e | 716

delivered her
owner’s duplicate
copy of TCT to
Dagupan City
Rural Bank as
security against
any liability she
might incur as its
cashier. She later
left her job and
went to the United
States. On
October 24, 1994
the rural bank
 P a g e | 717

where she worked

cancelled its lien
on Corpuz’s title,
she having
incurred no
liability to her
employer. Without
Corpuz’s
knowledge and
consent, however,
Natividad Alano,
the rural bank’s
manager, turned
over Corpuz’s title
 P a g e | 718

to Julita Camacho
and Amparo
Callejo.
Conniving with
someone from the
assessor’s office,
Alano, Camacho,
and Callejo
prepared a
falsified deed of
sale, making it
appear that
Corpuz sold her
 P a g e | 719

land to one "Mary

Bondoc."They
caused the
registration of the
deed of sale.
About a month
later the trio
executed another
fictitious deed of
sale with "Mary
Bondoc" selling
the property to
the spouses Rufo
and Teresa
 P a g e | 720

Palaganas. Nine
days later the
Palaganases
executed a deed
of sale in favor of
spouses Virgilio
and Elena
Songcuan
resulting in the
issuance of a new
TCT. Finally, four
months later or on
1995 the
Songcuans took
 P a g e | 721

out a loan of P1.1

million from
petitioner
Philippine National
Bank (PNB) and,
to secure
payment, they
executed a real
estate mortgage
on their title.
Before granting
the loan, the PNB
had the title
verified and the
 P a g e | 722

property
inspected.
ISSUE:
Whether or not
petitioner PNB is a
mortgagee in
good faith,
entitling it to its
lien on the title to
the property in
dispute.
HELD:
 P a g e | 723

As a rule, the
Court would not
expect a
mortgagee to
conduct an
exhaustive
investigation of
the history of the
mortgagor’s title
before he extends
a loan. But
petitioner PNB is
not an ordinary
mortgagee; it is a
 P a g e | 724

bank. Banks are

expected to be
more cautious
than ordinary
individuals in
dealing with
lands, even
registered ones,
since the business
of banks is
imbued with
public interest. It
is of judicial notice
that the standard
 P a g e | 725

practice for banks

before approving
a loan is to send a
staff to the
property offered
as collateral and
verify the
genuineness of
the title to
determine the real
owner or owners.
One of the CA’s
findings in this
 P a g e | 726

case is that in the

course of its
verification,
petitioner PNB
was informed of
the previous TCTs
covering the
subject property.
And the PNB has
not categorically
contested this
finding. It is
evident from the
faces of those
 P a g e | 727

titles that the

ownership of the
land changed
from Corpuz to
Bondoc, from
Bondoc to the
Palaganases, and
from the
Palaganases to
the Songcuans in
less than three
months and
mortgaged to PNB
within four
 P a g e | 728

months of the last

transfer.

SPOUSES
BASILIO and
NORMA HILAGA
vs. RURAL BANK
OF ISULAN
(COTABATO,
 P a g e | 729

INC., AS
REPRESENTED
BY ITS
MANAGER)
G.R. No.
179781, April
07, 2010
FACTS:
Petitioners
Basilio and Norma
B. Hilaga were the
owners of a parcel
 P a g e | 730

of land, identified
as Lot No. 172-A,
Pls-212-D-7,
located at Barrio
Lopez Jaena,
Municipality of
Norala, Province
of South Cotabato
and containing an
area of 46,868
square meters,
more or less.
 P a g e | 731

On March 16,
1970, petitioners
obtained a loan
from respondent
Rural Bank of
Isulan (Cotabato)
Inc., in the
amount of
P2,500.00. To
secure the loan,
they executed a
Real Estate
 P a g e | 732

Mortgage over the

above-mentioned
property which
was then covered
only by Tax
Declaration No.
5537. When
petitioners failed
to pay their
obligation when it
became due on
March 19, 1971,
 P a g e | 733

the respondent
bank initiated
foreclosure
proceedings. The
subject property
was sold at a
public auction by
the Provincial
Sheriff on April 20,
1977 and a
Certificate of
Extrajudicial Sale
 P a g e | 734

was issued in
favor of the Rural
Bank of Isulan
(Cotabato) Inc. as
the highest
bidder. The
respondent bank
then took
possession of the
foreclosed
property.
Meanwhile,
 P a g e | 735

unknown to
respondent bank,
a Free Patent title
(Original
Certificate of Title
No. P-19766) had
been issued in
favor of
petitioners on
August 4, 1976 or
before the
foreclosure sale.
 P a g e | 736

On September
21, 1994, or more
than seventeen
(17) years after
the foreclosure
sale, petitioner
Basilio Hilaga sent
a letter to the
respondent bank’s
lawyer, the late
Atty. Ismail
Arceno, conveying
 P a g e | 737

his desire to
redeem the
subject property.
When the letter
remained
unanswered,
petitioners,
through their
counsel, again
sent a letter dated
May 4, 1999,
seeking to redeem
 P a g e | 738

the foreclosed
property. The
second letter,
however, also
remained
unheeded.
Thus, on June 3,
1999, petitioners
filed a complaint
for Redemption of
Foreclosed
Mortgaged
 P a g e | 739

Property Under
Act No. 3135
before the
Regional Trial
Court of Surallah,
South Cotabato,
Branch 26,
seeking to redeem
the subject
property from the
respondent bank
under the
 P a g e | 740

provisions of Act
No. 3135.
The trial court
rendered
judgment in favor
of petitioners. On
appeal, the CA
reversed the trial
court. According
to the CA, the
right of petitioners
to redeem their
 P a g e | 741

foreclosed
property can only
be exercised
within two (2)
years from the
date of
foreclosure, as
provided under
Republic Act No.
720 or the Rural
Banks’ Act, as
amended by
 P a g e | 742

Republic Act No.

2670. The CA also
ruled that
petitioners are
guilty of laches.
On August 6,
2007, the CA
denied
petitioners’
motion for
reconsideration.
 P a g e | 743

Hence, this
appeal.

ISSUE:
Whether or not
the court of
appeals
committed a
reversible error of
law and grave
abuse of
 P a g e | 744

discretion in
holding that
petitioners has
only two years to
redeem their
property from the
issuance of
certificate of sale
after the same
was foreclosed.
HELD:
 P a g e | 745

The petition has

no merit.
In the present
case, petitioners
admit that when
the property was
mortgaged, only
the tax
declaration was
presented.
Although a free
patent title was
 P a g e | 746

subsequently
issued in their
favor on August 4,
1976, petitioners
failed to inform
the creditor rural
bank of such
issuance. As a
result, the
certificate of sale
was not registered
or annotated on
 P a g e | 747

the free patent

title. Petitioners
are estopped from
redeeming the
property based on
the free patent
title which was
not presented
during the
foreclosure sale
nor delivered to
the Register of
 P a g e | 748

Deeds for
annotation of the
certificate of sale
as required under
Section 5 of
Republic Act No.
720, as amended.
Estoppel in pais
arises when one,
by his acts,
representations or
admissions, or by
 P a g e | 749

his own silence

when he ought to
speak out,
intentionally or
through culpable
negligence,
induces another
to believe certain
facts to exist and
such other
rightfully relies
and acts on such
 P a g e | 750

belief, so that he
will be prejudiced
if the former is
permitted to deny
the existence of
such facts.
Petitioners
cannot fault
respondent for the
non-registration of
the certificate of
sale because
 P a g e | 751

petitioners did not

inform the
respondent bank
that a Torrens title
had already been
acquired by them
on August 4,
1976. By their
silence and
inaction,
petitioners misled
the respondent
 P a g e | 752

bank to believe
that their only
proof of ownership
was the tax
declaration.
Thus, the two (2)-
year redemption
period shall be
reckoned from the
date of the
foreclosure.
 P a g e | 753

For the same

reason,
petitioners’
assertion that
they will have five
(5) years from the
date of
registration of the
sale to redeem
the foreclosed
property under
Section 119 of the
 P a g e | 754

Public Land Act

has no merit, the
reckoning period
for the redemption
period being
properly from the
date of sale.
But even
assuming
arguendo that
petitioners can
avail of the five
 P a g e | 755

(5)-year
redemption period
provided under
Section 119 of the
Public Land Act,
they still failed to
exercise their
right of
redemption within
the reglementary
period provided
by law. As
 P a g e | 756

mentioned earlier,
Section 119 of
said Act expressly
provides that
where the land
involved is
acquired as a
homestead or
under a free
patent, if the
mortgagor fails to
exercise the right
 P a g e | 757

of redemption, he
or his heirs may
still repurchase
the property
within five (5)
years from the
expiration of the
two (2)-year
redemption
period. The
auction sale
having been
 P a g e | 758

conducted on
April 20, 1977,
petitioners had
until April 20,
1984 within which
to redeem the
mortgaged
property. Since
petitioner only
filed the instant
suit in 1999, their
right to redeem
 P a g e | 759

had already
lapsed. It took
petitioners
twenty-two (22)
years before
instituting an
action for
redemption. The
considerable
delay in asserting
one’s right before
a court of justice
 P a g e | 760

is strongly
persuasive of the
lack of merit in
petitioners’ claim,
since it is human
nature for a
person to enforce
his right when the
same is
threatened or
invaded.
P a g e | 761
P a g e | 762
 P a g e | 763

NATIONAL
HOUSING
AUTHORITY vs.
AUGUSTO BASA,
JR., LUZ BASA
 P a g e | 764

and EDUARDO
S. BASA
G.R. No.
149121, April
20, 2010
FACTS:
In 1983, spouses
Augusto and Luz
Basa obtained a
loan from NHA
secured by a real
 P a g e | 765

estate mortgage
since Spouses
Basa did not pay
the loan despite
repeated
demands, NHA
filed a verified
petition for
extrajudicial
foreclosure of
mortgage. The
properties were
 P a g e | 766

sold at public
auction where
NHA emerged as
the highest
bidder. On 16 April
1992, the
redemption period
expired, without
respondents
having redeemed
the properties. In
1992, NHA filed a
 P a g e | 767

petition for the

issuance of a Writ
of Possession
ordering spouses
Augusto and Luz
Basa to vacate
the subject lots.
However, it was
remained
unserved.
Respondents’
spouses Basa and
 P a g e | 768

Eduardo Basa
filed a petition for
intervention
anchored on
Section 8 of Act
No. 3135, as
amended, which
gives the
debtor/mortgagor
the remedy to
petition that the
sale be set aside
 P a g e | 769

and the writ of

possession be
cancelled. The
RTC rendered its
decision in favor
of the
respondents. A
motion for
reconsideration
was filed,
however, it was
denied. Thus,
 P a g e | 770

certiorari and
prohibition was
filed before the
Court of Appeals.
The Court of
Appeals, in its
Amended Decision
declared that the
period of
redemption had
not expired as the
certificate of sale
 P a g e | 771

had not been

registered or
annotated in the
original copies of
the titles
supposedly kept
with the Register
of Deeds since
said titles were
earlier razed by
fire. Hence, this
petition.
 P a g e | 772

ISSUE:
Whether or not
the respondent’s
right of
redemption has
already been
expired.
HELD:
Since entry of
the certificate of
 P a g e | 773

sale was validly

registered, the
redemption period
accruing to
respondents
commenced
therefrom, since
the one-year
period of
redemption is
reckoned from the
date of
 P a g e | 774

registration of the
certificate of sale.
It must be noted
that on 16 April
1991, the sheriff’s
certificate of sale
was registered
and annotated
only on the
owner’s duplicate
copies of the titles
and on 16 April
 P a g e | 775

1992, the
redemption period
expired, without
respondents
having redeemed
the properties. In
fact, on 24 April
1992, NHA
executed an
Affidavit of
Consolidation of
Ownership.
 P a g e | 776

Clearly,
respondents have
lost their
opportunity to
redeem the
properties in
question.
 P a g e | 777

PLANTERS
DEVELOPMENT
BANK vs. JAMES
NG and
ANTHONY NG
G.R. No.
187556, May 05,
2010
FACTS:
 P a g e | 778

On various
occasions in 1997,
James Ng and his
brother Anthony
(respondents)
obtained loans
from petitioner
amounting to
Twenty Five Million
Pesos
(P25,000,000.00)
to secure which
 P a g e | 779

they mortgaged
two parcels of
land situated in
San Francisco del
Monte, Quezon
City and covered
by Transfer
Certificate of Title
(TCT) Nos. 79865
and 79866 of the
Registry of Deeds
of Quezon City.
 P a g e | 780

Respondents
failed to settle
their loan
obligation, hence,
petitioner
instituted
extrajudicial
foreclosure of the
mortgage before
Notary Public
Stephen Z. Taala.
The Notice of
 P a g e | 781

Auction Sale
scheduled the
sale of the
properties
covered by the
mortgage on April
7, 1999 at the
Main Entrance of
the Hall of Justice
Building in
Quezon City. The
Notice was
 P a g e | 782

published in Metro
Profile, a
newspaper of
general
circulation, in its
March 9, 16 and
23, 1999 issues.
The highest
bidder at the
auction sale was
petitioner to
which was issued
 P a g e | 783

a Certificate of
Sale that was
registered with
the Register of
Deeds of Quezon
City on May 19,
1999.
As respondents
failed to redeem
the mortgage
within one year,
petitioner filed on
 P a g e | 784

June 26, 2001, an

ex-parte petition
for the issuance of
a writ of
possession,
docketed as LRC
Case No. Q-14305
(01) and lodged
before RTC-QC,
Branch 77.
In the meantime,
respondents
 P a g e | 785

instituted an
action for
Annulment of
Certificate of Sale,
Promissory Note
and Deed of
Mortgage, raffled
to RTC-QC, Branch
221 which, by
Order of June 14,
2000, issued a
writ of preliminary
 P a g e | 786

injunction
restraining
petitioner from
consolidating its
title to the
properties and
committing any
act of
dispossession that
would defeat
respondents’ right
of ownership.
 P a g e | 787

After numerous
incidents arising
from petitioner’s
petition for
issuance of a writ
of possession and
respondents’
complaint for
annulment which
incidents reached
this Court,
petitioner was
 P a g e | 788

finally allowed by
Branch 77 of the
RTC-QC, by Order
of August 22,
2008, to present
evidence ex parte
on its petition for
the issuance of a
writ of
possession. By
Decision of
January 19, 2009,
 P a g e | 789

RTC-QC, Branch
77 denied the
issuance of a writ
of possession in
this wise.
Petitioner’s
motion for
reconsideration of
the decision
having been
denied by Order
of April 20, 2009,
 P a g e | 790

it filed, before this

Court, the present
petition for review
on certiorari on
pure questions of
law, in accordance
with Rule 45 of
the Rules of Court.
ISSUE:
Whether or not
the validity of a
mortgage or its
 P a g e | 791

foreclosure as well
as the sale of the
property covered
by the mortgage
cannot be raised
as ground to deny
the issuance of a
writ of possession.
HELD:
The petition is
meritorious.
 P a g e | 792

It is settled that
questions
regarding the
validity of a
mortgage or its
foreclosure as well
as the sale of the
property covered
by the mortgage
cannot be raised
as ground to deny
the issuance of a
 P a g e | 793

writ of possession.
Any such
questions must be
determined in a
subsequent
proceeding as in
fact, herein
respondents
commenced an
action for
Annulment of
Certificate of Sale,
 P a g e | 794

Promissory Note
and Deed of
Mortgage.
Since
respondents failed
to redeem the
mortgage within
the reglementary
period,
entitlement to the
writ of possession
becomes a matter
 P a g e | 795

of right and the

issuance thereof
is merely a
ministerial
function.
P a g e | 796
 P a g e | 797

PACIFIC
REHOUSE
CORPORATION,
PACIFIC
CONCORDE
 P a g e | 798

CORPORATION,
MIZPAH
HOLDINGS, INC.,
FORUM
HOLDINGS
CORPORATION
and EAST ASIA
OIL
COMPANY,INC.
vs. EIB
SECURITIES,
INC.
 P a g e | 799

G.R. No.
184036,
October 13,
2010
FACTS:
On various dates
during the period
June 2003 to
March 2004,
plaintiffs bought
60,790,000 Kuok
Properties, Inc.
 P a g e | 800

(“KPP”) shares of
stock through the
Philippine Stock
Exchange (“PSE”).
The KPP shares
were acquired by
plaintiffs through
their broker,
defendant EIB.
The KPP shares of
stock were bought
by plaintiffs at an
 P a g e | 801

average price of
P0.22 per share.
Also on various
dates in July and
August 2003,
plaintiffs
bought/acquired
32,180,000 DMCI
shares of stock
through the PSE.
Of these shares,
16,180,000 were
 P a g e | 802

likewise acquired
by the plaintiffs
through their
broker, defendant
EIB, while the
remaining
16,000,000 DMCI
shares were
transferred from
Westlink Global
Equities, Inc. The
DMCI shares of
 P a g e | 803

stock were bought

by plaintiffs at an
average price of
P0.38 per share.
On 01 April 2004,
plaintiffs and
defendant EIB
agreed to sell the
60,790,000 KPP
shares of plaintiffs
to any party for
the price of P0.14
 P a g e | 804

per share. As
agreed by
plaintiffs and
defendant, the
sale of the KPP
shares of plaintiffs
was made with an
option on the part
of the plaintiffs to
buy back or
reacquire the said
KPP shares within
 P a g e | 805

a period of thirty
(30) days from the
transaction date,
at the buy-back
price of P0.18 per
share.
The notices of
sale issued by EIB
covering the sale
of the KKP shares
of petitioners
clearly show that
 P a g e | 806

the very same

KKP shares sold to
third parties albeit
under a buy-back
arrangement and
the “Property” of
petitioners were
made the
collaterals to
secure the
payment of the
reacquisition.
 P a g e | 807

Since the
possession of the
KKP shares and
the “Property”
were placed in
EIB, a third party
by common
agreement, then
the accessory
contract in the
case at bar is a
 P a g e | 808

contract of
pledge.
ISSUE:
Whether or not
the pledge on
“KKP
Shares/Property”
is valid.
HELD:
No. Art. 2085 is
applicable. Third
 P a g e | 809

persons who are

not parties to the
principal
obligation may
secure the latter
by pledging or
mortgaging their
own
property.
It is
indispensable that
the pledgor is the
 P a g e | 810

absolute owner of
the thing pledged
(second element).
In the case at bar,
the KKP shares
were sold to third
parties by EIB at
PhP 0.14 and as a
result, petitioners
lost their right of
ownership over
the KKP shares.
 P a g e | 811

Hence, from the

time of the sale,
petitioners were
no longer the
absolute owners
of said shares,
making the
pledge
constituted over
said KKP shares
null and
void.
 P a g e | 812

Also, it is
necessary under
Art. 2085 that the
person
constituting the
pledge has the
free disposal of
his or her
property, and in
the absence of
that free disposal,
that he or she be
 P a g e | 813

legally authorized
for the purpose
(third element).
This element is
absent in the case
at bar. Petitioners
no longer have
the free disposal
of the KKP shares
when EIB sold said
shares at the
stock exchange as
 P a g e | 814

they are no longer

the owners of the
shares. Thus,
there was no valid
pledge
constituted on the
KKP shares. The
notice of sale,
assuming it
incorporates the
accessory
contract of
 P a g e | 815

pledge, merely
stated “Property”
as collateral in
addition to KKP
shares. This is a
blatant violation
of Art. 2096,
which provides
that “a pledge
shall not take
effect against
third persons if
 P a g e | 816

description of the
thing pledged and
the date of the
pledge do not
appear in a public
instrument.” The
thing pledged
must be amply
and clearly
described and
specifically
identified.
P a g e | 817
 P a g e | 818

RAMON B.
BRITO, SR. vs.
 P a g e | 819

SEVERINO D.
DIANALA,
VIOLETA
DIANALA SALES,
JOVITA DIANALA
DEQUINTO,
ROSITA
DIANALA,
CONCHITA
DIANALA and
JOEL DEQUINTO
G.R. No.
171717,
 P a g e | 820

December 15,
2010
FACTS:
On September
27, 1976,
Margarita
Dichimo, assisted
by her husband,
Ramon Brito, Sr.,
together with
Bienvenido
Dichimo,
Francisco
 P a g e | 821

Dichimo, Edito
Dichimo, Maria
Dichimo, Herminia
Dichimo, assisted
by her husband,
Angelino Mission,
Leonora Dechimo,
assisted by her
husband, Igmedio
Mission, Felicito,
and Merlinda
Dechimo, assisted
by her husband,
Fausto Dolleno,
 P a g e | 822

filed a Complaint
for Recovery of
Possession and
Damages with the
then Court of First
Instance (now
Regional Trial
Court) of Negros
Occidental,
against a certain
Jose Maria Golez.
Petitioner's wife,
Margarita,
together with
 P a g e | 823

Bienvenido and
Francisco, alleged
that they are the
heirs of a certain
Vicente Dichimo,
while Edito, Maria,
Herminia,
Leonora, Felicito
and Merlinda
claimed to be the
heirs of one
Eusebio Dichimo;
that Vicente and
Eusebio are the
 P a g e | 824

only heirs of
Esteban and
Eufemia; that
Esteban and
Eufemia died
intestate and
upon their death
Vicente and
Eusebio, as
compulsory heirs,
inherited Lot No.
1536-B; that, in
turn, Vicente and
Eusebio, and their
 P a g e | 825

respective
spouses, also died
intestate leaving
their pro indiviso
shares of Lot No.
1536-B as part of
the inheritance of
the complainants.
On July 29, 1983,
herein
respondents filed
an Answer-in-
Intervention
claiming that prior
 P a g e | 826

to his marriage to
Eufemia, Esteban
was married to a
certain Francisca
Dumalagan; that
Esteban and
Francisca bore
five children, all of
whom are already
deceased; that
herein
respondents are
the heirs of
Esteban and
 P a g e | 827

Francisca's
children; that they
are in open,
actual, public and
uninterrupted
possession of a
portion of Lot No.
1536-B for more
than 30 years;
that their legal
interests over the
subject lot
prevails over
those of petitioner
 P a g e | 828

and his co-heirs;

that, in fact,
petitioner and his
co-heirs have
already disposed
of their shares in
the said property
a long time ago.
The trial court
issued an Order
dismissing without
prejudice
respondents'
Answer-in-
 P a g e | 829

Intervention for
their failure to
secure the
services of a
counsel despite
ample opportunity
given them. Thus,
the Regional Trial
Court (RTC) of
Bacolod City
rendered a
decision
approving the said
Compromise
 P a g e | 830

Agreement.
However, the
parties filed their
respective
Motions to
Dismiss.
Thereafter, the
cases were
consolidated. On
January 18, 1999,
herein petitioner
and his co-heirs
filed another
Complaint for
 P a g e | 831

Recovery of
Possession and
Damages, this
time against
herein
respondents.
Herein
respondents, on
the other hand,
filed with the
same court, on
August 18, 1999,
a Complaint for
Reconveyance
 P a g e | 832

and Damages
against petitioner
and his co-heirs.
On January 12,
2005, the CA
rendered
judgment granting
the appeal and
set aside the joint
orders.
ISSUE:Whether or
not an action for
reconveyance
 P a g e | 833

filed by the
respondents
already
prescribed.
HELD:
An action for
reconveyance
based on an
implied or
constructive trust
must perforce
prescribe in ten
years and not
 P a g e | 834

otherwise. A long
line of decisions of
this Court, and of
very recent
vintage at that,
illustrates this
rule. Undoubtedly,
it is now well
settled that an
action for
reconveyance
based on an
implied or
constructive trust
 P a g e | 835

prescribes in ten
years from the
issuance of the
Torrens title over
the property. The
only discordant
note, it seems, is
Balbin vs.
Medalla, which
states that the
prescriptive
period for a
reconveyance
action is four
 P a g e | 836

years. However,
this variance can
be explained by
the erroneous
reliance on
Gerona vs. de
Guzman. But in
Gerona, the fraud
was discovered on
June 25, 1948,
hence Section
43(3) of Act No.
190, was applied,
the new Civil Code
 P a g e | 837

not coming into

effect until August
30, 1950 as
mentioned earlier.
It must be
stressed, at this
juncture, that
article 1144 and
article 1456, are
new provisions.
In the instant
case, TCT No. T-
12561 was
 P a g e | 838

obtained by
petitioner and his
co-heirs on
September 28,
1990, while
respondents filed
their complaint for
reconveyance on
August 18, 1999.
Hence, it is clear
that the ten-year
prescriptive
period has not yet
expired. There is
 P a g e | 839

no dispute that
respondents are in
possession of the
subject property
as evidenced by
the fact that
petitioner and his
co-heirs filed a
separate action
against
respondents for
recovery of
possession
thereof. Thus,
 P a g e | 840

owing to
respondents'
possession of the
disputed property,
it follows that
their complaint for
reconveyance is in
fact
imprescriptible. As
such, with more
reason should
respondents not
be held guilty of
laches as the said
 P a g e | 841

doctrine which is
one in equity
cannot be set up
to resist the
enforcement of an
imprescriptible
legal right.
P a g e | 842
 P a g e | 843

CONSTANCIA G.
TAMAYO vs.
ROSALIA ABAD
SENORA
G.R. No.
176946,
November 15,
2010
FACTS:
 P a g e | 844

On September
28, 1995 at about
11:00 am,
Antonieto Senora,
43 years old and a
police chief
inspector of PNP
was riding a
motorcycle and
crossing the
intersection of
Sucat Road
 P a g e | 845

towards Filipinas
Avenue, when
allegedly a
tricycle driven by
Leovino Amparo
bumped his
motorcycle from
behind. The
motorcycle was
pushed into the
path of Isuzu elf
van driven by
 P a g e | 846

Elmer Pollosco,
which was
cruising along
Sucat road, the
van was
registered in the
name of Cirilio
Tamayo. The
delivery van tan
over Senora, while
his motorcycle
was thrown few
 P a g e | 847

meters away. He
was recovered
underneath the
delivery van,
rushed to the
Medical Center of
Paranaque, where
he was
pronounced dead
on arrival.
The Trial Court
found Leovino
 P a g e | 848

Amparo, Elmer
Pollosco and
Cirilio Tamayo
jointly and
severally liable to
plaintiffs and
ordered to pay
Php105, 100.00
for actual
damages, Php
50,000.00 for loss
of life, Php
 P a g e | 849

1,152,360.00 for
loss of earnings
and Php
30,000.00 for
attorney’s fees.
The Court of
Appeals affirmed
the RTC decision
but modified the
amount of loss of
earnings to
Php1,887,847.00.
 P a g e | 850

Hence this
present petition.
ISSUE: Whether
or not the Court of
Appeals erred in
declaring the joint
negligence of
defendants
Leovino Amparo
and Elmer
Pollosco to be the
proximate cause
 P a g e | 851

of the death of
Antonieto Senora.
HELD:
The issues
raised by the
petitioners are
questions of fact
necessarily calling
for re-examination
and re- evaluation
of the evidence
presented at the
 P a g e | 852

trial. The Court

has consistently
ruled that findings
of fact of trial
courts are entitled
to great weight
and should not be
disturbed, except
for strong and
valid reasons,
because the trial
court is in the
 P a g e | 853

better position to
examine the
demeanour of the
witnesses while
testifying.
If, as Pascual
testified, the truck
stopped when the
tricycle bumped
the motorcycle
from behind then
there would have
been no accident.
 P a g e | 854

Even if the
motorcycle was
nudged into the
path of the truck,
as she claimed,
there would have
been no impact if
the truck itself
was not moving,
and certainly not
an impact that
would pin the
motorcycle’s
driver under the
 P a g e | 855

truck and throw

the motorcycle a
few meters away.
The Court
likewise finds that
the CA did not err
in upholding
Cirilo’s solidary
liability for
Señora’s death.
The RTC correctly
disregarded the
testimonies of
 P a g e | 856

Cirilo’s wife and

his employee,
leaving no other
evidence to
support the claim
that he had
exercised the
degree of
diligence required
in hiring and
supervising his
employees.
 P a g e | 857

The award of
damages for loss
of earning
capacity is
concerned with
the determination
of losses or
damages
sustained by
respondents, as
dependents and
intestate heirs of
the deceased.
This consists not
 P a g e | 858

of the full amount

of his earnings,
but of the support
which they
received or would
have received
from him had he
not died as a
consequence of
the negligent act.
Thus, the amount
recoverable is not
the loss of the
victim’s entire
 P a g e | 859

earnings, but
rather the loss of
that portion of the
earnings which
the beneficiary
would have
received.
P a g e | 860
 P a g e | 861

SEALOADER
SHIPPING
CORPORATION
vs. GRAND
CEMENT
 P a g e | 862

MANUFACTURIN
G
CORPORATION,
JOYCE LAUNCH
& TUG CO., INC.,
ROMULO
DIANTAN &
JOHNNY PONCE
G.R. No.
167363,
December 15,
2010
 P a g e | 863

x
-------------------------
--------------x
TAIHEIYO
CEMENT
PHILIPPINES,
INC. (Formerly
Grand Cement
Manufacturing
Corporation) vs.
EALOADER
SHIPPING
 P a g e | 864

CORPORATION,
JOYCE LAUNCH
& TUG CO., INC.,
ROMULO
DIANTAN &
JOHNNY PONCE
G.R. No.
177466
FACTS:
Sealoader
executed a Time
 P a g e | 865

Charter Party
Agreement with
Joyce Launch
which owned and
operated the
motor tugboat M/T
Viper. By virtue of
the agreement,
Sealoader
chartered the M/T
Viper in order to
tow the former’s
 P a g e | 866

unpropelled
barges for a
minimum period
of fifteen days
from the date of
acceptance,
renewable on a
fifteen-day basis
upon mutual
agreement of the
parties.
 P a g e | 867

Subsequently,
Sealoader entered
into a contract
with Grand
Cement for the
loading of cement
clinkers and the
delivery thereof to
Manila. On March
31, 1994,
Sealoader’s
barge, the D/B
 P a g e | 868

Toploader, arrived
at the wharf
owned by Grand
Cement in Cebu
tugged by the M/T
Viper. The D/B
Toploader,
however, was not
immediately
loaded with its
intended cargo as
the employees of
 P a g e | 869

Grand Cement
were still loading
another vessel.
A case for
damages was filed
by Grand Cement
against Sealoader,
Diantan, and the
captain of M/T
Viper and Ponce
the barge patron
of D/B Toploader.
 P a g e | 870

Thereafter, an
amended
complaint was
filed by Grand
Cement and
included Joyce
Launch as
defendant and
prayed that all the
defendants be
held solidarily
liable for the
 P a g e | 871

damages
sustained on the
wharf.
Grand Cement
claimed that when
D/B Toploader
arrived in its
wharf, it was not
safely secured
and early that
day, news about
the typhoon had
 P a g e | 872

already been
circulated. When
requested to
move away their
vessels from the
wharf, Dianton
and Ponce refused
to do so and at
the most crucial
time of the day,
both of them
abandoned the
 P a g e | 873

vessel. Sealoader
on the other hand
denied liability by
stating that it was
Joyce Launch who
has responsibility
to secure M/T
Viper and D/B
Toploader in order
to avert any
damage to the
properties of third
 P a g e | 874

parties. Moreover,
Sealoader alleged
that it did not
initiate the
loading of the
vessel and the
same had docked
in the wharf long
before the arrival
of typhoon Bising
and typhoon
being a force
 P a g e | 875

majeure, the
event was beyond
its control.
Joyce Launch
maintained its
argument that the
resultant damage
to the wharf of
Grand Cement
was brought
about by a
fortuitous event,
 P a g e | 876

of which it was
belatedly warned.
Joyce Launch
insisted that, if
only the loading of
D/B Toploader
proceeded as
scheduled, M/T
Viper could have
tugged the barge
away from the
 P a g e | 877

wharf before the

typhoon struck.
The RTC ruled
that the
defendants are
liable and that
their negligence
caused the
damage to the
wharf. On appeal,
the CA affirmed
 P a g e | 878

the decision of the

RTC.
ISSUE:
Whether or not
Grand Cement is
guilty of
contributory
negligence it
having the last
clear chance to
avert the
damages cast off
 P a g e | 879

the mooring lines

attached to D/B
Toploader early
on.
HELD:
The Supreme
Court had
occasion to
reiterate the well-
established
doctrine of last
clear chance in
 P a g e | 880

Philippine National
Railways v. Brunty
as follows:
The doctrine of
last clear chance
states that where
both parties are
negligent but the
negligent act of
one is appreciably
later than that of
the other, or
 P a g e | 881

where it is
impossible to
determine whose
fault or
negligence caused
the loss, the one
who had the last
clear opportunity
to avoid the loss
but failed to do
so, is chargeable
with the loss.
 P a g e | 882

Stated differently,
the antecedent
negligence of
plaintiff does not
preclude him from
recovering
damages caused
by the
supervening
negligence of
defendant, who
had the last fair
 P a g e | 883

chance to prevent
the impending
harm by the
exercise of due
diligence
After a thorough
review of the
records of this
case, the Court
finds that
Sealoader was
indeed guilty of
 P a g e | 884

negligence in the
conduct of its
affairs during the
incident in
question.
One of the bases
cited by the RTC
for its finding that
Sealoader was
negligent was the
lack of a radio or
any navigational
 P a g e | 885

communication
facility aboard the
D/B Toploader. The
Court, therefore,
agrees with the
conclusion of
Grand Cement
that there was
either no radio on
board the D/B
Toploader, the
radio was not fully
 P a g e | 886

functional, or the
head office of
Sealoader was
negligent in failing
to attempt to
contact the D/B
Toploader through
radio. Either way,
this negligence
cannot be
ascribed to
 P a g e | 887

anyone else but

Sealoader.
The Court
agrees with the
ruling of the Court
of Appeals in the
Decision dated
November 12,
2004 that the
people at the
wharf could not
just cast off the
mooring lines
 P a g e | 888

without any
instructions from
the crew of the
D/B Toploader and
the M/T Viper.
Thus, Sealoader
should have taken
the initiative to
cast off the
mooring lines
early on or, at the
very least,
requested the
crew at the wharf
 P a g e | 889

to undertake the
same. In failing to
do so, Sealoader
was manifestly
negligent.
Article 2179 of
the Civil Code
defines the
concept of
contributory
negligence as
follows:
 P a g e | 890

Art. 2179. When

the plaintiff’s own
negligence was
the immediate
and proximate
cause of his
injury, he cannot
recover damages.
But if his
negligence was
only contributory,
the immediate
and proximate
cause of the injury
 P a g e | 891

being the
defendant’s lack
of due care, the
plaintiff may
recover damages,
but the courts
shall mitigate the
damages to be
awarded.
Contributory
negligence is
conduct on the
part of the injured
 P a g e | 892

party, contributing
as a legal cause to
the harm he has
suffered, which
falls below the
standard to which
he is required to
conform for his
own protection.
P a g e | 893
P a g e | 894
 P a g e | 895

NATIVIDAD vs.
CA
G.R. No.
126467,
February 02,
2010
FACTS:
Professional
Service Inc. (PSI),
 P a g e | 896

together with Dr.

Miguel Ampil (Dr.
Ampil) and Dr.
Juan Fuentes (Dr.
Fuentes), was
impleaded by
Enrique Agana
and Natividad
Agana (later
substituted by her
heirs), in a
complaint for
 P a g e | 897

damages filed in
the Regional Trial
Court (RTC) of
Quezon City,
Branch 96, for the
injuries suffered
by Natividad when
Dr. Ampil and Dr.
Fuentes neglected
to remove from
her body two
gauzes which
 P a g e | 898

were used in the

surgery they
performed on her
on April 11, 1984
at the Medical
City General
Hospital. PSI was
impleaded as
owner, operator
and manager of
the hospital.
 P a g e | 899

ISSUE:Whether
or not PSI can be
held liable for the
negligence of its
employees.
HELD:
The Court held
that PSI is liable to
the Aganas not
under the
principle of
respondeat
 P a g e | 900

superior for lack

of evidence of an
employment
relationship with
Dr.
Ampil but under
the principle of
ostensible agency
for the negligence
of Dr.
Ampil and, pro
hac vice, under
 P a g e | 901

the principle of
corporate
negligence for its
failure to perform
its duties as a
hospital.
While in theory a
hospital as a
juridical entity
cannot practice
medicine, in
reality it utilizes
 P a g e | 902

doctors, surgeons
and medical
practitioners in
the conduct
of its business of
facilitating
medical and
surgical
treatment. Within
that
reality, three legal
relationships
 P a g e | 903

crisscross: (1)
between the
hospital and the
doctor practicing
within its
premises; (2)
between the
hospital and the
patient
being treated or
examined within
its premises and
 P a g e | 904

(3) between the

patient and
the doctor. The
exact nature of
each relationship
determines the
basis and
extent of the
liability of the
hospital for the
negligence of the
doctor.
 P a g e | 905

Where an
employment
relationship
exists, the
hospital may be
held vicariously
liable under
Article 2176 in
relation to Article
2180 of the Civil
Code or the
principle of
 P a g e | 906

respondeat
superior. Even
when no
employment
relationship exists
but it is shown
that the hospital
holds out to the
patient that the
doctor is its
agent, the
hospital may still
 P a g e | 907

be vicariously
liable under
Article 2176 in
relation to Article
1431 and Article
1869 of the Civil
Code or the
principle of
apparent
authority.
Moreover,
regardless of its
 P a g e | 908

relationship with
the doctor,
the hospital may
be held directly
liable to the
patient for its own
negligence
or failure to follow
established
standard of
conduct to which
 P a g e | 909

it should conform
as a corporation.

NORTHWEST
AIRLINES, INC.
vs. SPOUSES
EDWARD and
NELIA HESHAN,
et al.
 P a g e | 910

G.R. No.
179117,
February 03,
2010
FACTS:
In July 1998,
Edward Heshan
(Edward)
purchased three
(3) roundtrip
tickets from
Northwest
 P a g e | 911

Airlines, Inc.
(petitioner) for
him, his wife Nelia
Heshan (Nelia)
and daughter
Dara Ganessa
Heshan (Dara) for
their trip from
Manila to St.
Louis, Missouri,
USA and back to
attend an ice
 P a g e | 912

skating
competition where
then seven year
old Dara was to
participate. When
Dara’s
participation in
the ice skating
event ended on
August 7, 1998,
the Heshans
proceeded to the
 P a g e | 913

airport to take the

connecting flight
from St. Louis to
Memphis on their
way to Los
Angeles. At the
airport, the
Heshans first
checked-in their
luggage at the
airport’s “curbside
check-in” near the
 P a g e | 914

entrance. Since
they arrived three
hours early for
their 6:05 p.m.
flight (Flight No.
972M), the
Heshans whiled
away the time at
a nearby coffee
shop. At 5:15
p.m. when the
check-in counter
 P a g e | 915

opened, Edward
took to the line
where he was
second in the
queue. When his
turn came and
presented the
tickets to
petitioner’s
customer service
agent Ken Carns
(Carns) to get the
 P a g e | 916

boarding passes,
he was asked to
step aside and
wait to be called
again.
On September
24, 1998,
respondents sent
a letter to
petitioner to
demand
indemnification
 P a g e | 917

for the breach of

contract of
carriage. Via
letter of
December
4, 1998, petitioner
replied that
respondents were
prohibited to
board Flight No.
972M for “verbally
 P a g e | 918

abusing the flight

crew.”
Branch 96 of the
RTC, by Decision
of August 20,
2002, rendered
judgment in favor
of respondents.
On appeal, the
Court of Appeals,
by Decision of
June 22, 2007,
 P a g e | 919

sustained the trial

court’s findings
but reduced the
award of moral
and exemplary
damages to P2
million and
P300,000,
respectively. Thus,
we hold that it can
be logically
inferred that the
 P a g e | 920

reason why no
boarding passes
were immediately
issued to the
respondents is
because Flight
972 from St. Louis
to Memphis is full
and the
respondents were
“bumped off”
from their flight.
 P a g e | 921

Reconsideration
having been
denied by the
appellate court,
petitioner filed the
present petition
for review.
ISSUES: Whether
or not the
respondents were
entitled to moral,
exemplary
 P a g e | 922

damages and
award of
attorney’s fees.
Whether or not
the court erred in
awarding
excessive
damages to
respondents.

HELD:
 P a g e | 923

The Court ruled

that the petition is
in part
meritorious.
There is a need to
substantially
reduce the moral
damages awarded
by the appellate
court. While
courts are given
discretion to
 P a g e | 924

determine the
amount of
damages to be
awarded, it
is limited by the
principle that the
amount awarded
should not be
palpably and
scandalously
excessive.
 P a g e | 925

Moral damages
are neither
intended to
impose a penalty
to the wrongdoer,
nor to enrich the
claimant. Taking
into consideration
the facts and
circumstances
attendant to the
case, an award to
 P a g e | 926

respondents of
P500,000, instead
of P2,000,000, as
moral damages is
to the Court
reasonable.
P a g e | 927
P a g e | 928
 P a g e | 929

PHILIPPINE
HAWK vs. LEE
G.R. No.
166869,
February 16,
2010
FACTS:
On 17 March
1991, plaintiff
Vivian Lee Tan and
 P a g e | 930

her husband
Silvino Tan, while
on board a
motorcycle driven
by the latter, and
a Metro Bus with
driven by
Margarito Avila
who was an
employee of
Philippine Hawk,
were involved in
 P a g e | 931

an
accident and as a
result of the
accident, Silvino
Tan died on the
spot while
plaintiff Vivian Lee
Tan suffered
physical injuries
which
necessitated
medical
 P a g e | 932

attention and
hospitalization.
ISSUE:
Whether or not
Philippine Hawk
can be held liable
under quasi-delict.
HELD:
The Court
upholds the
finding of the trial
 P a g e | 933

court and the

Court of Appeals
that petitioner is
liable to
respondent, since
it failed to
exercise the
diligence of
a good father of
the family in the
selection and
supervision of its
 P a g e | 934

bus driver,
Margarito Avila,
for having failed
to sufficiently
inculcate in him
discipline
and correct
behavior on the
road. Indeed,
petitioner’s tests
were
concentrated
 P a g e | 935

on the ability to
drive and physical
fitness to do so. It
also did not know
that
Avila had been
previously
involved in
sideswiping
incidents.
Whenever an
employee’s
 P a g e | 936

negligence causes
damage or injury
to another, there
instantly arises
a presumption
that the employer
failed to exercise
the due diligence
of a good
father of the
family in the
selection or
 P a g e | 937

supervision of its
employees. To
avoid
liability for a
quasi-delict
committed by his
employee, an
employer must
overcome the
presumption by
presenting
convincing proof
 P a g e | 938

that he exercised
the
care and diligence
of a good father of
a family in the
selection and
supervision
of his employee.
 P a g e | 939

ALFREDO AND
CLEOPATRE
PACIS vs.
JEROME
 P a g e | 940

JOVANNE
MORALES
G.R. No.
169467,
February 25,
2010
FACTS:
On 17 January
1995, petitioners
Alfredo P. Pacis
and Cleopatra D.
 P a g e | 941

Pacis
(petitioners) filed
with the trial court
a civil case for
damages against
respondent
Jerome Jovanne
Morales
(respondent).
Petitioners are the
parents of
Alfred Dennis
 P a g e | 942

Pacis, Jr. (Alfred),

a 17-year old
student who died
in a shooting
incident inside the
Top Gun Firearms
and Ammunitions
Store (gun store)
in Baguio City.
Respondent is the
owner of the gun
store.
 P a g e | 943

On January 19,
1991, Alfred
Dennis Pacis, then
17 years old and a
first year student
at the Baguio
Colleges
Foundation taking
up BS Computer
Science, died due
to a gunshot
wound in the head
 P a g e | 944

which he
sustained while he
was at the Top
Gun Firearms and
Ammunitions
Store located at
Upper Mabini
Street, Baguio
City. The gun
store was owned
and operated by
defendant Jerome
 P a g e | 945

Jovanne Morales.
With Alfred Pacis
at the time of the
shooting were
Aristedes Matibag
and Jason
Herbolario. They
were sales agents
of the defendant,
and at that
particular time,
the caretakers of
 P a g e | 946

the gun store. The

bullet which killed
Alfred Dennis
Pacis was fired
from a gun
brought in by a
customer of the
gun store for
repair. The gun,
an AMT Automag
II Cal. 22 Rimfire
Magnum with
 P a g e | 947

Serial No. SN-

H34194 (Exhibit
“Q”), was left by
defendant Morales
in a drawer of a
table located
inside the gun
store. Defendant
Morales was in
Manila at the
time. His
employee
 P a g e | 948

Armando
Jarnague, who
was the regular
caretaker of the
gun store was also
not around. He
left earlier and
requested sales
agents Matibag
and Herbolario to
look after the gun
store while he and
 P a g e | 949

defendant Morales
were away.
Jarnague
entrusted to
Matibag and
Herbolario a
bunch of keys
used in the gun
store which
included the key
to the drawer
 P a g e | 950

where the fatal

gun was kept.

It appears that
Matibag and
Herbolario later
brought out the
gun from the
drawer and placed
it on top of the
table. Attracted
by the sight of the
 P a g e | 951

gun, the
young Alfred
Dennis Pacis got
hold of the same.
Matibag asked
Alfred Dennis
Pacis to return the
gun. The latter
followed and
handed the gun to
Matibag. It
went off, the
 P a g e | 952

bullet hitting the

young Alfred in
the head.
A criminal case
for homicide was
filed against
Matibag before
branch VII of this
Court. Matibag,
however, was
acquitted of the
charge against
 P a g e | 953

him because of
the exempting
circumstance of
“accident” under
Art. 12, par. 4 of
the Revised Penal
Code.
By agreement of
the parties, the
evidence adduced
in the criminal
case for
 P a g e | 954

homicide against
Matibag was
reproduced and
adopted by them
as part of their
evidence in the
instant case. On 8
April 1998, the
trial court
rendered its
decision in favor
of petitioners.
 P a g e | 955

Respondent
appealed to the
Court of Appeals.
In its Decision
dated 11 May
2005, the Court of
Appeals reversed
the trial court’s
Decision and
absolved
respondent from
civil liability under
 P a g e | 956

Article 2180 of the

Civil Code.
Petitioners filed a
motion for
reconsideration,
which the Court of
Appeals denied in
its Resolution
dated 19 August
2005. Hence, this
petition.
ISSUE:
 P a g e | 957

Whether or not
respondent is
civilly liable for
the death of
Alfred.
HELD:
The Court
granted the
instant petition.
This case for
damages arose
out of the
 P a g e | 958

accidental
shooting of
petitioners’ son.
Under Article
1161 of the Civil
Code, petitioners
may enforce their
claim for damages
based on the civil
liability
arising from the
crime under
 P a g e | 959

Article 100 of the

Revised Penal
Code or they may
opt to file an
independent civil
action for
damages under
the Civil Code. In
this case, instead
of enforcing their
claim for damages
in the homicide
 P a g e | 960

case
filed against
Matibag,
petitioners opted
to file an
independent civil
action for
damages against
respondent whom
they alleged was
Matibag’s
employer.
 P a g e | 961

Petitioners based
their claim for
damages under
Articles 2176 and
2180 of the Civil
Code.
Unlike the
subsidiary liability
of the employer
under Article 103
of the Revised
Penal Code, the
 P a g e | 962

liability of the
employer or any
person for that
matter, under
Article 2176 of the
Civil Code is
primary and
direct, based on a
person’s own
negligence. Article
2176 states:
 P a g e | 963

Art. 2176.
Whoever by act or
omission causes
damage to
another, there
being
fault or
negligence, is
obliged to pay for
the damage done.
Such fault or
negligence, if
 P a g e | 964

there is no pre-
existing
contractual
relation between
the
parties, is called
quasi-delict and is
governed by the
provisions of this
Chapter.
Clearly,
respondent did
 P a g e | 965

not exercise the

degree of care
and diligence
required of a good
father of a family,
much less the
degree of care
required of
someone dealing
with dangerous
weapons, as
would exempt him
 P a g e | 966

from liability in
this case.
 P a g e | 967

HUTAMA-
RSEA/SUPERMA
X PHILS., J.V. vs.
KCD BUILDERS
CORPORATION,
represented by
its President
CELSO C.
DIOKNO
G.R. No.
173181, March
03, 2010
 P a g e | 968

FACTS:
On 10 December
2001, appellee
KCD Builders
Corporation filed a
complaint for sum
of money against
appellants
[Hutama-
RSEA/Super Max,
Philippines and/or
Charles H.C.
 P a g e | 969

Yang] before the

Regional Trial
Court of
Makati. Its cause
of action arose
from a written
contract which
was the Notice to
Proceed dated 10
November 2000
executed by the
parties whereby
 P a g e | 970

appellant as
principal
contractor of
Package 2-Site
Works in Philips
Semiconductors
Phils. Inc.-
Integrated Circuits
Plant Phase II
Project located at
the Light Industry
and Science Park
 P a g e | 971

of the Philippines-
2 (LISPP-2)
Calamba, Laguna
contracted with
appellee [KCD] as
sub-contractor for
the said project.
The final billing
dated 20
September 2001
was submitted to
appellant Charles
 P a g e | 972

H.C. Yang, and

despite a joint
evaluation by the
parties through
their respective
representatives
who agreed on
the amount of
P2,967,164.71 as
HUTAMA’s total
obligation to
appellee [KCD]
 P a g e | 973

and a letter of
demand,
appellant
corporation
[Hutama] failed
and refused to
pay. Summons
was served on
appellants
[Hutama and
Yang] on 8
February 2002
 P a g e | 974

which was
received by their
secretary, Ms.
Evelyn Estrabela
in behalf of the
two defendants
[Hutama and
Yang]. On 21
February 2002,
their counsel filed
an Entry of
Appearance and
 P a g e | 975

Motion for
Extension of time
to File Responsive
Pleading. They
were given a 20-
day extension
period to file the
responsive
pleading, or until
16 March 2002.
On 11 April
2002, appellee
 P a g e | 976

[KCD] filed a
Motion to Declare
Defendant/s
[Hutama and
Yang] in Default
for failure to file
the responsive
pleading within
the
extended period,
and set the same
for hearing on 26
 P a g e | 977

April 2002.
On 23 April 2002,
appellant Charles
H.C. Yang filed a
Motion to Dismiss
for
failure of the
complaint to state
a case of action
against him, as he
merely
signed the sub-
 P a g e | 978

contract between
the parties not for
his personal
benefit but
only in behalf of
appellant
HUTAMA. On the
same date,
appellant HUTAMA
filed an Urgent
Motion to Admit
Attached Answer
 P a g e | 979

with Compulsory
Counterclaim,
together with the
said answer.
During the
hearing on
appellee’s [KCD’s]
motion to declare
defendant/s
[Hutama and
Yang] in default,
the trial court
 P a g e | 980

noted the filing of

appellants’
[Hutama and
Yang’s] respective
motion to dismiss
and answer with
counterclaim but
noted that the
filing thereof on
27 March 2002
was too late
considering that
 P a g e | 981

they were only

given an extended
period up [to] 16
March 2002 to do
the same. Thus,
the trial court
granted the
motion to declare
defendants
[Hutama and
Yang] in default
and directed,
 P a g e | 982

upon appellee’s
[KCD’s] motion,
the presentation
of evidence ex-
parte before the
branch clerk of
court who was
appointed as
commissioner to
received
evidence.
Appellants
 P a g e | 983

[Hutama and
Yang] filed an
Urgent Motion to
Set Aside Order of
Default. During
the hearing, the
trial court ordered
appellee [KCD] to
file an opposition
or comment. After
the Manifestation
filed by appellee
 P a g e | 984

[KCD] on 24 June
2002, the trial
court set anew
the hearing on the
motion to set
aside order of
default on 22
August 2002, but
appellants
[Hutama and
Yang] failed to
appear. The trial
 P a g e | 985

court then denied

the said motion in
the Order dated
19 September
2002.

The Regional Trial

Court (RTC)
rendered a
decision in favor
of KCD Builders
Corporation
 P a g e | 986

(KCD). Aggrieved,
Hutama
Semiconductor
Phils., Inc.
(Hutama) and
Charles H.C. Yang
(Yang) filed an
appeal before the
CA. CA modified
its
decision
by dismissing the
 P a g e | 987

complaint against
appellant Charles
H.C. Yang for
lack of cause of
action. The
decision is
AFFIRMED in all
other respects.
Unsatisfied,
Hutama and Yang
filed a motion for
reconsideration;
 P a g e | 988

however, the
same was denied
in a Resolution
dated June 19,
2006. Hence, this
petition.
ISSUE:
Whether or not
the CA erred in
affirming the
decision of the
RTC as to the
 P a g e | 989

liability of Hutama
to KCD.
HELD:
Based on the
findings of fact of
the RTC, which
were affirmed by
the CA, it was
proven that
Hutama
contracted the
services of KCD as
 P a g e | 990

a sub-contractor
of Package 2 Site
Works at Phillips
Semiconductors
Philippines, Inc. –
Integrated Circuits
Plant Phase II
Project, located in
Calamba, Laguna.
After the
completion of the
project, KCD billed
 P a g e | 991

Hutama Three
Million Nine
Hundred Nine
Thousand Nine
Hundred Sixty-
Four Pesos and
05/100
(P3,909,964.05).
The amount was
reduced to Two
Million Nine
Hundred Sixty-
 P a g e | 992

Seven Thousand
One Hundred
Sixty Four Pesos
and 71/100
(P2,967,164.71)
by agreement of
the parties. Thus,
on October 11,
2001, KCD sent
Hutama the final
bill. However,
Hutama refused
 P a g e | 993

to settle the
obligation and its
refusal compelled
KCD to file the
collection suit
before the RTC.
Second, Hutama
avers that the CA
committed a
reversible error
when it upheld
the decision of the
 P a g e | 994

RTC, which was

based on the ex-
parte evidence
presented by KCD.
Allegedly, its
constitutional
right to due
process was
violated when the
RTC issued an
order of default
which resulted in
 P a g e | 995

its failure to
present
evidence.
However, we
find that the RTC
acted within the
confines of its
discretion when it
issued the order
of default upon
the motion of KCD
when Hutama
 P a g e | 996

failed to file an
answer within the
extended period.
The RTC did not
hastily issue the
order of default. It
gave Hutama the
opportunity to
explain its side.
On August 22,
2002, the motion
to set aside the
 P a g e | 997

order of default
was set for
hearing, but
neither Hutama’s
counsel, nor any
other
representative of
petitioner
corporation,
appeared.
According to the
counsel of
 P a g e | 998

Hutama, in his
Memorandum, he
failed to
file an answer on
time because he
went to the
province for the
Lenten season. He
assigned the case
to his associate,
but the latter also
went to the
 P a g e | 999

province.
This flimsy excuse
deserves scant
consideration.
Thus, the Court
denied the
petition.

SULPICIO LINES,
INC. vs.
 P a g e | 1000

DOMINGO E.
CURSO, et al.
G.R. No.
157009, March
17, 2010
FACTS:
On 23 October
1988, Dr. Curso
boarded at the
port of Manila the
MVDoña Marilyn,
 P a g e | 1001

an inter-island
vessel owned and
operated by
petitioner Sulpicio
Lines, Inc., bound
for Tacloban City.
Unfortunately, the
MV Doña Marilyn
sank in the
afternoon of
October 24, 1988
while at sea due
 P a g e | 1002

to the inclement
sea and weather
conditions
brought about by
Typhoon Unsang.
The body of Dr.
Curso was not
recovered, along
with hundreds of
other passengers
of the ill-fated
vessel. At the time
 P a g e | 1003

of his death, Dr.

Curso was 48
years old, and
employed as a
resident physician
at the Naval
District Hospital in
Naval, Biliran. He
had a basic
monthly salary of
P3,940.00, and
would have
 P a g e | 1004

retired from
government
service by
December 20,
2004 at the age of
65.
On 21 January
1993, the
respondents,
allegedly the
surviving brothers
and sisters of Dr.
 P a g e | 1005

Curso, sued the

petitioner in the
RTC in Naval,
Biliran to claim
damages based
on breach of
contract of
carriage by sea,
averring that the
petitioner had
acted negligently
in transporting Dr.
 P a g e | 1006

Curso and the

other
passengers. They
stated, among
others, that their
parents had
predeceased Dr.
Curso, who died
single and without
issue; and that, as
such, they were
Dr.
 P a g e | 1007

Curso’s surviving
heirs and
successors in
interest entitled to
recover moral and

other damages.
They prayed for
judgment, as
follows: (a)
compensatory
damages of
 P a g e | 1008

P1,924,809.00; (b)
moral damages of
P100,000.00; (c)
exemplary or
corrective
damages in the
amount deemed
proper and just;
(d) expenses of
litigation of at
least P50,000.00;
(e) attorney’s fees
 P a g e | 1009

of P50,000.00;
and (f) costs of
suit.
The petitioner
denied liability,
insisting that the
sinking of the
vessel was
due to force
majeure (i.e.,
Typhoon Unsang),
which exempted a
 P a g e | 1010

common carrier
from liability. It
averred that the
MV Doña Marilyn
was seaworthy in
all respects,
and was in fact
cleared by the
Philippine Coast
Guard for the
voyage; and that
after the accident
 P a g e | 1011

it conducted
intensive search
and rescue
operations and
extended
assistance and aid
to the victims and
their families.
RTC dismissed the
complaint upon its
finding that the
sinking of the
 P a g e | 1012

vessel was
due to force
majeure.
Respondents
appealed to the
CA having found
defendant
Sulpicio Lines
negligent. Hence,
this petition.
ISSUE:
 P a g e | 1013

Whether or not
brothers and
sisters of a
deceased
passenger in a
case of breach of
contract of
carriage are
entitled to an
award of moral
damages against
the carrier.
 P a g e | 1014

HELD:
The petition is
meritorious. As a
general rule,
moral damages
are not
recoverable in
actions for
damages
predicated on a
breach of
contract, unless
 P a g e | 1015

there is fraud or
bad faith. As an
exception, moral
damages may be
awarded in case
of breach of
contract of
carriage that
results in the
death of a
passenger, in
accordance with
 P a g e | 1016

Article 1764, in
relation to Article
2206 (3), of the
Civil Code., which
provide:
Article 1764.
Damages in cases
comprised in this
Section shall be
awarded in
accordance with
Title XVIII of this
 P a g e | 1017

Book, concerning
Damages. Article
2206 shall
also apply to the
death of a
passenger caused
by the breach of
contract by a
common carrier.
Article 2206. The
amount of
damages for
 P a g e | 1018

death caused by a
crime or quasi-
delict
shall be at least
three thousand
pesos, even
though there may
have been
mitigating
circumstances. In
addition:
 P a g e | 1019

(1) The defendant

shall be liable for
the loss of the
earning capacity
of the
deceased, and the
indemnity shall be
paid to the heirs
of the latter; such
indemnity shall in
every case be
assessed and
 P a g e | 1020

awarded by the
court, unless the
deceased on
account of
permanent
physical disability
not caused by the
defendant, had no
earning capacity
at the time of his
death;
 P a g e | 1021

(2) If the
deceased was
obliged to give
support according
to the provisions
of
article 291, the
recipient who is
not an heir called
to the decedent's
inheritance by the
law of testate or
 P a g e | 1022

intestate
succession, may
demand support
from the person
causing the death,
for a period not
exceeding five
years, the
exact duration to
be fixed by the
court;
 P a g e | 1023

(3) The spouse,

legitimate and
illegitimate
descendants and
ascendants of the
deceased may
demand moral
damages for
mental anguish by
reason of the
death of the
deceased.
 P a g e | 1024

The foregoing
legal provisions
set forth the
persons entitled
to moral
damages. The
omission from
Article 2206 (3) of
the brothers and
sisters of the
deceased
passenger reveals
 P a g e | 1025

the legislative
intent to exclude
them from the
recovery of moral
damages for
mental anguish by
reason of the
death of the
deceased. Inclusio
unius est exclusio
alterius. The
solemn power and
 P a g e | 1026

duty of the courts

to interpret and
apply the law do
not include the
power to correct
the law by reading
into it what is not
written therein.
Thus, the CA erred
in awarding moral
damages to the
respondents.
 P a g e | 1027

To be entitled to
moral damages,
the respondents
must have a right
based upon law. It
is true that under
Article 1003 of the
Civil Code they
succeeded to the
entire estate of
the late Dr. Curso
in the absence of
 P a g e | 1028

the latter’s
descendants,
ascendants,
illegitimate
children, and
surviving spouse.
However, they
were not included
among the
persons entitled
to recover moral
damages, as
 P a g e | 1029

enumerated in
Article 2219 of the
Civil Code.

NISSAN NORTH
EDSA vs.
UNITED
PHILIPPINE
SCOUT
 P a g e | 1030

VETERANS
DETECTIVE AND
PROTECTIVE
AGENCY
G.R. No.
179470, April
20, 2010
FACTS:
In 1993,
respondent United
Philippine Scout
 P a g e | 1031

entered into a
contract for
security services
with petitioner
Nissan, and
beginning 23 April
1993, it was
able to post 18
security guards
within Nissan’s
compound located
in EDSA
 P a g e | 1032

Balintawak,
Quezon City. On
31 January 1996,
Nissan informed
United that its
services were
being terminated
on that day.
Galope personally
pleaded with the
personnel
manager of
 P a g e | 1033

Nissan to
reconsider its
decision. As this
was ignored,
United wrote a
Letter demanding
payment of the
amount
equivalent to
thirty (30)
days of service in
view of Nissan’s
 P a g e | 1034

act of terminating
United’s services
without
observing the
required 30-day
prior written
notice as
stipulated under
paragraph
17 of their service
contract. As a
result of Nissan’s
 P a g e | 1035

continued failure
to
comply, a case for
Sum of Money
was filed. The
lower court ruled
in favor of
herein
respondent.
Nissan appealed
to the Regional
Trial Court. The
 P a g e | 1036

Regional
Trial Court,
however, denied
the appeal and
affirmed the
decision of the
Metropolitan Trial
Court. Nissan filed
a motion for
reconsideration
but the same
was denied. On
 P a g e | 1037

appeal to the
Court of Appeals
affirmed the
Decision of the
Regional Trial
Court, with the
modification that
the award for
exemplary
damages
was deleted. The
Court of Appeals
 P a g e | 1038

held that the

breach of contract
was not done
by Nissan in a
wanton,
fraudulent,
reckless,
oppressive or
malevolent
manner.
Nissan sought
reconsideration of
 P a g e | 1039

the decision
affirming the
judgment of the
lower court but
the Court of
Appeals denied
the same in a
Resolution
promulgated on
24 August 2007.
Hence, this
petition.
 P a g e | 1040

ISSUE:
Whether or not
Nissan committed
a breach of
contract, thereby
entitling United to
damages in the
amount
equivalent to 30
days’ service.
 P a g e | 1041

HELD:
At the heart of
the controversy is
paragraph 17 of
the service
contract, which
reads:
“However,
violations
committed by
 P a g e | 1042

either party on
the provisions of
this
Contract shall be
sufficient ground
for the
termination of this
contract,
without the
necessity of prior
notice, otherwise
a thirty (30) days
 P a g e | 1043

prior
written notice
shall be
observed.”
Nissan argues
that the failure of
United’s security
guards to report
for duty on two
occasions, without
justifiable cause,
constitutes a
 P a g e | 1044

violation of the
provisions of the
service contract,
sufficient to
entitle Nissan to
terminate
the same without
the necessity of a
30-day prior
notice. As the
Metropolitan
Trial Court of Las
 P a g e | 1045

Piñas City stated

in its decision,
Nissan did not
adduce any
evidence to
substantiate its
claim that the
terms of the
contract were
violated
by United. What
Nissan failed to do
 P a g e | 1046

is to point out or
indicate the
specific provisions
of the service
contract which
were violated by
United as a result
of
the latter’s lapses
in security. In so
failing, Nissan’s
act of unilaterally
 P a g e | 1047

terminating the
contract
constitutes a
breach thereof,
entitling United to

collect actual
damages.
P a g e | 1048
P a g e | 1049
 P a g e | 1050

OMC CARRIERS,
INC. vs.
SPOUSES
ROBERTO C.
NABUA and
ROSARIO T.
NABUA
 P a g e | 1051

G.R. No.
148974, July 02,
2010
FACTS:
On 04 August
1995, at about
3:00 p.m., an
Isuzu private
tanker with plate
no. PCH 612,
owned by and
registered in the
 P a g e | 1052

name of petitioner
OMC Carriers, Inc.
and then being
driven by its
employee Jerry P.
Añalucas
(Añalucas), was
cruising along
Quirino Highway
towards the
general direction
of Lagro, Quezon
 P a g e | 1053

City. At
BarangayPasong
Putik, Novaliches,
Quezon City, the
aforesaid private
tanker hit a
private vehicle, an
Isuzu Gemini with
plate no. NDF 372,
which was making
a left turn towards
a nearby Caltex
 P a g e | 1054

gasoline station.
The impact
heavily damaged
the right side
portion of the
latter motor and
mortally injured
its 18-year-old
driver, Reggie T.
Nabua, who was
later pronounced
dead on arrival at
 P a g e | 1055

the Fairview
Polymedic
Hospital.
Respondent
spouses Berlino
and Rosario
Nabua, the
parents of the
victim, filed a
Complaint for
damages against
petitioners and
 P a g e | 1056

the General
Manager of OMC
Carriers, Chito
Calauag, before
the RTC of Quezon
City, Branch 224.
The complaint
was docketed as
Civil Case No. Q-
95-24838 and
entitled, Spouses
Berlino C. Nabua
 P a g e | 1057

and Rosario T.
Nabua, Plaintiffs,
vs. OMC Carriers,
Inc., its General
Manager, Chito
Calauag, and Jerry
Añalucas y
Pitalino,
Defendants.
On 19 January
1998, the RTC
rendered a
 P a g e | 1058

Decision in favor
of the plaintiffs as
against
defendants and
ordering the latter
to pay the
plaintiffs, jointly
and
solidarily.
Aggrieved,
petitioners
appealed the RTC
 P a g e | 1059

Decision to the
CA. On
December 28,
1999, the CA
rendered a
Decision, partially
granting the
petition.
ISSUE:
Whether or not
the proximate and
immediate cause
 P a g e | 1060

of the accident
was the
negligence of the
victim, Reggie
Nabua.
HELD:
This Court is not
persuaded as the
same is a
question of fact.
All told, this Court
is convinced, and
 P a g e | 1061

thus affirms the

findings of fact of
the
RTC and the CA
that the
proximate cause
of the accident
was the
negligence of
petitioner
Añalucas.
 P a g e | 1062

Having
resolved the
same, this Court
shall now address
the defense of
petitioner
company that
they exercised
due diligence in
the selection and
supervision of
their employees.
 P a g e | 1063

On this note, the

CA ruled that
petitioners had
failed to overturn
the presumption
of negligence on
the part of the
employer.
In their defense,
the appellants’
witnesses have
admittedly
 P a g e | 1064

testified at length
regarding the
hiring and
supervisory
policies of the
appellant
company. While
they were able to
amply
demonstrate the
implantation of
the company’s
 P a g e | 1065

hiring
procedure insofar
as appellant Jerry
Añalucas was
concerned, the
same witnesses
failed to similarly
individualize the
company’s
purported
supervisory
policies.
 P a g e | 1066

The introduction
of evidence
showing the
employer
exercised the
required amount
of care in
selecting its
employees are
only half of the
employer’s
burden is
 P a g e | 1067

(sic) overcome.
The question of
diligent
supervision
depends on the
circumstances of
employment,
which, in the
instant case was
not sufficiently
proved by the
appellants. In
 P a g e | 1068

discounting merit
from the
appellants’
second
assignment of
error, this Court
is, consequently,
guided by the
principle that
the existence of
hiring procedure
and supervisory
 P a g e | 1069

policies cannot be
casually
invoked to
overturn the
presumption of
negligence on the
part of the
employer.
Article 2180 of the
Civil Code
provides:
xxxx
 P a g e | 1070

Employers shall
be liable for the
damages caused
by their
employees and
household helpers
acting within the
scope of their
assigned tasks,
even though
the former are not
engaged in any
 P a g e | 1071

business or
industry.
xxxx
The
responsibility
treated in this
article shall cease
when the persons
herein mentioned
prove they
observed all the
diligence of a
 P a g e | 1072

good father of a
family to prevent
damage. It is thus
clear that the
employer of a
negligent
employee is liable
for the damages
caused by the
latter. When an
injury is caused by
the negligence of
 P a g e | 1073

an employee,
there instantly
arises a
presumption of
the law that there
was negligence on
the part of the
employer, either
in the selection of
his employee or in
the supervision
over him after
 P a g e | 1074

such
selection. Howeve
r, the presumption
may be overcome
by a clear
showing on the
part of the
employer that he
has exercised the
care and diligence
of a good father of
a family in the
 P a g e | 1075

selection and
supervision of his
employee. In
other words, the
burden of proof is
on the employer.
Thus, petitioners
must prove two
things: first, that
they had
exercised due
diligence in the
 P a g e | 1076

selection of
petitioner
Añalucas, and
second that after
hiring Añalucas,
petitioners had
exercised due
diligence in
supervising him.
 P a g e | 1077

WALLEM
PHILIPPINES
SHIPPING, INC.
 P a g e | 1078

vs. S.R. FARMS,

INC.
G.R. No.
161849, July 09,
2010
FACTS:
On March 25,
1992, Continental
Enterprises, Ltd.
loaded on board
the vessel M/V
 P a g e | 1079

“Hui Yang,” at
Bedi Bunder,
India, a shipment
of Indian Soya
Bean Meal, for
transportation and
delivery to Manila,
with plaintiff
herein respondent
as
consignee/notify
party. The said
 P a g e | 1080

shipment is said
to weigh 1,100
metric tons and
covered by Bill of
Lading No. BEDI 4
dated March 25,
1992 (Exhibit A;
also
Exhibit I). The
vessel is owned
and operated by
defendant Conti-
 P a g e | 1081

Feed, with
defendant herein
petitioner Wallem
as its ship agent.
The subject
cargo is part of
the entire
shipment of Indian
Soya Bean
Meal/India
Rapeseed Meal
loaded in bulk on
 P a g e | 1082

board the said

vessel for delivery
to several
consignees.
Among the
consignees were
San Miguel
Corporation and
Vitarich
Corporation,
including the
herein plaintiff
 P a g e | 1083

(Exhibit A;
Exhibits 1 to 6;
TSN, p. 13, June
28, 1996).
On April 11,
1992, the said
vessel, M/V “Hui
Yang” arrived at
the port of
Manila, Pier 7
South Harbor.
Thereafter, the
 P a g e | 1084

shipment was
discharged and
transferred into
the custody of the
receiving barges,
the NorthFront-
333 and
NorthFront-444.
The offloading of
the shipment
went on until April
15, 1992 and
 P a g e | 1085

was handled by
[Ocean Terminal
Services, Inc.]
OTSI using its own
manpower and
equipment and
without the
participation of
the crew
members of the
vessel. All
throughout the
 P a g e | 1086

entire period of
unloading
operation, good
and fair weather
condition
prevailed.
At the instance
of the plaintiff, a
cargo check of the
subject shipment
was made by one
Lorenzo Bituin of
 P a g e | 1087

Erne Maritime and

Allied Services,
Co. Inc., who
noted a shortage
in the shipment
which was placed
at 80.467 metric
tons based on
draft survey made
on the NorthFront-
33 and
NorthFront-444
 P a g e | 1088

showing that the

quantity of cargo
unloaded from the
vessel was only
1019.53 metric
tons. Thus, per
the bill of lading,
there was an
estimated
shortage of
80.467.
 P a g e | 1089

Meanwhile,
defendant OTSI
filed its Answer
with Counterclaim
and Cross claim
denying the
material
allegations of the
Complaint and
alleging that it
exercised due
care and diligence
 P a g e | 1090

in the handling of
the shipment from
the carrying
vessel unto the
lighters; no
damage or loss
whatsoever was
sustained by the
cargo in question
while being
discharged by
OTSI; petitioner’s
 P a g e | 1091

claim had been

waived,
abandoned or
barred by laches
or estoppels;
liability, if any, is
attributable to its
co-defendants.
For its part,
petitioner denied
the allegations of
respondent
 P a g e | 1092

claiming, among
others, that it is
not accountable
nor responsible
for any alleged
shortage
sustained by the
shipment while in
the possession of
its co-defendants;
the alleged
shortage was due
 P a g e | 1093

to negligent or
faulty loading or
unloading of the
cargo by the
stevedores/shippe
r/consignee; the
shortage, if any,
was due to pre-
shipment
damage, inherent
nature, vice or
defect of the
 P a g e | 1094

cargo for which

herein petitioner
is not liable;
respondent’s
claim is already
barred by laches
and/or
prescription.
On October 8,
1999, the RTC
rendered its
Decision
 P a g e | 1095

dismissing
respondent’s
complaint, as well
as the opposing
parties’
counterclaims and
cross claims.
Aggrieved by the
RTC Decision,
respondent filed
an appeal with the
CA. On June 2,
 P a g e | 1096

2003, the CA
rendered Decision
which REVERSED
and SET ASIDE
and another one
entered ordering
defendants-
appellees Conti-
Feed and Maritime
Pvt. Ltd. and
Wallem
Philippines
 P a g e | 1097

Shipping, Inc., to
pay the sum
representing the
value of the
80.467 metric
tons of Indian
Soya Beans short
delivered, with
legal interest from
the time the
judgment
becomes final
 P a g e | 1098

until full payment,

plus attorney’s
fees and expenses
of litigation of
P10,000.00, as
well as the cost of
suit. Petitioner
filed a Motion for
Reconsideration.
ISSUE:
Whether or not
the court of
 P a g e | 1099

appeals erred in
applying the
presumption of
negligence under
article 1735 of the
Civil Code.
HELD:
In the instant
case, the Court is
not persuaded by
respondent’s
claim that the
 P a g e | 1100

complaint against
petitioner was
timely filed.
Respondent
argues that the
suit
for damages was
filed on March 11,
1993, which is
within one year
from the time
the vessel
 P a g e | 1101

carrying the
subject cargo
arrived at the Port
of Manila on April
11,
1993, or from the
time the shipment
was completely
discharged from
the vessel on April
15, 1992. There is
no dispute that
 P a g e | 1102

the vessel
carrying the
shipment arrived
at the Port of
Manila on April 11,
1992 and that the
cargo was
completely
discharged
therefrom on April
15, 1992.
However,
 P a g e | 1103

respondent erred
in arguing that the
complaint for
damages, insofar
as the petitioner
is concerned, was
filed on March 11,
1993.
The settled rule
is that the filing of
an amended
pleading does not
 P a g e | 1104

retroact to the
date of the filing
of the original;
hence, the statute
of limitation runs
until the
submission of the
amendment. It is
true that, as an
exception, this
Court has held
that an
 P a g e | 1105

amendment which
merely
supplements and
amplifies facts
originally alleged
in the complaint
relates back to
the date of the
commencement
of the action and
is not barred by
the statute of
 P a g e | 1106

limitations which
expired after the
service of the
original complaint.
The exception,
however, would
not apply to the
party impleaded
for the first time
in the amended
complaint.
The rule on the
 P a g e | 1107

non-applicability
of the curative
and retroactive
effect of an
amended
complaint, insofar
as newly
impleaded
defendants are
concerned, has
been established
as early as in the
 P a g e | 1108

case of Aetna
Insurance Co. v.
Luzon Stevedoring
Corporation. In
the said case, the
defendant Barber
Lines Far East
Service was
impleaded for the
first time in the
amended
complaint which
 P a g e | 1109

was filed after the

one-year period of
prescription. The
order of the lower
court dismissing
the amended
complaint against
the said
defendant on
ground of
prescription was
 P a g e | 1110

affirmed by this
Court.
Hence, reckoned
from April 15,
1992, the one-
year prescriptive
period
had already
lapsed. Having
ruled that the
action against
petitioner had
 P a g e | 1111

already
prescribed, the
Court no longer
finds it necessary
to address the
other issues
raised in the
present petition.
Hence, the
petition is partly
granted.
P a g e | 1112
P a g e | 1113
 P a g e | 1114

ROLITO CALANG
vs. PEOPLE OF
THE
PHILIPPINES
 P a g e | 1115

G.R. No.
190696, August
3, 2010
FACTS:
At around 2:00
p.m. of April 22,
1989, Rolito
Calang was
driving Philtranco
Bus No. 7001,
owned by
Philtranco along
Daang Maharlika
 P a g e | 1116

Highway in
Barangay
Lambao, Sta.
Margarita, Samar
when its rear left
side hit the front
left portion of a
Sarao jeep coming
from the opposite
direction. As a
result of the
collision,
Cresencio
Pinohermoso, the
 P a g e | 1117

jeep’s driver, lost

control of the
vehicle, and
bumped and killed
Jose Mabansag, a
bystander who
was standing
along the
highway’s
shoulder. The jeep
turned turtle three
(3) times before
finally
stopping at about
 P a g e | 1118

25 meters from
the point of
impact. Two of the
jeep’s
passengers,
Armando Nablo
and an
unidentified
woman, were
instantly killed,
while the other
passengers
sustained serious
physical injuries.
 P a g e | 1119

The prosecution
charged Calang
with multiple
homicide, multiple
serious
physical injuries
and damage to
property thru
reckless
imprudence
before the
Regional Trial
Court (RTC),
Branch 31,
 P a g e | 1120

Calbayog City. The

RTC, in its decision

dated May 21,

2001, found
Calang guilty
beyond
reasonable doubt
of reckless
imprudence
resulting to
multiple homicide,
multiple physical
injuries and
 P a g e | 1121

damage
to property, and
sentenced him to
suffer an
indeterminate
penalty of thirty
days
of arresto menor,
as minimum, to
four years and
two months of
prision
correccional, as
maximum. The
 P a g e | 1122

RTC ordered
Calang and
Philtranco, jointly
and
severally, to pay
P50,000.00 as
death indemnity
to the heirs of
Armando;
P50,000.00 as
death indemnity
to the heirs of
Mabansag; and
P90,083.93 as
 P a g e | 1123

actual damages to
the private
complainants. The
petitioners
appealed the RTC
decision to the
Court of Appeals
(CA), docketed as
CA-G.R. CR No.
25522. The CA, in
its decision dated
November 20,
2009 affirmed the
RTC decision in
 P a g e | 1124

toto. The CA
ruled that
petitioner Calang
failed to exercise
due care and
precaution in
driving the
Philtranco bus.
The CA further
ruled that Calang
demonstrated a
reckless attitude
when he drove
the bus, despite
 P a g e | 1125

knowing that it
was suffering from
loose
compression,
hence, not
roadworthy. The
CA added that the
RTC correctly held
Philtranco jointly
and severally
liable with
petitioner Calang,
for failing to prove
that it had
 P a g e | 1126

exercised the
diligence of a
good father of the
family to prevent
the accident. The
petitioners filed
with the Court a
petition for review
on certiorari and it
was denied.

ISSUE:
 P a g e | 1127

Whether or not
there was no basis
to hold Philtranco
jointly and
severally
liable with Calang
because the
former was not a
party in the
criminal case (for
multiple homicide
with multiple
 P a g e | 1128

serious physical
injuries and
damage to
property thru
reckless
imprudence)
before the RTC.
HELD:
The Court partly
granted the
motion. Liability of
Philtranco. We,
 P a g e | 1129

however, hold
that the RTC and
the CA both erred
in holding
Philtranco jointly
and severally
liable with Calang.
We emphasize
that Calang was
charged criminally
before the RTC.
Undisputedly,
 P a g e | 1130

Philtranco was not

a direct party in
this case. Since
the cause of
action against
Calang was based
on delict, both the
RTC and the CA
erred in holding
Philtranco jointly
and severally
liable with Calang,
 P a g e | 1131

based on quasi-
delict under
Articles 2176 and
2180 of the Civil
Code. Articles
2176 and 2180 of
the Civil Code
pertain to the
vicarious liability
of an employer for
quasi delicts that
an employee has
 P a g e | 1132

committed. Such
provision of law
does not apply to
civil liability
arising from
delict.
The foregoing
subsidiary liability
applies to
employers,
according to
Article 103 of the
 P a g e | 1133

Revised Penal
Code, which
reads:
The subsidiary
liability
established in the
next preceding
article shall also
apply to
employers,
teachers, persons,
and corporations
 P a g e | 1134

engaged in any
kind of
industry for
felonies
committed by
their servants,
pupils, workmen,
apprentices, or
employees in the
discharge of their
duties. The
provisions of the
 P a g e | 1135

Revised Penal
Code on
subsidiary
liability- Articles
102 and 103 are
deemed written
into the
judgments in
cases to which
they are
applicable. Thus,
in the dispositive
 P a g e | 1136

portion of its
decision, the trial
court need not
expressly
pronounce the
subsidiary liability
of the employer.
Nonetheless,
before the
employers’
subsidiary liability
is enforced,
 P a g e | 1137

adequate
evidence must
exist establishing
that (1) they are
indeed the
employers of the
convicted
employees; (2)
they are engaged
in some kind of
industry; (3) the
crime was
 P a g e | 1138

committed by the
employees in the
discharge of their
duties; and (4) the
execution against
the latter has not
been satisfied due
to insolvency. The
determination of
these conditions
may be done in
the same criminal
 P a g e | 1139

action in which
the employee’s
liability, criminal
and civil, has
been pronounced,
in a hearing set
for that precise
purpose, with due
notice to the
employer, as part
of the proceedings
 P a g e | 1140

for the execution

of the judgment.
 P a g e | 1141

ARRA REALTY
CORPORATION,
CARLOS D.
ARGUELLES and
REMEDIOS DE
LA RAMA-
 P a g e | 1142

ARGUELLES vs.
PACES
INDUSTRIAL
CORPORATION
G.R. No.
169761,
December 1,
2010
FACTS:
Teresa C. Aguilar
entered into an
 P a g e | 1143

Owner-General
Contractor
Agreement (First
Contract) with
Transcept
Construction for
the construction
of a two-storey
split level
vacation house.
Under the First
Contract, the
 P a g e | 1144

project would cost

P3,486,878.64
and was to be
completed on 7
June 2005. Aguilar
paid a
downpayment of
P1 million on 27
August 2004.
Transcept
submitted its First
Billing to Aguilar
 P a g e | 1145

for work
accomplishments
from start to 15
November 2004
and Aguilar paid
P566,356. Then
Aguilar received
the Second Billing
amounting to
P334,488 for the
period of 16
November 2004
 P a g e | 1146

to 15 December
2004. Transcept
informed Aguilar
that non-payment
would force them
to stop all works.
Aguilar
questioned the
Second Billing as
unusual for being
45 days ahead of
actual
 P a g e | 1147

accomplishment.
Aguilar did not
pay and Transcept
stopped working
on the Project.
Thereafter,
Aguilar hired
ASTEC, a duly
accredited testing
laboratory, to test
Transcept’s
quality of work
 P a g e | 1148

and the test

showed
substandard
works done by
Transcept. In a
letter, Transcept
outlined its
program to
reinforce or redo
the substandard
works discovered
by ASTEC.
 P a g e | 1149

Thereafter, ASTEC
sent Aguilar an
Evaluation of
Contractor’s
Performance
which showed
that aside from
the substandard
workmanship and
use of
substandard
materials,
 P a g e | 1150

Transcept was
unreasonably and
fraudulently
billing Aguilar. Of
the downpayment
amounting to
P1,632,436.29,
ASCTEC’s
reasonable
assessment of
Transcept’s
accomplishment
 P a g e | 1151

amounted only to
P527,875.94.
Astec
recommended the
partial demolition
of Transcept’s
work.
Thereafter,
Transcept and
Aguilar entered
into a
Construction
 P a g e | 1152

Contract (Second
Contract) to
extend the date of
completion from 7
June 2005 to 29
July 2005 and to
use up the P1.6
million
downpayment
paid by Aguilar.
Transcept failed to
finish the project
 P a g e | 1153

on time alleging
that the delay was
due to additional
works ordered by
Aguilar. Transcept
also asked for
payment of the
additional amount
of P290,824.96.
Aguilar countered
that the Second
Contract did not
 P a g e | 1154

provide for
additional works.
Later on, Aguilar
sent a demand
letter to Transcept
asking for
payment of
P581,844.54 for
refund and
damages.
Transcept ignored
the demand letter
 P a g e | 1155

so Aguilar filed a
complaint against
Transcept before
CIAC.
CIAC, after
assessing the
work
accomplished with
the corresponding
costs, as against
the downpayment
of P1,632,436.29
 P a g e | 1156

which was the

contract price in
the Second
Contract, ruled
that ruled that the
accomplishment
of P1,602,359.97
was 98.16% of
P1,632,436.29,
which was way
above 95% and
should therefore
 P a g e | 1157

be considered as
substantial
completion of the
Project. As such,
the CIAC ruled
that liquidated
damages could
not be awarded to
Aguilar. The CIAC
also found that
Aguilar demanded
extra works which
 P a g e | 1158

entailed additional
working days. The
CIAC computed
that the additional
works performed
over and above
the Second
Contract
amounted to
P189,909.91.
Aguilar appealed
CIAC’s ruling to
 P a g e | 1159

the CA which held

that Transcept
only accomplished
87.81% of the
contract price
thus entitling
Aguilar to
liquidated
damages
equivalent to 10%
of P1,632,436.29
or P163,243.63.
 P a g e | 1160

The Court of
Appeals further
ruled that
Transcept was not
entitled to
payment for
additional works
because they
were in fact only
rectifications of
the works poorly
 P a g e | 1161

done by
Transcept.
ISSUE:
Whether the
Court of Appeals
erred in awarding
Aguilar liquidated
damages.
HELD:
Section 20.11(A)
(a) of the
 P a g e | 1162

Construction
Industry Authority
of the Philippines
(CIAP) Document
No. 102 provides
that "[t]here is
substantial
completion when
the Contractor
completes 95% of
the Work,
provided that the
 P a g e | 1163

remaining work
and the
performance of
the work
necessary to
complete the
Work shall not
prevent the
normal use of the
completed
portion."
 P a g e | 1164

According to
CIAC’s
computation,
Transcept’s
accomplishment
amounted to
98.16% of the
contract price. It
is beyond the 95%
required under
CIAP Document
No. 102 and is
 P a g e | 1165

considered a
substantial
completion of the
Project. We thus
agree with CIAC’s
application of
Article 1234 of the
Civil Code, which
provides that "if
the obligation had
been substantially
performed in good
 P a g e | 1166

faith, the obligor

may recover as
though there had
been a strict and
complete
fulfillment, less
damages suffered
by the obligee."
There being a
substantial
completion of the
Project, Aguilar is
 P a g e | 1167

not entitled to
liquidated
damages but only
to actual damages
of P30,076.72,
representing the
unaccomplished
works in the
Second Contract
as found by the
CIAC, which is the
difference
 P a g e | 1168

between the
contract price of
P1,632,436.29
and the
accomplishment
of P1,602,359.97.
P a g e | 1169