Cases Masterfile

8/9/2019 Cases Masterfile

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TABLE OF CONTENTS

I. OBLIGATIONS

! DEVELOPMENT BANK OF THE PHILIPPINES (DBP) vs. GUARIÑA

AGRICULTURAL AND REALTY DEVELOPMENT CORPORATION

, G.R. No. 160758January 15, 2014Subject matter: (Default)

!

CONSOLIDATED INDUSTRIAL GASES, INC. vs. ALABANG

MEDICAL CENTER

G.R. No. 181983

November 13, 2013

Subject matter: (Reciprocal Obligations)

!

PLANTERS DEVELOPMENT BANK vs. SPOUSES ERNESTO LOPEZ

and FLORENTINA LOPEZ substituted by JOSEPH WILFRED

JOVEN JOSEPH GILBERT JOVEN and MARLYN JOVEN

G.R. No. 186332

October 23, 2013

Subject matter: ( Breach of Obligation )

! FIL-ESTATE PROPERTIES, INC. AND FIL-ESTATE NETWORK, INC.,

vs. SPOUSES CONRADO AND MARIA VICTORIA RONQUILLO

G.R. No. 185798

Date: Jan. 13, 2014

Subject matter: (Breach of Obligation)

! VECTOR SHIPPING CORPORATION vs. AMERICAN HOMEASSURANCE

G.R. No. 159213July 3, 2013Subject matter: (Subrogation)

!

S.C. MEGAWORLD CONSTRUCTION AND DEVELOPMENT

CORPORATION vs. ENGR. LUIS U. PARADA, REPRESENTED BY

ENGR. LEONARDO A. PARADA OF GENLITE INDUSTRIES

G.R. No. 183804

September 11, 2013

Subject matter: ( Novation)

!

METRO CONCAST STEEL CORPORATION, SPOUSES JOSE S.

DYCHIAO AND TIU OH YAN, SPOUSES GUILLERMO AND

MERCEDES DYCHIAO, AND SPOUSES VICENTE AND FILOMENA

DYCHIAO vs. ALLIED BANK CORPORATIONG.R. No. 177921December 4, 2013Subject matter: (Extinguishment of Obligation)

II.

CONTRACTS

!

PHILIPPINE NATIONAL BANK vs. TERESITA TAN DEE, ET AL.G.R. No. 182128February 19, 2014Subject matter: (Relativity of Contracts)


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!

CERILA J. CALANASAN, REPRESENTED BY TEODORA J.

CALANASAN AS ATTORNEY-IN-FACT vs. SPOUSES VIRGILIODOLORITO AND EVELYN C. DOLORITO G.R. No. 171937November 25, 2013

Subject matter: (Classification of Contracts)

!

SANDOVAL SHIPYARDS, INC. AND RIMPORT INDUSTRIES, INC.

REPRESENTED BY ENGR. REYNALDO G. IMPORTANTE vs.PHILIPPINE MERCHANT MARINE ACADEMY (PMMA) G.R. No. 188633April 10, 2013Subject matter: (Rescission)

! SANGGUNIANG PANLUNGSOD NG BAGUIO CITY vs. JADEWELL PARKING SYSTEMS CORPORATIONG.R. No. 160025April 23, 2014Subject matter: (Rescission)

! DOMINGO GONZALO vs. JOHN TARNATE JR.G.R. No. 160600January 15, 2014

Subject matter: (Pari Delicto)

! PHILIPPINE COMMERCIAL INTERNATIONAL BANK (NOW BDO

UNIBANK, INC.) vs. ARTURO P. FRANCO, SUBSTITUTED BY HISHEIRS, NAMELY: MAURICIA P. FRANCO, FLORIBEL P. FRANCO,

AND ALEXANDER P. FRANCO

G.R. No. 180069March 5, 2014Subject matter: (Extinguishment of Contracts)

III. SALES

!

ALI AKANG vs. MUNICIPALITY OF ISULAN, SULTAN KUDARATPROVINCE, REPRESENTED BY ITS MUNICIPAL MAYOR AND

MUNICIPAL VICE MAYOR AND MUNICIPAL

COUNCILORS/KAGAWADS

G.R. No. 186014June 26, 2013Subject matter: (Contract to Sell)

!

ROLANDO M. MENDIOLA vs. COMMERZ TRADING INT L., INC. G.R. No. 200895July 31, 2013

Subject matter: (Contract of Sale)

!

SKUNAC CORPORATION AND ALFONSO F. ENRIQUEZ vs. ROBERTO S.SYLIANTENG, ET AL.

G.R. No. 205879April 23, 2014Subject matter: (Double sale)

! ACE FOODS, INC., vs. MICRO PACIFIC TECHNOLOGIES CO., LTD.

G.R. No. 200602

December 11, 2013

Subject matter: ( Contract of Sale)


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IV.

DEPOSIT

! THE METROPOLITAN BANK AND TRUST COMPANY vs. ANA GRACEROSALES AND YO YUK TO

G.R. No. 183204

January 13, 2014

Subject matter: (Deposit)

V. ALEATORY CONTRACTS – INSURANCE, GAMBLING, LIFE ANNUITY

!

FORTUNE MEDICARE vs. DAVID ROBERT U. AMORIN

G.R. No.: 195872Date: Mar. 12, 2014Subject matter : Contract of Adhesion)

VI. AGENCY

!

NICANORA G. BUCTON (DECEASED), SUBSTITUTED BY

REQUILDA B. YRAY, vs. RURAL BANK OF EL SALVADOR, INC.,MISAMIS ORIENTAL, AND REYNALDO CUYONG, vs. ERLINDACONCEPCION AND HER HUSBAND AND AGNES BUCTON LUGOD G.R. No. 179625February 24, 2014Subject matter: (SPA)

VII. TRUSTS

!

SE JUAN TONG, ET AL,

vs.GO TIAT KUN, ET

G.R. No. 196023April 21, 2014Subject matter: (Sales)

VIII.

EXTRA-CONTRACTUAL OBLIGATIONS

! DR. FILOTEO A. ALANO vs. ZENAIDA MAGUD-LOGMAOG.R. No. 175540Date: April 7, 2014Subject matter: (Quasi-delict)

!

CATHAY PACIFIC AIRWAYS vs. JUANITA REYES, WILFREDO

REYES, MICHAEL ROY REYES, SIXTA LAPUZ, and SAMPAGUITA

TRAVEL CORP.

G.R. No. 185891June 26, 2013Subject matter: (Quasi-delict)

IX.

DAMAGES

!

MAGSAYSAY MARITIME CORPORATION vs. OSCAR D. CHIN, JR.

G.R. No. 199022April 7, 2014Subject matter: (Moral and Exemplary Damages)

! ONE NETWORK RURAL BANK, INC. vs. DANILO G. BARICG.R. No. 193684March 5, 2014Subject matter: (Nominal Damages)


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DEVELOPMENT BANK OF THE PHILIPPINES (DBP) vs.

GUARIÑA AGRICULTURAL AND REALTY DEVELOPMENT

CORPORATION

,

G.R. No. 160758

January 15, 2014

Facts:

In July 1976, Guariña Corporation applied for a loan from DBP to finance the

development of its resort complex situated in Trapiche, Oton, Iloilo. The loan, in the

amount of P3,387,000.00, was approved on August 5, 1976. Guariña Corporation

executed a promissory note that would be due on November 3, 1988. On October 5,

1976, Guariña Corporation executed a real estate mortgage over several real

properties in favor of DBP as security for the repayment of the loan and then achattel mortgage over the personal properties existing at the resort complex and

those yet to be acquired out of the proceeds of the loan, also to secure the

performance of the obligation. Prior to the release of the loan, DBP required Guariña

Corporation to put up a cash equity of P1,470,951.00 for the construction of the

buildings and other improvements on the resort complex. The loan was released in

several instalments, and Guariña Corporation used the proceeds to defray the cost of

additional improvements in the resort complex.

Guariña Corporation demanded the release of the balance of the loan, butDBP refused. Instead, DBP directly paid some suppliers of Guariña Corporation over

the latter's objection. DBP found upon inspection of the resort project, its

developments and improvements that Guariña Corporation had not completed the

construction works.7In a letter dated February 27, 1978,8 and a telegram dated June

9, 1978,9 DBP thus demanded that Guariña Corporation expedite the completion of

the project, and warned that it would initiate foreclosure proceedings should Guariña

Corporation not do so.

Issue:

Whether or not the foreclosure was correct?

Held:

Considering that it had yet to release the entire proceeds of the loan, DBP

could not yet make an effective demand for payment upon Guariña Corporation to

perform its obligation under the loan. According to Development Bank of the

Philippines v. Licuanan, it would only be when a demand to pay had been made andwas subsequently refused that a borrower could be considered in default, and the

lender could obtain the right to collect the debt or to foreclose the mortgage. Having

found and pronounced that the extrajudicial foreclosure by DBP was premature, and

that the ensuing foreclosure sale was void and ineffectual, the Court affirms the

order for the restoration of possession to Guarina Corporation and the payment of


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reasonable rentals for the use of the resort. The CA properly held that the premature

and invalid foreclosure had unjustly dispossessed Guarina Corporation of its

properties. Consequently, the restoration of possession and the payment of

reasonable rentals were in accordance with Article 561 of the Civil Code, which

expressly states that one who recovers, according to law, possession unjustly lostshall be deemed for all purposes which may redound to his benefit to have enjoyed it

without interruption.

It is true that loans are often secured by a mortgage constituted on real or

personal property to protect the creditor’s interest in case of the default of the

debtor. By its nature, however, a mortgage remains an accessory contract dependent

on the principal obligation, such that enforcement of the mortgage contract will

depend on whether or not there has been a violation of the principal obligation. While

a creditor and a debtor could regulate the order in which they should comply withtheir reciprocal obligations, it is presupposed that in a loan the lender should perform

its obligation – the release of the full loan amount – before it could demand that the

borrower repay the loaned amount.

Being a banking institution, DBP owed it to Guariña Corporation to exercise

the highest degree of diligence, as well as to observe the high standards of integrity

and performance in all its transactions because its business was imbued with public

interest. The high standards were also necessary to ensure public confidence in the

banking system, for, according to Philippine National Bank v. Pike: “The stability ofbanks largely depends on the confidence of the people in the honesty and efficiency

of banks.


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CONSOLIDATED INDUSTRIAL GASES, INC. vs. ALABANG

MEDICAL CENTER

G.R. No. 181983

November 13, 2013

Facts:

Consolidated Industrial Gases, Inc. (CIGI) is a domestic corporation engaged

in the business of selling industrial gases and installing centralized medical and

vacuum pipeline system. Alabang Medical Center AMC, is a domestic corporation

operating a hospital business. CIGI, as contractor and Alabang Medical Center AMC,

as owner, entered into a contract whereby the former bound itself to provide labor

and materials for the installation of a medical gas pipeline system for the hospital for

the contract price of P9,856,725.18 for Phase 1, which AMC duly paid in full.

The herein legal controversy arose after the parties entered into another

agreement,this time for the continuation of the centralized medical oxygen and

vacuum pipeline system in the hospital’s fourth and fifth floors (Phase 2 installation

project) at the cost of P2,267,344.42.

This second contract followed the same terms and conditions of the contract

for the Phase1 installation project. CIGI forthwith commenced installation works for

Phase 2 while AMC paid the partial amount of P1,000,000.00 with the agreement

that the balance shall be paid through progress billing and within fifteen days from

the date of receipt of the original invoice sent by CIGI.

On August 4, 1997, CIGI sent AMC Charge Sales Invoice as completion billing

for the unpaid balance of P1,267,344.42 for the Phase 2 installation project. When

the sales invoice was left unheeded, CIGI sent a demand letter to AMC. AMC,

however, still failed to pay thus prompting CIGI to file a collection suit before the RTC.

CIGI claimed that AMC’s obligation to pay the outstanding balance of the

contract price for the Phase 2 installation project is already due and demandable

pursuant to Article II, page 4 of the contract stating that the project shall be paid

through progress billing within fifteen days from the date of receipt of original invoice.

AMC averred that its obligation to pay the balance of the contract price has

not yet accrued because CIGI still has not turned over a complete and functional

medical oxygen and vacuum pipeline system.

RTC rendered its Decision wherein it adjudged AMC to have breached the

contract for failure to perform its obligation of paying the remaining balance of the

contract price. AMC appealed to the CA which granted the appeal and reversed the

RTC judgment. The CA ruled that it was CIGI who breached the contract when it failed

to complete the project and to turn over a fully functional centralized medical oxygen

and vacuum pipeline system.


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Issue:

Whether or not CIGI’s demand for payment upon AMC is proper.

Held:

No. The subject installation contracts bear the features of reciprocal

obligations. Reciprocal obligations are those which arise from the same cause, and in

which each party is a debtor and a creditor of the other, such that the obligation of

one is dependent upon the obligation of the other. They are to be performed

simultaneously, so that the performance of one is conditioned upon the

simultaneous fulfillment of the other. In reciprocal obligations, neither party incurs in

delay if the other does not comply or is not ready to comply in a proper manner withwhat is incumbent upon him.

From the moment one of the parties fulfills his obligation, delay by the other

begins. Being reciprocal in nature, the respective obligations of AMC and CIGI are

dependent upon the performance of the other of its end of the deal such that any

claim of delay or non-performance can only prosper if the complaining party has

faithfully complied with its own obligation.

In reciprocal obligations, before a party can demand the performance of theobligation of the other, the former must also perform its own obligation. For its failure

to turn over a complete project in accordance with the terms and conditions of the

installation contracts, CIGI cannot demand for the payment of the contract price

balance from AMC, which, in turn, cannot legally be ordered to pay. Otherwise, AMC

will be effectively forced to accept an incomplete performance contrary to Article

1248 of the Civil Code which states that "unless there is an express stipulation to

that effect, the creditor cannot be compelled partially to receive the prestations in

which the obligation consists."

Considering that AMC’s obligation to pay the balance of the contract price did

not accrue, the stipulated interest thereon also did not begin to run.


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PLANTERS DEVELOPMENT BANK vs. SPOUSES ERNESTO

LOPEZ and FLORENTINA LOPEZ substituted by JOSEPH

WILFRED JOVEN JOSEPH GILBERT JOVEN and MARLYN JOVEN

G.R. No. 186332

October 23, 2013

Facts:

Sometime in 1983, the spouses Emesto and Florentina Lopez applied for and

obtained a real estate loan in the amount of 3,000,000.00 from Planters Bank. To

secure the payment of the loan, the spouses Lopez mortgaged a parcel of land

covered by Transfer Certificate of Title No. T-16233.

On July 21, 1983, the parties signed an amendment to the loan agreement.

Accordingly, the interest rate was increased to twenty-three percent (23%) p.a. and

the term of the loan was shortened to three years. On March 9, 1984, the parties

executed a second amendment to the loan agreement. The interest rate was further

increased to twenty-five percent (25%) p.a. The contract also provided that releases

on the loan shall be subject to Planters Bank’s availability of funds. Since the

Philippine economy deteriorated the price of the materials and the cost of labor

escalated. To finish the project, the spouses Lopez obtained an additional loan in the

amount of P1,200,000.00 from Planters Bank.

On April 25, 1984, they entered into a third amendment to the loan

agreement. The amount of the loan and the interest rate were increased to

P4,200,000.00 and twenty-seven percent (27%) p.a., respectively. The spouses

Lopez failed to avail the full amount of the loan because Planters Bank refused to

release the remaining amount of P700,000.00. On October 13, 1984, the spouses

Lopez filed against Planters Bank complaint for rescission of the loan agreements

and for damages with the Regional Trial Court (RTC) of Makati City.

In a decision dated August 18, 1997, the RTC ruled in Planters Bank’s favor. It

held that the spouses Lopez had no right to rescind the loan agreements because

they were not the injured parties. On November 27, 2006, the CA reversed the RTC

ruling. It held that Planters Bank’s refusal to release the loan was a substantial

breach of the contract.

Issue:

Whether Planters Bank is liable for substantial breach in the loan agreement

thus giving ground for rescission.

Held:

NO. The CA’s conclusion that rescission is not proper. Planters Bank indeed

incurred in delay by not complying with its obligation to make further loan releases.


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Its refusal to release the remaining balance, however, was merely a slight or casual

breach as shown below. In other words, its breach was not sufficiently fundamental

to defeat the object of the parties in entering into the loan agreement. The well-

settled rule is that rescission will not be permitted for a slight or casual breach of the

contract. The question of whether a breach of contract is substantial depends uponthe attending circumstances.

The factual circumstances of this case lead us to the conclusion that Planters

Bank substantially complied with its obligation. To reiterate, Planters Bank released

P3,500,000.00 of the P4,200,000.00 loan. Only the amount of P700,000.00 was

not released. This constitutes 16.66% of the entire loan. Moreover, the progress

report dated May 30, 1984 states that 85% of the six-story building was already

completed by the spouses Lopez. It is also erroneous to solely impute the non-

completion of the building to Planters Bank. Planters Bank is not an insurer of thebuilding’s construction.

Even assuming that Planters Bank substantially breached its obligation, the

fourth paragraph of Article 1191 of the Civil Code expressly provides that rescission

is without prejudice to the rights of third persons who have acquired the thing, in

accordance with Article 1385 of the Civil Code. In turn, Article 1385 states that

rescission cannot take place when the things which are the object of the contract are

legally in the possession of third persons who did not act in bad faith.

In the present case, the mortgaged properties had already been foreclosed.

They were already sold to the highest bidder at a public auction. We recognize that

transferees pendente lite are proper, but not indispensable, parties in this case, as

they would, in any event, be bound by the judgment against Planters Bank. However,

the respondents did not overcome the presumption that the buyers bought the

foreclosed properties in good faith. The spouses Lopez did not cause the annotation

of notice of lis pendens at the back of the title of the mortgaged lot. Moreover, the

respondents did not adduce any evidence that would show that the buyers bought

the property with actual knowledge of the pendency of the present case.Furthermore, the spouses Lopez’s failure to pay the overdue loan made them parties

in default, not entitled to rescission under Article 1191 of the Civil Code.


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FIL-ESTATE PROPERTIES, INC. AND FIL-ESTATE NETWORK,

INC., vs. SPOUSES CONRADO AND MARIA VICTORIA

RONQUILLO

G.R. No. 185798

Date: Jan. 13, 2014

Facts:

Petitioner Fil-Estate Properties, Inc. is the owner and developer of the Central

Park Place Tower while Fil-Estate Network, Inc. is its authorized marketing agent.

Spouses Conrado and Maria Victoria Ronquillo bought from petitioners an 82-square

meter condominium unit at Central Park Place Tower in Mandaluyong City for a pre-

selling contract price of P5,174,000.00. Ronquillos executed and signed a

Reservation Application Agreement and deposited P200,000.00 as reservation fee.

They paid the full downpayment and had been paying monthly amortizations until

September 1998. Upon knowing that construction works had stopped, they also

stopped paying their monthly amortization. Claiming to have made a payment,

Ronquillos demanded a full refund of their payment with interest. Respondents then

filed a Complaint for Refund and Damages before the Housing and Land Use

Regulatory Board (HLURB).

Petitioners asserted the delay in construction to the 1997 Asian financial

crisis. They denied committing fraud or misrepresentation.

Issue:

Whether or not the Asian financial crisis constitute a fortuitous event which

would justify delay by petitioners in the performance of their contractual obligation.

Held:

No. The Asian financial crisis is not a fortuitous event. As a result of the

breach committed by petitioners, respondents may rescind the contract and ask for

refund the amount of amortizations paid including interest and damages; Petitioners

are likewise obligated to pay attorney’s fees and the administrative fine.


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VECTOR SHIPPING CORPORATION vs. AMERICAN HOME

ASSURANCE

G.R. No. 159213

July 3, 2013

Facts:

Vector was the operator of the motor tanker M/T Vector, while Soriano was

the registered owner of the M/T Vector. On September 30, 1987, Caltex entered into

a contract of Affreightment with Vector for the transport of Caltex’s petroleum cargo

through the M/T Vector. Caltex insured the petroleum cargo with respondent. In the

evening of December 20, 1987, the M/T Vector and the M/V Doña Paz, the latter a

vessel owned and operated by Sulpicio Lines, Inc., collided in the open sea near

Dumali Point in Tablas Strait, which led to the sinking of both vessels. On July 12,1988, respondent indemnified Caltex for the loss of the petroleum cargo in the full

amount of P7,455,421.08.

On March 5, 1992, respondent filed a complaint against Vector, Soriano, and

Sulpicio Lines, Inc. to recover the full amount of P7,455,421.08 it paid to Caltex. The

RTC issued a resolution dismissing Civil Case stating that this action is upon a

quasi!delict and as such must be commenced within four 4 years from the day they

may be brought. The tort complained of in this case occurred on 20 December 1987.

The action arising therefrom would under the law prescribe, unless interrupted, on

20 December 1991. The action not having been interrupted, had already prescribed.

Respondent appealed to the CA, which promulgated its assailed decision on

July 22, 2003 reversing the RTC. Although thereby absolving Sulpicio Lines, Inc. of

any liability to respondent, the CA held Vector and Soriano jointly and severally liable

to respondent for the reimbursement of the amount of P7,455,421.08 paid to Caltex

Respondent sought the partial reconsideration of the decision of the CA,

contending that Sulpicio Lines, Inc. should also be held jointly liable with Vector and

Soriano for the actual damages awarded.

Issues:

Whether this action of respondent was already barred by prescription for

bringing it only on March 5, 1992. A related issue concerns the proper determination

of the nature of the cause of action as arising either from a quasi !delict or a breach

of contract.

Held:

We concur with the CA’s ruling that respondent’s action did not yet prescribe.

Article 1144. The following actions must be brought within ten years from the time

the cause of action accrues: (1) Upon a written contract; (2) Upon an obligation

created by law; (3) Upon a judgment.


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We find and hold that that the present action was not upon a written contract,

but upon an obligation created by law. Hence, it came under Article 1144 (2) of the

Civil Code. This is because the subrogation of respondent to the rights of Caltex as

the insured was by virtue of the express provision of law embodied in Article 2207 of

the Civil Code.

The juridical situation arising under Article 2207 of the Civil Code is well

explained in Pan Malayan Insurance Corporation v. Court of Appeals, as follows:

Article 2207 of the Civil Code is founded on the well settled principle of

subrogation. If the insured property is destroyed or damaged through the fault or

negligence of a party other than the assured, then the insurer, upon payment to the

assured, will be subrogated to the rights of the assured to recover from the

wrongdoer to the extent that the insurer has been obligated to pay. Payment by the

insurer to the assured operates as an equitable assignment to the former of allremedies which the latter may have against the third party whose negligence or

wrongful act caused the loss. The right of subrogation is not dependent upon, nor

does it grow out of, any privity of contract or upon written assignment of claim. It

accrues simply upon payment of the insurance claim by the insurer [Compania

Maritima v. Insurance Company of North America, G.R. No. L!18965, October 30,

1964, 12 SCRA 213;

Verily, the contract of affreightment that Caltex and Vector entered into did

not give rise to the legal obligation of Vector and Soriano to pay the demand forreimbursement by respondent because it concerned only the agreement for the

transport of Caltex’s petroleum cargo. As the Court has aptly put it in Pan Malayan

Insurance Corporation v. Court of Appeals, supra, respondent’s right of subrogation

pursuant to Article 2207, supra, was "not dependent upon, nor did it grow out of, any

privity of contract or upon written assignment of claim but accrued simply upon

payment of the insurance claim by the insurer."

Considering that the cause of action accrued as of the time respondent

actually indemnified Caltex in the amount of P7,455,421.08 on July 12, 1988, the

action was not yet barred by the time of the filing of its complaint on March 5, 1992,

which was well within the 10!year period prescribed by Article 1144 of the Civil Code.

The insistence by Vector and Soriano that the running of the prescriptive

period was not interrupted because of the failure of respondent to serve any

extrajudicial demand was rendered inconsequential by our foregoing finding that

respondent’s cause of action was not based on a quasi!delict that prescribed in four

years from the date of the collision on December 20, 1987, as the RTC

misappreciated, but on an obligation created by law, for which the law fixed a longer

prescriptive period of ten years from the accrual of the action.


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S.C. MEGAWORLD CONSTRUCTION AND DEVELOPMENT

CORPORATION vs. ENGR. LUIS U. PARADA, REPRESENTED BY

ENGR. LEONARDO A. PARADA OF GENLITE INDUSTRIES

G.R. No. 183804

September 11, 2013

Facts:

S.C. Megaworld Construction and Development Corporation bought electrical

lighting materials from Genlite Industries, a sole proprietorship owned by Engineer

Luis U. Parada for its Read-Rite project in Canlubang, Laguna. The petitioner was

unable to pay for the above purchase on due date, but blamed it on its failure to

collect under its sub-contract with the Enviro Kleen Technologies, Inc. It was however

able to persuade Enviro Kleen to agree to settle its above purchase, but after paying

the respondent P250,000.00 on June 2, 1999, Enviro Kleen stopped making further

payments, leaving an outstanding balance of P816,627.00. It also ignored the

various demands of the respondent, who then filed a suit in the RTC, docketed as

Civil Case No. Q-01-45212, to collect from the petitioner the said balance, plus

damages, costs and expenses.

The petitioner in its answer denied liability, claiming that it was released from

its indebtedness to the respondent by reason of the novation of their contract, which,

it reasoned, took place when the latter accepted the partial payment of Enviro Kleen

in its behalf, and thereby acquiesced to the substitution of Enviro Kleen as the new

debtor in the petitioner’s place.

After trial, the RTC rendered judgment6 on May 28, 2004 in favor of the

respondent. On appeal, the CA affirmed the decision of the RTC in toto.

Issue:

Whether there was a novation between the parties through substitution of the

debtor.

Held:

No. Novation is a mode of extinguishing an obligation by changing its objects

or principal obligations, by substituting a new debtor in place of the old one, or by

subrogating a third person to the rights of the creditor. It is “the substitution of a new

contract, debt, or obligation for an existing one between the same or different

parties.”

Thus, in order to change the person of the debtor, the former debtor must be

expressly released from the obligation, and the third person or new debtor must

assume the former’s place in the contractual relation. Article 1293 speaks of

substitution of the debtor, which may either be in the form of expromision or


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delegacion, as seems to be the case here. In both cases, the old debtor must be

released from the obligation, otherwise, there is no valid novation.

From the circumstances obtaining below, we can infer no clear and

unequivocal consent by the respondent to the release of the petitioner from theobligation to pay the cost of the lighting materials. In fact, from the letters of the

respondent to Enviro Kleen, it can be said that he retained his option to go after the

petitioner if Enviro Kleen failed to settle the petitioner’s debt.


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METRO CONCAST STEEL CORPORATION, SPOUSES JOSE S.

DYCHIAO AND TIU OH YAN, SPOUSES GUILLERMO AND

MERCEDES DYCHIAO, AND SPOUSES VICENTE AND FILOMENA

DYCHIAO vs. ALLIED BANK CORPORATION

G.R. No. 177921

December 4, 2013

Facts:

Metro Concast, a domestic corporation engaged in the business of

manufacturing steel, through its officers, herein petitioners, obtained several loans

from Allied Bank covered by a promissory note and separate letters of credit/trust

receipts. Petitioners failed to pay, hence, Allied Bank, through counsel, sent them

demand letters, seeking payment of the total amount of P51, 064,093.62, but to no

avail. As a result, they prompted to file a complaint for collection of sum of money

before the RTC.

Petitioners offered the sale of Metro Concast’s remaining assets, consisting of

machineries and equipment, to Allied Bank, which the latter, however, refused.

Instead, Allied Bank advised them to sell the equipment and apply the proceeds of

the sale to their outstanding obligations. Accordingly, petitioners offered the

equipment for sale, but since there were no takers, the equipment was reduced into

scrap metal over the years. Peakstar Oil Corporation expressed interest in buying the

scrap metal. Unfortunately, they reneged on all their obligations under the MoA.

In this regard, petitioners asseverated that: (a) their failure to pay their

outstanding loan obligations to Allied Bank must be considered as force majeure;

and (b) since Allied Bank was the party that accepted the terms and conditions of

payment proposed by Peakstar, petitioners must therefore be deemed to have

settled their obligations to Allied Bank. The RTC dismissed the complaint. Upon

appeal, CA reversed and set aside the RTC ruling.

Issue:

Whether or not the obligation has been extinguished by force majeure

Held:

No. The Court dispelled the notion that the MoA would have any relevance to

the performance of petitioners’ obligations to Allied Bank. The MoA is a sale of assetscontract, while petitioners’ obligations to Allied Bank arose from various loan

transactions. Absent any showing that the terms and conditions of the latter

transactions have been, in any way, modified or novated by the terms and conditions

in the MoA, said contracts should be treated separately and distinctly from each


16/51

other, such that the existence, performance or breach of one would not depend on

the existence, performance or breach of the other.

While it may be argued that Peakstar's breach of the MoA was unforeseen by

petitioners, the same is clearly not "impossible" to foresee or even an event which is"independent of human will." Neither has it been shown that said occurrence

rendered it impossible for petitioners to pay their loan obligations to Allied Bank and

thus, negates the former’s force majeure theory altogether. In any case, as earlier

stated, the performance or breach of the MoA bears no relation to the performance

or breach of the subject loan transactions, they being separate and distinct sources

of obligation. The fact of the matter is that petitioners' loan obligations to Allied Bank

remain subsisting for the basic reason that the former has not been able to prove

that the same had already been paid or, in any way, extinguished.


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PHILIPPINE NATIONAL BANK vs. TERESITA TAN DEE, ET AL.

G.R. No. 182128

February 19, 2014

Facts:

Teresita Tan Dee (Dee) bought from respondent Prime East Properties Inc.

(PEPI) on an installment basis a residential lot located in Binangonan, Rizal.

Subsequently, PEPI assigned its rights over a 213,093-sq m property on August 1996

to respondent Armed Forces of the Philippines-Retirement and Separation Benefits

System, Inc. (AFP-RSBS), which included the property purchased by Dee.

Thereafter, PEPI obtained a P205,000,000.00 loan from petitioner Philippine

National Bank (petitioner), secured by a mortgage over several properties, including

Dee’s property. The mortgage was cleared by the Housing and Land Use RegulatoryBoard (HLURB) on September 18, 1996.

After Dee’s full payment of the purchase price, a deed of sale was executed by

respondents PEPI and AFP-RSBS on July 1998 in Dee’s favor. Consequently, Dee

sought from the petitioner the delivery of the owner’s duplicate title over the

property, to no avail. Thus, she filed with the HLURB a complaint for specific

performance to compel delivery of TCT No. 619608 by the petitioner, PEPI and

AFP-RSBS, among others. In its Decision dated May 21, 2003, the HLURB ruled in

favor of Dee.

Issue:

Whether Dee is entitled to the TCT of the subject property

Held:

The petitioner is correct in arguing that it is not obliged to perform any of the

undertaking of respondent PEPI and AFP-RSBS in its transactions with Dee because itis not a privy thereto. The basic principle of relativity of contracts is that contracts

can only bind the parties who entered into it, and cannot favor or prejudice a third

person, even if he is aware of such contract and has acted with knowledge thereof.

Note that at the time PEPI mortgaged the property to the petitioner, the

prevailing contract between respondents PEPI and Dee was still the Contract to Sell,

as Dee was yet to fully pay the purchase price of the property. On this point, PEPI

was acting fully well within its right when it mortgaged the property to the petitioner,

for in a contract to sell, ownership is retained by the seller and is not to pass until fullpayment of the purchase price. In other words, at the time of the mortgage, PEPI was

still the owner of the property. Thus, there is a valid mortgage.

Nevertheless, despite the apparent validity of the mortgage between the

petitioner and PEPI, the former is still bound to respect the transactions between


18/51

respondents PEPI and Dee. The petitioner was well aware that the properties

mortgaged by PEPI were also the subject of existing contracts to sell with other

buyers. While it may be that the petitioner is protected by Act No. 3135, as

amended, it cannot claim any superior right as against the installment buyers. This is

because the contract between the respondents is protected by P.D. No. 957, a social justice measure enacted primarily to protect innocent lot buyers.


19/51

CERILA J. CALANASAN, REPRESENTED BY TEODORA J.

CALANASAN AS ATTORNEY-IN-FACT vs. SPOUSES VIRGILIO

DOLORITO AND EVELYN C. DOLORITO

G.R. No. 171937

November 25, 2013

Facts:

The petitioner, Cerila J. Calanasan, took care of her orphan niece, respondent

Evelyn C. Dolorita, since the latter was a child. When Evelyn was already married to

respondent Virgilio Dolorita, the petitioner donated to Evelyn a parcel of land which

had earlier been mortgaged for Pl5,000.00. It was conditioned that Evelyn must

redeem the land and the petitioner was entitled to possess and enjoy the property as

long as she lived. Evelyn signified her acceptance of the donation and its terms in the

same deed. She then redeemed the property, had the title of the land transferred to

her name, and granted the petitioner usufructuary rights. Soon thereafter, the donor

complained with the Regional Trial Court that Evelyn had committed acts of

ingratitude against her and as such, she prayed that her donation in favor of her

niece be revoked.

The RTC dismissed the complaint stating that Article 765 of the New Civil

Code did not apply because the ungrateful acts were committed against Teodora, the

donor’s sister, and not against the donor, the petitioner. Equally important, the

perpetrator of the ungrateful acts was not Evelyn, but her husband Virgilio.

On appeal, the CA affirmed the RTC ruling but on a different legal ground. The

CA, after legal analysis, found that the donation was inter vivos and onerous.

Therefore, the deed of donation must be treated as an ordinary contract and Article

765 of the New Civil Code finds no relevance.

Issue:

Whether or not the rules on ordinary contracts would apply to onerous

donations

Held:

Donations with an onerous cause shall be governed by the rules on contracts.

We agree with the CA that since the donation imposed on the donee the burden of

redeeming the property for P15,000.00, the donation was onerous. As an

endowment for a valuable consideration, it partakes of the nature of an ordinarycontract; hence, the rules of contract will govern and Article 765 of the New Civil

Code finds no application with respect to the onerous portion of the donation.

Insofar as the value of the land exceeds the redemption price paid for by the

donee, a donation exists, and the legal provisions on donation apply. Nevertheless,


20/51

despite the applicability of the provisions on donation to the gratuitous portion, the

petitioner may not dissolve the donation. She has no factual and legal basis for its

revocation, as aptly established by the RTC. First, the ungrateful acts were committed

not by the donee; it was her husband who committed them. Second, the ungrateful

acts were perpetrated not against the donor; it was the petitioner's sister whoreceived the alleged ill treatments. These twin considerations place the case out of

the purview of Article 765 of the New Civil Code.


21/51

SANDOVAL SHIPYARDS, INC. AND RIMPORT INDUSTRIES, INC.

REPRESENTED BY ENGR. REYNALDO G. IMPORTANTE vs.

PHILIPPINE MERCHANT MARINE ACADEMY (PMMA)

G.R. No. 188633

April 10, 2013

Facts:

Philippine Merchant Marine Academy entered into a Ship Building Contract

with Sandoval Shipyards, Inc. through the latter's agent, Rimport Industries, Inc. on

19 December 1994. These lifeboats should have 45-HP Gray Marine diesel engines

and should be delivered within 45 working days from the date of the contract-signing

and payment of the mobilization/organization fund. Respondent, for its part, would

pay petitioners P1,685,200 in installments based on the progress accomplishment

of the work as stated in the contract.

As agreed upon, respondent paid petitioners P236,694.00 on 08 March 1995

as mobilization fund for the lifeboats; P504,947.20 on 15 March 1995 for its first

progress billing; and P386,600.00 on 25 March 1995 as final payment for the

lifeboats. On 10 August 1995, Angel Rosario, who claimed to have been verbally

authorized by its president, allegedly received the lifeboats at the Philippine Navy

Wharf in good order and condition.

An inspection team checked whether the work specifications had been

complied with. The team found that petitioners did not perform in conformity with the

approved plan. For these reasons, respondent’s dean submitted a report and

recommendation to the president of petitioners stating the latter’s construction

violations and asking for rectification. Despite repeated demands from respondent,

petitioners refused to deliver the lifeboats that would comply with the agreed plans

and specifications. As a result, respondent filed a Complaint for Rescission of

Contract with Damages against petitioners before the RTC, and trial ensued.

The RTC held that although the caption of the Complaint was "Rescission of

Contract with Damages," the allegations in the body were for breach of contract.

Petitioners were found to have violated the contract by installing surplus diesel

engines, contrary to the agreed plan and specifications. The CA ruled that petitioners

indeed committed a clear substantial breach of the contract, which warranted its

rescission. Rescission requires a mutual restoration of benefits received. However,

petitioners failed to deliver the lifeboats; their alleged delivery to Rosario was invalid,

as he was not a duly authorized representative named in the contract. Hence,

petitioners could not compel respondent to return something it never had possession

or custody of.

Issue:


22/51

Whether or not the case is for rescission and not damages or breach of

contract

Held:

The Court denies the Petition. Both the RTC and the CA found that petitioners

violated the terms of the contract by installing surplus diesel engines, contrary to the

agreed plans and specifications, and by failing to deliver the lifeboats within the

agreed time. The breach was found to be substantial and sufficient to warrant a

rescission of the contract. Rescission entails a mutual restitution of benefits

received. An injured party who has chosen rescission is also entitled to the payment

of damages. The factual circumstances, however, rendered mutual restitution

impossible. Both the RTC and the CA found that petitioners delivered the lifeboats to

Rosario. Although he was an engineer of respondent, it never authorized him to

receive the lifeboats from petitioners. Hence, as the delivery to Rosario was invalid, it

was as if respondent never received the lifeboats. As it never received the object of

the contract, it cannot return the object. Unfortunately, the same thing cannot be

said of petitioners. They admit that they received a total amount of P1,516,680 from

respondent as payment for the construction of the lifeboats. For this reason, they

should return the same amount to respondent.


23/51

SANGGUNIANG PANLUNGSOD NG BAGUIO CITY

vs. JADEWELL PARKING SYSTEMS CORPORATION

G.R. No. 160025

April 23, 2014

Facts:

On 1 March 1999, Jadewell proposed the privatization of the administration of

on-street parking in Baguio City using Schlumberger’s DG4S Pay and Display Parking

Meter (hereinafter "DG4S P&D"), which it touted as "technologically advanced, up to

the level of more progressive countries and which would make the city as the first

and only city in the Philippines, if not in Asia, to have metered parking as an

important part of its traffic and parking system.”

On 26 June 2000, the MOA was finally executed between Jadewell and the

City of Baguio. In September of 2000, Jadewell began to mobilize and take over the

parking facilities at the Ganza/Burnham Park area. Around this time, questions arose

regarding the compliance by Jadewell with the provisions of the MOA.

Ultimately, Jadewell was able to install no more than 14 parking meters in

three (3) areas of Baguio City: six (6) on Session Road, five (5) on Harrison Road and

three (3) on Lake Drive. At the time that these meters were installed, there were

already verbal complaints being raised against Jadewell by the Sanggunian for thefollowing alleged violations such as failure to install parking meters for each parking

space as specified in Section 3-F of Ordinance No. 003-2000 among others.

On 19 February 2002, the Sanggunian passed Resolution 37, expressing its

intent to rescind the MOA with Jadewell. However, City Mayor of Baguio, Bernardo M.

Vergara, vetoed Resolution stating that it was premature for the Sangguniang

Panlungsod to rescind the MOA, because the latter provides for a minimum period of

five years before the right of rescission can be exercised; and, that the right of

Jadewell to due process was violated due to the lack of opportunity to hear thelatter’s side. The Sanggunian, nevertheless, resolved through a Resolution to

override the veto of the City Mayor.

Jadewell denied the breach and commenced an action before the Regional

Trial Court (RTC) of Baguio, questioning the validity of the MOA’s revocation. The RTC

found the rescission unlawful. While pending on appeal, on 22 September 2006, City

Legal Officer Rabanes wrote a letter to Jadewell, through its President, Mr. Rogelio

Tan, informing Jadewell of Resolution No. 204, Series of 2006, which rescinded the

MOA, and ordering it to stop operations within 60 days from notice. This letter wasreceived on the same day it was issued; hence, the 60-day period lapsed on 22

November 2006. This notice, together with the resolution, constituted the second act

of rescission of the MOA by the city officials of Baguio.


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Issue:

Whether or not the rescission was valid?

Held:

YES. The rescission had taken effect and the MOA between the City and

Jadewell legally ceased to exist on 22 November 2006, 60 days had lapsed from

receipt of the letter dated 22 September 2006, informing Jadewell of the decision of

the City of Baguio to rescind the MOA under Section 12 thereof. Section 12 of the

said MOA requires that notice of the intention to rescind be given 60 days prior to the

effectivity of the rescission. Jadewell has not questioned the legal efficacy of this

notice. It has brought this matter of a second rescission to the Court’s attention only

as a matter of contumacious behavior on the part of the respondents.

Rescission under Article 1191 takes place through either of two modes: (1)

through an extrajudicial declaration of rescission; or (2) upon the grant of a judicial

decree of rescission.

Extrajudicial declaration of rescission is recognized as a power which does not

require judicial intervention. If the rescission is not opposed, extrajudicial declaration

of rescission produces legal effect such that the injured party is already relieved from

performing the undertaking. However, the power of declaring extrajudicial rescissionconferred upon the injured party is regulated by the Civil Code. If the extrajudicial

rescission is impugned by the other party, it shall be subject to a judicial

determination where court action must be taken, and the function of the court is to

declare the rescission as having been properly or improperly made, or to give a

period within which the debtor must perform the obligation alleged to be breached. A

unilateral cancellation of a contract may be questioned in courts by the affected

party to determine whether or not cancellation is warranted. Thus, in an extrajudicial

decree of rescission, revocation cannot be completely exercised solely on a party’s

own judgment that the other has committed a breach of the obligation but alwayssubject to the right of the other party to judicially impugn such decision.

It is important to contextualize that the agreement entered into by the City of

Baguio with Jadewell is the embodiment of a grant of franchise imbued with public

interest and is not merely an agreement between two private parties. It is in the view

of the SC that the first act of rescission by the City of Baguio may be valid even if

there is a stipulation against it within the first five years of the MOA’s existence.

Article 1191 of the New Civil Code provides a party the right to rescind the agreement

and clearly overrides any stipulation to the contrary. However, the grounds that wouldserve as basis to the application of the said article must be clearly established.

The objectives of the Sanggunian Panlungsod, as well as its intention to

rescind the MOA; because it deems to no longer serve the interest of the City of

Baguio, are clearly an exercise of its legislative or administrative function.


25/51

DOMINGO GONZALO vs. JOHN TARNATE JR.

G.R. No. 160600

January 15, 2014

Facts:

After the Department of Public Works and Highways (DPWH) had awarded the

contract for the improvement of the Sadsadan-Maba-ay Section of the Mountain

Province-Benguet Road to Gonzalo Construction, petitioner Domingo Gonzalo

(Gonzalo) subcontracted to respondent John Tarnate, Jr. (Tarnate) on October 15,

1997, the supply of materials and labor for the project under the latter’s business

known as JNT Aggregates. Their agreement stipulated, among others, that Tarnate

would pay to Gonzalo eight percent and four percent of the contract price,respectively, upon Tarnate s first and second billing in the project. In furtherance of

their agreement, Gonzalo executed a deed of assignment whereby he, as the

contractor, was assigning to Tarnate an amount equivalent to 10% of the total

collection from the DPWH for the project. This 10% retention fee (equivalent to

P233,526.13) was the rent for Tarnate’s equipment that had been utilized in the

project. Gonzalo further authorized Tarnate to use the official receipt of Gonzalo

Construction in the processing of the documents relative to the collection of the 10%

retention fee and in encashing the check to be issued by the DPWH for that purpose.

The deed of assignment was submitted to the DPWH on April 15, 1999. During theprocessing of the documents for the retention fee, however, Tarnate learned that

Gonzalo had unilaterally rescinded the deed of assignment by means of an affidavit

of cancellation of deed of assignment dated April 19, 1999 filed in the DPWH on April

22, 1999; and that the disbursement voucher for the 10% retention fee had then

been issued in the name of Gonzalo, and the retention fee released to him.

Tarnate demanded the payment of the retention fee from Gonzalo, but to no

avail. Thus, he brought this suit against Gonzalo on September 13, 1999 in the

Regional Trial Court (RTC) in Mountain Province to recover the retention fee of

P233,526.13, moral and exemplary damages for breach of contract, and attorney’s

fees. In his answer, Gonzalo admitted the deed of assignment and the authority given

therein to Tarnate, but averred that the project had not been fully implemented

because of its cancellation by the DPWH, and that he had then revoked the deed of

assignment. He insisted that the assignment could not stand independently due to

its being a mere product of the subcontract that had been based on his contract with

the DPWH; and that Tarnate, having been fully aware of the illegality and

ineffectuality of the deed of assignment from the time of its execution, could not go

to court with unclean hands to invoke any right based on the invalid deed of

assignment or on the product of such deed of assignment.

Issue:

Whether or not the rule of in pari delicto should apply.


26/51

Held:

NO. According to Article 1412 (1) of the Civil Code, the guilty parties to an

illegal contract cannot recover from one another and are not entitled to an

affirmative relief because they are in pari delicto or in equal fault. The doctrine of inpari delicto is a universal doctrine that holds that no action arises, in equity or at law,

from an illegal contract; no suit can be maintained for its specific performance, or to

recover the property agreed to be sold or delivered, or the money agreed to be paid,

or damages for its violation; and where the parties are in pari delicto, no affirmative

relief of any kind will be given to one against the other. Nonetheless, the application

of the doctrine of in pari delicto is not always rigid. An accepted exception arises

when its application contravenes well-established public policy. In this jurisdiction,

public policy has been defined as “that principle of the law which holds that no

subject or citizen can lawfully do that which has a tendency to be injurious to thepublic or against the public good.”

Unjust enrichment exists, according to Hulst v. PR Builders, Inc. "when a

person unjustly retains a benefit at the loss of another, or when a person retains

money or property of another against the fundamental principles of justice, equity

and good conscience." The prevention of unjust enrichment is a recognized public

policy of the State, for Article 22 of the Civil Code explicitly provides that "Every

person who through an act of performance by another, or any other means, acquires

or comes into possession of something at the expense of the latter without just orlegal ground, shall return the same to him." It is well to note that Article 22 "is part of

the chapter of the Civil Code on Human Relations, the provisions of which were

formulated as basic principles to be observed for the rightful relationship between

human beings and for the stability of the social order; designed to indicate certain

norms that spring from the fountain of good conscience; guides for human conduct

that should run as golden threads through society to the end that law may approach

its supreme ideal which is the sway and dominance of justice."

There is no question that Tarnate provided the equipment, labor andmaterials for the project in compliance with his obligations under the subcontract

and the deed of assignment; and that it was Gonzalo as the contractor who received

the payment for his contract with the DPWH as well as the 10% retention fee that

should have been paid to Tarnate pursuant to the deed of assignment. Considering

that Gonzalo refused despite demands to deliver to Tarnate the stipulated 10%

retention fee that would have compensated the latter for the use of his equipment in

the project, Gonzalo would be unjustly enriched at the expense of Tarnate if the latter

was to be barred from recovering because of the rigid application of the doctrine of in

pari delicto.


27/51

PHILIPPINE COMMERCIAL INTERNATIONAL BANK (NOW BDO

UNIBANK, INC.) vs. ARTURO P. FRANCO, SUBSTITUTED BY HIS

HEIRS, NAMELY: MAURICIA P. FRANCO, FLORIBEL P. FRANCO,

AND ALEXANDER P. FRANCO

G.R. No. 180069

March 5, 2014

Facts:

This is an action for damages filed [on September 5, 2000] by plaintiff Arturo

P. Franco against Philippine Commercial International Bank (PCIB), now known as

Equitable-PCIBank, and Equitable Banking Corp. The complaint essentially alleges,

among others, that plaintiff secured from defendant PCIB several Trust Indenture

Certificates.

Despite demands, defendants refused and still refuses to return to plaintiff

the trust amounts, plus the stipulated interest. In all of the trust transactions that

defendant PCIB had entered into with the plaintiff, defendant PCIB represented to

plaintiff that in making the trust investment, plaintiff was actually providing for his

future since the money invested was going to be managed and administered by their

PCIB-Trust Services Group and will be commingled, pooled and automatically rolled-

over for better investment return. Believing the representation of the bank, the

plaintiff invested his lifetime savings in the hope that the defendant bank.

Sometime in 1995, plaintiff discovered that one of his children had leukemia

and in the ensuing hospitalization and treatment, his funds were exhausted, thus,

plaintiff then turned to his Trust Indenture Certificates and started inquiring as to

how he could liquidate the trust. In the beginning, defendant bank constantly asked

for time to look for his records, at one time on June 18, 1998, promising to have an

answer before July 15, 1998, then writing plaintiff on May 18, 2000 saying that thebank had coordinated with their Branch and Trust Department but that it might

take some time to retrieve their records and that to plaintiff’s surprise, on June 22,

2000, he received a letter signed by defendant’s counsel, Curato Divina &

Partners, in effect denying plaintiff’s request for payment by stating that due to

the conversion of all outstanding PCIBank trust indenture accounts into common

trust certificates, all such PCIBank trust indenture certificates have been rendered

“null and void.”

Plaintiff prays for the payment of the amounts under the Trust IndentureCertificates, plus interest, moral and exemplary damages and attorney’s fees. In

their Answer, defendants admit the issuance by defendant PCIB of the Trust

Indenture Certificates subject matter of the complaint, but deny the allegation that

the investments subject of the Trust Indenture Certificates are automatically rolled-


28/51

over as such certificates have their own fixed term and maturity date, and that the

present action had already prescribed.

The RTC ruled in favor of plaintiff and ordering defendant Philippine

Commercial International Bank, now known as Equitable-PCIBank to pay. On appeal,the CA affirmed the RTC ruling.

Issue:

Whether the RTC and the CA erred in deciding in favor of the plaintiff.

Held:

Upon perusal of the entire case records, the Court finds no reversible errorcommitted by the CA in sustaining the RTC Decision. Considering the evidence at

hand, both courts have applied the law in accordance with the facts of the case.

Jurisprudence abounds that, in civil cases, one who pleads payment has the burden

of proving it. Even where the plaintiff must allege non-payment, the general rule is

that the burden rests on the defendant to prove payment, rather than on the plaintiff

to prove non-payment.

Jurisprudence abounds that, in civil cases, one who pleads payment has the

burden of proving it. Even where the plaintiff must allege non-payment, the generalrule is that the burden rests on the defendant to prove payment, rather than on the

plaintiff to prove non-payment. When the creditor is in possession of the document of

credit, he need not prove non-payment for it is presumed. The creditor's possession

of the evidence of debt is proof that the debt has not been discharged by payment. In

this case, respondent's possession of the original copies of the subject TICs strongly

supports his claim that petitioner Bank's obligation to return the principal plus

interest of the money placement has not been extinguished. The TICs in the hands of

respondent is a proof of indebtedness and a prima facie evidence that they have not

been paid. Petitioner Bank could have easily presented documentary evidence todispute the claim, but it did not.


29/51

ALI AKANG vs. MUNICIPALITY OF ISULAN, SULTAN KUDARAT

PROVINCE, REPRESENTED BY ITS MUNICIPAL MAYOR AND

MUNICIPAL VICE MAYOR AND MUNICIPAL

COUNCILORS/KAGAWADS

G.R. No. 186014

June 26, 2013

Facts:

Ali Akang is the registered owner of Lot located at Kalawag III, Isulan, Sultan

Kudarat, covered by Transfer Certificate of Title (TCT) with an area of 20,030 square

meters. Sometime in 1962, a two-hectare portion of the property was sold by the

petitioner to the Municipality of Isulan, Province of Sultan Kudarat through then

Isulan Mayor Datu Ampatuan under a Deed of Sale executed on July 18, 1962.

The respondent immediately took possession of the property and began

construction of the municipal building. Thirty-nine years later or on October 26, 2001,

the petitioner, together with his wife, Patao Talipasan, filed a civil action for Recovery

of Possession of Subject Property and/or Quieting of Title thereon and Damages

against the respondent, represented by its Municipal Mayor, et al. In his complaint,

the petitioner alleged that the agreement was one to sell, which was not

consummated as the purchase price was not paid. The respondent denied the

petitioner’s allegations, claiming that the petitioner’s cause of action was already

barred by laches; that the Deed of Sale was valid; and that it has been in open,

continuous and exclusive possession of the property for forty (40) years.

The RTC rendered judgment in favor of the petitioner. The RTC construed the

Deed of Sale as a contract to sell, based on the wording of the contract, which

allegedly showed that the consideration was still to be paid and delivered on some

future date – a characteristic of a contract to sell. The CA reversed the ruling of the

RTC and upheld the validity of the sale. It ruled that the Deed of Sale is not a mere

contract to sell but a perfected contract of sale. There was no express reservation of

ownership of title by the petitioner and the fact that there was yet no payment at the

time of the sale does not affect the validity or prevent the perfection of the sale

Issue:

Whether or not the Deed of Sale dated July 18,1962 is a valid and perfected

contract of sale.

Held:

A contract of sale is defined under Article 1458 of the Civil Code, by the

contract of sale, one of the contracting parties obligates himself to transfer the

ownership of and to deliver a determinate thing, and the other to pay therefore a

price certain in money or its equivalent. The elements of a contract of sale are: (a)


30/51

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 or its

equivalent.

A contract to sell, on the other hand, is defined by Article 1479 of the Civil

Code, a bilateral contract whereby the prospective seller, while expressly reserving

the ownership of the subject property despite delivery thereof to the prospective

buyer, binds himself to sell the said property exclusively to the prospective buyer

upon fulfillment of the condition agreed upon, that is, full payment of the purchase

price.

The Deed of Sale executed by the petitioner and the respondent is a perfected

contract of sale, all its elements being present. There was mutual agreement

between them to enter into the sale, as shown by their free and voluntary signing of

the contract. There was also an absolute transfer of ownership of the property by the

petitioner to the respondent as shown in the stipulation: “I petitioner hereby sell,

transfer, cede, convey and assign as by these presents do have sold, transferred,

ceded, conveyed and assigned.”

There was also a determinate subject matter, that is, the two-hectare parcel of

land as described in the Deed of Sale. Lastly, the price or consideration is at Three

Thousand Pesos (P3,000.00), which was to be paid after the execution of the

contract. The fact that no express reservation of ownership or title to the property can

be found in the Deed of Sale bolsters the absence of such intent, and the contract,

therefore, could not be one to sell. Had the intention of the petitioner been otherwise,

he could have: (1) immediately sought judicial recourse to prevent further

construction of the municipal building; or (2) taken legal action to contest the

agreement. The petitioner did not opt to undertake any of such recourses.


31/51

ROLANDO M. MENDIOLA vs. COMMERZ TRADING INT L. , INC.

G.R. No. 200895

July 31, 2013

Facts:

Genicon, Inc. (Genicon) is a foreign corporation which designs, produces, and

distributes patented surgical instrumentation focused exclusively on laparoscopic

surgery. Rolando Mendiola, a physician, entered into a contract with Genicon to be its

exclusive distributor of Genicon laparoscopic instruments in the Philippines, as

evidenced by a Distribution Agreement dated 18 July 2007. Petitioner, in turn,

entered into a Memorandum of Agreement (MOA) with respondent to facilitate the

marketing and sale of Genicon laparoscopic instruments in the Philippines. Under the

MOA, respondent would be compensated for P100,000.00 "for the use ofrespondent’s name, office, secretary, invoices, official receipts and facilities for every

sale of a complete set of Genicon laparoscopic instruments .

Respondent sent a price quotation to Pampanga Medical Specialist Hospital,

Inc. (PMSHI), which thereafter agreed to purchase a Genicon laparoscopic instrument

for Two Million Six Hundred Thousand Pesos. Then, petitioner ordered the

laparoscopic instrument from Genicon, which in turn shipped the medical equipment

to the Philippines. Respondent undertook the release of the laparoscopic instrument

from the Bureau of Customs and subsequently delivered the same to PMSHI.Respondent remitted to petitioner P2,430,000.00 only, instead of P2,500,000.00.

Despite petitioner’s repeated demands, respondent failed to remit the remaining

balance of P70,000.00 from the proceeds of the sale of the laparoscopic instrument.

Consequently, petitioner filed a collection suit against respondent.

The MeTC ruled in favor of petitioner. The Court held that respondent has no

right to retain the P70,000.00. Respondent had been duly compensated for its work

done. CA reversed the RTC’s award of interest and attorney’s fees. Hence this

petition.

Issue:

Whether or not respondent has the right to retain the balance of the proceeds

of the sale in the amount of P 70,000.00.

Held:

The court denies the petition. There is no dispute that the P70,000.00

respondent withheld from petitioner formed part of the proceeds of the sale of theGenicon laparoscopic instrument. Basic is the principle that a contract is the law

between the parties, and its stipulations are binding on them, unless the contract is

contrary to law, morals, good customs, public order or public policy. Indeed,

paragraph V of the MOA obligates petitioner to pay the taxes due from the sale of the

Genicon laparoscopic instrument. Petitioner admits that he is the one responsible in


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the payment of the EVAT and not the respondent, who merely acted as the marketer

of the Genicon laparoscopic instrument. Hence, as between petitioner and

respondent, petitioner bears the burden for the payment of VAT.

Thus, since respondent, as the seller on record, will be liable for the payment

of the VAT based on the official receipt it issued, we shall allow respondent to retain

the P70,000.00 only for the purpose of paying forthwith, if it has not done so yet, this

amount to the BIR as the estimated tax due on the subject sale.


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SKUNAC CORPORATION AND ALFONSO F. ENRIQUEZ vs. ROBERTO S.

SYLIANTENG, ET AL.

G.R. No. 205879

April 23, 2014

Facts:

The civil cases involved two (2) parcels of land identified as Lot 1and Lot 2

both situated along Wilson Street, Greenhills, San Juan City which are portions of a

parcel of land previously registered in the name of Luis A. Pujalte on October 29,

1945 and covered by Transfer Certificate of Title ("TCT") No. (-78865) (-2668) -93165

("Mother Title") of the Register of Deeds for the City of Manila.

Plaintiffs-appellants Roberto S. Sylianteng and Caesar S. Sylianteng base their

claim of ownership over the subject lots a Deed of Absolute Sale executed in their

favor by their mother, Emerenciana Sylianteng, on June 27, 1983. Appellants further

allege that Emerenciana acquired the lots from the late Luis Pujalte through a Deed

of Sale dated June 20, 1958. Then, when she sold the lots to appellants, TCT was

issued in their names.

Skunac Corporation and Alfonso F. Enriquez, claim that a certain Romeo

Pujalte who was declared as the sole heir of Luis Pujalte, caused the reconstitution of

the Mother Title resulting to its cancellation and the issuance of TCT No. 5760-R in

his favor. Romeo Pujalte then allegedly sold the lots to Skunac and Enriquez in 1992.

Respondents contend that they have a better right to the lots in question

because the transactions conveying the same to them preceded those claimed by

petitioners as source of the latter's titles. Respondents further assert that petitioners

could not be considered as innocent purchasers in good faith and for value because

they had prior notice of the previous transactions as stated in the memorandum of

encumbrances annotated on the titles covering the subject lots. Petitioners, for their

part, maintain that [respondents] acquired the lots under questionable

circumstances it appearing that there was no copy of the Deed of Sale, between

Emerenciana and Luis Pujalte, on file with the Office of the Register of Deeds.

Issues:

1.

Whether or not respondents' predecessor-in-interest, Emerenciana, validly

acquired the subject lots from Luis

2. Whether or not respondents, in turn, validly acquired the same lots from

Emerenciana.

Held:

The Court rules in the affirmative, but takes exception to the CA's and RTC's

application of Article 1544 of the Civil Code.


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Reliance by the trial and appellate courts on Article 1544 of the Civil Code is

misplaced. The said provision has no application in cases where the sales involved

were initiated not by just one but two vendors. In the present case, the subject lots

were sold to petitioners and respondents by two different vendors – Emerencianaand Romeo Pujalte (Romeo). Hence, Article 1544 of the Civil Code is not applicable.

Nonetheless, Emerenciana's acquisition of the subject lots from Luis and her

subsequent sale of the same to respondents are valid and lawful.

It is a settled rule that when two certificates of title are issued to different

persons covering the same land in whole or in part, the earlier in date must prevail,

and, in case of successive registrations where more than one certificate is issued

over the land, the person holding a prior certificate is entitled to the land as against a

person who relies on a subsequent certificate. The titles of respondents, havingemanated from an older title, should thus be upheld.

It is true that a person dealing with registered land need not go beyond the

title. However, it is equally true that such person is charged with notice of the

burdens and claims which are annotated on the title.


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ACE FOODS, INC., vs. MICRO PACIFIC TECHNOLOGIES CO.,

LTD.

G.R. No. 200602

December 11, 2013

Facts:

ACE Foods is a domestic corporation engaged in the trading and distribution

of consumer goods in wholesale and retail bases, while MTCL is one engaged in the

supply of computer hardware and equipment.

On September 26, 2001, MTCL sent a letter-proposal for the delivery and sale

of the subject products to be installed at various offices of ACE Foods

Foods accepted MTCL’s proposal and accordingly issued Purchase Order No.

100023 (Purchase Order) for the subject products amounting to P646,464.00

(purchase price). Thereafter, or on March 4, 2002, MTCL delivered the said products

to ACE Foods as reflected in Invoice No. 7733 (Invoice Receipt). The fine print of the

invoice states, inter alia, that "[t]itle to sold property is reserved in MICROPACIFIC

TECHNOLOGIES CO., LTD. until full compliance of the terms and conditions of above

and payment of the price"

MTCL’s demands against ACE Foods to pay the purchase price, however,remained unheeded. Instead of paying the purchase price, ACE Foods sent MTCL a

Letter dated September 19, 2002, stating that it "ha[s] been returning the [subject

products] to [MTCL] thru [its] sales representative Mr. Mark Anteola who has agreed

to pull out the said [products] but had failed to do so up to now."

ACE Foods lodged a Complaint since MTCL breached its "after delivery

services" obligations to it. MTCL maintained that it had duly complied with its

obligations to ACE Foods and that the subject products were in good working

condition when they were delivered, installed and configured in ACE Foods’spremises.

The RTC rendered a Decision, stating that it was a contract to sell. The CA

reversed and set aside the RTC’s ruling stating that the agreement between the

parties is in the nature of a contract of sale

Issue:

Whether ACE and MTCL entered a contract of a sale.

Held:

Yes. The very essence of a contract of sale is the transfer of ownership in

exchange for a price paid or promised. Corollary thereto, a contract of sale is


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classified as a consensual contract, which means that the sale is perfected by mere

consent. No particular form is required for its validity. Upon perfection of the contract,

the parties may reciprocally demand performance, i.e., the vendee may compel

transfer of ownership of the object of the sale, and the vendor may require the

vendee to pay the thing sold.In contrast, a contract to sell is defined as a bilateral contract whereby the

prospective seller, while expressly reserving the ownership of the property despite

delivery thereof to the prospective buyer, binds himself to sell the property exclusively

to the prospective buyer upon fulfillment of the condition agreed upon, i.e., the full

payment of the purchase price. A contract to sell may not even be considered as a

conditional contract of sale where the seller may likewise reserve title to the property

subject of the sale until the fulfillment of a suspensive condition, because in a

conditional contract of sale, the first element of consent is present, although it is

conditioned upon the happening of a contingent event which may or may not occur.

In this case, the Court concurs with the CA that the parties have agreed to a

contract of sale and not to a contract to sell as adjudged by the RTC. Bearing in mind

its consensual nature, a contract of sale had been perfected at the precise moment

ACE Foods, as evinced by its act of sending MTCL the Purchase Order, accepted the

latter’s proposal to sell the subject products in consideration of the purchase price of

P646,464.00. From that point in time, the reciprocal obligations of the parties – i.e.,

on the one hand, of MTCL to deliver the said products to ACE Foods, and, on the

other hand, of ACE Foods to pay the purchase price therefor within thirty (30) daysfrom delivery – already arose and consequently may be demanded.


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THE METROPOLITAN BANK AND TRUST COMPANY vs. ANA

GRACE ROSALES AND YO YUK TO

G.R. No. 183204

January 13, 2014

Facts:

China Golden Bridge Travel Services, a travel agency owned by Ana Grace

Rosales whose mother is Yo Yuk To. They opened a Joint Peso Account with

Metrobank’s Pritil-Tondo Branch which had a balance of P2,515,693.52. In May

2002, respondent Rosales accompanied her client Liu Chiu Fang, a Taiwanese

National applying for a retiree’s visa from the Philippine Leisure and Retirement

Authority (PLRA), to petitioner’s branch in Escolta to open a savings account, as

required by the PLRA.Since Liu Chiu Fang could speak only in Mandarin, respondentRosales acted as an interpreter for her. On March 3, 2003, respondents opened with

petitioner’s Pritil-Tondo Branch a Joint Dollar Account with an initial deposit of

US$14,000.00.

On July 31, 2003, petitioner issued a "Hold Out" order against respondents’

accounts. They filed before the Regional Trial Court (RTC) of Manila a Complaint for

Breach of Obligation and Contract with Damages against petitioner. Metrobank

asserted that there was a “Hold Out Clause" provided for in the Deposit Account

Agreement entered by the same stating that the Bank is hereby authorized to

withhold as security for any and all obligations with the Bank, all monies, propertiesor securities of the Depositor now in or which may hereafter come into the

possession or under the control of the Bank, whether left with the Bank for

safekeeping or otherwise"

Issue:

Whether or not Metrobank breached its contract with respondent.

Held:

Yes. Bank deposits, which are in the nature of a simple loan or mutuum, must

be paid upon demand by the depositor. The “Hold Out Clause” applies only if there is

a valid and existing obligation arising from any of the sources of obligation

enumerated in Article 1157 of the Civil Code. Petitioner failed to show that there was

an existing obligation between the same and the respondents. Notwithstanding the

criminal case filed by petitioner against respondent Rosales, it was not justified on

the part of petitioner to issue a “Hold Out” order as the case is still pending and no

final judgment of conviction has been rendered against respondent Rosales. At thetime petitioner issued the “Hold Out” order, the criminal complaint had not yet been

filed. Considering that respondent Rosales is not liable under any of the five sources

of obligation, there was no legal basis for petitioner to issue the “Hold Out” order. The

“Hold Out” clause does not apply in the instant case.


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FORTUNE MEDICARE vs. DAVID ROBERT U. AMORIN

G.R. No.: 195872

Date: Mar. 12, 2014

Facts:

David Robert U. Amorin (Amorin) was a cardholder/member of Fortune

Medicare, Inc. (Fortune Care), a corporation engaged in providing health

maintenance services to its members. The terms of Amorin's medical coverage were

provided in a Corporate Health Program Contract4 (Health Care Contract) which was

executed on January 6, 2000 by Fortune Care and the House of Representatives,

where Amorin was a permanent employee.

While on vacation in Honolulu, Hawaii, United States of America (U.S.A.) inMay 1999, Amorin underwent an emergency surgery, specifically appendectomy, at

the St. Francis Medical Center, causing him to incur professional and hospitalization

expenses of US$7,242.35 and US$1,777.79, respectively which he attempted to

recover from Fortune Care the full amount thereof upon his return to Manila, but the

company merely approved a reimbursement ofP12,151.36, an amount that was

based on the average cost of appendectomy, net of medicare deduction, if the

procedure were performed in an accredited hospital in Metro Manila.

He requested reimbursement based on the stipulation which states that if theemergency confinement occurs in a foreign territory, Fortune Care will be obligated to

reimburse or pay eighty (80%) percent of the approved standard charges which shall

cover the hospitalization costs and professional fees but Fortune Care denied

Amorin’s request

The RTC dismissed the complaint for breach of contract with damages. On

appeal however, the CA reversed the ruling of the RTC pointing out that health care

agreements such as the subject Health Care Contract, being like insurance contracts,

must be liberally construed in favor of the subscriber. In case its provisions aredoubtful or reasonably susceptible of two interpretations, the construction conferring

coverage is to be adopted and exclusionary clauses of doubtful import should be

strictly construed against the provider.

Issue:

Whether or not Fortune Care is still liable to Amorin.

Held:

Yes. We emphasize that for purposes of determining the liability of a health

care provider to its members, jurisprudence holds that a health care agreement is in

the nature of non-life insurance, which is primarily a contract of indemnity. Once the

member incurs hospital, medical or any other expense arising from sickness, injury or


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other stipulated contingent, the health care provider must pay for the same to the

extent agreed upon under the contract.

To aid in the interpretation of health care agreements, the Court laid down the

following guidelines in Philamcare Health Systems v. CA:

When the terms of insurance contract contain limitations on liability, courts

should construe them in such a way as to preclude the insurer from non-compliance

with his obligation. Being a contract of adhesion, the terms of an insurance contract

are to be construed strictly against the party which prepared the contract – the

insurer. By reason of the exclusive control of the insurance company over the terms

and phraseology of the insurance contract, ambiguity must be strictly interpreted

against the insurer and liberally in favor of the insured, especially to avoid forfeiture.

This is equally applicable to Health Care Agreements. The phraseology used in

medical or hospital service contracts, such as the one at bar, must be liberallyconstrued in favor of the subscriber, and if doubtful or reasonably susceptible of two

interpretations the construction conferring coverage is to be adopted, and

exclusionary clauses of doubtful import should be strictly construed against the

provider.


40/51

NICANORA G. BUCTON (DECEASED), SUBSTITUTED BY

REQUILDA B. YRAY, vs. RURAL BANK OF EL SALVADOR, INC.,

MISAMIS ORIENTAL, AND REYNALDO CUYONG, vs. ERLINDA

CONCEPCION AND HER HUSBAND AND AGNES BUCTON LUGOD

G.R. No. 179625

February 24, 2014

Facts:

On April 29, 1988, petitioner Nicanora G. Bucton filed with the Regional Trial

Court (RTC) of Cagayan de Oro a case for Annulment of Mortgage, Foreclosure, and

Special Power of Attorney (SPA) against Erlinda Concepcion (Concepcion) and

respondents Rural Bank of El Salvador, Misamis Oriental, and Sheriff Reynaldo

Cuyong

Petitioner alleged that she is the owner of a parcel of land and that

Concepcion borrowed the title on the pretext that she was going to show it to an

interested buyer; that Concepcion obtained a loan in the amount of P30,000.00 from

respondent bank; that as security for the loan, Concepcion mortgaged petitioner’s

house and lot to respondent bank using a SPA allegedly executed by petitioner in

favor of Concepcion; that Concepcion failed to pay the loan; that petitioner’s house

and lot were foreclosed by respondent sheriff without a Notice of Extra-Judicial

Foreclosure or Notice of Auction Sale; and that petitioner’s house and lot were sold in

an auction sale in favor of respondent bank.

Respondent bank claimed that it would not have granted the loan and

accepted the mortgage were it not for the assurance of Concepcion and Lugod that

the SPA was valid, prompting them to file a 3rd party complaint praying that in case it

be adjudged liable, it should be reimbursed by third-party defendants.

Petitioner insists that the SPA was forged, saying that ever since she got

married, she no longer used her maiden name, Nicanora Gabar, in signing

documents. In addition, petitioner presented Emma Nagac who testified that when

she was at Concepcion’s boutique, she was asked by the latter to sign as a witness

to the SPA, that when she signed the SPA, the signatures of petitioner and her

husband had already been affixed; and that Lugod instructed her not to tell petitioner

about the SPA.

The RTC sustained the claim and opined that the respondent bank should

have conducted a thorough inquiry on the authenticity of the SPA considering that

petitioner’s residence certificate was not indicated in the acknowledgement of the

SPA. The CA was not convinced and reversed the ruling of the RTC.

Issue:

Whether or not Bucton was bound by the SPA.

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