Estelita Villamar vs.

Balbino Mangaoil
FACTS: The petitioner Villamar, the registered owner of the property, entered into an agreement with the respondent
Mangaoil to purchase and sale a parcel of land. The terms in their agreement includes the down payment of P 185,000
pesos, which will be for the payment of a loan secured from the Rural Bank of Cauayan so that it will be withdrawn and
released from the bank and that a deed of absolute sale will be executed in favor of the respondent Mangaoil which was
complied by the parties. Consequently, the respondent Mangaoil informed the petitioner that he will withdraw from the
agreement for the land was not yet free from encumbrances as there were still tenants who were not willing to vacate
the land without giving them back the amount that they mortgaged the land. Also, the petitioner failed and refused,
despite repeated demands, to handover the Certificate of Title. Then, the respondent Mangaoil demanded the refund
of the down payment that he had secured with the petitioner and filed a complaint with the RTC to rescindthe contract
of sale. In the response of the petitioner, she averred that she had already complied with the obligations and caused the
release of the mortgaged land and the delivery of the Certificate of Title will be facilitated by a certain Atty. Pedro C.
Antonio. The respondent insisted that he can rescind the contract for the petitioner had failed to deliver the Certificate
of Title. The RTC and the CA dismissed the complaints for upon the deed of absolute sale, there was already a valid
and constructive delivery. ISSUE: 1) Whether or not the failure of delivery of the Certificate of Title will constitute
rescission of the contract? 2) Whether or not the execution of the deed of sale of real property is equivalent to a valid
and constructive delivery?
HELD: 1) Yes, the Court held that the failure of the petitioner to comply with the obligation to deliver to the respondent
the possession of the property and the certificate of the title will constitute rescission. Based on Article 1191 of the New
Civil Code of the Philippines, it Is clear that the power to rescind obligations is implied in reciprocal ones, in case one of
the obligors should not comply with what is incumbent upon him. The respondent cannot be deprived of his right to
demand for rescission in view of the petitioners failure to abide with item nos. 2 and 3 of the agreement. In the case
of Power Commercial and Industrial Corporation[25] cited by the petitioner, the Court ruled that the failure of the seller
to eject the squatters from the property sold cannot be made a ground for rescission if the said ejectment was not
stipulated as a condition in the contract of sale, and when in the negotiation stage, the buyer's counsel himself
undertook to eject the illegal settlers. The circumstances surrounding the case now under our consideration are
different. In item no. 2 of the agreement, it is stated that part of the P185,000.00 initially paid to the petitioner shall be
used to pay the mortgagors, Parangan and Lacaden. While the provision does not expressly impose upon the petitioner
the obligation to eject the said mortgagors, the undertaking is necessarily implied. Cessation of occupancy of the subject
property is logically expected from the mortgagors upon payment by the petitioner of the amounts due to them.
2) The execution of the deed of absolute sale does not constitute a constructive delivery for this case falls under to the
exception since a mere presumption and not conclusive delivery was created as the respondent failed to take material
possession of the subject property. A person who does not have actual possession of the thing sold cannot transfer
constructive possession by the execution and delivery of a public instrument. Thus, the respondent can rescind the
contract. The petition was denied and the petitioner is bound return the down payment plus interest to the respondent.

Luzon Development Bank vs. Angeles Catherine Enriquez

Ricardo De Leon and his spouse obtained a loan of 4,000,000 from Luzon Development Bank (LDB)to develop
Delta Development and Management Services, Inc. (DELTA) Homes I. They executed a real estate mortgage over several
of their property, including Lot 4 owned by Ricardo. Later, the mortgage was amended by increasing the loan to
8,000,000. The real Estate Mortgage and the amendment were annotated. DELTA executed a Contract to Sell with
Angeles Catherine Enriquez (Enriquez) over Lot no. 4 for 614,950. He made a down payment of 114,590. The Contract to
Sell provides that the failure to pay 3 successive monthly installments, gives the owner the power to consider the
Contract to Sell as void. Paid installments are forfeited in favor of the owner as liquidated damages and to cover
documentation expenses. DELTA defaulted on its loan to LDB. DELTA satisfied the loan by dation in payment. It signed a
deed of assignment over several properties, including Lot no. 4. The dation in payment was not annotated on the TCT of
Lot no. 4. Enriquez filed a complaint against DELTA with the Housing and Land Use Regulatory Board(HLURB) for
violating the terms of its License to sell by:1.) selling houses below the price prescribed by BP 220. 2.)failing to get
clearance for the mortgage from the HLURB. Enriquez sought a full refund of 301, 063 that she had already paid to
DELTA plus damages and administrative fines against the LDB and DELTA. Issue: Whether or not a Contract to Sell
conveys ownership over the Lot. Held: The Supreme Court held that a contract to sell does not transfer ownership. A
contract to sell is one where the prospective seller reserves the transfer of title to the prospective buyer until the
happening of an event, such as full payment of the purchase price. What the seller obliges himself to do is to sell the
subject property only when the entire amount of the purchase price has already been delivered to him. In this case,
Enriquez has not fully paid the purchase price of the Lot. She does not own the Lot. Therefore, DELTA's transfer of
ownership over the lot to LDB is valid. However, LDB is bound to respect the contract to sell with Enriquez. PD 957
provides that a contracts to sell registered by the seller with the Register of Deeds is binding on third persons. While
this particular contract was not registed with the Register of Deeds by DELTA, this does not prejudice Enriquez or
extinguish LDB's obligation to respect the Contract to Sell. Despite the non-registration, the BANK cannot be considered,
under the circumstances, an innocent purchaser for value of Lot 4 when it accepted the latter (together with other
assigned properties) as payment for DELTAs obligation. The BANK was well aware that the assigned properties,
including Lot 4, were subdivision lots and therefore within the purview of PD 957. It knew that the loaned amounts were
to be used for the development of DELTAs subdivision project, for this was indicated in the corresponding promissory
notes. The technical description of Lot 4 indicates its location, which can easily be determined as included within the
subdivision development. Under these circumstances, the BANK knew or should have known of the possibility and risk
that the assigned properties were already covered by existing contracts to sell in favor of subdivision lot buyers. Further,
as an entity engaged in the banking business, the BANK is required to observe more care and prudence when dealing
with registered properties. The Court cannot accept that the BANK was unaware of the Contract to Sell existing in favor
of Enriquez. In Keppel Bank Philippines, Inc. v. Adao,[66] we held that a bank dealing with a property that is already
subject of a contract to sell and is protected by the provisions of PD 957, is bound by the contract to sell (even if the
contract to sell in that case was not registered). A dacion en pago is governed by the law of sales.] Contracts of sale
come with warranties, either express (if explicitly stipulated by the parties) or implied (under Article 1547 et seq. of the
Civil Code). In this case, however, the BANK does not even point to any breach of warranty by DELTA in connection with
the Dation in Payment. To be sure, the Dation in Payment has no express warranties relating to existing contracts to sell
over the assigned properties. As to the implied warranty in case of eviction, it is waivable and cannot be invoked if the
buyer knew of the risks or danger of eviction and assumed its consequences. As we have noted earlier, the BANK, in
accepting the assigned properties as full payment of DELTAs total obligation, has assumed the risk that some of the
assigned properties are covered by contracts to sell which must be honored under PD 957.

DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner, vs.BEN P. MEDRANO and PRIVATIZATION MANAGEMENT
OFFICE [PMO], Respondents.
Respondent Ben Medrano was the President and General Manager of Paragon Paper Industries, Inc. (Paragon) wherein
he owned 37,681 shares. Sometime in 1980, petitioner DBP sought to consolidate its ownership in Paragon. Medrano
was then asked to contact or sound off the minority stockholders and to convince them to sell their shares to DBP at
P65.00 per share, or 65% of the stocks par value of P100.00. Medrano followed the instructions and began to contact
each member of the minority stockholders. He was able to contact all except one who was in Singapore. Medrano
testified that all, including himself, agreed to sell, and all took steps to have their shares surrendered to DBP for
payment. They made proposals to DBP and the Board of Directors of DBP approved the sale under DBP Resolution No.
4270 subject to the following terms and conditions: (1) that prior to the implementation of the approval, 57,596 shares
of Paragons stock issued to the stockholders concerned shall first be surrendered to the DBP; (2) that all the parties
concerned shall give their written conformity to the arrangement; and (3) that the transaction shall be implemented
within forty-five (45) days from the date of approval (December 24, 1980); otherwise, the same shall be deemed
canceled. Medrano then indorsed and delivered to DBP all his 37,681 shares which had a value of P2,449,265.00. DBP
accepted said shares and took over Paragon. DBP, through Jose de Ocampo, who was also a member of its Board of
Governors, also offered Medrano a commission of P185,010.00 if the latter could persuade all the other Paragon
minority stockholders to sell their shares. Medrano was able to convince only two stockholders, Alberto Wong and
Gerardo Ledonio III, to sell their respective shares. Thus, his commission was reduced to P155,455.00. Thereafter,
Medrano demanded that DBP pay the value of his shares, which he had already turned over, and his P155,455.00
commission. When DBP did not heed his demand, Medrano filed a complaint for specific performance and damages
against DBP on September 2, 1981. DBP filed an Answer arguing that there was no perfected contract of sale as the
three conditions in DBP Resolution No. 4270 were not fulfilled. Likewise, certain minority stockholders owning 17,635
shares refused to sell their shares. Hence, DBP exercised its right to cancel the sale under Resolution No. 4270. However,
during the pendency of the case, DBP conveyed the shares to the Asset Privatization Trust (APT) in a Deed of Transfer.
Issue : WON ARTICLE 1545 can be applied NOTWITHSTANDING ITS FINDING THAT THERE WAS NO PERFECTED
CONTRACT OF SALE BETWEEN MEDRANO AND DBP. HELD : As a rule, a contract is perfected upon the meeting of the
minds of the two parties. Under Article 147513 of the Civil Code, a contract of sale is perfected the moment there is a
meeting of the minds on the thing which is the object of the sale. In the present case, Medranos offer to sell the shares
of the minority stockholders at the price of 65% of the par value was not absolutely and unconditionally accepted by
DBP. DBP imposed several conditions to its acceptance and it is clear that Medrano indeed tried in good faith to comply
with the conditions given by DBP but unfortunately failed to do so. Hence, there was no birth of a perfected contract of
sale between the parties. Article 1545 speaks of a party to a contract of sale who fails in the performance of his/her
obligation. The application of this article presupposes that there is a perfected contract between the parties and that
one of them fails in the performance of an obligation under the contract. The present case does not fall under this
article because there is no perfected contract of sale to speak of. Medranos failure to comply with the conditions set
forth by DBP prevented the perfection of the contract of sale. Hence, Medrano and DBP remained as prospective-seller
and prospective-buyer and not parties to a contract of sale. This notwithstanding, however, we cannot simply agree with
DBPs argument that since there is no perfected contract of sale, DBP should not be ordered to pay Medrano any
amount. In civil law, DBPs act of keeping the shares delivered by Medrano without paying for them constitutes unjust
enrichment. It was not proper for DBP to hold on to Medranos shares of stock after it became obvious that he will not
be able to comply with the conditions for the contract of sale. From that point onwards, the prudent and fair thing to do
for DBP was to return Medranos shares because DBP had no just or legal ground to retain them.

LUCIANO BRIONES and NELLY BRIONES, Petitioners, vs.JOSE MACABAGDAL, FE D. MACABAGDAL and VERGON
REALTY INVESTMENTS CORPORATION, Respondents.
Respondent-spouses purchased from Vergon Realty Investments Corporation (Vergon) Lot No. 2-R, a 325-square-meter land located
in Vergonville Subdivision No. 10 at Las Pias City, Metro Manila and covered by Transfer Certificate of Title No. 62181 of the Registry
of Deeds of Pasay City. On the other hand, petitioners are the owners of Lot No. 2-S, which is adjacent to Lot No. 2-R.
Sometime in 1984, after obtaining the necessary building permit and the approval of Vergon, petitioners constructed a house on Lot
No. 2-R which they thought was Lot No. 2-S. After being informed of the mix up by Vergons manager, respondent-spouses
immediately demanded petitioners to demolish the house and vacate the property. Petitioners, however, refused to heed their demand.
Thus, respondent-spouses filed an action to recover ownership and possession of the said parcel of land with the RTC of Makati City.3
Petitioners insisted that the lot on which they constructed their house was the lot which was consistently pointed to them as theirs by
Vergons agents over the seven (7)-year period they were paying for the lot. They interposed the defense of being buyers in good faith
and impleaded Vergon as third-party defendant claiming that because of the warranty against eviction, they were entitled to indemnity
from Vergon in case the suit is decided against them.4When a person builds in good faith on the land of another, Article 448 of the Civil
Code governs. Said article provides,
ART. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as
his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who
built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged
to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the
owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of
the lease and in case of disagreement, the court shall fix the terms thereof. The above-cited article covers cases in which the builders,
sowers or planters believe themselves to be owners of the land or, at least, to have a claim of title thereto. 15 The builder in good faith
can compel the landowner to make a choice between appropriating the building by paying the proper indemnity or obliging the builder
to pay the price of the land. The choice belongs to the owner of the land, a rule that accords with the principle of accession, i.e., that
the accessory follows the principal and not the other way around. However, even as the option lies with the landowner, the grant to
him, nevertheless, is preclusive. He must choose one.16 He cannot, for instance, compel the owner of the building to remove the
building from the land without first exercising either option. It is only if the owner chooses to sell his land, and the builder or planter fails
to purchase it where its value is not more than the value of the improvements, that the owner may remove the improvements from the
land. The owner is entitled to such remotion only when, after having chosen to sell his land, the other party fails to pay for the same.17
As to the liability of Vergon, petitioners failed to present sufficient evidence to show negligence on Vergons part. Petitioners claim is
obviously one (1) for tort, governed by Article 2176 of the Civil Code, which provides:
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 there is no preexisting contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter. (Emphasis ours.)
Under this provision, it is the plaintiff who has to prove by a preponderance of evidence: (1) the damages suffered by the plaintiff; (2)
the fault or negligence of the defendant or some other person for whose act he must respond; and (3) the connection of cause and
effect between the fault or negligence and the damages incurred.19 This the petitioners failed to do. The President of Vergon signed the
building permit as a precondition for its approval by the local government, but it did not guarantee that petitioners were constructing the
structure within the metes and bounds of petitioners lot. The signature of the President of Vergon on the building permit merely proved
that petitioners were authorized to make constructions within the subdivision project of Vergon. And while petitioners acted in good faith
in building their house on Lot No. 2-R, petitioners did not show by what authority the agents or employees of Vergon were acting when
they pointed to the lot where the construction was made nor was petitioners claim on this matter corroborated by sufficient evidence.

SPOUSES MICHAEL UY & BONITA UY, Petitioners,vs.EDUARDO ARIZA, ERLINDA A. ABDON, BENJAMIN ARIZA, TERESITA
A. SIMPORIOS, HEIRS OF MARIANO ARIZA, JR., namely: JUANITA L. ARIZA, DENNIS L. ARIZA, ROLDAN L. ARIZA, &
JOVANNI L. ARIZA; and the Heirs of FAUSTO ARIZA, namely: JESUSA ARIZA, THELMA SOLLANO, ARTURO ARIZA, ELDINA
CONOS, VILMA SABERON, & REBECCA PADULLO, Respondents.
On October 8, 1996, spouses Michael and Bonita Uy, petitioners, purchased 200 square meters of the parcel of land designated as Lot
No. 3229-C-2-F, covered by Transfer Certificate of Title (TCT) No. T-20007, from respondents. The contract stipulated that petitioners
had the right of choice to designate which portion of Lot No. 3229-C-2-F would be the subject of the sale. 1
Petitioners exercised their right to choose within two to three months from the sale, informing respondents that they have selected and
in fact occupied around 200 square meters of a portion of land. 2
On August 4, 1997, petitioners purchased another 200 square meters of the same Lot No. 3229-C-2-F, with the same option to choose
which portion. They selected and occupied an adjoining portion to the lot in their first sale. 3
It appears that the parcels of land petitioners had chosen and occupied were already titled in the names of the Delgados, namely,
Carlos, Allan and Antonio, Jr. Although originally part of Lot No. 3229-C-2-F, the two parcels of land were part of some 3,500 square
meters that were purportedly sold by the respondents to the Delgados on July 31, 1985. This deed of sale to the Delgados was
annotated on TCT No. T-20007 (covering Lot No. 3229-C-2-F) on June 10, 1993, and a new title for the covered area was issued on
April 21, 1994, which was likewise annotated on TCT No. T-20007 on the same date. 4 Thus, at the time of the first sale by the
respondents to petitioners, the two parcels of land had been cancelled from Lot No. 3229-C-2-F (covered by TCT No. T-20007), and
were already part of Lot No. 3229-C-2-F-1 (covered by TCT No. T-39106). 5
Petitioners were sued for unlawful detainer by the Delgados. In September 1998, petitioners entered into a compromise agreement
with the Delgados and surrendered possession of the subject parcels of land. Petitioners compromised the case without giving notice
to respondents. Issue : whether the complaint filed in the RTC by petitioners fails to state a cause of action for specific performance
with delivery of possession of real property and damages against respondents. HELD : At the outset, it could already be seen that
indeed, [petitioners] have no cause of action against [respondents]. The case for specific performance which was filed by [petitioners]
against [respondents] is not the proper remedy in this case. Rather, said action was purely an afterthought on the part of [petitioners]
when they were eventually evicted from the lots they bought from [respondents].
The facts of the case are very clear. [Petitioners] bought from [respondents] a 200 square meter lot which was part of a bigger parcel of
land covered by TCT No. 20007 registered in the names of [respondents], and which [petitioners] immediately took possession of. After
a year, [petitioners] again bought from [respondents] and took possession of the adjacent lot also measuring 200 square meters. Since
the sale, [petitioners] had been in peaceful possession of the lots until they were evicted from the same by third persons claiming to be
the owners of the said lots. Thus, if [petitioners] have a cause of action against [respondents], it would be one for the enforcement of
warranty in case of eviction.
But even if [petitioners] would file an action for the enforcement of warranty in case of eviction against [respondents], We are afraid that
the same will not prosper. The records of the case reveal that the unlawful detainer case filed by third persons against [petitioners],
which led to the ouster of the latter from the subject lots, was decided by compromise agreement without impleading [respondents] as
third-party defendants. It should be stressed that in order for the case to prosper, it is a precondition that the seller must have been
summoned in the suit for the eviction of the buyer. This rule is provided under the provisions of Articles 1558 and 1559 of the New Civil
Code. In order that a vendors liability for eviction may be enforced, the following requisites must concur a) there must be a final
judgment; b) the purchaser has been deprived of the whole or part of the thing sold; c) said deprivation was by virtue of a right prior to
the sale made by the vendor; and d) the vendor has been summoned and made co-defendant in the suit for eviction at the instance of
the vendee. In the case at bar, the fourth requisite that of being summoned in the suit for eviction (Case No. 4252) at the instance of
the vendee is not present.

GOODYEAR PHILIPPINES, INC., Petitioner, vs.ANTHONY SY and JOSE L. LEE, Respondents.

"The vehicle was originally owned by Goodyear Philippines, Inc. ([Goodyear]) which it purchased from Industrial and Transport
Equipment, Inc. in 1983. It had since been in the service of [Goodyear] until April 30, 1986 when it was hijacked. This hijacking was
reported to the Philippine National Police (PNP) which issued out an alert alarm on the said vehicle as a stolen one. It was later on
recovered also in 1986."The vehicle was used by [Goodyear] until 1996, when it sold it to Anthony Sy on September 12, 1996. "Sy, in
turn, sold it to Jose L. Lee on January 29, 1997. But the latter on December 4, 1997, filed an action for rescission of contract with
damages against Sy[,] because he could not register the vehicle in his name due to the certification from the PNP Regional Traffic
Management Office in Legazpi City that it was a stolen vehicle and the alarm covering the same was not lifted. Instead, the PNP in
Legazpi City impounded the vehicle and charged Lee criminally. "Upon being informed by Sy of the denial of the registration of the
vehicle in Lees name, [Goodyear] requested on July 10, 1997 the PNP to lift the stolen vehicle alarm status. This notwithstanding,
[Goodyear] was impleaded as third-party defendant in the third-party complaint filed by Sy on January 9, 1998. ISSUE : Whether or not
the complaint lacks of a cause of action, the petitioner did not breach any warranty in the absence of proof that at the time it sold the
subject vehicle to Sy, petitioner was not the owner thereof. HELD : Elements of a Cause of Action: "1) the legal right of the plaintiff;
"2) the correlative obligation of the defendant to respect that legal right; and "3) an act or omission of the defendant that violates such
right." In the present case, the third element is missing. The Third-Party Complaint filed by Sy is inadequate, because it did not allege
any act or omission that petitioner had committed in violation of his right to the subject vehicle. The Complaint capitalized merely on the
fact that the vehicle -- according to the records of the PNP, which was a stranger to the case -- was "a stolen vehicle." The pleading did
not contain "sufficient notice of the cause of action"17 against petitioner. The Deed of Sale between petitioner and Respondent Sy was
attached as Annex A19 to the Third-Party Complaint filed by the latter against the former. The Deed stated that petitioner was the
absolute owner of the subject vehicle. No contrary assertion was made in the Complaint. Hence, the trial court correctly observed that
the Complaint had failed to show that, at the time of its sale to Respondent Sy, the vehicle belonged to a person other than petitioner.20
Warranties Passed On By the Vendor to the Vendee. In a contract of sale, the vendor is bound to transfer the ownership of and to
deliver the thing that is the object of the sale.21 Moreover, the implied warranties are as follows: first, the vendor has a right to sell the
thing at the time that its ownership is to pass to the vendee, as a result of which the latter shall from then on have and enjoy the legal
and peaceful possession of the thing;22 and, second, the thing shall be free from any charge or encumbrance not declared or known to
the vendee.23 Upon the execution of the Deed of Sale, petitioner did transfer ownership of and deliver the vehicle to Respondent Sy. 24
No other owner or possessor of the vehicle had been alleged, and the ownership and possession rights of petitioner over it had never
been contested. The Deed of Sale executed on September 12, 1996 showed that petitioner was the absolute owner. Therefore, at the
time that ownership passed to Sy, petitioner alone had the right to sell the vehicle. In the same manner, when he sold the same truck to
Jose L. Lee,25 Respondent Sy was exercising his right as absolute owner. Unfortunately, though, from the time Respondent Lee
attempted to register the truck in his name, he could not have or enjoy the legal and peaceful possession of the vehicle, because it had
been impounded by the PNP, which also opposed its registration. No Lien or Breach of Warranty. In the present case, petitioner did
not breach the implied warranty against hidden encumbrances. The subject vehicle that had earlier been stolen by a third party was
subsequently recovered by the authorities and restored to petitioner, its rightful owner. Whether Sy had knowledge of the loss and
subsequent recovery, the fact remained that the vehicle continued to be owned by petitioner, free from any charge or encumbrance
whatsoever. No Notice of Any Breach of Warranty. Gratia argumenti that there was a breach of the implied warranty against hidden
encumbrances, notice of the breach was not given to petitioner within a reasonable time. Article 1586 of the Civil Code requires that
notice be given after the breach, of which Sy ought to have known. In his Third-Party Complaint against petitioner, there was no
allegation at all that respondent had given petitioner the requisite notice. More important, an action for damages for a breach of implied
warranties must be brought within six months from the delivery of the thing sold.35 The vehicle was understood to have been delivered
to Sy when it was placed in his control or possession.36 Upon execution of the Deed of Sale on September 12, 1996, control and
possession of the vehicle was transferred to respondent. That the vehicle had been delivered is bolstered by the fact that no contrary
allegation was raised in the Third-Party Complaint. Whether the period should be reckoned from the actual or from the constructive
delivery through a public instrument, more than six months had lapsed before the filing of the Third-Party Complaint. Finally, the
argument that there was a breach of the implied warranty against eviction does not hold water, for there was never any final judgment
based on either a right prior to the sale; or an act that could be imputed37 to petitioner and deprive Sy of ownership or possession of the
vehicle purchased.

VIRGILIO R. ROMERO, petitioner, vs.HON. COURT OF APPEALS and ENRIQUETA CHUA VDA. DE ONGSIONG, respondents.
The parties pose this question: May the vendor demand the rescission of a contract for the sale of a parcel of land for a cause
traceable to his own failure to have the squatters on the subject property evicted within the contractually-stipulated period? Petitioner
Virgilio R. Romero, a civil engineer, was engaged in the business of production, manufacture and exportation of perlite filter aids,
permalite insulation and processed perlite ore. In 1988, petitioner and his foreign partners decided to put up a central warehouse in
Metro Manila on a land area of approximately 2,000 square meters. The project was made known to several freelance real estate
brokers. A day or so after the announcement, Alfonso Flores and his wife, accompanied by a broker, offered a parcel of land measuring
1,952 square meters. Located in Barangay San Dionisio, Paraaque, Metro Manila, the lot was covered by TCT No. 361402 in the
name of private respondent Enriqueta Chua vda. de Ongsiong. Petitioner visited the property and, except for the presence of squatters
in the area, he found the place suitable for a central warehouse. Later, the Flores spouses called on petitioner with a proposal that
should he advance the amount of P50,000.00 which could be used in taking up an ejectment case against the squatters, private
respondent would agree to sell the property for only P800.00 per square meter. Petitioner expressed his concurrence. On 09 June
1988, a contract, denominated "Deed of Conditional Sale," wherein it was stated that the balance of the purchase price in the amount
of ONE MILLION FIVE HUNDRED ELEVEN THOUSAND SIX HUNDRED PESOS (P1,511,600.00) ONLY shall be paid 45 days after
the removal of all squatters from the above described property. Pursuant to the agreement, private respondent filed a complaint for
ejectment (Civil Case No. 7579) against Melchor Musa and 29 other squatter families with the Metropolitan Trial Court of Paraaque. A
few months later, or on 21 February 1989, judgment was rendered ordering the defendants to vacate the premises. The decision was
handed down beyond the 60-day period (expiring 09 August 1988) stipulated in the contract. The writ of execution of the judgment was
issued, still later, on 30 March 1989. In a letter, dated 07 April 1989, private respondent sought to return the P50,000.00 she received
from petitioner since, she said, she could not "get rid of the squatters" on the lot. Atty. Sergio A.F. Apostol, counsel for petitioner, in his
reply of 17 April 1989, refused the tender. Issue : WON there was a perfected contract and the vendors failure to comply with the
condition of the sale grants him the right to rescind the contract. It would be futile to challenge the agreement here in question as not
being a duly perfected contract. A sale is at once perfected when a person (the seller) obligates himself, for a price certain, to deliver
and to transfer ownership of a specified thing or right to another (the buyer) over which the latter agrees. The object of the sale, in the
case before us, was specifically identified to be a 1,952-square meter lot in San Dionisio, Paraaque, Rizal, covered by Transfer
Certificate of Title No. 361402 of the Registry of Deeds for Pasig and therein technically described. The purchase price was fixed at
P1,561,600.00, of which P50,000.00 was to be paid upon the execution of the document of sale and the balance of P1,511,600.00
payable "45 days after the removal of all squatters from the above described property." From the moment the contract is perfected, the
parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to
their nature, may be in keeping with good faith, usage and law. Under the agreement, private respondent is obligated to evict the
squatters on the property. The ejectment of the squatters is a condition the operative act of which sets into motion the period of
compliance by petitioner of his own obligation, i.e., to pay the balance of the purchase price. Private respondent's failure "to remove the
squatters from the property" within the stipulated period gives petitioner the right to either refuse to proceed with the agreement or
waive that condition in consonance with Article 1545 of the Civil Code. 16 This option clearly belongs to petitioner and not to private
respondent. In contracts of sale particularly, Article 1545 of the Civil Code, aforementioned, allows the obligee to choose between
proceeding with the agreement or waiving the performance of the condition. It is this provision which is the pertinent rule in the case at
bench. Here, evidently, petitioner has waived the performance of the condition imposed on private respondent to free the property from
squatters. In any case, private respondent's action for rescission is not warranted. She is not the injured party. 21 The right of resolution
of a party to an obligation under Article 1191 of the Civil Code is predicated on a breach of faith by the other party that violates the
reciprocity between them. 22 It is private respondent who has failed in her obligation under the contract. Petitioner did not breach the
agreement. He has agreed, in fact, to shoulder the expenses of the execution of the judgment in the ejectment case and to make
arrangements with the sheriff to effect such execution. In his letter of 23 June 1989, counsel for petitioner has tendered payment and
demanded forthwith the execution of the deed of absolute sale. Parenthetically, this offer to pay, having been made prior to the demand
for rescission, assuming for the sake of argument that such a demand is proper under Article 1592 23 of the Civil Code, would likewise
suffice to defeat private respondent's prerogative to rescind thereunder. There is no need to still belabor the question of whether the
P50,000.00 advance payment is reimbursable to petitioner or forfeitable by private respondent, since, on the basis of our foregoing
conclusions, the matter has ceased to be an issue. Suffice it to say that petitioner having opted to proceed with the sale, neither may
petitioner demand its reimbursement from private respondent nor may private respondent subject it to forfeiture.

BINALBAGAN TECH. INC., and HERMILO J. NAVA, petitioners, vs. THE COURT OF APPEALS, MAGDALENA L.
PUENTEVELLA, ANGELINA P. ECHAUS, ROMULO L. PUENTEVELLA, RENATO L. PUENTEVELLA, NOLI L. PUENTEVELLA
and NELIA LOURDES P. JACINTO, respondents.
On May 11, 1967, private respondents, through Angelina P. Echaus, in her capacity as Judicial Administrator of the intestate estate of
Luis B. Puentevella, executed a Contract to Sell and a Deed of Sale of forty-two subdivision lots within the Phib-Khik Subdivision of the
Puentebella family, conveying and transferring said lots to petitioner Binalbagan Tech., Inc. (hereinafter referred to as Binalbagan). In
turn Binalbagan, through its president, petitioner Hermilio J. Nava (hereinafter referred to as Nava), executed an Acknowledgment of
Debt with Mortgage Agreement, mortgaging said lots in favor of the estate of Puentebella. Upon the transfer to Binalbagan of titles to
the 42 subdivision lots, said petitioner took possession of the lots and the building and improvements thereon. Binalbagan started
operating a school on the property from 1967 when the titles and possession of the lots were transferred to it. It appears that there was
a pending case, wherein the possession of the building and other property was taken from petitioner Binalbagan and given to the thirdparty claimants, the de la Cruz spouses. Consequently, in 1982 the judgment in Civil Case No. 7435 was finally executed and
enforced, and Puentabella was restored to the possession of the subdivision lots on May 31, 1982. It will be noted that petitioner was
not in possession of the lots from 1974 to May 31, 1982. After petitioner Binalbagan was again placed in possession of the subdivision
lots, private respondent Angelina Echaus demanded payment from petitioner Binalbagan for the subdivision lots, enclosing in the letter
of demand a statement of account as of September 1982 showing a total amount due of P367,509.93, representing the price of the
land and accrued interest as of that date. As petitioner Binalbagan failed to effect payment, private respondent Angelina P. Echaus filed
on October 8, 1982 Civil Case No. 1354 of the Regional Trial Court of the Sixth Judicial Region stationed in Himamaylan, Negros
Occidental against petitioners for recovery of title and damages. An amended complaint was filed by private respondent Angelina P.
Echaus by including her mother, brothers, and sisters as co-plaintiffs, which was admitted by the trial court on March 18, 1983.
However, the court in its decision favored Binalbagan due to prescription. HELD: A party to a contract cannot demand performance of
the other party's obligations unless he is in a position to comply with his own obligations. Similarly, the right to rescind a contract can be
demanded only if a party thereto is ready, willing and able to comply with his own obligations thereunder (Art. 1191, Civil Code; Seva
vs. Berwin, 48 Phil. 581 [1926]; Paras, Civil Code of the Philippines, 12th ed. Vol. IV, p. 200). In a contract of sale, the vendor is bound
to transfer the ownership of and deliver, as well as warrant, the thing which is the object of the sale (Art. 1495, Civil Code); he warrants
that the buyer shall, from the time ownership is passed, have and enjoy the legal and peaceful possession of the thing ARTICLE
1547. In a contract of sale, unless a contrary intention appears, there is (1) An implied warranty on the part of the seller that he has a
right to sell the thing at the time when the ownership is to pass, and that the buyer shall from that time have and enjoy the legal and
peaceful possession of the thing. As afore-stated, petitioner was evicted from the subject subdivision lots in 1974 by virtue of a court
order in Civil Case No. 293 and reinstated to the possession thereof only in 1982. During the period, therefore, from 1974 to 1982,
seller private respondent Angelina Echaus' warranty against eviction given to buyer petitioner was breached though, admittedly,
through no fault of her own. It follows that during that period, 1974 to 1982, private respondent Echaus was not in a legal position to
demand compliance of the prestation of petitioner to pay the price of said subdivision lots. In short, her right to demand payment was
suspended during that period, 1974-1982.The prescriptive period within which to institute an action upon a written contract is ten years
(Art. 1144, Civil Code). The cause of action of private respondent Echaus is based on the deed of sale aforementioned. The deed of
sale whereby private respondent Echaus transferred ownership of the subdivision lots was executed on May 11, 1967. She filed Civil
Case No. 1354 for recovery of title and damages only on October 8, 1982. From May 11, 1967 to October 8, 1982, more than fifteen
(15) years elapsed. Seemingly, the 10-year prescriptive period had expired before she brought her action to recover title. However, the
period 1974 to 1982 should be deducted in computing the prescriptive period for the reason that, as above discussed, from 1974 to
1982, private respondent Echaus was not in a legal position to initiate action against petitioner since as aforestated, through no fault of
hers, her warranty against eviction was breached. In the case of Daniel vs. Garlitos, (95 Phil. 387 [1954]), it was held that a court order
deferring action on the execution of judgment suspended the running of the 5-year period for execution of a judgment. Here the
execution of the judgment in Civil Case No. 7435 was stopped by the writ of preliminary injunction issued in Civil Case No. 293. It was
only when Civil Case No. 293 was dismissed that the writ of execution in Civil Case Na. 7435 could be implemented and petitioner
Binalbagan restored to the possession of the subject lots. Deducting eight years (1974 to 1982) from the period 1967 to 1982, only
seven years elapsed. Consequently, Civil Case No. 1354 was filed within the 10-year prescriptive period. Working against petitioner's
position too is the principle against unjust enrichment which would certainly be the result if petitioner is allowed to own the 42 lots
without full payment thereof.

WESTWIND SHIPPING CORPORATION vs. UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS
INC., Respondents.
197 metal containers/skids of tin-free steel were shipped for delivery to the consignee, San Miguel Corporation
(SMC)and was covered by Bill of Lading. These were loaded and received clean on board M/V Golden Harvest Voyage, a
vessel owned and operated by Westwind Shipping Corporation (Westwind). SMC insured the cargoes against all risks
with UCPB General Insurance Co., Inc. (UCPB) for P6,209,245.28. It arrived in Manila, Philippines on August 31, 1993 and
was discharged in the custody of the arrastre operator, Asian Terminals, Inc. (ATI), but, six containers/skids worth
P117,093.12 sustained dents and punctures from the forklift used by the stevedores of Ocean Terminal Services, Inc.
(OTSI) during the unloading operation. Orient Freight International, Inc. (OFII), the customs broker of SMC, withdrew
from ATI the 197 containers/skids thru J.B. Limcaoco Trucking (JBL). It was discovered upon discharge that not only 6 but
15 containers/skids were in bad order. Almost a year after, on August 15, 1994, SMC filed a claim against UCPB,
Westwind, ATI, and OFII to recover the amount corresponding to the damaged 15 containers/skids. When UCPB paid the
total sum of Philippine Pesos: Two Hundred Ninety-Two Thousand Seven Hundred Thirty-Two and Eighty Centavos
(P292,732.80), SMC signed the subrogation receipt. Thereafter, in the exercise of its right of subrogation, UCPB
instituted on August 30, 1994 a complaint for damages against Westwind, ATI, and OFII.
It was held that for marine vessels, Article 619 of the Code of Commerce provides that the ship captain is liable for the
cargo from the time it is turned over to him at the dock or afloat alongside the vessel at the port of loading, until he
delivers it on the shore or on the discharging wharf at the port of unloading, unless agreed otherwise. Being the
custodian of the goods discharged from a vessel, an arrastre operator's duty is to take good care of the goods and to
turn them over to the party entitled to their possession. But the precise question is which entity had custody of the
shipment during its unloading from the vessel? It is settled in maritime law jurisprudence that cargoes while being
unloaded generally remain under the custody of the carrier x x x. What Westwind failed to realize is that the
extraordinary responsibility of the common carrier lasts until the time the goods are actually or constructively delivered
by the carrier to the consignee or to the person who has a right to receive them. There is actual delivery in contracts for
the transport of goods when possession has been turned over to the consignee or to his duly authorized agent and a
reasonable time is given him to remove the goods. In this case, since the discharging of the containers/skids, which were
covered by only one bill of lading, had not yet been completed at the time the damage occurred, there is no reason to
imply that there was already delivery, actual or constructive, of the cargoes to ATI. For undertaking the transport of
cargoes from ATI to SMCs warehouse in Calamba, Laguna, OFII is considered a common carrier. As long as a person or
corporation holds itself to the public for the purpose of transporting goods as a business, it is already considered a
common carrier regardless of whether it owns the vehicle to be used or has to actually hire one. As a common carrier,
OFII is mandated to observe, under Article 1733 of the Civil Code,23 extraordinary diligence in the vigilance over the
goods24 it transports according to the peculiar circumstances of each case. In the event that the goods are lost,
destroyed or deteriorated, it is presumed to have been at fault or to have acted negligently unless it proves that it
observed extraordinary diligence.25 In the case at bar it was established that except for the six containers/skids already
damaged OFII received the cargoes from ATI in good order and condition; and that upon its delivery to SMC additional
nine containers/skids were found to be in bad order as noted in the Delivery Receipts issued by OFII and as indicated in
the Report of Cares Marine Cargo Surveyors. Instead of merely excusing itself from liability by putting the blame to ATI
and SMC it is incumbent upon OFII to prove that it actively took care of the goods by exercising extraordinary diligence
in the carriage thereof. It failed to do so. Hence its presumed negligence under Article 1735 of the Civil Code remains
unrebutted.

LAND BANK OF THE PHILIPPINES v. PEREZ

Petitioner Land Bank of the Philippines (LBP) is a government financial institution and the official depository of the
Philippines. Respondents are the officers and representatives of Asian Construction and Development Corporation
(ACDC), a corporation incorporated under Philippine law and engaged in the construction business. On June 7, 1999, LBP
filed a complaint for estafa or violation of Article 315, paragraph 1(b) of the Revised Penal Code, in relation to P.D. 115,
against the respondents before the City Prosecutors Office in Makati City. In the affidavit-complaint of June 7, 1999,
the LBPs Account Officer for the Account Management Development, Edna L. Juan, stated that LBP extended a credit
accommodation to ACDC through the execution of an Omnibus Credit Line Agreement between LBP and ACDC on
October 29, 1996. In various instances, ACDC used the Letters of Credit/Trust Receipts Facility of the Agreement to buy
construction materials. The respondents, as officers and representatives of ACDC, executed trust receipts in connection
with the construction materials, with a total principal amount of P52,344,096.32. The trust receipts matured, but ACDC
failed to return to LBP the proceeds of the construction projects or the construction materials subject of the trust
receipts. LBP sent ACDC a demand letter, dated May 4, 1999, for the payment of its debts, including those under the
Trust Receipts Facility in the amount of P66,425,924.39. When ACDC failed to comply with the demand letter, LBP filed
the affidavit-complaint. ISSUE: Trust receipt or loan? HELD: The disputed transactions are not trust receipts wherein an
entruster who owns or holds absolute title or security interests over certain specified goods, documents or instruments,
releases the same to the possession of the entrustee upon the latter's execution and delivery to the entruster of a
signed document called a "trust receipt" wherein the entrustee binds himself to hold the designated goods, documents
or instruments in trust for the entruster and to sell or otherwise dispose of the goods, documents or instruments with
the obligation to turn over to the entruster the proceeds thereof to the extent of the amount owing to the entruster or
as appears in the trust receipt or the goods, documents or instruments themselves if they are unsold or not otherwise
disposed of, in accordance with the terms and conditions specified in the trust receipt. Article 1371 of the Civil Code
provides that *i+n order to judge the intention of the contracting parties, their contemporaneous and subsequent acts
shall be principally considered. Under this provision, we can examine the contemporaneous actions of the parties
rather than rely purely on the trust receipts that they signed in order to understand the transaction through
their intent. LBP knew that ACDC was in the construction business and that the materials that it sought to buy under the
letters of credit were to be used for the following projects: the Metro Rail Transit Project and the Clark Centennial
Exposition Project. Clearly, they were aware of the fact that there was no way they could recover the buildings or
constructions for which the materials subject of the alleged trust receipts had been used. Notably, despite the
allegations in the affidavit-complaint wherein LBP sought the return of the construction materials, its demand letter
dated May 4, 1999 sought the payment of the balance but failed to ask, as an alternative, for the return of the
construction materials or the buildings where these materials had been used. LBP knew these materials were to be used
for government projects as property of the public domain.
Based on these premises, we cannot consider the agreements between the parties in this case to be trust receipt
transactions because (1) from the start, the parties were aware that ACDC could not possibly be obligated to reconvey to
LBP the materials or the end product for which they were used; and (2) from the moment the materials were used for
the government projects, they became public, not LBPs, property.

Insurance Company of North America, petitioner, v. Asian Terminals, Inc., respondent

Facts:
The trial court dismissed petitioners complaint for actual damages on the ground of
prescription under the Carriage of Goods by Sea Act. Thus, an action was instituted to review the
RTCs decision. On November 2002, Macro-Lite Corporation shipped to San Miguel Corporation, throughM/V DIMI P
vessel, 185 packages (or 231,000 sheets) of electrolytic tin free steel, complete and ingood order condition and covered
by Bill of Lading. The shipment had a declared value of US$169,850.35 and was insured with petitioner against all risks
under its marine policy.The carrying vessel arrived at the port of Manila and when the shipment was
dischargedtherefrom, it was noted than 7 packages were damaged and in bad order. The shipment was thenturned over
to the custody of respondent (as arrastre operator) for storage and safekeeping
pending its withdrawal by the consignees authorized customs broker, which was later withd
rawnby the customs broker from custody of the respondent.An examination report was written and showed that an
additional 5 packages were found tobe damaged and in bad order.Consignee, San Miguel Corporation, filed separate
claims against respondent and petitionerfor the damage of 11,200 sheets of electrolytic tin free steel. Petitioner, as
insurer of the cargo,paid the consignee the amount of Php 431,592.14 for the damage caused to the
shipment.Thereafter, petitioner formally demanded reparation against respondent and as respondent failedto satisfy its
demand, petitioner filed an action for damages with the RTC.The trial court dismissed the complaint because it was
already barred by the statute of limitations. It held that COGSA, embodied in CA 65, applies to this case since the goods
wereshipped from a foreign port to the Philippines. Under the said law, particularly paragraph 4, Section3(6), the
shipper has the right to bring a suit within one year after the delivery of the goods or the date when the goods should
have been delivered.Issue:Whether or not, the one-year prescriptive period for filing a suit under the COGSA applies
tothis action.
The COGSA (Public Act No. 521 of the 74th US Congress) was accepted to be made applicable to all contracts for the
carriage of goods by sea to and from the Philippine ports in foreign trade by
virtue of CA 65. The term carriage of goods covers the period from the time when the goods are
loaded to the time when they are discharged from the ship; thus, it can be inferred that the periodof time when
the goods have been discharged from the ship and given to the custody of the arrastreoperator is not covered by the
COGSA.The prescriptive period for filing an action for the loss or damage of the goods under the
COGSA is found in paragraph 6, Section 3. It states that in any event, the carrier and the ship shall
be discharged from all liability in respect of loss or damage unless suit is brought within one yearafter delivery of the
goods or the date when the goods should have been delivered. Provided, thatif a notice of loss or damage, either
apparent or concealed, is not given as provided for in thissection, that fact shall not affect or prejudice the right of the
shipper to bring suit within one yearafter the delivery of the goods or the date when the goods should have been
delivered. However, the COGSA does not mention that an arrastre operator may invoke the prescriptive period of 1
year; hence, it does not cover the arrastre operator.

Ramos v. PNB
Luis Ramos acquired an agricultural loan from PNB and executed a Real Estate Mortgage wherein it was stated inter alia
that it will also cover subsequent or future loans. A few years later, Ramos entered into a credit line agreement with the
said bank and was able to procure two sugar quedan financing loans evidenced by a promissory note. Because of his
failure to pay the quedan financing loan, Ramos authorized the Philippine National Bank or any of its duly authorized
officer, to dispose and sell all the Quedan Receipts (Warehouse Receipts) pledged to said bank, after maturity date of
the Sugar Quedan Financing line. Incidentally, the above-mentioned sugar quedans became the subject of three other
cases between PNB and Noahs Ark, which cases have since reached this Court. Meanwhile, the spouses Ramos fully
settled the agricultural loan of P160,000.00 and so they then demanded from PNB the release of the real estate
mortgage. PNB, however, refused to heed the spouses demand countering that since the mortgage covers all their
future loans, thus, it also covers the quedan financing loan which was not yet settled because the case against Noahs
Ark was still pending at that time.
HELD: Here, it cannot be denied that the real estate mortgage executed by the parties provided that it shall stand as
security for any subsequent promissory note or notes either as a renewal of the former note, as an extension thereof,
or as a new loan, or is given any other kind of accommodations such as overdrafts, letters of credit, acceptances and bills
of exchange, releases of import shipments on Trust Receipts, etc. The same real estate mortgage likewise expressly
covered any and all other obligations of the Mortgagor to the Mortgagee of whatever kind and nature whether such
obligations have been contracted before, during or after the constitution of this mortgage. Thus, from the clear and
unambiguous terms of the mortgage contract, the same has application even to future loans and obligations of the
mortgagor of any kind, not only agricultural crop loans. Such a blanket clause or dragnet clause in mortgage
contracts has long been recognized in our jurisprudence. As a general rule, a mortgage liability is usually limited to the
amount mentioned in the contract. However, the amounts named as consideration in a contract of mortgage do not
limit the amount for which the mortgage may stand as security if, from the four corners of the instrument, the intent to
secure future and other indebtedness can be gathered. This stipulation is valid and binding between the parties and is
known as the "blanket mortgage clause" (also known as the "dragnet clause)."
The creditor, in a contract of real security, like pledge, cannot appropriate without foreclosure the things given by way
of pledge. Any stipulation to the contrary, termed pactum commissorio, is null and void. The law requires foreclosure in
order to allow a transfer of title of the good given by way of security from its pledgor, and before any such foreclosure,
the pledgor, not the pledgee, is the owner of the goods. x x x.[45]
A close reading of the Authorization executed by Luis Ramos reveals that it was nothing more than a letter that
gave PNB the authority to dispose of and sell the sugarquedans after the maturity date thereof. As held by the Court of
Appeals, the said grant of authority on the part of PNB is a standard condition in a contract of pledge, in accordance with
the provisions of Article 2087 of the Civil Code that it is also of the essence of these contracts that when the principal
obligation becomes due, the things in which the pledge or mortgage consists may be alienated for the payment to the
creditor. More importantly, Article 2115 of the Civil Code expressly provides that the sale of the thing pledged shall
extinguish the principal obligation, whether or not the proceeds of the sale are equal to the amount of the principal
obligation, interest and expenses in a proper case. As we adverted to in Sayo, it is the foreclosure of the thing pledged
that results in the satisfaction of the loan liabilities to the pledgee of the pledgors. Thus, prior to the actual foreclosure
of the thing pleged, the sugar quedan financing loan in this case is yet to be settled. As matters stand, with more reason
that PNB cannot be compelled to release the real estate mortgage and the titles involved therein since the issue of
whether the sugarquedan financing loan will be fully paid through the pledged sugar receipts remains the subject of
pending litigation.

Unsworth Transport International v. CA and Pioneer Insurance and Surety Corp.

On August 31, 1992, the shipper Sylvex Purchasing Corporation delivered to UTI a shipment of 27 drums of various raw
materials for pharmaceutical manufacturing. UTI issued Bill of Lading covering the aforesaid shipment. The subject
shipment was insured with private respondent Pioneer Insurance and Surety Corporation in favor of Unilab against all
risks in the amount of P1,779,664.77 . On September 30, 1992, the shipment arrived at the port of Manila. On October
6, 1992, petitioner received the said shipment in its warehouse after it stamped the Permit to Deliver Imported Goods
procured by the Champs Customs Brokerage. On October 15, 1992, the arrastre Jardine Davies Transport Services, Inc.
(Jardine) issued Gate Pass which stated that 22 drums Raw Materials for Pharmaceutical Mfg. were loaded on a truck
by Champs for delivery to Unilabs warehouse. The materials were noted to be complete and in good order in the gate
pass. On the same day, the shipment arrived in Unilabs warehouse and was immediately surveyed by an independent
surveyor, J.G. Bernas Adjusters & Surveyors, Inc. which stated that 1-p/bag torn on side contents partly spilled, 1s/drum #7 punctured and retaped on bottom side content lacking and 5-drums shortship/short delivery. Respondent
paid for the damage but filed a complaint against UTI.
HELD: Admittedly, petitioner is a freight forwarder. The term freight forwarder" refers to a firm holding itself out to the
general public (other than as a pipeline, rail, motor, or water carrier) to provide transportation of property for
compensation and, in the ordinary course of its business, (1) to assemble and consolidate, or to provide for assembling
and consolidating, shipments, and to perform or provide for break-bulk and distribution operations of the shipments; (2)
to assume responsibility for the transportation of goods from the place of receipt to the place of destination; and (3) to
use for any part of the transportation a carrier subject to the federal law pertaining to common carriers. A freight
forwarders liability is limited to damages arising from its own negligence, including negligence in choosing the carrier;
however, where the forwarder contracts to deliver goods to their destination instead of merely arranging for their
transportation, it becomes liable as a common carrier for loss or damage to goods. A freight forwarder assumes the
responsibility of a carrier, which actually executes the transport, even though the forwarder does not carry the
merchandise itself. It is undisputed that UTI issued a bill of lading in favor of Unilab. Pursuant thereto, petitioner
undertook to transport, ship, and deliver the 27 drums of raw materials for pharmaceutical manufacturing to the
consignee. A bill of lading is a written acknowledgement of the receipt of goods and an agreement to transport and to
deliver them at a specified place to a person named or on his or her order. It operates both as a receipt and as a
contract. It is a receipt for the goods shipped and a contract to transport and deliver the same as therein stipulated. As
a receipt, it recites the date and place of shipment, describes the goods as to quantity, weight, dimensions, identification
marks, condition, quality, and value. As a contract, it names the contracting parties, which include the consignee; fixes
the route, destination, and freight rate or charges; and stipulates the rights and obligations assumed by the parties.
Undoubtedly, UTI is liable as a common carrier. Common carriers, as a general rule, are presumed to have been at fault
or negligent if the goods they transported deteriorated or got lost or destroyed. That is, unless they prove that they
exercised extraordinary diligence in transporting the goods. In order to avoid responsibility for any loss or damage,
therefore, they have the burden of proving that they observed such diligence. Mere proof of delivery of the goods in
good order to a common carrier and of their arrival in bad order at their destination constitutes a prima facie case of
fault or negligence against the carrier. If no adequate explanation is given as to how the deterioration, loss, or
destruction of the goods happened, the transporter shall be held responsible.
All these conclusively prove the fact of shipment in good order and condition, and the consequent damage to one steel
drum of Vitamin B Complex Extract while in the possession of petitioner which failed to explain the reason for the
damage. Further, petitioner failed to prove that it observed the extraordinary diligence and precaution which the law
requires a common carrier to exercise and to follow in order to avoid damage to or destruction of the goods entrusted
to it for safe carriage and delivery.[29]

MOF v. Shinyang Brokerage Corp.

On October 25, 2001, Halla Trading Co., a company based in Korea, shipped to Manila secondhand cars and other
articles on board the vessel Hanjin Busan 0238W. The bill of lading covering the shipment, i.e., Bill of Lading No.
HJSCPUSI14168303,[2] which was prepared by the carrier Hanjin Shipping Co., Ltd. (Hanjin), named respondent Shin
Yang Brokerage Corp. (Shin Yang) as the consignee and indicated that payment was on a Freight Collect basis, i.e., that
the consignee/receiver of the goods would be the one to pay for the freight and other charges in the total amount
of P57,646.00. The shipment arrived in Manila on October 29, 2001. Thereafter, petitioner MOF Company, Inc. (MOF),
Hanjins exclusive general agent in the Philippines, repeatedly demanded the payment of ocean freight, documentation
fee and terminal handling charges from Shin Yang. The latter, however, failed and refused to pay contending that it did
not cause the importation of the goods, that it is only the Consolidator of the said shipment, that the ultimate consignee
did not endorse in its favor the original bill of lading and that the bill of lading was prepared without its consent. Thus,
on March 19, 2003, MOF filed a case for sum of money before the Metropolitan Trial Court of Pasay City (MeTC Pasay).
Claiming that it is merely a consolidator/forwarder and that Bill of Lading No. HJSCPUSI14168303 was not endorsed to it
by the ultimate consignee, Shin Yang denied any involvement in shipping the goods or in promising to shoulder the
freightage. It asserted that it never authorized Halla Trading Co. to ship the articles or to have its name included in the
bill of lading. Shin Yang also alleged that MOF failed to present supporting documents to prove that it was Shin Yang
that caused the importation or the one that assured payment of the shipping charges upon arrival of the goods
in Manila. ISSUE: The issue for resolution is whether a consignee, who is not a signatory to the bill of lading, is bound by
the stipulations thereof. Corollarily, whether respondent who was not an agent of the shipper and who did not make
any demand for the fulfillment of the stipulations of the bill of lading drawn in its favor is liable to pay the corresponding
freight and handling charges. HELD : The bill of lading is oftentimes drawn up by the shipper/consignor and the carrier
without the intervention of the consignee. However, the latter can be bound by the stipulations of the bill of lading
when a) there is a relation of agency between the shipper or consignor and the consignee or b) when the consignee
demands fulfillment of the stipulation of the bill of lading which was drawn up in its favor. A consignee, although not a
signatory to the contract of carriage between the shipper and the carrier, becomes a party to the contract by reason of
either a) the relationship of agency between the consignee and the shipper/ consignor; b) the unequivocal acceptance
of the bill of lading delivered to the consignee, with full knowledge of its contents or c) availment of the stipulation pour
autrui, i.e., when the consignee, a third person, demands before the carrier the fulfillment of the stipulation made by
the consignor/shipper in the consignees favor, specifically the delivery of the goods/cargoes shipped. In the instant
case, Shin Yang consistently denied in all of its pleadings that it authorized Halla Trading, Co. to ship the goods on its
behalf; or that it got hold of the bill of lading covering the shipment or that it demanded the release of the cargo. Basic
is the rule in evidence that the burden of proof lies upon him who asserts it, not upon him who denies, since, by the
nature of things, he who denies a fact cannot produce any proof of it. Thus, MOF has the burden to controvert all these
denials, it being insistent that Shin Yang asserted itself as the consignee and the one that caused the shipment of the
goods to the Philippines. In civil cases, the party having the burden of proof must establish his case by preponderance of
evidence, which means evidence which is of greater weight, or more convincing than that which is offered in opposition
to it. Here, MOF failed to meet the required quantum of proof. Other than presenting the bill of lading, which, at most,
proves that the carrier acknowledged receipt of the subject cargo from the shipper and that the consignee named is to
shoulder the freightage, MOF has not adduced any other credible evidence to strengthen its cause of action. It did not
even present any witness in support of its allegation that it was Shin Yang which furnished all the details indicated in the
bill of lading and that Shin Yang consented to shoulder the shipment costs. There is also nothing in the records which
would indicate that Shin Yang was an agent of Halla Trading Co. or that it exercised any act that would bind it as a
named consignee. Thus, the CA correctly dismissed the suit for failure of petitioner to establish its cause against
respondent.

Gloria Ocampo and Teresita Tan v. Land Bank of the Phils.

In 1991, Gloria Ocampo and her daughter, Teresita Tan, obtained from the Land Bank of the Philippines a quedan
loan evidenced by a promissory note. Ocampo and Tan availed of the Quedan Financing Program of Quedancor,
whereby the latter guaranteed to pay the Land Bank their loan, upon maturity, in case of non-payment. Pursuant
thereto, they delivered to the Land Bank several grains warehouse receipts (quedans), and executed a Deed of
Assignment/Contract of Pledge covering 41,690 cavans of palay. The liability of Quedancor, however, was limited to
eighty percent (80%) of the outstanding loan plus interests at the time of maturity. Corollarily, the quedans delivered by
Ocampo and Tan, as security, turned out to be insufficient. Accordingly, Ocampo and Tan constituted a real estate
mortgage over two parcels of unregistered land owned by Ocampo. After the maturity of the remaining three (3)
promissory notes on October 2, 1991, Ocampo failed to pay the balance for her quedan loan. Thus, the Land Bank filed
with Quedancor a claim for guarantee payment as regards the 20% portion of the quedan loan, Land Bank filed
on March 27, 2000 a petition for extrajudicial foreclosure of real estate mortgage pursuant to Act No. 3135, as
amended. Ocampo and Tan elevated the matter before the CA with the issues: whether or not the deed of real estate
mortgage was void; and assuming that it was valid, whether or not the loan was already extinguished. HELD: A perusal
of the Deed of Real Estate Mortgage dated September 6, 1991 revealed the signatures of Gloria Ocampo and Teresita
Tan as well as that of Zenaida Dasig and Julita Orpiano. On the acknowledgment portion were the names of Gloria
Ocampo and Teresita Tan, alongside their respective residence certificate numbers and the places and dates of issue,
together with the name of Atty. Elmer Veloria, the notary public. It is well settled that a document acknowledged before
a notary public is a public document that enjoys the presumption of regularity. It is a prima facie evidence of the truth
of the facts stated therein and a conclusive presumption of its existence and due execution. Anent the second issue, We
also resolve the same against Ocampo and Tan and, consequently, hold that the loan obligation was not yet
extinguished. The essence of a contract of mortgage indebtedness is that a property has been identified or set apart
from the mass of the property of the debtor-mortgagor as security for the payment of money or the fulfillment of an
obligation to answer the amount of indebtedness, in case of default of payment. In the case before Us, the loan amount
was established. It was also admitted that 80% was guaranteed by Quedancor, while the remaining 20%, by the Deed
of Real Estate Mortgage. In the case of Vda. De Jayme v. Court of Appeals, We held that dacion en pago is the delivery
and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of
the obligation. Thus, it is a special mode of payment where the debtor offers another thing to the creditor, who
accepts it as equivalent of payment of an outstanding debt, which undertaking, in one sense, amounts to a sale. As
such, the essential elements are consent, object certain, and cause or consideration. In its modern concept, what
actually takes place in dacion en pago is an objective novation of the obligation where the thing offered as an accepted
equivalent of the performance of an obligation is considered as the object of the contract of sale, while the debt is
considered as the purchase price. In any case, common consent is an essential prerequisite, be it sale or novation, to
have the effect of totally extinguishing the debt or obligation. The requisite consent is not present in this case, for as
explained by the Court of Appeals: True, the plaintiffs-appellees executed a Deed of Assignment. But what does the
said deed guarantee? The Deed of Assignment referred to was entered into between Quedan [Guarantee] Fund Board
and the plaintiffs-appellees. The appellant creditor bank, however, had no participation, or much less, consented to the
execution of the said deed of assignment. Hence, the deed of assignment cannot have the valid effect of extinguishing
the real estate mortgage or much less the quedan loan insofar as the creditor bank is concerned. Basic is the rule that
in order to have a valid payment, the payment shall be made to the person in whose favor the obligation is constituted,
or his successor-in-interest, or any person authorized to receive it. Why then did the plaintiff Gloria Ocampo assigned
(sic) her properties to a guarantor and not directly to the creditor bank? The pre-trial order will readily disclose that the
Quedan [Guarantee] Fund Board is a mere guarantor or surety of 80% of the quedan loan. Thus, even if the deed of
assignment has the effect of a valid payment, we may reasonably conclude that the extinguishment is only up to the
extent of 80% of the quedan loan. Thus, it leaves the balance of 20% of the quedan loan which can be fully satisfied by
the foreclosure of the real estate mortgage.

Rolan A. Nieto v. Madella & Cruz Law Offices

In accordance with Act No. 2137, the Warehouse Receipts Law, Noahs Ark Sugar Refinery issued on several dates, the
following Warehouse Receipts (Quedans): (a) March 1, 1989, Receipt No. 18062, covering sugar deposited by Rosa Sy;
(b) March 7, 1989, Receipt No. 18080, covering sugar deposited by RNS Merchandising (Rosa Ng Sy); (c) March 21, 1989,
Receipt No. 18081, covering sugar deposited by St. Therese Merchandising; (d)March 31, 1989, Receipt No. 18086,
covering sugar deposited by St. Therese Merchandising; and (e) April 1, 1989, Receipt No. 18087, covering sugar
deposited by RNS Merchandising. The receipts are substantially in the form, and contains the terms, prescribed for
negotiable warehouse receipts by Section 2 of the law. Subsequently, Warehouse Receipts Nos. 18080 and 18081 were
negotiated and endorsed to Luis T. Ramos; and Receipts Nos. 18086, 18087 and 18062 were negotiated and endorsed to
Cresencia K. Zoleta. Ramos and Zoleta then used the quedans as security for two loan agreements - one for P15.6 million
and the other for P23.5 million - obtained by them from the Philippine National Bank. The aforementioned quedans
were endorsed by them to the Philippine National Bank. Luis T. Ramos and Cresencia K. Zoleta failed to pay their loans
upon maturity on January 9, 1990. Consequently, on March 16, 1990, the Philippine National Bank wrote to Noahs Ark
Sugar Refinery demanding delivery of the sugar stocks covered by the quedans endorsed to it by Zoleta and Ramos.
Noahs Ark Sugar Refinery refused to comply with the demand alleging ownership thereof, for which reason the
Philippine National Bank filed with the Regional Trial Court of Manila a verified complaint for Specific Performance with
Damages and Application for Writ of Attachment against Noahs Ark Sugar. HELD: The rule may be simplified thus:
While the PNB is entitled to the stocks of sugar as the endorsee of the quedans, delivery to it shall be effected only upon
payment of the storage fees.
Imperative is the right of the warehouseman to demand payment of his lien at this juncture, because, in accordance
with Section 29 of the Warehouse Receipts Law, the warehouseman loses his lien upon goods by surrendering
possession thereof. In other words, the lien may be lost where the warehouseman surrenders the possession of the
goods without requiring payment of his lien, because a warehousemans lien is possessory in nature.
We, therefore, uphold and sustain the validity of the assailed orders of public respondent, dated December 20,
1994 and March 1, 1995.
In fine, we fail to see any taint of abuse of discretion on the part of the public respondent in issuing the questioned
orders which recognized the legitimate right of Noahs Ark, after being declared as warehouseman, to recover storage
fees before it would release to the PNB sugar stocks covered by the five (5) Warehouse Receipts. Our resolution,
dated March 9, 1994, did not preclude private respondents unqualified right to establish its claim to recover storage
fees which is recognized under Republic Act No. 2137. Neither did the Court of Appeals decision, datedDecember 13,
1991, restrict such right.
Our Resolutions reference to the decision by the Court of Appeals, dated December 13, 1991, in CA-G.R. SP. No. 25938,
was intended to guide the parties in the subsequent disposition of the case to its final end. We certainly did not
foreclose private respondents inherent right as warehouseman to collect storage fees and preservation expenses as
stipulated n the face of each of the Warehouse Receipts and as provided for in the Warehouse Receipts Law (R.A. 2137).

PNB v. Atendido
On June 26, 1940, Laureano Atendido obtained from the Philippine National Bank a loan of P3,000 payable in 120 days
with interests at 6% per annum from the date of maturity. To guarantee the payment of the obligation the borrower
pledged to the bank 2,000 cavanes of palay which were then deposited in the warehouse of Cheng Siong Lam & Co. in
San Miguel, Bulacan, and to that effect the borrower endorsed in favor of the bank the corresponding warehouse
receipt. Before the maturity of the loan, the 2,000 cavanes of palay disappeared for unknown reasons in the warehouse.
When the loan matured the borrower failed to pay either the principal or the interest and so the present action was
instituted. Defendant set up a special defense and a counterclaim. As regards the former, defendant claimed that the
warehouse receipt covering the palay which was given as security having been endorsed in blank in favor of the bank,
and the palay having been lost or disappeared, he thereby became relieved of liability. And, by way of counterclaim,
defendant claimed that, as a corollary to his theory, he is entitled to an indemnity which represents the difference
between the value of the palay lost and the amount of his obligation. The only issue involved in this appeal is whether
the surrender of the warehouse receipt covering the 2,000 cavanes of palay given as a security, endorsed in blank, to
appellee, has the effect of transferring their title or ownership to said appellee, or it should be considered merely as a
guarantee to secure the payment of the obligation of appellant.
In upholding the view of appellee, the lower court said: "The surrendering of warehouse receipt No. S-1719 covering the
2,000 cavanes of palay by the defendant in favor of the plaintiff was not that of a final transfer of that warehouse
receipt but merely as a guarantee to the fulfillment of the original obligation of P3,000.00. In other word, plaintiff
corporation had no right to dispose (of) the warehouse receipt until after the maturity of the promissory note Exhibit A.
Moreover, the 2,000 cavanes of palay were not in the first place in the actual possession of plaintiff corporation,
although symbolically speaking the delivery of the warehouse receipt was actually done to the bank." We hold this
finding to be correct not only because it is in line with the nature of a contract of pledge as defined by law (Articles 1857,
1858 & 1863, Old Civil Code), but is supported by the stipulations embodied in the contract signed by appellant when he
secured the loan from the appellee. There is no question that the 2,000 cavanes of palay covered by the warehouse
receipt were given to appellee only as a guarantee to secure the fulfillment by appellant of his obligation. This clearly
appears in the contract Exhibit A wherein it is expressly stated that said 2,000 cavanes of palay were given as a collateral
security. The delivery of said palay being merely by way of security, it follows that by the very nature of the transaction
its ownership remains with the pledgor subject only to foreclose in case of non-fulfillment of the obligation. By this we
mean that if the obligation is not paid upon maturity the most that the pledgee can do is to sell the property and apply
the proceeds to the payment of the obligation and to return the balance, if any, to the pledgor (Article 1872, Old Civil
Code). This is the essence of this contract, for, according to law, a pledgee cannot become the owner of, nor appropriate
to himself, the thing given in pledge (Article 1859, Old Civil Code). If by the contract of pledge the pledgor continues to
be the owner of the thing pledged during the pendency of the obligation, it stands to reason that in case of loss of the
property, the loss should be borne by the pledgor. The fact that the warehouse receipt covering the palay was delivered,
endorsed in blank, to the bank does not alter the situation, the purpose of such endorsement being merely to transfer
the juridical possession of the property to the pledgee and to forestall any possible disposition thereof on the part of the
pledgor. This is true notwithstanding the provisions to the contrary of the Warehouse Receipt Law. In conclusion, we
hold that where a warehouse receipt or quedan is transferred or endorsed to a creditor only to secure the payment of a
loan or debt, the transferee or endorsee does not automatically become the owner of the goods covered by the
warehouse receipt or quedan but he merely retains the right to keep and with the consent of the owner to sell them so
as to satisfy the obligation from the proceeds of the sale, this for the simple reason that the transaction involved is not a
sale but only a mortgage or pledge, and that if the property covered by the quedans or warehouse receipts is lost
without the fault or negligence of the mortgagee or pledgee or the transferee or endorsee of the warehouse receipt or
quedan, then said goods are to be regarded as lost on account of the real owner, mortgagor or pledgor.