1. Director of Lands et.al vs Funtillar et.

Al (GR 68533 May 23, 1986)

FACTS: This is a petition to review the decision of the respondent court which affirmed the
adjudication by the land registration court of a parcel of land in favour of the private
respondents. The land was part of the property originally belonging to one Candida
Fernandez whose ownership and possession began sometime during her lifetime and
extended until 1936 when she died. Sometime in1940 or 1941, the parcel of land was
forfeited in favour of the government for failure to pay real estate taxes. However, the same
was redeemed in 1942 by Vitaliano Aguirre, one of the three children of Candida Fernandez,
who was then the administrator of the property. A final deed of sale was executed by the
Provincial Treasurer in favor of Vitaliano Aguirre. The heirs of Candida Fernandez later
partitioned the property among themselves. The particular lot now was adjudicated in favor
of the applicants-respondents. In 1972, private respondents, who were the grandchildren of
Fernandez, applied for the registration of a parcel of land. The Director of Lands and Director
of Forest Development filed an opposition alleging that neither applicants nor their
predecessor-in-interest possessed sufficient title to the land; that neither applicants, nor their
predecessors have been in open, continuous, exclusive and notorious possession and
occupation of the land for at least thirty (30) years immediately preceding the filing of the
application; and that the land is a portion of the public domain belonging to the Republic of
the Philippines.
ISSUE: Whether or not private respondents have established possession for at least thirty
years to entitle them to confirmation of imperfect title and registration under the law
HELD: Yes. Long before Candidas death in 1936, she already possessed the disputed
property. This possession must be tacked to the possession of her heirs, through
administrator Vitaliano Aguirre, and later to the possession of the private respondents
themselves, who are Candida's grandchildren. The fact of possession is bolstered by the
forfeiture in1940 of the land in favor of the government. It would be rather absurd under the
circumstances of this case to rule that the government would order the forfeiture of property
for non-payment of real estate taxes if the property is forest land. It is also reasonable to rule
that the heirs of Candida Fernandez redeemed the property because they wanted to keep
the land of the deceased in the possession of their family, thus continuing prior possession.
From 1936 and earlier up to 1972 is more than the required period.

2. Arradaza et.al vs CA & Larrazabal (GR 50422 Feb. 8, 1989)

FACTS: The petitioners were the legitimate children of spouses Ignacio Arradaza and
Marcelina Quirino who died on August 31, 1974. In 1941, Ignacio Arradaza and Marcelina
Quirino purchased from spouses Gervacio Villas and Jovita Tabudlong a piece of land. The
deed of sale was lost during the war and Original Certificate of Title No.35901 was therefore
issued in the name of Gervacio Villas and Jovita Tabudlong but they recognized the vendee
spouses as the real owners of the land. On October 21, 1947, Ignacio Arradaza sold the
same land to Estelita Magalona Bangloy. She took over possession of the land, declared it
for taxation purpose and paid taxes thereon. On February 13, 1963 while the land was still in
the name of spouses Villas, Larrazabal purchased the property from Estelita Magalona
Bangloywhich was evidenced by a "Deed of Sale of a Parcel of Land" executed in favor of
Larrazabal. Original Certificate of Title No. 35901 was cancelled and Transfer Certificate of
Title No. 4581 was issued in the name of private respondent and the land was declared for
taxation purposes. On January 18, 1975, petitioners filed an action against private
respondent before the CFI of Leyte to recover their one-half (1/2) share of the land as heirs
of Ignacio Arradaza and Marcelina Quirino, and to exercise the right of legal redemption over
one-half (1/2) of the property sold by their deceased father while he was already a widower
on October 21, 1947.Private respondent on the other hand, maintains that prescription has
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set in because the predecessors-in-interest of petitioners were not registered owners

protected by Act 496, He asserts that when the transaction occurred on October 21, 1947
the Code of Civil Procedure was still in force. The prescriptive period was only ten (10) years
irrespective of the good or bad faith of Estelita M. Bangloy. The trial court rendered a
Summary Judgment in favor of the private respondent which was affirmed by the Court of
Appeals. Hence, this petition.
ISSUE: Whether or not the Court of Appeals erred in the decision
RULING: No, decision of court of appeals is affirmed. Summary judgment procedure is a
method for promptly disposing of action in which there is no genuine issue as to the
existence of any material fact. The Record on Appeal clearly shows that petitioners and
respondents submitted their respective lists of witnesses and their affidavits, and exhibits
during the pre-trial, and memoranda. Private respondent, in particular, submitted among
others, exhibits, Transfer Certificate of Title No. 4581 in his name and that of his wife dated
April 18, 1963, and tax declarations in his name and that of his predecessors-in-interests.
From these affidavits, exhibits and other evidence, the trial court rendered its Summary
Judgment. An examination of the record clearly and readily shows that the statute of
limitation has stepped in and that the petitioners are guilty of laches and that the property
has been in possession of private respondent who is a purchaser in good faith and for value.
There is therefore, no genuine triable issue of fact.

3. David vs Bandin (GR 48322 April 8, 1987)

FACTS: During their lifetime, the spouses Juan Ramos and Fortunate Calibo, were the
owners of two parcels of land; the Talon Property and Laong property. Both spouses died
intestate, leaving as heirs two legitimate children, Candida and Victoriana Ramos, and
grand-daughter, Agapita Ramos, daughter of their deceased Sora Anastacio. Candida and
Victoriana died intestate on February 16, 1955 and December 12,1931, respectively.
Candida Ramos; her niece, Agapita Ramos; and her nephew, Eulogio Bandin, sold a portion
of the Talon property to the spouses Rufino 0. Miranda and Natividad Guinto. This portion
was divided into three lots. Parcel 1 was subsequently sold to Narciso Velasquez and Albino
Miranda. Parcels 2 and 3 were subsequently sold to Jose Ramirez and Sotero Ramirez,
repectively, who registered these properties and obtained OCT Nos. 2027 and 2029 in their
respective names. The remaining portion of the Talon property was extra judicially
partitioned on September17, 1955 among the heirs of Candida Ramos and was subdivided
in seven lots. Lot 5 was given to Victoria Martin, who was able to register the land and was
issued OCT No. 3706. Lot 6 was given to Maximina Martin, who also was able to register the
land and was issued OCT No. 3707. A portion of these lots were subsequently sold to
Magno de la Cruz who was able to obtain TCT. The Laong property was sold by Candida
Ramos and her children on December 19, 1943 to Hermogenes Lucena, husband of Juanita
Martin, one of the daughters of Candida. On September 23, 1959, Juanita (then widowed)
sold the property to the spouses Gregorio and Mary Venturanza. On January21, 1965, the
Venturanzas, in a deed of sale also signed by Juanita Martin, conveyed a portion of the
property to the spouses Felipe and Antonia David. Juanita Martin was able to register the
property in her name and was issued OCT No. 8916 on July 1, 1971.On June 14, 1963,
respondents, who were the heirs of Victoriana except for Agapita, filed a complaint for the
recovery and partition of property. A decision was rendered by the trial court, in favor of the
plaintiffs,declaring, however, that certain properties could no longer be reconveyed to
plaintiffs since they had been transferred to purchasers who bought them in good faith for
value. Not satisfied with the decision, both plaintiffs and defendants appealed to the Court of
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Appeals which nullified the transfers made to the defendants who were declared by the trial
court as purchasers in good faith.
ISSUES: Whether or not private respondents' claim is barred by prescription2. Whether or
not petitioners were buyers in good faith
HELD: No. Respondents claim is not barred by laches and prescription since it was not
shown that they were guilty of negligence or slept on their rights. They sent a letter of
demand to the heirs of Candida Ramos on April 23, 1963, and filed their complaint against
them on June 14, 1963, or within a period of approximately eight (8) years from Candida's
death.
Petitioners Felipe David and Antonia G. David were buyers in bad faith. They bought
the property when it was still unregistered land. The defense of having purchased the
property in good faith may be availed of only where registered land is involved and the buyer
had relied in good faith on the clear title of the registered owner. One who purchases an
unregistered land does so at his peril His claim of having bought the land in good faith, i.e.
without notice that some other person has a right to, or interest in, the property, would not
protect him if it turns out that the seller does not actually own the property.

4. Gallardo vs Intermediate Appellate Court (GR 67742 October 29, 1987)

FACTS: Petitioners were nephew and niece of the late Pedro Villanueva and first cousin of
the private respondent Marta Villanueva vda. de Agana, the latter being the daughter of
Pedro Villanueva. The subject matter of this controversy involves a parcel of land situated in
Cavinti, Laguna consisting of 81,300 square meters, more or less, initially covered by an
original Certificate of Title No. 2262, issued on April 2, 1924 owned and registered in the
name of the late Pedro Villanueva. On August 10, 1937, petitioner claimed that the
aforestated land was sold to them in a private document, an unnotarized deed of sale written
in Tagalog that was allegedly signed by the late Pedro Villanueva conveying and transferring
the property in question in favor of the petitioners. Subsequently, the Original Certificate of
Title was cancelled and a new certificate of title was issued in the name of the petitioners
covered by Transfer Certificate of Title No. RT- 6293 (No. 23350) on January 4, 1944. On
November 17, 1976, defendant Marta Villanueva together with Pedro Villanueva, Jr., and
Restituto R.Villanueva executed and filed an Affidavit of Adverse Claim with the Office of the
Register of Deeds of Laguna. When petitioners learned of this Affidavit of Adverse Claim,
attempt was made to settle said controversy amicably, but they failed. So, petitioners
instituted court suit against the private respondent and her husband, Dr. Marcelo S. Agana,
Sr. by filing a complaint for Quieting of Title and Damages with the Court of First Instance of
Laguna on February 3, 1977. The Court of First Instance of Laguna rendered its decision
declaring the deed of sale of August 10, 1937, as well as the reconstituted transfer certificate
of title of petitioners, void ab initio.
Thus, petitioners filed notice of appeal to the Intermediate Appellate Court. However, the
Intermediate Appellate Court, on May 22, 1984, affirmed in toto the decision of the trial court.
Hence, this petition.
ISSUE: Whether or not there was a valid reconstitution of Transfer Certificate of TitleNo. RT6293 (No. 23350) issued in the names of petitioners.
HELD: No. Section 127 of Act 496 which requires, among other things, that the conveyance
be executed "before the judge of a court of record or clerk of a court of record or a notary
public or a justice of the peace, who shall certify such acknowledgment substantially in form
next hereinafter stated was violated.
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The action of the Register of Deeds of Laguna in allowing the registration of the private deed
of sale was unauthorized and did not lend a bit of validity to the defective private document
of sale. With reference to the special law, Section 127 of the Land Registration Act, Act 496
Deeds of Conveyance, affecting lands, whether registered under this act or unregistered
shall be sufficient in law when made substantially in accordance with the following forms,
and shall be as effective to convey, encumber or bind the lands as though made in
accordance with more prolix forms heretofore in use. It is therefore evident that Exhibit "E"
in the case at bar is definitely not registerable under the Land Registration Act. Also, the
contention that ownership over registered property may be acquired by prescription or
adverse possession is absolutely without merit. No title to registered land in derogation of
that of the registered owner shall be acquired by prescription or adverse possession.
Prescription is unavailing not only against the registered owner but also against his
hereditary successors.

5. Narciso Buenaventura and Maria Buenaventura vs CA and Manotok Realty ,

Inc. (GR 50837 Dec. 28, 1992)
FACTS:
Petitioners' allegation in their complaint filed in the court of origin, that fraud was employed in
the execution of a deed of sale and subsequently, in the issuance of a transfer certificate of
title, renders their action for reconveyance susceptible to prescription either within 4 years or
10 years. In the present case, even if one bends backwards and considers the
circumstances alleged as having created an implied or constructive trust, such that the
action for reconveyance would prescribed in the longer period of 10 years, still petitioners'
action is plainly time-barred. Considering that the deed of sale executed by the Philippine
Homesite and Housing Corporation in favor of Lorenzo Caia and Francisca Caia-Rivera
was executed on November 4, 1965 and on the following day, Transfer Certificate of Title
No. 21484 was issued in favor of the vendees (private respondents), the party allegedly
defrauded in the transaction, herein petitioners, had only 10 years or until September 5,
1975 within which to file the appropriate action. In the instant case, the action was filed only
on December 28, 1976, which was beyond the prescribed period set by law. Aggrieved by
the rules of the trial court, herein private respondents filed a petitioner with the Court of
Appeals which later granted the petitioner and ordered the dismissal of the complaint of then
private respondents, now herein petitioners, on the ground that their action has already
prescribed. A subsequent motion for reconsideration was to no avail.
ISSUE: Whether or not petitioner Court of Appeals erred in the decision
RULING: No, The defendant-appellee purchased the parcel of land in question giving rise to
the complaint of herein plaintiffs-appellants. The latter delayed the assertion of their
supposed right to annul the sale for a period of over fifteen (15) years despite knowledge or
notice of such sale. They had all the opportunity within that period of time to take action to
set aside or annul the sale. Defendant-appellee was never apprised of any intention on the
part of plaintiffs-appellants to annul the sale until this action was filed. Finally, the defendantappellee stands to lose the property in question if the suit filed against him by plaintiffsappellants shall be deemed barred.

6. Francisco v. CA, 122 SCRA 538 [1983]

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FACTS: On February 6, 1966, Dr. Patrocinio Angeles, who was then the Director of the
Morong Emergency Hospital, filed a case for intriguing against honor allegedly committed on
December 26, 1965 by Dr. Emiliano and Atty. Harry Bernardino. On May 3, 1966, the
Provincial Fiscal filed an information against Francisco and Bernardino with the CFI of Rizal
of the crime of grave oral defamation. Later, upon order of the court, the information was
amended by adding statements allegedly uttered by the two accused constituting the crime
of slander.
On Feb. 1, 1973, the trial court convicted Francisco and Bernardino of the crime of
grave oral defamation and sentenced each of them the penalty of arresto mayor and was
made to pay the complainant P10,000. Upon appeal in the Court of Appeals, the trial court's
decision was modified finding the accused guilty of simple slander. Bernardino passed away
while this petition was instituted in the Supreme Court. Francisco, then argues that since the
CA had found that the offense committed was the lesser offense of simple slander, which
under Art. 90 of the RPC, prescribes in two months, the CA should have dismissed the case.
Further, Francisco claims that the CA should have acquitted him on the ground that the said
crime had already prescribed as per evidence presented, the alleged defamatory remarks
were committed on December 26, 1965, while the information charged against him was filed
more than four months later.
The Solicitor General, however, contends that "for the purpose of determining the
proper prescriptive period, what should be considered is the nature of the offense charged in
the information which is grave oral defamation, not the crime committed by the accused, as
said crime was found by the Court to constitute only simple slander". Since the prescription
for grave oral defamation is six months, the crime has not yet prescribed when it the
information was filed. Moreover, the Solicitor General argues that the filing of the complaint
in the Fiscal's office interrupts the period of prescription. Only 39 days had passed from the
time the offense was allegedly committed to the day of the filing of the complaint.
ISSUES: Whether or not the crime of simple slander found by the CA to be the offense
committed by the petitioners has prescribed.
Whether or not the filing of a complaint in the Fiscal's office interrupts the prescription of an
offense.
HELD:
1. Yes. An accused cannot be convicted for the lesser offense necessarily included in the
crime charged if at the time of the filing of the information, the lesser offense has already
prescribed. To hold otherwise, according to the Court, would be to sanction a circumvention
of the law on prescription by the simple expedient of accusing the defendant of the graver
offense.
2. Yes. Prescription is interrupted with the filing of the case even if the court is without
jurisdiction, even if it be merely for purposes of preliminary examination or investigation.
Thus, the filing of the complaint in the Fiscal's office interrupts the period of prescription.
7. Quirino Mateo & Matias vs Dorotea diaz et. al (GR 137305 Jan. 17, 2002)
FACTS: The land involved is registered under the Torrens system in the name of petitioners
father Claro Mateo. There is no question raised with respect to the validity of the title.
Immediately after petitioners discovered the existence of OCT 206 in 1977 or 1978, they
took steps to assert their rights thereto. They divided the land between the two of them in an
extrajudicial partition. Then petitioners led the case below to recover ownership and
possession as the only surviving children of original owners, the late Claro Mateo. The
Regional Trial Court (RTC), Bulacan, at Malolos, ruled that prescription and laches are
applicable against petitioners, that real actions over an immovable prescribe after 30 years,
5

that ownership can be acquired thru possession in good faith and with just title for a period of
10 years, and that ownership may be acquired thru uninterrupted adverse possession for 30
years without need of just title or of good faith. The Court of Appeals (CA) affirmed that of
the trial court, thus, this petition for review on certiorari.

ISSUE: Whether or not the equitable doctrine of laches may override a provision of the
Land Registration Act on imprescriptibility of title to registered land. Otherwise put, the issue
raised is whether prescription and the equitable principle of laches are applicable in
derogation of the title of the registered owner.

HELD: A party who had led immediately a case as soon as he discovered that the land in
question was covered by a transfer certicate in the name of another person is not guilty of
laches.(St. Peter Memorial Park, Inc. v. Cleofas, 92 SCRA 389 [1979]).An action to recover
possession of a registered land never prescribe in view of the provision of Sec. 44 of Act 496
(now Sec. 47 of PD 1529) to the effect that no title to registered land in derogation to that of
a registered owner shall be acquired by prescription or adverse possession.
The Supreme Court thereupon reverses the CAs decision. In lieu thereof, the Court
remands the case to the trial court for determination of the heirs of Claro Mateo in a proper
proceeding.
8. Far East Bank & Trust Co. vs Estrella Q. Querimit (GR 148582 Jan. 16, 2002)
FACTS: Respondent deposited her savings with petitioner-bank. She did not withdraw her
deposit even after maturity date of the certicates of deposit (CDs) precisely because she
wanted to set it aside for her retirement, relying on the banks assurance, as reected on the
face of the instruments themselves, that interest would accrue or accumulate annually
even after their maturity. Petitioner-bank failed to prove that it had already paid respondent,
bearer and lawful holder of subject CDs, petitioner failed to prove that the CDs had been
paid out of its funds, since evidence by respondent stands unrebutted that subject CDs until
now remain unindorsed, undelivered, and unwithdrawn by her.
ISSUE: Whether or not it is unjust to allow the doctrine of laches to defeat the right of
respondent to recover her savings which she deposited with the petitioner?
RULING: Yes, it would be unjust not to allow respondent to recover her savings which she
deposited with petitioner-bank. For one, Petitioner failed to exercise that degree of diligence
required by the nature of its business. Because the business of banks is impressed with
public interest, the degree of diligence required of banks is more than that of a good father of
the family or of an ordinary business rm. The duciary nature of their relationship with their
depositors requires banks to treat accounts of their clients with the highest degree of care.
Respondent is entitled to moral damages because of the mental anguish and humiliation she
suffered as a result of the wrongly refusal of petitioner to pay her even after she had delivered the CDs. (Arts. 2217 and 2219). In addition, petitioner should pay respondent
exemplary damages which the trial court imposed by way of example or correction for the
public good (Art. 2229). Finally, respondent is entitled to attorneys fees since petitioners
act or omission compelled her to incur expenses to protect her interest making such award
just and equitable.

9. Development Bank of the Philippines vs CA and Carlos Cajes (GR 129471 April
28, 2000)
FACTS: Petitioner led an ejectment suit against private respondent, claiming ownership of
a parcel of land covered by a TCT, which included the 19.4 hectares being occupied by the
latter. The trial court declared petitioner to be the owner of the land, but the Court of Appeals
(CA) reversed the trial court. On appeal, petitioner claimed that its predecessor-in-interest
had become the owner of the land by virtue of the decree of registra-tion in his name. The
Supreme Court afrmed the CA.
ISSUE: Whether or not petitioner be the owner of the disputed land
RULING: Taking into consideration the possession of his predecessor-in-interest, private
respondent had been in uninterrupted adverse possession of the land for more than 30
years prior to the decree of registration issued in favor of petitioners predecessor-in-interest.
Such possession ripened into ownership of the land thru acquisitive prescription a mode of
acquiring ownership and other real rights over immovable property. A decree of registration
cut off or extinguished a right acquired by a person only when such right refers to a lien or
encumbrance on the land which was not annotated on the certicate of title issued thereon,
but not to the right of ownership thereof. Registration of land does not create a title nor vest
one. Accordingly, the 19.4 hectares of land being occupied by private respondent must be
reconveyed in his favor.

10. Presidential Ad hoc fact-Finding Committee on Behest Loans vs Aniano A.

Desierto (GR 130340 Oct. 25, 1999)
FACTS: Behest loans, which are part of the ill-gotten wealth which former President
Ferdinand E. Marcos and his cronies accumulated and which the Government thru the
Presidential Commission on Good Government (PCGG) seeks to recover, have a
prescriptive period to be counted from the discovery of the crimes charged, and not from the
date of their commission. If the commission of the crime is known, the prescriptive period
shall commence to run on the day it was committed.

ISSUE: Whether or not action may be barred by prescription

RULING: The prosecution of offenses arising from, relating or incident to, or involving illgotten wealth contemplated in Sec. 15, Art. XI of the Philippine Constitution of 1987 may be
barred by prescription. Said provision applies only in civil actions for recovery of ill-gotten
wealth, and not to criminal cases.

11. De Jesus et. al vs CA (GR 57092 Jan. 21, 1993)

FACTS: Reckoned from the time she executed the affidavit of adjudication in 1961, eleven
years after the New Civil Code had taken effect, private respondents possession of the
contested lot is far too short of the prescriptive period of 30 years, considering that her
possession is in bad faith. The ling of the petition for recovery of ownership and possession
and quieting of title by petitioners on Apr. 27, 1973 was well below the acquisitive
7

prescriptive period for private respondent, which is 30 years under Art.1141 of the present
Civil Code. In this case, the statutory period of prescription is deemed to have commenced
when petitioners were made aware of a claim adverse to them, when the affidavit of
adjudication was duly registered with the Registry of Deeds which, at the earliest may be
considered to be in 1974, when private respondent was able to secure a tax declaration in
her name.
ISSUE: Whether or not the court of appeals erred in the decision in declaring the private
respondents to be the absolute owner of the land
RULING: Prescription running even after the effectivity of the New Civil Code on August 30,
1950, continued to be governed by Sec. 41 of the Old Civil Code. Under the present Civil
Code, the prescriptive period required for the acquisition of immovable property is 10 years if
the possession is in good faith, and 30 years if in bad faith. Such open, continuous,
exclusive and notorious occupation of the disputed property for 30 years must be
conclusively established.

12. G.R. No. L-28616 January 22, 1980

TOMAS RODIL and the deceased spouse CATALINA CRUZ, substituted by her heirs,
namely: VIVENCIO RODIL married to ZUEKO MATSUO CONSOLACION RODIL married
to FRANCISCO HEMEDES DOMICIANO RODIL married to VIRGINIA MARALIT,
CLARITA RODIL married to JUAN ALGIER NATALIA RODIL married to SILVINIANO
ATIENZA, LYDIA RODIL married to CARLOS HORILLENO VEDASTO RODIL married to
TESSIE MANGUBAT and CELIA RODIL married to MACARIO TIU JR., petitioners,
vs.
HON. JUDGE MARIANO V. BENEDICTO as Judge of the COURT OF FIRST INSTANCE
OF NUEVA ECIJA, BRANCH V-GAPAN and the heirs of ALEJANDRO ABES, namely:
ALEJO ABES, BIENVENIDO ABES, ROSITA ABES, married to MATEO MALLARI,
FIDELA ABES, married to PONCIANO ATENIDO, DAVID ABES, MARCELO ABES,
NICANOR ABES, SEVERINO ABES, JOVITA ABES, married to GIL CABRETA
EUFROCINA ABES, married to ROMULO BOTE; LOURDES ABES, married to ALIPIO
TAGNIPIS LUZ ABES, TEODORA ABES, EMITERIO ABES, JR., GREGORIO ABES,
ERLINDA ABES, married to LUIS TAAL, RENATO ABES, ESTRELLITA TALPLACIDO
REYNALDO ABES, TERESITA ABES, CAROLINA ABES, and FERNANDO ABES; the
latter four who are minors are represented by their mother CRISPINA
DOMINGO, respondents.
FACTS:
Cadastre were claimed and applied for by the Spouse Tomas Rodil and Catalina Cruz. The
claim was not contested. Afterwards, the cadastral court adjudicated the lots in favor of the
applicant and the Original Certificate was issued also in favor of them. However, the heirs of
Alejandro Abes filed a petition with the court for the review of the registration decree upon
the ground that they are the true owner and in actual possession of the land and that the
spouse-claimant was secured such land thru fraud. The cadastral court denied the petition
for review that the heirs of Alejandro Abes failed to overcome the evidence of the above
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stated petitioner. The spouse filed a petition for the issuance of writ of possession asking
that they be placed in possession of the lots and the private respondents be evicted.
The heirs of Alejandro Abes also filed a Motion for Reconsideration contending that the
petition for the writ of possession was filed out of time and that there was no allegation in the
petition and neither was it proved that the respondent were defeated in the registration
proceeding. The respondent judge set aside the decision and ordered the dissolution of the
writ of possession. The petitioner filed a Motion for Reconsideration but was denied.

ISSUE:
Whether or not the filing of the petitioner for the petition of the issuance of writ of possession
was filed out of time.

RULING
No. the decision in the land registration case has become final; it may not be enforced after
the lapse of a period of 10 years, except by another proceeding to enforce the judgment or
decision. This is derived from the provision of the Ruled of Court and refers to civil actions
and is not applicable to special proceedings, such as a land registration case.
In special proceedings the purpose is to establish a status, condition or fact; in land
registration proceedings, the ownership by a person or a parcel of land is sought to be
established. After the ownership has been proved and confirmed by judicial declaration, no
further proceeding to enforce said ownership is necessary, except when the adverse or
losing party had been in possession of the land and the winning party desires to oust him
therefrom.

13. G.R. No. 97332 October 10, 1991

SPOUSES
JULIO
D.
VILLAMOR
AND
MARINA
VILLAMOR, petitioners,
vs.
THE HON. COURT OF APPEALS AND SPOUSES MACARIA LABINGISA REYES AND
ROBERTO REYES,respondents.
FACTS
Private respondent was the owner of a 600-square meter lot and she sold a portion of 300
square meter of the said lot to the Spouses Villamor which is the petitioners. Private
Respondent executed a Deed of Option in favor of the Villamor in which the remaining 300
square meter portion would be sold to the petitioners under the conditions stated in the
deed. In the deed, it stated that the private respondent and her husband agreed to sell and
convey the remaining one-half portion whenever the need for that sale arises either on the
part of the private respondents or the petitioners at the same price of 70.00 per square
9

meter. However, after the husband of private respondent retired, they offered to repurchase
the lot sold to the petitioners but they had refused and reminded about the deed of option.
On the other hand, the petitioners contention that they had express their desire to the
private respondent to purchase the remaining half portion of the lot but they are being
ignored by the latter.
The petitioners filed a complaint for specific performance against the private respondent
which was rendered by the trial court in favor of them and ordered the private respondent to
sell unto them the lot. Not satisfied by the decision, the private respondent appealed to the
Court of appeals which reversed the trial courts decision on finding that the Deed of Option
is void for lack of consideration.
ISSUE
Whether or not the Deed of Option is valid
RULING
No. A contract of sale is, under Article 1475 of the Civil Code, "perfected at the moment there
is a meeting of minds upon the thing which is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand perform of contracts." Since there
was, between the parties, a meeting of minds upon the object and the price, there was
already a perfected contract of sale. What was, however, left to be done was for either party
to demand from the other their respective undertakings under the contract. It may be
demanded at any time either by the private respondents, who may compel the petitioners to
pay for the property or the petitioners, who may compel the private respondents to deliver
the property.
However, the Deed of Option did not provide for the period within which the parties may
demand the performance of their respective undertakings in the instrument. The parties
could not have contemplated that the delivery of the property and the payment thereof could
be made indefinitely and render uncertain the status of the land. The failure of either parties
to demand performance of the obligation of the other for an unreasonable length of time
renders the contract ineffective.
14. G.R. No. 139776

August 1, 2002

PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY, petitioner,

vs.
JUDGE LORE R. VALENCIA-BAGALACSA, Regional Trial Court of Libmanan,
Camarines Sur, Branch 56, and EDUARDO Z. LUMANIOG, CELSO Z. LUMANIOG and
RUBEN Z. LUMANIOG, respondents
FACTS
Faustino Lumaniog was insured by the petitioner under Life Insurance Policy with the face
value of P50, 000.00 and he died of coronary thrombosis. His heirs, the private respondent
which is his legitimate children filed before the RTC a complaint for the recovery of sum of
money against the petitioner alleging that they continuously claimed for all the proceeds and
interest under the life insurance policy and despite the repeated demands for payment and/
10

for settlement of the claim due for the petitioner, they finally refused or disallowed said claim
after several years later. However, the petitioner counterclaim that the cause of action of
private respondent had prescribed and they are guilty of laches, which the ground of
concealment on the part of the deceased when he asserted in his application for insurance
coverage that he had not been treated for indication of chest pain and other illness, well in
fact he was known hypertensive. The RTC upholds the Order the claim of private
respondents counsel that the running of the 10-year period was stopped and when
petitioner finally decided to deny their claim that the 10-year period it was only begun to run.
Petitioner filed a petition for certiorari in Court of Appeals but it affirmed the decision of the
RTC, stating that the 10-year period should instead be counted from the date of rejection by
the insurer since this is the time when the cause of action accrues.
ISSUE
1. Whether or not the 10-year period will start after the cause of action accrues.
2. Whether or not the RTC committed grave abuse of discretion in its order that the 10year period had not yet lapsed.

RULING
1. Yes. The 10-year period will be counted from the date of rejection by the insurer. The
cause of action did not accrue until the claim was finally rejected by the insurance
company. This is because, before such final rejection, there was no real necessity for
bringing the suit. However, in this case, the denial of the claim had already been
made by the petitioner through a letter and the private respondent did not gave rise
the cause of action.
2. Yes. The RTC arbitrarily ruled in its Order that the 10-year period had not yet lapsed
because it is based on the finding on mere explanation of the private respondents
counsel and not the evidence presented by the parties as to the date when to reckon
the prescriptive period. The ruling of the RTC that the cause of action of private
respondent had not prescribed is arbitrarily and patently erroneous for not being
founded by evidence on record and therefore, the same is void.

15. G.R. No. L-45277 August 5, 1985

AUGUSTO
BASA, petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, represented by the Solicitor General, and Judge
GUILLERMO F. VILLASOR, Branch XV, Court of First Instance of Manila, respondent.
FACTS
The Commissioner of Internal Revenue assessed against the petitioners deficiency income
taxes. The deficiencies were based on the taxpayers failure to report in full his capital gains
on the sales of land. This result to justify the imposition of 50% surcharge, in which the
11

taxpayer did not contest the assessment in the Tax Court. On the assumption that the
assessment had final and incontestable, the Commissioner sued the taxpayer in Manila
Court of First Instance for the collection of the amount which rendered their decision against
the petitioner and ordered him to pay the surcharge. The petitioner then appealed to the
Court of Appeals and did not perfected his appeal within the reglementary period.
ISSUE
Whether or not petitioners cause of action has prescribed.
RULING
Yes. The issue of prescription raised by him is baseless. The assessments were predicated
on the fact that his income tax returns, if not fraudulent, were false because he under
declared his income. In such a case, the deficiency assessments may be made within ten
years after the discovery of the falsity or omission. The court action should be instituted
within five years after the assessment but this period is suspended during the time that the
Commission is prohibited from instituting a court action.

16. G.R. No. L-46893 November 12, 1985

REPUBLIC
OF
THE
vs.
FRANCISCO RICARTE, defendant-appellee.

PHILIPPINES, plaintiff-appellant,

FACTS
Francisco Ricarte filed his income tax return and the Office of the Collector of Internal
Revenue made corresponding assessment and fixed at P222.00 the defendants income tax
liability pursuant to the express provision of Section 51 (a) of the National Internal Revenue
Code, then in effect. The defendant paid his income tax in two equal installment of P111.00.
The R.A. 2343 took effect amending the old law which includes the Section 51(a). Under its
amendatory, the taxpayer assess himself, files his return and pays the tax as shown in his
return upon filing thereof. After investigation, it was found out that the defendant had a
deficiency of P1, 136.87 in his income tax and a notice was issued and together with
corresponding audit sheet and letter of demand, was emailed to the defendant. For the
failure of the defendant to pay his deficiency in income tax liability, the petitioner filed a
complaint for collection of taxes before the City Court of Cebu. After hearing and trial, the city
court dismissed the case on the ground of prescription of action. The case was filed only
more than the prescriptive period of five years. The issue was upheld to the Court of First
Instance of Cebu which rendered their decision dismissing the appellants complaint on the
ground that the basis for the assessment are made under the provisions of a new law, R.A.
2343 which was not yet in effect at the time of the filing of the defendants income tax return
and the action against the defendant had already prescribed.
12

ISSUE
Whether or not the cause of action had already been prescribed.
RULING
Yes. The lower court that the present action was filed after the prescriptive period of five (5)
years provided for in Section 332(c) of the National Internal Revenue Code which reads:
(c) Where the assessment of any internal revenue tax has been made within
the period of limitation above described such tax may be collected by distrait
or levy or by a proceeding in court, but only if begun (1) within five years after
the assessment of the tax,
Appellant asseverates that the present action was filed within the five-year prescriptive
period provided for under the above quoted provision of the tax code; that the subsequent
notice of assessment was made and appellee notified; that from January 19, 1961 up to the
date this case was filed in court on January 14, 1966, only four years, eleven months and
twenty-five days had elapsed.
Thus, the prescriptive period provided for in Section 332(c) of the tax code should be
counted from April 6, 1959, the date when the Bureau of Internal Revenue assessed the
income tax return of the appellant. From said date until the filing of this case on January 14,
1966, six years and nine months had elapsed. Verily, the action had already prescribed.
17. G.R. No. L-57493 January 7, 1987
BALIWAG
TRANSIT,
INC., petitioner,
vs.
THE HON. COURT OF APPEALS AND ROMAN MARTINEZ, respondents.
FACTS
Two passenger bus lines with similar buses and similar routes were being operated by firm
names Baliwag Transit and Baliwag Transit, Inc (BTI) in which the petitioner of this case.
The former was owned by Pascual Tuazon who continued to operate it until his death while
the latter was owned by Mrs. Victoria Vda. de Tengco, the niece of Mr. Tuazon which exist
until the present time. Both bus lines operate under different grants of franchise by the Public
Service Commission but were issued only one ID Number by the SSS. Private respondent
claiming to be an employee of both bus lines with one ID Number filed a petition by the
Social Security Commission to compel BTI to remit to SS private respondents SSS Premium
contributions. He alleged that he was employed by petitioner as conductor and later as
inspector with corresponding salary increases and the petitioner deducted from his salaries,
premium contributions but was remitted to the SSS a lesser amount. On the contention of
the petitioner, they denied having employed private respondent Ramon Martinez, the truth
being the he employed by Pascual Tuazon who owned and operated buses which were
separate and distinct from the buses of the petitioner. The employment of private respondent
lasted until when his employer Pascual Tuazon became bankrupt. It was the moment when
the deduction from the private respondent contributions for the years in question. Moreover,
there were witnesses present which stated that the two buses has granted separate
13

franchises to operate public utility buses, both operating between Manila and Baliuag routes.
It was also being question that the private respondent brought the action which was already
prescribed.
ISSUE
Whether or not the cause of action had already prescribed.
RULING
Yes. Private respondent having allowed seventeen (17) years to elapse before filing the
petition with the SSS has undoubtedly slept on his rights and his cause of action has already
prescribed under Article 1144 (2) of the Civil Code which states that The following action
must be brought within ten-year period from the time the right of action accrues:
(2.) Upon and obligation created by law.

18. G.R. No. L-41427 June 10, 1988

CONSTANCIA
C.
vs.
COURT OF APPEALS and CONSUELO DAVID, respondents

TOLENTINO, petitioner,

FACTS
The petitioner is the present legal wife of Arturo Tolentino, while Respondent Consuelo David
was legally married to Arturo Tolentino on February 8, 1931. Their marriage likewise
produced children. The marriage was dissolved and terminated pursuant to the law during
the Japanese occupation by a decree of absolute divorce granted by the Court of First
Instance of Manila on the ground of desertion and abandonment by the wife. The trial court
granted the divorce on its finding that Arturo Tolentino was abandoned by Consuelo David
for at least three (3) continuous years.
Thereafter, Arturo Tolentino married a certain Pilar Adorable, who however, died soon after
their marriage. Tolentino subsequently married Constancia. Consuelo David, on the other
hand, continued using the surname Tolentino after the divorce and up to the time of the filing
of this complaint. There was the issue raised that the petitioners cause of action had been
prescribed because she then filed a complaint not upon knowing of the fact that private
respondent are using the surname of Tolentino.
ISSUE
14

Whether or not the petitioner's cause of action has already prescribed

RULING
Yes. The respondent Court of Appeals, on the other hand, is of the opinion that the period of
prescription should be four (4) years, since it appears to be an action based on quasi-delict.
hatever the period, it cannot be denied that the action has long prescribed whether the
cause accrued on April 21, 1945 when the petitioner and Arturo Tolentino got married, or on
August 30, 1950, when the present Civil Code took effect, or in 1951 when Constancia
Tolentino came to know of the fact that Consuelo David was still using the surname
Tolentino. It is the legal possibility of bringing the action which determines the starting point
for the computation of the period of prescription.
The petitioner should have brought legal action immediately against the private respondent
after she gained knowledge of the use by the private respondent of the surname of her
former husband. As it is, action was brought only on November 23, 1971 with only verbal
demands in between and an action to reconstitute the divorce case. The petitioner should
have filed her complaint at once when it became evident that the private respondent would
not accede to her demands instead of waiting for twenty (20) years.

19. G.R. No. 72645 June 30, 1987

LUZON
SURETY
COMPANY,
INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT, and EUGENIA G. PUYAT, GIL G. PUYAT, JR.,
ANTONIO G. PUYAT, VICENTE G. PUYAT, VICTOR G. PUYAT, JESUS-PUYATCONCEPCION, ALFONSO G. PUYAT, and EUGENIA PUYAT-JOSON, respondents.
FACTS
There was this case with the petitioner against the Material Distributor, Inc. and judgment
was rendered against the defendants, including Gil Puyat, for the principal sum of
P20,000.00 with interest at the rate of 12% computed and compounded quarterly from June
25, 1958, and the further sum of P3,608.00 representing premiums and stamps. The
judgment became final on April 13, 1967, but was not enforced. However, Gil Puyat died and
there was a claim against his estate that was filed but his administrators oppose the claim for
the reason that it is unenforceable and barred by laches for no steps were taken by the
claimant to secure a writ of execution against defendant Gil Puyat during his lifetime to
enforce the judgment. The RTC dismissed the case which was affirmed by the Intermediate
15

Appellate Court. The prescription of cause of action which was raised as an issue for the
case at bar for the execution of the final judgment.
ISSUE
Whether or not the petitioners cause of action had been prescribed.
RULING
Yes. This is whether the ten-year prescriptive period to file an action to enforce a judgment
pursuant to Article 1144(3) of the New Civil Code commences to run from the finality of the
original judgment or from the revived judgment. The 10-year prescriptive period must
commence from the finality of the original judgment. However, the failure of the private
respondents to raise prescription in their "Comment to Claim" does not imply the waiver of
such defense. In the instant case, there is no new issue of fact that arises in connection with
the question of prescription. All the pertinent dates showing that the petitioner's enforcement
of the judgment has already prescribed can be found in the petitioner's allegations in the
"claim" as well as its evidence. This removes the case from the general rule that prescription
if not impleaded in the answer is deemed waived.
20. G.R. No. L-61352 February 27, 1987
DOLE
PHILIPPINES,
INC., plaintiff-appellant,
vs.
MARITIME COMPANY OF THE PHILIPPINES, defendant-appellee
FACTS
The cargo subject of the instant case was discharged in Dadiangas unto the custody of the
consignee. The corresponding claim for damages sustained by the cargo was filed by the
petitioner with the respondent vessel. The petitioner brought an action with three (3) causes
of action involving three separate and different shipments. The third cause is the main issue
of the case. The RTC dismissed the complaint since there was already settlement and
compromise happened but the third issue is not part of the compromise or settlement. The
petitioner instituted the present complaint and the RTC granted moved for preliminary
hearing but the respondent filed a motion to dismiss on the ground of prescription. The RTC
dismissed the complaint and denied the motion for reconsideration filed by petitioner.
ISSUE
Whether or not the petitioner cause of action had already prescribed.
RULING
YES. No different result would obtain even if the Court were to accept the proposition that a
written extrajudicial demand does toll prescription under the Carriage of Goods by Sea Act.
The demand in this instance would be the claim for damage-filed by Dole with Maritime. The
effect of that demand would have been to renew the one- year prescriptive period from the
date of its making. Unfortunately, Dole let the new period lapse without filing action. It
instituted an action for the new civil case more than one month after that period has expired
and its right of action had prescribed. Well within the one-year prescriptive period in Sec.
16

3(6) of the Carriage of Goods by Sea Act." equates tolling with indefinite suspension. It is
clearly fallacious and merits no consideration.
21. G.R. No. L-44338 April 15, 1988
ROSARIO
C.
BUCCAT, plaintiff-appellee,
vs.
LIBRADA ROSALES DISPO, Assisted by Her Husband PROCESO DISPO, defendantsappellants.
FACTS
The petitioner Rosario Buccat and respondent Librada Dispo entered into a contract of
lease, the expiration date of which was August 31, 1967, over the former's 542-square meter
lot situated at Bo. Catbangen, San Fernando, La Union. By virtue of the said contract, the
respondent constructed the National Business Institute, a small vocational school on the
parcel of land subject of the lease agreement. Afterwards, nine years before the expiration of
the contract, the parties entered into another lease agreement over the same parcel of land
substantially modifying the duration of the lease that the lease contract shall remain in full
force and effect as long as the land will serve the purpose for which it is intended as a school
site of the National Business Institute but the rentals now stipulated shall be subject to
review every after ten (10) years by mutual agreement of the parties.
However, eight months after the supposed expiration date of the first contract, the petitioner
filed a complaint for Unlawful Detainer against respondent, the basis of which was the
expiration of the first lease contract, as the second agreement, according to petitioner, was
null and void for being simulated and for want of consideration. The second contract was
allegedly executed only after "respondent approached the petitioner and revealed to the
latter their problems and difficulty in securing the official recognition by the government of
the National Business Institute". The trial court dismissed the complaint on the ground of
prescription.
ISSUE
Whether or not the petitioner has the right of action in fixing the period of lease.

RULING
Yes. The cause of action for the fixing of the period of lease accrued. This is as it should be
because prior to that, the validity of the second contract of lease was being challenged. The
case for unlawful detainer filed by the petitioner became in fact a case questioning the
validity of the second contract on the grounds that the said contract was simulated and that
there was no consideration. The petitioner could not have been expected to file an action for
the fixing of the period of the lease before the Court of Appeals promulgated its decision
17

because she was not yet aware that the said paragraph of the second contract was a
provision that called for an indefinite period. For the reason that the very existence, and
subsequently, the interpretation of the second contract of lease, particularly par. 3 thereof,
were put in issue in the unlawful detainer case, the court trying the case was required to
interpret the provisions of, and consequently, rule on the validity of the said contract. The
remedy or the cause of action for the filing of a case for the fixing of a period in the contract,
therefore, only accrued when the court finally declared the second contract valid but that the
provision as to the period was indefinite and hence, an action for the fixing of the period of
the contract had to be filed.

22.

[G.R.

No.

73198.

September

2,

1992.]

PRIVATE DEVELOPMENT CORPORATION OF THE PHILIPPINES, Petitioner, v. THE

INTERMEDIATE APPELLATE COURT AND ERNESTO C. DEL ROSARIO, Respondents.
FACTS
Davao Timber Corporation, DATICOR for brevity, and the Private Development Corporation
(PDCP) entered into a loan agreement 3 whereby PDCP extended to DATICOR a loan in
foreign currency for the purpose of establishing a kiln drying and woodworking plant in Mati,
Davao Oriental. It was stipulated in the loan agreement that the foreign currency loan was to
be paid with an interest rate commencing on the several dates on which disbursements of
the
proceeds
of
the
loans
were
made.
DATICOR likewise executed a Deed of Chattel Mortgage 8 on the machineries and
equipments attached to the land in Davao Oriental as added security for said loans. PDCP
asked DATICOR to pay a service fee of one (1%) per cent per annum on the outstanding
balance of the peso loan to cover the cost of administering DATICORs account and
supervision of the project. PDCP initiated extra-judicial foreclosure proceedings 12 against
the parcel of land owned by Del Rosario in Manila and the five (5) parcels of land owned by
DATICOR in Davao Oriental. DATICOR filed case in the Court of First Instance of Davao
Oriental seeking a writ of injunction to prevent PDCP from foreclosing its properties in
Davao, and likewise praying for the annulment of the loan contract as it is in violation of the
Usury Law and damages. They rendered decision dismissing the complaint. However, the
Intermediate Appellate Court reversed the decision and rendered that the loan agreement is
declaring void and no effect of stipulations of interest.
ISSUE
Whether or not the cause of action had prescribed
RULING
NO.

With

regard

to

the

first

contention,

Article

1957

of

the

Civil

Code

". . . contracts and stipulations, under any cloak or device whatever, intended to circumvent
the
law
against
usury
shall
be
void."
18

Furthermore,

Article

1410

provides:

"The action or defense for the declaration of the inexistence of a contract does not
prescribe."
The aforesaid articles therefore state that all usurious stipulations are void and as such, an
action to annul such usurious stipulations does not prescribe. The aforesaid articles
therefore state that all usurious stipulations are void and as such, an action to annul such
usurious stipulations does not prescribe.

23.

Mataas na Lupa Tenants Association vs Carlos Dimayuga and Juliana Diego

Vda. De Gabriel (L-32049, June 25, 1984)

FACTS:
Petitioners filed a complaint for the exercise of preferential rights with the then Court
of First Instance of Manila, Branch IV alleging that the Contract of Sale executed by Juliana
Diez Vda. De Gabriel with Carlos Dimayuga is expressly prohibited by law as it is mandated
for the respondent to execute such sale to petitioners. Therefore said contract should be
declared null and void. The lower court ruled in favour of the respondents, ordering the
dismissal of the case on the ground that petitioners failed to state a cause of action. Thus
petitioners resorted to the petition of certiorari for the review of the said order before the SC.
ISSUES:
1. Whether or not the contract of sale is null and void
2. Whether or not the petitioners may invoke their preferential rights as tenants
HELD/RULING:
1. Yes. The R.A. 1162 as amended by R.A. 2342 and 3516 set forth the following
conditions that of offering first the sale of the land to petitioners and the latter's
renunciation in a public instrument-were not met when the land was sold to
respondent Dimayuga. Evidently, said sale is illegal and therefore void.
The 1973 Constitution section 6, article II emphasizes the stewardship concept that
such private property is supposed to be held by the individual only as trustee for the people
in general, who are its real owners. As a mere steward, the individual must exercise his right
to the property not for his own exclusive and selfish benefit but for the good of the entire
community. P.D. 1157 Proclaiming Urban Land Reform in the Philippines and providing for
the Implementing Machinery thereof. superseded R.A. 1152, 2342, 3516.
2. Yes. This decree is firmly based on sec. 6 of art. II of the 1973 constitution
undoubtedly adopts and crystallizes the greater number of people criterion when it speaks
of tenants and residents in declared urban land reform zones or areas without mention of the
land area covered by such zones. The focus therefore, is on people who would
benefit and not on the size of the land involved. Under section 6 of which also states
that tenant-families have been vested the right of first refusal to purchase of the land
within a reasonable time and reasonable price subject to the rules and
regulations of the Ministry of Human Settlements. It is further supported by PD 1967
which evidently include Mataas na Lupa, the land in controversy within the Urban Land Reform
Zone.
19

24.

Leonides Pengson vs CA (GR L-65622 June 29, 1984)

FACTS:
The defendant Pacific Merchandising Corporation is the owner of shares in the
Aluminum Products (Alpro) to the extent of 96% of its capital (share) holdings. PMC was
indebted to defendant Reynolds Philippines Corporation, in the sum of more than
P800,000.00, because of which indebtedness its shares in the Alpro were pledged with
Reynolds as a collateral of its loan. Because PMC needed some money, it decided to sell its
shares with the Alpro to the herein plaintiff Leonides C. Pengson', the deed of sale being
evidenced by Exhibit A. Among other things, the plaintiff assumed the obligation of PMC to
Reynolds, which amount however was reduced from more than P800,000.00 to only
P500,000.00. Since the certificates covering the shares were then held by Reynolds in
pledge as security for PMC obligation, the former's consent to the sale with assumption had
to be obtained. As a security for the payment to Reynolds of the aforesaid P500,000.00 in
five (5) annual installments, the first installment being P125,000.00. Pengson mortgaged to
Reynolds a parcel of land. While Pengson paid the first installment in the sum of
P125,000.00 in three (3) installments and a bit late, the next in installments which fell due
were not paid for in spite of demands. Consequently, Reynolds foreclosed by considering an
unpaid installments due and demandable.
ISSUE:
Whether or not Reynolds Phil. Corporation is entitled to surrender the said
certificates of stocks to Leonidas Pengson.
HELD/RULING:
No. Reynolds was not a party to the contract of sale between PMC and the herein
plaintiff. This being so, it had no obligation whatsoever on the strength of the contract ii favor
of the plain. Plaintiff, by the terms of the contract, however, since plaintiff undertook to pay
PMC obligation to Reynolds, plaintiff was under obligation with the PMC on account of the
said undertaking. Otherwise, there is absolutely no reciprocal obligation between the herein
plaintiff and the appellant Reynolds. Otherwise said, the new debtor of Reynolds was the
plaintiff and no longer PMC To argue now, as the plaintiff contends, that Reynolds was under
an obligation to return the certificates of stocks pledged to it by PMC is to put the plaintiff in a
better footing than PMC was with Reynolds. There is absolutely no agreement by Reynolds
to that effect in the consent it gave to the sale by PMC of the said shares in favor of the
plaintiff.
25.

Phil. National Bank vs CA (SCAD, 1996)

FACTS:
Respondent Carmelo H. Flores purchased from petitioner at its Manila Pavilion
Hotel unit, two (2) managers checks worth P500,000.00 each, paying a total of
P1,000,040.00, including the service charge. A receipt for said amount was issued by the
petitioner.
Flores presented these checks at the Baguio Hyatt Casino unit of petitioner. Petitioner
refused to encash the checks but after a lengthy discussion, it agreed to encash one (1) of
20

the checks. However, it deferred the payment of the other check until after Flores agreed
that it be broken down to five (5) managers checks of P 100,000.00 each. Petitioner refused
to encash one of the five checks until after it is cleared by the Manila Pavilion Hotel unit.
Having no other option, Flores agreed to such an arrangement. However, upon his return
to Manila, he made representations to petitioner through its Malate Branch so that the check
may be encashed but to no avail. Flores, thereafter, wrote a letter to his counsel informing
the latter of the aforementioned events. A Formal Demand was made by private
respondents counsel but petitioner persisted in its refusal to honor the check. Flores filed a
case with the Regional Trial Court of Quezon City, Branch 100.
ISSUE:
Whether or not the CA erred in law holding that the best evidence to show whether
Mr. Flores paid the unit is the issuance of receipt worth P1, 000, 040
HELD/RULING:
No. A receipt is defined as A written and signed acknowledgment that money has
been paid or goods have been delivered. A receipt is merely presumptive evidence and is
not conclusive. A written acknowledgment that money or a thing of value has been
received. Since a receipt is a mere acknowledgment of payment, it may be subject to
explanation or contradiction. A receipt may be used as evidence against one just as any
other declaration or admission. A simple receipt not under seal is presumptive evidence only
and may be rebutted or explained by other evidence of mistake in giving it, or of nonpayment
or
of
the
circumstances
under
which
it
was
given.
A local bank, while acting as local correspondent bank, does not have the right to intercept
funds being coursed thru it by its foreign counterpart for transmittal and deposit to the
account of an individual with another local bank, and thereafter apply the said funds to
certain obligations owed to it by the said individual.

26.Heirs of Luis Bacus et. al vs CA and Spouses Faustino and Victoriana Duray (GR
127695 Dec. 3, 2001)
FACTS:
On 1984 Luis Bacus leased to Faustino Duray a parcel of agricultural land with total
land area of 3,002 of square meters, in Cebu. The lease was for six years ending in 1990,
the contract contained an option to buy clause. Under the said option, the lessee had the
exclusive and irrevocable right to buy 2,000 square meters 5 years from a year after the
effectivity of the contract, at P200 per square meter. That rate shall be proportionately
adjusted depending on the peso rate against the US dollar, which at the time of the
execution of the contract was 14 pesos. Close to the expiration of the contract Luis Bacus
died on 1989, after Duray informed the heirs of Bacus that they are willing and ready to
purchase the property under the option to buy clause. The heirs refused to sell, thus Duray
filed a complaint for specific performance against the heirs of Bacus. He showed that he is
ready and able to meet his obligations under the contract with Bacus. The RTC ruled in favor
of the Durays and the CA later affirmed the decision.

21

ISSUE:
Whether or not the heirs of Luis Bacus be compelled to sell the portion of the lot
under the option to buy clause.

HELD/RULING:
Yes, Obligations under an option to buy are reciprocal obligations. The performance
of one obligation is conditioned on the simultaneous fulfilment of the other obligation. In
other words, in an option to buy, the payment of the purchase price by the creditor is
contingent upon the execution and delivery of the deed of sale by the debtor.
When the Durays exercised their option to buy the property their obligation was to advise
the Bacus of their decision and readiness to pay the price, they were not yet obliged to
make the payment. Only upon the Bacus actual execution and delivery of the deed of sale
were they required to pay. The Durays did not incur in delay when they did not yet deliver the
payment nor make a consignation before the expiration of the contract. In reciprocal
obligations, neither party incurs in delay if the other party does not comply or is not ready to
comply in a proper manner with what is incumbent upon him. Only from the moment one of
the parties fulfills his obligation, does delay by the other begin.

27.

Canonizado vs Benitez (L-49315, L-60966 Feb. 20, 1984)

FACTS:
The petitioner filed an action for support against her estranged husband, the private
respondent in the Juvenile and Domestic Relations Court of Manila. The trial court granted
the claim but denied similar support for the petitioner on the ground that she was gainfully
employed. The petitioner questioned this decision in a petition for certiorari with this Court.
When the corresponding writ of execution was issued, the respondent filed an action in the
Court of First Instance to restrain the sale by public auction of certain properties over which
he claimed to have lost ownership. An alias writ of execution was issued but was not
satisfied because of an order of the court. A decision on the merits was promulgated by the
Juvenile and Domestic Relations Court awarding arrearages in support pendente lite to both
the petitioner and her daughter, this decision was affirmed on appeal, with modification. This
became final and executor.

ISSUE:
Whether or not the implementation of Writ of Execution is valid.
HELD/RULING:
Yes, the implementation is valid. The writ of execution ordered is not affected by that
motion. Such support has already become due and has acquired the character of vested
rights accruing to the petitioner and the daughter Christina.

22

The other possible reason for the respondent judge's delay in implementing the writ of
execution is a second pending motion this time to restrain levy on the ground that the
properties sought to be taken are the same properties declared exempt in the order of May
20, 1963. The court noted, though, that as worded the alias writ of execution issued by the
respondent judge covers other properties of the private respondent that can answer for the
payment of the support in arrears. While mandamus is not available to control discretion, it
may nevertheless issue to compel the performance of a ministerial act, as in this case. The
writ of execution having been authorized and directed by this Court, the only task of the
respondent judge is to issue and enforce it. As the properties exempt from execution have
already been determined, the respondent judge should now order the enforcement of the
writ against the other properties of the private respondent not exempt from execution. That is
a ministerial act that can be, as it is hereby, compelled.

28.

Serrano vs Central Bank (L-30511 Feb. 14, 1980)

FACTS:
Manuel Serrano made a time deposit, for one year with 6%interest of One Hundred
Fifty Thousand pesos with the respondent Overseas Bank of Manila.
Concepcion Maneja also made a time deposit, for one year with 6-1/2% interest, of Two
Hundred Thousand Pesos on the same respondent Overseas Bank of Manila. Concepcion
Maneja, the married, assigned and conveyed to petitioner Manuel Serrano, her time deposit
of
Php
200,
000.
Notwithstanding series of demands for encashment of theaforementioned time
deposit
from the respondent Overseas Bank of Manila, not a single one of the time deposit
certificates was honored by respondent Overseas Bank of Manila. Respondent Central Bank
dissolved and liquidated the Overseas Bank of Manila. The former denied that it is
a guarantor of thepermanent solvency of any banking institution as claimed by thepetitioner.
Respondent Central Bank avers no knowledge of petitioners claim that the properties given
by the respondent Overseas Bank of Manila as additional collaterals to the respondent
Central Bank of The Philippines for the formers overdrafts and emergency loans were
acquired from the depositors money including the time deposits of the petitioner. The
Philippines for the formers overdrafts and emergency loan were acquired from the
depositors money including the time deposits of t h e p e t i t i o n e r .
ISSUE:
Whether or not the respondents are jointly and solidary liable for damages due
to breach of trust.
HELD/RULING:
No. Both parties overlooked the fundamental principle in the nature o f b a n k
d e p o s i t s w h e n t h e p e t i t i o n e r c l a i m e d t h a t t h e r e s h o u l d b e created a
constructive trust in his favor when the respondent Overseas Bank of Manila increased
the
collaterals
in
favour
of
the
respondent
Central Bank of the Philippines for the formers overdrafts ande
mergency loans, since these collaterals were acquired by the use of depositors money.
Bank deposits are in nature of irregular deposits. They are really loans because they earn
interest. All kinds of bank deposits, whether f i x e d , s a v i n g s o r c u r r e n t a r e t o b e
t r e a t e d a s l o a n s a n d a r e t o b e covered by the loans. Current and savings deposits
23

are loans to a bank because it can use the same. The petitioner here in the making
time deposits that earn interests with respondent Overseas Bank of Manila was in reality
a creditor of the respondent bank and not a depositor. The respondent
bank was in turn a debtor of petitioner. Failure of the respondent bank to honor the time
deposit is failure to pay obligation as a debtor and not a breach of trust arising from
depositorys failure to return the subject matter of the deposit.

29.

Santos vs CA (L-60210 March 27, 1984)

FACTS:
This is an Appeal by certiorari from the decision of the then Court of Appeals in CAG.R. No. SP-13056, affirming the one rendered by the then Court of First Instance of Manila,
Branch XVI. Herein private respondent Aurora Gutierrez instituted an unlawful detainer case
in the then City Court of Manila against herein petitioners Arturo P. Santos and Adelina Y.
Santos on grounds that she needs the premises for her personal use and the necessity of
repairs thereon, and that the petitioners were delinquent in the payment of rentals.
In their Answer with Counterclaim, Petitioners, among others, admitted that they are "the
legitimate tenants and/or lessees of the subject apartment with the present rental rate of
P250.00 a month on a month-to-month contract of lease."
ISSUE:
Whether or not the CA erred in affirming the decision of the lower court.
HELD/RULING:
No. Paragraph 1 of Article 1673 of the Civil Code is an exception to Section 4 of Presidential
Decree
No.
20.
Said
Section
1
of
Article
1673
provides
that
" The lessor may judicially eject the lessee for any of the following causes :(1) When the
period agreed upon, or that which is fixed for the duration of lease under article 1682 and
1687,
has
expired;"

Thus, judicial ejectment lies when the lease is for a definite period or when the fixed
or definite period agreed upon has expired. The lease in the case at bar having a definite
period, it follows that private respondents right to judicially eject petitioners from the
premises may be enforced. As aptly stated by respondent Court of Appeals, If both land and
the building belong to the lessor, the right referred to hereinabove does not apply."

30.

Gonzales vs PNB (GR 33320 May 30, 1983)

FACTS:
Petitioner Ramon A. Gonzales instituted in the erstwhile Court of First Instance of
Manila a special civil action for mandamus against the herein respondent praying that the
latter be ordered to allow him to look into the books and records of the respondent bank in
order to satisfy himself as to the truth of the published reports that the respondent has
guaranteed the obligation of Southern Negros Development Corporation in the purchase of a
US$ 23 million sugar-mill to be financed by Japanese suppliers and financiers; that the
respondent is financing the construction of the P 21 million Cebu-Mactan Bridge to be
constructed by V.C. Ponce, Inc., and the construction of Passi Sugar Mill at Iloilo by the
24

Honiron Philippines, Inc., as well as to inquire into the validity of Id transactions. The
petitioner has alleged hat his written request for such examination was denied by the
respondent. The trial court having dismissed the petition for mandamus, the instant appeal to
review the said dismissal was filed.
ISSUE:
Whether or not a stockholder of PNB can insist on the inspection of its books.
HELD/RULING:
No. The court a quo denied the prayer of the petitioner that he be allowed to examine
and inspect the books and records of the respondent bank regarding the transactions
mentioned on the grounds that the right of a stockholder to inspect the record of the
business transactions of a corporation granted under Section 51 of the former Corporation
Law is not absolute, but is limited to purposes reasonably related to the interest of the
stockholder, must be asked for in good faith for a specific and honest purpose and not gratify
curiosity or for speculative or vicious purposes; that such examination would violate the
confidentiality of the records of the respondent bank as provided in Section 16 of its charter,
Republic Act No. 1300, as amended; and that the petitioner has not exhausted his
administrative remedies.

31.

Hilario Javarata vs Sandiganbayan (L-56170 Jan. 31, 1984)

FACTS:
That on or about the period from April 30, 1979 to May 25, 1979, in the Municipality
of Tubao, Province of La Union, Philippines, and within the jurisdiction of this Honorable
Court, the abovenamed accused, being then the Assistant Principal of the Leones Tubao, La
Union Barangay High School and with the use of his influence as such public official and
taking advantage of his moral and official ascendancy over his classroom teachers, with
deliberate intent did then and there wilfully, unlawfully and feloniously made demand and
actually received payments from other classroom teachers, ROMEO DACAYANAN,
DOMINGO LOPEZ, MARCELA BAUTISTA, and FRANCISCO DULAY various sums of
money, namely: P118.00, P100.00, P50.00 and P70.00 out of their salary differentials, in
consideration of accused having officially intervened in the release of the salary differentials
of the six classroom teachers, to the prejudice and damage of the said classroom teachers,
in the total amount of THREE HUNDRED THIRTY EIGHT (P338.00) PESOS, Philippine
Currency.
ISSUE:
Whether or not Jaravata violated the Anti Graft and Corrupt practices Act.
HELD/RULING:
No. There is no law which invests the petitioner with the power to intervene in the
payment of the salary differentials of the complainants or anyone for that matter. Far from
exercising any power, the petitioner played the humble role of a supplicant whose mission
was to expedite payment of the salary differentials. In his official capacity as assistant
principal he is not required by law to intervene in the payment of the salary differentials.
Accordingly, he cannot be said to have violated the law afore-cited although he exerted
efforts to facilitate the payment of the salary differentials.

25

32.

Ganzon vs Judge Sancho (GR 56450 July 23, 1983)

FACTS:
On August 28, 1979, petitioner Rodolfo Ganzon initiated proceedings to extrajudicially foreclose a real estate mortgage executed by the private respondents in his favor.
The mortgage covered a parcel of residential land of the subdivision plan located in the
District of Molo, Iloilo City Thereafter, petitioner Gregorio Lira served personal notice of the
foreclosure proceedings on the private respondents. A day before the scheduled public
auction, the private respondents filed a civil action for specific performance, damages, and
prohibition with preliminary injunction against the petitioners with the respondent court. The
private respondents asked for the issuance of a writ of preliminary injunction to enjoin the
petitioners from proceeding with the foreclosure and public auction sale. Acting on the urgent
ex-parte motion of private respondents, the trial court issued an order enjoining the
provincial sheriff from proceeding with the scheduled auction sale on September 28, 1979.
Private respondents filed an amended complaint. On March 28, 1980 the petitioners
filed their answer to the amended complaint; they further maintained that the extra-judicial
foreclosure proceedings would be in accordance with the terms and conditions of the said
mortgage. After the issues had been joined but before actual trial, the private respondents
filed a "Motion For Release Of Real Estate And For The Clerk Of Court To Accept Bond Or
Cash In Lieu Thereof," to which the petitioners interposed an Opposition. The respondent
court granted the respondents' motion. The petitioners filed an Urgent Motion for
Reconsideration Of the Order and Opposition To The Approval of Surety Bond. The
respondent court in its order denied the aforesaid motion

ISSUE:
Whether or not the trial court may order the cancellation of a mortgage lien annotated
in a Torrens Certificate of Title to secure the payment of a promissory note and substitute
such mortgage lien with a surety bond approved by the same court to secure the payment of
the promissory note.
HELD/RULING:
Yes, the court may order the cancellation of a mortgage lien. At the pre-trial, what the
parties admitted were the existence and due execution of the documents, including the
absolute deed of sale of realty and the subject real estate mortgage. In connection with the
documents, the issues per the pre-trial order were "... whether or not the documents express
the true intention of the parties, and whether or not they complied with the provisions of the
document. Hence, at that stage of the case, the trial court's order dated November 20, 1980
had no factual basis. Even on the assumption that the factual bases of the trial court's
questioned orders were justified by evidence in the records the same would still not be
proper. A mortgage is but an accessory contract. "The consideration of the mortgage is the

26

same consideration of the principal contract without which it cannot exist as an independent
contract."

33.

Molave Motor Sales, Inc. vs Laron and Geminiano (L-65377 May 28, 1984)

FACTS:
Petitioner is a corporation engaged in the sale and repair of motor vehicles in
Dagupan City. Private respondent in the case below, was, or is, the sales manager of
Petitioner. Alleging that the respondent was a former employee, Petitioner had sued him for
payment of accounts pleaded as that during his incumbency as such the defendant caused
and without authority from the plaintiff incurred accounts with the remaining balances in the
total sum of P33,890.38 excluding interests, arising from the purchases of vehicles and
parts, repair jobs of his personal cars and cash advances, faithful reproductions of the
Vehicle Invoice, Debit Memos, Deed of Absolute Sale, Repair Orders, Charge Invoices,
Vouchers, Promissory Notes, Acknowledgement Letter and Statement of Account. In his
Answer, The Respondent denied. He further alleged in a counterclaim that he should still be
considered an employee of Petitioner inasmuch as there has been no application for
clearance in regards to his separation. At the pre-trial conference, the Respondent raised the
question of jurisdiction of the Court stating that Petitioners complaint arose out of employeremployee relationship, and he subsequently moved for dismissal. It was then when
respondent Judge dismissed the case finding that the sum of money and damages sued
upon arose from employer-employee relationship and that jurisdiction belonged to the Labor
Arbiter and the NLRC.
ISSUE:
Whether or not the Civil Code is the governing statute in the instant case.
HELD/RULING:
Yes, the Civil Code is the governing statute. It is obvious from the complaint that the
plaintiffs have not alleged any unfair labor practice. Theirs is a simple action for damages for
tortious acts allegedly committed by the defendants. Such being the case, the governing
statute is the Civil Code and not the Labor Code. It results that the orders under review are
based on a wrong premise. In the case below, Petitioner had sued for monies loaned to
Respondent, the cost of repair jobs made on his personal cars, and for the purchase price of
vehicles and parts sold to him. Those accounts have no relevance to the Labor Code. The
cause of action was one under the civil laws, and it does not breach any provision of the
Labor Code or the contract of employment of Respondent. Hence, the civil courts, not the
Labor Arbiters and the NLRC, should have jurisdiction.

34.

Borcena et. al vs IAC (GR 70099 Jan. 7, 1987)

FACTS:

27

On July 6, 1981, the petitioners engaged the legal services of respondent Gil P. de
Guzman, hereby retaining and employing the services of e Guzmans Legal office towards
its prosecution. On this same date, respondent de Guzman filed a complaint for damages
against the Metropolitan Waterworks and Sewerage System, Nam Kwang, Socea Bonna
and Chun Bae Kim. Atty. de Guzman filed a motion for preliminary attachment praying that
an order be issued attaching properties of the defendants thereof representing attorney's
fees, or a total of P852, 000.00. The motion was granted upon plaintiffs' posting a bond of
P852, 000.00 issued by a bonding company acceptable to the court. The motion was denied.
The court directed the MWSS to turn over the P852,000.00 to the deputy sheriff and for the
latter to deposit the same with the Sta. Maria Municipal Treasurer. De Guzman filed a
manifestation questioning the restriction on the checks that the same be deposited only with
the Municipal Treasurer of Sta. Maria, Bulacan as uncalled for and contrary to the court's
order. Atty. Perpetuo L. B. Alonzo entered his appearance as new counsel for the petitioners.
Atty. de Guzman filed an opposition to Gimeno's ex-parte motion to transfer deposit of
garnished amount. Atty. de Guzman filed an attorney's lien on the garnished amount of
P852,000.00 pursuant to Section 26 of Rule 138. The petitioners filed a manifestation. The
lower court denied the petitioners' motion for reconsideration and opposition to the motion
for execution pending appeal, and granted the motion for execution pending appeal. The
Intermediate Appellate Court denied due course to the petition questioning the execution
pending appeal.
ISSUE:
Whether or not Atty. Gil de Guzman is entitled for his legal services to the petitioners
HELD/RULING:
Yes. Contracts for attorney's services in this jurisdiction stand upon an entirely
different footing from contracts for the payment of compensation for any other services. By
express provision of section 29 of the Code of Civil Procedure, an attorney is not entitled in
the absence of express contract to recover more than a reasonable compensation for his
services; and even when an express contract is made the court can ignore it and limit the
recovery to reasonable compensation if the amount of the stipulated fee is found by the
court to be unreasonable. This is a very different rule from that announced in section 1091 of
the Civil Code with reference to the obligation of contracts in general where it is said that
such obligation has the force of law between the contracting parties.
35. [G.R. No. 119231. April 18, 1996]
PHILIPPINE NATIONAL BANK, petitioner, vs. HON. PRES. JUDGE BENITO C. SE, JR.,
RTC, BR. 45, MANILA; NOAHS ARK SUGAR REFINERY; ALBERTO T. LOOYUKO,
JIMMY T. GO and WILSON T. GO, respondents
Facts:
Noahs Ark Sugar Refinery issued a receipt to RNS Merchandising (Rosa Ng Sy); (c)
and Receipt No. 18081, covering sugar deposited by St. Therese.it was later
negotiated to Cresencia K. Zoleta and Luis T. Ramos.the quedans were used as security
loan for the amount of P15.6 million and the other for P23.5 million from the PNB.ramos and
28

zoleta failded to pay the loan and request Noahs Ark Sugar Refinery for the delivery of
the sugar stocks covered by the quedans endorsed by Zoleta and Ramos.the refusal of
Noah ark sugar refinery to deliver the said sugar stocks prompted the PNB to file a case
demanding the delivery of the said sugar stock.THE RTC denied the petition and was
brought up to the CA and was affirmed by the Supreme court.the respondent file an
Omnibus Motion seeking deferment of the proceedings until private respondents are heard
on their claim for warehousemans lien. On the other the Philippine National Bank filed a
Motion for the Issuance of a Writ of Execution and an Opposition to the Omnibus Motion filed
by private respondents.
Issue:whether or not the Noahs Ark Sugar Refinery is subject for payment of storage
fee in sugar stocks.
Ruling:
Warehouse Receipts provision pursuant to Sections 27 and 31 of the Warehouse Receipts Law (R.A.
2137) that the respondent rivate respondents cannot legally be deprived of their right to enforce
their claim for warehousemans lien, for reasonable storage fees and preservation expenses.
case was dismissed fro lack of merit
36. G.R. No. L-60151 June 24, 1983
SALVADOR L. BUDLONG, in his capacity as Acting Third Assistant City Fiscal, City of
Tagbilaran,
petitioner,
vs.
HONORABLE AQUILES T. APALISOK, in his capacity as Acting City Judge, City Court,
Branch II, City of Tagbilaran, and CAMILIO PUYO Y GALAGAR, respondents.
Facts:
The private respondent was charged with physical injuries and pleaded guilty before
the court and the respondent judge for the said crime and was convicted without
saying anything about the civil liability of the said private respondent.private
respondent applied for probation there after. Petitioner herein filed a separate civil
case but respondent deny the motion with reason that the case was already close and
terminated. Hence, this petion for grave abuse of discretion against the respondent
judge.
Issue: whether or not the respondent judge committed grave abuse of discretion in
denying the motion to hear the civil case of the petitioner contending that the case
had been terminated and closed.
Ruling:
The respondent judge committed grave abuse of discretion in denying the motion to
try the civil case by the petitioner contending that the conviction of the private
respondent from criminal case does not include civil liability as stated in art 113 of the
revised penal code.

29

37. G.R. No. L-39999 May 31, 1984

ROY PADILLA, FILOMENO GALDONES, ISMAEL GONZALGO and JOSE FARLEY
BEDENIA,
petitioners,
vs.
COURT OF APPEALS, respondent.
Facts:
Petioners herein where charged of grave coercion where they were convicted in the
CFI but the court of appeals reversed the decision and acquitted them of the criminal
charged on the ground of reasonable doubt but directing them to pay jointly and
severally the amount of P9,600.00 to the complainants as actual damages.Hence, this
petion for certiorari contending that they acquittal in the criminal case should also
acquit them in their civil liabilities.
Issue: whether or not the acquittal of the petitioner also extinguishes their civil
liabilities.
Ruling:
The decision of the Court of appeals is affirmed contending that the acquittal of the
petitioner in the criminal case did not extinguish their civil liabilities in Section 3 (c)
of Rule 111 and Article 29 of the Civil Code does not require proof beyond reasonable
doubt for the conviction in civil case.

38. G.R. No. L-49781 TO L-49791 June 24, 1983

THE
PEOPLE
OF
THE
PHILIPPINES,
petitioner,
vs.
HON. JUDGE CATALINO CASTAEDA, JR. OF THE COURT OF FIRST INSTANCE OF
ILOILO; MANUEL DOCDOCIL; CIRIACO ESTRELLA; ERLINDA FACUNDO; SONIA
GONZALES; JUANITO GOMELIA; FERMIN LEONOR; ESING PES; ROLANDO
PETINGLAY; DAMIANA SOILA; LYDIA VENCER AND VICTORIA YAPSING respondents
Facts:
Petitioner filed a criminal case against private respondents for occupying the lot and erecting
a house therein. Private respondents were acquitted on the said crime for failure of the
petitioner in proving the private respondents guilt beyond reasonable doubt. Petioner herein
files a motion in the court of first instance contending that although private respondents were
acquitted on the criminal charged. Private respondent should return him the lot. The courts
of first instance dismiss the appeal. Petitioner petition in the court of appeals for review but
was forwarded to the Supreme Court because it involves the question of law, hence this
petition.
Issue:
Whether or not the acquittal of the respondent in criminal case extinguish his civil liabilities.

30

Ruling:
The appeal is dismissed without merit. The petitioner should have filed a separate civil action
against respondent for the recovery of the lot.

39.G.R. No. L-57555 August 28, 1984

THE
PEOPLE
OF
THE
vs.
TERESA JALANDONI, accused-appellant

PHILIPPINES,

plaintiff-appellee,

Facts:
This petion was raised praying that the decision of the court of appeals be modified and
to order the respondent jalandoni to pay P1,391,780.00 accused-appellant's civil liability
to private complainant plus interest at the legal rate of 12% per annum from the time
of demand for payment until full payment. Respondent was pronounced guilty of
estafa in CFI but the decision was reversed by Court of appeals. Respondent
contends that thethe amount of the civil liability, if any, is unsettled and requires
necessarily the introduction of proof.
Issue:
Whether or not the acquittal in the criminal case of not beyond reasonable doubt
extinguishes the civil liability
Ruling:
The petion was granted and order the respondent to pay the civil liability of P 1,391,780.00
with interest at the legal rate of 12% per annum as respondent admitted in her written
statement that BPI suffered damages.
40. G.R. No. L-50632 February 24, 1981
THE
PEOPLE
OF
THE
vs.
MARIANO ENTES, accused-appellant.

PHILIPPINES,

plaintiff-appellee,

Facts:
The plaintiff filed a case of rape against her father herein respondent.the court of first
instance convicted the respondent for death penalty and indemnify the plaintiff amounting to
P12,000 pesos. Hence this automatic review of the supreme court.
Issue: whether of not criminal case carries with it the civil liability
Ruling;
The decision is affirmed in all other aspects with modification and sentence should be
31

reclusion perpetual not death.

41. G.R. No. L-57804 January 23, 1984

THE
PEOPLE
OF
THE
PHILIPPINES,
petitioner,
vs.
MAYOR EMILIANO CARUNCHO JR., ALFONSO CORDOVA, CESAR CORPUZ, JACINTO
GONZALES and HON. ERIBERTO ESPIRITU, in his capacity as Judge of the Municipal
Court of Pasig, respondents
Facts:
This petion for certiorari was raised against respondent for grave abuse of discretion
amounting to lack of jurisdiction. Respondent herein dismissed the case of slight
physical injuries against mayor caruncho on the reason of affidavit of desistance is
complete and in accordance with the requirements of PD 1508 submitted by Reyes,
who filed the criminal case.
Issue:
Whether or not the affidavit of desistance in a criminal case would not result to civil
liability
Ruling:
The petition is dismissed for lack of merit.

42. G.R. No. L-59919 November 26, 1986

MALAYAN
INSURANCE
CO.,
INC.,
petitioner-appellant,
vs.
THE HONORABLE COURT OF APPEALS and AURELIO LACSON, respondentsappellees.
Edgardo Elumba, Yulo, Sedonio, Alejandro and Associates for petitioner-appellant.
Filomeno B. Tan, Jr., Soberrano, Leong, Amihan, Tan, Escuerte, Parel and Associates
for private respondent-appellee.
Facts:
The record shows that petitioner entered into an insurance contract where the respondent
insured his car for one year. The car was brought by the petitioner to the Carlos Jamelo's
repair shop and was stolen by its employees. In the event thereof, the accident and the
damage of the car amounted to P21, 849.62.the accused were convicted in the criminal
charged and respondent asks for indemnification from his insurance. Petitioner herein
refused to pay the private respondent contending that the driver of the car at the time of the
accident is not a duly licensed driver. Private respondent seek relief in the court and had a
32

favourable decision which was affirmed by the herein respondent Court of appeals. Hence
this petition for certiorari was raised by petitioner Malayan Insurance co Inc. against the
respondent court of appeals and private respondent Lacson, in affirming the decision of the
CFI in ordering the petitioner to pay the amount of P20, 000.00, less deductible franchise,
which is the maximum coverage of the insurance policy and interest from the date of filing of
the complaint, and the amount of P5, 000.00 as attorney's fees and expenses in litigation.
Issue: whether or not the insurance company covered damages in accident events arising
from a criminal case.
Ruling:
The court affirmed the decision of the Court of appeals on the ground that the conviction of
the accused entitles the respondent to recover his insurance.and the Arts. 1169, 1170 and
2209 of the Civil Code. Thus, a debtor who is in delay (default) is liable for damages (Art.
1170) generally from extrajudicial or judicial demand (Art. 1169) in the form of interest.

43. [G.R. No. 138210. June 06, 2002]

SPOUSES SINFRONIO PUERTO and ESPERANZA PUERTO, petitioners, vs. HON.
COURT OF APPEALS, HON. BR. 83 OF THE REGIONAL TRIAL COURT OF QUEZON
CITY and SPS. INOCENCIO and ELEUTERIA CORTES, respondents.
Facts:
Petioner herein brought a land from Mrs. Luna but did not have it titled before they executed
a contract of mortgaged to the respondents where it did not contain any stipulation of
interest however it sates that if petitioner fails to pay the debt.the petioner would foreclose
the said house and lot. Petitioner herein failed to pay the debt,hence,the house and lot was
owned by the respondent.petioner were given few more days to look for a house but
petioner refuses to leave the said house and responden t filed a ejectment case against
them. Petitioner entered into an agreement with the respondent to rent the house for the
amount of P3000 pesos but only through verbal agreement and later made to a contract of
lessor and lessee.The petioner was not able to pay the succeeding payment because of the
usurious demands of private respondents.petioner filed a case of declaration of nullity of the
Deed of Real Estate Mortgage. the case was dismissed by the CFI. On appeal, the decision
was reversed hence this petition of certiorari to reverse the decision of the Court of Appeals.
Issue: whether or not the usurious contract entered by the petitioner and respondent is valid
or void.
Ruling:
The petition is granted and order the petitioner to pay the 150.000 plus 12% interest to the
respondent under section 2 of the Usury Law,the maximum rate of interest on a loan or
forbearance of money secured by a mortgage upon real estate the title to which is duly
registered and the the cancellation of the land title by the respondents and returning it to the
petitioner.

33

44. G.R. No. L-60151 June 24, 1983

SALVADOR L. BUDLONG, in his capacity as Acting Third Assistant City Fiscal, City of
Tagbilaran, petitioner, vs.HONORABLE AQUILES T. APALISOK, in his capacity as Acting
City Judge, City Court, Branch II, City of Tagbilaran, and CAMILIO PUYO Y GALAGAR,
respondents.
Facts:
The petitioner herein was charged with a criminal case and pleaded guilty. the judge
rendered the decision in convicting the petitioner.the petitioner file a motion to to hear and
prove his civil liabilities.the respondent judge dismissed the motion.hence, this petition was
raised.
Issue: whether or not the civil case arising from criminal case can be heard separately
Ruling:s
The petition is granted and ordering the respondent judge to try and hear the civil case of the
petitioner. When a criminal action is instituted, the civil action for the civil liability arising from
the offense is impliedly instituted with the criminal action. unless the offended party
expressly waives the civil action or reserves his right to institute it separately (Art. 100,
Revised Penal Code and sec. 1, Rule 111, Rules of Court).
45. [G.R. No. 139885. January 13, 2003]
BANGKO SENTRAL NG PILIPINAS, petitioner, vs. JESUS G. SANTAMARIA, doing
business under the name and style of J. SANTAMARIA & ASSOCIATES, respondent.

No.46
G.R No.L-26970 March 19,1984
Buayan Cattle Co.,Inc. vs Quintillian
Facts
Petitioner was a prior lessee in the actual, peaceful and continued possession at least since
1965 of the disputed area until the private respondent de las Marias, on the strength of a
pasture lease granted only in 1964, unilaterally removed the petitioners fences and
immediately established his own boundary fence 580 hectares into the petitioners pasture
land. The Secretary of Agriculture suspend the effectivity of private respondent pasture lease
agreement and there has been the issuance of preliminary injunction against petitioner.
Finally, the relocation survey caused by the private respondent to determine the exact
location of pasture land allegedly awarded to him is questioned as irregular for having been
conducted by a forest guard, not competent to do so as well as the validity of the said survey
itself is also contested as not having been made in accordance with the rules of Bureau of
Forestry.
34

Issue: Whether or not private respondent acquire lawful possession of the area?
Ruling
Private respondent admits the presence of an actual possessor under a lease right in the
disputed area prior to his own entry and occupation thereof. Assuming that private
respondents lease of right is equally valid as that of the present possessor, here in,
petitioner ,the formers course of action should not have been to destroy the petitioners
fence and enter disputed area and set-up his own fence there in. Private respondent should
seek the aid of a competent court and not take the law into his own hands. Usurpation is not
such as a method of acquiring possession Civil Code provides:
Art.536 In no case may possession be acquired through force or intimidation as long as
there is a possessor who objects there to. He who believes that he has an action or right to
deprive another of the holding of a thing must invoke the aid of competent court, if the holder
should refuse to deliver the thing.
No.47
G.R No. L-29838 March 18,1983
Bobis and Guadalupe vs The provincial sheriff of Camarines Norte
Facts
The Petitioners appealed from the judgment of CFI of Cam.Norte when it dismissed the
complaint for annulment of an execution sale the subject of which is a parcel of land who has
been sold to petitioners by spouses Camino and Eco after a controversy involving one
Ortega (who file a complaint against petitioners and spouses) claiming recovery of the
portion of land and the value of improvements there in. Parties executed a compromise
agreement and such was submitted to the court, the souses partially paid the amount for the
improvements as a result, a writ of execution was issued commanding respondent sheriff
and consequently levied upon the land in question at an execution sale to one Rivera.
Issue: Whether or not the sale to Petitioners in fraud of creditors?
Ruling
No. The right of Rivera over the land is derived from a void execution sale. The rule,
however, is not presumed. As fraud is criminal in nature, it must be proved by clear
preponderance of evidence. In order that a contract may be rescinded as in fraud of
creditors, it is essential that it be shown that both contacting parties have acted maliciously
and with fraud and for the purpose of prejudicing said creditors, and that the latter are
deprived by the transaction of all means by which they may effect collection of their claims.
All these must concur in a given case presence of only one of them is not enough.
The writ of execution is null and void and of no legal effect to the petitioners. Annulment of
the writ of execution carries with it annulment of sale made by the sheriff pursuant to said
writ as well as the order of the court approving the sale. In Yboleon vs. Sison, Court ruled
that a judge or court, which sets aside a judgment rendered upon consent of the parties and
based on a compromise entered in to by them, which is converted into such judgment,
35

cannot amend or set it aside without the consent of said parties, or without first having
declared in an incidental preliminary hearing that such compromise is vitiated by any act of
the ground for nullity enumerated in Art.2038 of the Civil Code. Since modification of
judgment was made unilaterally in the writ of execution without any preliminary hearing, it
was unjustified.

No.48
G.R No.L-58004 May 30,1983
PLDT vs NLRC
Facts
The petitioner questioned the decision of Labor Arbiter together with public respondent
NLRC when it dismissed the clearance to dismiss private respondents who are employees of
petitioner and ordering their reinstatement, without loss of seniority rights as well as other
privileges and back wages. Prior to such, private respondents were alleged to be involved in
telehygeinic racket that cause inconvenience to telephone users, they have been arrested
and detained by military authorities, coming upon the knowledge of petitioner he placed
employees in preventive suspension, then after private respondents reported for work but
was refused by petitioner and latter filed application for clearance to dismiss private
respondents from employment while the latter filed their own complaint for illegal dismissal.
Issue: Whether or not the denial of clearance to dismiss and the entitlement to back wages
of private respondents, justified?
Ruling
Yes. The petitioner not having proved nor substantiated any ground to justify its alleged loss
of confidence in the employees so as to authorize their dismissal based on the ground that
we have to recognize the Constitutional right of the employees to security of tenure. They
not having given just and valid causes to warrant termination of their employment. Art.280
New Labor Code as amended, their reinstatement entitles them to payment of back wages.
Considering, however that private respondent employees have been laid off for over four
years during which period they were not prevented from deriving income from some other
gainful activity, the court deems it fair that their back wages should be limited to two years
without deduction.
No.49
G.R No.L-66724 September 30,1984
Bagumbayan Corp. vs IAC and Sena
Facts

36

The petitioner corporation is the owner of the hotel where in the respondent with her family
come into for an evening show, a waiter was serving the private respondents table and the
tray containing the drinks was overturned and fell on her, she drenched, felt chill, and
splinters from the broken glasses allegedly destroyed her dress together with her handbag
and shoes which cost P1000. She had to remove her dress and under wear on the ladies
room, was not given any towel to cover herself. She testified claiming moral damages of
100,000 for herself and her husband due to embarrassment and that the management did
not even apologize that night. Also, exemplary damages of the same amount to teach
management a lesson.
Issue: Whether or not private respondent be entitled to moral as well as exemplary
damages?
Ruling
The instant case is not specifically mentioned in Art.2219 which refers to quai-delicts causing
physical injuries. Generally, there can be no recovery of moral damages if case is not
mentioned in art.2219 and 2220. Embarassment to which private respondent was exposed
by the incident is not mental anguish contemplated in Art.2217 for which moral damages can
be recovered. While in the case award for moral damages has some basis the grant of
moral and exemplary damages is devoid of legal justification because it is nor predicated
upon any of the cases enumerated in the Civil Code Art.2217and 2219. Petitioner ordered to
pay private respondent P5,000 to cover her actual damages, litigation expenses and
attorneys fees.
No.50
G.R No.155076 February 27,2006
Laurel vs Abrogar
Facts
The petitioner was one of the officers of a Company who offers and sells phone cards for
international long distance calls such was allege by private respondent PLDT as one of the
alternative calling patterns that constitute network fraud and violate its network integrity
known as International Simple Resale method of routing and completing international long
distance calls using International Private Lease lines. PLDT filed a complaint against
petitioners for network fraud, also contended that movant unlawfully took personal property
belonging to it. Here in petitioner filed a motion to quash the information but was denied.
Issue: Whether or not international telephone calls can be regarded personal property?
Ruling
Respondent PLDT does not acquire possession, much less, ownership of the voices of
telephone calls or of the electronic voice signals or current emanating from said calls the
human voice and the electronic voice signals or current caused thereby are intangible and
not susceptible of possession, occupation or appropriation by respondent PLDT or even the
petitioner for that matter. The petitioner is not charged, under the amended information for
theft of telecommunication or telephone services offered by PLDT. Even if he is, the term
37

personal property under art 308 of RPC cannot interpreted beyond its scams as to include
telecommunication or telephone services or computer services for that matter.
According to Cuello Callon, in the context of Penal Code, only those movable properties
which can be taken and carried from the place they are found are proper subject of theft.
Intangible properties such as rights and ideas are not subject of theft because the same
cannot be taken from the place it is found occupied or appropriated. It should be
distinguished from the right or interests to whom they relate. The person is entitled to
exercise it, is not subject of theft or larceny. Such rights or interests are intangible and
cannot be taken by another.
No.51
CA-GR 56874-R July 8,1981
Ambaan vs Bellosillo,et.al
Facts
There was a public utility jeep driven by a reckless driver as a result of which passengers
suffered injuries.
Issue: Whether or not the passengers can sue the owner-operator of the vehicle?
Ruling
Yes. The petitioner passenger can sue the owner-operator of the jeep without necessity of
first bringing a criminal case against the said driver. The governing law in such case is the
Civil Code which requires common carriers to carry their passengers safely to their
destinations with the exercise of extraordinary diligence. Considering the negligence of the
driver it is clear that under the master and servant rule, the liability of the owner-operator is
not subsidiary but direct and immediate. Indeed, the negligence of the servant in contractual
obligations is the negligence of the master. The master and the servant rule is also known as
the doctrine of respondeat superior .Under this rule, the master, to escape liability, cannot
put up the defense of a good father in the selection and supervision of employees (except to
mitigate said liability, if this defense duly proven).
No.52
CA-GR 21947-CR July 21,1981
People vs Alejandro O.Tan Jr. (Cannot be found)
No.53
G.R No. 148582 January 16,2002
Far East Bank and Trust Co. vs Querimit
Facts
The petitioner bank maintains their stand in denying here in petitioners withdrawal of deposit
telling the latter that her husband withdrawn the money. Respondent here in through counsel
38

sent a demand letter and a request for updating and payment of the certificate of deposit,
including interest there in, with the refusal of petitioner to grant such demand here in
respondent filed a complaint.
Issue: Whether or not petitioner bank be liable for denying withdrawal of deposit?
Ruling
Yes. Petitioner failed to prove payment of the subject certificate of deposit issued to the
respondent and therefore, remains liable for the value of the dollar deposits indicated there
on with accrued interest. Responsibility arising from negligence in the performance of every
kind of obligation is demandable. Petitioner failed to exercise that degree of diligence
required by the nature of its business. Because the business of banks is impressed with
public interest, the degree of diligence required of bank is more than that of a good father of
a family or of an ordinary business firm. The fiduciary nature of their relationship with their
depositors requires them to treat the accounts of their client with the highest degree of care.

No.54
G.R No.L-47851 October 3, 1986
Juan F.Nakpil and Sons et.al vs CA et.al
Facts
The petitioner here in together with a Construction company entered into a contract with
private respondent Philippine bar association for the construction of the latters office
building. Two years later after the completion of the building, an unusually strong earthquake
hit Manila, the building sustained major damage.PBA commences an action for recovery of
damages arising from the partial collapse of the building, and allege that such as accused by
the defect in the construction, the failure of the contractor to follow the plans and
specifications and violations by petitioner of the terms of contract the latter claimed that it
was an act of God that cause the failure of the building which should exempt them from
liability.
Issue: Whether or not Act of God-an unusually strong earthquake which caused the failure of
the building exempt petitioner from liability?
Ruling
No. To exempt from liability under Art.1174 of the Civil code, for a breach of an obligation
due to an act of God following must concur
(a) the cause of the breach of the obligation must be independent of the will of the debtor;
(b)the event must be either unforeseeable or unavoidable;
(c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a
normal manner, and
(d) the debtor must be free from any participation in or aggravation of injury to the creditor.
39

Thus, if the happening of a fortuitous event or an act of God, there concurs a corresponding
fraud, negligence, delay or violation or contravention in any manner of the tenor of the
obligation as provided in Art.110 of the Civil Code, which results in loss or damage, the
obligor cannot escape liability. As correctly assessed by both courts, the defects in the
construction and in the plans and specification were proximate causes that rendered the
PBA building unable to withstand the earthquake. For this reason they cannot claim
exemption from liability.
No.55
G.R No.L-56487 October 21, 1991
Gatchalian vs Delim
Facts:
The petitioner was one of the injured passengers who sustained physical injuries from a
mini-bus mishap, before such a snapping sound was heard at one part of the bus and
shortly it bumped a cement flower pot on the side of the road and turned turtle and fell into a
ditch. Passengers while confined in the hospital was visited by the wife of respondent
operator who paid for their medical expenses and made to sign the petitioner together with
others a joint affidavit (waiver of the right to institute action),not withstanding such, petitioner
instituted an action against respondent for damages, respondent contended that such was
caused by the fortuitous event and that they did exercise the necessary diligence.
Issue: Whether or not private respondent exercise the necessary diligence?
Ruling
No. The obvious confined failure of respondent to look after the road worthiness and safety
of the bus, coupled with the drivers refusal or neglect to stop the mini-bus after he had
heard a snapping sound and the cry of alarm from one of the passengers constituted
wanton disregard of the physical safety of passengers and hence gross negligence on part
of respondent and his driver.
In cases of death or injuries to passengers, a statutory presumption arises that the common
carrier was at fault or had acted negligently unless it proves that it observed extraordinary
diligence as prescribed in Art 1733 and 1755 of the Civil Code.
What is involved here is the liability of a common carrier for injuries sustained by passengers
in respect of whose safety a common carrier must exercise extraordinary diligence, we,
must construe any such purported waiver most strictly against the common carrier. For a
waiver to be valid it must not be contrary to law, morals public policy or good custom as
provided by Art.6 Civil Code.

No.56
G.R no.159617 August 8,2007
40

Sicam vs Jorge
Facts
The petitioner was the owner of a Pawnshop where respondent pawned several pieces of
jewelry to secure a loan. After which, two men entered the pawnshop and took away
whatever cash and jewelry were found inside the pawnshop vault. Incident was entered into
the police blotters. Petitioner through a letter informed respondent of the incident.
Respondent requested petitioner to prepare the pawned jewelry for withdrawal but the latter
failed to do as such respondent filed a complaint for indemnification of the loss of pawned
jewelry and damages. Petitioner interposed the defense of Fortuitous event and negates
negligence.
Issue: Whether or not the loss of the thing pawned exempt petitioner from liability?
Ruling
No. By the very evidence, petitioner is guilty of concurrent or contributing negligence as
provided in Art.1170 of the Civil Code:
Those who in the performance of their obligation are guilty of fraud, negligence or delay, and
those who in any manner contravene the tenor there of, are liable for damages. Also,
Art.2123 of the Civil Code provides that with regard to pawnshops and other establishments
which are engaged in making loans secured by pledges, the special laws and regulations
concerning them shall be observed and subsidiary, the provision on pledge ,mortgage and
antichresis.
The provision on pledge particularly Art.2099 of the Civil Code provides that the creditor shall
take care of the thing pledge with the diligence of a good father of a family this means that
petitioner must take care of the pawns the way a prudent person would as to his own
personal property.
57. Liam Law vs. Olympic Sawmill Co., G.R. L-30771, 28 May 1984
Facts: This action is an appeal by Olympic Sawmill, Co. which was raised by the CA to the
Supreme Court being an issue of law. Hence, the petitioner is Olympic Sawmill, Co.
The petitioner filed this appeal contesting the trial court decision obliging them to pay
the principal amount of P10,000.00 plus P6,000.00 as liquidated damages for attorney's
fees, legal interest and other cost incident to the non-payment of the principal. Said nonpayment constituted of the original loan of the principal without interest which was left unpaid
even after an extension of 3 months, and the subsequent extension which included the
interest which was also left unpaid. The petitioner then argued that the additional P6,000.00
is an usurious interest and such has been deemed admitted by Liam Law "as it was not
denied specifically under oath" as provided by Section 9 of the Usury Law Act, as follows:
SEC. 9. The person or corporation sued shall file its answer in writing under oath to
any complaint brought or filed against said person o corporation before a competent court to
recover the money or other personal or real property, seeds or agricultural products, charged
or received in violation of the provisions of this Act. The lack of taking an oath to an answer
to a complaint will mean the admission of the facts contained in the latter.
41

Issue: Whether or not a claim of usurious interest is deemed admitted by the Liam Law
when he fails to deny such claim of usury specifically and under oath
Finding: The Court ruled that the provision does not apply as the said provision
contemplates a complaint for the recovery of usurious interest paid, not the evasion of
payment of interest by claim of usury. Also, under Article 1354 of the Civil Code, it is
presumed that the agreement exists and is lawful, unless the debtor proves the contrary. No
evidence was presented to substantiate the claim. Moreover, usury is currently legally nonexistent and any interest may be charged as agreed upon by both parties.

58. Serrano vs Central Bank, Overseas Bank of Manila, et al, G.R. No. L-30511, 14
February 1980
Facts: This petition for mandamus and prohibition seeks to establish joint and solidary
liability of P350,000, with interest, against the respondent Central Bank for the alleged failure
to strictly supervise Overseas Bank of Manila (OBM) which resulted to its inability to return
the time deposits made by and assigned to the petitioner. He contends that since the assets
of OBM were acquired by the use of depositors' money, these must be held in a trust fund
favoring the depositors even when the said assets were already used as collaterals to
Central Bank for OBMs emergency loans and overdrafts. The respondent Central Bank
argues that it could not have watched over every move of OBM, the latter operating on a
limited degree in view of its chronic insolvency before it was ultimately dissolved and
liquidated by the Central Bank. It also averred that it had no knowledge of the assets used
as collaterals being sourced from depositors and that it was entitled to claim the said assets.
Issue: Whether or not there should be a constructive trust in favor of the depositors instead
of the Central Bank for the collaterals given by OBM to the Central Bank for OBM's
overdrafts and loans
Finding: No, the petitioner is not entitled to the constructive trust as bank deposits are in
the nature of irregular deposits. They are really loans because they earn interest. All kinds of
bank deposits, whether fixed, savings, or current are to be treated as loans and are to be
covered by the law on loans. Current and savings deposits are loans to a bank because it
can use the same. The petitioner here in making time deposits that earn interests with
respondent Overseas Bank of Manila was in reality a creditor of the respondent Bank and
not a depositor. The respondent Bank was in turn a debtor of petitioner. Failure of the
respondent Bank to honor the time deposit is failure to pay its obligation as a debtor and not
a breach of trust arising from a depositary's failure to return the subject matter of the deposit.

59. Municipality of San Miguel vs Hon. Oscar Fernandez, G.R. No. L-61744, 26 June
1984
Facts: In Civil Case No. 604-B, the lower court held the petitioner municipality liable to Mrs.
Imperio for rentals paid by the occupants of subdivision lots donated by the deceased Mr.
Imperio in favor of the municipality, and the partial revocation of the Deed of Donation as
well as the restoration of ownership and possession over the said lots in favor of Mrs.
Imperio. The respondent judge then issued a writ of execution to the municipality after the
42

lower court's decision became final for its failure to file an appeal on time. Herein petitioner
filed this review for certiorari arguing that property or funds belonging to the municipality are
all public funds exempt from execution and cannot be subject to levy.
Issue: Whether or not the funds of the petitioner municipality, in the hands of the provincial
and municipal treasurers of Bulacan and San Miguel, respectively, are public funds exempt
from execution for the satisfaction of the money judgement in Civil Case No. 604-B
Finding: It is the settled doctrine of the law that not only the public property but also the
taxes and public revenues of such corporations cannot be seized under execution against
them, either in the treasury or when in transit to it. Judgments rendered for taxes, and the
proceeds of such judgments in the hands of officers of the law, are not subject to execution
unless so declared by statute. These are held in trust for the people, intended and used for
the accomplishment of the purposes for which municipal corporations are created, and that
to subject said properties and public funds to execution would materially impede, defeat or
destroy the said purpose. Besides, there must be, pursuant to Section 2(a) of Presidential
Decree No. 477, a corresponding appropriation in the form of an ordinance duly passed by
the Sangguniang Bayan before any money of the municipality may be paid out. There was
no showing of such ordinance in the present case.

60. Special Services Corporation vs Centro La Paz, G.R. No. L-44100, 28 April 1983
Facts: In 1972, a judgment was rendered in favor of petitioner Special Services Corporation
by CFI-Manila against one Alejandro Estudillo in an action for Replevin with Sum of Money. A
writ of execution was thereafter issued but remained unsatisfied. So by virtue of an alias writ
of execution, the Sheriff of Manila levied real properties of which Alejandro was one of the
registered owners. Alejandro then moved to dissolve/cancel the notice of levy before the
scheduled auction, alleging that he and the other owners indicated on the title that the
properties merely held in trust the properties and improvements therein in favor of Centro La
Paz. Centro also submitted a third party claim averring exclusive ownership of the
properties. The lower court then held that although the trust was unregistered, Centro La
Paz is indeed the true owner of the property in dispute, and that the persons registered as
owners - including Alejandro - are merely trustees of Centro. Thus, the properties cannot be
levied upon.
Issues:
Whether or not the fact of registration of ownership by the private individuals
bar evidence that the property is held in trust in favor of Centro La Paz
Finding: No, it does not bar evidence that sufficiently establishes that the registered owners
of the parcels of land, all of whom are members of Centro La Paz, hold the properties in trust
for the latter by virtue of the indubitable documents executed even before the institution of
suit. In the same manner that real property, registered solely in the name of husband, can be
proven to be conjugal property with his wife, the fact of registration in the name of Alejandro
and others does not bar evidence to show that the related owners hold the properties in trust
for Centro La Paz. The petitioner also could not be deemed a purchaser in good faith when it
knew of Centro La Paz' claim, particularly when the latter had filed a third party claim with
the Sheriff before the scheduled auction sale, which knowledge was equivalent to
registration of the trust.
43

61. Eastern Shipping Lines, Inc. vs South Sea Exports, Inc et al., G.R. No. 58883-R, 21
July 1981
(cannot find)

62. Co Bun Chun vs Overseas Bank of Manila, G.R. No. L-27342, 24 May 1984
Facts: Petitioner placed with the Overseas Bank of Manila (OBM) a time deposit of P66,000
for one year with a 4.5% interest per annum. Four days later, he assigned to the bank the
said time deposit as security for the 6-month overdraft accounts of Henry Shoe Supply and
Northwest Auto Supply amounting to P300,000. It was a condition of the assignment that the
time deposit could not be withdrawn unless the overdraft line, interests due thereon and
expenses incurred had been fully paid. The overdraft accounts were then liquidated only
after almost a year after they became due, during which the bank incurred 5% of the
accounts or P11,444.06 as expense for the collection of the amounts due. Hence, the
respondent bank deducted from the time deposit the said collection expense. The petitioner
filed the instant action to recover the amount contending that the bank had no right to charge
attorney's fees and expenses in the extrajudicial collection from the time deposit, but the
instant action was dismissed.
Issue: Whether or not the petitioner is correct in his contention that making him liable for the
costs of extrajudicial collection would make his obligation as guarantor more onerous than
the principal debtor and must only be liable for interest, as given in Arts. 2054 and 2209 of
the Civil Code
Finding: No, he is incorrect. The petitioner is bound by the terms of the deed assigning his
time deposit to the bank. He was not a mere guarantor of the overdraft account, as the
assignment specifically bound him to pay expenses incurred for the collection of the
accounts. The expense charged was different from the interest of the overdraft accounts and
was a consequence of the default of the petitioner's companies. He may, however, seek
reimbursement from the companies for what he had to pay the bank.

63. Regales vs IAC (L-65022 Jan. 31, 1984)

(cannot find)

64. San Miguel, et al. vs Elbinias, et al., G.R. No. L-48210, 31 January 1984)
Facts: The petitioner and the estate of the deceased Romeo was proceeded against by
private respondent Carmen for recovery of a 1,300 square meter unregistered land valued at
P50,000, which was then awarded to the later. Private Carmen subsequently asked for a writ
of execution which was issued together with an order of demolition of the properties of the
petitioners in the said land. But before they could be demolished, petitioners Rafols and San
Miguel filed third party claims with the Sheriff, with the latter approving only that of San
44

Miguel. Private respondent then posted the P25,000 bond to push with the demolition. The
petitioners then filed for the issuance of a writ of preliminary injunction to stop the demolition,
but was asked by the respondent judge to also post the P50,000 bond. The petitioners
appealed the bond be reduced alleging that the bond required must only be for the rental of
the land and not for the value of the property; the appeal was denied by the respondent
judge.
Issue: Whether or not the respondent judge acted with grave abuse of discretion in requiring
petitioners to post a bond for the issuance of a writ of preliminary injunction at P50,000 and
subsequently refusing to reduce it
Ruling: No. The amount of the bond to be posted is discretionary upon the trial court and
should not be interfered with except in case of grave abuse of such discretion. Hence, the
trial court may fix any amount for the bond so long as it is not done arbitrarily, capriciously, or
without basis. In the case at bar, the amount of the bond required by respondent Judge is
reasonable and justifiable under the circumstances. Firstly, in fixing the amount of the bond
at P50,000 respondent Judge took into consideration the market value of the property which
is admittedly P50,000 and the fact that when the third-party claim of the petitioner was given
cognizance by the court, private respondent Carmen was required to post a bond of P25,000
in order to enforce the writ of execution and the order of demolition be implemented.
Secondly, the damages which private respondents may suffer by virtue of the issuance of
the writ of preliminary injunction are not limited to the rent due for the use and enjoyment of
the property occupied by petitioners but include those that may arise from their inability to
enjoy the ownership and possession of the property pursuant to the final and executory
decision in favor of private respondents.

65. Agapito Gutierrez vs Capital Insurance and Surety Corp., G.R. No. L-26827, 29
June 1984
Facts: The petitioner had his jeepney insured by the respondent for one year against
passenger and third-party liability. The insurance policy included that the authorized driver
must be a holder of a valid and subsisting professional driver's license. On May 1962, the
jeepney figured in an accident wherein one of the passengers fell off and died. The driver of
the jeepney, although duly licensed until 1963, did not have his license with him during the
accident. What he had was a carbon copy of a traffic violation report (TVR) issued on
February 1962 which required him to report to the traffic court on March 1962. The TVR
served as a temporary operator's permit for 15 days after issuance; thus, the driver was
holding an expired permit. The petitioner paid the widow of the deceased but was refused
reimbursement by the respondent. The lower court and CFI held that the driver was an
authorized driver as his TVR was coextensive with the two-year term of his confiscated
license, hence this instant case.
Issue: Whether or not an insurance covers a jeepney whose driver's traffic violation report
or temporary operator's permit had already expired
Ruling: No. Parties are bound by the stipulations in the policy. As the insurance policy
plainly fixed the meaning of "authorized driver" . That stipulation cannot be disregarded or
rendered meaningless. It is binding on the insured. A driver with an expired TVR or expired
45

temporary operator's permit is not considered an authorized driver within the meaning of the
policy, and does not make the petitioner entitled to recovery.

66. Integrated Construction vs Hon. Relova, et al., G.R. No. 41117, 29 December 1986
Facts: The petitioners sued the respondent Metropolitan Waterworks and Sewerage System
(MWSS) for breach of contract which the Arbitration Board, through the respondent judge,
awarded to the petitioners. The decision ordered MWSS to pay the petitioners
P15,518,383.61 - less P2,329,433.41, to be set aside as a trust fund in favor of the creditors
of the joint venture in connection with the project. Subsequently, the petitioners agreed to
give MWSS some discounts provided that MWSS pay them within fifteen days of this
agreement or up to October 17, 1972. They later agreed to extend the period of payment of
the discounted price to October 31. MWSS, however, paid the discounted price only on
December 22. Three years thereafter, after the release of the trust fund to the satisfy their
creditor's claims, the petitioners filed a motion for execution for the balance due. Respondent
judge denied the motion on the ground that the parties had novated the award by their
subsequent agreement to the discounted price.
Issues:
Whether or not the respondent judge erred in holding that the original award
was novated by the subsequent agreement granting the discounted rate if paid on or before
October 31, and barred the collection of the balance of the original judgment-award
Finding: No. Although the tenor of the subsequent agreement in a sense novated the
judgment award there being a shortening of the period of payment, the suspensive and
conditional nature of the agreement is expressly acknowledged and stipulated. The failure of
MWSS to pay within the stipulated period removed the very cause and reason for the
agreement, therefore remitting to the petitioners their original rights under the judgment
award. The petitioners also never acknowledged full payment and refused MWSS' request
for a conforme or quitclaim; thus, they cannot be held in estoppel for now collecting the
balance of the original judgment-award.

67. Luzon Surety Corp., Inc. vs Quebrar, et al., G.R. No. L-40617, 31 January 1984
Facts: The petitioner issued two administrator's bonds in the amount of P15,000 each to
respondent Quebrar as administrator of the testate estates of Chinsuy and Lipa in 1954. In
consideration of the suretyship, wherein the petitioner was bound jointly and severally with
the respondents, the latter executed two indemnity agreements to each pay the petitioner
P300 in advance as premium thereof for every 12 months or fraction thereof or while any
renewal or substitution thereof is in effect. They also agreed to indemnify the petitioner
against any and all damages, losses, costs, stamps, etc., including 15% of the account for
attorney's fees. The respondents paid the advance for the first year but in 1957 amended the
project and partition of accounts which was approved by the CFI. Petitioner then demanded
the payment of the premiums and stamps but in 1962, the respondents countered with a
motion for cancellation of executor's bonds as the heirs of the estates have already received
their respective shares; this was approved by the CFI. By October 1962, the petitioner's
demand amounted to P4,872 from the last payment of the premium and stamps made by the
46

respondents. The lower court then allowed the recovery of the said amount ruling that even if
the respondents did not expressly seek the renewal of the said bonds, the same were in
force and effect until their cancellation in 1962.
Issue: Whether or not the administrator's bonds were in force and effect from and after the
year that they were filed and approved by the court up to their cancellation in 1962
Ruling: Yes. The proper determination of the liability of the surety and of the principal on the
bond must depend primarily upon the language of the bond itself. Having in mind the
purpose and intent of the law, the surety is then liable under the administrator's bond, for as
long as the administrator has duties to do as such administrator. Since the liability of the
sureties is co-extensive with that of the administrator and embraces the performance of
every duty he is called upon to perform in the course of administration, it follows that the
administrator is still duty bound to respect the indemnity agreements entered into by him.
The respondent administrator did not cease his function after the approval of the
amendment of the project and partition of accounts, for administration is for the purpose of
liquidation of the estate and distribution of the residue among the heirs and legatees. And
liquidation means the determination of all the assets of the estate and payment of all the
debts and expenses. It was found that even after in 1957, there were still debts and
expenses to be paid; thus, the bond is deemed as in effect.
68. Sps. Mariano Z. Velarde and Avelina D. Velarde vs CA (GR 108346 July 11, 2001)
FACTS: The parties herein entered into a contract of sale over a parcel of land owned by the
private respondents. A Deed of Sale with Assumption of Mortgage, with a balance of P1.8
million, was then executed by the private respondents in favor of the petitioners. Pursuant to
their agreements, the petitioners paid to the bank (BPI) the monthly mortgage payments for
three (3) months; until they were advised that their Application for Assumption of Mortgage
was denied. This prompted the plaintiffs to stop any further payment. Private respondent
informed the petitioners that such non-payment constitutes the non-fulfillment of their
obligations. Petitioners, through counsel, responded that they are willing to pay in cash the
balance subject to several conditions. Private respondents then sent a notarial notice of
cancellation/rescission of the Deed of Sale. Petitioners filed a complaint opposing the
rescission, which was dismissed, but later reversed in their MR. The Court of Appeals
reinstated the decision to dismiss.
ISSUE: Whether or not there is a substantial breach of contract that would entitle its
rescission.
HELD: Yes. Article 1191 of the New Civil Code applies. The breach committed did not
merely consist of a slight delay in payment or an irregularity; such breach would not normally
defeat the intention of the parties to the contract. Here, petitioners not only failed to pay the
P1.8 million balance, but they also imposed upon private respondents new obligations as
preconditions to the performance of their own obligation. In effect, the qualified offer to pay
was a repudiation of an existing obligation, which was legally due and demandable under the
contract of sale. Hence, private respondents were left with the legal option of seeking
rescission to protect their own interest. However, since the rescission is based on Article
1191, mutual restitution is required to bring back the parties to their original situation prior to

47

the inception of the contract; so as to prevent the unjust enrichment of one party at the
expense of the other.
69. Ayson-Simon vs Adamos and Feria (L-39378 Aug. 28, 1984)
FACTS: Adamos and Feria, defendants herein, purchased two lots from Juan Porciuncula.
However, Porciunculas successors-in-interest sought for the cancellation of the sale, which
was subsequently granted by the court. While such case was pending, the defendants sold
to Ayson Simon the lots in question. Due to the failure of the former to deliver the said lots,
plaintiff-appellee filed a civil case for specific performance. The court ruled in her favor, but
due to the original sale of the lots to the defendants-appellants being null and void, there is
impossibility that they can comply with their commitment to plaintiff. The latter then sought
the rescission of the contract plus damages.
ISSUE: Whether or not petitioner can choose to rescind the contract, even after she had
chosen the specific performance thereof.
HELD: Yes. The rule that the injured party can only choose between fulfillment and
rescission of the obligation, and cannot have both, applies when the obligation is possible of
fulfillment. If, as in this case, the fulfillment has become impossible, Article 1191 allows the
injured party to seek rescission even after he has chosen fulfillment.

70. DMRC Enterprise vs Este Del Sol Mountain Reserve (GR 57936 Sept. 26, 1984)
FACTS: Petitioner leased a number of heavy equipment to respondent; with the further
condition that 30% of the payments due to the petitioner is to be invested in the purchase of
shares of stock of the defendant corporation. As a result of the agreement, petitioner
proceeded to perform what was incumbent upon it; however, despite repeated demands, the
respondent refused to pay its outstanding obligations to the former. Thus, petitioner filed a
complaint with the CFI, but was dismissed for supposedly being beyond the jurisdiction of
the court, and within that of the SEC. Hence, this petition.
ISSUE: Whether or not the regular courts have jurisdiction over the action for collection of
money representing unpaid obligations filed by the petitioner, rather than SEC.
HELD: Yes. The expanded jurisdiction of the Securities and Exchange Commission under
PD 902-A extends only and exclusively to intra-corporate matters, which is not present in this
case. Jurisdiction over all other claims remains with the regular courts. Petitioner now seeks
to enforce the contract seeking payment for the lease of heavy equipments under Article
1657 (1) of the Civil Code, which obliges the lessee to pay the price of the lease according to
terms stipulated. The fact that the case involves shares of stock to be used as payment for
lease rentals does not convert it into an intra-corporate controversy.

71. Central Bank vs CA and Sulpicio M. Tolentino (GR 45710 Oct. 3, 1985)
FACTS: Island Savings Bank granted an P80, 000.00 loan, secured by a mortgage, to
private respondent. However, only a mere P17,000.00 partial release was actually received
48

by the respondent, the rest withheld due to lack of funds and liquidity problems. Respondent
signed a promissory note to pay the same within 3 years, but failed to do so. In view of such,
the bank attempted to foreclose the real estate mortgage. An action for injunction, specific
performance or rescission and damages was filed by respondent, which was dismissed. It
was likewise dismissed on appeal in CA, but with a modified decision, that the bank can
neither foreclose the real estate mortgage nor collect the P17,000.00 loan.
ISSUE: Whether or not respondents action for specific performance prosper.
HELD: No. Private respondent, under Article 1191 of the Civil Code, may choose between
specific performance or rescission with damages in either case. Since Island Savings Bank
is now prohibited from doing further business by Monetary Board Resolution No. 967,
making specific performance impossible, rescission is the only alternative remedy left. Since
both parties were in default in the performance of their respective reciprocal obligations, they
are both liable for damages. Article 1192 of the Civil Code provides that in case both parties
have committed a breach of their reciprocal obligations, the liability of the first infractor shall
be equitably tempered by the courts. The liability of Island Savings Bank for damages in not
furnishing the entire loan is offset by the liability of Sulpicio M. Tolentino for damages, in the
form of penalties and surcharges, for not paying his overdue P17,000.00 debt.

72. Ang et. al vs CA and Lee Chuy Realty Corp. (GR 80058 Feb. 13, 1989)
FACTS: Petitioners, owners of 3 parcels of land, entered into a contract of sale of said
properties with private respondent, at the agreed total price of P1,600,000.00; the latter
paying P50,000.00 as down payment. However, due to petitioners failure to comply with
their agreed undertaking to clear obstructions on the subject lands, private respondent
demanded the refund of the down payment, which the former failed to do. Private
respondent then filed a complaint for the collection of a sum of money with damages. The
trial court ruled in favor of petitioners, while the CA reversed such decision.
ISSUE: Whether or not the petitioners breached the agreement so as to warrant its
rescission.
HELD: Yes. The Court held that it is the petitioners refusal to proceed with the sale, unless
private respondent agreed to pay the higher price of P2,340,000.00, which constitutes the
serious breach of the agreement. Thus the private respondent had the right to rescind the
agreement. Moreover, it appears petitioners had already sold the subject properties to
Dolora Chua; they can no longer perform what was incumbent upon them under the terms of
the agreement, that is, to deliver the subject property to private respondent. This is another
breach of their agreement. As a consequence of the resolution of the contract of sale, the
parties should be restored to their original situation. Petitioners should, therefore, refund the
P50,000.00 down payment they received.

73. Filoil Marketing Corp. vs IAC et. al (GR 67115 Jan. 20, 1989)

49

FACTS: This case arose from a sale of a piece of land, owned by private respondent,
Pabalan, in favor of Villa Rey Transit. Upon receipt of the title thereto, the land was
immediately mortgaged on behalf of Villa Rey Transit to the herein petitioner as security for a
loan, from the former defaulted; hence the mortgage was extrajudicially foreclosed and the
land was sold at public auction, in which petitioner is the highest bidder. Upon learning of
such developments, Pabalan filed a complaint in the CFI, asking for the rescission of the
contract and for damages. The court held in favor of complainant, later affirmed by the CA.
ISSUE: Whether or not the contract can still be rescinded despite the presence of a third
party, the petitioner, which is supposedly an innocent purchaser of the property.
HELD: No. The Court of Appeals erred in holding that the contract of sale was subject to
rescission on the ground of non-compliance with one of its conditions, presumably the
payment of the purchase price, under Article 1191 of the said Code. That ground was merely
assumed and not established. In fact, it did not exist at the time of the filing of the complaint.
It follows that if the contract was not rescissible as to the other defendants, much less would
it be rescissible as to the petitioner, which was not even a party to that contract.

74. Angeles vs Calasanz et.al (GR 42283 March 18, 1985)

FACTS: Defendants-appellants and plaintiffs-appellees entered into a contract to sell a piece
of land, for the amount of P3,920.00 plus 7% interest per annum. The plaintiffs-appellees
paid the monthly installments until July 1966, when their aggregate payment already
amounted to P4, 533.38. The defendants-appellants requested the remittance of past due
accounts, and cancelled the said contract because the plaintiffs failed to do so for more than
4 months. Hence, plaintiffs-appellees filed a case before the CFI to compel the defendants to
execute
in
their
favor
the
final
deed
of
sale.
ISSUE: Whether or not the contract to sell was validly cancelled by the defendantsappellants.
HELD: No. The breach of the contract adverted to by the defendants-appellants is so slight
and casual when the plaintiffs-appellees had already paid the monthly installments for a
period of almost nine (9) years. Furthermore, although the principal obligation was only P
3,920.00 excluding the 7 percent interests, the plaintiffs- appellees had already paid an
aggregate amount of P 4,533.38. To sanction the rescission made by the defendantsappellants will work injustice to the plaintiffs- appellees. It would unjustly enrich the
defendants-appellants. Article 1234 of the Civil Code also provides that if the obligation has
been substantially performed in good faith, the obligor may recover as though there had
been a strict and complete fulfillment, less damages suffered by the obligee.

75. Ouano vs CA (GR 95900 July 23, 1992)

FACTS: Petitioner leased his motor vessel to respondent Rafols, subject to the condition
that the latter should operate the vessel for his own benefit, and should not sublet or subcharter the same without the knowledge and written consent of the owner. Rafols later
contracted with respondent Market Developers, Inc. (MADE) through its group manager,
50

respondent Chua, to transport cement in the mentioned vessel for a freightage of P46,
150.00, without consent of petitioner. The amount was paid to Rafols. Petitioner filed a
complaint in the RTC, seeking payment of P23,000.00 representing the freight charges for
the cement cargo, with damages.
ISSUE: Whether or not MADE and Chua are liable for damages to petitioner by being bound
by the contract of lease between the latter and Rafols.
HELD: No. The obligation of contracts is limited to the parties making them and, ordinarily,
only those who are parties to contracts are liable for their breach. Parties to a contract
cannot thereby impose any liability on one who, under its terms, is a stranger to the contract,
and, in any event, in order to bind a third person contractually, an expression of assent by
such person is necessary. The charter contract was entered into only by and between
petitioner and respondent Rafols, and the other private respondents were neither parties
thereto nor were they aware of the provisions thereof. The act of the charterer in subchartering the vessel, in spite of a categorical prohibition may be a violation of the contract,
but the owner's right of recourse is against the original charterer, either for rescission or
fulfillment, with the payment of damages in either case.

76. Suria vs IAC (GR 73893 June 30, 1987)

FACTS: Private respondents entered into a Deed of Sale with Mortgage with petitioners over
a parcel of land owned by the former. Petitioners failed to pay the stipulated installments,
only one installment was paid despite repeated demands, thus violating the terms and
conditions of the contract. Respondents then filed for the rescission of the contract, which
was favorably granted by the court.
ISSUE: Whether or not the subsidiary and equitable remedy of rescission is available in the
presence of the remedy of foreclosure in the light of Art. 1383.
HELD: No. The parties had entered into a contract of sale where the vendor obligates
himself to transfer the ownership of and to deliver a determinate thing to the buyer, who is
obligated to pay a price certain in money or its equivalent. The respondents have complied
with their part and parted with the title. The buyer fulfilled his end of the bargain when he
executed the deed of mortgage. The relationship between the parties is no longer as buyer
and seller, because the contract of sale has been perfected and consummated and it is
already of a mortgagor and mortgagee. The petitioners breach of obligation is not with
respect to the perfected contract of sale but in the obligations created by the mortgage
contract. The remedy of rescission is not a principal action retaliatory in character but
becomes a subsidiary one; which by law is available only in the absence of any other legal
remedy. Foreclosure here is not a remedy accorded by law, but is a specific provision found
in the contract.

77. Aparri vs CA (L-30057 Jan. 31, 1984)

FACTS: Petitioner was appointed as General Manager of NARRA, through the approval of
Resolution No. 13 by the private respondent. On March 15, 1962, Resolution No. 24 was
51

approved by the Board of Directors, which states that the incumbent General Manager shall
perform his duty until March 31,1962. Petitioner filed a mandamus with preliminary injunction
with the CFI. The petition prays for the annulment of the resolution of NARRA board.
ISSUE: Whether or not Resolution No. 24 was a removal or dismissal of petitioner without
cause.
HELD: No. It was affirmed that the term of office of petitioner expired on March 31, 1962. In
the case at bar, the term of office is not fixed by law. However, the power to fix the term is
rested in the Board of Directors, subject to the recommendation of the office of economic
coordination and the approval of the President of the Philippines. Resolution No. 24 speaks
of no removal but an expiration of the term of office of the petitioner.
78. New Frontier Mines, Inc. vs NLRC (GR 51578 May 29, 1984)
FACTS: Briones was employed by petitioner, which later assigned him at the company's
chromite project in Camarines Sur as chief accountant and administrative officer, performing
various duties and considered to be a managerial employee. He was charged with incurring
cash shortages, and later stopped reporting to work without permission or notice to the
company. He was fired as a result. A complaint for illegal dismissal was filed by petitioner.
The Labor Arbiter ordered his reinstatement with backwages. The company filed a petition
for certiorari.
ISSUE: Whether or not petitioner was illegally dismissed.
HELD: No. The Labor Arbiter and Commissioners acted with grave abuse of discretion in
ordering the reinstatement with backwages of Briones, a managerial employee. As a
managerial employee, the company had the right to terminate Briones' services "for lack of
confidence" and abandonment of work.
79. SANTOS VS COURT OF APPEALS
G.R NO. 60210
MARCH 27, 1984
FACTS:
Private respondent, Aurora Gutierrez, instituted an unlawful detainer case in the City
Court of Manila against petitioners Arturo P. Santos and Adelina Y. Santos on grounds that
she needs the premises for her personal use and that the petitioners were delinquent in the
payment of rentals of the subject apartment.
Petitioners admitted that they are the legitimate tenants and/or lessees of the subject
apartment with the present rental rate of P250.00 a month on a month-to-month contract of
lease.
The City Court decided and ordered the defendants to vacate the premises in
question and surrender its possession to the plaintiff. They were also ordered to pay plaintiff
for the delinquent rental fees. Petitioners appealed to the CFI which found the instant
decision as in accordance with the law. Petitioners then went to the CA on a petition for
review.
ISSUE:
Whether the lessor may judicially eject the lessees even when the contract of lease is
said to be month-to-month
HELD:
52

Yes. The judicial ejectment lies when the lease is for a definite period or when the
fixed or definite period agreed upon has expired. A month-to-month period expires each
month and may be terminated at the end of each month. The lease as agreed upon by the
parties is a lease with a definite period which follows that the private respondent can enforce
the right to judicially eject the petitioners from the premises. The petition is hereby
dismissed.
80. BALUCANAG VS JUDGE FRANCISCO
GR NO. 33422
MAY 30, 1983
FACTS:
Charvet owns a lot in Pandacan, Manila. In 1952, the said lot was leased to
respondent Stohner for a period of 5 years at the monthly rental of 2140.00. Stohner made
fillings on the land and constructed a house. On 1966, Charvet sold the lot to petitioner
Balucanag. For Stohners failure to pay the rents, Balucanag, thru counsel, wrote Stohner a
letter demanding that he vacate the premises. Stohner claimed that he was a builder in good
faith.
Balucanag instituted in the City Court of Manila an ejectment suit against Stohner
which rendered a decision in favor of Balucanag. On appeal by Stohner, the CFI of Manila,
presided by Judge Francisco set aside the decision and held that Stohner was a builder in
good faith because he had constructed the residential house with the consent of the original
lessor, Charvet. And that after expiration of the lease contract on 1957, Charvet did not order
for Stohners ejectment nor removal of the house.
Balucanag filed petition for review.
ISSUE:
Whether Balucanag can terminate the lease considering that the contract between
Stohner and Charvet had already expired on 1957
HELD:
Yes. An implied new lease was created between Balucanag and Stohner, the period
of which is established by Art. 1687 of the Civil Code:
Art. 1687. If the period for the lease has not been fixed, it is understood to be from
year to year, if the rent agreed upon is annual; from month to month, if it is monthly:
from week to week, if the rent is weekly: and from day to day, if the rent is to be paid
daily. ...
Under the above article, the duration of the new lease must be deemed from month
to month, the agreed rental in the instant case being payable on a monthly basis. The lessor
may thus terminate the lease after each month with due notice upon the lessee. After such
notice, the lessee's right to continue in possession ceases and an action of unlawful detainer
may be brought against him.
81. Ace-Agro Development Corp. vs CA
GR 119729
January 21, 1997
FACTS:
Ace-Agro had been cleaning soft drink bottles and repairing wooden shells for
Cosmos within its company premises in San Fernando, Pampanga. On April 25, 1990, a fire
broke out in the Cosmos plant. As a result, Ace-Agros work stopped. On May 15, 1990, AceAgro requested Cosmos to resume its services but they were advised that on account of the
fire destroying nearly all the bottles and shells, Cosmos was terminating their contract. Ace53

Agro requested Cosmos to reconsider its decision but upon receiving no reply, they informed
the employees of the termination of their employment, which led the employees to file a
complaint for illegal dismissal before the Labor Arbiter against both Ace-Agro and Cosmos.
Ace-Agro sent another letter for reconsideration to Cosmos to which they replied that they
could resume work but outside company premises. Ace-Agro refused the offer, claiming that
to work outside would incur additional transportation costs. Cosmos then advised Ace-Agro
that they could resume work inside the company premises but then Ace-Agro unjustifiably
refused because it wanted and extension of the contract to make up for the period of
inactivity.
ISSUE:
Because the suspension of work under a contract has been brought about by force
majeure, is the period during which work has been suspended justify an extension of the
term of the contract?
HELD:
No. The suspension of work due to fire does not merit an automatic extension. The
stipulation that in the event of a fortuitous event or force majeure the contract shall be
deemed suspended during the said period does not mean that it stops the running of the
period the contract has been agreed upon to run. The fact that the contract is subject to a
resolutory period, which relieves the parties of their respective obligations, does not stop the
running of the period of their contract.
82. Millare vs Hernando
GR NO. 55480
JUNE 30, 1987
FACTS:
On June 17, 1975, a five-year Contract of Lease was executed between Pacifica
Millare and Elsa Co married to Antonio Co. Co would rent the Peoples Restaurant at P350
per month. In May to July 1980, a dispute arose when Millare informed the Co spouses that
they would continue leasing the restaurant as long as they were amenable to paying P1200
per month. A counter-offer of P700 was made by Co, to which Millare allegedly stated that
the amount of monthly rentals could be resolved at a later time which Co took to mean that
the Contract of Lease had been renewed. In contrast, Millare flatly denies ever having
considered or offered a renewal of the Contract of Lease. On July 22, Millare requested
them to vacate the premises, and Co reiterated her unwillingness to pay P1200 for being
excessive and their intention to deposit the rentals in court, as Millare refused to accept their
counter-offer. Co spouses filed a complaint with the CFI of Abra claiming that renewal of the
Contract of Lease stated a valid cause of action. Millare filed an ejectment case against Co.
The judge ordered the renewal of the Contract of Lease and allowed Co to deposit the
rentals in Court following Art.1197 of the Civil Code.
ISSUE:
(1) Whether or not the private respondents, Co spouses, have a valid cause of action
against the petitioner
(2) Whether Art.1197 of the Civil Code is applicable to the case at bar
HELD:
(1) No. Paragraph 13 of the Contract of Lease can only mean that the lessor and
lesee may agree to renew the contract upon their reaching agreement on the
terms and conditions to be embodied in such renewal contract. Failure to reach
agreement on the terms and conditions of the renewal contract will prevent the
54

contract from being renewed at all. In the instant case, the lessor and the lessee
conspicuously failed to reach agreement on both the amount of the rental and on
the term of the renewed contract.
(2) No. Article 1197 of the Civil Code provide as follows:
If the obligation does not fix a period, but from its nature and the
circumstances it can be inferred that a period was intended, the courts may
fix the duration thereof.
The courts shall also fix the duration of the period when it depends upon the
will of the debtor.
In every case, the courts shall determine such period as may, under the
circumstances, have been probably contemplated by the parties. Once fixed
by the courts, the period cannot be changed by them. (Emphasis supplied.)
The first paragraph of Article 1197 is clearly inapplicable, since the Contract of Lease did in
fact fix an original period of five years, which had expired. It is also clear from paragraph 13
of the Contract of Lease that the parties reserved to themselves the faculty of agreeing upon
the period of the renewal contract. The second paragraph of Article 1197 is equally clearly
inapplicable since the duration of the renewal period was not left to the will of the lessee
alone, but rather to the will of both the lessor and the lessee. Most importantly, Article 1197
applies only where a contract of lease clearly exists. Here, the contract was not renewed at
all, there was in fact no contract at all the period of which could have been fixed.
83. JEREOS VS CA
GR NO. 48747
SEPTEMBER 30, 1982
FACTS:
Private respondent, Padorla, is the holder of a certificate of Public Convenience for
the operation of a jeepney line in Iloilo City. On 1971, one of his jeepneys driven by Jaravilla,
hit Judge Rodriguez and his wife resulting to the death of Judge Rodriguez and causing
injuries to the wife. Jaravilla was convicted of the crime of Homicide and Physical injuries
through Reckless Imprudence and sentenced accordingly. Soledad, the wife, and her
children filed with the CFI of Iloilo an action for damages against Jaravilla (driver), Padorla
(holder) and Jereos, the actual owner of the jeepney.
Jereos denied ownership of the jeepney and claimed that the plaintiffs have no cause
of action against him. Padorla also claimed that he was only the franchise owner and has
nothing to do with the actual control, operation and supervision of the jeepney which is under
Jereos control.
The CFI rendered judgment ordering Jaravilla and Padorla to pay jointly and
severally to the plaintiffs. Both appealed to the CA contending that Jereos should also be
jointly and severally liable with the damages incurred by them. The CA held that Jereos
should be jointly and severally liable for the damages. Jereos appealed from the decision.
ISSUE:
Whether Jereos is solidarily (jointly and severally) liable with Javarilla and Padorla
HELD:
Yes. In a civil action due to a quasi-delict (culpa aquiliana), the registered owner, the
actual owner, and the driver of the jeep involved are solidarily liable. The registered owner or
55

the operator has the right to be indemnified by the real or actual owner of the amount that he
may be required to pay as damage for the injury caused.
84. REPUBLIC PLANTERS BANK VS CA
GR NO. 93073
DECEMBER 21, 1992
FACTS:
In 1979, World Garment Manufacturing, through its board, authorized Shozo
Yamaguchi (president) and Fermin Canlas (treasurer) to obtain credit facilities from Republic
Planters Bank (RPB). For this, 9 promissory notes were executed. Each promissory note
was uniformly written in the following manner:
___________, after date, for value received, I/we, jointly and severally promise to
pay to the ORDER of the REPUBLIC PLANTERS BANK, at its office in Manila,
Philippines, the sum of ___________ PESOS(.) Philippine Currency
Please credit proceeds of this note to:
________ Savings Account ______XX Current Account
No. 1372-00257-6 of WORLDWIDE GARMENT MFG. CORP.
Sgd. Shozo Yamaguchi
Sgd. Fermin Canlas
The note became due and no payment was made. RPB eventually sued Yamaguchi and
Canlas. Canlas, in his defense, averred that he should not be held personally liable for such
authorized corporate acts that he performed inasmuch as he signed the promissory notes in
his capacity as officer of the defunct Worldwide Garment Manufacturing.
ISSUE:
Whether or not Canlas should be held liable for the promissory notes.
HELD:
Yes. The solidary liability of private respondent Fermin Canlas is made clearer and
certain, without reason for ambiguity, by the presence of the phrase joint and several as
describing the unconditional promise to pay to the order of Republic Planters Bank. Where
an instrument containing the words I promise to pay is signed by two or more persons, they
are deemed to be jointly and severally liable thereon.
Canlas is solidarily liable on each of the promissory notes bearing his signature for
the following reasons: The promissory notes are negotiable instruments and must be
governed by the Negotiable Instruments Law.
Under the Negotiable lnstruments Law, persons who write their names on the face of
promissory notes are makers and are liable as such. By signing the notes, the maker
promises to pay to the order of the payee or any holder according to the tenor thereof.
85.PURITA ALIPIO VS CA
GR NO. 134100
SEPTEMBER 29, 2000
Facts:
The trial court ordered petitioner and Manuel spouses to pay private respondent the
unpaid balance of the agreed rent in the amount of P50,000 without specifying whether the
amount is to be paid by them jointly or solidarily.

56

Issue:
Whether the obligation to pay is jointly or solidarily
Held:
The obligation is joint. Applying Art 1207 of the Civil Code, the obligation of petitioner
and the Manuel spouses is presumed to be only JOINT. If from the law or the nature or the
wording of the obligation the contrary does not appear, an obligation is presumed only to be
joint. The debt is divided into as many equal shares as there are debtors, each debt being
considered as distinct from one another.
Art. 1207. Reads as follows:
The concurrence of two or more creditors orof two or more debtors in one and the
same obligation does not imply that each one of the former has a right to demand, or
that each one of the latter is bound to render, entire compliance with the prestation.
There is a solidary liability only when the obligation expressly so states, or
when the law or the nature of the obligation requires solidarity.
86. CONSTANTE AMOR DE CASTRO VS CA
GR NO. 115838
JULY 18, 2002
FACTS:
Private respondent Artigo sued petitioners Constante and Amor De Castro to collect
the unpaid balance of his brokers commission from the De Castros.
The appellants, De Castros, were co-owners of 4 lots in Cubao, Quezon City. The
appellee, Artigo, was authorized by appellants to act as real estate broker in the sale of
these properties for the amount of P23,000,000.00, 5% of which will be given to the agent as
commission. Appellee first found the Times Transit Corporation and 2 lots were sold. In
return, he received P48,893.76 as commission.
Appellee apparently felt short changed because according to him, his total
commission should be P352,500.00 which is 5% of the agreed price of P7,050,000.00 paid
by Times Transit Corporation to appellants for the 2 lots and that it was he who introduced
the buyer to appellants and unceasingly facilitated the negotiation which ultimately led to the
consummation of the sale. Hence, he sued to collect the balance of P303,606.24 after
having received P48,893.76 in advance.
Appellants argued that appellee is selfishly asking for more than what he truly
deserved as commission to the prejudice of other agents who were more instrumental to the
consummation of the sale and that there were more or less 18 others who took active efforts.
The De Castros argued that Artigos complaint should have been dismissed for
failure to implead all the co owners of the 2 lots. . The De Castros contend that failure to
implead such indispensable parties is fatal to the complaint since Artigo, as agent of all the
four co-owners, would be paid with funds co-owned by the four co-owners.
It was shown also that Constante Amor De Castro signed the authorization of Artigo
as owner and representative of the co-owners.
ISSUE:
Whether or not the complaint merits dismissal for failure to implead other co-owners
as indispensable parties
HELD:
No. The De Castros contentions are devoid of legal basis. The CA explained that it is
not necessary to implead the co-owners since the action is exclusively based on a contract
of agency between Artigo and Constante. The rule on mandatory joinder of indispensable
parties is not applicable to the instant case.
Constante signed the note as owner and as representative of the other co-owners.
Under this note, a contract of agency was clearly constituted between Constante and Artigo.
57

Whether Constante appointed Artigo as agent, in Constantes individual or representative

capacity, or both, the De Castros cannot seek the dismissal of the case for failure to implead
the other co-owners as indispensable parties. The De Castros admit that the other coowners are solidarily liable under the contract of agency, citing Article 1915 of the Civil Code,
which reads:
Art. 1915. If two or more persons have appointed an agent for a common transaction
or undertaking, they shall be solidarily liable to the agent for all the consequences of
the agency.
The solidary liability of the four co-owners, however, militates against the De Castros
theory that the other co-owners should be impleaded as indispensable parties.
When the law expressly provides for solidarity of the obligation, as in the liability of
co-principals in a contract of agency, each obligor may be compelled to pay the entire
obligation. The agent may recover the whole compensation from any one of the coprincipals, as in this case.
Indeed, Article 1216 of the Civil Code provides that a creditor may sue any of the
solidary debtors. This article reads:
Art. 1216. The creditor may proceed against any one of the solidary debtors or some
or all of them simultaneously. The demand made against one of them shall not be an
obstacle to those which may subsequently be directed against the others, so long as
the debt has not been fully collected.
87. OPERATORS INC. VS AMERICAN BISCUIT CORP., INC.
GR NO. 34767
OCTOBER 23, 1987
FACTS:
Plaintiff American Biscuit Company (ABC), a manufacturer of biscuit, candy and
bubble gum products in financial distress, entered into an agreement with defendant
Operators Inc. where it ceded the entire, total and complete present operation of its business
in consideration for which Operators Inc. undertook to answer for existing obligations of the
plaintiff to its several creditors and to compensate plaintiff with a percentage of the gross
profits realized in the course of the operations.
Barely 10 months thereafter, ABC and Operators Inc, entered into another agreement
(Tripartite Agreement) with defendant Associated Biscuit Operators. Associated agreed to
engage in the manufacture and marketing of the biscuit products of ABC under the terms
and conditions of the Operating Contract of September 26, 1953.
Operators an Associated had both undertaken to pay ABCs obligation owing to its
various creditors. Defendants would share 50-50 in the monthly installments of the
P110,000.00 unpaid balance of the loan (China Banking Corporation). This arrangement was
religiously complied with by the Operators Inc. which paid P1500.00 monthly, making a total
payment of more than P100,000.00 including interest. Defendant Associated in turn, failed to
make good its commitments to pay its share of P55,000.00.
America Biscuit filed a complaint against Operators Incorporated and Associated
Biscuit for the cancellation of the Operating Contract and the Tripartite Agreement, with
prayers to put Associated Biscuit under receivership and for damages. American Biscuit
maintained that the payment of its indebtedness and of its overhead expenses was a joint
and solidary obligation of Operators and Associated Biscuit.
ISSUE:
Whether or not the payment of indebtedness to ABCs creditors by Operators and
Associated Biscuit was a solidary obligation
HELD:
58

The position of Operators that under the Operating Contract and the Tripartite
Agreement it is not answerable for the misfeasance of Associated, is belied by the very
provisions of the Tripartite Agreement, thus:
10. Incorporating Clauses.
Paragraphs 9, 10, 11, the provisions on Board of Arbitrators, 14, 15, 16 and 17 of the
contract of September 26, 1953 between the American Biscuit Co., Inc. and Operators
Incorporated are hereby incorporated into this Contract by way of reference and made an
essential part hereof; and the word OPERATORS mentioned in said paragraphs is to be
understood as to include the Associated Biscuit Operators Inc., for purposes of this Contract;
and both the Operators Incorporated and the Associated Biscuit Operators Inc., in so far as
liabilities and obligations therein contained in said paragraphs shall be made answerable to
the American Biscuit Co., Inc., jointly and severally.
There is thus no mistaking the fact that Operators and Associated had assumed, per their
agreements, Americans liabilities to its creditors in solidum.
Article 1207 of the new Civil Code states that: "there is a solidary liability when the obligation
expressly so states . . ."
What may have led Operators in denying the solidary character of its obligations was the fact
that it was engaged in the manufacture of candy whereas Associated Biscuit was supposed
to manufacture biscuits, and the fact that the two operators were required to invest different
minimum amounts in the venture. But these conditions do not alter the solidary nature of
their obligations as expressly provided. According to Article 1211 of the Civil Code, "solidarity
may exist although the debtors may not be bound in the same manner and by the same
periods and conditions." Accordingly, the disparity in their functions under the contracts does
not vary the fact that they were bound, in connection with Americans liabilities, jointly and
severally.
88.Ouano Arrastre Service, Inc. vs Aleonor et. al (GR 97664 Oct. 10, 1991) pending

89. COUNTRY BANKERS INSURANCE CORP. VS CA

GR 85161
SEP. 11, 1991
FACTS:
Lessor Ventanilla and Lessee Sy, entered into a lease agreement over a theater. The
lease was for six years. After more than two years of the operation of the theaters, Ventanilla
made demands for the repossession of the leased properties in view of Sys arrears in
monthly rentals and non-payment of amusement taxes. In pursuance of their latter
agreement, Sys arrears in rental in the amount of P125,445 was reduced to P71,028.
However, the accrued amusement tax liability of the three theaters to the City Government
had accumulated to P84,000 despite the fact that Sy had been deducting the amount of
P4,000 from his monthly rental with the obligation to remit the said deductions to the city
59

government. Hence, letters of demand were sent to Sy demanding payment of the arrears in
rentals and amusement tax delinquency.
When Sy failed to pay the amounts in full, despite demands, Ventanilla padlocked the
gates of the three theaters under lease and took possession thereof. Sy filed an action for
reformation and injunction. By virtue of the injunction, Sy regained possession of the theater.
The trial court held that Sy is not entitled to reformation. On the counterclaim, the court
found that Ventanilla was deprived of the enjoyment of the leased premises and suffered
damages as a result of the fi ling of the case by Sy and his violation of theterms and
conditions of the agreement. It held that Ventanillais entitled to recover the damages in
addition to the arrears in rentals and amusement tax delinquency of Sy and the accrued
interest thereon. It found that as of the end of Nov. 1980, whenVentanilla regained
possession of the three theaters, Sys unpaid rentals and amusement tax liability amounted
to P289,534. In addition, it held Sy under obligation to pay P10,000 every month from Feb.
to Nov. 1980 or the total amount of P100,000 with interest on each amount of P10,000 from
the time the same became due. Thus, P10,000 portion of the monthly lease rental was
supposed to come from the remaining cash deposit of Sybut with the consequent forfeiture
of the remaining cash deposit of P290,000, there was no more cash deposit from which said
amount could be deducted further. It adjudged Sy to pay attorneys fees equivalent to 10% of
the amounts above-mentioned. Finally, the court held Sy thru the injunction bond liable to
pay P10,000 every month from Feb. to Nov. 1980. The amount represents the supposed
increase in rental from P50,000 to P60,000 in view of the offer of someone to lease the three
theaters involved for P60,000 a month. The Court of Appeals (CA) sustained the trial court.
HELD:
The Supreme Court affirmed the CAs decision and held that inasmuch as the
forfeiture clause provides that the deposit shall be deemed forfeited, without prejudice to any
other obligation still owing by the lessee to the lessor, the penalty cannot substitute for the
P100,000 supposed damage resulting from the issuance of the injunction against the
P29,000 remaining cash deposit. This supposed damage suffered by OVEC was the alleged
P10,000 a month increase in rental (from P50,000 to P60,000), which OVEC failed to realize
for ten months from Feb. to Nov. 1980 in the total sum of P100,000. This opportunity cost
which was duly proven before the trial court, was correctly made chargeable by the said
court against the injunction bond posted by CISCO. The undertaking assumed by CISCO
under subject injunction refers to all such damages as such party may sustain by reason of
the injunction if the Court should fi nallydecide that the Plaintiff was not entitled thereto. The
CA correctly sustained the trial court in holding that the bond shalland may answer only for
damages which OVEC may suffer as a result of the injunction. The arrears in rental, the
unremitted amounts of the amusement tax delinquency, the amount of P100,000 (P10,000
portions of each monthly rental which were not deducted from plaintiffs cash deposit from
Feb. to Nov. 1980after the forfeiture of said cash deposit on Feb. 11, 1980) and attorneys
fees which were all charged against Sy were correct and considered by the CA as damages
which OVEC sustained not as a result of the injunction.
90.Commercial Credit Corporation of Cagayan de Oro vs. CA (GR 78315 Jan. 2, 1989)
Facts: In 1978, private respondent Cagayan De Oro Coliseum, Inc. executed a promissory
note in the amount of P329,852.54 in favor of petitioner Commercial Credit Corporation of
Cagayan de Oro, to be paid in 36 monthly installments which is secured by a real estate
mortgage. However, respondent defaulted in the payment of the monthly installments due,
petitioner proceeded with the extrajudicial foreclosure of the real estate mortgage in
September, 1979. Then after, parties executed a compromise agreement on the basis which
a compromise judgment was rendered that the private respondent would still pay the debt so
with the interest. But, private respondent failed to comply again with the terms of the
60

judgment for failure to pay several installments in the amount of P70,152.65 which matured
on July 13, 1982, petitioner filed an ex-parte motion for the issuance of a writ of execution on
March 4, 1983. The Court granted the said motion in an order. At that point, a notice of
auction sale was issued. Private respondent filed a motion for reconsideration of said order
alleging that it had paid its obligation. The execution of the writ was suspended pending
consideration of said motion. The trial court denied said motion for reconsideration and,
accordingly, a writ of execution was issued. The Deputy Provincial Sheriff set the auction
sale. Nevertheless said auction sale did not take place as scheduled due to some internal
problems in the office of sheriff. Private respondent then filed a special civil action in the
Court of Appeals to annul said compromise-judgment, alleging that the trial court acted in
serious violation of law and/or in grave abuse of discretion. In due course, a decision was
rendered by said appellate court, which the said present petition is denied and the overdue
and unpaid installments shall earn one half per cent (1/2%) per month penalty charge until
fully paid, plus two per cent (2%) of the outstanding balance as additional attorney's fees. A
motion for reconsideration of the decision was filed by petitioner. The petitioner alleged that
the CA committed a grave and reversible error in applying Article 1229 of the NCC and
modified the effects of the 3% penalty interest and attorneys fees after it upheld the legality
of the compromise judgment of the trial court.
Issue: Whether or not CA erred in modifying the compromise agreement.
Issue: Yes, CA erred in modifying said agreement since respondent appellate court has no
authority to reduce the penalty and attorney's fees therein stipulated which is the law
between the parties and is res judicata. When the parties entered into the said compromise
agreement and submitted the same for the approval of the trial court, its terms and
conditions must be the primordial consideration why the parties voluntarily entered into the
same. The trial court approved it because it is lawful, and is not against public policy or
morals. Even CA upheld the validity of the said compromise agreement. In the present case,
the compromise agreement was voluntarily entered into by the parties assisted by their
respective counsel and was duly approved by the trial court. Indeed, it was confirmed by the
respondent appellate court to be lawful. The modification of said compromise judgment by
the respondent appellate court is predicated on the provision of Article 1229 of the Civil Code
which provides as that the Judge shall equitably reduce the penalty when the principal
obligation has been partly or irregularly complied with by the debtor. Even if there has been
no performance, the penalty may also be reduced by the courts if it is iniquitous or
unconscionable. The foregoing provision of the law applies only to obligations or contract,
subject of a litigation, the condition being that the same has been partly or irregularly
complied with by the debtor. The provision also applies even if there has been no
performance, as long as the penalty is iniquitous or unconscionable. It cannot apply to a final
and executory judgment.

91.INSULAR BANK OF ASIA AND AMERICA vs. SALAZAR G.R. No. 82082 March 25,
1988
Facts: On September 12, 1984, the plaintiff-appellant filed a complaint with the Regional
Trial Court alleging that the defendants-appellees were indebted to IBAA in the amount of
61

P87,647.19 as of September 15, 1984 including interest at 21% per annum penalty charges,
and attorney's fees. RTC rendered judgment in favor of the plaintiff ordering the defendant
spouses Salazar to pay IBAA the sum of Eleven Thousand Two Hundred Fifty Three Pesos
and Twenty Five Centavos ( P11,253.25 ), with interest thereon at the rate of 19% per
annum from the filing of the complaint on September 12, 1984 until fully paid. The
defendants are further ordered to pay the plaintiff-attorney's fees in the amount of one
Thousand Pesos (P1, 000.00) and to pay the costs. Petitioner IBAA appealed from the
judgment of RTC of Leyte since there has been an agreement between the evidenced by a
promissory note where the defendants-appellees bound themselves jointly and severally to
pay the amount with interest at 19% per annum and with the express authority to increase
without notice the rate of interest up to the maximum allowed by law and subject further to
penalty charges or liquidated damages upon default equivalent to 2% per month on any
amount due and unpaid. In the event the account was referred to an attorney for collection,
the defendants-appellees were also bound to pay 25% of any amount due as attorney's fees
plus expenses of litigation and costs. In accordance with the agreement, the plaintiffappellant increased the rate of interest to 21% pursuant to Central Bank Circular No. 705
dated December 1, 1979.
Issue: Whether or not the plaintiff can increase the rate of interest from 19% to 21% in
accordance with the CBC No. 705.
Held: No, the plaintiff cannot do so. The Civil Code permits the agreement upon penalty
apart from the interest. Should there be such an agreement, the penalty does not include the
interest, and as such the two are different and distinct things which may be demanded
separately. The stipulation about payment of such additional interest rate partakes of the
nature of a penalty clause which is sanctioned by law.
92.ROSETE ET.AL VS PEROBER DEV.CORP (CA-GR 61031-R JULY 31,1981)
93.CORAZON and CONSTANTE AMOR DE CASTRO and vs. CA and FRANCISCO
ARTIGO
Facts: Private respondent sued petitioners to collect the unpaid balance of his brokers
commission from the De Castros. Respondent was authorized by petitioners to act as real
estate broker in the sale of 4 properties for the amount of P23,000,000.00, five percent (5%)
of which will be given to the agent as commission. It was Artigo who first found Times
Transit Corporation, represented by its president Mr. Rondaris, as prospective buyer which
desired to buy two (2) lots. Then the sale of lots took place. Private respondent received
from the spouses P48, 893.76 as commission. It was then that the rift between the
contending parties soon emerged. Artigo apparently felt short changed because according to
him, his total commission should be P352,500.00 which is five percent (5%) of the agreed
price of P7,050,000.00 paid by Times Transit Corporation to appellants for the two (2) lots,
and that it was he who introduced the buyer to appellants and unceasingly facilitated the
negotiation which ultimately led to the consummation of the sale. Hence, he sued below to
collect the balance of P303,606.24 after having received P48,893.76 in advance. On the
other hand, spouses completely traverse appellees claims and essentially argue that
appellee is selfishly asking for more than what he truly deserved as commission to the
prejudice of other agents who were more instrumental in the consummation of the sale. But
despite this and out of appellants pure liberality, beneficence and magnanimity, appellee
nevertheless was given the largest cut in the commission (P48,893.76), although on the
62

principle of quantum meruit he would have certainly been entitled to less. Furthermore, the
purchase price for the two lots was only P3.6 million as appearing in the deed of sale and
not P7.05 million as alleged by appellee. Thus, CA upheld the trial courts finding that the
purchase price was P7.05 million and not P3.6 million. Evidence aliunde is admissible
considering that Artigo is not a party, but a mere witness in the deed of sale between the De
Castros and Times Transit. CA explained that, the rule that oral evidence is inadmissible to
vary the terms of written instruments is generally applied only in suits between parties to the
instrument and strangers to the contract are not bound by it. Besides, Artigo was not suing
under the deed of sale, but solely under the contract of agency.
Issue: Whether or not Artigos claim has been extinguished by full payment, waiver or
abandonment.
Held: The De Castros reliance on Article 1235 of the Civil Code is misplaced. Artigos
acceptance of partial payment of his commission neither amounts to a waiver of the balance
nor puts him in estoppel. The word accept as used in Article 1235 of the NCC, it means to
partake a satisfactory or sufficient or agree to an incomplete or irregular performance. In this
case at bar, the mere receipt of a partial payment is not equivalent to the required
acceptance of performance as would extinguish the whole obligation.
94.CHONNEY LIM vs.CA and LEA CASTRO WHELAN and KEITH LAWRENCE
WHELAN, G.R. No. 104819 July 20, 1998
Facts: On March 1984, a conditional deed of sale was executed between appellant Lim and
appellee Lea Whelan. It was stipulated that appellee Whelan would buy from the appellant a
parcel of land with an area of 1,000 square meters for the sum of P600,000.00 or U.S.
$30,000.00 in U.S. $100 denomination. The property, however, was mortgaged to the Bank
of the Philippine Islands; the loan which on maturity on August 14, 1984, would be
P269,960.88. Lea Whelan then paid an earnest money of U.S. $9,000.00 consisting of U.S.
$8,000.00 in $100.00 bills and U.S. $1,000.00 in traveller's checks of $100.00; thereafter,
she occupied the premises. Subsequently, appellee Whelan allegedly gave appellant Lim
U.S. $8,000.00, a bank draft in the sum of P141,000.00 and later a check for P17,800.00
drawn against PCI Bank. After these payments, a deed of absolute sale was signed by
appellee Whelan and appellant Lim on June 21, 1984, appellant Lim allegedly gave Whelan
xeroxed copies of title, realty tax receipts and bills for light and water. On August 23, 1984,
appellant sent Whelan a telegram demanding her to vacate the subject property. Whelan
countered that she was already the owner thereof. On August 24, 1984, a complaint for
ejectment was filed against the, appellee. Lim claimed that he was not paid the U.S.
$8,000.00 due him; that the bank draft for the sum of P141,000.00 was not honored; and
that the check for P17,800.00 bounced. Defendant-appellee Lea Whelan, however, replied
that she paid the indebtedness of the appellant in the amount of P210,297.70 inclusive of
interests and penalty charges hence, the mortgage of the property to the Bank of the
Philippine Islands was already cancelled. Consequently, appellee stopped the payment of
the bank draft and check in favor of the appellant. Appellee, likewise, claimed that she paid
the capital gains tax on the sale of the property to her in the amount of P14,994.00.
Furthermore, appellee Whelan alleged that the house which was built on the land she
bought, had been renovated at her expense for the amount of P180,000.00 to P200.000.00.
When, in 1986, the said house was damaged by a typhoon, it was repaired and had cost
appellee P17,000.00. Since the bank draft was dishonored and the PCI Bank check
bounced, petitioner alleged that he was not paid. He therefore instituted an action for
63

rescission of contract. On the other hand, Lea Whelan filed an action for specific
performance demanding from Lim the delivery of the title of said property which she has fully
paid.
Issue: Whether or not Chonney Lim has been fully paid for the property in question.
Held: Yes, Lim has been fully paid and even took advantage in the situation. The payment of
loan and capital gains tax undoubtedly relieved the appellant from such obligations. The
benefit had been mutual, both appellant and appellee had obtained advantages on their
sides the appellant from his loan and appellee from being secured of the possession. The
court found no error with the ruling that petitioner is not entitled to rescission of the contract.
It cannot be denied that Chonney Lim is also not without fault in this case. It was Chonney
Lim's obligation to see to it that the property was free from all encumbrances and tax
liabilities, among others, which he obviously failed to do. The respondent court's ruling in
considering the payment of the mortgage loan and the capital gains tax by Lea Whelan as
her full payment for the property is but a fair disposition which this Court does not see any
cogent reason to reverse.

95.RIDO MONTECILLO vs. IGNACIA REYNES and SPOUSES REDEMPTOR and ELISA
ABUCAY
Facts: Respondents Ignacia Reynes and Spouses Abucay filed a complaint for Declaration
of Nullity and Quieting of Title against petitioner Rido Montecillo. Reynes asserted that she
is the owner of a lot situated in Mabolo, Cebu City, covered by Transfer Certificate of Title
No. 74196 and containing an area of 448 square meters. In 1981, Reynes sold 185 square
meters of the Mabolo Lot to the Abucay Spouses who built a residential house on the lot they
bought. Reynes alleged further that on March 1, 1984 she signed a Deed of Sale of the
Mabolo Lot in favor of Montecillo. Reynes, being illiterate, signed by affixing her thumb-mark
on the document. Montecillo promised to pay the agreed P47, 000.00 purchase price within
one month from the signing of the Deed of Sale. However, Petitioner Montecillos Deed of
Sale does not state that the P47, 000.00 purchase price should be paid by the former to
Cebu Ice Storage (CIS). Montecillo failed to adduce evidences before the trial court showing
that Reyes had agreed verbally or in writing that the said purchase price should be paid to
CIS.
Issue: Whether or not Reynes and Montecillo agreed that said consideration of P47,000.00
in the Deed of Sale be paid to Cebu Ice and Cold Storage to secure the release of the
Transfer Certificate of Title.
Held: No, there is no stipulation to the same. Absent any evidence showing that respondent
had agreed to the payment of the purchase price to any other party, the payment to be
effective must be made to the respondent, the vendor in the sale. Thus, petitioners payment
to CIS is not the payment that would extinguish the formers obligation to respondent under
the Deed of Sale. In summary, Montecillos Deed of Sale is null and void ab initio not only for
lack of consideration, but also for lack of consent.

64

96. ESMERALDA and REYNALDO ALCARAZ and vs. PEDRO M. TANGGA-AN, MENAS
R. TANGGA-AN, VIRGINIA III YVETTE R. TANGGA-AN, CECIL T. VILLAFLOR, HERMES
R. TANGGA-AN, VENUS R. TANGGA-AN, JUPITER R. TANGGA-AN, YVONNE T. FRI,
VIVIEN R. TANGGA-AN and HON. JUDGE P. BURGOS and THE COURT OF APPEALS,
G.R. No. 128568. April 9, 2003
Facts: It was alleged in the complaint that the late Virginia Tangga-an (the spouse of
respondent Pedro Tangaa-an and mother of the rest of the respondents) leased a residential
building (house) located at Premier Street, Hipodromo, Cebu City to the petitioner spouses.
The lease contract was limited to the use and occupancy of the said residential building and
did not include the lot on which it was constructed because the said lot was then owned by
the National Housing Authority (NHA). Under the contract, the petitioner spouses bound
themselves for five years to pay Virginia a monthly rental of P4,000 beginning November 22,
1991. However, since November 1993, they failed to pay rent. Thus, as of October, 1994,
they were in arrears in the amount of P48,000. Despite repeated demands by respondents
to pay the rentals in arrears and to surrender the possession of the residential building, the
petitioner spouses refused to vacate the same. Respondents sought to repossess the
property for their own use and benefit. On the other hand, the petitioner spouses alleged
that, on July 23, 1993, that their payments to Virgilio were made in good faith, who is the
person in possession of credits in accordance with Art. 1242. Payment made in good faith
shall release the debtor. This, spouses pointed out that they were released from the
obligation. They claimed that Virgilio collected the rentals in his capacity as co-owner and
being son of Virginia, he was also entitled to the rent of the subject house.
Issue: Whether or not the payments made to Virgilio which was made in good faith releases
the spouses from their obligation.
Held: No. Virgilio collected the rentals not as a co-owner but as the alleged sole owner of the
subject house. The petitioner spouses themselves admitted that Virgilio claimed sole
ownership of the house and lot. It would be incongruous for them to now assert payment in
good faith to a person they believed was collecting in behalf of his co-heirs after admitting
that they paid rent to Virgilio as the sole owner thereof. Hence, for violating of the terms of
the lease contract, i.e., payment of rent, respondents can legally demand the ejectment of
the petitioner spouses.

97.PABLO
V.
ZAGALA
and
PABLO
V.
ZAGALA
&
CO.
vs.
THE HONORABLE JOSE B. JIMENEZ, in his capacity as Presiding Judge of Branch VI,
Court of First Instance of Manila, and FRANCISCO G. GUBALLA, G.R. No. L-33050,
July 23, 1987
Facts: This is a petition for certiorari and mandamus directly elevated by the petitioners to
this Court from the then Court of First Instance (now Regional Trial Court) of Manila. It seeks
the review and annulment of the Orders of the respondent judge in 1970, denying the
petitioners' Motion For Fixing The Peso Value Of Judgment In Dollars And For Issuance Of
65

Writ Of Execution To Enforce The Same, as well as the one dated December 19, 1970,
denying for lack of merit the petitioners' Motion For Reconsideration. Also, it prays that the
respondent judge be ordered to grant the petitioners' motion for the fixing of the peso
equivalent of the judgment in dollars as contained in the decision of the trial court and be
compelled to issue the writ of execution to enforce the same judgment. In 1967, the
petitioners filed with the trial court a complaint for the collection of sums of money allegedly
due them from the private respondent. On the cause of action, the amount of U.S. $9,404.14
equivalent to P36,864.23 at the current exchange rate of P3.92 to the dollar, or the
equivalent amount thereof based on the exchange rate officially prevailing at the time of
payment, plus interest thereon at nine (9%) percent based and computed in U.S. dollars
from the maturity dates of the drafts in question until full payment. Without entering into any
trial on the merits and after the case had been set for pre-trial, the petitioners and the private
respondent entered into a Compromise Agreement under date of May 17, 1968. They filed
this agreement with the trial court on the same date. That said compromise agreement was
approved and the parties are strictly enjoined to comply with the terms and conditions
thereof, which is made an integral part of the dispositive portion of this decision. However, it
was not fully complied with by the private respondent, prompting the petitioners to file with
the trial court a motion for the fixing of the peso value of the judgment in dollars and for the
issuance of a writ of execution to enforce the same on October 26, 1970. Acting on this
motion, the respondent judge, the Hon. Jose B. Jimenez, the new Presiding Judge of Branch
VI of the Court of First Instance of Manila, issued an order which denied the motion filed on
October 26, 1970, by counsel for the plaintiffs praying before Court fixing the peso value of
the judgment in the first cause of action in the complaint (which is in dollars) at the present
rate of P6.55 to the dollar, as per certification of the Far East Bank and trust Company;
Issue: Whether or not a judgment awarding an amount in U.S Dollars may be paid with its
equivalent amount in local currency.
Held: Yes, a judgment awarding an amount in U.S Dollars may be paid with its equivalent
amount in local currency in the conversion rate prevailing at the time of payment. If the
parties cannot agree on the same, the trail court should determine such conversion rate.
Needless to say, the judgment debtor may simply satisfy said award by paying in the full
amount in U.S. dollars. Thus, if the plaintiff files a motion to fix the peso value of the
judgment in dollars, they only intend to exercise the right granted to them by the present
jurisprudence that the trial court shall determine or fix the conversion rate prevailing at the
time of payment, and it is error for the trial court to deny said motion.

98.C.F. SHARP & CO., INC. vs. NORTHWEST AIRLINES, INC.

Facts: In 1974, respondent, through its Japan Branch, entered into an International
Passenger Sales Agency Agreement with petitioner, authorizing the latter to sell its air
transport tickets. Petitioner failed to remit the proceeds of the ticket sales, for which reason,
respondent filed a collection suit against petitioner before the Tokyo District Court which
rendered judgment on January 29, 1981, ordering petitioner to pay respondent the amount
of 83,158,195 Yen and damages for the delay at the rate of 6% per annum from August 28,
1980 up to and until payment is completed. Unable to execute the decision in Japan,
66

respondent filed a case to enforce said foreign judgment with the Regional Trial Court of
Manila. However, the case was dismissed on the ground of failure of the Japanese Court to
acquire jurisdiction over the person of the petitioner. Respondent appealed to the Court of
Appeals, which affirmed the decision of the trial court. Respondent filed a petition for review
with this SC. The court issued the writ of execution against defendant C.F. Sharp ordering
said defendant to pay the plaintiff the sum of 83,158,195 Yen at the exchange rate prevailing
on the date of the foreign judgment on January 29, 1981, plus 6% per annum until May 19,
1983; and from said date until full payment, 12% per annum (6% by way of damages and
6% interest) until the entire obligation is fully satisfied. In 1995, petitioner filed a petition for
certiorari, assailing the aforequoted order. On May 29, 1996, the case was referred to the
Court of Appeals. Petitioner contended that it had already made partial payments; hence, it
was liable only for the amount of 61,734,633 Yen. Moreover, it argued that it was not liable to
pay additional interest on top of the 6% interest imposed in the foreign judgment.
Issue: Whether or not stipulations on the satisfaction of obligations in foreign currency are
valid.
Held: Under this law, stipulations on the satisfaction of obligations in foreign currency are
void. Payments of monetary obligations, subject to certain exceptions, shall be discharged
in the currency which is the legal tender in the Philippines. But since R.A. No. 529 does not
provide for the rate of exchange for the payment of foreign currency obligations incurred
after its enactment, the Court held in a number of cases that the rate of exchange for the
conversion in the peso equivalent should be the prevailing rate at the time of payment. The
repeal of R.A. No. 529 by R.A. No. 8183 has the effect of removing the prohibition on the
stipulation of currency other than Philippine currency, such that obligations or transactions
may now be paid in the currency agreed upon by the parties. Just like R.A. No. 529,
however, the new law does not provide for the applicable rate of exchange for the
conversion of foreign currency-incurred obligations in their peso equivalent. It follows,
therefore, that the jurisprudence established in R.A. No. 529 regarding the rate of conversion
remains applicable. Thus, the obligations in foreign currency may be discharged in Philippine
currency based on the prevailing rate at the time of payment. The wisdom on which the
jurisprudence interpreting R.A. No. 529 is based equally holds true with R.A. No. 8183.
Verily, it is just and fair to preserve the real value of the foreign exchange- incurred obligation
to the date of its payment.

99.ISIDRO M. ONGSIP vs. PRUDENTIAL BANK & TRUST CO., G.R. No. L-27328, May
30, 1983
Facts: This case is about the deduction from a depositor's current account of postdated
check and deposits on marginal credit allegedly by the depositor. The Prudential Bank &
Trust Co. appealed from the decision ordering the bank to pay Isidro M. Ongsip the sum of
P225,484.95 with legal interest from June 2, 1955 until fully paid, the sum of P19,416.37 with
legal interest from July 14, 1955 until fully paid and P5,000 as attorney's fees. (Appeal
before R.A. No. 5440.) Ongsip had a current account with the Prudential Bank during the
period from 1952 to 1960. The bank debited against Ongsip's current account amounting to
P25,484.95 and the sum of P19,416.37 representing marginal depositors on six letters of
67

credit opened with the bank, not by Ongsip but by third persons. Ongsip made formal
demands upon the bank for the restitution of the debited amounts but the bank did not honor
the demands. Ongsip then complained to the Central Bank against the acts of the Prudential
Bank but the Central Bank disclaimed jurisdiction. According to the bank, it was especially
arranged with Ongsip that the latter would deposit postdated and immature checks, and the
bank would debit them against his current account, and when the checks matured, credit
them to his current account: credit, then debit, then credit again. The trial court did not
believe that such a special arrangement existed. It was an irregular banking practice. The
trial court could not sanction such an irregularity. The bank contends that the trial court erred
in holding that Ongsip was damaged by debiting P225,484.95 against his account because it
did not consider the re-crediting entries and other evidence surrounding the transaction.
Although the bank admitted that the crediting of postdated checks to a current account is an
irregular practice, it tolerated the irregularity because Ongsip was a valued client.
Issue: Whether or not Ongsip was liable for the marginal deposits on six letters of credit
which were clandestinely purchased by him. The court found the bank's contention to be
correct, as shown in Exhibits 51 to 51-E, which prove Ongsip's assumption of the marginal
deposits involved in the six letters of credit. He is liable for that amount. However, a
postdated check is not a check at all, and a bank shall not deduct from a depositors current
account the postdated check issued by the depositor.

100.EVELYN J. SANGRADOR, joined by her husband RODRIGO SANGRADOR, SR. vs.

SPOUSES FRANCISCO VALDERRAMA and TERESITA M. VALDERRAMA, G.R. No.
79552 November 29, 1988
Facts: In 1983 the defendants-spouses Francisco and Teresita Valderrama obtained a
P500,000 loan from Manuel Asencio payable on or before April 12, 1984, and secured by a
real estate mortgage on their house and lot (actually 3 lots) in front of the Jaro Plaza in Iloilo
City. Foreseeing that they would not be able to pay the loan and redeem their property upon
maturity of the loan, the defendants scouted around for money-lenders who would be willing
to lend them money with which to pay off their mortgage to Asencio. Through the help of a
loan broker, Wilson Jesena, they were able to obtain on April 6, 1984 a P1,000,000 loan
from the plaintiff Teresita Sangrador, who is an aunt of Jesena, on the security of the same
property which they redeemed from Asencio. The loan was evidenced by a promissory note.
The makers of that note, jointly and severally undertake that in the event that an
extraordinary inflation of the Philippine Peso should supervene between now and eight (8)
months after date, then the value of the Philippine Peso at the time of the establishment of
this obligation, shall be the basis of payment pursuant to Art. 1250 of the Civil Code of the
Philippines. It was acknowledged the official exchange rate of the Philippine Peso to the US
Dollar at P14.002 to $1. The corresponding adjustment in the value of the Philippine Peso
shall be made in the event that at the time of the maturity of this obligation, the rate of
exchange will have changed as a result of the supervening inflation.
Issue: Whether or not the loan obtained by private respondents from petitioners was in the
amount of P1,400,000.00 or P1,000,000.00 only.

68

Held: The Promissory Note (Exh- B) and the Deed of Real Estate Mortgage (Exh. A)
executed by the respondents in favor of the petitioners indeed state that the loan is in the
amount of P1,400,000.00. However, the other documents executed by the parties
contemporaneously with said Promissory Note and Deed of Real Estate Mortgage clearly
show that the actual loan, i.e. the amount received by respondents, was only P1,000,000.00.
Thus, for the payment made by the petitioners for the account of the respondents to Manuel
Asencio, thereby releasing the mortgage on the property, so that it could in turn be
mortgaged to the petitioners, the respondents signed a receipt in favor of the petitioners in
the amount of P625,000.00 (Exh. 2). Hence, SC agreed with the finding of the Court of
Appeals that the disputed amount of P400,000.00 was a hidden interest that the petitioners
had required the respondents to pay at the maturity of the loan, but said amount of
P400,000.00 was not received by or delivered to the respondents. This conclusion is
strengthened by the fact that the promissory note and the deed of real estate mortgage
(Exhs. B and A), strangely enough, do not contain any express stipulation on interest, or rate
of interest, when the loan involved therein is in the substantial amount of allegedly
P1,400,000.00. Since petitioners failed to prove the supervening of extraordinary inflation
between 6 April 1984 and 7 December 1984no proofs were presented on how much, for
instance, the price index of goods and services had risen during the intervening periodan
extraordinary inflation cannot be assumed; consequently, there is no reason or basis, legal
or factual, for adjusting the value of the Philippine Peso in the settlement of respondents'
obligation.

101. G.R. No. L-43446 May 3, 1988

FILIPINO
PIPE
AND
FOUNDRY
CORPORATION, plaintiff-appellant,
vs.
NATIONAL WATERWORKS AND SEWERAGE AUTHORITY, defendant-appellee.
FACTS:
NAWASA entered into a contract with the plaintiff FPFC for the latter to supply it with
centrifugally cast iron pressure pipes worth P270,187.50 to be used in the construction of the
Anonoy Waterworks in Masbate and in Samar.
NAWASA paid in installments on various dates, a Total of P134,680.00 leaving a
balance of P135,507.50 excluding interest. Having completed the delivery of the pipes, the
plaintiff demanded payment from the defendant of the unpaid balance of the price with
interest in accordance with the terms of their contract. When the NAWASA failed to pay the
balance of its account, the plaintiff filed a collection suit.
The trial court rendered judgment ordering the defendant to pay the unpaid balance
of P135,507.50 in NAWASA negotiable bonds, redeemable after ten years from their
issuance with interest at 6% per annum, P40,944.73 as interest up to March 15, 1966 and
the interest accruing thereafter to the issuance of the bonds at 6% per annum and the costs.

69

Defendant, however, failed to satisfy the decision. It did not deliver the bonds to the
judgment creditor.
FPFC filed another complaint seeking an adjustment of the unpaid balance in
accordance with the value of the Philippine peso when the decision was rendered on
November 23, 1967.
ISSUE: WON there exists an extraordinary inflation to justify the adjustment of NAWASAs
unpaid judgment obligation

RULING:
No, there is no extraordinary inflation. Extraordinary inflation exists "when there is a
decrease or increase in the purchasing power of the Philippine currency which is unusual or
beyond the common fluctuation in the value said currency, and such decrease or increase
could not have reasonably foreseen or was manifestly beyond contemplation the the parties
at the time of the establishment of the obligation.
While appellant's voluminous records and statistics proved that there has been a
decline in the purchasing power of the Philippine peso, this downward fall of the currency
cannot be considered "extraordinary." It is simply a universal trend that has not spared our
country.

102. G.R. No. L-36706 March 31, 1980

COMMISSIONER
OF
PUBLIC
HlGHWAYS, petitioner,
vs.
HON. FRANCISCO P. BURGOS, in his capacity as Judge of the Court of First Instance
of Cebu City, Branch 11, and Victoria Amigable, respondents.

FACTS:
Victoria Amigable is the owner of parcel of land situated in Cebu City with an area of 6,167
square meters. Sometime in 1924, the Government took this land for road-right-of-way
purpose. The land had since become streets known as Mango Avenue and Gorordo Avenue
in Cebu City.
The Government proved the value of the property at the time of the taking thereof in 1924 of
deeds of conveyance executed in 1924 or thereabouts, of several parcels of land in the
Banilad Friar Lands in which the property in question is located, showing the price to be at
P2.37 per square meter. For her part, Victoria Amigable presented newspaper clippings of
the Manila Times showing the value of the peso to the dollar obtaining about the middle of
1972, which was P6.775 to a dollar.
70

ISSUE:
Whether or not the provision of Article 1250 of the New Civil Code is applicable in
determining the amount of compensation to be paid to respondent Victoria Amigable for the
property taken is raised because the respondent court applied said Article by considering the
value of the peso to the dollar at the time of hearing

RULING:
ART. 1250. In case extra-ordinary inflation or deflation of the currency
stipulated should supervene, the value of the currency at the time of the
establishment of the obligation shall be the basis of payment, unless there is
an agreement to the contrary.
It is clear that the foregoing provision applies only to cases where a contract or
agreement is involved. It does not apply where the obligation to pay arises from law,
independent of contract. The taking of private property by the Government in the exercise of
its power of eminent domain does not give rise to a contractual obligation.

103. G.R. No. L-58961 June 28, 1983

SOLEDAD
SOCO, petitioner,
vs.
HON. FRANCIS MILITANTE, Incumbent Presiding Judge of the Court of First Instance
of Cebu, Branch XII, Cebu City and REGINO FRANCISCO, JR., respondents.

FACTS:
Soco leased her commercial building and lot situated at Manalili Street, Cebu City, to
Francisco for a monthly rental of P 800.00 for a period of 10 years renewable for another 10
years at the option of the lessee. Francisco noticed that Soco did not anymore send her
collector for the payment of rentals and at times there were payments made but no receipts
were issued.
After writing a letter, Francisco sent his payment for rentals by checks issued by the
Commercial Bank and Trust Company. Obviously, these payments in checks were received
because Soco admitted that prior to May, 1977, defendant had been religiously paying the
rental.
71

The factual background setting of this case clearly indicates that soon after Soco learned
that Francisco sub-leased a portion of the building to NACIDA, at a monthly rental of more
than P3,000.00 which is definitely very much higher than what Francisco was paying to Soco
under the Contract of Lease, the latter felt that she was on the losing end of the lease
agreement so she tried to look for ways and means to terminate the contract.
Soco filed a civil case seeking the annulment and/or reformation of the Contract of Lease.

ISSUE: WON there was substantial compliance with the requisites of consignation and so
ruled in favor of private respondent, Regino Francisco, Jr., lessee of the building
RULING:
The Court finds and rules that the lessee has failed to prove tender of payment except that in
Exh. 10; he has failed to prove the first notice to the lessor prior to consignation except that
given in Exh. 10; he has failed to prove the second notice after consignation except the two
made in Exh. 12; and he has failed to pay the rentals for the months of July and August,
1977 as of the time the complaint was filed for the eviction of the lessee.
The evidence is clear, competent and convincing showing that the lessee has violated the
terms of the lease contract and he may, therefore, be judicially ejected.

104. Avelino v velez

[G.R. No. L-48448. February 20, 1984.]

FACTS:
Five parcels of land all located at Katipunan Street, Cebu City, were formerly owned by
Rodrigo Velez, the father of petitioners. In an extrajudicial partition, the said lots were
adjudicated to Respondents.Petitioners made several demands to vacate upon respondents
who asked an extension of one year but thereafter, respondents changed their minds and
refused to vacate.
Upon their refusal, petitioners filed an ejectment casealleging that except for Magin Velez,
they have no other lot of their own and are living on other persons premises; that
respondents are not only occupying the premises but also accepting boarders and/or using
the same for commercial purposes and that several demands have been made to give way
to the needs of petitioners and their respective families but respondents maliciously,
abusively and defiantly refused to accede to petitioners lawful demands.
In their answer, respondents admitted the ownership of the land by petitioners. But they
alleged that they have been occupying portions of the lots by virtue of oral agreements of
72

lease for an indefinite period, paying monthly rentals for their respective portions ranging
from P4.00 to P12.00; that the present action is barred by res judicata and or prior judgment
and that the present action, if at all there is any cause of action, is essentially one for
unlawful detainer since the last demand to vacate was made less than a year ago.

Issue: WON the failure of the owners to collect, or their refusal to accept the rentals is a
valid defense
RULING: No. Since this is a case of accion publiciana, the purpose of which is being to
establish who have a better right to possess. Although respondents had been paying
nominal rentals for some time, they did not thereby acquire the legal status of tenants.
Squatting is unlawful and no amount of acquiescence converts it into a lawful act.
Furthermore, the failure of the owners to collect, or their refusal to accept the rentals are not
valid defenses. Article 1256 of the Civil Code provides that "if the creditor to whom tender of
payment has been made refuses without just cause to accept it, the debtor shall be released
from responsibility by the consignation of the thing or sum due."cralavirtua1a
The right of the private respondents over the property which they own in order to use the
same as their residence, not being owners of any other dwelling place, may not be denied.

105. G.R. No. L-51767 June 29, 1982

LETICIA CO, assisted by her husband MUI YUK KONG, in substitution of CITADEL
INSURANCE
&
SURETY
CO.,
INC., plaintiff-appellee,
vs.
PHILIPPINE NATIONAL BANK, defendant-appellant.

FACTS:
Standard Parts Manufacturing Corporation borrowed from PNB a total of
P4,296,803.56. the said obligation was secured by the mortgages on the Baguio and Makati
real estates of STANDARD and the chattel mortgage on its personal properties. When
STANDARD failed to pay its obligation, PNB extrajudicially foreclosed the mortgage on the
Baguio properties as well as the chattel mortgage with PNB as the highest bidder for
P1,514,305.00. subsequently, on August 8, 1974, PNB also foreclosed the mortgage on the
Makati property and purchased the same, as the highest bidder, for P1,363,000.00
Meanwhile, CITADEL wrote PNB a letter stating therein its desire to redeem the
property, it being the alleged assignee of the right of redemption of Standard Parts with
respect only to said property. Citadel, however, offered to redeem the property for only
P1,621,970.00. In its reply to said letter, PNB, justifiably refused to accept the tender of
payment of citadel considering that the amount of P1,621,970.00 was very much lower than
the PNBs P3,366,546.42 per the Statement of Account of Standard Parts.
73

ISSUE:WON the tender of payment, lower than the total amount, should be accepted

RULING:Yes, the tender of P1.6 M should be accepted, although CITADEL should pay the
full amount of P3.3 M to PNB without any interest when it refused a redemption legally and
validly tendered.
PNB does not have to account to CITADEL/LETICIA CO for any of the rentals it had earned
from the time it took possession of the property. In the final analysis, instead of PNB losing
P1,744,576.42, under strict technical legal reasoning, as explained above, applying hereto
the principle of unjust enrichment, which We deem in the peculiar circumstances at this
instant case to be the fairest way of resolving this controversy, it would still be paid by
petitioner a certain amount, not to mention what must be quite substantial and considerable,
the rentals the said bank it has earned, which it does not have to account for.
The foreclosure of the security is a measure of last resort, hence when by the exercise of the
right of redemption, the bank can recover the money it has loaned, nothing could be more
proper than to allow the borrower to retain his property.
106. [G.R. No. 138588. August 23, 2001]
FAR EAST BANK & TRUST COMPANY, petitioner, vs. DIAZ REALTY INC., respondent.
FACTS:
Diaz and Company got a loan from PaBC [Pacific Banking Corporation] in the amount
of P720,000.00, with interest at 12% per annum, later increased to 14%, 16%, 18% and
20%. The loan was secured by a real estate mortgage over two parcels of land owned by the
plaintiff Diaz Realty.
In 1981, Allied Banking Corporation rented an office space in the building covered by the
mortgage contract, with the conformity of mortgagee PaBC, whereby the parties agreed that
the monthly rentals shall be paid directly to the mortgagee for the lessors account, either to
partly or fully pay off the aforesaid mortgage indebtedness.
In 1985, the Central Bank closed PaBC, placed it under receivership, and appointed Renan
Santos as its liquidator.
Sometime in December 1986, appellant FEBTC purchased the credit of Diaz & Company in
favor of PaBC.
Thus, Diaz tendered to FEBTC the amount of P1,450,000.00 through an Interbank check, in
order to prevent the imposition of additional interests, penalties and surcharges on its loan;
that FEBTC did not accept it as payment and instead, was asked to deposit the amount with
the defendants Davao City Branch Office, allegedly pending the approval of Central Bank
Liquidator Renan Santos. However, there was still no news whether or not it accept its
tender of payment, thushe filed this case at the Regional Trial Court of Davao City.

74

ISSUE:WON there was a valid tender of payment

RULING:Yes. For a valid tender of payment, it is necessary that there be a fusion
of intent, ability and capability to make good such offer, which must be absolute and must
cover the amount due. Though a check is not legal tender, and a creditor may validly refuse
to accept it if tendered as payment, one who in fact accepted a fully funded check after the
debtors manifestation that it had been given to settle an obligation is estopped from later on
denouncing the efficacy of such tender of payment.
Diaz intended to settle its obligation with petitioner is evident from the records of the
case. After learning that its loan balance wasP1,447,142.03, it presented to petitioner a
check in the amount of P1,450,000, with the specific notation that it was for full payment of
its Pacific Bank account that had been purchased by FEBTC. The latter accepted the check,
even if it now insists that it considered the same as a mere deposit. The check was
sufficiently funded, as in fact it was honored by the drawee bank. When petitioner refused to
release the mortgage, respondent instituted the present case to compel the bank to
acknowledge the tender of payment, accept payment and cancel the mortgage. These acts
demonstrate respondents intent, ability and capability to fully settle and extinguish its
obligation to petitioner.
107. G.R. No. L-32116 April 2l, 1981
RURAL BANK OF CALOOCAN, INC. and JOSE O. DESIDERIO, JR., petitioners,
vs.
THE COURT OF APPEALS and MAXIMA CASTRO, respondents.
FACTS:
Respondent Maxima Castro, accompanied by Severino Valencia, went to the Rural Bank of
Caloocan to apply for an industrial loan. It was Severino Valencia who arranged everything
about the loan with the bank and who supplied to the latter the personal data required for
Castro's loan application. Having approved the loan for the amount of P3,000.00, Castro,
accompanied by the Valencia spouses, signed a promissory note corresponding to her loan
in favor of the bank.
On the same day, the Valencia spouses also obtained from the bank an equal amount of
loan for P3,000.00 in which Castro was the co-maker. The two loans were secured by a realestate mortgage on Castro's house and lot. For failure to satisfy the loans of P6,000
covering the two promissory notes, the said property was sold at an auction sale.
Castro only learned later that the mortgage contract which was an encumbrance on her
property was for P6.000.00 and not for P3,000.00 and that she was made to sign as comaker of the promissory note without her being informed of this. Thus, she filed a suit
praying for annulment of the foreclosure sale of her property, and that thru mistake on her
part or fraud on the part of Valencias she was induced to sign as co-maker of a promissory
note and to constitute a mortgage on her house and lot to secure the questioned note. At the
time of filing her complaint, respondent Castro deposited the amount of P3,383.00 with the
court a quo in full payment of her personal loan plus interest.
ISSUE:WON the promissory note may be invalidated and the mortgage contract valid only
up to P3,000
75

RULING:Yes. The loan for P6,000 was obtained by fraud perpetrated on Castro by the
Valencias who had abused her confidence, taking advantage of her old age and ignorance of
her financial need. Respondent court added that "the mandate of fair play decrees that she
should be relieved of her obligation under the contract" pursuant to Articles 24 and 1332 of
the Civil Code.Thus, as a result of the fraud upon Castro and the misrepresentation to the
bank inflicted by the Valencias both Castro and the bank committed mistake in giving their
consents to the contracts. In other words, substantial mistake vitiated their consents given.
For if Castro had been aware of what she signed and the bank of the true qualifications of
the loan applicants, it is evident that they would not have given their consents to the
contracts.
Pursuant to Article 1342 of the Civil Code which provides: Misrepresentation by a third
person does not vitiate consent, unless such misrepresentation has created substantial
mistake and the same is mutual.
Thus, the fraud particularly averred in the complaint, having been proven, is deemed
sufficient basis for the declaration of the promissory note invalid insofar as it affects Castro
vis-a-vis the bank, and the mortgage contract valid only up to the amount of P3,000.00.
108. G.R. No. L-56196 January 7, 1986
RESTITUTA, JESUS, ISIDRO AND JOEL, ALL SURNAMED HULGANZA AND MATILDE
COLLAMAR, petitioners,
vs.
THE HONORABLE COURT OF APPEALS AND BASILIA GEMARINO, respondents.
FACTS:
Lot 161, Pls. 256, the subject matter of the present case, is registered in the name of
spouses NicomedezHulganza and MatildeCollamarwas issued pursuant to a free patent.
Before NicomedezHulganza died leaving as his heirs herein petitioners. The said property
was sold on April 21, 1971 in favor of the defendant BasiliaGemarino in the amount of
P10,000.00.Since that date, up to the present private respondent has been in possession of
the property peacefully, openly or publicly, adversely and without interruption in the concept
of owner.
But on April 13, 1972, petitioners filed a complaint in court seeking to repurchase the
property from said respondent under the provisions of Section 119 of Public Land Act 141 as
amended.
ISSUE:
WON it is necessary that the formal offer to redeem the land in question be accompanied by
a bona fide tender of the redemption price, or the repurchase price be consigned in Court,
within the period of redemption even if the right is exercised through the filing of a judicial
action
RULING:No, bona fide tender of the redemption price or its equivalent consignation of
said price in court is not essential.

76

The formal offer to redeem, accompanied by a bona fide tender of the redemption price,
within the period of redemption prescribed by law, is only essential to preserve the right of
redemption for future enforcement beyond such period of redemption and within the period
prescribed for the action by the statute of limitations.
Where, as in the instant case, the right to redeem is exercised thru the filing of judicial action
within the period of redemption prescribed by the law, the formal offer to redeem,
accompanied by a bona fide tender of the redemption price, might be proper, but is not
essential.
The filing of the action itself, within the period of redemption, is equivalent to a formal offer to
redeem. Any other construction, particularly with reference to redemption of homesteads
conveyed to third parties, would work hardships on the poor homesteaders who cannot be
expected to know the subtleties of the law, and would defeat the evident purpose of the
Public Land Law "to give the homesteader or patentee every chance to preserve for
himself and his family the land that the state granted him as a reward for his labor in
cleaning and cultivating it."

109. G.R. No. 70623 June 30, 1987

ST.
DOMINIC
CORPORATION, petitioner,
vs.
THE INTERMEDIATE APPELLATE COURT, HON. RICARDO P. TENSUAN, RTC BRANCH
LXXXIII, QUEZON CITY FRANCISCA B. BUSTAMANTE, FLAVIANO BUSTAMANTE,
CARLOS ROBES, ADALIA FRANCISCO and AURORA FRANCISCO, respondents.
FACTS:
Sometime in 1961, the People's Homesite and Housing Corporation awarded the property in
question to one Cristobal Santiago, Jr., in whose favor a final deed of sale was executed and
Transfer Certificate of Title was issued.
Subsequently, the Robes spouses mortgaged the realty to the Manufacturer's Bank and
Trust Company. Thereafter, on February 2, 1968, Civil Case No. Q- 1 1895 was
filed.Claiming legal interest in the property, the Bustamante spouses were allowed to
intervene in the case.
For failure of the Robes' spouses to pay the mortgage obligation, the Manufacturer's Bank
and Trust Company foreclosed the lot and caused the same to be sold at public auction.
The property was purchased by Aurora Francisco in whose favor a certificate of sale was
issued. No redemption of said property was effected.
Thus, the property in the name of the Robes spouseswas cancelled and was issued to
Aurora Francisco on the same date.
On April 20, 1976, Aurora Francisco applied for a writ of possession which was granted and
thereafter sold the property to petitioner, St. Dominic Corporation.
77

ISSUE:
he trial court's statement exempting from execution one not a party to the case nor privy to
the interests of the parties therein, from the effects of its pronouncements, cannot be
considered an amendment of its final and executory judgment in Civil Case No. Q- 1 1895.
RULING:
Anent the effect of the trial court's judgment on the mortgagee bank's rights and on the
foreclosure of the property in question, this Court has held that where a Torrens title was
issued as a result of regular land registration proceedings and was in the name of the
mortgagor when given as a security for a bank loan, the subsequent declaration of said title
as null and void is not a ground for nullifying the mortgage rights of the bank which had
acted in good faith.
A mortgagee has the right to rely on what appears on the face of the certificate of title. In the
absence of anything to excite suspicion, it is under no obligation to look beyond the
certificate and investigate the title of the mortgagor appearing on the face of said certificate.
There is no showing in the records that the mortgagee bank was aware of any shadow
affecting the title of the mortgaged property when it was mortgaged. As will be explained
later, the intervenors are only prospective awardees of the disputed lot. They are not the
owners. They have no title to the land.
Any subsequent lien or encumbrance annotated at the back of the certificate of title cannot
in any way prejudice the mortgage previously registered and the lots subject thereto pass to
the purchaser at public auction free from any lien or encumbrance. Otherwise, the value of
the mortgage could be easily destroyed by a subsequent record of an adverse claim, for no
one would purchase at a foreclosure sale if found by the posterior claim. Aurora Francisco's
title, as a purchaser at the auction sale of the property in question, cannot be bound by the
adverse claims of the plaintiffs in Civil Case No. Q-11895. This is even more true with
petitioner St. Dominic Corporation which had acquired title from Aurora Francisco without
any notice or flaw.
Upon proper foreclosure of a first mortgage, all liens subordinate to the mortgage are
likewise foreclosed. The foreclosure as well as the sale of the property were annotated on
the title to the property, then still in the name of Adalia Francisco and Carlos Robes. Such
annotation serves as constructive notice to the parties having any claim or nterest in the
property to exercise their right of redemption or to participate in the foreclosure sale.
Certainly, there was an opportunity for the claimants in Civil Case No. Q-1 1895 to acquire
the property at issue. St. Dominic's rights can no longer be disturbed.

110. G.R. No. L-67649 June 28, 1988

ENGRACIO
FRANCIA, petitioner,
vs.
INTERMEDIATE APPELLATE COURT and HO FERNANDEZ, respondents.
FACTS:

78

EngracioFrancia is the registered owner of a residential lot and a two-story house built upon
it situated in Pasay City, Metro Manila. On October 15, 1977, a 125 square meter portion of
Francia's property was expropriated by the Republic of the Philippines for the sum of
P4,116.00 representing the estimated amount equivalent to the assessed value of the
aforesaid portion.
Since 1963 up to 1977 inclusive, Francia failed to pay his real estate taxes. Thus, on
December 5, 1977, his property was sold at public auction by the City Treasurer of Pasay
City pursuant to Section 73 of Presidential Decree No. 464 known as the Real Property Tax
Code in order to satisfy a tax delinquency of P2,400.00. Ho Fernandez was the highest
bidder for the property.
Francia contends that his tax delinquency of P2,400.00 has been extinguished by legal
compensation. He claims that the government owed him P4,116.00 when a portion of his
land was expropriated on October 15, 1977. Hence, his tax obligation had been set-off by
operation of law as of October 15, 1977.
ISSUE:WON there is legal compensation to off-set Francias tax obligation to the
government
RULING:No. There is no legal basis for the contention. By legal compensation, obligations
of persons, who in their own right are reciprocally debtors and creditors of each other, are
extinguished (Art. 1278, Civil Code). The circumstances of the case do not satisfy the
requirements provided by Article 1279, to wit:
(1) that each one of the obligors be bound principally and that he be at the
same time a principal creditor of the other;
xxx xxxxxx
(3) that the two debts be due.
xxx xxxxxx
This principal contention of the petitioner has no merit. We have consistently ruled that there
can be no off-setting of taxes against the claims that the taxpayer may have against the
government. A person cannot refuse to pay a tax on the ground that the government owes
him an amount equal to or greater than the tax being collected. The collection of a tax
cannot await the results of a lawsuit against the government.
111. [G.R. No. 138669. June 6, 2002]
STEVE TAN and MARCIANO TAN, petitioners, vs. FABIAN MENDEZ, JR., respondent.
FACTS:
Petitioners Steve Tan and Marciano Tan are the owners of Master Tours and Travel
Corporation and operators of Philippine Lawin Bus Co., Inc., while respondent Fabian
Mendez, Jr. is the owner of three gasoline stations in Iriga City, Ligao, Albay, and Sipocot,
Camarines Sur. Petitioners opened a credit line for their buses lubricants and fuel
79

consumption with respondent. At the same time, the latter was also designated by
petitioners as the booking and ticketing agent of Philippine Lawin Bus Co. in Iriga City.
Under such arrangement, petitioners drivers purchased on credit fuel and various oil
products for its buses through withdrawal slips issued by petitioners, with periodic payments
to respondent through the issuance of checks. On the other hand, respondent remitted the
proceeds of ticket sales to petitioners also through the issuance of checks. Sent together
with respondents remittance are the remittances of the ticket sales in the Baao Booking
office, which is managed separately and independently by another agent, Elias Bacsain.
Accordingly, petitioners issued several checks to respondent as payment for oil and fuel
products. Said check was dishonored by the bank upon presentment for payment for being
drawn against insufficient funds.
Respondent sent a demand letter to petitioners demanding that they make good the
check or pay the amount thereof, to no avail. Hence, an information for violation of the
Bouncing Checks Law was filed against petitioners

ISSUE:
Whether or not payment through compensation or offset can preclude prosecution for
violation of B.P. 22.
RULING:
No compensation can take place between petitioners and respondent as respondent is
not a debtor of petitioners insofar as the two checks representing collections from the Baao
ticket sales are concerned.Article 1278 of the Civil Coderequires, as a prerequisite for
compensation, that the parties be mutually and principally bound as creditors and debtors.If
they were not mutually creditors and debtors of each other, the law on compensation would
not apply.In this case, the memorandum shows that some unencashed checks returned to
respondent to allegedly offset the dishonored check were from the Baao ticket sales which
are separate from the ticket sales of respondent. Respondent only acted as an intermediary
in remitting the Baao ticket sales and, thus, is not a debtor of petitioners.
Interestingly, petitioners never alleged compensation when they received the demand
letter, during the preliminary investigation, or before trial by filing a motion to
dismiss. Moreover, if indeed there was payment by compensation, petitioners should have
redeemed or taken the checks back in the ordinary course of business.There is no evidence
on record that they did so.

112. CARLOS vs. ABELARDO

GR No. 146504 April 9, 2002
80

Facts:
Honorio Carlos filed a petition against Manuel Abelardo, his son-in-law for recovery of
the $25,000 loan used to purchase a house and lot located at Paranaque. It was in
October 1989 when the petitioner issued a check worth as such to assist the spouses
in conducting their married life independently. The seller of the property
acknowledged receipt of the full payment. In July 1991, the petitioner inquired from
spouses status of the amount loaned from him, the spouses pleaded that they were
not yet in position to make a definite settlement. Thereafter, respondent expressed
violent resistance to the extent of making various death threats against petitioner. In
1994, petitioner made a formal demand but the spouses failed to comply with the
obligation. The spouses were separated in fact for more than a year prior the filing of
the complaint hence spouses filed separate answers. Abelardo contended that the
amount was never intended as a loan but his share of income on contracts obtained
by him in the construction firm and that the petitoner could have easily deducted the
debt from his share in the profits. RTC decision was in favor of the petitioner,
however CA reversed and set aside trial courts decision for insufficiency of evidence.
Evidently, there was a check issued worth $25,000 paid to the owner of the Paranaque
property which became the conjugal dwelling of the spouses. The wife executed an
instrument acknowledging the loan but Abelardo did not sign.
ISSUE: WON a loan obtained to purchase the conjugal dwelling can be charged
against the conjugal partnership.
HELD:
Yes, as it has redounded to the benefit of the family. They did not deny that the same
served as their conjugal home thus benefiting the family. Hence, the spouses are
jointly and severally liable in the payment of the loan. Abelardos contention that it is
not a loan rather a profit share in the construction firm is untenable since there was
no proof that he was part of the stockholders that will entitle him to the profits and
income of the company.

113. SOLINAP VS. JUDGE DEL ROSARIO

July 25, 1983
Facts:
Spouses Tiburcio Lutero and Asuncion Magalona, owners of the Hacienda Tambal,
leased the said hacienda to petitioner Solinap for a period of 10 years for the rental of
P50,000.00 a year. It was further agreed that the sum of P25,000.00 should be paid by
Solinap to the PNB to amortize the indebtedness of the spouses Lutero. Lutero died
on 1971. His heirs instituted the testate estate proceedings of the deceased, presided
by respondent Judge Amelia K. del Rosario. Respondent judge, issued an order,
stating "that in order to protect the estate, the administrator, Judge Nicolas Lutero, is
hereby authorized to scout among the testamentary heirs who is financially in a
position to pay all the unpaid obligations of the estate, including interest, with the
right of subrogation in accordance with existing laws." Juanito Lutero [grandson and
81

heir of Tiburcio] and his wife Hardivi R. Lutero paid the PNB the sum of P25,000.00 as
partial settlement of the deceased's obligations.
Issue:
Whether or not the defendants [Luteros] are indebted to the plaintiff and, if so, the
amount thereof
Held:
The argument fails to consider Article 1279 of the Civil Code which provides that
compensation can take place only if both obligations are liquidated. In the case at bar,
the petitioner's claim against the respondent Luteros in Civil Case No. 12379 is still
pending determination by the court. While it is not for Us to pass upon the merits of
the plaintiffs' cause of action in that case, it appears that the claim asserted therein is
disputed by the Luteros on both factual and legal grounds. More, the counterclaim
interposed by them, if ultimately found to be meritorious, can defeat petitioner's
demand.

114. PEREZ VS. CA

GR. L-56101 Feb. 20, 1984
Facts:
CONGENERIC issued what was in effect a promissory note in the amount of
P111,973.58 in favor of bearer No. 049, later identified as Ramon C. MOJICA, or an
entity owned by him. That promissory note, denominated hereinafter as Bill 1298, was
to mature on August 6, 1974. CONGENERIC issued another bearer promissory note
for the sum of P208,666.67, also in favor of MOJICA or an entity owned by him. The
note, denominated hereinafter as Bill 1419, was to mature on August 13, 1974. MEVER
Films, Inc. the private respondent herein, borrowed P500,000.00 from CONGENERIC,
the former issuing in favor of the latter a negotiable promissory note to mature on
August 5, 1974. That note shall hereinafter be referred to as NCI-0352. What may be
stated in connection with the note is that it had no provision for interest, except that,
if not paid on due date, it would be subject to interest at 14% per annum.
CONGENERIC received P200,000.00 from petitioner herein CORAZON and issued to
her, as BEARER 209, a confirmation of sale (CS) numbered 0366. Under the terms of
CS-0366, CORAZON was to be paid P203,483.33 on August 5, 1974, CONGENERIC
would make collection on behalf of CORAZON; and ALL OF CONGENERICS
INTEREST IN NCI-0352 WAS BEING TRANSFERRED TO HER. Under this last
provision, CORAZON, subject to defenses, could have sued MEVER for payment of
the full amount of P500,000.00, specially if CONGENERIC should not object. It may
also be noted that while NCI-0352 was not subject to interest prior to August 5, 1974,
CONGENERIC obligated itself to pay CORAZON interest on August 5, 1974 in the
amount of P3,483.33, or roughly an interest rate of 19% per annum.

82

Issue:
Whether or not the compensation is proper
Held:
According to the Civil Code, Article 1279 In order that compensation may be proper,
it is necessary (1) That each one of the obligors be found principally, and that he be at
the same time a principal creditor of the other; (2) That both debts consist in a sum of
money, or if the things due are consumable, they be of the same kind, and also of the
same quality if the latter has been stated; (3) That the two debts be due; (4) That they
be liquidated and demandable; (5) That over neither of them there be any retention or
controversy, commenced by third persons and communicated in due time to the
debtor. We note that the xerox copies of Bill No. 1298 and Bill No. 1419 attached by
MEVER to its Brief do not contain the "roll-over" notations. However, MEVERs own
exhibits before respondent Appellate Court, Exhibits "3" and "3-A", do show those
notations and MEVER must be held bound by them.

115. STEVE TAN AND MARCIANO TAN VS. FABIAN MENDEZ, JR.
G.R. No. 138669. June 6, 2002

Facts:
Steve Tan and Marciano Tan are owners of Master Tours and Travel Corporation and
operators of Philippine Lawin Bus Co., Inc., while Fabian Mendez, Jr. is the owner of
three gasoline stations in Iriga City, Ligao, Albay, and Sipocot, Camarines Sur. The
Tans opened a credit line for their buses lubricants and fuel consumption with
Mendez. At the same time, the latter was also designated as the booking and
ticketing agent of Philippine Lawin Bus Co. in Iriga City.
Under such arrangement, the Tans drivers purchased on credit fuel and various oil
products for its buses through withdrawal slips issued, with periodic payments to
respondent through the issuance of checks. On the other hand, respondent remitted
the proceeds of ticket sales to petitioners also through the issuance of checks.
Accordingly, petitioners issued several checks as payment for oil and fuel products.
One of these is in the amount of P58,237.75, as payment for gasoline and oil products
procured during the period May 2 to 15, 1991. Said check was dishonored by the
bank.
Mendez sent a demand letter demanding that they make good the check or pay the
amount thereof, to no avail. Hence, an information for violation of B.P. 22 was filed
against the Tans, upon the complaint of Mendez, before the RTC of Iriga City, Branch
37
Issue:

83

Whether or not petitioners can be held liable for violation of B.P. 22 or the Bouncing
Checks Law
Held:
The law enumerates the elements of B.P. Blg. 22 to be (1) the making, drawing, and
issuance of any check to apply for account or for value; (2) the knowledge of the
maker, drawer, or issuer that at the time of issue he does not have sufficient funds in
or credit with the drawee bank for the payment of the check in full upon its
presentment; and (3) the subsequent dishonor of the check by the drawee bank for
insufficiency of funds or credit or dishonor for the same reason had not the drawer,
without any valid cause, ordered the bank to stop payment. We find all the foregoing
elements present in this case.
The conviction of petitioners is sustained and it is deemed appropriate to modify the
penalties imposed. The penalty of imprisonment is deleted and in lieu thereof,
imposed upon petitioners a fine amounting to double the value of the subject check,
with subsidiary imprisonment in case of insolvency or non-payment.

116. ILOILO TRADERS FINANCE. INC. VS. HEIRS OF OSCAR SORIANO, JR.
404 SCRA 67 June 16, 2003
FACTS:
Respondents executed two promissory notes secured by real property mortgages in
favor of petitioner. The respondents defaulted and petitioner moved for extra-judicial
foreclosure of the mortgages. Respondent filed a complaint against petitioner. The
parties later entered into amicable settlement and submitted it to the trial court for
approval. The trial court required the parties to give some clarifications on several
issues that were not complied. The amicable settlement was disapproved and the
court proceeded. Respondents withdrew the case and filed a (new) case for novation
and specific performance which was decided favorably for the respondents. The
Court of Appeals affirmed the judgment.
ISSUE:
Whether or not the amicable settlement entered into between parties has novated the
original obligation
HELD:
No. The parties entered into the agreement basically to put an end to Civil Case No.
14007 then pending before the Regional Trial Court. Concededly, the provisions of the
settlement were beneficial to the respondent couple. The compromise extended the
terms of payment and implicitly deferred the extrajudicial foreclosure of the
mortgaged property. It was well to the interest of respondent spouses to ensure its
judicial approval; instead, they went to ignore the order of the trial court and virtually
failed to make any further appearance in court. This conduct on the part of
respondent spouses gave petitioner the correct impression that the Sorianos did not
84

intend to be bound by the compromise settlement, and its non-materialization

negated the very purpose for which it was executed

117. BOYSAW ET. AL., VS. INTERPHIL PROMOTIONS, ET. AL.

G.R. No. L-22590

March 20, 1987

Facts:
Boysaw and his then Manager, Ketchum, signed with Interphil Promotions, Inc.
represented by Sarreal, Sr., a contract to engage Gabriel "Flash" Elorde in a boxing
contest for the junior lightweight championship of the world. A supplemental
agreement not covered by thje principal contract was added. Boysaw fought and
defeated Louis Avila. Ketchum on his own behalf and on behalf of his associate Frank
Ruskay, assigned to J. Amado Araneta the managerial rights over Solomon Boysaw.
Araneta assigned to Yulo the managerial rights over Boysaw that he earlier acquired
from Ketchum and Ruskay. The next day, Boysaw wrote Lope Sarreal, Sr. informing
him of his arrival and presence in the Philippines.
Yulo, Jr. wrote to Sarreal informing him of his acquisition of the managerial rights
over Boysaw and indicating his and Boysaw's readiness to comply with the boxing
contract. On the same date, on behalf of Interphil Sarreal wrote a letter to the Games
and Amusement Board [GAB] expressing concern over reports that there had been a
switch of managers in the case of Boysaw, of which he had not been formally notified,
and requesting that Boysaw be called to an inquiry to clarify the situation
Issue:
Whether or not there was a violation of the fight contract
Held:Yes. On the issue pertaining to the violation of fight contract, the evidence
established that the contract was violated by appellant Boysaw himself when, without
the approval or consent of Interphil, he fought Louis Avila on June 19, 1961 in Las
Vegas Nevada. Appellant Yulo admitted this fact during the trial. While the contract
imposed no penalty for such violation, this does not grant any of the parties the
unbridled liberty to breach it with impunity.

118. TORRES ET. AL., VS. CA

G.R. No. 92540 December 11, 1992
Facts:
The contracts related to this case are ten parcels of land belonging to Flores that she
leased to the spouses Torres, for a specified term of four agricultural years
commencing from 1985 and at stipulated rentals payable in piculs of sugar. The
parties agreed on their renewal under the original terms, subject to the condition that
the lessees would deliver to Flores the amount of P50,000.00 not later than February
85

15, 1989. Flores said she would need the money for her projected trip abroad. Flores
claims that the petitioner failed to comply with this condition and that consequently
she informed them. In their answer to the complaint, the petitioners submitted that the
contracts had been validly renewed because they had complied with the abovementioned condition. They contended that the lease had been continued under the
rule of tacita reconduccion and that the complainant was estopped from denying that
she had granted them an option to renew the contracts. After trial under the Rule on
Summary Procedure, Judge Teopisto L. Calumpang held that the contracts had not
been validly renewed because the Torreses had failed to deliver the amount of
P50,000.00 in cash to Flores as promised.
Issue:
Whether or not the contract has been validly renewed
Held:
No. We begin by reiterating the familiar rule that the findings of fact of the lower
courts are binding on this Court unless they come within the specified exceptions,
which are also well-known. 7 None of such exceptions has been established in the
case at bar. We therefore accept that there was an oral agreement between the parties
to extend the original contracts of lease provided that the petitioners could deliver to
the private respondent the sum of P50,000.00 in cash not later than February 15, 1989.
This was a suspensive condition that was not met.

119. SSS VS. DEPARTMENT OF JUSTICE, ET. AL.

G.R. NO. 158131 August 8, 2007
Facts:
Jose V. Martel and Olga S. Martel are directors of Systems and Encoding Corporation
(SENCOR), an information technology firm, with respondent Jose V. Martel serving as
Chairman of the Board of Directors. SSS is a GOCC mandated by its charter, RA 1161, to
provide financial benefits to private sector employees. SENCOR is covered by RA 1161, as
amended by RA 8282, Section 22 of which requires employers like SENCOR to remit
monthly contributions to petitioner representing the share of the employer and its
employees. In 1998, SSS filed with the Pasay City Prosecutor's Office a complaint against
Martels and their five co-accused for SENCOR's non-payment of contributions covering the
period January 1991 to May 1997. To pay this amount, Martels offered to assign to petitioner
a parcel of land in Tagaytay City. SSS accepted the offer "subject to the condition that they
will settle their obligation either by way of dacion en pago or through cash settlement within a
reasonable time. Thus, petitioner withdrew its complaint but reserved its right to revive the
same "in the event that no settlement is arrived at." Jose V. Martel wrote petitioner offering,
in lieu of the Tagaytay City property, computer-related services. The record does not disclose
petitioner's response to this new offer but on 7 December 2001, petitioner filed another
complaint against Martels and their five co-accused for SENCOR's non-remittance of
contributions, this time from February 1991 to October 2000.
Issue:
Whether or not the SSSs action to revive the complaint valid
Held:

86

Yes. The DOJ found that respondent Martels and petitioner entered into a compromise
agreement before the filing of the Information in Criminal Case No. 01-0517 and that such
"negated" any criminal liability on respondent Martels' part.

120. CRUZ VS. GANGAN 443 Phil 856 (2003)

**CANT FIND THE CASE**

121. GANZON VS. JUDGE SANCHO

G.R. No. L-56450 July 25, 1983
Facts:
Ganzon initiated proceedings to extra-judicially foreclose a real estate mortgage
executed by the private respondents in his favor. The Deed of Real Estate Mortgage
executed on March 19, 1979 between Randolph Tajanlangit and Esteban Tajanlangit as
mortgagors on one hand and Ganzon as mortgagee on the other hand was to secure
the payment by the Tajanlangits of a promissory note amounting to P40,000.00 in
favor of Ganzon. The mortgage covered a parcel of residential land, located in the
District of Molo, Iloilo City. Lira, in his capacity as ex-oficio provincial sheriff of Iloilo
served personal notice of the foreclosure proceedings on the private respondents.
Lira also caused the publication in a newspaper of general circulation in the City and
Province of Iloilo of a Notice of Extra Judicial Sale of Mortgaged Property, setting the
sale at public auction of the mortgaged property at 10:00 a.m. on September 28, 1979,
at his office at the Provincial Capitol, Iloilo City. On September 27, 1979, a day before
the scheduled public auction, the private respondents filed a civil action for specific
performance, damages, and prohibition with preliminary injunction against the
petitioners with the respondent court.

Issue:
Whether or not mortgage is an accessory contract
Held:
Yes. A mortgage is but an accessory contract. "The consideration of the mortgage is
the same consideration of the principal contract without which it cannot exist as an
independent contract."

122. TEOFISTO GUINGONA, JR. VS. CITY FISCAL OF MANILA

April 4, 1984
Facts:
From March 1979 to March 1981, Clement David made several investments with the
National Savings and Loan Association. On March 21, 1981, the bank was placed
under receivership by the Bangko Sentral. Upon Davids request, petitioners
Guingona and Martin issued a joint promissory note, absorbing the obligations of the
87

bank. On July 17, 1981, they divided the indebtedness. David filed a complaint for
estafa and violation of Central Bank Circular No. 364 and related regulations
regarding foreign exchange transactions before the Office of the City Fiscal of Manila.
Petitioners filed the herein petition for prohibition and injunction with a prayer for
immediate issuance of restraining order and/or writ of preliminary injunction to enjoin
the public respondents to proceed with the preliminary investigation on the ground
that the petitioners obligation is civil in nature.
Issue:
Whether there was a violation of Central Bank Circular No. 364
Held:
Petitioner Guingona merely accommodated the request of the Nation Savings and
loan Association in order to clear the bank draft through his dollar account because
the bank did not have a dollar account. Immediately after the bank draft was cleared,
petitioner Guingona authorized Nation Savings and Loan Association to withdraw the
same in order to be utilized by the bank for its operations. It is safe to assume that the
U.S. dollars were converted first into Philippine pesos before they were accepted and
deposited in Nation Savings and Loan Association, because the bank is presumed to
have followed the ordinary course of the business which is to accept deposits in
Philippine currency only, and that the transaction was regular and fair, in the absence
of a clear and convincing evidence to the contrary.

123. G.R. No. L-46405 June 30, 1986

LA
CAMPANA
FOOD
PRODUCTS,
INC., petitioner-appellant,
vs.
PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK, and L.F. VILLASEOR, in his
capacity as City Sheriff of Quezon City, respondents-appellees.

FACTS: Petitioner had a credit line with respondent PCIB secured by two real estate
mortgages wherein petitioner negotiated a loan with Intercontinental Monetary Corporation
to be guaranteed by the DBP and agreed to guarantee petitioner's foreign loan subject to the
condition that petitioner should deposit with it the proceeds of the loan which should be
made available for payment of petitioner's obligation to local financial institutions and to
serve as working capital. DBP registered its mortgage on petitioner's titles and there was no
further payment on petitioner's outstanding obligations with PCIB was made either by DBP
or by petitioner itself. PCIB instituted foreclosure proceedings on the real estate mortgages
executed by petitioner in its favor. Auction sale was set on petitioner's properties but
petitioner filed the Petition for Certiorari, Mandamus, Prohibition with Preliminary Injunction
with the lower Court and it was given due course and issued a TRO enjoining the sheriff
from proceeding with the auction sale. PCIB, on the other hand, maintains that petitioner's
obligations with it still subsist as the same was not assumed by DBP. Opposing the issuance
of a Writ of Preliminary Injunction, PCIB alleged that since there has been no full payment of
petitioner's obligations no release of the mortgage executed by petitioner in its favor has
been made. With respect to the Statement of Accounts, PCIB claimed that it was merely
intended to show that petitioner's account had been transferred from its Dasmarias Branch
to its Legal Department for proper action and not as evidence of extinguishment of
obligation.
88

ISSUE: Whether or not there was a novation due to substitution the person of the debtor
HELD: No. We agree with respondent-appellee's contention that there was no novation. DBP
did not substitute petitioner-appellant as debtor to respondent-appellee. It merely agreed to
guarantee petitioner's foreign loan subject to the condition that petitioner should deposit with
it the proceeds of the loan which should be made available for payment of petitioner's
obligation to local financial institutions and to serve as working capital. The DBP guarantee
was to be secured by a first mortgage on the assets then mortgaged to DBP and the assets
offered as additional securities, which included the parcels of land mortgaged to petitioner.
Consequently, DBP requested respondent bank to lend Transfer Certificates of Title Nos.
24402 and 24403 covering the parcels of land mortgaged to respondent bank by petitioner
for DBP to be able to register its mortgage thereon. Respondent bank agreed to the
registration of DBP's second mortgage and to cancel or release its first mortgage upon
receipt in full of the payment of petitioner's mortgage debt.Inasmuch as only the sum of
P140,000.00 was remitted by DBP to respondent bank representing partial payment of
petitioner's outstanding obligation of P526,632.67, the first mortgage of respondent bank
was not cancelled or released and the mortgage of DBP remained a second mortgage.
Clearly, then, respondent bank had the right to institute foreclosure proceedings on its first
mortgage in view of the non-payment of the balance of the mortgage debt.

124.G.R. No. 74623 August 31, 1987

BISAYA LAND TRANSPORTATION CO., INC., ANTONIO V. CUENCO and BENJAMIN G.
ROA, petitioners,
vs.
MARCIANO C. SANCHEZ AND THE HON. INTERMEDIATE APPELLATE
COURT, respondents.

FACTS: Petitioner Bisaya Land Transportation Company, Inc. has been engaged in the
shipping business, operating several passenger-cargo vessels, and among the ports of call
of these vessels has been Butuan City. Sanchez was an employee of BISTRANCO
appointed as shipping agent. A formal Contract of Agency was executed between
BISTRANCO, represented by Receiver Atty. Amor and Sanchez, represented by his
authorized representative Aranas but he found out that the Contract of agency was quite
prejudicial to him, he executed with BISTRANCO a Supplemental Shipping Agency Contract
which was duly signed by Receiver Atty. Amor on behalf of BISTRANCO and Sanchez
himself. But, both the Contract of Agency and the Supplemental Shipping Agency Contract
were never submitted by Atty. Adolfo Amor to the receivership court for its approval. For
years, he established good business relations with the business community of Butuan City.
Sanchez succeeded in increasing the volume of the shipping business of BISTRANCO at
the Butuan City port, so much so that his earnings on freight alone increased. While the
shipping business of BISTRANCO in Butuan City flourished, co-petitioner Roa, as wrote
Sanchez a letter advising him that BISTRANCO would commence operating its branch
office in Butuan City. Prior to this, Sanchez was invited to attend a meeting of the Board of
Directors of BISTRANCO wherein he was told by co-petitioner Cuenco that the Board was
to open a branch office in Butuan City and he was asked what would be his proposals.
89

Sanchez submitted his proposals in writing, but these were not acceptable to BISTRANCO.
Realizing that the letter was in effect a repudiation of the Contracts, Sanchez filed an action
for specific performance with preliminary injunction and damages with the Regional Trial
Court of Cebu City and is granted in his favor.
ISSUE: whether or not there was novation as to the agreement of the parties changing their
object or principal obligations
HELD: No. Novation is not equivalent or synonymous to mere alteration, modification or
amendment. Novation is the substitution of a new obligation for an existing or old one, which
is thereby extinguished. Novation takes place when the object or principal condition of an
obligation is changed or altered. Novation is never presumed; it must be explicitly stated or
there must be a manifest incompatibility between the old and the new obligations in every
aspect. The test of incompatibility between two obligations or contracts, is whether or not
they can stand together, each one having an independent existence. If they cannot, they are
incompatible, and the later obligation novates the first. In the case at bar, it can be deduced
that the Agreements were not meant to novate the herein questioned contracts. Rather, the
intent of the parties was to suspend some of the provisions of the Contracts for a period of
one (1) year, during which, the provisions of the Agreements will prevail. Besides, the
changes were not really substantial to bring about a novation. The changes pointed out by
BISTRANCO between the Contracts and the Agreements do not go into the essence of the
cause or object of the former. Considering that the contract of agency and the supplemental
shipping agency contract are valid and binding between BISTRANCO and Sanchez, the
former's opening of a branch in Butuan City was, in effect, a violation of the Contracts.
Sanchez entered into the agency Contract because of the expected income and profits for
himself.
125.

G.R. No. 110207. July 11, 1996 Reyes vs CA

FACTS: A Deed of Extrajudicial Partition and Settlement was allegedly entered into
between petitioner Florentino and his sisters. The subject of the alleged partition was a
parcel of land located in Bangkal, Makati and was registered in the name of Bernardino
Reyes, the father of petitioner and private respondents. Sometime, private respondents,
having discovered the registration of the said Deed denied having knowledge of its execution
and disclaimed having signed the same; nor did they ever waive their rights, shares and
interest in the subject parcel of land. According to private respondents, subject Deed was
fraudulently prepared by petitioner and that their signatures thereon were forged. They also
assert that one Atty. Jose Villena, the Notary Public who notarized the said Deed was not
even registered in the list of accredited Notaries Public of Pasay City. After the property was
partitioned, petitioner, his children and private respondent Paula Palmenco allegedly
executed a Deed of Co-owners' Partition dividing the property among themselves. Private
respondents filed a Complaint for "Annulment of Sale and Damages With Prayer for
Preliminary Injunction/Restraining Order" before the Makati RTC against petitioner and the
Register of Deeds of Makati to declare the title null and void and rendered judgment in favor
of the private respondents. The petition was raised to the Court of Appeals but affirmed the
decision of the lower court.

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ISSUE: Is there a novation when there is clearly no agreement to release the debtor from the
responsibility
HELD: No. The mere circumstance of the creditor receiving payments from a third party
who acquiesced to assume the obligation of the debtor when there is clearly no agreement
to release the debtor from the responsibility does not constitute novation. Petitioners cannot
justify their ownership and possession of the subject parcel of land since they could not meet
the requisites provided by the provisions they have cited. Regarding the requirement of
good faith, the first paragraph of Article 526 states,"He is deemed a possessor in good faith
who is not aware that there exists in his title or mode of acquisition any flaw which
invalidates it." From the cited provision, petitioners could not have been possessors in good
faith of the subject parcel of land considering the finding that at the very inception they
forged the Deed of Extrajudicial Partition and Settlement which they claim to be the basis for
their just title. Having forged the Deed and simulated the signatures of private respondents,
petitioners, in fact, are in bad faith. The forged Deed containing private respondents'
simulated signatures is a nullity and cannot serve as a just title. Moreover, this Court agrees
with the private respondents that there can be no acquisitive prescription considering that
the parcel of land in dispute is titled property, i.e., titled in the name of the late Bernardino
Reyes, the father of both petitioner Florentino and the private respondents.[14] This fact,
petitioners do not deny.[15] Hence, even if they allege adverse possession that should ripen
into ownership due to acquisitive prescription, their title cannot defeat the real rights of
private respondents who stepped into the shoes, as it were, of their father as successors-ininterest. As it is, petitioners cannot even claim adverse possession as they admit that the
private respondents likewise resided and continue to reside on the subject property.

126. G.R. Nos. 147933-34. December 12, 2001

PUBLIC ESTATES AUTHORITY, petitioner, vs. ELPIDIO S. UY, doing business under the
name and style EDISON DEVELOPMENT & CONSTRUCTION, AND THE COURT
OF APPEALS, respondents.
FACTS: Petitioner is the government agency tasked by the Bases Conversion Development
Authority to develop the Heritage Park, petitioner executed with respondent Elpidio S. Uy,
doing business under the name and style Edison Development & Construction, a
Landscaping and Construction Agreement, whereby respondent undertook to perform all
landscaping works. The Agreement stipulated that the completion date for the landscaping
job was within 450 days, commencing within 14 days after receipt by respondent from
petitioner of a written notice to proceed. Due to delays, the contracted period was extended
to 693 days. Among the causes of the delay was petitioners inability to deliver to
respondent 45 hectares of the property for landscaping, because of the existence of
squatters and a public cemetery. Respondent instituted with the Construction Industry
Arbitration Commission an action, seeking to collect from petitioner damages arising from its
delay in the delivery of the entire property for landscaping.
ISSUE: Whether or not the petitioners liability to respondent has been extinguished by
novation
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HELD: Petitioners argument that its liability to respondent has been extinguished by
novation when it assigned and turned over all its contracted works at the Heritage Park to
the heritage Park Management Corporation. This, however, cannot bind respondent, who
was not a party to the assignment. Moreover, it has not been shown that respondent gave
his consent to the turn-over. Article 1293 of the Civil Code expressly provides: Novation
which consists in substituting a new debtor in the place of the original one, may be made
even without the knowledge or against the will of the latter, but not without the consent of the
creditor. Payment by the new debtor gives him the rights mentioned in articles 1236 and
1237.
127. G.R. No. L-44748 August 29, 1986
RADIO
COMMUNICATIONS
OF
THE
PHILS.,
vs.
COURT OF APPEALS and LORETO DIONELA, respondents.

INC.

(RCPI). petitioner,

FACTS: The private respondent received a telegram sent by the petitioner with defamatory
words on and wounded his feelings, also caused him undue embarrassment and affected
adversely his business as well because other people have come to know of said defamatory
words. Defendant corporation as a defense, alleges that the additional words in Tagalog was
a private joke between the sending and receiving operators and that they were not
addressed to or intended for plaintiff and therefore did not form part of the telegram and that
the Tagalog words are not defamatory. Nobody other than the operator manned the teletype
machine which automatically receives telegrams being transmitted. The said telegram was
detached from the machine and placed inside a sealed envelope and delivered to plaintiff,
obviously as is. The additional words in Tagalog were never noticed and were included in the
telegram when delivered.
ISSUE: whether or not there was a breach of contract between the parties
HELD: Yes,petitioner is a domestic corporation engaged in the business of receiving and
transmitting messages. Everytime a person transmits a message through the facilities of the
petitioner, a contract is entered into. Upon receipt of the rate or fee fixed, the petitioner
undertakes to transmit the message accurately. There is no question that in the case at bar,
libelous matters were included in the message transmitted, without the consent or
knowledge of the sender. There is a clear case of breach of contract by the petitioner in
adding extraneous and libelous matters in the message sent to the private respondent. As a
corporation, the petitioner can act only through its employees. Hence the acts of its
employees in receiving and transmitting messages are the acts of the petitioner. To hold that
the petitioner is not liable directly for the acts of its employees in the pursuit of petitioner's
business is to deprive the general public availing of the services of the petitioner of an
effective and adequate remedy. In most cases, negligence must be proved in order that
plaintiff may recover. However, since negligence may be hard to substantiate in some cases,
we may apply the doctrine of RES IPSA LOQUITUR (the thing speaks for itself), by
considering the presence of facts or circumstances surrounding the injury.
128. G.R. No. L-24856 November 14, 1986
NATIONAL
POWER
vs.
EIN CHEMICAL CORPORATION and
CO., defendants-appellee

CORPORATION, plaintiff-appellant,
PHILIPPINE

92

INTERNATIONAL

SURETY

FACTS: NAPOCOR after public bidding, awarded to the EIN the contract formalized to
supply and deliver 3,691 long tons of crude sulfur in one shipment to the Maria Cristina
Fertilizer Plant in Iligan City EIN obtained from the NPC a letter of credit with PNB.
Anticipating failure to deliver on the contract date, EIN requested and was granted by NPC a
further extension of the expiry date of the letter of credit. EIN delivered only 1,000 long tons
of crude sulfur ostensibly due to lack of bottoms; but was paid therefor by NPC the amount
of P101,764.05. Even though it failed to deliver as per contract, EIN requested to be allowed
to participate in another bidding to be conducted by NPC but the latter disqualified EIN from
participating in the said bidding. The NPC instead sued EIN for damages for breach of
contract.The lower court dismissed the case declaring that EIN was not in bad faith; that, the
extension of the expiry date of the letter of credit carried with it the extension of the delivery
time; that before it became the duty of EIN to deliver, the NPC should first open the letter of
credit notwithstanding the fixed delivery date; that NPC was unjustified in disqualifying EIN
from bidding for the next contract; and, that there was scarcity of bottoms when the expiry
date of the letter of credit was extended.The NPC appealed the trial court's decision
questioning all the foregoing points.
ISSUE: Whether or not EIN committed a breach of contract which would entitle NPC to
damages
HELD: Yes, a review of the records shows that the contract was freely entered into by both
parties in good faith. The provisions of the contract, however, indicate that there is no
relationship between the delivery date and the opening of the letter of credit which was
anyway opened within a reasonable time after the signing of the contract. The extensions of
the expiry dates of the letter of credit cannot, by any means, be interpreted as extensions of
the delivery date. If this was the intention of the parties, then a corresponding date or
deadline could have been provided. As the terms show, no other delivery date can even be
inferred. The claim that the intention of the parties for the EIN to ship the goods upon notice
of the opening of the letter of credit is without merit. The imputation of malicious delay on the
part of NPC is groundless, there being no proof to that effect. On the contrary, NPC has
been very lenient by extending the expiry date of the letter of credit thrice despite the failure
of EIN to fully deliver on the contract. The problem of bottoms is one that is well-known and
anticipated by suppliers and shippers, and NPC cannot be faulted for such problem since it
opened the letter of credit within a reasonable time after the signing of the contract. The
NPC, in fact, had no duty to inform EIN of -the shipping time between the US Atlantic ports
and the Philippines since all shippers and suppliers are presumed to know this as part of
their business. Evidently, the EIN clearly committed a breach of contract by failing to
completely deliver on its contract inspite of the leniency of the NPC in enforcing its rights.
Laxity of a contracting party in the enforcement of its rights under the contract does not in
any manner diminish its rights thereunder.

129.G.R. No. L-61898 August 9, 1985

LAO
SOK, petitioner
vs.
LYDIA SABAYSABAY, AMPARO MANGULAT, ROSITA SALVIEJO, NENITA RUINATA,

93

VILMA CAPILLO, VIRGINIA SANORJO and THE NATIONAL LABOR RELATIONS

COMMISSION, respondents.

FACTS: Petitioner Lao Sok owned and operated the Shelton Department Store located at
Carriedo Street, Quiapo, Manila. Private respondents were all salesladies of the department
store with a daily wage of P14.00 each. Sometime, petitioner's store was razed by fire. He
did not report the loss of jobs of the salesladies which resulted from the burning of his
department store to the Regional Office of the Ministry of Labor. Petitioner promised the
private respondents that he would transfer them to his other department stores. Several
weeks passed but petitioner still did not fulfill his promise. The petitioner, however, told the
respondents that he would give them their separation pay and other benefits due them as
soon as he collected the insurance proceeds arising from his burned store. The private
respondents accepted this offer of the petitioner. Petitioner later collected the proceeds of his
insurance but he did not give the private respondents their separation pay and other
benefits. Neither did he employ them in his other stores as earlier promised. Later on, the
private respondents filed a complaint with the Ministry of Labor and Employment charging
the petitioner with illegal dismissal and non-payment of their separation pay, allowance and
incentive leave pay and rendered in favor of the complainants.
ISSUE: whether or not there was a valid contract wherein petitioner is bound to comply with
his contractual obligation
HELD: Yes, respondent NLRC, therefore, acted properly in ordering petitioner to give private
respondents their separation pay as he was bound to comply with his contractual obligation
which is the law between the parties. It was in reality not a mere 'promise' as petitioner terms
it but a contract, because all the essential requisites of a valid contract are present, to wit: (1)
consent was freely given by the parties, (2) there was a subject matter, which is the payment
of the separation pay of private respondents, and (3) a cause, which is the loss of job of
private respondents who had been petitioner's salesladies for several years. Lao Sok made
an offer which was duly accepted by the private respondents. There was, therefore, a
meeting of the minds between two parties whereby one bound himself with respect to the
other, to give something or to render some service (Article 1305, Civil Code). By the
unconditional acceptance of the offer that they would be paid separation pay, a contract was
therefore perfected. Contracts in whatever form they may have been entered into are binding
on the parties unless form is essential for the validity and enforceability of that particular
contract.

130. G.R. No. L-42283 March 18, 1985

BUENAVENTURA
ANGELES,
ET
vs.
URSULA TORRES CALASANZ, ET AL., defendants-appellants.

AL., plaintiffs-appellees,

FACTS: The two parties here entered into a contract to sell a piece of land located in Cainta,
Rizal for the amount of P3,920.00 plus 7% interest per annum. The plaintiffs-appellees made
a downpayment of P392.00 upon the execution of the contract. On numerous occasions, the
94

defendants-appellants accepted and received delayed installment payments from the

plaintiffs-appellees. Sometime, the defendants-appellants wrote the plaintiffs-appellees a
letter requesting the remittance of past due accounts and thereafter cancelled the said
contract because the plaintiffs-appellees failed to meet subsequent payments. The plaintiffsappellees filed a suit to compel the defendants-appellants to execute in their favor the final
deed of sale because they found out that they have already paid the total amount of
P4,533.38 including interests, realty taxes and incidental expenses for the registration and
transfer of the land. However, the defendants-appellants alleged that the plaintiffs-appellees
violated paragraph six (6) of the contract to sell when they failed and refused to pay and/or
offer to pay the monthly installments, thereby constraining the defendants-appellants to
cancel the said contract. The lower court rendered judgment in favor of the plaintiffsappellees.
ISSUE: Whether or not the parties in this case contracted a contact of adhesion
HELD: Yes.The contract to sell entered into by the parties has some characteristics of a
contract of adhesion. The defendants-appellants drafted and prepared the contract. The
plaintiffs-appellees, eager to acquire a lot upon which they could build a home, affixed their
signatures and assented to the terms and conditions of the contract. They had no
opportunity to question nor change any of the terms of the agreement. It was offered to them
on a "take it or leave it" basis. While it is true that paragraph 2 of the contract obligated the
plaintiffs-appellees to pay the defendants-appellants the sum of P3,920.00 plus 7% interest
per annum, it is likewise true that under paragraph 12 the seller is obligated to transfer the
title to the buyer upon payment of the P3,920.00 price sale. The contract to sell, being a
contract of adhesion, must be construed against the party causing it. We agree with the
observation of the plaintiffs-appellees to the effect that "the terms of a contract must be
interpreted against the party who drafted the same, especially where such interpretation will
help effect justice to buyers who, after having invested a big amount of money, are now
sought to be deprived of the same thru the prayed application of a contract clever in its
phraseology, condemnable in its lopsidedness and injurious in its effect which, in essence,
and in its entirety is most unfair to the buyers."
131. G.R. No. L-68111 December 20, 1988
BERNOLI
P.
ARQUERO, petitioner,
vs.
HONORABLE NAPOLEON J. FLOJO, Presiding Judge, Branch VI, Regional Trial Court,
Second Judicial Region, Aparri, Cagayan and RADIO COMMUNICATION OF THE
PHILIPPINES (RCPI), respondents.

FACTS: The petitioner and private respondent Radio Communications of the Philippines,
Inc. (RCPI), entered into a contract for services for the transmission of a telegraphic
message thru RCPI to Atty. Eleazar S. Calasan at his office address. The text of the
telegram contract form for transmission Atty. Calasan received a copy of the telegram the
next day but he was made to pay the sum of P 7.30 for delivery charges. Thereafter, at the
birthday party of Asst. Fiscal Bonifacio Sison, Atty. Calasan confronted and censured the
petitioner anent the said telegram. Despite the petitioner's explanation that the telegram had
been duly paid for he was branded as a "stingy mayor who cannot even afford to pay the
95

measely sum of P 7.30 for the telegram in the presence of many persons.Thus, the
petitioner filed an action for damages against RCPI before the RTC,then RCPI filed a motion
to dismiss on the ground of improper venue, contending that pursuant to the service
contract, the parties had agreed that the venue of any action which may arise out of the
transmittal of the telegram shall be in the courts of Quezon City alone.
ISSUE: Whether or not the agreement of the parties in this case as to venue is contrary to
law, public order, public policy, morals or good customs
HELD: No. The parties do not dispute that in the written contract sued upon, it was expressly
stipulated that any action relative to the transmittal of the telegram against the RCPI must be
brought in the Courts of Quezon City alone. We note that neither party to the contract
reserved the right to choose the venue of action as fixed by law (i.e., where the plaintiff or
defendant resides, at the election of the plaintiff [par. 'b'], Section 2, Rule 4, Revised Rules of
Court), as is usually done if the parties purported to retain that right of election granted by
the Rules. Such being the case, it can reasonably be inferred that the parties intended to
definitely fix the venue of action, in connection with the written contract sued upon, in the
courts of Quezon City only. Section 3, Rule 4, Revised Rules of Court sanctions such
stipulation by providing that "by written agreement of the parties the venue of action may be
changed or transferred from one province to another." In the instant case, the condition with
respect to venue in the telegram form for transmission was printed clearly in the upper front
portion of the form. Considering the petitioner's educational attainment (being a lawyer by
profession and the Municipal Mayor of Sta. Teresita, Cagayan), he must be charged with
notice of the condition limiting the venue to Quezon City, and by affixing his signature
thereon, he signified his assent thereto.
132. G.R. No. 131086. December 14, 2001
BPI EXPRESS CARD CORPORATION, petitioner, vs. EDDIE C. OLALIA, respondent.
FACTS: Respondent Eddie C. Olalia applied for and was granted membership and credit
accommodation with BECC. It was renewed in the name of Cristina G. Olalia, respondents
ex-wife. This second card was an extension of Olalias credit card. BECC alleges that the
extension card was delivered and received by Olalia at the same time as the renewal card.
However, Olalia denies ever having applied for, much less receiving, the extension card. As
evidenced by charge slips presented and identified in court, it was found that the extension
card in the name of Cristina G. Olalia was used for purchases with a total unpaid charges
from the use of this card amounted to P101,844.54. BECC sent a demand letter to Olalia, to
which the latter denied liability saying that said purchases were not made under his own
credit card and that he did not apply for nor receive the extension card in the name of his
wife. He has likewise not used or allowed anybody in his family to receive or use the
extension card. Moreover, his wife, from whom he was already divorced, left for the States in
1986 and has since resided there. In addition, neither he nor Cristina was in Bacolod or
Iloilo at the time the questioned purchases were made. She was dropped as defendant by
the trial court wherein a case for collection was filed by BECC before the RTC but Olalia only
admits responsibility for the amount of P13,883.27, representing purchases made under his
own credit card.
ISSUE: Whether or not there was a valid contract wherein the parties entered into
96

HELD: BECC supports its allegation that Eddie C. Olalia received the extension card in
the name of his wife, by presenting the Renewal Card Acknowledgement Receipt wherein
Olalia affixed his signature. Such will not suffice to prove to this Court that the requirements
for the issuance of the extension card have been complied with, especially in the face of
respondents firm denial. We have previously held that contracts of this nature are contracts
of adhesion, so-called because their terms are prepared by only one party while the other
merely affixes his signature signifying his adhesion thereto. As such, their terms are
construed strictly against the party who drafted it.In this case, it was BECC who made the
foregoing stipulation, thus, they are now tasked to show vigilance for its compliance. BECC
failed to explain why a card was issued without accomplishment of the requirements.
Moreover, BECC did not even secure the specimen signature of the purported extension
cardholder, such that it cannot now counter Eddie C. Olalias contention that the signatures
appearing on the charge slips of the questioned transactions were not that of his former wife,
Cristina G. Olalia. We note too that respondent Eddie C. Olalia did not indicate nor declare
that he had a spouse when he applied for a credit card with BECC. In fact, at the time the
extension card was issued and allegedly received by respondent, Cristina had long left the
Philippines. BECCs negligence absolves respondent Olalia from liability.

133.BALIWAG TRANSIT INC. VS CA JANUARY 31,1981

134.ADORACION Y CRUZ ET AL VS CA JULY 27,1998

135. G.R. No. 139114

October 23, 2001

PEOPLE
OF
THE
PHILIPPINES, plaintiff-appellee, vs.
CAILLES, accused-appellant.

ROMAN

LACAP

FACTS: The accused was a shabu-supplier and a former military officer was apprehended
by the NBI Agents in a buy-bust operation conducted by the latter. The lower court convicted
the accused. During the buy-bust operation, although the money was already in the place
where the buy-bust operation happened, he was not able to accept the payment for the
shabu being sold by the NBI Agent who was the poseur-buyer. In his appeal, he contended
that the there was no actual delivery of the drug to the poseur-buyer, and that he should be
acquitted because the crime was not established because of the absence of the delivery of
the thing sold and payment therefor (as one of the 2 elements necessary for the prosecution
of the crime of illegal sale of shabu under Sec. 15, Art. III of R.A. 9264 as amended by Sec.
20, Art IV of RA 7659).

97

ISSUE: Whether or not there should be a complete actual delivery of the thing sold as well
as actual handling down of money to the seller as in the contention of the accused

RULING: No. Although the accused-appellant did not actually hand the contraband to
Doloiras, he placed it on top of the vault where Doloiras could easily have gotten it after
paying accused-appellant. There was thus a constructive delivery of the drug. The fact that
accused-appellant tried to put the shabu back inside the vault is of no moment as the crime
had by then been already consummated. There is no rule which requires that in buy-bust
operations there must be a simultaneous exchange of the money and the drug between the
poseur-buyer and the pusher. Nor was it important that the "boodle" money was not
presented in court. What is material to the prosecution of the illegal sale of dangerous drugs
is proof that the transaction actually took place, coupled with the presentation in court of the
corpus delicti.

136. BATAAN SEEDLING ASSOCIATION, INC. and CARLOS VALENCIA, petitioners, vs.
REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF
ENVIRONMENT and NATURAL RESOURCES, respondent
G.R. No. 141009

July 2, 2002

FACTS: Petitioner Bataan Seedling Association, Inc. (BSAI) entered into a Community
Based Reforestation Contract on October 26, 1990 with the Republic of the Philippines,
represented by the DENR. Under said contract, BSAI, in consideration of the amount of
P975,126.61, bound itself to undertake the reforestation of a fifty-hectare open/denuded
forest land in Barangay Liyang, Pilar, Bataan within a period of three (3) years. BSAI likewise
undertook to report to the DENR any event or condition which delays or may delay or
prevent completion of the work, and submit progress billings and accomplishment reports.
Concomitant with the contract is the Project Development Plan and the Approved Schedule
of Progress Payments detailing the annual cash flow and schedule of activities within the
three-year period, and the Contract of Undertaking providing for the mobilization fund in the
amount of P75,054.66. Said fund was allotted and released by respondent to enable BSAI to
start with the project, but the fund was to be returned to respondent upon completion of the
project or deducted from the periodic release of moneys to petitioners.
Believing that petitioners failed to comply with their obligations under the contract,
respondent sent a notice of cancellation dated July 31, 1992 to petitioner Carlos Valencia,

98

President of BSAI, asking the latter to show cause why the contract should not be
terminated.

Due to their failure to respond to the notice of cancellation, as well as return the mobilization
fund, respondent filed a Complaint for Damages against petitioners.

ISSUE: Whether the unilateral cancellation by the respondent of the Community-Based

Reforestation Contract is valid, being without factual and legal basis

RULING: Yes. There was a material breach of the contract warranting its cancellation. The
breach was not merely a slight or casual breach, but a substantial one giving sanction to the
cancellation. Under Clause 4.1 of the contract, respondents "shall have the right to suspend,
terminate or cancel" the contract upon petitioners substantial failure to fulfill their obligations,
or a willful violation of the material conditions, stipulations, and covenants thereof. It can be
concluded from the tenor of said clause that the parties intended mandatory compliance with
all the provisions of the contract. As stated previously, among such provisions requiring strict
adherence are the submission of progress reports and the reporting of such event which
may delay or prevent the project. Hence, upon petitioners failure to comply with said
obligations, respondent was well within its right to cancel the contract by express grant of
Clause 4.1.

137. CLARITA V. TANKIANG SANCHEZ, BEATRIZ V. TANKIANG, ANTONIO V.

TANKIANG, FRANCISCO V. TANKIANG, SYLVIA TANKIANG MANALO, ROSALINA V.
TANKIANG, EDILBERTO V. TANKIANG, VICENTE V. TANKIANG, and ROMEO V.
TANKIANG, as heirs of LUISA VILLARICA TANKIANG, petitioners, vs. THE
HONORABLE COURT OF APPEALS and PEDRO CRISTOBAL, respondents.
G.R. No. L-62275 June 22, 1984

FACTS: The petitioners are the owners of the fishpond being questioned in this case. In
1968, the fishpond was given out in a civil law lease to Alfredo Villarica. Private respondent
Cristobal was in the employ of Villarica since 1968, and upon the termination of the lease on
August 30, 1980, Cristobal refused to surrender his alleged tenant status contending that
despite the expiration of the civil law lease contract between his employer (Villarica) and the
original owner (the mother of the petitioners herein) on the said fishpond, he is entitled to the
continuous possession thereof as "bantay-kasama".

99

He then, instituted an action before the then Court of Agrarian Relations against the
petitioner contending that he is entitled for security of tenure. The mentioned court ruled in
favor of the private respondent which was affirmed by the CA. Hence this petition

ISSUE: Whether or not private respondent has the security of tenure

RULING: No. Even though the fishpond is considered as an agricultural land since there is
an existence of civil law lease, the relationship between the owner-lessor and the civil law
lessee as to their relationship, rights and obligations are governed by the Civil Code and not
by the (Agricultural Tenancy Act R.A. 1199). When the lessee's rights ceases because the
term has expired, all other rights created by the exercise of that right must also cease.
Cristobal being hired only as a laborer of the lessee, the case is not covered by a leasehold
tenancy under R. A. No. 1199.

138.OCHENGCO VS CITY COURT OF ZAMBOANGA JANUARY 11,1980

139. RADIO COMMUNICATIONS OF THE PHILS., INC. (RCPI). petitioner, vs. COURT OF
APPEALS and LORETO DIONELA, respondents.
G.R. No. L-44748 August 29, 1986

FACTS: Loreto Doinela (herein private respondent) received a telegram sent by the RCPI
(herein petitioner) with words that according to him was defamatory. The words were: SA
IYO WALANG PAKINABANG DUMATING KA DIYAN-WALA-KANG PADALA DITO KAHIT
BULBUL MO. Defendant corporation as a defense, alleges that the additional words in
Tagalog was a private joke between the sending and receiving operators and that they were
not addressed to or intended for plaintiff and therefore did not form part of the telegram and
that the Tagalog words are not defamatory. Nobody other than the operator manned the
teletype machine which automatically receives telegrams being transmitted. The said
telegram was detached from the machine and placed inside a sealed envelope and
delivered to plaintiff, obviously as is. The additional words in Tagalog were never noticed and
were included in the telegram when delivered. The private respondent being embarrassed
with the knowledge that the particular telegram was already red by many people, he filed a
case against the petitioner. The RTC and the CA ruled in favor of the private respondent.
Hence, this petition.
ISSUE: Whether or not there was a breach of contract committed on the part of the petitioner
HELD: Yes, there was a breach of contract on the part of the petitioner thru negligence of its
employees. As a domestic corporation engaged in the business of receiving and transmitting
100

messages, every time a person transmits a message through the facilities of the petitioner, a
contract is entered into. Upon receipt of the rate or fee fixed, the petitioner undertakes to
transmit the message accurately. There is no question that in the case at bar, libelous
matters were included in the message transmitted, without the consent or knowledge of the
sender. There is a clear case of breach of contract by the petitioner in adding extraneous
and libelous matters in the message sent to the private respondent. As a corporation, the
petitioner can act only through its employees. Hence the acts of its employees in receiving
and transmitting messages are the acts of the petitioner. To hold that the petitioner is not
liable directly for the acts of its employees in the pursuit of petitioner's business is to deprive
the general public availing of the services of the petitioner of an effective and adequate
remedy. In most cases, negligence must be proved in order that plaintiff may recover.
However, since negligence may be hard to substantiate in some cases, we may apply the
doctrine of RES IPSA LOQUITUR (the thing speaks for itself), by considering the presence
of facts or circumstances surrounding the injury.
140. CABATAN VS CA L-44875 AUGUST 19,1986

141.
LL
AND
COMPANY
DEVELOPMENT
AND
AGRO-INDUSTRIAL
CORPORATION, petitioner, vs. HUANG CHAO CHUN AND YANG TUNG FA, respondents.
G.R. No. 142378

March 7, 2002

FACTS: The petitioner alleged that respondents Huang Chao Chun and Yang Tung Fa
violated their amended lease contract over a 1,112 square meter lot it owns, when they did
not pay the monthly rentals thereon in the total amount of P4,322,900.00. It also alleged that
the amended lease contract already expired on September 16, 1996 but respondents
refused to surrender possession thereof plus the improvements made thereon, and pay the
rental arrearages despite repeated demands.

The amended lease contract was entered into by the parties sometime in August, 1991. The
same amended the lease contract previously entered into by the parties on August 8, 1991.
Among the amended terms and conditions were: 2. The term of this lease is FIVE (5)
YEARS from the effectivity of said lease, and with the option to renew, specifically shall
commence from September 15, 1991 and shall expire on September 16, 1996, and maybe
adjusted depending upon the ejectment of tenants; 5. The monthly rental is subject to
increase, said increase shall be based upon the imposition of Real Estate Tax for every two
(2) years upon presentation of the increased real estate tax to the Le[ssees], but said
increase shall not be less than 25% percent and 9. The parties agree as by these presents
have agreed to strictly observe the terms and conditions of the Contract of Lease. Violation
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by the Lessees of any of the terms and condition of said contract is equivalent to forfeitures
of the deposit in favor of the Lessor, furthermore the Lessees agreed to vacate the lease[d]
premises for any violation of the terms and condition of said contract, without going to court.
The respondents contended that they did not agree with the new rates in the amended lease
contract and that it is not fair to eject them from the premises after only five years,
considering the value of the improvements they introduced therein.

ISSUE: Whether or not the contract of lease is lawful

RULING: A stipulation in a lease contract stating that its five-year term is subject to "an
option to renew" shall be interpreted to be reciprocal in character. Unless the language
shows an intent to allow the lessee to exercise it unilaterally, such option shall be deemed to
benefit both the lessor and the lessee who must both consent to the extension or renewal,
as well as to its specific terms and conditions.

A unilateral increase in the rental rate cannot be authorized, considering that (1) the option to
renew is reciprocal and, thus, the terms and conditions thereof -- including the rental rate -must likewise be reciprocal; and (2) the contracted clause authorizing an increase -- "upon
presentation of the increased real estate tax to lessees" -- has not been complied with by
petitioner. The contention of the respondents on the ejectment has no merit because what
they did was with the knowledge of the risk the contract was plainly provided for 5-year
lease period and besides, both parties freely and voluntarily entered to the said lease
contract.
142. FELICIDAD VILLANUEVA, FERNANDO CAISIP, ANTONIO LIANG, FELINA
MIRANDA,
RICARDO
PUNO,
FLORENCIO
LAXA,
and
RENE
OCAMPO, petitioners, vs.HON. MARIANO CASTAEDA, JR., Presiding Judge of the
Court of First Instance of Pampanga, Branch III, VICENTE A. MACALINO, Officer-inCharge, Office of the Mayor, San Fernando, Pampanga, respondents.

G. R. No. L-61311 September 2l, 1987

FACTS: The subject land of this petition is located in the vicinity of the public market of San
Fernando, Pampanga, on which stands a conglomeration of vendors stalls together forming
what is commonly known as a talipapa.

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The dispute started way back in 1961, when the municipal council of San Fernando adopted
Resolution No. 218 authorizing some 24 members of the Fernandino United Merchants and
Traders Association to construct permanent stags and sell in the above-mentioned place.
The action was protested on November 10, 1961, in Civil Case No. 2040, where the CFI of
Pampanga, Branch 2, issued a writ of preliminary injunction that prevented the defendants
from constructing the said stalls until final resolution of the controversy. On January 18,
1964, while this case was pending, the municipal council of San Fernando adopted
Resolution G.R. No. 29, which declared the subject area as "the parking place and as the
public plaza of the municipality, thereby impliedly revoking Resolution No. 218, series of
1961. Four years later, the aforesaid case was decided and it was held that the land
occupied by the petitioners, being public in nature, was beyond the commerce of man and
therefore could not be the subject of private occupancy. The writ of preliminary injunction
was made permanent.

The basic contention of the petitioners is that the disputed area is under lease to them by
virtue of contracts they had entered into with the municipal government, first in 1961 insofar
as the original occupants were concerned, and later with them and the other petitioners by
virtue of the space allocations made in their favor in 1971 for which they saw they are paying
daily fees. The municipal government has denied making such agreements. In any case,
they argue, since the fees were collected daily, the leases, assuming their validity, could be
terminated at will, or any day, as the claimed rentals indicated that the period of the leases
was from day to day. Moreover they contended that the said land was already reserved by
the National Planning Commission to be a public plaza as early as 1951.

ISSUE: Whether or not the act of the municipal council of San Fernando in adopting
Resolution No. 29 impliedly revoking Resolution No. 218 is a violation of non-impairment
clause

RULING: No. Every contract affecting the public interest suffers a congenital infirmity in that
it contains an implied reservation of the police power as a postulate of the existing legal
order. This power can be activated at any time to change the provisions of the contract, or
even abrogate it entirely, for the promotion or protection of the general welfare.
Since the occupation of the place in question in 1961 by the original 24 stallholders (whose
number later ballooned to almost 200), it has deteriorated increasingly to the great prejudice
of the community in general. The filthy condition of the talipapa, where fish and other wet
items are sold, has aggravated health and sanitation problems, besides pervading the place
with a foul odor that has spread into the surrounding areas and any other problems.
The problems caused by the usurpation of the place by the petitioners are covered by the
police power as delegated to the municipality under the general welfare clause. This
authorizes the municipal council "to enact such ordinances and make such regulations, not
repugnant to law, as may be necessary to carry into effect and discharge the powers and
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duties conferred upon it by law and such as shall seem necessary and proper to provide for
the health and safety, promote the prosperity, improve the morals, peace, good order,
comfort, and convenience of the municipality and the inhabitants thereof, and for the
protection of property therein." In this case, the police power is validly exercised through the
adoption of Resolution No. 29 by the municipal council of San Fernando.

143. IRENEO LEAL, JOSE LEAL, CATALINA LEAL, BERNABELA LEAL, VICENTE LEAL
EUIOGIA LEAL PATERNO RAMOS, MACARIO DEL ROSARIO, MARGARITA ALBERTO,
VICTORIA TORRES, JUSTINA MANUEL, JULIAN MANUEL, MELANIA SANTOS,
CLEMENTE SAMARIO, MARIKINA VALLEY, INC., MIGUELA MENDOZA, and REGISTER
OF DEEDS OF RIZAL, petitioners, vs. THE HONORABLE INTERMEDIATE APPELLATE
COURT (4th Civil Cases Division), and VICENTE SANTIAGO (Substituted by SALUD M.
SANTIAGO), respondents
G.R. No. L-65425 November 5, 1987

FACTS: A document entitled "Compraventa," written entirely in the Spanish language,

provided that en caso de venta no podran vender a otros dischos lotes de terreno sino al
aqui vendedro o los herederos or sucesores de este. It is an express prohibition against the
sale of the lots described in the compraventa to third persons or strangers. On March 21,
1941, a document entitled compraventa involving three parcels of land, was executed by
the private respondent's predecessors-in-interest, Vicente Santiago and his brother, Luis
Santiago, in favor of Cirilio Leal the deceased father of some of the petitioners. Pursuant to
this "Compraventa," the title over the three parcels of land in the name of the vendors was
cancelled and a new one was issued in the name of Cirilo Leal who immediately took
possession and exercised ownership over the said lands. When Cirilo died on December 10,
1959, the subject lands were inherited by his six children, who are among the petitioners,
and who caused the consolidation and subdivision of the properties among themselves.
Between the years 1960 and 1965, the properties were either mortgaged or leased by the
petitioners-children of Cirilo Leal to their co-petitioners.

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Sometime before the agricultural year 1966-1967, Vicente Santiago approached the
petitioners and offered re- repurchase the subject properties. Petitioners, however, refused
the offer. Consequently, Vicente Santiago instituted a complaint for specific performance
before the then Court of First Instance of Quezon City on August 2, 1967.

ISSUE: Whether or not the express prohibition in the compraventa was lawful

RULING: No. Contracts under the New Civil Code are generally binding between the parties,
their assigns and heirs; however, under Art. 1255 of the Civil Code of Spain, which is
applicable in this instance, pacts, clauses, and conditions which are contrary to public order,
are null and void, thus, without any binding effect.
Parenthetically, the equivalent provision in the Civil Code of the Philippines is that of Art.
1306, which states: "That contracting parties may establish such stipulations, clauses, terms
and conditions as they may deem convenient, provided they are not contrary to law, morals,
good customs, public order, or public policy. Public order signifies the public weal public
policy.
One such condition which is contrary to public policy is the present prohibition to sell to third
parties, because the same virtually amounts to a perpetual restriction to the right of
ownership, specifically the owner's right to freely dispose of his properties. Any prohibition,
stated as indefinite as to time, so much so that it shall continue to be applicable even
beyond the lifetime of the original parties to the contract is void.

144. TOP-WELD MANUFACTURING, INC., petitioner, vs. ECED, S.A., IRTI, S.A.,
EUTECTIC CORPORATION, VICTOR C. GAERLAN, and THE HON. COURT OF
APPEALS, respondents.
G.R. No. L-44944 August 9, 1985

FACTS: The petitioner, a domestic corporation entered into separate contracts with two
different foreign entities, IRTI, S.A. (IRTI) and ECED, S.A., (ECED). The two foreign entities
mentioned were not given a certification by the Board of Investments of the Philippines and a
license by the Security and Exchange Commision to do business in the Philippines.
However, the parties continue to enter into said contracts.
The agreement between IRTI and the petitioner was that the petitioner was constituted a
licensee of IRTI to manufacture welding products under certain specifications, with raw
materials to be purchased by the former from suppliers designated by IRTI, for a period of
three. In another agreement between the petitioner and the ECED, the petitioner was

105

designated as ECED's distributor in the Philippines of certain welding products and

equipment. By its terms, the contract was to remain effective until terminated by either party.
Upon learning that the two foreign entities were negotiating with another group to replace the
petitioner as their licensee and distributor, the latter instituted a Civil Case against IRTI,
ECED another corporation named EUTECTIC Corporation, another foreign entity and an
individual named Victor C. Gaerlan, a Filipino citizen alleged to be the representative and
employee of these three corporations.
In its complaint, the petitioner sought the issuance of a writ of preliminary injunction to
restrain the corporations from negotiating with third persons or from actually carrying out the
transfer of its distributorship and franchising rights. It also asked the court to prohibit the
defendants from terminating their contracts with the petitioner.

ISSUE: Whether or not the petitioner can compel the foreign entities not to terminate and/or
from negotiating with third persons in producing and distributing its products

RULING: No. The petitioner had actual knowledge of the applicability of R.A. No. 5455 (An
Act to Require that the Making of Investments and the Doing of Business within the
Philippines by Foreigners or Business Organizations Owned in Whole or in Part by
Foreigners Should Contribute to the Sound and Balanced Development of the National
Economy on a Self-Sustaining Basis, And For Other Purposes) at the time the contract was
executed and at all times thereafter. This conclusion is compelled by the fact that the same
statute is now being propounded by the petitioner to bolster its claim. The petitioner was also
a party at fault, because he has the knowledge that the foreign corporations are not licensed
to do business in the Philippines, notwithstanding this fact he still entered into those
contracts. The very purpose of the law was circumvented and evaded when the petitioner
entered into said agreements despite the prohibition of R.A. No. 5455. The parties in this
case being equally guilty of violating R.A, No. 5455, they are in pari delicto, in which case it
follows as a consequence that petitioner is not entitled to the relief prayed for in this case.
The law will not aid either party to an illegal agreement.
145
UCPB General Insurance Corporation Inc. vs Masagana Telemart, Inc. (GR 137172 April
4, 2002)
Facts:
Masagana Telemart had an issurance plan with UCPB General Insurance
Corporation Inc which covered 22 May 1991 to 22 May 1992. On June 13, 1992, the
properties of Masagana Telemart in Taft Avenue were burned. A month after the tragedy,
Masagana tendered 5 Equitable Bank Manager's Checks as renewal premium payments
which UCPB accepted. The following day, Masagana made its formal demand for
indemnification for the burned insured properties. UCPB rejected MAsagana's claim since
106

the policies expired and were not renewed for anoter term, Masagana sent a notice of nonrenewal earlier and the properties were burned before the tender of premium payment.
Issue:
Whether or not the stipiulations in the insurance contract is void
Ruling:
No, the stipulations in the insurance contract is not void. Art 1306 of the civil code has
provided that The contracting parties may establish such stipulations clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals,
good customs, public order, or public policy. The insurance policy between UCPB and
Masagana is not against the law, morals, good customs, public order or public policy.
Moreover, there is nothing in Section 77 which prohibits the parties in an insurance contract
to provide a credit term within which to pay the premiums.

146 San Miguel Corp. vs NLRC (GR 80774 May 31, 1988)
Facts:
San Miguel Corporation sponsored a program which granted cash awards to all SMC
employees except the Division Managers and higher ranked personnel. Vega proposed an
innovation proposal which would eliminate the defects in the quality of taste of the San
Miguel BeerGrande. Vega demanded the cash award, but his proposal was rejected and so,
he was not able to receive the cash award. A case was brought to the labor arbiter, but the
arbiter dismissed the complaint on the ground that the money claim of Vega is not incidental
to his employment. Case was then brought to the Supreme court.

Issue:
Whether or not the innovation program of San Miguel Corporation is an enforceable contract
and should Vega be granted with award money
Ruling:
Yes, the innovation program of San Miguel Corporation is an enforceable contract, and
therefore, Vega should be granted with award money. The SMC innovation program was an
invitation from SMC to its employees to submit innovation proposals and that it undertook to
grant cash awards to employees whoa ccept such invitation and whose suggestions,
satisfied the requirements of the innovation program. This could be translated into some
substantial benefit to the Corporation. Therefore, this could be taken as facio ut des or I do

107

that you give. Therefore, there has bee an implied contract that has risen between the
corporation and Vega.

147. Corpus vs CA (98 SCRA 424)

Facts:
David is a lawyer who accepted the case of Corpus. There has been no express
agreement between the two with regards to attorney's fees and other fees. David filed a
case against Corpus. David won and was paid a check by Corpus. David declined the check
and Corpus contended that since David rejected the check, the services that he had done for
him has is gratuitous.
Issue:
Whether or not there has been a valid contract betwen David and Corpus
Ruling:
Yes, there has been a valid contract between David and Corpus. It may be a fact that there
has been no express agreement between the two, but there existed an implied agreement
for the payment of attorney's fees as evidenced by becoming a lawyer to Corpus. The
Payment of attorney's fees to David may be justified by virtue of the innominate contract of
facio ut des (I Do that you Give). Furthermore, no one shall be unjustly enrich at the
expense of another, which is what Corpus did.

148. Alcuaz vs. PSBA

Facts:
Teachers of PSBA has signed a contract with the said school stating that their contracts are only for 1
semester. That after such, PSBA will not have any contractual relationship with any of those teachers. Some
of those teachers who have been working in PSBA questioned the validity of the said contract and if there is
any way that the teachers can have a permanent employed status in the school.
Issue:
Whether or not the teachers can be employed permanently notwithstanding the existence of the contract
Ruling:
Yes, the teachers can be employed permanently notwithstanding the existence of the contract. It has been
held that teachers who have been teaching in the institution should have permanent status in the institution
and they cannot be removed without just cause and due process.

149.PNB vs CA (GR 88880 April 30, 1991)

Facts:
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The Rocamora spouses obtained a loan from PNB that is payable within 5 years. It has an
interest of 12% per annum and a penalty fee of 5% per annum in case of delayed payments.
They mortgaged a real estate and a chattel mortgage over machineries and the remaining
mortgage was guaranteed by CIGLF. The promisory note and the real estate mortgage deed
contained an escalation clause which allowed PNB to increa the 12% rate anytime without
notice, within the limits allowed by law. During the due date, the amount PNB is collecting
amounted to P 206,297.47, which is inclusive of the principal, interest and penalty. The
spouses refused to pay and alleged that PNB increased the interest to 42% per annum .
Issue:
Whether or not the interest imposed by PNB is void
Ruling:
Yes, the interest imposed by PNB is void. There may be the presence of an escalation
clause in the contract, but the clause does not give PNB the inbridled right to adjust interest
rates unilaterally. The rate of interest made should be made as a result of agreement
between parties. Any change must be mutually agreed upon, otherwise the change carries
no binding effect. According to Article 1308 of the Civil Code, a stipulation on the validity or
compliance with the contractthat is left solely to the will of one of the parties is void.
Therefore, the unconsented increase in interest rates is ineffective since it transgresses the
principle of mutuality of contracts.
150.FGU Insurance Corp. G.P. Sarmiento Trucking Corp. and Lamebert M. Eroles (GR 141910 Aug. 6,
2002)
Facts:
GPS delivered 30 units of Condura SD white refrigeratorsto the Central Luzon Appliances in
Dagupan City. While it was on its way, it collided with an unidentified truck, causing it to fall into a deep canal
which resulted to in the damage of the refrigerators. FGU, the insurarer, paid the value of the cargoes to the
subrogee of the rights and interests of FGU. FGU then sough reimbursement from GPS. FGU filed a
complaint for damages and breach of contract against GPS. RTC granted the motion to dismiss and denied
the motion for reconsideration. The case has been elevated to theCA and SC.
Issue:
Whether or not GPS can escape liability arising from the breach
Ruling:
No, GPS cannot escape liability arising from the breach. In culpa contractual, the existence of the contract
and the failure of its performance can justify the right to relief. The law will not permit a party to be set free from
liability for any kind of misperformance. A breach upon the contract confers upon the injuured party a valid
cause for recovering that which may have been lost or suffered.
151. Siredy Enterprise Inc. vs CA (GR 129039 Sept. 17, 2002)
Facts:

109

De Guzman is an architect who owns the Jigscon Construction. Siredy, on the other
hand is the developer of a subdivision in Marilao, Bulacan. The president of Siredy executed
a letter of authorization to Santos which allows the latter to negotiate and enter contract in
relation to the subdivision and that the proceeds will be deposited to the former. Santos then
entered a deed of agreement with De Guzman. De Guzman proceeded with the construction
of houses in the subdivision, but when the time came when he needed to collect payment,
he failed to collect any amount from Siredy. Siredy contended that they did not authorise De
Guzman to enter into a contract with anyone in regards to the construction of houses in the
subdivision.
Issue:
Whether or not contracts can take effect when it has been entered by its agent
Ruling:
Yes, contracts can take effect even if it has been entered, provided that such agent has been
duly authorised. This has been provided for by Art 1311 of the Civil code which states that
Contracts take effect only between the parties, their assigns and heirs, except in case where
the rights and oligations arising from the contract are not transmissible by their nature, or by
stipulation or by provision of law. No exception has been shown to this case. Since The
president of Siredy signed the letter of authorisation, he has vested Santos the authority to
act in his behalf. Therefore, the contract that he has entered with De Guzman is valid.

152. Bobis vs Prov. Sheriff of Camarines Norte (GR 29838 March 18, 1983)
Facts:
A Complaint for annulment of execution of sale has been filed in CFI Camarines Norte. A land was owned
by the Eco spouse, by which the said land has been cultivated by the Bobis Spouses. Ortega, a third party,
filed a case to recover of the planted land but subsequently reached a compromise agreement. . The Ecos
then sold the land to the Bobises. After the sale, the Ecos only paid 50php to Alfonso as part of the
Compromise agreement for the improvements. A writ of execution has been ordered and commanded the
Sheriff that the goods of the defendants be caused to be made te sum of 140php. The sheriff levied upon the
land which included the land that the Ecos sold to the Bobises. The latter then sought for the modificatio of the
writ contending that they were not the ones obliged to pay but the former. The motion was then denied and
the sheriff sold the land to the highest bidder. No one exercised the right of redemption, and so the sheriff
executed an Officers Deed of Sale in favor of the highest bidder. The highest bidder requested for the
Bobises to surrender the title within 5 days but they did not surrender.
Issue:
Whether or not the sale of the Sheriff to the highest bidder is valid
Ruling:
No, the sale of the Sheriff to the highest bidder is not valid. Only the Ecos were adjudged to
pay the highest bidder and the Bobises were not ordered to pay the highest bidder. The
order made by the judge for commanding the sheriff against the property of the Ecos and
Bobises was unjust since the ownership of the lot has been transferred from the Ecos to the
Bobises. Giving the liability of the Ecos to the Bobises is a prejudice to the right of the new
110

owners. Selling the land to another person would prejudice the right of the new owners,
which are the Bobises.
153. House International Building Tenants Association Inc. vs IAC (GR 752887 June 30,
1987)
Facts:
The House International is a non stock non profit corporation whose directors and
members are heads of the families of the Building in 777 Ongpin Street. The land was
formerly owned by Atty. Ang who mortgaged it to the GSIS to be able to secure payment of a
loan. The mortgage has been forclosed and the right of redemption over the property has
expired; resulting to the selling of the said building to the Centertown Marketing through a
deed of conditional sale, without informing the tenants of the building. The said Company
was not authorised to engage in real estate, so it resulted for it to corporate a sister company
for them to be able to engage in real estate business. The House Association filed for the
annulment of the deed of conditional sale.
Issue:
Whether or not the House International Building Tenants Association is a proper party to file
a case for the annulment of conditional sale
Ruling:
No, the House International Building Tenants Association is a proper party to file a case for
the annulment of conditional sale. Article 1397 of the Civil Code has provided that The action
for the annulment of contracts may be instituted by all who are thereby obliged principally or
subsidiarily. The Association is not a party nor a privy to the Deed of conditional sale and
therefore, it cannot assail the validity of the said contracts.
154.Rebecca C. Young et. al vs CA (GR 79518 Jan. 13, 1989)
Facts:
The Defendant Philippine Holding, Inc. is the former owner of a piece of land located at
Soler St., Sta. Cruz, Manila, and a two storey building erected thereon, consisting of six
units. The owner Philippine Holding, Inc. secured an order from the City Engineer of Manila
to demolish the building. Antonio Young, then a tenant of said Unit 1352, filed an action to
annul the City Engineer's demolition As an incident in said case, the parties submitted a
Compromise Agreement to the Court. Paragraph 3 of said agreement provides that plaintiff
(Antonio S. Young) and Rebecca Young and all persons claiming rights under them bind
themselves to voluntarily and peacefully vacate the premises which they were occupying as
lessees which are the subject of the condemnation and demolition order and to surrender
possession . A case was filed to the RTC and Young contended that even assuming that her
supposed right of first refusal is a stipulation for the benefit of a third person, she did not
inform the obligor of her acceptance as required by the second paragraph of Article 1311 of
the Civil Code.
Issue:
Whether or not Youngs stipulation that gave her the right of refusal is a stipulation pour
autrui

111

Ruling:
The stipulation that young gave may be a stipulation pour autrui but it is unrebutted
that she did not communicate her acceptance whether expressly or impliedly. The requisites
of a stipulation pour autrui or a stipulation in favor of a third person are the following: (1)
there must be a stipulation in favor of a third person (2) the stipulation must be a part, not
the whole of the contract (3) the contracting parties must have clearly and deliberately
conferred a favor upon a third person, not a mere incidental benefit or interest (4) the third
person must have communicated his acceptance to the obligor before its revocation. (5)
neither of the contracting parties bears the legal representation or authorization of the third
party. The argument is pointless, considering that the sale of subject property to some other
person or entity constitutes in effect a revocation of the grant of the right of first refusal to
Rebecca C. Young.

155. Associated Bank vs CA (GR 123793 June 29, 1998)

Facts:
In 1975 Associated Banking Corporation and Citizens Bank and Trust Company
merged to form just one banking corporation known as Associated Citizens Bank,
the surviving bank. On 1981, the Associated Citizens Bank changed its corporate
name to Associated Bank by virtue of the Amended Articles of Incorporation. On
1977, the defendant executed in favor of Associated Bank a promissory note
whereby the former undertook to pay the latter the sum of P2,500,000.00 payable
on or before 1978. As per said promissory note, the defendant agreed to pay
interest at 14% per annum, 3% per annum in the form of liquidated damages,
compounded interests, and attorneys fees, in case of litigation equivalent to 10% of
the amount due. The defendant, still owes plaintiff bank the amount
of P2,250,000.00 exclusive of interest and other charges. Despite repeated
demands the defendant failed to pay the amount due.
Issue:
Whether or not the promissory note in the amount of 2.5M in favor of CBTC is a
contract pour autrui
Ruling:
No, the promissory note in the amount of 2.5M in favor of CBTC is not a contract
pour autrui. The requisites of Contract pour autrui are the following: 1) the stipulation in
favor of a third person must be a part of the contract, and not the contract itself; (2) the
favorable stipulation should not be conditioned or compensated by any kind of obligation;
and (3) neither of the contracting parties bears the legal representation or authorization
of the third party. There has been no stipulation in the contract that would even resemble
a provision in consideration of a third party and the instrument does not disclose the
112

purpose of the loan contract. The promisory note merely lays down the terms of
payment.

156. Velasco et al vs CA
Facts:
On November 10, 1965, Alta Farms secured a loan amounting to Three Million Two Hundred
Fifty Five Thousand Pesos (P3,255,000.00) and another additional loan of Five Million Sixty
Two Thousand Pesos (P5,062,000.00) from GSIS in order to finance a piggery project. Alta
Farms defaulted in the payment of said loan. It then executed a Deed of Sale with
Assumption of Mortgage with Asian Engineering Corporation but without the consent of
GSIS in violation of the mortgage contracts. Even without obtaining approval from the GSIS,
AEC executed an Exclusive Sales Agency, Management and Administration Contract in
favor of Laigo Realty Corporation, with the intention of converting the piggery project into a
subdivision. After the development of the area, LRC entered into a contract with Lumanlan to
construct 20 houses for the home buyers. Lumanlan then constructed the houses for which
he claims a balance of P309,187.76. Lumanlan admitted that Mrs. Laigo paid him several
checks amounting to P124,855.00 but which checks were all dishonoured. Then, LRC
entered into another contract with Velasco to construct houses for the home buyers who
agreed with Velasco on the prices and downpayment to be paid by the individual home
buyers. When neither Laigo nor the home buyers paid for the houses constructed, Velasco
wrote to GSIS to intercede for the unpaid accounts of the home buyers.
Issue:
Whether or not GSIS is liable to the Velasco and Lumanlan for the cost of the construction
now owned by the GSIS?
Held:
Yes. The GSIS is liable for the cost of construction incurred by Velasco and Lumanlan for the
construction of the houses for the home buyers. GSIS should pay them. Since, GSIS
assumed the ownership of the houses built and was benefited by the same. In Article 2127,
the mortgage extends to the natural accessions, to the improvements, growing fruits, and
rents.

157. Yu vs. CA
Facts:
Yu is the exclusive distributor of the House of Mayfair wall covering products here in the
Philippines. His former dealer (private respondent) purchased the merchandise from the
House of Mayfair in England through FNF Trading in West Germany and sold said
merchandise in the Philippines. The House of Mayfair has had an exclusive agency
agreement with Yu to promote and procure the merchandise in the Philippines. Yu insisted
that the he was by-passed and that private respondent acted in concert with The FNF
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Trading in misleading Mayfair into believing that the goods ordered by the Trading were
intended for shipment to Nigeria although they were actually shipped and sold in the
Philippines. The private respondent then professed ignorance of the exclusive contract in
favor of Yu. Yu then filed for preliminary injunction.
Issue:
Whether or not the writ of preliminary injunction must be granted to the petitioner?
Held:
Yes. The writ of preliminary injunction must be granted. The court held that injunction is the
proper remedy to prevent a wrongful interference with contracts by strangers to such
contracts where the legal remedy is insufficient and resulting to injury is irreparable. The
liability of private respondent does not emanate from the four corners of the contract for
Unisia Merchandising Co. (private respondent) is not a party thereto but its accountability is
an independent act generative of civil liability. The right to perform an exclusive
distributorship agreement and to reap the profits resulting from such performance are
proprietary rights which a party may protect which may otherwise not be diminished by the
expedient act of utilizing or interposing a person or firm to obtain goods from the supplier to
defeat the very purpose for which the exclusive distributorship was conceptualized at the
expense of the sole authorized distributor.

158.Malbarosa vs. Ca
Facts:
Malbarosa was the president and General Manager of Philtectic Corp., a subsidiary of
private respondent SEADC. AS an officer, he was issued a car and membership in the
Architectural Center. Malbarosa wanted to resign and intimidated the vice chairman and the
Board of Directors of the private respondent so that his incentive compensation is paid to
him as President of Philtectic. He then submitted his resignation to the VP. One of the
officers met with the petitioner and said that he will get an approximate amount of P395k.
After receipt of the resignation, the VP sent a letter-offer to the petitioner stating the
acceptance of the resignation and advised him that he is entitled to P251k as his incentive
compensation. Also, the VP proposed the satisfaction of his incentive by giving him the car,
instead of cash. Malbarosa was required to affix his signature in the letter if he agrees to the
offer. Malbarosa refused to sign the letter. Later, the private respondent demanded that
Malbarosa return the car and turn over the membership in the Architectural Center.
Malbarosa then wrote to the counsel of the private respondent that he cannot comply with
the demand since he already accepted the offer 14 days after it was made. He enclosed a
Xerox of the original with his affixed signature as required. With his refusal, private
respondent instituted an action for recovery.
Issue:
Whether or not there was a valid acceptance on the part of Malbarosa of the letter-offer of
the respondent?

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Held:
No. There was no valid acceptance. Under Article 1319 of the New CC, the consent by a
party is manifested by the meeting of the offer and the acceptance upon the thing and the
cause which are to constitute the contract. An offer may be reached at any time until it is
accepted. An offer that is not accepted does not give rise to consent. To produce a contract,
there must be acceptance of the offer which may be express or implied but must not qualify
the terms of the offer. The acceptance must be absolute, unconditional and without variance
any sort from the offer.

159. Lim vs. CA

Facts:
Private respondent owns a parcel of land which was sold to the petitioners. The petitioners
broker prepared a receipt embodying the agreement with certain conditions. The conditions
are as follows: a) The sum of P200,000.00 shall form part of the purchase price; b) The
balance shall be paid in full after the ejectment of the squatters; c) The seller assumes full
responsibility to eject the squatters within a period of sixty (60) days from the date of receipt
of the earnest money, in case of failure, the seller shall refund to the buyer the sum of
P200,000.00, however if the buyer shall fail to pay the balance after the seller has ejected
the squatters, the amount of P200,000.00 shall be forfeited by the seller; d)Taxes shall be
paid by the buyer; e) Zapalta Realty Co., shall be the exclusive broker of the buyers; f) Buyer
assumes full responsibility of the premises immediately upon the eviction of the squatters.
The seller then failed to eject the squatters but the buyers did not demand for the return of
the earnest money. The seller then met with the buyers to negotiate a price increase to
facilitate the ejectment of the squatters. Then the seller insisted in returning the earnest
money for the seller still failed to eject the squatters. The buyer refused to accept the refund.
The buyers now claims that the contract of sale was already perfected.
Issue:
Whether or not there was a perfected contract of sale?
Held:
Yes. The contract of sale was already perfected. Art 1475 of the CC states, Whenever
earnest money is given in a contract of sale, it shall be considered as part of the price and as
proof of the perfection of the contract. Failure to comply with the condition only gives the
party the option either to refuse or to proceed with the sale or to waive the condition. Art
1545 of the CC states, Where the obligation of either party to a contract of sale is subject to
any conditions which is not performed, such arty may refuse to proceed with the contract or
he may waive performance of the condition. If the other party has promised that the
condition should happen or be performed, such first mentioned party may also treat the
nonperformance of the condition as a breach of warranty. Where the ownership in the things
has not passed, the buyer may treat the fulfillment by the seller of his obligation to deliver the
same as described and as warranted expressly or by implication in the contract of sale as a
condition of the obligation of the buyer to perform his promise to accept and pay for the
thing. In this case, there is already a perfected contract. The condition was imposed only on
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the performance of the obligation. Hence, petitioners have the right to choose whether to
demand the return of P200,000.00 which they have paid as earnest money or to proceed
with the sale. They have chosen to proceed with the sale and private respondent cannot
refuse to do so.

160.. Badillo vs. Ferrer

Facts:
Macario died without a will in 1966, leaving a widow, Clavita and five minor children. He left a
parcel of land. In 1967, Clarita, in her own behalf and as natural guardian of the minor
plaintiff executed a deed of extrajudicial partition and sale of the property through which she
sold the property to Gregorio. Modesta, a sister of Macario, was able to obtain guardianship
over the property and persons of the minor children on 1968.
In 1970, Modesta caused the minor children to file a complaint to annul the sale of their
participation in the property and asked that as co-owner they be allowed to execute the right
of legal redemption with respect to Claritas participation therein. The trial court annulled the
sale to Gregorio of the minor childrens participation in the property and allowed them to
redeem the participation of their mother therein.
Issue:
Whether or not the contention is untenable?
Held: Yes, the contention is untenable. Under Art. 1390 of the CC, it renders a contract
voidable if one of the parties is incapable of giving consent to the contract or if the
contracting partys consent is vitiated by mistake, violence, intimidation, undue influence or
fraud. Surviving widow has no authority or has acted beyond her powers in conveying to the
vendees the undivided share of her minor children in the property, as her powers as the
natural guardian covers only matters of administration and cannot include the power of
disposition, and she should have first secured court approval before alienation of the
property. Since the minors never ratified the deed, and in fact questioned its validity, the
contract remained unenforceable or unauthorized, and restitution by the minors as to the
portion of the purchase price which pertains to their share is not legally sanctioned.
161. Coronel vs. Constantino
Facts:
A property owned by Honoria Aguinaldo is the subject property. One half of which was
inherited by Emilia Meking Vda. De Coronel together with her sons Benjamin, Catalino and
Ceferino, all surnamed Coronel. The other half was inherited by Florentino Constantino and
Aurea Buensuceso. The share of Emilia and sons were sold to Jess C. Santos and Priscilla
Bernardo by virtue of deed of sale. The property bought by Santos and Bernardo were in
turn sold to Constantino and Buensuceso by virtue of a Compromise Agreement.
Constantino and Buensuceso filed a case claiming that they are the owners of the subject
property and defendants have illegally started to introduce construction on the premises in
question, and pray that defendants respect, acknowledge and confirm the right of ownership
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of the plaintiffs to the share, interest and participation of the one-third (1/3) portion of the
subject property. Respondents claimed that the property which is the subject of the deed of
sale includes the share of the sons of Emilia.
Issue:
Whether or not the Contract of Sale executed by Emilia as parent-co-owner is unenforceable
with respect to the shares of her co-heirs-children?
Held:
Yes. The Contract of Sale is unenforceable with respect to the shares of the children of
Emilia. It is true that Emilia executed the deed but it is not a competent proof that Benjamin,
son of Emilia had sold his own share of the subject property. Emilia executed the instrument
in her own behalf and not in representation of her three children. Article 493 of the Civil Code
states: Each co-owner shall have the full ownership of his part and of the fruits and benefits
pertaining thereto, and he may therefore alienate, assign, or mortgage it, and even
substitute another person in its enjoyment, except when personal rights are involved. But the
effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the
portion which may be allotted to him in the divisin upon the termination of the co-ownership.
The sale of the subject property made by Emilia in favor of Santos and Bernardo is limited to
the portion which may be allotted to her upon the termination of her co-ownership over the
subject property with her children. Also, according to Article 1317 and 1403 (1) of the Civil
Code,
Art. 1317. No one may contract in the name of another without being authorized by the
latter, or unless he has by law a right to represent him.
A contract entered into in the name of another by one who has no authority or legal
representation or who has acted beyond his powers shall be unenforceable, unless it is
ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it
is revoked by the other contracting party.
Art. 1403. The following contracts are unenforceable, unless they are ratified:
Those entered into in the name of another person by one who has been given no authority
or legal representation, or who has acted beyond his powers.
Mere silence of Benjamin does not mean that he consents to the sale of his share. No
evidence was presented that the three sons were aware of the sale made by their mother.
Unaware of such sale, Benjamin could not be considered as having voluntarily remained
silent and knowingly chose not to file an action for the annulment of the sale. His alleged
silence and inaction may not be interpreted as an act of ratification on his part.
162. LCC CORP VS FARRALES L-30786 FEBRUARY 20, 1984
163. Clarin vs. Rulona
Facts:

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Clarin owns a 10 hectare land in Bohol which is said to be his share from his co-owners.
Clarin executed a Contract of Sale in favor of Rulona with the agreed purchase price of
P2,500.00. The initial payment will be P1,000.00 and the remaining balance will be paid
monthly in the amount of P100.00. Rulona then paid the initial payment and the initial
monthly payment. Late on Clarin returned the P1,100.00 against Rulonas will for he was not
able to convince the other co-owners regarding the sale of his share. Clarin also said that
there was no perfected contract of sale for it was subjected to the condition that his coowners would consent to the sale of his share.
Issue:
Whether or not there was a perfected Contract of Sale?
Held:
Yes. There is a perfected Contract of Sale. It can be seen that Clarin agreed to sell and
Rulona agreed to buy a definite object which is the 10 hectare land. Clarin and Rulona also
agreed on the price of the said land which is P2,500.00. As Clarins receipt of the payment
made by Rulona, it cannot be denied that the Contract of Sale was perfected for the contract
was already partially been executed thru the acceptance of the intial payment. Clarins
acceptance of said payment clearly showed his consent to the contract thereby precluding
him from rejecting its binding effect. A contract is valid even though one of the parties who
entered into it is against his better judgment.
164. Magsaysay vs. CA
Facts:
Private respondent law firm of Salcedo, Del Rosario, Bito, Misa and Lozada was the lessee
of the whole 9th floor of the petitioners building under a five year lease contract with express
provisos against any extension or renewal by implication of the lease and for the review of
the rental rate at the end of the second year of the lease and every two years thereafter.
Before the end of the fourth year the petitioner notified the respondent regarding the
increase in the rental rate. There were a lot of negotiations regarding the renewal of the
contract and increase in the rental rate. The petitioner now demanded the respondent to
vacate the premises and that it pay the rental in arrears.
Issue:
Whether or not there was an implied new lease after the expiration of the two-year period of
the renewed lease?
Held:
No. There was no implied new lease after the expiration of the two-year period of the
renewed lease. There could be no such implied renewal or right to ask the courts to fix a
longer term (Articles 1670 and 1687 of CC) in the face of the express stipulation in the basic
and fixed five- year contract that the lease shall not be deemed extended or renewed by
implication beyond the stipulated contractual period for any cause or reason whatsoever but
only by negotiations on or before 90 days prior to the expiration date and that the rental
provided was subject to review at the end of the second year and every two years thereafter,
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commensurate with increases in operating expenses including the cost of labor. Even in the
several negotiations, the mere fact that the lessee was willing to pay what he claimed to be a
reasonable rent which was less than that demanded by the lessor did not operate in any
sense to extend said renewal of the lease simply because respondent continued wrongfully
detaining the premises after the expiration of the fixed period of the lease.
165. DOUGLAS MILLARES AND ROGELIO LAGDA VS NLRC GR 110524
166. Rural Bank of Caloocan vs CA
Facts:
Maxima Castro together with Severino Valencia went to the Rural Bank of Caloocan to apply
for a loan. Valencia arranged everything with regards to the loan including the supplying of
the latter personal data needed for the application. When the loan was approved Castro was
accompanied by the Valencia spouses to sign a promissory note which corresponds to her
loan in favor of the bank. On that same day, the spouses also obtained from the bank an
equal amount of loan. They also signed a promissory note and had Castro affixed her
signature as co-maker. Both loans were secured by a real estate mortgage on Castros
house and lot. Later, the house and lot was sold at a public auction to satisfy the obligation
covering the two promissory notes plus interest and attorneys fees. Castro then claimed that
she is a 70 year old widow who cannot read and write in English. Since she needed money
to invest in the business of the Valencia spouses, she obtained a loan. While obtaining said
loan, she needed to sign several forms with no one explaining to her the nature and contents
of the documents. It was only when she received the letter from the sheriff that she learned
that the mortgage contract which was an encumbrance on her property and that she was
made to sign as co-maker of the promissory note without her being informed. Castro filed a
suit against the Valencias contending that thru mistake on her part or fraud on the part of the
Valencias she was induced to sign as co-maker of a promissory note and to constitute a
mortgage on her house and lot.
Issue:
Whether or not the promissory note executed by Castro is valid?

Held:
The Valencias defrauding Castro by making her sign the promissory note and the mortgage
contract, they also misrepresented to the bank Castros personal qualifications in order to
secure its consent to the loan. As a result of the fraud upon Castro and the
misrepresentation to the bank inflicted by the Valencias both Castro and the bank committed
mistake in giving their consents to the contracts. Substantial mistake vitiated their consents
given. For if Castro had been aware of what she signed and the bank of the true
qualifications of the loan applicants, it is evident that they would not have given their
consents to the contracts. Art. 1342 of the CC which provides: Misrepresentation by a third
person does not vitiate consent, unless such misrepresentation has created substantial
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mistake and the same is mutual. We cannot declare the promissory note valid between the
bank and Castro and the mortgage contract binding on Castro, for while the contracts may
not be invalidated insofar as they affect the bank and Castro on the ground of fraud because
the bank was not a participant thereto, such may however be invalidated on the ground of
substantial mistake mutually committed by them as a consequence of the fraud and
misrepresentation inflicted by the Valencias.

167. Edilberto Cruz and Simpliciano Cruz v. Bancom Finance Corp.

(Union Bank of the Phils.)
GR 147788, Mar. 19, 2002
FACTS: Although the Deed of Sale between petitioners and Candelaria Sanchez stipulated a
consideration of P150,000, there was actually no exchange of money between them.
Respondent never offered any evidence to refute the foregoing. On the contrary, it even
admitted that the stipulated consideration of P150,000 in the Deed of Sale had never been
actually paid by Sanchez to petitioners.
ISSUE: Whether or not the Honorable Court of Appeals seriously erred when it held that the
petitioners intended to enter into a sale of the property in question and that the declarations
of Petitioner Fr. Edilberto Cruz in Court belied the court a quos finding that the Deeds of
Sale in question were absolute simulations.
HELD: The Deed of Sale were absolutely simulated, hence, null and void. Thus, it did not
convey any rights that could ripen into valid titles. There being no valid real estate mortgage,
there could also be no valid foreclosure or valid auction sale, either. At bottom, respondent
cannot be considered either as a mortgagee or as a purchaser in good faith. This being so,
petitioners would be in the same position as they were before they executed the simulated
Deed of Sale in favor of Sanchez; they are still the owners of the property.

168. Francisco Cuison, et al. v. Jose Ramolete

GR 51291, May 29, 1984
FACTS: Marciano Cuizon distributed his registered parcel of land between his daughters
Rufina and Irene. The latter has the salt beds and she later executed a Deed of Sale with
Reservation of Usufruct involving the property in favor of the petitioners Francisco, Rosita,
who are both minors, and Purificacion, who was assisted by their mother, Rufina. However,
the sale was not registered because the petitioners felt it was unnecessary due to the
lifetime usufructuary rights of Irene. In 1976, the original Cert of title No. 0171 was issued in
the name of Marciano Cuizon and cert of title No. 10477 covering the property in question
was issued by the Register of Deeds to Irene Cuizon. The latter died in 1978 hence, Rufina,
in the extrajudicial settlement of the estate, adjudicated to herself all the property of the
decedent including the property in question and, thus, TCT No. 12665 was issued in favor of
the petitioners. However, the respondent, Domingo Antigua, allegedly selected by the heirs
of Irene to act as administrator, filed a petition for letters of administrator which was granted.
As administrator, he filed an inventory of the estate of Irene and include the salt beds and
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later asked the court to sell the property and prayed that one of the petitioners deliver the
salt to him.
ISSUE: Whether or not a probate court has jurisdiction over parcels of land already covered
by a Transfer Certificate of Title issued in favor of owners who are not parties to the intestate
proceedings if the said parcels have been included in the inventory of properties of the
estate prepared by the administrator
HELD: A probate court has NO jurisdiction to order the sale of properties belonging to
registered owners (with Certificates of Title), if said owners are not parties to the
proceedings, and this is so even if the properties had been included in the inventory
submitted by the administrator of the estate.
In the instant case, the property involved is not only claimed by outside parties but it, was
sold seven years before the death of the decedent and is duly titled in the name of the
vendees who are not party to the proceedings. In Bolisay vs. Alcid, (85 SCRA 213), this
Court was confronted with a similar situation. The petitioners therein sought to annul the
order of the respondent court in a special proceeding which in effect ruled that
notwithstanding that the subject property was duly titled in the name of petitioners, the
administratrix of the intestate estate involved in said proceeding had the right to collect the
rentals of said property over the objection of the titled owners just because it was included in
the inventory of said estate and there was an ordinary action in the regular court over the
ownership thereof and the estate was one of the parties therein. This Court viewed the
petition as one seeking for a prima facie determination and not a final resolution of the claim
of ownership. Having been apprised of the fact that the property in question was in the
possession of third parties and more important, covered by a transfer certificate of title
issued in the name of such third parties, the respondent court should have denied the
motion of the respondent administrator and excluded the property in question from the
inventory of the property of the estate. It had no authority to deprive such third persons of
their possession and ownership of the property. Respondent court was clearly without
jurisdiction to issue the order of June 27, 1979. Thus, it was unnecessary for the petitioners
to first apply for relief with the intestate court.
169. Private Development Corp. of the
Phils. v. IAC & Ernesto C. del Rosario
GR 73198, Sept. 2, 1992
FACTS: Davao Timber Corporation (DATICOR) and the Private Development Corporation
(PDCP) entered into a loan agreement whereby PDCP extended to the former a loan of US$
265,000.00 and another in the amount of P2,500,000.00 which stipulates that that the
former was to be paid with an interest rate of eleven and three fourths (11-3/4%) per cent
per annum and the latter at the rate of twelve (12%) per cent per annum. The loans were
originally secured by a first mortgage executed by President of DATICOR, in his personal
capacity, and his sister, Cuerva, as third party mortgagors on a parcel of land which they
owned in common. Later, Del Rosario and Cuerva partitioned this mortgaged property and
two certificates of titles were issued.

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PDCP executed a partial release of mortgage on the parcel of land owned by Cuerva,
provided that DATICOR was to mortgage an additional five (5) parcels of land consisting of
prime industrial lands with buildings thereon. Hence, DATICOR executed an Addendum to
Mortgage in favor of PDCP and likewise executed a Deed of Chattel Mortgage on the
machineries and equipment attached to the land in Davao Oriental as added security for said
loans.
A total of P3,000,000.00 was already paid by Del Rosario to PDCP and which the latter
applied to interests, service fees and penalty charges, such that according to PDCP,
DATICOR still has an outstanding balance on the principal loan of P10,887,856.99 as of May
15, 1983. Hence, PDCP initiated extra-judicial foreclosure proceedings against the parcel of
land owned by Del Rosario in Manila and the five (5) parcels of land owned by DATICOR in
Davao Oriental.
ISSUE: Whether or not declaring the stipulations of interest in the loan agreement between
DATICOR and PDCP is void and of no effect
HELD: The law should not be interpreted to mean forfeiture of the principal loan as that
would be unjustly enriching the borrower. The unpaid principal debt still stands and remains
valid but the stipulation as to the usurious interest is void; consequently, the debt is to be
considered without stipulation as to the interest. In a simple loan with stipulation of usurious
interest, the prestation of the debtor to pay the principal debt, which is the cause of the
contract (Art. 1350, Civil Code), is not illegal. The illegality lies only as to the prestation to
pay the stipulated interest; hence, being separable, the latter only should be deemed void,
since it is the only one that is illegal. The foregoing interpretation is reached with the
philosophy of usury legislation in mind; to discourage stipulations on usurious interest, said
stipulations are treated as wholly void, so that the loan becomes one without stipulation as to
the payment of interest. It should not, however, be interpreted to mean forfeiture even of the
principal, for this would unjustly enrich the borrower at the expense of the lender.
Furthermore, penal sanctions are available against a usurious lender, as a further deterrence
to usury. The principal debt remaining without stipulation for payment of interest can thus be
recovered by judicial action.
170. Ong v. Ong
GR 67888, Oct. 8, 1985
FACTS: On February 25, 1976 Imelda Ong, for and in consideration of One (P1.00) Peso
and other valuable considerations, executed in favor of private respondent Sandra Maruzzo,
a minor, a Quitclaim Deed whereby she transferred, released, assigned and forever quitclaimed to Sandra Maruzzo, her heirs and assigns, all her rights, title, interest and
participation in the ONE-HALF () undivided portion of the parcel of land. However, on
November 19, 1980, Imelda Ong revoked the aforesaid Deed of Quitclaim and, thereafter,
on January 20, 1982 donated the whole property to her son, Rex Ong-Jimenez. On June 20,
1983, Maruzzo, through her guardian (ad litem) Alfredo Ong, filed an action for the recovery
of ownership/possession and nullification of the Deed of Donation over the portion belonging
to her and for Accounting. RTC rendered judgment in favor of respondent Maruzzo and held
that the Quitclaim Deed is equivalent to a Deed of Sale and, hence, there was a valid
conveyance in favor of the latter.
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Petitioners appealed to IAC and on June 20, 1984, the latter affirmed the appealed judgment
and held that the Quitclaim Deed is a conveyance of property with a valid cause or
consideration; that the consideration is the One (P1.00) Peso which is clearly stated in the
deed itself; that the apparent inadequacy is of no moment since it is the usual practice in
deeds of conveyance to place a nominal amount although there is a more valuable
consideration given. Hence, this case.
ISSUE: Whether or not One (P1.00) Peso consideration is not a consideration at all to
sustain the ruling that the Deed of Quitclaim is equivalent to a sale
HELD: The above pronouncement of respondent Appellate Court finds support in the ruling
of this Court in Morales Development Co., Inc. vs. CA, 27 SCRA 484, which states that "the
major premise thereof is based upon the fact that the consideration stated in the deeds of
sale in favor of Reyes and the Abellas is P1.00. It is not unusual, however, in deeds of
conveyance adhering to the Anglo-Saxon practice of stating that the consideration given is
the sum of P1.00, although the actual consideration may have been much more. Moreover,
assuming that said consideration of P1.00 is suspicious, this circumstance, alone, does not
necessarily justify the inference that Reyes and the Abellas were not purchasers in good
faith and for value. Neither does this inference warrant the conclusion that the sales were
null and void ab initio. Indeed, bad faith and inadequacy of the monetary consideration do
not render a conveyance inexistent, for the assignor's liberality may be sufficient cause for a
valid contract (Article 1350, Civil Code), whereas fraud or bad faith may render either
rescissible or voidable, although valid until annulled, a contract concerning an object certain
entered into with a cause and with the consent of the contracting parties, as in the case at
bar."
171. Heirs of del Rosario v. Santos
L-46892, Sept. 30, 1981
FACTS: Amparo Del Rosario entered into a contract with Atty. Andres Santos and his wife
Aurora Santos whereby the latter sold to the former a 20,000 sq. m. of land which is to be
segregated from Lot 1. Said lot forms part of the several lots belonging to a certain Teofilo
Custodio, of which lots, Attorney Santos, by agreement with the latter, as his attorneys fees,
owns interests thereof. Parties agreed that spouses Santos shall thereafter execute a
Deed of Confirmation of Sale in favor of Del Rosario as soon as the title has been released
and the subdivision plan of said Lot 1 has been approved by the Land Registration
Commissioner. The spouses Santos failed, thus, Del Rosario claims malicious breach of a
Deed of Sale.
Defendant thereafter filed a motion to dismiss alleging that the deed of sale was only an
accommodation graciously extended, out of close friendship between the defendants and
the plaintiff, hence, tantamount to waiver, abandonment or otherwise extinguishment of the
demand set for thin the complaint. They further alleged that the claim on which the action or
suit is founded is unenforceable under the statute of frauds and that the cause or object of
the contract did not exist at the time of the transaction. RTC ruled in favor of petitioners.
Defendants appealed.
ISSUE: Whether or not the sale is valid as to the cause or object of the contract
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HELD: Yes. The Supreme Court held that the execution of the Deed of Sale is valid
notwithstanding the lack of any title to the lot by appellants at the time of execution of the
Deed of Sale in favor of appellee as there can be a sale of an expected thing in accordance
with Article 1461 of the NCC: Article 1461: Things having a potential existence may be the
object of the contract of sale. The efficacy of the sale of a mere hope of expectancy is
deemed subject to the condition that the thing will come into existence. The sale of a vain
hope or expectancy is void.
The case at bar is not a case of a vain hope or expectancy which is void under the law. The
expectant right came into existence or materialized for the appellants actually derived titles
from Lot 1 which subsequently became the object of subdivision. Moreover, when a party
admits the genuineness of a document, he also admits that the words and figures of the
document are set out correctly, and that he waives all formal requisites required by law, such
as the oath, acknowledgment, or revenue stamps.
172. Gallardo v. IAC
GR 67742, Oct. 29, 1987
FACTS: Meliton claims that on Aug. 10, 1937, Pedro sold to him (Meliton) thru an
unnotarized deed of sale, allegedly signed by Pedro, now deceased, the property in
question. Based on the private document of sale, the Original Certificate of Title was
cancelled and a New Certificate of Title issued in the name of Meliton. Because the recirds
were destroyed, thru an affidavit of reconstitution, the Register of Deeds issued the
corresponding transfer certificate of title in the name of Meliton. On Nov. 17, 1976, Marta,
Pedros daughter, executed and filed an affidavit of adverse claim with the Office of the
Register of Deeds. On December 9, 1976, a deed of conveyance and release of claim was
prepared which provided that Marta is withdrawing the adverse claim. But Marta refused to
sign the affidavit of quitclaim and countered that the deed of sale be declared null and void
ab initio. The RTC declared the deed of sale of August 10, 1937 as well as the reconstituted
certificate of title of Meliton void ab initio. IAC affirmed RTCs decision.
ISSUE: Whether or not the unnotarized deed of sale purportedly executed on August 10,
1937 by the primitive owner Pedro Villanueva, in favor of petitioners, can be considered as a
valid instrument for effecting the alienation by way of sale of a parcel of land registered
under the Torrens System
HELD: The deed of sale is not registerable under the Land Registration Act. True, a private
conveyance of registered property is valid between the parties. But the only right the buyer
of registered property in a private document is to compel through court processes the seller
to execute a deed of conveyance sufficient in law for registration purposes.
Melitons reliance on Art. 1356 of the Civil Code is unfortunate. The general rule enunciated
in Art. 1356 is that contracts are obligatory, in whatever form they may have been entered,
provided all the essential requisites for their validity are present.
The next sentence provides the exception, which requires a contract to be in some form
when the law so requires for validity or enforceability. Said law in Sec. 127 of Act 496
requires that the conveyance be executed before the judge of a court of record or clerk of a
court of record or a notary public or a justice of the peace, who shall certify such
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acknowledgment substantially in form next hereinafter stated. Such law was involved here.
The Register of Deeds act in allowing the registration of the private deed of sale was
authorized and did not validate the defective private document of sale.
173. Jomoc v. CA
GR 92871, Aug. 2, 1991
FACTS: The subject lot forming part of the estate of the late Pantaleon Jomoc was
fictitiously sold and transferred to third persons. The petitioner, as administratrix of the estate
and in behalf of all the heirs, filed suit to recover the property which was decided in their
favor and was accordingly appealed by Mariano So to CA. In February 1979, pending the
appeal, Jomoc executed a Deed of Extrajudicial Settlement and Sale of Land with private
respondent for P300,000.00. The document was not yet signed by all the parties nor
notarized but in the meantime, Maura So had made partial payments amounting to
P49,000.00.
In 1983, Mariano So, the appellant in the recovery proceeding, agreed to settle the case by
executing a Deed of Reconveyance of the land in favor of the heirs of Pantaleon Jomoc.
However, on February 28, 1983, the heirs of Jomoc executed another extra-judicial
settlement with absolute sale in favor of intervenors Lim Leong Kang and Lim Pue. Later,
Maura So demanded from the Jomoc family the execution of a final deed of conveyance but
was ignored. Thus, private respondent Maria So sued petitioners-heirs for specific
performance to compel them to execute and deliver the proper registrable deed of sale over
the lot. It was on the same date, February 28, 1983, allegedly upon the Jomocs' belief that
Maura So had backed out from the transaction that the Jomocs executed the other
extrajudicial settlement with sale of registered land in favor of the spouses Lim for a
consideration of P200,000.00 part of which amount was allegedly intended to be returned to
Maura So as reimbursement. The spouses Lim, however, registered their settlement and
sale only on April 27, 1983.
ISSUE: Whether or not private respondent Maura So abandoned or backed out from the
agreement for the purchase of a lot belonging to the heirs of Pantaleon Jomoc, so that the
subsequent sale to petitioner spouses Lim is null and void
HELD: The Supreme Court affirmed the CAs decision and held that Lim spouses allegation
that the contract of sale by Maria Jomoc with Maura So is enforceable under the Statute of
Frauds, is without merit. Lim spouses do not deny the existence of the Extrajudicial
Settlement, including its terms and contents, notwithstanding the incompleteness in form.
The meeting of the minds and the delivery of sums as partial payment is admitted by both
parties to the agreement. Hence, there was already a valid and existing contract, not merely
perfected as the trial court saw it, but partly executed.
It is of no moment whether or not it is enforceable under the Statute of Frauds, which rule is
not applicable because of partial payment of the vendees obligation and its acceptance by
the vendors-heirs. The contract of sale of real property even if not complete in form, so long
as the essential requisites of consent of the contracting parties, object and cause of the
obligation concur and they were clearly established to be present, is valid and effective as
between the parties.
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174. Fule v. CA
GR 112212, Mar. 2, 1998
FACTS: In July 1984, petitioner, as corporate secretary of the bank, asked Remelia Dichoso
and Oliva Mendoza to look for a buyer who might be interested in the Tanay property. The
two found one in the person of herein private respondent Dr. Ninevetch Cruz. It so
happened that at the time, petitioner had shown interest in buying a pair of emerald-cut
diamond earrings owned by Dr. Cruz which he had seen in January of the same year when
his mother examined and appraised them as genuine.
In the afternoon of October 23, 1984, petitioner met Atty. Belarmino at the latters residence
to prepare the documents of sale. As pre-arranged, petitioner left Atty. Belarminos residence
with Dichoso and Mendoza and headed for the bank, arriving there at past 5:00 p.m. Dr.
Cruz and the cashier then opened the safety deposit box, the former retrieving a transparent
plastic or cellophane bag with the jewelry inside and handing over the same to petitioner.
The latter took the jewelry from the bag, went near the electric light at the banks lobby, held
the jewelry against the light and examined it for ten to fifteen minutes. After a while, Dr.
Cruz asked, Okay na ba iyan? Petitioner expressed his satisfaction by nodding his head.
For services rendered, petitioner paid the agents, Dichoso and Mendoza, the amount of
US$300.00 and some pieces of jewelry. Later, at about 8:00 oclock in the evening of the
same day, petitioner arrived at the residence of Atty. Belarmino complaining that the jewelry
given to him was fake. He then used a tester to prove the alleged fakery. On October 26,
1984, petitioner filed a complaint before the RTC against private respondents praying,
among other things, that the contract of sale over the Tanay property be declared null and
void on the ground of fraud and deceit.
ISSUE: Whether the Court of Appeals erred in upholding the validity of the contract of barter
or sale under the circumstances of this case
HELD: Article 1358, which requires the embodiment of certain contracts in a public
instrument, is only for convenience, and registration of the instrument only adversely affects
third parties. Formal requirements are for the benefit of third parties. Non-compliance
therewith does not adversely affect the validity of the contract nor the contractual rights and
obligations of the parties thereunder. It is evident from the facts of the case that there was a
meeting of the minds between petitioner and Dr. Cruz. As such, they are bound by the
contract unless there are reasons or circumstances that warrant its nullification. Hence, the
problem that should be addressed in this case is whether or not under the facts duly
established herein, the contract can be voided in accordance with law so as to compel the
parties to restore to each other the things that have been the subject of the contract with
their fruits, and the price with interest.
On the other hand, there is fraud when, through the insidious words or machinations of one
of the contracting parties, the other is induced to enter into a contract which, without them,
he would not have agreed to.[24] The records, however, are bare of any evidence
manifesting that private respondents employed such insidious words or machinations to
entice petitioner into entering the contract of barter. Neither is there any evidence showing
that Dr. Cruz induced petitioner to sell his Tanay property or that she cajoled him to take the
earrings in exchange for said property. On the contrary, Dr. Cruz did not initially accede to
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petitioners proposal to buy the said jewelry. Rather, it appears that it was petitioner, through
his agents, who led Dr. Cruz to believe that the Tanay property was worth exchanging for her
jewelry as he represented that its value was P400,000.00 or more than double that of the
jewelry which was valued only at P160,000.00. If indeed petitioners property was truly worth
that much, it was certainly contrary to the nature of a businessman-banker like him to have
parted with his real estate for half its price. In short, it was in fact petitioner who resorted to
machinations to convince Dr. Cruz to exchange her jewelry for the Tanay property.
175. Castillo v. Castillo
L-18238, Jan. 22, 1980
FACTS: Ysidro C. Castillo died on October 15, 1947 leaving as his heirs his wife Enriqueta
Katigbak and their nine children Intestate proceedings for the settlement of the deceased's
estate were instituted and in January, 1948, Enriqueta was appointed administratrix. On
June 21, 1948, she filed an inventory of the properties as well as the obligations left by the
deceased. However, on November 11, 1948, Enriquetta submitted a project of partition,
stating that the properties which constituted the residuary hereditary estate of the deceased
Ysidro are: (1) 38 parcels of land which are properties brought to the marriage by the
deceased Ysidro and (2) 19 parcels of land which are conjugal properties of the spouses.
Under said project of partition, all the 38 parcels of land brought by the deceased into the
marriage and 4 parcels of the conjugal properties were adjudicated to all the nine children in
equal shares, pro-indiviso; 8 parcels of the conjugal properties were adjudicated to the
widow as her share in the conjugal partnership and the remaining 7 parcels given in usufruct
to the widow. Despite approval of the project of partition and the closing of the intestate
proceedings, the properties remained under the administration of Enriqueta.
On February 4, 1960, after an extrajudicial demand for partition failed, herein plaintiffappellant Zenaida K. Castillo, filed an action for partition with accounting and receivership
against her mother Enriqueta and siblings alleging that the project of partition omitted to
include certain properties acquired by the defendants using community funds in their
acquisition, she prayed that said properties be divided and partitioned accordingly.
ISSUE: Whether or not lower court erred when it held that the money used in the purchase
of 1/2 of the land covered by Exhibit Plaintiff 2 below to the spouses Ysidro C. Castillo and
Enriqueta Katigbak and therefore, erred when it ordered that the same be partitioned as a
conjugal partnership property
HELD: We find no error in the lower court's ruling that the money used in the purchase of
of the land covered by Exhibit Plaintiff 2 belonged to the spouses Ysidro C. Castillo and
Enriqueta Katigbak and ordering that such land be partitioned as conjugal partnership
property. We must here underscore the specific rule in our civil law that all properties of the
marriage shall be presumed conjugal unless it be proved that they belong exclusively to
either of the spouses. To rebut or overcome this presumption, there must be clear,
convincing and satisfactory proof that this consideration of the sale was paid by only one of
the spouses and from her exclusive or separate property. The document in question, Exhibit
Plaintiff 2, is a public instrument valid and binding even as against third parties, the said
deed of sale having been duly registered in the Register of Deeds on June 23, 1947. The
Register of Deeds has duly certified that said deed of sale was duly recorded in the
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Registration Book under Act 3344. It needs no further argumentation to hold that the
defendants-appellants' gratuitous testimony cannot prevail over the recitals in said public
instrument, for it must be here reiterated that: A recital in a public instrument celebrated with
all the legal formalities under the safeguard of a notarial certificate is evidence against the
parties and a high degree of proof is necessary to overcome the legal presumption that such
recital is true. (Valencia v. Tantoco, et al., 99 Phil. 824).

176. SARMING VS DY GR 133643 JUNE 6, 2002

177. BA Finance Corp. v. IAC & Rene Tan
GR 76497, Jan. 20, 1993
FACTS: Private respondent applied for a loan from the petitioner using his 1975 Volkswagen
Sedan as collateral. After the loan application was approved, he received from the petitioner
the sum of 0P15,913.06 and as of June 9, 1977, he had P5,951.64 leaving a balance of
P9,961.42, exclusive of interests. In a letter dated June 7, 1977, Edmundo S. Bacay, then
assistant vice-president of the petitioner corporation demanded payment of P2,009.34 as
rentals due for the private respondent's use of the car in question, otherwise, the private
respondent had to relinquish possession of the same in favor of the petitioner. In view of the
petitioner's unlawful act of depriving him of his property without due process of law, nominal,
moral and exemplary damages are sought to be recovered by the private respondent. On
the other hand, the petitioner alleged that there was no unlawful taking of the subject car
since it was the private respondent's driver who voluntarily surrendered possession of the
said car after the private respondent failed and refused to pay the monthly rental of P991.94
for the months of April, May and June 1977. They further claimthat the surrender of the
possession of the subject car by the private respondent to the petitioner as the legal owner
thereof was pursuant to the provisions of the Contract of Lease executed on October 25,
1976 between the petitioner corporation as lessor and the spouses Tan as lessees.
ISSUE: Whether or not the appellate court correctly ordered the reformation of the subject
lease contract to one of simple loan with the car being posted by way of chattel mortgage
HELD: In the case at bar, there is no dispute that there was a meeting of the minds with
respect to the arrangement whereby the private respondent borrows money from the
petitioner and the subject car serves as security for the payment of the loaned amount. The
private respondent had insisted that what he merely intended in contracting with the
petitioner was to secure a loan with his Volkswagen Sedan as collateral. Upon the other
hand, the petitioner, by virtue of the private respondents loan application, prepared the
necessary papers which included a Deed of Absolute Sale of the subject car in its favor in
order that its legal ownership shall serve as the security for the repayment of the amount
being loaned by the private respondent thru the payment of monthly rentals under a Contract
of Lease which the latter duly signed.
In order that an action for reformation may prosper, there must be a meeting of the minds of
the parties to a contract, but their true intention is not expressed therein by reason of
mistake, fraud, inequitable conduct or accident. Notwithstanding, the private respondent has
not succeeded in proving the above circumstances to avail of the remedy of reformation. In
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attempting to prove his allegation that a contract of simple loan was intended, the private
respondent pointed out the discrepancy between the purchase price of P20,000 as indicated
in the Deed of Absolute Sale and the amount of P15,913.06 actually received by him as
evidenced by a check dated Oct. 22, 1976 issued to Martina Industries by the petitioner with
regard to the financing arrangement agreed upon by them. Such discrepancy dismisses the
petitioners position that he had agreed to sell his car to the petitioner; hence, the basis for
the financing lease contract as claimed by the petitioner is not existent. For all intents and
purposes, a financing lease may be seen to be a contract sui generis, possessing some
but not necessarily all of the elements of an ordinary or civil law lease. Thus, legal title to the
equipment leased is lodged in the financial lessor. The financial lessee is entitled to the
possession and use of the leased equipment. At the same time, the financial lessee is
obligated to make periodic payments denominated as lease rentals, which enable the
financial lessor to recover the purchase price of the equipment which had been paid to the
supplier thereof.

178.GSIS vs CA (GR 52478 Oct. 30, 1986)

179.UP College of Agriculture vs Gabriel (GR 70826 Oct. 12, 1987)
180.Azcona vs Jamandre (GR 30597 Jone 30, 1987)
181.Simeon del Rosario vs Shell Co. of the Phils. Ltd. (L28776 Aug. 19, 1988)
182.The Manila Banking Corporation vs Anastacio Teodoro, Jr. and Grace Anna 182.Teodoro
(GR 53955 Jan.13, 1989)
183.Lucio Tan Alim vs CA (GR 93213 Aug. 9, 1991)
184.Mojica vs CA (GR 94247 Sept. 11, 1991)
185.Republic vs Sandigan (GR 9067 Nov. 5, 1991)
186.Oil and Natural Gas Commission vs CA (GR 114323 July 23, 1998)
187.Petrophil Corp. vs CA (GR 122796 Dec. 10, 2001)
188.Aurora Capulong vs CA (L-61337 June 29, 1984)
189. WELDON CONSTRUCTION CORP. VS CA

GR. 35721 October 12,1987

FACTS
Petitioner is the contractor of a theater building whose owner is Manuel Cascio. Petitioner
demands payment of an alleged contract of supervisor of construction between the theater
owner, Manuel Casio herein private respondent and the petitioners predecessors-in-interest.
The private respondents refused to pay the amounts demanded on the ground that the Gay
Theater Building was constructed by Weldon Construction for the stipulated price of
P600,000 which has already been fully paid. The irreconcilable positions takens by the
parties brought the controversy before the courts which ruled in favor of the petitioner. It
ruled that the agreements between the parties is a contract of supervision of construction
and ordered the theater owner to pay the 10% supervision fee or commission provided for
in the contract. CA affirmed the decision of the lower court.
ISSUE
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Whether or not private respondent is to pay for the concession and additional fees
HELD
No. The Court finds that the agreement between the parties in the contract of construction is
for a stipulated price of work. Both parties having fully performed their reciprocal obligations
is accord with said contract, petitioner is stopped from invoking an entirely different
agreement so as to demand additional consideration. Once a contract has been
consummated, there is nothing left to be done or to be demanded by the parties thereto. All
obligations arising from the contract are extinguished. Weldon Construction assumed the
obligation to construct the building at the price fixed by the parties and to furnish both the
labor and materials required for the project.

190.NAESS SHIPPING LINES PHILS INC VS NLRC GR. NO. 73441 Sept. 4, 1987
FACTS
Pablo Dublin had been hired by NAESS Shipping Phil Inc to serve aboard MV DYUI Pacific
under an employment contract which incorporated as part thereof the special agreement
between International Workers Federation (ITF) and NAESS Shipping which binds NAESS
to pay cash benefits for loss of life of their workers to the immediate next of kin and to each
dependent child under the age of 18.
Dublin while on board the ship fatally stabbed the second cook, and to escape he jumped
and fell overboard and was never seen again after thorough search. The widow of Dublin
filed a complaint against NAESS with the POEA for the payment of death benefit as stated
in the Special Agreement. NAESS denied liability on the ground that Dublin has committed
suicide and therefore not subject for comoensation. POEA, however ruled in favor of the
complainant. NAESS filed a motion for reconsideration, which on appeal was referred and
dismissed by NLRC. Hence this petition for certiorari.
ISSUE
Whether or not death caused by suicide is compensable
HELD
YES. If the Special Agreement intended to subject NAESS liability for death benefits to any
conditions, such as one barring compensation for death whether intentional or otherwise, the
contract would have specifically provided; just as it did in incorporating the lack-of-fault
proviso in the disability benefits clause. Thus, contracts which are the private laws between
the contracting parties, should be fulfilled according to the literal sense of their stipulations if
their terms are clear and leave no room for doubts as to the intention of the contracting
parties.

191. CARLOS BUNDALION vs CA, JUANITO LITTAWA and EDNA CAMCAM,

G.R. No. L-55739
June 22, 1984
FACTS
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The petitioners purchased three (3) contiguous parcels of land ,which through a Deed of
Sale with Right to Repurchase, sold to the private respondents the same three contiguous
parcels of land for the same amount under specified terms and conditions which include that
the repurchase price would escalate month after month, depending on when repurchase
would be effected. It was also stipulated in the same contract that the vendor shall have the
right to possess, use, and build on, the property during the period pending redemption. The
petitioners filed a petition for declaratory relief and/or reformation of instrument before the
Court of First Instance to declare the Deed of Sale with Right to Repurchase an equitable
mortgage and the entire portion of the same deed referring to the accelerating repurchase
price null and void for being usurious. Private respondents, in turn, filed a petition for the
consolidation of ownership on the ground that "more than a year has elapsed since the
execution of the Deed of Sale with Right to Repurchase by the vendor." The private
respondents contended that under the provisions of Article 1607 in relation to Article 1616 of
the New Civil Code, the vendor has lost all his rights to avail himself of the right to
consolidate ownership of the property subject of the Deed of Sale." Petitioners filed their
opposition. trial court rendered the decision in favor of the private respondents. The
petitioners appealed to the Court of Appeals which affirmed in toto the decision of the trial
court.
ISSUE
Whether or not the deed of sale with right to repurchase should be declared as an equitable
mortgage.
HELD
YES. The stipulation in the contract sharply escalating the repurchase price every month
enhances the presumption that the transaction is an equitable mortgage. Its purpose is to
secure the return of the money invested with substantial profit or interest, a common
characteristic of loans. Vendors covered by Article 1602 of the Civil Code are usually in no
position to bargain with the vendees and will sign onerous contracts to get the money they
need. The contract also provides that "it is agreed that the vendor shall have the right to
possess, use, and build on, the property during the period of redemption." When the vendee
acknowledged the right of the vendor to retain possession of the property the contract is one
of loan guaranteed by mortgage, not a conditional sale or an option to repurchase.

192. LUCIO TAN VS CA

GR NO 100942

AUGUST 12,1992

FACTS
Private respondent Sanchez invested 100,000 in Manila Bar Restaurant owned by Tiglao
who agreed that the amount would earn a profit of 4% per annum abd could be withdrawn by
Sanchez anytime. Subsequently, Tiglao assigned his rights, interests and good will over the
restaurant to the petitioned Lucio Tan. Tan executed a promissory note for the return to
Sanchez of her investment subject to the conditions that 50,000 will be paid upon signing of
contract of lease of the lot upon which the restaurant is erected, and the balance 50,000
payable on or before the expiration of the contract. After the lapse of 2 years following the
conclusion of the contract, Sanchez demanded from petitioner payment of the 50,000 which
Tan refused to pay. Petitioner argued that the ejectment case on the restaurant prevented
him from operating it, and this constitutes a fortuitous event making him not legally liable to
private respondent.
ISSUE

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Whether or not the Petitioner is liable to private respondent of the 50,000 despite the
discontinued operation of the Manila Bar Restaurant
HELD
Yes. The Court stated that the provisions in the promissory note should be given a natural
and ordinary meaning which states that: Petitoner would pay private respondent the balance
of 50,000 a) on or before the expiration of the 2 year period on March 6,1984; b) regardless
of the outcome of the operations of the restaurant; c) in no case beyond 2 years from March
6,1982 (date of promissory note). Neither was there a failure of considerations in the
execution of the promissory note. Tan was not executing said document because he was
taking over the management and operation of the restaurant for he had earlier acquired that
right from Tiglao under the Deed of Conveyance and Transfer. The continued operation of
the restaurant is not a suspensive condition for the obligation of the petitioner to pay the
balance to Sanchez, contrary to what the petitioner claimed. Nowhere does it say in any part
of the note that its payment was conditioned on the continued operation of the restaurant.
Petition is denied.

193.FINMAN GENERAL ASSURANCE CORP VS CA GR NO 100970 Sept. 2, 1992

FACTS
On Oct. 22,1986, deceased Carlie Surposa was insured with the Petitioner, with his parents,
spouses and brothers as beneficiaries. While said insurance was in full force and effect, the
insured was killed and stabbed. Thereafter, Julia Surpoza- private respondent, filed a written
notice of claim with the petitioner which denied said claim on the ground that murder and
assault were not within the scope of the coverage of the Insurance policy. The Insurance
Commission found petitioner liable to pay complainant the proceeds of the policy. CA
affirmed this decision. Hence this petition.
ISSUE
Whether or not the term accident used in the insurance policy refer to a deliberate act
such as murder
HELD
YES. The terms accident and accidental as used in the insurance contracts have not
acquired any technical means, and as construed by the courts as an event that takes place
without ones foresight or expectation. Applying the principle of expressio uniius exclusion
alterius, since murder and assault have not been expressly included in the enumeration of
the circumstances that would negate liability in said insurance policy, it cannot be
considered by implication to discharge petitioner from liability for any injury, disability or loss
suffered by the insured. Hence petition is denied.

194. NATIONAL POWER CORP VS CA

GR 43706

NOV. 14,1986

FACTS
NPC entered into a contract with Far Eastern Electric Inc (FEEI) for the erection of
Transmission Lines for the Angat Hydroelectric Project on Dec. 26,1962. The Phil. American
Gen Insurance Co. (PHILAMGEN) issued a surety bond for the faithful performance of the
undertaking by FEEI, subject to the conditions that bonds will expire 1 year from the final
completion and acceptance and said bond will be cancelled 30 days after its expiration,
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unless surety is notified of any existing obligations thereunder. In July 20,1962,

PHILAMGEN and FEEI informed NPC that FEEI was giving up the construction due to
financial difficulties. NPC thereby wrote to PHILAMGEN, formally holding the latter liable for
the cost of work to be completed plus damages. Work was completed by NPC on Sept.
30,1963 but was able to notify PHILAMGEN of the outstanding payable balance January
30,1967. PHILAMGEN did not pay and contended that its liability under the bond has
expired Sept. 20,1964 and claimed that no notice of any obligation of the surety was made
within 30 days. Trial court ruled in favor the NPC.
ISSUE
Whether or not PHILAMGEN is not liable to pay the surety obligations because of the failure
to file a notice of obligation within the 30-day condition
HELD
YES. PHILAMGEN is liable to pay the surety obligations. The 30-day period adverted in the
surety bond applies to the completion of the work of the contractor which was never
materialized. The surety bond must be read in its entirety and together with the contract
between NPC and contractor. It cannot be denied that the breach of contract thru
abandonment of unfinished work was within the effective date of the contract and surety
bond. Such abandonment gave rise to the continuing liability of the bond To rule that
PHILAMGEN was not notified could be a gross error.
195. PHILIPPINE AMERICAN GEN. INSURANCE CO. VS SWEET LINES INC
GR NO 87434
August 5, 1992
FACTS
A maritime suit was commenced by petitioner Philippine American General Insurance Co.,
Inc. (Philamgen) and Tagum Plastics, Inc. (TPI) against private respondents Sweet Lines, Inc.
(SLI) et al , seeking recovery of the cost of lost or damaged shipment with damages, allegedly due to
defendants' negligence. A total of 7,000 bags of low density polyethylene were shipped
from Baton Rouge, LA to Manila on board a vessel belonging to the Shipping Corporation of
India (SCI). From Manila, the cargoes were shipped to Davao on board a vessel owned by
Sweet Lines. The consignee was Far East Bank to be received by Tagum Plastics. The
cargoes were insured by Far East Bank with the Philippine American General Insurance Co
(Philamgen) and were covered by bills of lading which contained the following stipulation in
paragraph 5 xxxClaims for non-delivery, misdelivery, loss or damage must be filed within 30
days from accrual. Suits arising from shortage, damage or loss, non-delivery or misdelivery
shall be instituted within 60 days from date of accrual of right of actionxxx
On May 15, 1977, the shipment(s) were discharged from the interisland carrier into the
custody of the Far East Bank. In the survey, only a total of 5,820 bags from the 7,000 bags
were delivered to the consignee in good order condition, leaving a balance of 1,080 bags.
Some of the 1,080 bags were either MISSING OR DAMAGED beyond the point of being
useful for the intended purpose.
ISSUE
1. Whether or not the existence of the so-called prescriptive period stated in the contract
constitute a valid defense.
2. Whether or not Philamgen acted within the prescriptive period

133

HELD
1. Yes. The prescriptive periods were valid and legal. The Sc stated that in the absence of
any statutory limitation and subject only to the requirement on the reasonableness of the
stipulated limitation period, the parties to a contract of carriage may fix by agreement a
shorter time for the bringing of suit on a claim for the loss of or damage to the shipment than
that provided by the statute of limitations. Such limitation is not contrary to public policy for it
does not in any way defeat the complete vestiture of the right to recover, but merely requires
the assertion of that right by action at an earlier period than would be necessary to defeat it
through the operation of the ordinary statute of limitations. The SC also said that, ..., the
shortened period for filing suit is not unreasonable and has in fact been generally recognized
to be a valid business practice in the shipping industry. This is in recognition of the inherent
dangers of carriage by sea.
2.NO. Philamgen did not act within the prescriptive period. The shipment was discharged
into the custody of the consignee on May 15, 1977, and it was from this date that petitioners'
cause of action accrued, with thirty (30) days therefrom within which to file a claim with the
carrier for any loss or damage which may have been suffered by the cargo and thereby
perfect their right of action. Claim was filed only on April 28, 1978, way beyond the period
provided in the bills of lading and violative of the contractual provision, the inevitable
consequence of which is the loss of petitioners' remedy or right to sue. Hence , petition is
denied.
196. MARIMPERIO VS CA and UNION IMPORT & EXPORT CORPORATION and
PHILIPPINES TRADERS CORPORATION
GR NO 40234 Dec. 14,1987
FACTS
Philin Traders Corporation and Union Import and Export Corporation entered into a joint
business venture for the purchase of copra from Indonesia for sale in Europe. Philin and
Union authorized Toeg to negotiate for its charter but with instructions to keep confidential
the fact that they are the real charterers. Interocean Shipping Corporation, was made to
appear as charterer, although it merely acted in behalf of the real charterers, private
respondents herein entered into an agreement with the owner, Marimperio for the hire of
vessel Paxoi The Charterer was however twice in default in its payments which were
supposed to have been done in advance. Petitioner withdrew the vessel from Charterers
service and held said Charterer responsible for unpaid hirings and all legal claims. The
Charterer again remitted an amount corresponding to the 3rd 15-day hire of the vessel
PAXOI, but this time the remittance was refused. Union and Philin filed a complaint against
the Unknown Owners of the Vessel SS Paxoi, which was amended to identify the
defendant as Marimperio Compaia Naviera S.A for specific performance with prayer for
preliminary attachment. Petitioner alleged that he has no agreement or relationship
whatsoever with the respondents and are unknown to petitioner; that the charter party
entered into by petitioner with the Interocean Shipping Co. over the vessel "SS PAXOI" does
not authorize a sub-charter of said vessel to other parties; and that at any rate, any such
sub-charter was without the knowledge or consent of the petitioner or its agent, and
therefore, has no effect and/or is not binding upon the petitioner. The CFI of Manila rendered
its decision in favor of Marimperio. Union and Philin filed a Motion for Reconsideration .
Acting on the two motions for reconsideration, the trial court reversed its stand in its
amended decision a n d r u l e d i n f a v o r o f U n i o n , P h i l i n a n d I n t e r o c e a n . On
Appeal, the Court of Appeals affirmed the amended decision of the lower court except the
portion granting commission to Interocean, which it reversed thereby dism issing
134

the complaint-in-intervent ion. Marimperio filed with the Supreme Court its
petition for review on certiorari.
ISSUE
Whether or not respondents have the legal capacity to bring the suit for specific
performance against petitioner based on the charter party
HELD
NO. According to Article 1311 of the Civil Code, a contract takes effect between the parties
who made it, and also their assigns and heirs, except in cases where the rights and
obligations arising from the contract are not transmissible by their nature, or by stipulation or
by provision of law. Since a contract may be violated only by the parties, thereto as against
each other, in an action upon that contract, the real parties in interest, either as plaintiff or as
defendant, must be parties to said contract. Therefore, a party who has not taken part in it
cannot sue or be sued for performance or for cancellation thereof, unless he shows that he
has a real interest affected thereby. It is not the sub-lessee, but the lessor, who can bring the
action. In the instant case, it is clear that the sub-lessee or the private respondent as such
cannot maintain the suit they filed with the trial court.
197. RIVIERA FILIPINA VS CA

GR NO. 117355

April 5,2002

FACTS
Private respondent Juan Reyes executed a contract of lease with Riviera on a parcel of
land. Said lot was subject of a real estate mortgage of Reyes to Prudential Bank. Due to
failure to pay, the bank extrajudicially foreclosed the mortgage but gave Reyes until March
7,1989 to redeem the said property. Without the capacity to redeem, Reyes offered Riviera
with the right of first refusal, to redeem the land at P5,000 per square meter. Riviera offered
P4,000 per square meter which was denied by Reyes. On Dec.2,1988 Riviera wrote Reyes
confirming the formers intent to purchase for the fixed price of 5,000 per square meter. In
response, Reyes informed Riviera that their offer was not acceptable and that they have
failed to take advantage of the opportunity , thus lost their right of first refusal to the said
property. On May 1, 1989, a Deed of Absolute Sale was executed by Reyes to Cypress and
Cornhill. Riviera sought from Reyes and Cypress a resale of said property on the ground
that its right of first refusal under the lease contract was violated.
ISSUE
Whether or not Petitioners right of first refusal was violated by the sale of the property to
another after unsuccessful negotiations for sale with the Petitioner
HELD
NO. The court held that in order to have full compliance of the contractual right granting the
petitioner the first option to purchase, the sale of property for the price for which they have
been sold to a third person should have likewise been offered to the former. There should
be identity of terms and conditions to be offered to the buyer holding a right of first refusal.
However, these general propositions do not decide for the case at bar. The court finds
relevant consideration that the intention of the parties must be given primordial
consideration, and in case of death, their contemporaneous and subsequent acts shall be
principally considered. As clearly shown by the records of the case, Reyes and Riviera
interpreted the lease provision of right of first refusal to simply mean that should lessor
135

Reyes decide to sell the leased property during the term of the lease, such sale should be
offered to the lease. And that is what exactly ensued between Reyes and Riviera, a series
of negotiations on the price per square meter with neither party willing to bridge from his
offer as evidenced by the exchange of letters between the two parties. Hence Rivieras right
was not violated. Petition is denied.

198. Pilipinas Bank vs IAC GR NO 67881 June 30, 1987

FACTS: Hacienda Benito, Inc. as vendor, and private respondents, as vendees executed
Contract to Sell over a parcel of land on monthly installments subject to the condition: The
contract shall be considered automatically rescinded and cancelled and of no further force
and effect upon failure of the vendee to pay when due, three or more consecutive
installments as stipulated therein or to comply with any of the terms and conditions
thereof
During the contract, petitioner sent series of notices to private respondents for the latters
balances. After more than two years, PR sent a letter expressing their desire to settle their
desire to fully settle their obligation. Petitioner wrote a letter to PR , informing them that the
contract to sell had been rescinded. PR filed Complaint for Specific Performance with
Damages to compel petitioner to execute a deed of sale.
After trial, the lower court rendered a decision in PRs favor, holding that petitioner could not
rescind the contract to sell, because: (a) petitioner waived the automatic rescission clause by
accepting payment and by sending letters advising private respondents of the balances due,
thus, looking forward to receiving payments thereon. Said decision was affirmed on appeal.
Hence, this Petition For Review on Certiorari,
ISSUE:
Whether or not the Contract to Sell was rescinded, under the automatic rescission clause
contained therein.
HELD:
NO, the contract cannot be rescinded. The petition is meritless because there was a
clear WAIVER of the stipulated right of automatic rescission as evidenced by the many
extensions granted private respondents by the petitioner. In all these extensions, the
petitioner never called attention to the proviso on "automatic rescission." The assailed
decision is affirmed.

136

MIAA vs. Joaquin Rodriguez

G.R. No. 161836, February28,2006

FACTS
Petitioner Manila International Airport Authority (MIAA), a GOCC operating the Ninoy
Aquino International Airport Complex, implemented expansion programs for its
runway in the 70s. So it bought and occupied some of the properties surrounding the
area through expropriation. In 1996, respondent lot owner proposed to sell to MIAA at
P2,350.00 per square meter one of the lots already occupied by the expanded
runway. No deal was made. So respondent Rodriguez bought the bigger lot, a portion
of which was occupied by the runway, as well as all the rights to claim reasonable
rents and damages for the occupation, from its owner then, Buck Estate, Inc., for P4
million.
Rodriguez demanded from the MIAA full payment for the property and back rentals
for 27 years, amounting to P468.8 million. Failing to reach an agreement with MIAA,
Rodriguez filed a case for accion reinvindicatoria with damages. Finding that the
MIAA had illegally taken possession of the property, the trial court ruled respondents
favor. The Court of Appeals modified the trial courts decision, holding that Rodriguez
is entitled to back rentals only from the time he became the registered owner of the
property in 1996.
ISSUE
Whether or not Rodriguez is entitled to full payment and back rentals for 27 years with
damages

HELD
The petition is partly meritorious. The subject lot was occupied as a runway of the MIAA
starting in 1972. Thus, the value of the lot in 1972 should serve as the basis for the award of
compensation to the owner. MIAA occupied a portion thereof for its expanded runway where
the actual taking was made without the benefit of expropriation proceedings, and the owner
sought recovery of the possession of the property prior to the filing of expropriation
proceedings,
On actual damages for the occupation of the subject lot, undeniably, MIAAs illegal
occupation for more than 20 years has resulted in pecuniary loss to Rodriguez and his
predecessors-in-interest which entitles him to adequate compensation in the form of actual
or compensatory damages, on the value of the land at the time of taking, from said point up
to full payment by the MIAA. This is based on the principle that interest runs as a matter of
law and follows from the right of the landowner to be placed in as good position as money
can accomplish, as of the date of the taking. Case laws ruled that the indemnity for rentals is
inconsistent with a property owners right to be paid legal interest on the value of the
property, for if the condemnor is to pay the compensation due to the owners from the time of
the actual taking of their property, the payment of such compensation is deemed to retroact
to the actual taking of the property, and hence, there is no basis for claiming rentals from the
time
of
actual
taking.

137

200.
CITIBANK N.A VS. CABAMONGAN
488 SCRA 517, 2006
FACTS:
Spouses Cabamongan opened a joint and/or foreign currency time deposit in favor of
their two children with Citibank. On a material date, a person who claimed to be Carmelita
sought the pretermination of the account. She presented identification cards to ascertain her
identity to the then account officer. When she left with the money, she left an identification
card. The account officer then called up the address. The spouses and their family knew of
the incident. They were presently residing in the U.S and there was a prior incident wherein
they got robbed in their house with the jewelry box and cards stolen. Spouses made several
demands for the return of the amount but Citibank refused to do so.
ISSUE:
Whether or not the bank is guilty of negligence?
RULING:
Yes. First, the depositor did not present the Certificate of Deposit. Second, from the
internal memorandum issued by the Account Officer, he admitted to the fact that the
specimen signature was different from the one who misrepresented herself as Carmelita.
Third, the bank kept in its records pictures of its depositors. It is inconceivable how the bank
was duped by an impostor.

201.
MERCEDES CANULLAS vs. HON. WILLELMO FORTUN
GR NO. L-57499, JUNE 22, 1984
FACTS:
The petitioner Mercedes Calimlim-Canullas and Fernando Canullas were married in
1962, with 5 (five) children, and were living on a house situated on a land inherited by the
latter. In 1978, Fernando abandoned his family and lived with Corazon Daguines. In 1980,
Fernando sold the house and lot to Daguines, who initiated a complaint for quieting of title.
Mercedes resisted, claiming that the house and lot were conjugal properties, and the sale
was null and void for she had not consented thereto.
ISSUE:
Whether or not the sale of the house and lot and improvements thereon is valid?
RULING:
No. The contract of sale was null and void being contrary to morals and public policy.
The law emphatically prohibits the spouses from selling property to each other subject to
certain exceptions. Similarly, donations between spouses during marriage are prohibited.

138

202.
METROPOLITAN WATERWORKS & SEWERAGES SYSTEM vs. CA
GR NO. 12600 & 128520, OCTOBER 7, 1998
FACTS:
In 1965, petitioner MWSS leased around one hundred twenty eight (128) hectares of
its land to respondent CHGCCI for twenty five (25) years and renewable for another fifteen
(15) years or until the year 2005, with the stipulation allowing the latter to exercise a right of
first refusal should the subject property be made open for sale. The terms and conditions of
respondent CHGCCI's purchase thereof shall nonetheless be subject to presidential
approval. Pursuant to Letter of Instruction No. 440 issued on July 29, 1976 by then President
Ferdinand E. Marcos directing petitioner MWSS to negotiate the cancellation of the MWSSCHGCCI lease agreement for the disposition of the subject property, Oscar Ilustre, then
General Manager of petitioner MWSS, sometime in November of 1980 informed respondent
CHGCCI, through its president herein respondent Pablo Roman, Jr., of its preferential right
to buy the subject property which was up for sale. Validation thereof was to be made by an
appraisal company of petitioner MWSS' choice, the Asian Appraisal Co., Inc. which, on
January 30, 1981, pegged a fair market value of P40.00 per square meter or a total of P53,
800,000.00 for the subject property. Upon being informed that petitioner MWSS and
respondent CHGCCI had already agreed in principle on the purchase of the subject property,
President Marcos expressed his approval of the sale as shown in his marginal note on the
letter sent by respondents Jose Roxas and Pablo Roman, Jr. dated December 20, 1982.
ISSUE:
Whether or not the contract which consent is vitiated by mistake, violence,
intimidation, undue influence or fraud is void?
RULING:
No. Taking such allegation to be hypothetically true, such would have resulted in
only voidable contracts because all three elements of a contract, still obtained
nonetheless. The alleged vitiation of MWSS' consent did not make the sale null and void ab
initio. Thus, "a contract where consent is given through mistake, violence, intimidation,
undue influence or fraud, is voidable. Contracts "where consent is vitiated by mistake,
violence, intimidation, undue influence or fraud" are voidable or annullable. As the contracts
were voidable at the most, the four year prescriptive period under Article 1391 of the New
Civil Code will apply. This article provides that the prescriptive period shall begin in the
cases of intimidation, violence or undue influence, from the time the defect of the consent
ceases", and "in case of mistake or fraud, from the time of the discovery of the same time.

203.
DEVELOPMENT BANK OF THE PHILIPPINES VS. CA
GR NO. L-28774, FEBRUARY 28, 1980
FACTS:

139

DBP bought 91,188.30 square meters of land, consisting of 159 lots, in the proposed
Diliman Estate Subdivision of the PHHC. However, the sale of the lots to DBP, Lots 2 and 4,
which form part of said 159 lots, were still sold by PHHC to the spouses Nicandro, for which
2 deeds of sale were issued to them by PHHC. Upon learning of PHHCs previous
transaction with DBP, the spouses filed a complaint against DBP and the PHHC to rescind
the sale of Lots 2 and 4 by PHHC in favor of DBP. The CFI held that the sale of Lots 2 and 4,
to DBP is null and void, for being in violation of Section 13 of the DBP Charter.
ISSUE:
Whether the act of DBP in appropriating to itself CUBA's leasehold rights over the
fishpond in question without foreclosure proceedings was contrary to Article 2088 of the Civil
Code and, therefore, invalid.

RULING:
Yes. The spouses stand to be prejudiced by reason of their payment in full of the
purchase price for the same lots which had been sold to DBP by virtue of the transaction in
question. The general rule is that the action for the annulment of contracts can only be
maintained by those who are bound either principally or subsidiarily by virtue thereof.
However, a person who is not obliged principally or subsidiarily in a contract may exercise
an action for nullity of the contract if he is prejudiced in his rights with respect to one of the
contracting parties, and can show the detriment which could positively result to him from the
contract in which he had no intervention.
204.
CFI OF RIZAL & ELENA ONG ESCUTIN vs. CA & FELIX ONG
JULY 25, 1981
FACTS:
On October 20, 1977, Elena Ong Escutin, executrix of the Testate Estate of the late
Ponciano Ong Lacson, asked the probate court in Spec. Proc. No. Q-14700 of the Court of
First Instance of Rizal, Branch IX, Quezon City, for authority to sell property of the estate in
order to pay the taxes and other claims against the estate. After a cursory inquiry on the
current market value of properties within the vicinity where the property to be sold is located,
the probate court, in an order dated February 3, 1978, authorized the executrix to sell the
property for not less than P360,000.00. On February 28, 1978, the executrix sold the
property to the herein intervenor, Gan Heng, for P400, 000.00, and from this amount she
paid the taxes amounting to P54, 480.28. On March 16, 1978, she submitted the Deed of
Sale to the probate court for approval and the hearing thereof was set for April 17, 1978. On
140

April 11, 1978, however, Felix Ong filed an opposition to the approval of the sale, alleging,
among others, that he had offered to buy the property at a higher price of P450, 000.00,
which claim was denied by the executrix.
ISSUE:
Whether or not the contract of sale is valid?
RULING:
Yes. The offer of Felix Ong to buy the property at a higher price would not make the
approval of the sale a grave abuse of discretion because the difference in the prices was not
the only factor taken into consideration by the probate court in approving the sale. As the
probate court said: "The price was not at all bad and although Felix Ong and/or Manuel Ong
are willing to pay P50,000.00 more which would benefit the estate, we are not inclined to
disapprove the sale on that account alone; as otherwise, this could put the executrix in a
very embarrassing position.

205.
EARTH MINERALS EXPLORATION vs. DEPUTY EXECUTIVE SECRETARY CATALINO
MACARAIG
GR NO. 78569, FEBRUARY 11, 1991
FACTS:
Zambales Chromite, as claim-owner, on one hand, and Philzea Mining and
Development Corporation as operator, on the other, entered into a "Contract of
Development, Exploitation and Productive Operation" on the ten (10) patentable mining.
During the lifetime of such contract, Earth Minerals Exploration, Inc. submitted a Letter of
Intent on June 30, 1984 to Zambales Chromite whereby the former proposed and the latter
agreed to operate the same mining area subject of the earlier agreement between Zambales
Chromite and Philzea Mining. On August 10, 1984, Zambales Chromite and Earth Minerals
concretized their aforementioned Letter of Intent when they entered into an "Operating
Agreement" for the latter to operate the same mining area. Consequently, the same mining
property of Zambales Chromite became the subject of different agreements with two
separate and distinct operators. On November 29, 1984, petitioner Earth Minerals filed with
the Bureau of Mines and Geo-Sciences a petition for cancellation of the contract between
Zambales Chromite and Philzea Mining, pursuant to Section 7, P.D. 1281. In its petition,
Earth Minerals alleged, among others, that Philzea Mining committed grave and serious
violations of the latter's contract with Zambales Chromite among which are: failure to
produce the agreed volume of chromite ores; failure to pay ad valorem taxes; failure to put
up assay buildings and offices, all resulting in the non-productivity and non-development of
the mining area.
ISSUE:
Whether or not the petitioner Earth Minerals is the proper party to seek cancellation
of the operating agreement between Philzea Mining and Zambales Chromite?
141

RULING:
Yes. A contract takes effect only between the parties who made it, and also their
assigns and heirs, except in cases where the rights and obligations arising from the contract
are not transmissible by their nature, or by stipulation or by provision of law (Article 1311,
New Civil Code). Since a contract may be violated only by the parties thereto as against
each other, in an action upon that contract, the real parties in interest, either as plaintiff or as
defendant must be parties to said contract. In relation thereto, Article 1397 of the Civil Code
lays the general rule that an action for the annulment of contracts can only be maintained by
those who are bound either principally or subsidiarily by virtue thereof. The rule, however,
admits of an exception.

206.
TAN QUETO VS. CA
GR NO. 35648, MAY 16, 1983
FACTS:
Restituta Tagalinar Guangco de Pombuena received the questioned lot (Lot 304-B of
the Cadastre Survey of the Municipality of Centro, Misamis Occidental) either as a purported
donation or by way of purchase on 11 February 1927 for P50.00 as the alleged consideration
thereof. The transaction took place during her mothers lifetime (her father having
predeceased the mother) and consummated while Restituta was already married to her
husband Juan Pombuena. On 22 January 1935, Juan filed an application of Torrens title
over the land for himself and his supposed co-owner Restituta. On 22 November 1938, a
decision was promulgated (GLRC 1638, Cadastral Case 12) pronouncing Juan (married to
Restituto) as the owner of the land. On 22 September 1949 a contract of lease over the lot
was entered into between Pershing Tan Queto and Restituta (with the consent of her
husband) for a period of 10 years. Meanwhile, On 27 December 1960 Restituta sued Tan
Queto for unlawful detainer (the lease contract having expired) before the Municipal Court of
Ozamis City. On 22 April 1962, as a consequence of the cadastral case, an OCT was issued
in Juans name. On 10 October 1962, Tan Queto and Juan entered into a barter agreement
whereby Tan Queto became the owner of the disputed lot, and the spouses in turn became
the owners of a parcel of land with the house constructed thereon previously owned by Tan
Queto. Thereafter, Tan Queto constructed on the disputed land a concrete building, without
any objection on the part of Restituta. The Municipal court ruled in favor of the spouses in
the unlawful detainer case; but on appeal in the CFI, the entire case was dismissed because
of an understanding (barter) entered into by Juan and Tan Queto. Restituta sued both Juan
and Tan Queto for reconveyance of the title over the registered but disputed lot, for
annulment of the barter, and for recovery of the land with damages.
ISSUE:
Whether or not the contract of sale is valid or not?
RULING:
142

The sale cannot be said to be fictitious or simulated (and therefore void) as there was
a valid consideration therefor. Assuming that there had indeed been a simulation, the parties
thereto cannot use said simulation to prejudice a stranger to said stratagem (like petitioner
herein).

207.
LEABRES VS. CA
GR

NO.

41847,

DECEMBER

12,

1986

FACTS:
Clara Tambunting de Legarda died testate on April 22, 1950. Among the properties
left by the deceased is the Legarda Tambunting Subdivision located on Rizal Avenue
Extension, Manila. Shortly after the death of said deceased, plaintiff Catalino Leabres
bought, on a partial payment of P1, 000.00 a portion (No. VIII, Lot No. 1) of the Subdivision
from surviving husband Vicente J. Legarda who acted as special administrator, the deed or
receipt of said sale appearing to be dated May 2, 1950. On August 28, 1950, the Probate
Court of Manila appointed Vicente Legarda as an administrator together with Pacifica Price
and Augusto Tambunting over the testate estate of said Clara Tambunting and authorized
through its order of November 21, 1951 the sale of the property. Vicente L. Legarda was
relieved as a regular Administrator and the Philippine Trust Co. which took over as such
administrator advertised the sale of the subdivision which includes the lot subject matter
herein in various issues of the Manila Times and Daily Mirror. No adverse claim or interest
over the subdivision or any portion thereof was ever presented by any person, and in the
sale that followed, the Manotok Realty, Inc. emerged the successful bidder. By order of the
Probate Court, the Philippine Trust Co. executed the Deed of Absolute Sale of the
subdivision in favor of the Manotok Realty, Inc. which deed was judicially approved on March
143

20, 1959, and recorded immediately in the proper Register of Deeds which issued the
corresponding Certificates of Title to the Manotok Realty, Inc., the defendant appellee herein.
A complaint dated February 8, 1966, was filed by herein plaintiff, which seeks, among other
things, for the quieting of title over the lot subject matter herein, for continuing possession
thereof, and for damages. Leabres anchors his claim on the receipt dated May 2, 1950,
which he claims as evidence of the sale of said lot in his favor. However, Catalino
Leabres has not registered his supposed interest over the lot in the records of the Register
of Deeds, nor did he present his claim for probate in the testate proceedings over the estate
of the owner of said subdivision, in spite of the notices advertised in the papers.

ISSUE:
Whether or not a receipt is a valid basis for a contract of sale?

RULING:
No. An examination of the receipt reveals that the same can neither be regarded as a
contract of sale or a promise to sell. There was merely an acknowledgment of the sum of
one thousand pesos (P1, 000.00). There was no agreement as to the total purchase price of
the land or to the monthly installment to be paid by the petitioner. The requisites of a valid
contract of sale namely: 1. consent or meeting of the minds of the parties; 2.
determinate

subject

matter/object;

3.

price

certain

in

money

or

its

equivalent/consideration are lacking in said receipt and therefore the sale is not valid or
enforceable.
208.
BUMANLAG vs. ALZATE
GR NO. 39119, SEPTEMBER 26, 1987
FACTS:
Petitioners sued herein private respondents for partition of the lots inherited by both
parties from their deceased father; respondents however moved to dismiss on the ground
that some years before a final and executory judgment (based on a compromise agreement)
involving the same parties, same subject matter, and same causes of action had already
been rendered by a court of competent jurisdiction and that therefore the doctrine of res
judicata clearly bars the present case; petitioners contend that said judgment is void
because the compromise agreement had been signed in their behalf by their lawyer who had
not been authorized by them to enter into such agreement, consequently there can be
no res judicata.
144

ISSUE:
Whether or not the compromise agreement is void?
RULING:
No. The compromise agreement is not void but merely unenforceable. The
petitioners by their silence for sixteen (16) years and by their overt acts of exchanging or
bartering some of the lots awarded to them with some of the lots of the private respondents
have doubtless ratified the act of their attorney. The argument that the partition in the first
case was not one with metes and bounds is bankrupt. There was such a physical and actual
partition, not merely a metaphysical one.
.209.
HEIRS OF CECILIO CLAUDEL ET. AL vs. CA
JULY 12, 1991
FACTS:
Cecilio Claudel acquired from the Bureau of Lands a parcel of land. Thirty-nine years
after his death, two branches of Cecilios family contested the ownership over the land. The
heirs of Cecilio partitioned the lot among themselves and obtained the corresponding TCTs.
Siblings of Cecilio filed a complaint for Cancellation of Titles and Reconveyance with
Damages alleging that their parents had purchased from the late Cecilio several portions of
lot. They admitted that the transaction was verbal but they were able to present the
subdivision plan. The CFI dismissed the complaint disregarding the evidence. The CA
reversed the CFIs ruling ordering the cancellation of the TCTs issued in the name of the
heirs of Cecilio. As ruled by the CA, the Statute of Frauds applies only to executor contracts
and not the consummated sales as in the case at bar where oral evidence may be admitted.
ISSUE:
Whether or not a contract of sale of land may be proven orally?
RULING:
Yes, a contract of sale of land may be proven orally subject to certain exceptions.
This case falls within the exception. The provision of the Statute of Fraud that is pertinent to
the present controversy is stated in Article 1403 of the Civil Code of the Philippines.
210.
SYQUIA vs. CA
GR NO. 61932, JUNE 30, 1987
FACTS:
Petitioner Ernesto Syquia wrote to private respondent Litton manifesting his
willingness to renew the contract of lease on the Dutch Inn Building upon its expiration.
Litton, however, refused, invoking the clear and unequivocal terms of the contract of lease,
specifically the duration thereof which allegedly does not provide for renewal or extension.
Petitioner was asked in writing to vacate the premises on or before the expiration. Having
failed to do so, Litton filed the case for ejectment. The City Court rendered a decision in
favor of Litton. CA affirmed the decision. Petitioner now alleges an oral promise or assurance
of the representatives of Litton giving him priority or renewal of the contract of lease.
145

ISSUE:
Whether or not the alleged oral assurance or promise is enforceable?
RULING:
No. The SC ruled that an alleged oral assurance or promise of the representatives of
the lessor that the lessee should be given priority or a renewal of the lease cannot be
enforceable. Under Article 1403, No. 2(e), of the NCC, an agreement for the leasing for a
longer period than one year is unenforceable by action unless the same, or some note or
memorandum thereof, be in writing and subscribed by the party charged, or by his agent.
211.GENARO CORDIAL, vs. DAVID MIRANDA
December 14, 2000
FACTS:
David Miranda, a businessman from Angeles City, was engaged in rattan business.
Gener Buelva was the supplier of David but the former met an accident and died. Genero
Cordial and Miranda met through Buelvas widow, Cecilla. They agreed that Cordial will be
his supplier of rattan poles. Cordial shipped rattan poles as to the agreed number of pieces
and sizes however Miranda refused to pay the cost of the rattan poles delivered. Miranda
alleged that there exist no privacy of contract between Miranda and Cordial. Cordial filed a
complaint against Miranda. The RTC rendered its decision in favor of the petitioner. The CA
reversed the decision of the RTC.
ISSUE:
Whether or not Statute of Frauds applies in this case.
RULING:
No, the CA and respondent Miranda stress the absence of a written memorandum of
the alleged contract between the parties. Respondent implicitly argues that the alleged
contract is unenforceable under the Statute of Frauds however, the statute of frauds applies
only to executor and not to completed, executed, or partially executed contracts. Thus, were
one party has performed ones obligation, oral evidence will be admitted to prove the
agreement. In the present case, it has already been established that petitioner had delivered
the rattan poles to respondent. The contract was partially executed; the Statute of Frauds
does not apply.
212. Castillo vs. Castillo
Gr L-18238 Jan. 22, 1980
FACTS:
Castillo died leaving as his heirs his wife Katigbak and their nine children. Intestate
proceedings for the settlement of the deceased's estate were instituted. Katigbak was
appointed administratrix. On June 21, 1948, she filed an inventory of the properties as well
as the obligations left by the deceased. Two months thereafter, she was ordered to submit a
project of partition. On November 11, 1948, the surviving spouse as administratrix submitted
a project of partition. Despite approval of the project of partition and the closing of the
intestate proceedings, the properties remained under the administration of Enriqueta K. Vda.
de Castillo. On February 4, 1960, after an extrajudicial demand for partition, herein plaintiffappellant Zenaida, assisted by her husband, filed an action for partition with accounting and
receivership against her mother Enriqueta Katigbak and her brothers and sisters. Alleging
that the project of partition omitted to include certain properties acquired by the defendants

146

using community funds in their acquisition, she prayed that said properties be divided and
partitioned accordingly. Hence, this petition.
ISSUE:
Whether or not the contention of appellant is meritorious.
HELD:
Yes, indeed, the right of plaintiff-appellant Zenaida Castillo to demand partition is
indisputable, such right being embodied in paragraph 1, Article 494 of the New Civil Code.
The finding of the trial court that the firing of the complaint in the case at bar was not
malicious is a finding of fact which is binding and conclusive upon Us, thereby negating any
award of damages against plaintiffs-appellants, following the ruling that it is not a sound
policy to place a penalty on the right to litigate and that in order that a person may be made
liable to the payment of moral damages, the law requires that his act be wrongful. The
adverse result of an action does not per se make the act wrongful and subject the actor to
the payment of moral damages. The law could not have meant to impose a penalty on the
right to litigate; such right is so precious that moral damages may not be charged on those
who may exercise it erroneously.
213.Cario vs. CA
GR 47661 July 31, 1987
FACTS:
Encabo applied with the Bureau of Lands, to purchase a parcel of land which was
granted. Later an agreement of transfer was made. LTA, unaware of the transfer of rights by
Encabo to Quesada, adjudicated the lot in favor of Encabo, and LTA and Encabo signed an
Agreement to Sell. LTA later came to know about the "transfer" of rights from Encabo to
Quesada. However, before the LTA's disapproval of the transfer of Encabo's rights to
Quesada, the latter had entered into possession of the lot in question. Cario filed a petition
with the LTA seeking approval of the transfer to herein petitioners of rights to the lot in
question. LTA rendered a decision holding that the status quo should be maintained. The
Carios appealed the decision of the LTA to the Office of the President. The Carios refused
to give up the possession of the lot despite the rulings of the LTA and the Office of the
President; thereafter, the Encabos filed an action in the Court of First Instance of Manila to
declare them as the owners of the lot. After hearing and trial, the lower court rendered
decision in favor of the plaintiffs therein the Encabos. Hence, this petition.
ISSUE:
Whether or not the court erred in rendering decision in favor of respondent.
HELD:
No, the petitioners herein have nothing else to support their claim over the disputed
lot except for the Deed of Sale, Exhibit "D-1" which is even unnotarized, and the exact date
of execution, unknown. Whereas, on the other hand, the private respondents clearly have a
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preponderance of evidence negating the validity of such deed. Contracts of sale are void
and produce no effect whatsoever where the price, which appears therein as paid, has in
fact never been paid by the vendee to the vendor. The Civil Code provides Art. 1409. The
following contracts are inexistent and void from the beginning: xx(2) Those which are
absolutely simulated or fictitious; xx These contracts cannot be ratified. Neither can the right
to set up the defense of illegality be waived. Furthermore, even without going into the merits
and/or validity of Exhibit "D-1", it is clear that there has been no legal transfer of rights in
favor of the Carios because neither the LTA nor the Land Authority has approved or given
due course to such transfer of rights. The LTA never waived its right to approve the transfer
of rights. Since no approval or due course has yet been given by the LTA or LA to such
transfer of rights, the document Exhibit "D-1" is not enforceable against the latter.

214.Tolentino vs Judge Edgardo L. Paras

GR 43095 May 30, 1983
FACTS:
Amado Tolentino had contracted a second marriage with private respondent while his
marriage with petitioner, Serafia G. Tolentino was still subsisting. Petitioner charged Amado
with Bigamy which Court, upon Amado's plea of guilty, sentenced him to suffer the
corresponding penalty. After Amado had served the prison sentence imposed on him, he
continued to live with private respondent until his death. His death certificate carried the
entry "Name of Surviving Spouse Maria Clemente." Petitioner sought to correct the name
of the surviving spouse in the death certificate from "Maria Clemente" to "Serafia G.
Tolentino", her name. The lower Court dismissed the petition "for lack of the proper
requisites under the law". Conformably thereto, petitioner filed the case against private
respondent and the Local Civil Registrar of Paombong, Bulacan, for her declaration as the
lawful surviving spouse, and the correction of the death certificate of Amado. In an Order,
respondent Court, upon private respondent's instance, dismissed the case, stating that the
case is considered MOOT and ACADEMIC. Thus, petitioner's present recourse mainly
challenging the grounds relied upon by respondent Court in ordering dismissal.
ISSUE:
Whether or not the court erred when it denied petitioners contention that she was the
legal wife.
HELD:
Yes, considering that Amado, upon his own plea, was convicted for Bigamy, that
sentence furnishes the necessary proof of the marital status of petitioner and the deceased.
There is no better proof of marriage than the admission by the accused of the existence of
such marriage. The second marriage that he contracted with private respondent during the
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lifetime of his first spouse is null and void from the beginning and of no force and effect. It
cannot be safely concluded, then, without need of further proof nor is remand to the Court
below, that private respondent not the surviving spouse of the deceased Amado, but
petitioner. Rectification of the erroneous entry in the records of the Local Civil Registrar may,
therefore, be validly made. The court declared petitioner the surviving spouse of the
deceased Amado Tolentino.

215. COMELEC vs. JUDGE MA. LUISA QUIJANO-PADILLA

September 18, 2002
G.R. No. 151992
FACTS:
In 1996, the Philippine Congress passed Republic Act No. 8189, otherwise known as
the Voter's Registration Act of 1996. Pursuant thereto, COMELEC promulgated Resolution
No. 00-0315 approving in principle the Voter's Registration and Identification System Project
(VRIS) Project. The idea is to have a national registration of voters whereby each registrant's
fingerprints will be digitally entered into the system and upon completion of registration,
compared and matched with other entries to eliminate double entries. On September 9,
1999, the COMELEC issued invitations to pre-qualify and bid for the supply and installations
of information technology equipment for its VRIS Project. Photokina Marketing Corporation
(PHOTOKINA) pre-qualified and eventually won. A contract was perfected between the
parties, but COMELEC failed to comply with the contract due to insufficiency of funds.
Respondent filed a suit against petitioner, of which respondent judge granted the writ of
prohibitory injunction to private respondent and denying the Omnibus Motion of petitioner.
Hence, the instant petition for certiorari filed by the Office of the Solicitor General (OSG) in
behalf of then COMELEC.
ISSUE:
Whether or not the Office of the Solicitor-General has authority and/or standing to
file the petition considering that the petitioners have not been authorized by the COMELEC
en banc to take such action.
RULING:
Yes, the OSG is an independent office. In the discharge of its task, the primordial
concern of the OSG is to see to it that the best interest of the government is upheld. This is
regardless of the fact that what it perceived as the best interest of the government runs
counter to its client agencys position. In the present case, it appears that after the Solicitor
General studied the issues he found merit in the cause of the petitioner based on the
applicable law and jurisprudence. Thus, it is his duty to represent the petitioner as he did by
filing this petition. He cannot be disqualified from appearing for the petitioner even if in so
doing his representation runs against the interests of the CSC. It is in the interest of the
State that questions relating to government contracts be settled without delay. This is more
so when the contract, as in this case, involves the disbursement of public funds and the
modernization of our countrys election process, a project that has long been overdue.

216.Pilipinas Shell Petroleum Corp. vs.

Compensation Commission
GR L-41301 Dec. 15, 1986
FACTS:

149

De la Rosa and the Workmens

Petitioner was employed by respondent as a laborer. While in the service, petitioner

contracted illness with symptoms of gradual numbness of the body. Despite his sickness,
petitioner continued working. Notwithstanding his complaint about his illness, he was
transferred by respondent to another branch twice. While at the respondent's Depot claimant
suffered a stroke. He was given vacation leave and after the expiration, respondent
separated him from the service because of his sickness. Respondent paid him his retirement
gratuity and special benefit pursuant to its retirement plan and collective bargaining
agreement and consideration of which, petitioner signed a document entitled 'Release'
including the Workmen's Compensation Benefit to which he may be entitled under the Act. In
1970, private respondent filed a claim for disability compensation under the Workmen's
Compensation Act against the petitioner. After the case was heard on its merits, the Regional
Office rendered a decision dismissing the claim. On May 26, 1975, private respondent filed a
Motion for Reconsideration with the respondent Commission. Finding private respondent's
petition to be meritorious, the respondent commission rendered a Decision reversing the
Regional Office's decision. Hence this petition.

ISSUE:
Whether or not the respondent workmen's compensation commission erred and
abused its discretion and authority in reversing the dismissal of the claim for compensation
filed by and in awarding him disability benefits.
HELD:
Yes, as correctly pointed out by respondent Commission, "The payment made by
respondent entitled 'special payment' does not refer to disability benefits for if it did, it would
have been definitely stated. Thus, Pilipinas Shell Petroleum Corp., having failed to prove that
petitioner was paid the compensation benefits as mandated by WCA, it should be held liable
therefore, the Release document executed by private respondent being null and void. Also of
equal significance is the fact that petitioner was involuntary separated from the service. It
does not appear from the records that he was paid his separation pay pursuant to the
separation pay law which leads to the logical conclusion drawn by the respondent
Commission that the special payment stands aptly more as a consideration for his
involuntary separation.
217. Abelardo Lim and Esmadito Gunnaban vs. CA
GR 125817 Jan. 16, 2002
FACTS:
Private respondent purchased a passenger jeepney from Vallarta. While private
respondent continued offering the jeepney for public transport services he did not have the
registration of the vehicle transferred in his name nor did he secure for himself a certificate of
public convenience for its operation. Thus, Vallarta remained on record as its registered
owner and operator. On 22 July 1990, while the jeepney was running, it collided with a tenwheeler-truck owned by petitioner Lim and driven by his co-petitioner Gunnaban. Gunnaban
150

owned responsibility for the accident. Petitioner Lim shouldered the costs for hospitalization
of the wounded, compensated the heirs of the deceased passenger. He also negotiated
with private respondent and offered to have the passenger jeepney repaired at his
shop. Private respondent however did not accept the offer so Lim offered him P20,000.00,
the assessment of the damage as estimated by his chief mechanic. The main point of
contention between the parties related to the amount of damages due private respondent.
The trial court rendered a decision in favour of private respondent. Thereafter, petitioners
appealed to the Court of Appeals which affirmed the decision of the trial court. Hence this
petition.
ISSUE:
Whether or not the Court of Appeals erred in sustaining the decision of the trial court
despite their opposition to the well-established doctrine that an operator of a vehicle
continues to be its operator as long as he remains the operator of record.

HELD:
No, the kabit system is an arrangement whereby a person who has been granted a
certificate of public convenience allows other persons who own motor vehicles to operate
them under his license, sometimes for a fee or percentage of the earnings. Although the
parties to such an agreement are not outrightly penalized by law, the kabit system is
invariably recognized as being contrary to public policy and therefore void and inexistent
under Art. 1409 of the Civil Code. In the present case it is at once apparent that the evil
sought to be prevented in enjoining the kabit system does not exist. The case arose from the
negligence of another vehicle. Thus it cannot be said that private respondent Gonzales and
the registered owner of the jeepney were in estoppel for leading the public to believe that the
jeepney belonged to the registered owner. On the contrary, it was private respondent himself
who had been wronged and who has the right to proceed against petitioners for the damage
caused on his passenger jeepney as well as on his business.

218. Caram, Jr. vs Laureta

Gr L-28740 Feb. 24, 1981
FACTS:
Mata conveyed a large tract of agricultural land in favor of respondent Laureta. The
deed of absolute sale in favor of respondent was not registered because it was not
acknowledged before a notary public or any other authorized officer. Respondent occupied
the land and even paid taxes. However, the same land was sold to Caram which was legally
acknowledged. Mata admitted the existence of a private absolute deed of sale of his only
property in favor Laureta but alleging that he signed the same as he was subjected to
duress, threat and intimidation for the plaintiff was the commanding officer of the 10th
division. He also admitted the existence of sale in favour of Caram on the sale land but it
was obtained through fraud since Caram knew that he was illiterate. The trial court rendered
a decision in favour of Mata and respondent. Thereafter, Caram raised the issue to the CA
which also affirmed the lower courts decision by reason of bad faith on the part of Caram.
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Forthwith, Laureta filed an action for nullity, recovery of ownership and/or reconveyance with
damages against Mata and Caram.
ISSUE:
Whether or not respondent can seek for the nullity and recovery of ownership/ or
reconveyance or the said land.
HELD:
No, since Caram was a registrant in bad faith, the situation is as if there was no
registration at all. It is true that Mata had alleged that the deed of sale in favor of Laureta
was procured by force. Such defect, however, was cured when, after the lapse of four years
from the time the intimidation ceased, Mata lost both his rights to file an action for annulment
or to set up nullity of the contract as a defense in an action to enforce the same. Further, the
second sale is not a voidable contract which provides that the action for annulment shall be
brought within four (4) years from the time of the discovery of fraud does not apply. Hence,
Laureta's action could not have prescribed since the second contract of sale, having been
registered in bad faith, is null and void. Article 1410 of the Civil Code of the Philippines
provides that any action or defense for the declaration of the inexistence of a contract does
not prescribe.

219. Buenaventura vs. CA

GR 50837 Dec. 28, 1992
FACTS
Respondent spouses Leonardo Joaquin and Feliciana Landrito are the parents of
petitioners as well as of respondents, all surnamed Joaquin. Sought to be declared null and
void ab initio are six deeds of sale of real property executed by respondent parents in favor
of their respondent children and the corresponding certificates of title issued in their names.
Respondents aver that first, petitioner siblings do not have a cause of action against them as
well as the requisite standing and interest to assail their titles over the properties in litis;
second, the sales were with sufficient considerations and made by respondent parents
voluntarily, in good faith, and with full knowledge of the consequences of their deeds of sale;
and third, the certificates of title were issued with sufficient factual and legal basis. The trial
court ruled in favor of the respondents and dismissed the complaint. The Court of Appeals
affirmed the decision of the trial court. Hence, this petition.
ISSUES
1. Whether or not the Deeds of Sale are void for lack of consideration.
2. Whether or not the Deeds of Sale are void for gross inadequacy of price.
HELD
1. NO, it is not the payment of price that determines the validity of a contract of sale.
Payment of the price has nothing to do with the perfection of the contract. Payment of the
price goes into the perfection of the contract. Failure to pay the consideration is different
from lack of consideration. The former results in a right to demand the fulfillment or
cancellation of the obligation under an existing valid contract while the latter prevents the
existence of a valid contract.
152

2. No, petitioners failed to prove any of the instances mentioned in art. 1355 and
1470 of the Civil Code this would invalidate, or even affect, the Deeds of Sale. Indeed, there
is no requirement that the price be equal to exact value of the subject matter of the sale. All
the respondents believed that they received the commutative value of what they gave.
Moreover, the factual findings of the appellate court are conclusive on the parties and carry
greater weight when they coincide with the factual findings of the trial court. In the instant
case, the trial court found that the lots were sold for a valid consideration, and that the
defendant children actually paid the purchase price stipulated in their respective Deeds of
Sale.
220. Heirs of Ingjugtiro vs. Sps. Casals
GR 134718 Aug. 20, 2001
FACTS:
During the Second World War, Mamerto Ingjug died leaving behind the subject parcel of land
to his descendants, herein petitioners. The vendors allegedly represented to the vendees
that the property was inherited by them from the late Mamerto Ingjug, and that they were his
only surviving heirs. On 10 August 1992, herein petitioners challenged respondents'
ownership of the property against respondents. Petitioners alleged that they only discovered
in 1990 that the property had already been sold and titled to respondents, and that
respondents refused, despite repeated demands, to deliver and return to them their shares
in the property.
Respondents et al, filed a motion to dismiss, instead of an answer, arguing that the
complaint failed to state a cause of action and was barred by prescription and laches. They
contended that they acquired the property in good faith. The trial court dismissed the
complaint. On 26 February 1998 the Court of Appeals, affirmed the Decision of the trial
court.
ISSUE:
Whether or not petitioners' right to institute a complaint for partition and
reconveyance is effectively barred by prescription and laches.
HELD:
No, in actions for reconveyance of property predicated on the fact that the
conveyance complained of was null and void ab initio, a claim of prescription of action would
be unavailing. The action or defense for the declaration of the inexistence of a contract does
not prescribe. Neither could laches be invoked in the case at bar. Laches is a doctrine in
equity and our courts are basically courts of law and not courts of equity. Equity, which has
been aptly described as "justice outside legality," should be applied only in the absence of,
and never against, statutory law. The positive mandate of Art. 1410 of the New Civil Code
conferring imprescriptibility to actions for declaration of the inexistence of a contract should
pre-empt and prevail over all abstract arguments based only on equity. Certainly, laches
cannot be set up to resist the enforcement of an imprescriptible legal right, and petitioners
can validly vindicate their inheritance despite the lapse of time.

153

221. Sps. Narciso Rongavilla and Dolores Rongavilla vs CA

GR 83974 Aug. 17, 1998
FACTS:
Private respondents borrowed the amount of 2, 000 from the petitioners for the
purpose of having their dilapidated rooftop repaired. A month later, petitioner visited their
aunt's home, bringing with them a document for the signature of their aunts. The document
is admittedly typewritten in English. When asked, they said that it was just a document to
show that the private respondents had a debt amounting to P2,000. On account of that
representation, private respondent signed the document. After a lapse of over four years,
petitioner went to private respondents' place and asked them to vacate the parcel in
question, claiming that she and her husband were already the new owners of the land.
Surprised by this, private respondents went to the Office of the Register of Deeds of the
Province of Rizal to verify the matter. They discovered that their Certificate of Title had been
cancelled and a new one, Transfer Certificate had been issued in favor of petitioners. It was
only then that the private respondents realized that the document they had previously been
asked by their nieces to sign was a deed of sale. Hence, respondents filed in the court which
favoured them. CA also affirmed the decision.
ISSUE:
Whether or not respondent Court of Appeals commit reversible error when it upheld the
trial court's judgment that the disputed Deed of Sale is void and inexistent.

HELD:
No, in the present case, plaintiffs-appellees declared under oath in their complaint that
they signed the alleged document without knowing that said document was a deed of
absolute sale. This means that plaintiffs-appelles consent was not only vitiated, but that
plaintiffs-appelles have not give their consent at all. And since there was no consent, the
deed of absolute sale is, therefore, null and void ab initio. They never intended to sell, nor
acceded to be bound by the sale of their land. Lack of consent and consideration made the
deeds of sale void altogether and rendered them subject to attack at any time, conformably
to the rule in Article 1410 that an action to declare the inexistence of void contracts 'does
not prescribe.
222. PACKAGING PRODUCTS CORPORATION and LORENZO INOCANDO, petitioners,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION and BRICCIO ELERIA
G.R. No. L-50383

July 23, 1987

Facts: Defendant Briccio Eleria was removed by the management of the account of La
Tondena, Inc., he alleges that this was thru the cajolery and manipulations of Inocando. He
154

contends that he certainly would not have agreed to receive the amount of P5,000.00 every
month as consolation for the loss of La Tondena, Inc., account as it is an amount that pales
very much in comparison to the total income he was receiving as commissions for the La
Tondena account. The defendant charges that management is guilty of diminution of benefits
and claims that management should pay him the commissions due him from the La
Tondena, Inc., and that the management does not have a good ground to take away from
him the La Tondena, Inc., account as there have been no complaints coming from the La
Tondena people on the way he was servicing the account.While the Petitioner, deny almost
all of complainant's allegations. The Petitioner denies the claim that he was assured and
given a seven and one-half percent (7-1/2%) commission rate for the sales made to La
Tondena, Inc., alleging that complainant was entitled only to the regular commission of onehalf percent (1/2%). The 7% commission, and that it was actually constituted the commission
rebates given by the Petitioner corporation to certain employees of La Tondena, Inc.
Petitioner maintains that the main reason why management took away from the Defendant
the La Tondena, Inc., was that they learned that the defendant did not actually pass on the
commission rebates to the La Tondena employees and that they became more suspicious
because of Defendant's high style of living and expensive activities which suspicion was
allegedly heightened when complainant refused petitioner Inocando's offer that he
(Inocando) accompany him in making the rebate payments. Petitioner Inocando denies
complainant's charges of harassment, discrimination and humiliation, alleging that
complainant actually did not object to receive the monthly income of P5,000.00 to
compensate for the loss of the La Tondena, account. He avers that the new accounts
assigned to be developed by Defendant were actually big and possessed of tremendous
potentials for expansion.
Issues: Whether or not both the petitioners and the private respondent are pari delicto with
respect to Article 1411 of civil code
Ruling: Yes, Both the petitioners and the private respondent are pari delicto with respect to
Article 1411of the civil code, because the 7% "commission rebates" are extra charges which
La Tondena top management has to bear and which it will eventually pass on to the buyers
of its products. The Bureau of Internal Revenue is cheated of sizeable amounts of taxes;
hence the arrangement is illegal and immoral. The corrupting influence affects the
employees of the buyer corporation and the officials and employees of the supplier firms
who are involved in the arrangements. And as always, it is the consuming public which
ultimately suffers. The court declaredthe agreement sought to be enforced is illegal and
immoral. And Neither one of the party may expect positive relief from courts of justice in the
interpretation of their contract. The courts leave them as they were at the time the case was
filed.

223.
TEJA
MARKETING
AND/OR
ANGEL
JAUCIAN,
petitioner,
vs.
HONORABLE INTERMEDIATE APPELLATE COURT * AND PEDRO N. NALE,
respondents.
G.R. No. L-65510 March 9, 1987
155

Facts: The defendant bought from the plaintiff a motorcycle with complete accessories and
a sidecar in the total consideration of P8,000.00. Out of the total purchase price the
defendant gave a downpayment of P1,700.00 with a promise that he would pay plaintiff the
balance within sixty days. The defendant, however, failed to comply with his promise and so
upon his own request, the period of paying the balance was extended to one year in monthly
installments, when he stopped paying anymore. The plaintiff made demands but just the
same the defendant failed to comply with the same thus forcing the plaintiff to consult a
lawyer and file this action for his damage in the amount of P546.21 for attorney's fees and
P100.00 for expenses of litigation. The plaintiff also claims that the total account of the
defendant was already P2,731.06 as shown in a statement of account. This amount includes
not only the balance of P1,700.00 but an additional 12% interest per annum on the said
balance; a 2% service charge; and P 546.21 representing attorney's fees. In this particular
transaction a chattel mortgage was constituted as a security for the payment of the balance
of the purchase price. It has been the practice of financing firms that whenever there is a
balance of the purchase price the registration papers of the motor vehicle subject of the sale
are not given to the buyer. The agreement also of the parties here was for the plaintiff to
undertake the yearly registration of the motorcycle with the Land Transportation
Commission. The plaintiff failed to register the motorcycle on that year on the ground Lastly,
the plaintiff explained also that though the ownership of the motorcycle was already
transferred to the defendant the vehicle was still mortgaged with the consent of the
defendant to the Rural Bank of Camaligan for the reason that all motorcycle purchased from
the plaintiff on credit was rediscounted with the bank. On his part the defendant did not
dispute the sale and the outstanding balance of P1,700. 00 still payable to the plaintiff.
Because of this failure of the plaintiff to comply with his obligation to register the motorcycle
the defendant suffered damages when he failed to claim any insurance indemnity which
would amount to no less than P15,000.00 for the more than two times that the motorcycle
figured in accidents aside from the loss of the daily income of P15.00 as boundary fee ,and
when the motorcycle was impounded.
Issue: Whether or not the agreement (kabit system) of the parties entered into is not contrary
to public policy
Ruling: No, the agreement (kabit system) of the parties entered into is contrary to public
policy and the agreement is void and in existent under Article 1409 of the Civil Code, and It
is a fundamental principle that the court will not aid either party to enforce an illegal contract,
but will leave both where it finds then. Upon this premise it would be error to accord the
parties relief from their predicament. The defect of in existence of a contract is permanent
and cannot be cured by ratification or by prescription. The mere lapse of time cannot give
efficacy to contracts that are null and void.

224.
HEIRS
OF
MARCIANA
G.
AVILA,
petitioners,
vs.
HON. COURT OF APPEALS, and ALADINO CH. BACARRISAS, respondents.
G.R. No. L-45255 November 14, 1986

156

Facts: The Court of First Instance of Misamis Oriental, as a cadastral court, adjudicated Lots
594 and 828 of the Cadastral Survey of Cagayan to Paz Chavez. But because Paz Chavez
failed to pay the property taxes of Lot 594, the government offered the same for sale at a
public auction. Marciana G. Avila, wife of Leonardo Avila and the mother of the herein
petitioners, participated in and won the bidding. Despite the provision of Section 579 of the
Revised Administrative Code prohibiting public school teachers from buying delinquent
properties, nobody, not even the government questioned her participation in said auction
sale. In fact after the expiration of the redemption period, the Provincial Treasurer executed
in her favor the final bill of sale. OCT Nos. 100 and 101, covering said Lots 594 and 828,
were issued in favor of Paz Chavez. In opposition thereto, private respondents filed a
petition for review of the decrees at the Court of First Instance of Misamis Oriental, Branch II,
in Cadastral Case No. 17, Lot No. 594 entitled "The Director of Lands, Applicant v. Atanacia
Abalde, et al., Claimants in Re: Petition for Review of Decree, Marciana G. Avila, Petitioner
vs. Paz Chavez, Respondents." After hearing on the merits, the Cadastral Court declare the
adjudicated lots in question in favor of respondent Paz Chavez, NULL and VOID Decrees
Nos. 433 and 434 issued by the Chief of Land Registration Office
Issues: Whether or not the contract of sale is valid
Ruling: No, the contract of sale is void from the beginning, because , their mother and
predecessor-in-interest, purchased the questioned property at a public auction conducted by
the government; paid the purchase price; and was issued a final bill of sale after the
expiration of the redemption period, however undisputed that such purchase was prohibited
under Section 579 of the Revised Administrative Code which provide
Section 579. Inhibition against purchase of property at tax sale.-Official and
employees of the Government of the Republic of the Philippines are prohibited from
purchasing, directly or indirectly, from the Government, any property sold by the Government
for the non-payment of any public tax. Any such purchase by a public official or employee
shall be void.
Under Article 1409 of the Civil Code, a void contract is inexistent from the beginning. It
cannot be ratified neither can the right to set up the defense of its illegality be waived.
Marciana Avila was a party to an illegal transaction, and therefore, under Art. 1412 of the
Civil Code, she cannot recover what she has given by reason of the contract or ask for the
fulfillment of what has been promised her.
225.
E.
RAZON,
INC.
and
ENRIQUE
RAZON,
petitioners,
vs.
PHILIPPINE PORTS AUTHORITY, PRIMITIVO S. SOLIS, JR. and VICENTE T. SUAZO,
JR., respondents. MARINA PORT SERVICES, INC., intervenor.
G.R. No. 75197 June 22, 1987
Facts: There was bidding for the contract to manage all the piers in South Harbor, Manila,
After a public bidding, petitioner ERI was awarded five-year contract to operate the arrastre
service for Piers 3 and 5 at the South Harbor. it allegedly invested millions of pesos in
acquiring port-handling equipment upon assurance from the government that its contract
157

would be renewed without public bidding. Thus, when the Bureau of Customs informed
petitioner ERI of its decision to call for a new bidding and accordingly issued an invitation to
bid for the operation of the arrastre service for any and all piers in South Harbor, including
Piers 3 and 5, petitioner ERI instituted a special civil action for certiorari, prohibition,
mandamus and injunction with preliminary and mandatory injunction and/or restraining order
before the then Court of First Instance of Manila against the Secretary of Finance,
Commissioner of Customs and members of the Bidding Committee to enjoin them from
proceeding with the bidding and to compel them to renew petitioner ERI's contract. The
Court of First Instance, issued the writ prayed for, whereupon then Secretary of Finance
Cesar Virata elevated the case. The Supreme Court ordered the holding of a public bidding
for all the piers, conditioned that no final award should be given until further orders from the
court.
The management contract covering all the piers in the South Harbor was executed between
petitioner ERI and the government for a term of five years, renewable for another five years.
In August of the same year, petitioner ERI increased its capitalization from P2 Million to 20
Million.
Respondent PPA informed petitioner ERI/MPSI thru a letter of even date that it was
canceling the management contract and taking over the cargo handling operations as well
as the equipment of petitioner "effective immediately"
Petitioners contend that they were denied their right to due process when respondent PPA
cancelled the Management Contract without prior hearing and investigation. In support of
this contention, they advance the theory that the management contract is not an ordinary
commercial contract, but more in the nature of a franchise or license, which, in this case, has
been impressed with property rights by reason of the length of time petitioners have been
enjoying it, and hence cannot be cancelled without according petitioners the opportunity to
be heard on the alleged complaints and contract violations. As a corollary, petitioners further
assert that respondent PPA was not exercising proprietary functions, i.e., as a party to a
contract exercising its right to rescission or resolution when it cancelled petitioners' contract,
but as a regulatory body exercising adjudicatory powers in finding and concluding that
petitioner ERI/MPSI had violated the management contract. Hence, their contention that
since said findings and conclusions were reached in violation of petitioners' right to due
process, the resultant cancellation is null and void.
Issue: whether or not the Management Contract itself is null and void under Article 1422 of
the Civil Code
Ruling: the Management Contract itself is null and void as provided in Article 1422 of the
Civil Code for Being the direct consequence and result of a previous illegal contract, and that
there is no need for judicial action for the annulment of a void contract. Any such action
would be merely declaratory. Thus, it was well within the rights of respondent PPA to
unilaterally cancel and treat as avoided the Management Contract and no arbitrariness may
be attached to its exercise of this right.

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226. APOLINAR R. ROYALES and PRESENTACION GREGORIO, petitioners,

vs.
HON. INTERMEDIATE APPELLATE COURT, JOSE PLANAS, HON. J. CESAR SANGCO
etc., et al., respondents
G.R. No. L-65072 January 31, 1984
Facts: The spouses Apolinar R. Royales and Presentacion Gregorio, petitioners herein, are
the lessees of a residential house owned by respondent Jose Planas located at No. 1866 Int.
I, Oroquieta St., Manila. Planas instituted before the then City Court of Manila an ejectment
suit against petitioners, Issues having been joined, trial on the merits ensued. Respondent
Planas testified on his own behalf and was cross-examined by petitioners' counsel. When
neither petitioners nor their counsel appeared at the hearing despite due notice, the trial
court ordered the defendants and all persons holding or claiming under them to immediately
vacate the house located at No. 1866 Int. I Oroquieta Street, Sta. Cruz, Manila, subject of
this action and restore possession thereof to the plaintiff and to pay to the latter.
Issue: Whether or not a party can invoke the jurisdiction of a court to secure affirmative relief
against his opponent and, after obtaining or failing to obtain such relief, repudiate or
question that same jurisdiction
Ruling: No, the Petitioners could have prevented the trial court from exercising jurisdiction
over the case by seasonably taking exception, they instead invoked the very same
jurisdiction by filing an answer and seeking affirmative relief from it. And they participated in
the trial of the case by cross-examining respondent Planas. Upon this premise, petitioners
cannot now be allowed belatedly to adopt an inconsistent posture by attacking the
jurisdiction of the court to which they had submitted themselves voluntary. They already
sleep on their right to do so. And that it is not right for a party who has affirmed and invoked
the jurisdiction of a court in a particular matter to secure an affirmative relief, to afterwards
deny that same jurisdiction to escape a penalty.

227. RUPERTO PUREZA, petitioner, vs. THE HONORABLE COURT OF APPEALS, ASIA
TRUST DEVELOPMENT BANK and SPOUSES BONIFACIO AND CRISANTA ALEJANDRO,
respondents.
[G.R. No. 122053. May 15, 1998]
Facts: Respondent spouses Bonifacio and Crisanta Alejandro are building contractors
conducting business under the name of Boncris Trading and Builders. Petitioner Ruperto
Pureza sought their services in the construction of a two-story house at Sucat, Muntinlupa.
He applied for a Pag-Ibig Housing Loan with the Asia Trust Development Bank in the amount
of one hundred ninety-four thousand one hundred pesos (P194,100.00), signing an order of
payment authorizing the release of specified amounts to the contractor in connection with
the construction. This arrangement was embodied in a Construction Agreement entered into
by the parties, with the net proceeds of the loan amounting to one hundred fifty-five
thousand, three hundred fifty-six pesos and thirty centavos (P155,356.30). Before the
completion of the project on the spouses Alejandro informed petitioner that certain finishing
works must be cancelled to reduce costs. petitioner (as plaintiff) filed an action for Specific
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Performance and damages with a Prayer for the Issuance of a Writ of Preliminary Injunction
before the Regional Trial Court of Makati, Branch 142, to prevent respondent (defendant
therein) Asia Trust Development Bank from collecting the loan or foreclosing the mortgage
on plaintiff's house and lot. He claimed that although the construction was only seventy
percent (70%) finished, the Bank had released to the spouses ninety percent (90%) of the
proceeds of the loan, except for the sum of fourteen thousand pesos (P14,000.00) which the
Bank applied to amortizations. In their answer, the defendant spouses alleged that the
plaintiff and his wife Myrna authorized the release of the proceeds of the loan on a staggered
basis, in accordance with the Order of Payment. They further state that, the plaintiff having
signed a Certificate of House Completion/Acceptance, the Bank was likewise authorized to
turn the loan over to the Pag-Ibig Housing as creditor. The lower court rendered a decision in
favor of plaintiff, ordering defendant Bank to pay the sum of forty-eight thousand pesos
(P48,000.00) representing twenty-eight percent (28%) of the net proceeds of the loan which
it was found to have negligently delivered to defendant spouses. The spouses were, in turn,
ordered to reimburse the Bank the said amount. Both the Bank and the spouses were
ordered to pay to plaintiff the sum of forty thousand pesos (P40,000.00) representing the
cost of repair on the house of plaintiff where defective or inferior materials were used; moral
damages in the amount of two hundred thousand pesos (P200,000.00); exemplary damages
in the amount of fifty thousand pesos (P50,000.00); the sum of thirty thousand pesos
(P30,000.000) as attorney's fees; and the costs of suit. Defendant-appellants Asia Trust
Development Bank and spouses Alejandro appealed to the Court of Appeals, which issued a
Resolution dismissing the appeal of the latter for failure to pay docket fees and other legal
expenses.With respect to the Asia Trust Development Bank, the appealed decision was
modified dismissing the complaint against it.
Issue: Whether or not Respondent Bank and respondent spouses can be held jointly and
solidarily liable
Ruling: No, Respondent Bank and respondent spouses cannot be held jointly and solidarily
liable for the costs of repair, moral and exemplary damages, attorney's fees and the costs of
suit, Because the findings of the lower court that respondent Bank recklessly and negligently
released the proceeds of the loan to the spouses were not supported by evidence. The
Bank did nothing but fulfill its undertakings under the loan agreement in accordance with
petitioner's instructions. It cannot be charged for any damage caused upon the house of
petitioner even if such damage may be attributable to the spouses. If, indeed, repairs were
necessary to improve the physical condition of the house, respondent Bank not being the
contractor thereof, cannot be held jointly and severally liable with the spouses.
228. ADORACION E. CRUZ, THELMA DEBBIE E. CRUZ and GERRY E. CRUZ,
petitioners,vs. COURT OF APPEALS and SPOUSES ELISEO and VIRGINIA MALOLOS,
respondents.
[G.R. No. 126713. July 27, 1998]
Facts: Upon the death of Delfin I. Cruz, [his] surviving spouse and children executed a
notarized Deed of Partial Partition by virtue of which each one of them was given a share of
several parcels of registered lands all situated in Taytay, Rizal.That despite the execution of
this Deed of Partial Partition and the eventual disposal or sale of their respective shares, the
contracting parties herein covenanted and agreed among themselves and by these presents
do hereby bind themselves to one another that they shall share alike and received equal
shares from the proceeds of the sale of any lot or lots allotted to and adjudicated in their
individual names by virtue of this deed of partial partition.That this Agreement shall continue
160

to be valid and enforceable among the contracting parties herein up to and until the last lot
covered by the Deed of [P]artial [P]artition above adverted to shall have been disposed of or
sold and the proceeds thereof equally divided and their respective shares received by each
of them.Meanwhile, the spouses Eliseo and Virginia Malolos filed Civil Case against the
spouses Nerissa Cruz-Tamayo and Nelson Tamayo for a sum of money. The Court of First
Instance of Rizal, Branch XVI (Quezon City) rendered a decision in favor of Eliseo and
Virginia condemning the spouses Nerissa and Nelson Tamayo to pay them, After the finality
of that decision, a writ of execution was issued. Enforcing said writ, the sheriff of the court
levied upon the lands in question these properties were sold in an execution sale to the
highest bidders, the spouses Eliseo and Virginia Malolos. Accordingly, the sheriff executed a
Certificate of Sale over all the rights, claims, interests, titles, shares, and participations of
defendant spouses Nerissa Tamayo and Nelson Tamayo. Nerissa Cruz Tamayo failed to
exercise her right of redemption within the statutory period and so the final deed of sale was
executed by the sheriff conveying the lands in question to spouses Eliseo and Virginia
Malolos. The Malolos couple asked Nerissa Cruz Tamayo to give them the owners
duplicate copy of the seven (7) titles of the lands in question but she refused. The couple
moved the court to compel her to surrender said titles to the Register of Deeds of Rizal for
cancellation. But Nerissa was adamant. She did not comply with the Order of the court and
so the Malolos couple asked the court to declare said titles as null and void.At this point,
Adoracion Cruz, Thelma Cruz, Gerry Cruz and Arnel Cruz entered the picture by filing is
said lower court a motion for leave to intervene and oppose [the] Maloloses motion. The
Cruzes alleged that they were co-owners of Nerissa Cruz Tamayo over the lands in
question.said court issued an Order modifying the Order by directing the surrender of the
owners duplicate copies of the titles of the lands in question to the Register of Deeds not for
cancellation but for the annotation of the rights, interest acquired by the Maloloses over said
lands.
Issue: Whether or not petitioners were estopped from claiming that there was a coownership over the disputed parcels of land which were also covered by the DPP
Ruling: Under the principle of estoppel, petitioners are barred from claiming co-ownership of
the lands in issue. In estoppel, a person, who by his deed or conduct has introduced
another to act in a particular manner, is barred from adopting an inconsistent position,
attitude or course of conduct that thereby causes loss or injury to another. It further bars him
from denying the truth of a fact which has, in the contemplation of law, become settled by the
acts and proceedings of judicial or legislative officers or by the act of the party himself, either
by conventional writing or by representations, express or implied or in pairs.
In their transaction with others, petitioners have declared that the other lands covered by the
same MOA are absolutely owned, without indicating the existence of a co-ownership over
such properties. Thus, they are estopped from claiming otherwise because, by their very
own acts and representations as evidenced by the deeds of mortgage and of sale, they have
denied such co-ownership.

161

229.
MANILA
ELECTRIC
COMPANY,
vs.
COURT OF APPEALS and PEDRO J. VELASCO, respondents.

petitioner,

G.R. No. L-33794 May 31, 1982

Facts: The respondent purchased three (3) lots from the People's Homesite and Housing
Corporation (PHHC, for short) there was a Deed of sale that was executed which provides
that; The properties herein sold and any other construction that shall be made thereon shall
be used exclusively for residential purposes and no business, industry or factory of whatever
kind or nature shall be allowed or permitted within the premises. Later on, VELASCO sold
two of the aforesaid three lots (the PROPERTY, for short) to petitioner Manila Electric
Company (MERALCO, for short), which is the public service company furnishing electric
current to the Manila area, including Quezon City. The following year, MERALCO
established a substation within the PROPERTY, the construction of which "was started in
September, 1953 and was finished the following November". On November 29, 1954,
VELASCO wrote a letter to MERALCO stating that; In mild spirit, the time has come when
the undersigned is compelled to call your attention to a previously anticipated would-be
effect of your electric sub-station, in order to avoid possible bad effects and "repercussions
and complications" which might be too late to remedy. The following year, on February 1,
1955, VELASCO filed a complaint in Civil Case of the Court of First Instance of Rizal (the
NUISANCE CASE, for short) praying that MERALCO be ordered "to remove and abate the
nuisances herein complained against," with damages. The trial Court dismissed the
complaint but, on appeal to this Court, the dismissal was set aside and, , MERALCO was
"ordered to either transfer its sub-station at South D and South 6 Streets, Diliman, Quezon
City, or take appropriate measures to reduce its noise at the property line between the
defendant company's compound and that of the plaintiff-appellant to an average of forty (40)
to fifty 50 decibels within 90 days from finality of this decision; In the meanwhile, on
November 23, 1957, VELASCO had instituted a complaint in Civil Case, the Court of First
Instance of Rizal (the CANCELLATION CASE, for short) for the rescission of the sale of the
PROPERTY to MERALCO and to collect rentals for the use and occupation of the
PROPERTY while in the latter's possession. The complaint was dismissed by the trial Court
on the ground that the NUISANCE CASE and the CANCELLATION CASE had split
VELASCO'S cause of action such that the CANCELLATION CASE was precluded from
being instituted. On appeal to the Court of Appeals, the judgment of the trial Court was
reversed on the finding that no cause of action was split, considering that abatement of
nuisance was distinct and separate from rescission of the contract of sale in favor of ME
RALCO

Issue: Whether or not VELASCO can no longer cancel the contract on the alleged violation
of the condition, because he did not object to its construction
Ruling: Yes, because Even if the requirement for "residential purposes" were a condition
imposed by VELASCO himself in the contract of sale between VELASCO and MERALCO,
the former can no longer cancel the contract on the alleged violation of the condition. When
MERALCO erected the sub-station, VELASCO did not object to its construction as such. In
162

his letter, VELASCO merely asked for "technical assurance that your electric sub-station is
not dangerous to neighbors nor would that be a nuisance". It could not be that he did not
then realize that the sub-station was not a residence. He must have viewed it as for
"residential purposes or one year after the sub-station had been established, he "with his
family tried to tolerate (it) for a while". Actually, what was ultimately objected to by VELASCO
was the noise of the sub-station; but there was no original and timely objection to the
establishment itself of the sub-station as being not for residential purposes. If there had been
no noise whatsoever from the sub-station, no controversy would have arisen.
Contracts should be given effect as the parties construe it. "Acts done by the parties to a
contract in the course of its performance are admissible in evidence upon the question of its
meaning as being their own contemporaneous interpretation of , its terms". Thus,
VELASCO should be held as estopped from seeking cancellation of his sale of the
PROPERTY to MERALCO because the sub-station, while it was built, was considered by
VELASCO as not violative of the requirement for "residential purposes". Estoppel against
VELASCO has set in.

230. SOCIAL SECURITY COMMISSION (For the Social Security System) petitioner,
vs.
PONCIANO L. ALMEDA and EUFEMIA P. ALMEDA
G.R. No. L-75428 December 14, 1988
Facts: The defendant applied for and obtained approval of a commercial loan in the amount
of THREE MILLION (P3,000,000.00) PESOS from the Social Security System (SSS)
payable in ten years (with interest) at the rate of 9% per annum and under the terms and
conditions contained in the Deed of First Mortgage executed by and between the parties.
The proceeds of the loan were to be used for the construction of a 7-storey commercial
building in Pasong Tamo, Makati, Rizal. As provided under paragraph 11 of the Deed of First
Mortgage, no deviation whatsoever from the approved plans, specifications and bill of
materials shall be made without the express and written consent of the MORTGAGEE. After
receiving an initial release of EIGHT HUNDRED EIGHTY THOUSAND (P880,000.00)
PESOS, Almeda however started construction of the proposed building on a different lot and
on the basis of a revised plan without the prior written consent of SSS. This prompted SSS
to inform Almeda to 'desist from continuing the construction based on the altered plans' and
that 'should you, however, insist to proceed with the construction of the building in
accordance with the revised plans. The defendant are requested to remit to the office SSS,
Legal Department, SSS Building, East Avenue, Quezon City, the amount of P880,000.00
plus the accrued interest thereon. Thereupon, Almeda filed with the then Court of First
Instance of Rizal a complaint for specific performance and damages, a Civil Case.

Issue: Whether or not respondents were in estoppel

163

Ruling: Yes, the respondents were in estoppel, because when respondents negotiated for
the reduction of the attorney's fees, they acquiesced to the stipulation therefor and cannot
now question its validity. It is undisputed that respondents requested merely for a reduction
of the attorney's fees. In a Resolution No. 286, SSS approved respondents' request and
reduced the attorney's fees from 20% to 15% Respondents thereafter paid without protest
the total obligation including attorney's fees equivalent to 15%. The claim of respondent
Ponciano Almeda that he verbally protested the collection of attorney's fees is belied by SSS
Resolution No. 286 which shows that Almeda merely requested the reduction of attorney's
fees. Between Almeda's testimony, which is obviously self-serving, and Resolution No. 286,
which is a public document, the latter certainly carries greater probative value.

231. JOSE P. LAUREL V, in his official capacity as Provincial Governor of Batangas,

petitioner,
vs.
CIVIL SERVICE COMMISSION and LORENZO SANGALANG, respondents.
G.R. No. 71562 October 28, 1991
Facts:The private respondent Sangalang wrote a letter to the Civil Service Commission to
bring to its attention the "appointment" of Benjamin Laurel as Provincial Administrator of
Batangas by the Governor, his brother. He alleges therein that: (1) the position in question is
a career position, (2) the appointment violates civil service rules, and (3) since the Governor
authorized said appointee to receive representation allowance, he violated the Anti-Graft and
Corrupt Practices Act. He then asks that the matter be investigated.In his letter to the
Chairman of the Civil Service, Jose A. Oliveros, Acting Provincial Attorney of Batangas, for
and in behalf of herein petitioner, asserts that the latter did not violate the provision
prohibiting nepotism under Section 49 of P.D. No. 807 because, with respect to the positions
of Senior Executive Assistant and Civil Security Officer, both are primarily confidential in
nature; and, with respect to the position of Provincial Administrator:Although what was
extended to Benjamin was merely a designation and not an appointment, the Civil Service
Commission ruled that "the prohibitive mantle on nepotism would include designation,
because what cannot be done directly cannot be done indirectly." It further held that Section
24(f) of Republic Act No. 2260 provides that no person appointed to a position in the noncompetitive service (now non-career) shall perform the duties properly belonging to any
position in the competitive service (now career service). The petitioner, therefore, could not
legally and validly designate Benjamin, who successively occupied the non-career positions
of Senior Executive Assistant and Civil Security Officer, to the position of Provincial
Administrator, a career position under Section 4 of R.A. No. 5185.
Petitioner's motion to reconsider said Resolution, based on the claim that the questioned
position is primarily confidential in nature, having been denied in Resolution No. 85-271 of 3
July 1985 wherein the respondent Civil Service Commission maintains that said position is
not primarily-confidential in nature since it neither belongs to the personal staff of the
Governor nor are the duties thereof confidential in nature considering that its principal
functions involve general planning, directive and control of administrative and personnel
service in the Provincial Office
164

Issue: Whether or not estoppel has bound petitioner to his prior admission
Ruling: Yes, estoppel has bound petitioner to his prior admission. under Article 1431 of the
Civil Code, through estoppel an admission or representation is rendered conclusive upon the
person making it, and cannot be denied or disproved as against the person relying thereon,
because The sole ground invoked by him for exemption from the rule on nepotism is, as
above indicated: the rule does not apply to designation only to appointment. He changed
his mind only after the public respondent, in its Resolution No. 83-358, ruled that the
"prohibitive mantle on nepotism would include designation, because what cannot be done
directly cannot be done indirectly" and, more specifically, only when he filed his motion to
reconsider said resolution

232. JEFFERSON LIM, petitioner, vs. QUEENSLAND TOKYO COMMODITIES, INC.,

respondent.
[G.R. No. 136031. January 4, 2002]
Facts: Petitioner Lim was then allowed to trade with respondent company which was
coursed through Shia by virtue of the blank order forms, all signed by Lim. Respondent
furnished Lim with the daily market report and statements of transactions as evidenced by
the receiving forms, some of which were received by Lim.
During the first day of trading Lim made a net profit of P6,845.57. Shia went to the office of
Lim and informed him about it. He was elated. He agreed to continue trading. During the
second day of trading or on October 23, 1992, they lost P44,465. Respondent learned that it
would take seventeen (17) days to clear the managers check given by petitioner. Hence, on
October 23, 1992, at about 11:00 A.M., upon managements request, Shia returned the
check to petitioner who informed Shia that petitioner would rather replace the managers
check with a travelers check.Considering that it was 12:00 noon already, petitioner
requested Shia to come back at 2:00 P.M.. Shia went with petitioner to the bank to purchase
a travelers check at the PCI Bank, Juan Luna Branch at 2:00 P.M.. Shia noticed that the
travelers check was not indorsed but Lim told Shia that Queensland could sign the indorsee
portion. Because Shia trusted the latters good credit rating, and out of ignorance, he
brought the check back to the office unsigned.Inasmuch as that was a busy Friday, the
check was kept in the drawer of respondents consultant. Later, the travelers check was
deposited with Citibank.Shia informed petitioner that they incurred a floating loss of P44,695
on October 23, 1992. He told petitioner that they could still recover their losses. He could
unlock the floating loss on Friday. By unlocking the floating loss, the loss on a particular day
is minimized.Citibank informed respondent that the travelers check could not be cleared
unless it was duly signed by Lim, the original purchaser of the travelers check. A Miss
Arajo, from the accounting staff of Queensland, returned the check to Lim for his signature,
but the latter, aware of his P44,465 loss, demanded for a liquidation of his account and said
he would get back what was left of his investment.Meanwhile, Lim signed only one portion of

165

the travelers check, leaving the other half blank. He then kept it. Arajo went back to the
office without it.
Respondent asked Shia to talk to petitioner for a settlement of his account but petitioner
refused to talk with Shia. Shia made follow-ups for more than a week. Because petitioner
disregarded this request, respondent was compelled to engage the services of a lawyer, who
sent a demand letter to petitioner. This letter went unheeded. Thus, respondent filed a
complaint against petitioner.

Issue: Whether or not petitioner is estopped from impugning the validity of the Customers
Agreement
Ruling: Yes, The petitioner is estopped from impugning the validity of the Customers
Agreement. For a party to a contract cannot deny the validity thereof after enjoying its
benefits without outrage to ones sense of justice and fairness, because knowing fully well
the nature of the contract he was entering into. The Customers Agreement was duly
notarized and as a public document it is evidence of the fact, which gave rise to its execution
and of the date of the latter. Next, petitioner paid his investment deposit to respondent in the
form of a managers check in the amount of US$5,000 as evidenced by PCI Bank Managers
Check No. 69007, dated October 22, 1992.All these are indicia that petitioner treated the
Customers Agreement as a valid and binding contract. And also, on the part of petitioner
there was misrepresentation of facts. He replaced the managers check with an unendorsed
travelers check, instead of cash, while assuring Shia that respondent Queensland could
sign the indorsee portion thereof. As it turned out, Citibank informed respondent that only the
original purchaser (i.e. the petitioner) could sign said check. When the check was returned
to petitioner for his signature, he refused to sign. Then, as petitioner himself admitted in his
Memorandum, he used the travelers check for his travel expenses.More significantly,
petitioner already availed himself of the benefits of the Customers Agreement whose validity
he now impugns. As found by the CA, even before petitioners initial marginal deposit (in the
form of the PCI managers check dated October 22, 1992) was converted into cash, he
already started trading on October 22, 1992, thereby making a net profit of P6,845.57.

233. Makati Leasing vs. Wearever Textile

(GR 58469 May 16, 1983)
Facts:

166

Wearever Textile Mills, Inc. discounted and assigned several receivables with Makati
Leasing and Financial Corp. under a Receivable Purchase Agreement so that the latter
would lend money to the former. In order to secure the collection of the receivables
assigned, Wearever executed a Chattel Mortgage over certain raw materials inventory as
well as a machinery (Artos Aero Dryer Stentering Range). Upon default of Wearever in
paying what is due, Makati Leasing filed a petition for extrajudicial foreclosure of the
properties mortgaged to it. Enforcing then the writ of seizure issued by the lower court, the
Sheriff removed the main drive motor of the machinery. Upon appeal, CA reversed the ruling
of the RTC and ordered the return of the motor to Wearever since the said machinery cannot
be the subject of a replevin and chattel mortgage for it is a real property pursuant to Art. 415
(3) of the NCC. CA argued that the machinery is attached to the ground by means of bolts
and the only way to remove it from the respondents plant would be to drill out or destroy the
concrete floor which is why all that the sheriff could do to enforce the writ was to take the
main drive motor of the machinery.
Issue:
Whether the machinery is a personal property.
Held:
Yes. By destination, it is a real property but by virtue of the intention of the parties
stipulated in their chattel mortgage contract, the machinery was intended to be a personal
property. The Court made reference to its ruling in Tumalad v. Vicencio and Standard Oil Co.
of New York v. Jaramillo where it held that a real property may be considered as a personal
property for purposes of executing a chattel mortgage thereon as long as the parties to the
contract so agree and no innocent third party will be prejudiced thereby, and once the parties
so agreed, they are already stopped from claiming otherwise. Private respondent contended
that its characterization of the subject machinery as chattel in their agreement should not be
appreciated against it because it had never represented nor agreed in such as it was merely
required and dictated on by the petitioner to sign a chattel mortgage in blank form. The Court
was not persuaded by its contention as the said issue was not duly raised in the lower and
appellate courts nor will the said signing in blank by the respondent make the contract void
but merely voidable by a proper action in court. Furthermore as it was undeniable that it
benefited from the chattel mortgage, it cannot be allowed to impugn its efficacy for equity
reasons.

234. Carolina Liquete Ganzon vs CA (GR 136831 July 30, 2002)

Facts:
Plaintiff is the registered owner of a parcel of land situated in Balasa, Iloilo, covered
by TCT Nos. T-48983, and another lot covered by TD No. 0085;that on March 11, 1974,
plaintiff and defendant Florisco Banhaw entered into a contract of lease on said lot for a term
167

of three (3) years, commencing from the crop year 1974-1975 up to and including the crop
year 1976-1977; that it is provided in the contract of lease that defendant Banhaw cannot
sub-lease the subject land; that the term of the lease has already expired without defendant
returning possession thereof, and that it was later discovered that defendant sub-leased the
property to the other defendants; that, despite demands, defendants refused to vacate the
property. Thus, plaintiff prayed that judgment be rendered ordering defendants to vacate the
property.
Issue:
Whether or not the Contarct of lease is valid.
Held:
It was established that the agreement entered into between Florisco Banhaw and
Carolina L. Ganzon is one of a civil law lease. As such civil law lessee, Banhaw who was in
legal possession of the questioned landholdings may institute tenants thereon. However, the
record of this case is bereft of any credible and substantial evidence to prove that the other
defendants herein allegedly instituted as tenants by Florisco Banhaw are sharing or paying
rentals to him or to the landowner. Mere allegations without the corresponding receipts
would not sufficiently establish tenancy relationship especially since there was an express
prohibition in the civil law lease contract to sub-lease the subject land to any other person.
This Court has laid down the rule that in order for a tenancy relationship to exist,
these elements must be present:
(1) That the parties are the landowner and the tenant or agricultural lessee;
(2) that the subject matter of the relationship is an agricultural land;
(3) that there is consent between the parties to the relationship;
(4) that the purpose of the relationship is to bring about agricultural production;
(5) that there is personal cultivation on the part of the tenant or agricultural lessee;
and
(6) that the harvest is shared between the landowner and the tenant or agricultural
lessee.
Respondent Florisco Banhaw was not instituted as an agricultural lessee but, rather, as civil
law lessee of the land. Neither were the other private respondents, Rolando Banhaw,
Honorato Banhaw, Igmedio Pama, et al., so installed by the landowner as tenants. The DAR
itself, in its ORDER of 14 August 1991, confirmed that respondents could not be installed
agricultural lessees by Florisco Banhaw himself since they were members of his (Florisco)
immediate farm household.
235. Nyco Sales Corp. vs BA Finance Corp. (GR 71694 Aug. 16, 1991)
Facts:
Nyco Sales Corporation whose president and general manager is Rufino Yao, is engaged in
the business of selling construction materials. Sometime in 1978, the brothers Santiago and
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Renato Fernandez both acting in behalf of Sanshell Corporation, approached Rufino Yao for
credit accommodation. They requested Nyco, thru Yao, to grant Sanshell discounting
privileges which Nyco had with BA Finance Corporation .Yao apparently acquiesced, hence
on or about November 15, 1978, the Fernandezes went to Yao for the purpose of
discounting Sanshell's post-dated check which was a BPI-Davao Branch for the amount of
P60,000.00. The said check was payable to Nyco. Following the discounting process agreed
upon, Nyco, thru Yao, endorsed the check in favor of BA Finance. Thereafter, BA Finance
issued a check payable to Nyco which endorsed it in favor of Sanshell. Sanshell then made
use of and/or negotiated the check. Accompanying the exchange of checks was a Deed of
Assignment executed by Nyco in favor of BA Finance with the conformity of Sanshell. Nyco
was represented by Rufino Yao, while Sanshell was represented by the Fernandez brothers.
Under the said Deed, the subject of the discounting was the aforecited check .At the back
thereof and of every deed of assignment was the Continuing Suretyship Agreement whereby
the Fernandezes unconditionally guaranteed to BA Finance the full, faithful and prompt
payment and discharge of any and all indebtedness of Nyco.
Issue:
whether or not the assignor is liable to its assignee for its dishonored checks
Held:
An assignment of credit is the process of transferring the right of the assignor to the
assignee, who would then be allowed to proceed against the debtor. It may be done either
gratuitously or generously, in which case, the assignment has an effect similar to that of a
sale.
According to Article 1628 of the Civil Code, the assignor-vendor warrants both the credit
itself (its existence and legality) and the person of the debtor (his solvency), if so stipulated,
as in the case at bar. Consequently, if there be any breach of the above warranties, the
assignor-vendor should be held answerable therefor. There is no question then that the
assignor-vendor is indeed liable for the invalidity of whatever he as signed to the assigneevendee.

236.Abines vs BPI (482 SCRA 421)

Facts:
BPI alleged in the complaint that on April 23, 1999 and May 26, 2000, petitioners obtained
from respondents BPI and BPI Family Bank a loan in the amount of P22,935,200.00 and
P23,162,959.42, respectively, as evidenced by BPI Promissory Note Nos. 5012531-00 and
1120000014, and secured by two deeds of real estate mortgage. When the petitioners
defaulted on their loan payments, the mortgaged properties were extrajudicially foreclosed
and sold at public auction where BPI emerged as the highest bidder. The bid price of
P35,730,184.00, however, did not cover the total amount owed by petitioners to
respondents, hence, BPI sought the collection of the deficiency amount plus interest.
On the other hand, petitioners filed on May 13, 2002, a complaint against respondents for
accounting in order to determine the correct amount of principal and outstanding obligations,
annulment of foreclosure, annulment or reformation of documents, annulment of registration
of certificate of sale, redemption, specific performance, injunction, and damages, with an
application for preliminary injunction before the RTC of Cebu City, which was docketed as
Civil Case No. 27700 (REFORMATION CASE).
Issue:
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Whether or not the collection of money by BPI correct.

Held:
The COLLECTION CASE should subsist because it is the first action filed and the more
appropriate vehicle for litigating all the issues in controversy. In the REFORMATION CASE,
petitioners acknowledge their indebtedness to respondents but they contest the amounts of
the principal, interest and the remaining balance. Clearly, these claims are in the nature of
defenses to the COLLECTION CASE and should be asserted in that case and not in a
separate action. Accordingly, the subject REFORMATION CASE should be dismissed on the
ground of litis pendentia.
Finally, it may not be amiss to point out that on May 17, 2004, while the instant case was
pending before the Court of Appeals, the trial court rendered a decision in the COLLECTION
CASE finding petitioners liable to respondents for a deficiency sum of P19,227,174.53.19 In
that case, the issues with respect to the validity and enforceability of the promissory notes
and real estate mortgages as well as the validity of the foreclosure proceedings were valid.

237. Prudential Bank vs Panis (GR 50008 Aug. 31, 1987)

FACTS:
Spouses Magcale secured a loan from Prudential Bank. To secure payment, they
executed a real estate mortgage over a residential building. The mortgage included also the
right to occupy the lot and the information about the sales patent applied for by the spouses
for the lot to which the building stood. After securing the first loan, the spouses secured
another from the same bank. To secure payment, another real estate mortgage was
executed over the same properties.The Secretary of Agriculture then issued a Miscellaneous
Sales Patent over the land which was later on mortgaged to the bank.The spouses then
failed to pay for the loan and the REM was extrajudicially foreclosed and sold in public
auction despite opposition from the spouses. The respondent court held that the REM was
null and void.

HELD:
A real estate mortgage can be constituted on the building erected on the land belonging to
another. The inclusion of building distinct and separate from the land in the Civil
Code can only mean that the building itself is an immovable property. While it is true that a
mortgage of land necessarily includes in the absence of stipulation of the improvements
thereon, buildings, still a building in itself may be mortgaged by itself apart from the land
on which it is built. Such a mortgage would still be considered as a REM for the building
would still be considered as immovable property even if dealt with separately and apart from
the land. The original mortgage on the building and right to occupancy of the land was
executed before the issuance of the sales patent and before the government was
divested of title to the land. Under the foregoing, it is evident that the mortgage
executed by private respondent on his own building was a valid mortgage. As to the
second mortgage, it was done after the sales patent was issued and thus prohibits pertinent
provisions of the Public Land Act.

238. Mendoza vs CA (GR 116710 June 25, 2001)

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Facts:
In 1964, it was proven that a parcel of land located in Sta. Maria, Bulacan, is owned by
Mendoza. Mendoza applied for a title. During pendency of the application before the land
registration court, Mendoza sold the land to Daniel Cruz. The contract of sale was admitted
in court in lieu of the pending application for land title. The registration court rendered a
decision in July 1965, ordering the registration of the two parcels of land in the name of Cruz
subject to the usufructuary rights of Mendoza.
The decision became final and executory. In 1968, however, upon failure of Cruz to pay
Mendoza, Mendoza petitioned that the title issued in the name of Cruz be cancelled. The
land registration court ruled in favor of Mendoza on the ground that the court erred in its
earlier decision in issuing the land title to Cruz who was not a party to the application of
title initiated by Mendoza. Cruz appealed. The Court of Appeals ruled in favor of Cruz.
ISSUE:
Whether or not the contract of sale is valid.
HELD:
First of all, it was proven that Mendoza caused the registration in the name of Cruz
pursuant to their contract of sale. Second, Mendoza overlooks Section 29 of the Land
Registration Act which expressly authorizes the registration of the land subject matter of a
registration proceeding in the name of the buyer (Cruz) or of the person to whom the land
has been conveyed by an instrument executed during the interval of time between the filing
of the application for registration and the issuance of the decree of title. SEC. 29. After the
filing of the application and before the issuance of the decree of title by the Chief of the
General Land Registration Office, the land therein described may be dealt with and
instruments relating thereto shall be recorded in the office of the register of deeds at any
time before issuance of the decree of title, in the same manner as if no application had been
made. The interested party may, however, present such instruments to the Court of First
Instance instead of presenting them to the office of the register of deeds, together with a
motion that the same be considered in relation with the application, and the court after notice
to the parties, shall order such land registered subject to the encumbrance created by a said
instruments, or order the decree of registration issued in the name of the buyer or of the
person to whom the property has been conveyed by said instruments. . . .
A stranger or a third party may be dealt with in the land registration proceedings. The only
requirements of the law are: (1) that the instrument be presented to the court by the
interested party together with a motion that the same be considered in relation with the
application; and (2) that prior notice be given to the parties to the case. And the peculiar
facts and circumstances obtaining in this case show that these requirements have been
complied with in this case.

239. Litonjua Jr. vs Eternit Corp. (490 SCRA204)

Facts:

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The Eternit Corporation owned by Eteroutremer S.A. Corporation (ESAC), a corporation

registered under the laws of Belgium. Glanville was the General Manager and President of
EC, while Delsaux was the Regional Director for Asia of ESAC. They engaged the services
of realtor/broker Lauro G. Marquez. Marquez thereafter offered the land to Eduardo B.
Litonjua, Jr. forP27,000,000.00. Litonjua counter offered P20,000,000.00 cash. Marquez
apprised Glanville & Delsaux of the offer. Delsaux sent a telex stating that, based on the
"Belgian/Swiss decision," the final offer was "US$1,000,000.00 andP2,500,000.00. The
Litonjua brothers deposited US$1,000,000.00 with the Security Bank & Trust Company, and
drafted an Escrow Agreement to expedite the sale. Meanwhile, with the assumption of
Corazon C. Aquino as President, the political situation improved. Marquez received a letter
from Delsaux that the ESAC Regional Office decided not to proceed with the sale. When
informed of this, the Litonjuas, filed a complaint for specific performance and payment for
damages on account of the aborted sale.
Issue:
WON the appellate court committed grave error of law in holding that Marquez needed a
written authority from respondent ETERNIT before the sale can be perfected.
Held:
A corporation is a juridical person separate and distinct from its stockholders and is not
affected by the personal rights, obligations and transactions of the latter. It may act only
through its board of directors or, when authorized by its board resolution, through its officers
or agents. The general principles of agency govern the relation between the corporation and
its officers or agents, subject to the articles of incorporation, by-laws, or relevant provisions
of law. Agency may be oral unless the law requires a specific form. However, to create or
convey real rights over immovable property, a special power of attorney is necessary. Thus,
when a sale of a piece of land or any portion thereof is through an agent, the authority of the
latter shall be in writing, otherwise, the sale shall be void. In this case, the petitioners failed
to adduce in evidence any resolution of the Board of Directors of EC empowering Marquez,
Glanville or Delsaux as its agents, to sell, let alone offer for sale, for and in its behalf, the
eight parcels of land owned by it,therefore the sale is invalid.

240. Gelano vs CA (L-39050 Feb. 24, 1981)

Facts:
Private respondent Insular Sawmill, Inc. is a corporation organized on September 17,
1945 with a corporate life of fifty (50) years, or up to September 17, 1995, with the primary
purpose of carrying on a general lumber and sawmill business. To carry on this business,
private respondent leased the paraphernal property of petitioner-wife Guillermina M. Gelano
at the corner of Canonigo and Otis, Paco, Manila for P1,200.00 a month. It was while private
respondent was leasing the aforesaid property that its officers and directors had come to
know petitioner-husband Carlos Gelano who received from the corporation cash advances
on account of rentals to be paid by the corporation on the land. Petitioner Carlos Gelano
obtained from private respondent cash advances of P25,950.00. The said sum was taken
and received by petitioner Carlos Gelano on the agreement that private respondent could
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deduct the same from the monthly rentals of the leased premises until said cash advances
are fully paid. Out of the aforementioned cash advances in the total sum of P25,950.00,
petitioner Carlos Gelano was able to pay only P5,950.00 thereby leaving an unpaid balance
of P20,000.00 which he refused to pay despite repeated demands by private respondent.
Petitioner Guillermina M. Gelano refused to pay on the ground that said amount was for the
personal account of her husband asked for by, and given to him, without her knowledge and
consent and did not benefit the family.
Issue:
Whether or not Guillermina M. Gelano is liable for the debt of her husband Carlos
Gelano.
Held:
Petitioners contend that the obligations contracted by petitioner Carlos Gelano from
November 19, 1947 until August 18, 1950 (before the effectivity of the New Civil Code) and
from December 26, 1950 until July 14, 1952 (during the effectivity of the New Civil Code)
were his personal obligations, hence, petitioners should not be held jointly and severally
liable. As regards the said issues, suffice it to say that with the findings of the Court of
Appeals that the obligation contracted by petitioner-husband Carlos Gelano redounded to
the benefit of the family, the inevitable conclusion is that the conjugal property is liable for his
debt pursuant to paragraph 1, Article 1408, Civil Code of 1889 9 which provision incidentally
can still be found in paragraph 1, Article 161 of the New Civil Code. 10 Only the conjugal
partnership is liable, not joint and several as erroneously described by the Court of Appeals,
the conjugal partnership being only a single entity.
241. Victorias vs Leuenberger and CA (GR 31189 March 31, 1989)
Facts:
Respondent Norma Leuenberger, married to Francisco Soliva, inherited the whole of
Lot No. 140 from her grandmother, Simeona J. Vda. de Ditching (not from her predeceased
mother Isabel Ditching). In 1952, she donated a portion of Lot No. 140, about 3 ha., to the
municipality for the ground of a certain high school and had 4 ha. converted into a
subdivision.
In 1963, she had the remaining 21 ha. or 208.157 sq. m. relocated by a surveyor
upon request of lessee Ramon Jover who complained of being prohibited by municipal
officials from cultivating the land. It was then that she discovered that the parcel of land,
more or less 4 ha. or 33,747 sq.m. used by Petitioner Municipality of Victorias, as a
cemetery from 1934, is within her property.
Issue:
Whether or not Norma Leuenberger and Francisco Soliva are the lawful owners of
the land in litigation
Held:
It is expressly provided by law that the thing sold shall be understood as delivered,
when it is placed in the control and possession of the vendee. (Civil Code Art. 1497). Where
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there is no express provision that title shall not pass until payment of the price, and the thing
gold has been delivered, title passes from the moment the thing sold is placed in the
possession and control of the buyer. Delivery produces its natural effects in law, the principal
and most important of which being the conveyance of ownership, without prejudice to the
right of the vendor to payment of the price.
Similarly, when the sale is made through a public instrument, the execution thereof shall be
equivalent to the delivery of the thing which is the object of the contract, if from the deed, the
contrary does not appear or cannot be clearly inferred. (Civil Code Art. 1498). The execution
of the public instrument operates as a formal or symbolic delivery of the property sold and
authorizes the buyer to use the document as proof of ownership.
In the case at bar it is undisputed that petitioner had been in open, public, adverse and
continuous possession of the land for a period of more than thirty years. In fact, according to
the municipal treasurer there are over 1000 graves in the cemetery, therefore it is the
Municipality of Victorias that has the right over the disputed property.

242.South City Homes, Inc. Fortune Motors (Phils.), Palawan Lumber Manufacturing
Corp. vs BA Finance Corp. (GR 135462 Dec. 7, 2001)
Facts:
Prior to the transactions covered by the subject drafts and trust receipts, defendantappellant Fortune Motors Corporation (Phils.) has been availing of the credit facilities of
plaintiff-appellant BA Finance Corporation. On January 17, 1983, Joseph L. G. Chua,
President of Fortune Motors Corporation, executed in favor of plaintiff-appellant a Continuing
Suretyship Agreement, in which he jointly and severally unconditionally guaranteed the
full, faithful and prompt payment and discharge of any and all indebtedness of Fortune
Motors Corporation to BA Finance Corporation.
Issue:
Whether there was a novation of the obligation so as to extinguish the liability of the
sureties.
Held:
Petitioners assert that the suretyship agreement they signed is void because there
was no principal obligation at the time of signing as the principal obligation was signed six
(6) months later. The Civil Code, however, allows a suretyship agreement to secure future
loans even if the amount is not yet known.Article 2053 of the Civil Code provides that:
Art. 2053 A guaranty may also be given as security for future debts, the amount of which
is not yet known. x x x

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Moreover,an assignment of credit is an agreement by virtue of which the owner of a credit,

known as the assignor, by a legal cause, such as sale, dacion en pago, exchange or
donation, and without the consent of the debtor, transfers his credit and accessory rights to
another, known as the assignee, who acquires the power to enforce it to the same extent as
the assignor could enforce it against the debtor.[7] As a consequence, the third party steps
into the shoes of the original creditor as subrogee of the latter. Petitioners obligations were
not extinguished. Thus:
x x x Moreover, in assignment, the debtors consent is not essential for the validity of the
assignment (Art. 1624 in relation to Art. 1475, Civil Code), his knowledge thereof affecting
only the validity of the payment he might make (Article 1626, Civil Code).
Article 1626 also shows that payment of an obligation which is already existing does not
depend on the consent of the debtor. It, in effect, mandates that such payment of the
existing obligation shall already be made to the new creditor from the time the debtor
acquires knowledge of the assignment of the obligation. The law is clear that the debtor had
the obligation to pay and should have paid from the date of notice whether or not he
consented.

243.Mariano vs Judge De Vera (GR 59974 March 9, 1987)

CANT BE FOUND. ILL JUST LOOK IT UP IN THE SCRA :0

244. TIBURCIO SAMONTE v CA. et.al

G.R.NO. 1042223; July 12. 2001
FACTS:
Petitioner, as successor in interest of the Jadol spouses argues that respondents action for
reconveyance, filed only in 1975, had long prescribed considering that the Jadol spouses
caused the registration of portion of the subject lot in their names way back in August 8,
1957. It is petitioners contension that since 18 years had already lapsed from the issuance
of the transfer certificate of title until the time when respondents filed the action in the court a
quo in 1975, the same was it me barred. As it has been indubitably established that fraud
attended the registration of a portion of the subject property, the Jadol spouses were
trustees thereof, on behalf of the surviving heirs of Abao. An action based on implied or
constructive trust prescribes in 10 years from the time of its creation or upon the alleged
fraudulent registration of the property.

ISSUE: Whether or not the action for reconveyance had already prescribed

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HELD: No. Petitioners defense of prescription is untenable. The general rule that the
discovery of fraud is deemed to have taken place upon the discovery of fraud is deemed to
have taken place upon registration of real property because it is considered a constructive
notice to all persons does not apply in this case. Instead CA correctly applied the ruling in
Adille v CA, apropos to the instant case, thus It is true that the registration under the Torrens
system is constructive notice of title, but it has likewise been our holding that the Torrens title
does not furnish a shield Por Fraud. It is, therefore, no argument to say that the act of
registration is equivalent to notice of repudiation, assuming there was one, not with
understanding the long standing rule that the registration operates as universal notice of
title. In Adille, petitioner therein executed a deed of extrajudicial partition misrepresenting
himself to be the sole heir of his mother when, in fact, she had of her children. As a
consequence, petitioner therein was able to secure title to the land in his name alone his
siblings hen filed a case petitioner was only a trustee on an implied trust of the property.
Among the issues resolved by the court in that case was prescription. Said petitioner
registered the property in 1955 and the claim of private respondents therein was prescribed
in 1974. Thus in citing Adille, the SC said that in the in instant case the CA rightfully ruled
that respondents action for reconveyance had not yet prescribed.

245. NO DIGEST

246. Heirs of Tanak Pangaaraan Patiwayon et. al v Hon. Martinez et al.

G.R No. 49027; June 10, 1985
Facts:
Respondent Tagwalan, to fraud, was able to sucure a title on his own name to the exclusion
of his heirs who equally have a right to a share of the land.

Issues: 1.whether or not the action was for reconveyance

2. Whether ornot the action of the co-heirs had already prescribed having been
brought one year from the date of issuance of OCT.

Held:
1. Yes. Petitioners action was one for reconveyance.
Petitioners main purpose was to recover their rightful share of their inheritance as revealed
in their arguments.

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2. No. Petitioners actin had not yet prescribed.

Since respondent was able to secure the disputed title thru fraud, an implied trust was
created in favor of his co-heirs. Respondent is deemed to merely hold the property for them
and his benefit.

There being an implied trust, the action to recover prescribes after 10 years. Consequently,
the present action I not yet barred by prescription.

247.Adaza and Marundan v CA

G.R No. L-47354; March 21, 1989

Facts: Victor Adaza executed a deed of donation covering a parcel of land in favor of his
daughter violeta. When, however victor died, violeta signed a deed of Waiver wherein she
recognized the fact that she owned the subject land in common with her brother Horacio
although the propertys title was issued solely on her name.

Issue: whether or not an implied trust was created in favor of Horacio.

Held: Yes. An implied trust was created in favor of Horacio.

The statement in the Deed of Waiver is Admission of Violeta that she held half of the land in
trust for petitioner Horacio. The execution of the Deed of Donation by Violetas father created
an implied trust in favor of Horacio with respect of half of the property donated. This is in
consonance with Article 1449 which provides that, there is also an implied trust when a
donation is made to a person but it appears that although the legal estate is transmitted to
the done, he nevertheless is either to have no beneficial interest or only a part thereof.

248. Gonzales v IAC

GR No. 66479; Nov. 21, 1991
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Facts: Private respondents instituted a complaint for partition against Fausto Soy. They claim
that they had a pro-indiviso share in a parcel of land. Their claim was anchored on the fact
that Fausto Soy was the borther of Emelia Soy, the deceased mother of Rosita Lopez; of
Cornelia Soy, deceased mother of Agueda, Amado, and Felipe; and of Anastacia Soy.
Fausto contested the claims of plaintiffs and asserted exclusive title in his name; claiming
that the land in question was never registered in the names of his parents, that he had been
the registered owner of the premises since 1932.

Issue: whether or not the subject land was held in trust by Fausto Soy for his sisters Emilia,
Corelia, and Anastacia.

Held: No. the subject land was no held in trust by Fausto Soy for his sisters.

After Fausto Soy, the predecessors- in interest of petitioners, had appeared to be the
registered owner of the lot for more than 30 years, his title indefeasible and his dominical
rights over it could no longer be challenged. Any insinuation as to existence of an implied
constructive trust should not be allowed. Private respondent is likewise wrong in invoking
article 1456 as this is a constructive trust arising from operation of law which is not a trust in
the technical sense.

249. Spouses Horacio and Felisa Benito v Agapita Saguitan-Ruiz

G.R No. 149906, December 26, 2002

Facts:
The allegations in the complaint constituted a suit for reconveyance and not an action to
invalidate certificates of title grounded on fraud.

Issue: whether or not the prescriptive period for the action is 10 years.

Held: yes. The prescriptive period is 10 years, not one year from entry of decree of
registration, otherwise stated. CA is correct in holding that respondents complaint is in
reality an action reconveyance based on implied or constructive trust. This suit prescribes 10
years from the issuance of title over the property.
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250. added case by Judge, please find na lang case digest

Eugenio Feliciano etal vs Pedro Canoza etal

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