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G.R. No.

164791, June 29, 2010




The Petioners Lao and Manansala entered into a Contract of Lease with Special Plans Incorporated (SPI).
Upon expiration of the contract, it was further renewed for another eight months. Petitioners did not pay the
allotted rental fees which prompted SPI to send a demand letter asking for full payment of rentals in arrears.
Petitioners did not give payment, giving the reason that SPI failed to deliver the leased premises for their intended
use and because of this they incurred expenses for necessary repairs as well as expenses for the repair of
structural defects.. They counterclaimed SPI to pay the sum of 422,000 pesos as actual damages against the claim
of SPI of 118,000 for accumulated unpaid rentals.

The Metropolitan Court found that the unpaid rentals only amounted to 95,000 pesos and declared SPI
responsible for repairing the structural defects of the leased premises and thus dismissed SPI’s case. SPI then
appealed to the Regional Trail Court of Quezon City which then modified the decision of the lower court,
disagreeing on the off-setting of the amount allegedly spent by the petitioners for the repairs of the structural
defects of subject property with their unpaid rentals and ordered the Petitioners to pay 95,000 for unpaid rentals.
The petitioners then appealed to the Court of Appeals wherein they asserted that the amount of 545,000.00 that
they spent for repairs, P125,000.00 of which was spent on structural repairs, should be judicially compensated
against the said unpaid rentals amounting to 95,000.00.


Whether or not the unpaid rentals should be judicially compensated with the expenses incurred by the

Held: Petition Dismissed.

In order that compensation to take place two persons, in their own right, should be creditors and debtors
of each other. In order for compensation to be proper, it is necessary that:

1. Each one of the obligors be bound principally and that he be at the same time a principal creditor of
the other;
2. 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. The two debts are due:
4. The debts are liquidated and demandable;
5. Over neither of them be any retention or controversy, commenced by third parties and
communicated in due time to the debtor.

The Petitioners failed to properly discharge their burden to show that the debts are liquidated and
demandable. A claim is liquidated when the amount and time of payment is fixed. If acknowledged by the debtor,
although not in writing, the claim must be treated as liquidated. When the defendant, who has an unliquidated
claim, sets it up by way of counterclaim, and a judgment is rendered liquidating such claim, it can be compensated
against the plaintiff’s claim from the moment it is liquidated by judgment. Compensation takes place only if both
obligations are liquidated.
G.R. No. 171925 July 23, 2010




The Respondent, Permanent Homes Inc. is a real estate development company that applied and was
granted an “Omnibus Line” credit facility in the Solidbank to finance its housing project known as “Buena Vida
Townhomes” in the amount of sixty million pesos.

Of the sixty million available to Permanent Homes, it availed of a total of 41.5 million pesos, covered by
three (3) promissory notes wherein it irrevocably authorized Solidbank to increase or decrease at any time the
interest rate based on the prevailing rates in the local or international capital markets. The adjustment of the
interest rates shall be effective from the date indicated in the written notice or if no date was indicated the time
the notice was sent. If Permanent Homes disagrees with the interest rate adjustment, they shall prepay all
amounts due within thirty (30) days, from the receipt of the written notice. Otherwise, they shall be considered to
have given their consent to the interest rate adjustment. Contrary to the stipulations indicated in the promissory
note. There was a standing agreement by both parties that any increase or decrease in the interest rates shall be
subject to the mutual agreement of the parties. There were three loan availments done, each with a series of
increases and decreases in the interest rates as the provisions of the promissory note stipulated.

It is now the contention of Permanent Homes that Solidbank unilaterally and arbitrarily accelerated the
interest rates without any declared basis of such increases, of which Permanent Homes did not agree to or been
informed of. That this was contrary to their standing agreement that any interest rate changes will be subject to
mutual agreement of the parties. They aver that they could not protest the actions of the Bank for fear that it
would cut off their credit facility.

Solidbank, on the other hand, avers that Permanent Homes has no cause of action against it, as the
aforementioned pertinent provisions of the Omnibus Credit Line and the promissory notes stipulated and agreed
to and duly signed by PERMANENT HOMES. Thus, in accordance with said provisions, SOLIDBANK was authorized
to, upon due notice, periodically adjust the interest rates on PERMANENT HOMES’ loan availments during the
monthly interest repricing dates, depending on the changes in prevailing interest rates in the local and
international capital markets.

ISSUE: Whether or not the interest rate repricing of Solidbank in the course of the loan valid?


The Supreme Court held that the repricing of the interest rates were VALID. The validity of the actions of
the bank are (1) the parties mutually agreed on said stipulations; (2) repricing takes effect only upon Solidbank’s
written notice to Permanent of the new interest rate; and (3) Permanent has the option to prepay its loan if
Permanent and Solidbank do not agree on the new interest rate. The interest rates implemented by Solidbank
were consistent with prevailing rates in the local or international capital markets.

In order that obligations arising from contracts may have the force of law between the parties, there must
be a mutuality between the parties based on their essential equality. A contract containing a condition which
makes its fulfillment dependent exclusively upon the uncontrolled will of one of the contracting parties is void.
There was no showing that either Solidbank or Permanent coerced each other to enter into the loan agreements.
The terms of the Omnibus Line Agreement and the promissory notes were mutually and freely agreed upon by the
G.R. No. 171998, October 20, 2010


Anamer Salazar a freelance sales agent, was approached by Isagani Calleja and Jess Kallos and asked if she
knew a supplier of rice. Salazar then accompanied the two to J.Y. Brothers Marketing Corporation (J.Y. Bros.) a
corporation known to be in the business of selling sugar and rice and other commodities. Calleja and Kallos with
Salazar procured 300 cavans of rice worth 214,000. The payment was with a Prudential Bank check issued by Nena
Timario and with the assurance of Salazar that it was as good as cash. J.Y. Bros. parted with 300 cavans of rice.
However upon presentment, the check was dishonoured the reason was due to “Closed Account”. J.Y. Bros. then
informed Salazar, Calleja and Kallos of the state of the check and they issued a replacement a cross Solid Bank
Check in the same amount but it bounced due to “”Insufficient Funds”

Despite the demand letter issued by J.Y. Bros. Salazar could not settle the amount due. This prompted J.Y.
Bros. to charge Salazar and Timario with the crime of estafa before the Regional Trial Court (RTC) of Legazpi City.
The decision of RTC was to acquit Salazar of the crime she was charged but held her liable for the payment of the
300 bags of rice. Aggrieved she appealed to the Supreme Court which granted her prayer to reconsider the civil
aspect of the case and allow her to present evidence.

The RTC dismissed the civil aspect of Salazar. It found that the first check drawn by Timario was payable
to the order of J.Y. Bros and that it was negotiable order instrument and that Salazar only endorsed and
negotiated the check, so it must not produce the technical effect of an indorsement arising from negotiation. The
Prudential Bank check was a negotiable check, and it bounced, so it was replaced by a non-negotiable crossed Solid
Bank check. A that a negotiable check being replaced by a non-negotiable one has the effect of discharging from
the obligation whoever may be the endorser of the negotiable check. The RTC adjudicated that there was
Novation, and the ultimate effect of such substitution was to extinguish the obligation arising from the issuance of
the Prudential Bank check.

J.Y. Bros. appealed to CA and it reversed RTC’s decision. CA ordered Salazar to pay the amount.

ISSUE: Whether or not the acceptance of the Solid Bank check by the J.Y. Bros amounted to novation?

HELD: Petition Denied

Novation is done by the substitution or change of the obligation by a subsequent one which extinguishes
the first, either by changing the object or principal conditions or substituting the person of the debtor or by
subrogating a third person in the rights of the creditor. It may either be Extinctive or Modificatory, much being
dependent on the nature of the change and the intention of the parties.

Extinctive Novation is never presumed, there must be an express intention to novate; if it is implied, the
acts of the parties must clearly demonstrate their intent to dissolve the old obligation as the moving consideration
for the emergence of the new one. Implied novation necessitates that the incompatibility between the old and
new obligation be total on every point such that the old obligation is completely superceded by the new one. The
test of incompatibility is whether they can stand together, each one having an independent existence; if they
cannot and are irreconcilable, the subsequent obligation would also extinguish the first.

An extinctive novation would thus have the twin effects of, first, extinguishing an existing obligation
and, second, creating a new one in its stead. This kind of novation presupposes a confluence of four essential
requisites: (1) a previous valid obligation, (2) an agreement of all parties concerned to a new contract, (3) the
extinguishment of the old obligation, and (4) the birth of a valid new obligation. Novation is merely modificatory
where the change brought about by any subsequent agreement is merely incidental to the main obligation (e.g., a
change in interest rates or an extension of time to pay; in this instance, the new agreement will not have the effect
of extinguishing the first but would merely supplement it or supplant some but not all of its provisions.)

The obligation to pay a sum of money is not novated by an instrument that expressly recognizes the old,
changes only the terms of payment, adds other obligations not incompatible with the old ones or the new contract
merely supplements the old one.

There are only two ways which indicate the presence of novation and thereby produce the effect of
extinguishing an obligation by another which substitutes the same. First, novation must be explicitly stated and
declared in unequivocal terms as novation is never presumed. Secondly, the old and the new obligations must be
incompatible on every point.1avvphi

Novation speaks of two distinct obligations, this is inapplicable in this case. In this case, respondent’s
acceptance of the Solid Bank check, which replaced the dishonored Prudential Bank check, did not result to
novation as there was no express agreement to establish that petitioner was already discharged from his liability
to pay respondent the amount of P214,000.00 as payment for the 300 bags of rice. As we said, novation is never
presumed, there must be an express intention to novate.

In fact, when the Solid Bank check was delivered to respondent, the same was also indorsed by petitioner
which shows petitioner’s recognition of the existing obligation to respondent to pay P214,000.00 subject of the
replaced Prudential Bank check.
G.R. No. 181560, November 15, 2010


Respondent Chona Losin (Losin) is the owner of Glamour Chicken House. Her supplier for poultry meat
was Vitarich the Petitioner. As her account was transferred to Vitarich branch in Gen. Santos. Losin’s poultry
needs were serviced through Rodrifo Directo and Allan Rosa both salesmen and authorized collectors of Vitarich,
and Arnold Baybay (Baybay), a supervisor of said corporation. Unfortunately, her account started to experience
problems Directo had been delivering stocks to her even without prior booking which was the customary process
of doing business with her. Directo was terminated by Vitarich and Rosa and Baybay resigned. They also left
without turning over invoices covering Losin’s account. Demand letters were sent to Losin covering her unpaid
amounts but when she checked her records, she discovered that here was an overpayment to Vitarich. She relayed
this to Vitarich and said that she issued checks that were collected by Directo.

It appeared that 3 checks issued by Losin were dishonored because of either for reasons Drawn Against
Insufficient Funds (DAIF) or Stop Payment. Vitarich filed a complaint in RTC General Santos City and it held in favor
of Vitarich. Losin then appealed to the CA and judged in favor of Losin. Citing Article 2180 as basis. “Employers
shall be liable for the damages caused by their employees... acting within the scope of their assigned tasks.”

It was for the reason that Directo was known to Losin as an agent and authorized collector of Vitarich, so
she paid in good faith to him. Criminal acts done by Vitarich’s agent (Directo) has a separate accountability and
must not be imputed to their client (Losin). Also, Losin was not duly notified of Directo’s termination so she acted
in good faith. CA also said that Vitarich has the burden of proof, but they failed to prove that the goods were
delivered to and received by Losin. Because of the unfavorable judgment, Vitarich went to SC for a petition for

ISSUE: Whether or not Losin is liable to Vitarich?


Yes Losin is clearly liable to Vitarich. As a general rule, one who pleads payment has the burden of
proving it. In Jimenez v. NLRC, the Court ruled that the burden rests on the debtor to prove payment, rather than
on the creditor to prove non-payment. The debtor has the burden of showing with legal certainty that the
obligation has been discharged by payment.

Losin failed to present a single official receipt to prove payment. This is contrary to the well-settled rule
that a receipt, which is a written and signed acknowledgment that money and goods have been delivered, is the
best evidence of the fact of payment although not exclusive. All she presented were copies of the list of checks
allegedly issued to Vitarich through its agent Directo, a Statement of Payments Made to Vitarich and apparently
copies of the pertinent history of her checking account with Rizal Commercial Banking Corporation (RCBC). At best,
these may only serve as documentary records of her business dealings with Vitarich to keep track of the payments
made but these are not enough to prove payment.

Citing Article 1249 (2) of the Civil Code The delivery of promissory notes payable to order, or bills of
exchange or other mercantile documents shall produce the effect of payment only when they have been cashed,
or when through the fault of the creditor they have been impaired.

No cash payment was proved. It was neither confirmed that the checks issued by Losin were actually
encashed by Vitarich. Thus, the Court cannot consider that payment, much less overpayment, made by Losin. She
was only liable to Vitarich to those purchases that were proven to be delivered and received by her or her
LAND BANK OF THE PHILIPPINES, petitioner, vs. ALFREDO ONG, respondent.
G.R. No. 190755. November 24, 2010.


Spouses Johnson and Evangeline Sy secured a loan from the Land Bank of Legazpi City in the amount of 16
million pesos. The Spouses could no longer pay their loan. They sold 3 mortgaged parcels of land to Evengeline’s
mother under a Deed of Sale with Assumption of Mortgage. Evangeline's father, the petitioner Alfredo Ong, then
went to Land Bank to report the sale and assumption of mortgage.

The Branch Head Atty. Edna Hingco, , told Alfredo and his counsel Atty. Ireneo de Lumen that there was
nothing wrong with the agreement with the Spouses Sy, and provided them with requirements for the assumption
of mortgage. She informed Alfredo that he should pay part of the principal which was computed at PhP750,000
and to update due or accrued interests on the promissory notes so that she could easily approve the assumption of

After two weeks, Alfredo issued a check for PhP750,000 and personally gave it to Atty. Hingco. A receipt
was then issued for his payment. Atty. Hingco then informed Alfredo that the certificate of title of the Spouses Sy
would be transferred in his name but this never materialized and no notice of transfer was sent to him.

Alfredo later found out that his application for assumption of mortgage was not approved by the Bank.
The bank learned from its credit investigation report that the Ongs had a real estate mortgage in the amount of
PhP18,300,000 with another bank and it was past due. Alfredo claimed that this was fully paid later on.

Land Bank foreclosed the mortgage of the Spouses Sy after several months. Alfredo only learned of the
foreclosure when he saw the subject mortgage properties included in a Notice of Foreclosure of Mortgage and
Auction Sale at the RTC in Tabaco, Albay. Alfredo then initiated an action for recovery of sum of money with
damages against Land Bank. Alfredo maintained that Land Bank's foreclosure without informing him of the denial
of his assumption of the mortgage was done in bad faith. The RTC and CA held that the payment was not for the
arrears but for the approval of his assumption of mortgage.

Issue: Whether or not Article 1236 does not apply and is there novation in the instant case?


Art. 1236 of the Civil Code “The creditor is not bound to accept payment or performance by a third person
who has no interest in the fulfilment of the obligation, unless there is a stipulation to the contrary. Whoever pays
for another may demand from the debtor what he has paid, except that if he paid without the knowledge or
against the will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor.

Land Bank was not bound to accept Alfredo’s payment, as he did not have an interest in the payment of
the loan of the Spouses Sy. He made a conditional payment so that the properties subject of the Deed of Sale with
Assumption of Mortgage would be titled in his name. Land Bank required Alfredo to make payment before his
assumption of mortgage would be approved. He was informed that the certificate of title would be transferred
accordingly. He, thus, made payment not as a debtor but as a prospective mortgagor.

The Second paragraph of 1236 does not apply Alfredo made the payment for his own interest and not on
behalf of the Spouses Sy, recourse is not against the latter.

There is no Novation in this case, Not all the elements of novation were present. Novation must be
expressly consented to. Moreover, the conflicting intention and acts of the parties underscore the absence of any
express disclosure or circumstances with which to deduce a clear and unequivocal intent by the parties to novate
the old agreement.
Novation may be Extinctive or Modificatory. It is extinctive when an old obligation is terminated by the
creation of a new obligation that takes the place of the former; it is merely modificatory when the old obligation
subsists to the extent it remains compatible with the amendatory agreement. An extinctive novation results either
by changing the object or principal conditions (objective or real), or by substituting the person of the debtor or
subrogating a third person in the rights of the creditor (subjective or personal). Under this mode, novation would
have dual functions — one to extinguish an existing obligation, the other to substitute a new one in its place —
requiring a conflux of four essential requisites: (1) a previous valid obligation; (2) an agreement of all parties
concerned to a new contract; (3) the extinguishment of the old obligation; and (4) the birth of a valid new
G.R. No. 172020. December 6, 2010.


Respondent-spouses Norberto and Milagros Castañares are engaged in the business of exporting shell
crafts and other handicrafts. The Respondents obtained from petitioner Traders Royal Bank various loans and
credit accommodations. Respondents executed two real estate mortgages (REMs) covering their properties
evidenced by Promissory Notes. The petitioner only released the amount of P35,000.00 although the mortgage
deeds indicated the principal amounts as P86,000.00 and P60,000.00. For failure of the respondents to pay their
outstanding loans with petitioner, the latter proceeded with the extrajudicial foreclosure of the real estate

The trial court found that despite respondents’ insistence that the REM covered only a separate loan
forP86,000.00 which they believed petitioner committed to lend them, the evidence clearly shows that said REM
was constituted as security for all the promissory notes

The CA held that the RTC overlooked the fact that there were no adequate evidence presented to prove
that petitioner released in full to the respondents the proceeds of the REM loan the appellate court declared that
where there was failure of the mortgagee bank to deliver the consideration for which the mortgage was executed,
the contract of loan was invalid and consequently the accessory contract of mortgage is likewise null and void.
Because only 35,000.00 out of the P86,000.00 stated in the REM was released by Traders Royal Bank and that the
REM was valid only to that extent.

Issue: Whether or not the CA erred in holding that the real estate mortgage dated 18 april 1977 is valid only in part
to the extent of php35,000.00 which is allegedly the amount proved to have been actually released to respondents
out of the sum of php86,000.00?


Because of the “dragnet clause” or Blanket mortgage clause” that would subsume all debts of past and
future origins. It has been held as a valid and legal undertaking, the amounts specified as consideration in the
contracts do not limit the amount for which the pledge or mortgage stands as security, if from the four corners of
the instrument, the intent to secure future and other indebtedness can be gathered. A pledge or mortgage given
to secure future advancements is a continuing security and is not discharged by the repayment of the amount
named in the mortgage until the full amount of all advancements shall have been paid.

A "dragnet clause" operates as a convenience and accommodation to the borrowers as it makes available
additional funds without their having to execute additional security documents, thereby saving time, travel, loan
closing costs, costs of extra legal services, recording fees, et cetera. While a real estate mortgage may
exceptionally secure future loans or advancements, these future debts must be sufficiently described in the
mortgage contract. An obligation is not secured by a mortgage unless it comes fairly within the terms of the
mortgage contract.

The REMs shows that its terms are broad enough to cover packing credits and export advances granted by
the petitioner to respondents. That the respondents subsequently availed of letters of credit and export advances
in various amounts as reflected in the promissory notes, buttressed the claim of petitioner that the amounts
of P86,000.00 and P60,000.00 stated in the REMs merely represent the maximum total loans which will be secured
by the mortgage.
KOREAN AIR CO., LTD. and SUK KYOO KIM, Petitioners
ADELINA A.S. YUSON, Respondent.

G.R. No. 170369, June 16, 2010


Korean Air Co., Ltd. (Korean Air) hired Adelina Yuson (Yuson) as reservations agent, Subsequently she was
promoted to Passenger Sales Manger. Korean Air suffered a net loss of over $367,000,000. Consequently, Korean
Air reduced its budget for 2001 by 10 percent. In order to cut costs, Korean Air offered its employees an early
retirement program (ERP). Yuson accepted the offer for early retirement. Suk informed Yuson that she was
excluded from the ERP because she was retiring on 8 January 2002. Explaining the exclusion as it was for staffs
upon discretion of management who still have long years left with the company before reaching retirement age.

Yuson claimed that her exclusion was discriminatory and requested Korean Air perform its obligation
arising out of a Contract legally perfected with their Offer of ERP. It was denied by Korean Air. She reiterated her
claim in that Korean Air’s offer for early retirement and her acceptance of the offer constituted a perfected
contract. The Court of Appeals held that Yuson could claim benefits because the because "the offer was certain
and the acceptance is absolute; hence, there is a valid contract pursuant to the last paragraph of Article 1315 of
the New Civil Code”

Issue: Whether or not the ERP that Korean Air offered to its employees and Yuson’s acceptance constitutes a valid
contract? (Art.1315)


No, citing Art. 1319 of the Civil Code “That the offer must be certain and acceptance absolute.” An offer
is a unilateral proposition made by one party to another for the celebration of a contract. For an offer to be
certain, a contract must come into existence by the mere acceptance of the offeree without any further act on the
offeror’s part. The offer must be definite, complete and intentional.

In the present case, the offer is not certain: (1) the 21 August 2001 memorandum clearly states that,
"MNLSM Management, on its discretion, is hereby offering the said early retirement program to its staff"; (2)
applications for the ERP were forwarded to the head office for approval, and further acts on the offeror’s part
were necessary before the contract could come into existence; and (3) the 21 August 2001 memorandum clearly
states Korean Air’s intention, which was, "to prevent further losses." Korean Air could not have intended to
ministerially approve all applications for the ERP.

G.R. No. 162218 February 25, 2010


Rico Shipping, Inc., represented by its President, Erlinda Viray-Jarque, together with respondent Viray, in
their own personal capacity and as solidary obligors (the three parties collectively known as the debtors), Obtained
two separate loans from Metropolitan Bank and Trust Company (MBTC) in the total amount of P250,000. A
promissory note was executed promising payment in four semi-annual installments of P62,500. The two loans
were subsequently renewed and secured by one promissory note. The debtors made a total payment of P134,054
leaving a balance of P115,946 which remained unpaid despite demands by MBTC. The debtors loaned obtained
two more loans from MBTC which subsequently went unpaid.

The Regional Trial Court (RTC) rendered judgment in favor of MBTC ordering the debtors to pay the
money owed.

On 29 December 1982, the government issued Free Patents in favor of Viray over three parcels of land.
The Original Certificate of Title containing the free patents were registered with the Registry of Deeds of Cagayan
de Oro City. The RTC of Manila issued a writ of execution over the lots owned by Viray. Pursuant to the writ of
execution, the City Sheriff of Cagayan de Oro sold the lots at public auction in favor of MBTC as the winning bidder
and issued a Certificate of Sale to MBTC. Viray filed an action for annulment of sale against the sheriff and MBTC
with the RTC of Cagayan de Oro City. Viray sought the declaration of nullity of the execution sale, the sheriff’s
certificate of sale, the sheriff’s deed of final conveyance and the TCT's issued by the Register of Deeds. The RTC of
Cagayan de Oro City rendered its decision in favor of MBTC.

Viray filed an appeal with the CA alleging that the RTC of Cagayan de Oro City committed reversible error
in ruling solely on the issue of redemption instead of the issue of validity of the auction sale, being the lis mota of
the action. The appellate court reversed the decision of the RTC of Cagayan de Oro City. The CA ruled that the
auction sale conducted by the sheriff was null and void ab initio since the sale was made during the five-year
prohibition period in violation of Section 118 of Commonwealth Act No. 141 (CA 141) or the Public Land Act.

ISSUE: Whether or not the auction sale falls within the five-year prohibition period laid down in Section 118 of CA


Section 118 of CA 141 states:

Except in favor of the Government or any of its branches, units, or instruction, lands acquired under free
patent or homestead provisions shall not be subject to encumbrance or alienation from the date of the approval of
the application and for a term of five years from and after the date of issuance of the patent and grant, nor shall
they become liable to the satisfaction of any debt contracted prior to the expiration of said period, but the
improvements or crops on the land may be mortgaged or pledged to qualified persons, associations, or

No alienation, transfer, or conveyance of any homestead after five years and before twenty-five years
after issuance of title shall be valid without the approval of the Secretary of Agriculture and Natural Resources,
which approval shall not be denied except on constitutional and legal grounds.
Yes, the auction sale falls within the five-year prohibition period laid down in Section 118 of CA 141. The
law clearly provides that lands which have been acquired under free patent or homestead shall not be
encumbered or alienated within five years from the date of issuance of the patent or be liable for the satisfaction
of any debt contracted prior to the expiration of the period.
In the present case, the three loans were obtained on separate or several years before the free patents on
the lots were issued by the government to respondent on 29 December 1982. The RTC of Manila, in a Decision,
ruled in favor of petitioner ordering the debtors, including respondent, to pay jointly and severally certain amounts
of money. The public auction conducted by the sheriff on the lots owned by respondent occurred on 12 October
1984. The execution sale of the lots occurred less than two years after the date of the issuance of the patents. This
clearly falls within the five-year prohibition period provided in the law, regardless of the dates when the loans
were incurred.

A civil obligation cannot be enforced against, or satisfied out of, the sale of the homestead lot acquired by
the patentee less than five years before the obligation accrued even if the sale is involuntary. For purposes of
complying with the law, it is immaterial that the satisfaction of the debt by the encumbrance or alienation of the
land grant was made voluntarily, as in the case of an ordinary sale, or involuntarily, such as that effected through
levy on the property and consequent sale at public auction. In both instances, the law would have been violated.
It must be emphasized that the main purpose in the grant of a free patent or homestead is to preserve and keep
in the family of the homesteader that portion of public land which the State has given to him so he may have a
place to live with his family and become a happy citizen and a useful member of the society.

Section 118 of CA 141, therefore, is predicated on public policy. Its violation gives rise to the cancellation
of the grant and the reversion of the land and its improvements to the government at the instance of the latter.
The provision that “nor shall they become liable to the satisfaction of any debt contracted prior to the expiration
of the five-year period” is mandatory and any sale made in violation of such provision is void and produces no
effect whatsoever, just like what transpired in this case. Clearly, it is not within the competence of any citizen to
barter away what public policy by law seeks to preserve. The Supreme Court denied the petition and affirmed the
Decision of the Court of Appeals.
Enrico S. Eulogio Petitioner vs. Spouses Clemente Apeles and Luz Apeles Respondents
G. R. No. 167884 January 20, 2009


The Spouses Apeles leased a property to Arturo Eulogio (Arturo). When Arturo died, his son Enrico
succeeded as lessor of the subject property. He entered into a contract of lease with an option to purchase with
the spouses. It is stipulated in the contract that the LESSOR (Enrico) has an option to buy the subject house and lot
within three years and that the monthly rentals paid by him during the 3-year lease period will just be deducted
from the purchase price agreed upon by them. There is also a stipulation that if Enrico gives an oral or written
notice to the spouses before the expiration of the 3-year lessee period, then the latter shall proceed with the
execution of the contract by selling, transferring and conveying the said property to Enrico. Before the 3-year lease
period expires.

Enrico decided to exercise his option to purchase the subject property by giving oral and written notice to
the respondents. Unfortunately, spouses Apeles ignored his manifestations. Enrico Eulogio then instituted a
Complaint for Specific Performance with Damages against the spouses Apeles. His cause of action is based on par.
5 of their Contract of Lease with Option to Purchase vesting him the right to acquire ownership of the subject
property after paying the agreed amount of consideration. Enrico contended that Luz Apeles voluntarily signed
their contract of lease and therefore the property should be transferred to him. On the other hand, Luz Apeles
denied that she signed the contract. According to Luz Apeles, it was impossible for her to sign the contract because
she was in the United States of America that time and that her signature thereon was just forged.

The RTC ruled in favor of Enrico and ordered them to comply with the provisions of the Contract.

The Court of Appeals noted that the Notary Public did not observe utmost care in certifying the due
execution of the Contract of Lease with Option to Purchase. The Court of Appeals chose not to accord the disputed
Contract full faith and credence.

Whether or not Enrico can compel the spouses Apeles to execute the Deed of Sale over the subject property in his


No. The Supreme Court held that Enrico Eulogio can not compel the spouses Apeles to execute the Deed
of Sale in his favor.

While it is true that a notarized document carries the evidentiary weight conferred upon it with respect to
its due execution, and has in its favor the presumption of regularity, this presumption, however, is not absolute. It
may be rebutted by clear and convincing evidence to the contrary.

In civil cases, the party having the burden of proof must establish his case by a preponderance of
evidence. Preponderance of evidence is the weight, credit, and value of the aggregate evidence on either side and
is usually considered to be synonymous with the term "greater weight of the evidence" or "greater weight of the
credible evidence." Preponderance of evidence is a phrase which, in the last analysis, means probability of the
truth. It is evidence which is more convincing to the court as worthier of belief than that which is offered in
opposition thereto.

In the case at bar, the spouses Apeles were able to prove beyond preponderant evidence the invalidity of
the Contract of Lease with Option to Purchase. While Enrico just relied on his own self-serving testimonies, without
asserting any proof of collaborating testimony or circumstantial evidence to support his claim. This is considered as
an option contract. It is a contract by which the owner of the property agrees with another person that the latter
shall have the right to buy the former’s property at a fixed price within a certain time. It is not a sale of property
but a sale of right to purchase. In order for an option contract to be valid, there must be a separate and distinct
consideration that supports it. In the present case, it is definite that Enrico gave no consideration to the spouses
for the option contract. The absence of monetary or any material consideration keeps this court from enforcing
the rights of the parties under said option contract.

An option is a contract by which the owner of the property agrees with another person that the latter
shall have the right to buy the former’s property at a fixed price within a certain time. It is a condition offered or
contract by which the owner stipulates with another that the latter shall have the right to buy the property at a
fixed price within a certain time, or under, or in compliance with certain terms and conditions; or which gives to
the owner of the property the right to sell or demand a sale

An option is not of itself a purchase, but merely secures the privilege to buy. It is not a sale of property
but a sale of the right to purchase. It is simply a contract by which the owner of the property agrees with another
person that he shall have the right to buy his property at a fixed price within a certain time. He does not sell his
land; he does not then agree to sell it; but he does sell something, i.e., the right or privilege to buy at the election
or option of the other party. Its distinguishing characteristic is that it imposes no binding obligation on the person
holding the option, aside from the consideration for the offer.

G.R. No. 173227 / January 20, 2009


Alicia Villanueva (respondent) borrowed money from the Sebastian Siga-An (Petitioner) in the amount of
540,000. The loan agreement was not written and there was no stipulation as to the payment of interest for the
loan. She issued a check for 500,000 as partial payment of the loan and a 200,000 check as payment for the
remaining balance. Since she paid more than the amount of the loan the excess amount applied as interest. The
petitioner was still not satisfied with the interest of the loan threatened to block or disapprove her transactions in
the Philippine Navy Office (PNO), she paid additional amounts of cash and checks as interests for the loan. There
was no receipt given to her the reason was that there was mutual trust and confidence between them. The Total
amount she paid was 1,200,000.

The petitioner said that respondent requested him to restructure the payment of the second loan
as she could not give full payment to the loan. As per their agreement, respondent gave petitioner several post
dated checks to guarantee payment of the obligation. Respondent admitted that she borrowed an amount of
1,240,000 inclusive of interest. He presented the checks for encashment but only one check was honoured. He
then proceeded to file a criminal case for violation of B.P. 22 (Bouncing checks Law) when respondent failed to
settle her account.

The Petitioner insists that that there was no overpayment because the respondent admitted in the
promissory note that that her monetary obligation was 1,240,000 inclusive of interest.

The RTC held that there was overpayment of the loan and that the respondent should refund to her the
excess amount. That the respondent’s obligation was only to pay 540,000 and that the interest should not be
included as there was no agreement between them. It concluded that the excess payment should be returned
pursuant to the principle of solutio indebiti.

Whether or not there is interest payment due to the petitioner?
Whether or not the principle of Solutio Indebiti applies in this case?


Article 1956 of the Civil Code, which refers to monetary interest, specifically mandates that no interest shall be due
unless it has been expressly stipulated in writing. As can be gleaned from the foregoing provision, payment of
monetary interest is allowed only if: (1) there was an express stipulation for the payment of interest; and (2) the
agreement for the payment of interest was reduced in writing. The concurrence of the two conditions is required
for the payment of monetary interest. Thus, we have held that collection of interest without any stipulation
therefor in writing is prohibited by law

1. No. Respondent did not categorically declare in the same case that she and respondent made
an express stipulation in writing as regards payment of interest at the rate of 7%. As earlier discussed, monetary
interest is due only if there was an express stipulation in writing for the payment of interest.

Under Article 1960 of the Civil Code, if the borrower of loan pays interest when there has been no stipulation
therefor, the provisions of the Civil Code concerning solutio indebiti shall be applied. Article 2154 of the Civil Code
explains the principle of solutio indebiti. Said provision provides that if something is received when there is no right
to demand it, and it was unduly delivered through mistake, the obligation to return it arises. In such a case, a
creditor-debtor relationship is created under a quasi-contract whereby the payor becomes the creditor who then
has the right to demand the return of payment made by mistake, and the person who has no right to receive such
payment becomes obligated to return the same. The quasi-contract of solutio indebiti harks back to the ancient
principle that no one shall enrich himself unjustly at the expense of another. The principle of solutio indebiti
applies where (1) a payment is made when there exists no binding relation between the payor, who has no duty to
pay, and the person who received the payment; and (2) the payment is made through mistake, and not through
liberality or some other cause. We have held that the principle of solutio indebiti applies in case of erroneous
payment of undue interest.

2. Yes, it applies It was duly established that respondent paid interest to petitioner. Respondent was under no duty
to make such payment because there was no express stipulation in writing to that effect. There was no binding
relation between petitioner and respondent as regards the payment of interest. The payment was clearly a
mistake. Since petitioner received something when there was no right to demand it, he has an obligation to return
G.R. No. 176246 February 13, 2009

FACTS: Respondent Central Surety & Insurance Company (Central Surety) acquired an industrial loan worth six
million pesos from petitioner Premiere Development Bank, evidenced by Promissory Note. Should Central Surety
fail to pay, it would be liable to Premiere Bank for: (1) unpaid interest up to maturity date; (2) unpaid penalties up
to maturity date; and (3) unpaid balance of the principal. To Secure Payment for the loan Central Surety executed a
Deed of Assignment with Pledge in favor of Premier Bank its proprietary share in Wack Wack and golf and country

Central Surety had another commercial loan with Premiere Bank worth 40,898,000.00 pesos, again by
Promissory Note. To secure payment of the loan they were secured a real estate mortgage over a Condominium
Certificate. This was availed through a renewal of Central Surety’s prior loan.

It was stipulated in the contract that Premiere Bank as creditor would have the right to decide to which
the payment would be applied, and that there is no need for an express demand from the creditor to make the
obligations due and demandable. Central Surety issued a check worth 6,000,000.00 pesos and payable to Premiere
Bank. However, the latter returned such check and sent a letter, as part of a normal bank procedure, demanding
payment and threatening foreclosure of Central Surety’s securities, the pledge and real estate mortgage, should it
fail to pay within ten days from date of receipt. This was alleged by the latter to be an act of waiving Premiere
Bank’s right to apply payments. Central Surety moves for the release of the Wack Wack Membership pledge for
their supposed paid loan.

The lower court ruled in favor of Premiere Bank, while the Court of Appeals reversed the prior decision of
the lower court.

ISSUE: (1) Whether or not Premiere Bank waived its right of application of payments on the loans of Central Surety;
(2) Whether the release of the Wack Wack Membership pledge is in order.


(1) No. Relevant to the case is the statutory provision on application of payments, particularly Article 1252 of the
Civil Code. “He who has various debts of the same kind in favor of one and the same creditor, may declare at the
time of making the payment, to which of them the same must be applied. xxx” The debtor’s right to apply payment
is only directory, and not mandatory, as manifested by the use of the word “may”. Such right may be waived or
even granted to the creditor if both parties agree on such circumstance.

In the instant case, it was stipulated in the contract that the right to apply payments would be enjoyed by
the Premiere Bank. It cannot be understood that such granted right was waived by Premiere Bank. As all debts
were already due, the subsequent demand made by Premiere Bank cannot be equated with a waiver of the right
to demand payment of all the matured obligations of Central Surety to Premiere Bank. The Court also recognized
the standard practice in commercial transactions to send demand letters before default may set in. The demand
cannot be considered a waiver for a waiver must be positively demonstrated, and voluntary, made knowingly,
intelligently and with sufficient awareness of relevant circumstances and likely consequences. Also any inference
of a waiver made by Premiere Bank is denied by the provision of the Promissory Note that “no failure on the part
of Premiere Bank to exercise, and no delay in exercising any right hereunder, shall operate as a waiver thereof.”
When Central Surety issued a check as payment to Premiere Bank, it knew very well that it had several loans which
granted Premiere Bank the right to apply its payment.

(2) No. Considering that the parties are bound by a contract of adhesion, where Central Surety imposed a ready-
made contract on Premiere Bank, the latter had freedom to reject or adhere to the contract. Central Surety, being
a well-established personality, would also not be considered as a disadvantaged party. The contract between the
parties falls on the dragnet clause, which is one “specifically phrased to subsume all debts of past and future
origins.” The security clause in the instant case is that of a continuing pledge, wherein the Wack Wack Membership
served as security for the standing obligation, also for future advancements. Such security worth 15,000,000.00
pesos was clearly worth more than the industrial loan worth 6,000,000.00 pesos, which was understood to secure
the ballooning debt of the Central Surety. As all demandable obligations are yet to be fulfilled, the release of the
Wack Wack membership as security cannot yet to be done as prayed for by Central Surety. Wherefore, the instant
petition is partially granted. The decision of the Court of Appeals is set aside and the decision of the Regional Trial
Court of Makati is reinstated with modification.
G.R. No. 126890, April 2, 2009


Petitioner United Planters Sugar Milling Co., Inc. (UPSUMCO) obtained 2.1 billion pesos as “take-off loans”
from the respondent Philippine National Bank (PNB), secured by a real estate mortgage over two parcels of land
where the milling plant is located and chattel mortgages over the machineries and equipment.

Another loan called “operational loans” was obtained by UPSUMCO, allotted for the financing of the sugar
mill enterprise’s operation. Subsequently, it defaults. Philippine National Bank then assigned the credit to
respondent Asset and Privatization Trust (APT). APT forecloses on the mortgaged assets which were sold for .45
billion pesos, leaving a balance of 1.6 billion pesos. The balance was condoned by APT upon UPSUMCO's
agreement to abandon its right to redeem the mortgaged assets.

Even with this condonation, PNB proceeded to offset the funds of UPSUMCO, amounting to roughly 90
million pesos. Petitioner UPSUMCO holds that this was invalid, as APT had already condoned the debt or
obligation. However, PNB insisted on its validity, claiming that it was proper because: (1) it was an exercise of its
right as a 3rd party, who was paying on behalf of the debtor (that is entitled to be reimbursement in so far as the
payment has redounded to the benefit of the debtor); and (2) the debt or the Deed of Assignment had not yet
been condoned since it was only the “take off loans” and not the “operational loans“, which were allegedly not
assigned to APT, that had been actually condoned in the agreement.

(1) Whether or not PNB has the right over the offsetting of the money of UPSUMCO as well as the
compensation in relation to the Deed of Assignment;
(2) Whether or not “operational loans” may be included in the condonation of Deed of Assignment.

HELD: decision of the Court of Appeals is reinstated

(1) No. The Supreme Court held that PNB did not have a right to offset the funds of UPSUMCO. PNB could
not compensate since it was merely an agent and not a principal creditor in the loan, which is required for
compensation, as provided in Articles 1278 and 1279 of the Civil Code. According to Article 1278, “Compensation
shall take place when two persons, in their own right, are creditors and debtors of each other.” In relation to the
proper parties to a compensation,

Article 1279 provides that “In order that compensation may be proper, it is necessary: (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.” Also,
PNB could not claim the compensation as reimbursement for the payments it made to APT, since it did not have
the consent of UPSUMCO. PNB may not claim the compensation also since the payments did not redound to the
benefit of UPSUMCO. The debt to which these were applied to had been remitted by APT.

(2) Yes. As to the issue regarding the “takeoff loan” and the “operational loan”, PNB was silent and did
not even show any proof to bolster its claims that the operational loans were still outstanding. That it was only the
takeoff loans that had been condoned convinces the Court that these had already been also included in the
condonation. Thus UPSUMCO must be given a refund for the mistakenly offsetting of its money. It is emphasized
by the Court that the amount claimed by APT by way of counterclaim is over and beyond what it can possibly be
entitled to, as it is clear that the “take-off loans” were actually condoned. Because it was not evident from the
voluminous records what the outstanding balance of the operational loans UPSUMCO’s bank accounts were
debited, the remand ordered by the Court of Appeals is ultimately the wisest and fairest recourse.
G.R. No. 138814 , April 16, 2009


Respondent Miguel V. Campos filed a petition with the Securities, Investigation and Clearing Department
(SICD) of the Securities and Exchange Commission (SEC) against the petitioners Makati Stock Exchange, Inc. (MKSE)
The petition sought: (1) to nullify the Resolution dated 3 June 1993 of the MKSE Board of Directors, which
allegedly deprived him of his right to participate equally in the allocation of Initial Public Offerings (IPO) of
corporations registered with MKSE; (2) the delivery of the IPO shares he was allegedly deprived of, for which he
would pay IPO prices;.

SICD granted the issuance of a Temporary Restraining Order to enjoin petitioners from implementing or
enforcing the resolution of the MKSE. they also issued a writ of preliminary injunction for the implementation or
enforcement of the MKSE Board Resolution in question.

On March 11,1994, petitioners filed a motion to dismiss on the following grounds: (1) Petition became
moot due to the cancellation of the license of the MKSE (2) The SICD had no jurisdiction over the petition and (3)
the petition failed to state a cause of action. However, the SICD denied petitioner’s motion to dismiss.

Whether or not the petition failed to state a cause of action.

The petition filed by respondent Miguel Campos should be dismissed for failure to state a cause of action.

A cause of action is the act or omission by which a party violates a right of another.

It contains three essential elements: 1) the legal right of the plaintiff 2) the correlative obligation of the
defendant and 3) the act or omission of the defendant in violation of said legal right. If these elements are absent,
the complaint will be dismissed on the ground of failure to state a cause of action. Furthermore, the petition filed
by respondent failed to lay down the source or basis of respondent’s right and/or petitioner’s obligation.

Article 1157 of the Civil Code, provides that Obligations arise from: law, Contracts, Quasi Contracts, Acts
or omissions punished by law and quasi delicts. Therefore an obligation imposed on a person and the
corresponding right granted to another, must be rooted in at least one of these five sources.

The mere assertion of a right and claim of an obligation in an initiatory pleading, whether a Complaint or
Petition, without identifying the basis or source thereof, is merely a conclusion of fact and law. A pleading should
state the ultimate facts essential to the rights of action or defense asserted, as distinguished from mere
conclusions of fact or conclusions of law.

The Respondent merely quoted in his Petition the MKSE Board Resolution, passed sometime in 1989,
granting him the position of Chairman Emeritus of MKSE for life. However, there is nothing in the said Petition
from which the Court can deduce that respondent, by virtue of his position as Chairman Emeritus of MKSE, was
granted by law, contract, or any other legal source, the right to subscribe to the IPOs of corporations listed in the
stock market at their offering prices.
Pantaleon vs American Express International
G.R. No. 174269 May 8, 2009


Polo Pantaleon (Petitioner) and his family joined an escorted tour of Western Europe. In a guided city tour
in Amsterdam, Mrs. Pantaleon while she was in Coster she purchased a diamond, pendant and a chain which
totalled U.S. 13,826.00. To pay for these purchases Petitioner presented an American Express card together with
his passport. The sales clerk took the card’s imprint, and asked Pantaleon to sign the charge slip. Ten minutes
later, the store clerk informed Pantaleon that his AmexCard had not yet been approved. His son, who had already
boarded the tour bus, soon returned to Coster and informed the other members of the Pantaleon family that the
entire tour group was waiting for them. Pantaleon asked the store clerk to cancel the sale. The store manager
though asked plaintiff to wait a few more minutes. After 15 minutes, the store manager informed Pantaleon that
respondent had demanded bank references. Pantaleon supplied the names of his depositary banks, then
instructed his daughter to return to the bus and apologize to the tour group for the delay. The Pantaleon family
then went United States before returning to. While in the United States, Pantaleon continued to use his Amex
card, several times without hassle or delay, but with two other incidents similar to the Amsterdam brouhaha. On
30 October 1991, Pantaleon purchased golf equipment amounting to US $1,475.00 using his AmEx card, but he
cancelled his credit card purchase and borrowed money instead from a friend, after more than 30 minutes had
transpired without the purchase having been approved. Pantaleon used the card to purchase children’s shoes
worth $87.00 at a store in Boston, and it took 20 minutes before this transaction was approved by respondent.

In Manila, Pantaleon sent a letter through counsel to American Express (Respondent), demanding an
apology for the "inconvenience, humiliation and embarrassment he and his family thereby suffered" for
respondent’s refusal to provide credit authorization for the aforementioned purchases. Respondent did give the
apology requested. Pantaleon then instituted an action for damages with the Regional Trial Court (RTC) of Makati
City, Branch 145. Pantaleon prayed that he be awarded P2,000,000.00, as moral damages; P500,000.00, as
exemplary damages; P100,000.00, as attorney’s fees; and P50,000.00 as litigation expense


Whether or Not American Express committed mora solvendi in its obligations to Pantaleon


The accepted relationship between a credit card provider and its card holders is that of creditor-
debtor, with the card company as the creditor extending loans and credit to the card holder, who as debtor is
obliged to repay the creditor. This relationship already takes exception to the general rule that as between a bank
and its depositors, the bank is deemed as the debtor while the depositor is considered as the creditor.

If we shift perspectives see the credit card company as the debtor/obligor, insofar as it has the obligation
to the customer as creditor/obligee to act promptly on its purchases on credit. There was delay on the part of
respondent in its normal role as creditor to the cardholder, such delay would not have been in the acceptance of
the performance of the debtor’s obligation (i.e., the repayment of the debt), but it would be delay in the extension
of the credit in the first place. Such delay would not fall under mora accipiendi, which contemplates that the
obligation of the debtor, such as the actual purchases on credit, has already been constituted. Herein, the
establishment of the debt itself (purchases on credit of the jewelry) had not yet been perfected, as it remained
pending the approval or consent of the respondent credit card company. There was an obligation on the part of
respondent to act on Pantaleons’ purchases with "timely dispatch," or within a period significantly less than the
one hour it apparently took before the purchase at Coster was finally approved.

G.R. No. 163244 June 22, 2009

Kalayaan Development & Industrial Corporation (Kalayaan) found out that Spouses Jose and Gloria
Valenzuela (Petitioners) had built their home on a land it owned, they demanded that they vacate said property.
Upon negotiation, petitioners and Kalayaan entered a Contract to Sell of the subject property for P1,416,000 in
twelve equal monthly instalments. The stipulation was that upon failure to pay any of said installments, petitioners
would be liable for a liquidated penalty of 3% a month compounded monthly.

The Petitioners were only able to pay a total of P208, 000.00. They requested Kalayaan to issue a deed of
sale for 118 square meters of the lot where their house stood, arguing that since they had paid half the purchase
price. Kalayaan, instead, sent two demand letters asking petitioners to pay their outstanding obligation with

Gloria Valenzuela’s sister, Juliet Giron, assumed the remaining balance for the 118 square meters of the
subject property at P10,000.00 per month to Kalayaan, which the latter accepted in behalf of Gloria. Thereafter,
Kalayaan demanded that petitioners pay their remaining outstanding obligation, but went unheeded. Kalyaan then
filed a Complaint for the Rescission of Contract and Damages against petitioners.

The RTC of Caloocan rendered a Decision in favor of Kalayaan, rescinding the contract between the
parties and ordering petitioners to vacate the premises. Petitioners aver that the CA failed to see that the original
contract between petitioners and Kalayaan was altered, changed, modified and restricted as a consequence of the
change in the person of the principal debtor (Sps. Valenzuela to Juliet). Nevertheless, the CA affirmed the RTC

Whether or not the original contract was novated and the principal obligation to pay for the remaining
half of the subject property was transferred from petitioners to Juliet.

No. Novation is never presumed. Novation is the extinguishment of an obligation by the substitution or
change of the obligation by a subsequent one which extinguishes or modifies the first, either by changing the
object or principal conditions, or by substituting another in place of the debtor, or by subrogating a third person in
the rights of the creditor. Parties to a contract must expressly agree that they are abrogating their old contract in
favor of a new one. In the absence of an express agreement, novation takes place only when the old and new
obligations are incompatible on every point.

The requisites of novation are: 1) There must be a previous valid obligation; 2) There must be an
agreement of the parties concerned to a new contract; 3) There must be the extinguishment of the old contract;
and 4) There must be the validity of the new contract.

In the instant case, none of the requisites are present, Kalayaan never agreed to the creation of a new
contract between them or Juliet. Kalayaan’s acceptance of the late payments made by Juliet is, an act of tolerance
on the part of Kalayaan.

G.R. No. 162074 July 13, 2009

The Acuña spouses obtained a loan from Prudential secured by a real estate mortgage on Cecilleville’s
property. The Acuña spouses defaulted on their loan, and Prudential initiated foreclosure proceedings. Cecilleville
tried to annul the real estate mortgage but failed when the Court ruled that Cecilleville had ratified the real estate
mortgage. In effect, Cecilleville became a third-party accommodation mortgagor. Cecilleville paid Prudential to
avoid foreclosure of its mortgaged properties. Cecilleville repeatedly asked the Acuña spouses to reimburse what it
paid Prudential, but the Acuña spouses refused to do so.

Whether or not Cecilleville are entitled to reimbursement from the defendants.

Yes. Article 1236 of the Civil Code applies “Whoever pays for another may demand from the debtor what
he has paid, except that if he paid without the knowledge or against the will of the debtor, he can recover only
insofar as the payment has been beneficial to the debtor.”

Cecilleville clearly has an interest in the fulfillment of the obligation because it owns the properties
mortgaged to secure the Acuña spouses’ loan. When an interested party pays the obligation, he is subrogated in
the rights of the creditor. Because of its payment of the Acuña spouses’ loan, Cecilleville actually steps into the
shoes of Prudential and becomes entitled, not only to recover what it has paid, but also to exercise all the rights
which Prudential could have exercised. There is, in such cases, not a real extinguishment of the obligation, but a
change in the active subject.


THE HON. REINATO G. QUILALA, in his capacity as Presiding Judge of the Regional Trial Court, Branch 57, City of

G.R. No. 157391. July 15, 2005

RCAM is the owner of advertising spaces located within the compounds of the Our Lady of Guadalupe
Minor Seminary and San Carlos Seminary in Guadalupe, Makati City. RCAM, as lessor, and LPI, as lessee, entered
into the following agreements for the lease of promotional areas:
(a) wherein RCAM leased to LPI certain advertising spaces for 4 years at a monthly rental of P11,000.00. The
rentals were subject to 15% increase every two years; and
(b) an Amendment To An Agreement, pursuant to which RCAM and LPI extended the lease period for five years,
with a total duration of seven years from February 1, 1990to March 1, 1997 and wherein the monthly rental was
increased to PI2,000.00, subject to a 10% annual increase.
On January 18, 1990, a Sublease Agreement was entered into by LPI and Astro Advertising, Inc. (Astro) in which the
former sublet Lot 28-B to the latter for five years. Under the agreement, the monthly rentals were to be paid
directly by Astro to the office of the RCAM. To clarify and consolidate the various agreements previously executed
by RCAM and LPI, the parties entered into a Memorandum of Agreement (MOA) dated September 28, 1993,
whereby they disregarded all prior contracts and considered them of no further force and effect. In the MOA,
RCAM leased to LPI specific advertising spaces, including those earlier subleased to Astro, for a period of four
years, at a monthly rental of P60,783.96 and subject to a 10% annual increment. When the sublease
to Astro expired in February 1995, RCAM did not turn over to LPI the possession of the sublet advertising
areas. Instead, the said areas were leased to Macgraphics Carranz International Corporation (MCIC) which erected
its own advertising signs thereon. In 1995, RCAM, sent a letter to LPI its delinquency in settling the rental
obligations which included the rentals due from Astro. The MTC rendered a Decision declaring LPI’s possession of
the leased premises as lawful, but ordered the same to pay the rentals due from September 1995 until it ceased
occupying the leased premises and declaring LPI made an overpayment of P344,550.33. The court further
pronounced that the payments made directly to RCAM during the first period should not be credited to LPI
because the latter had donated the amount to RCAM. The MTC maintained that the stipulation contained in the
sublease agreement was a stipulation pour autrui under Article 1311 of the NCC. However, the court also
maintained that LPI should be credited for the payments made by Astro during the second period, after the MOA
took effect, to March 1995. Finally, the MTC held that LPI was obliged to pay rentals in the amount of P414,486.50
when the complaint was filed. RCAM asserts that the Court's ruling, which directed it to deliver to LPI the
possession of the areas covered by the MOA for the remaining period of the lease, is not in accord with the
applicable laws and prevailing jurisprudence. It further insists that the MOA stipulated a fixed lease period which
had long before expired, and that the implementation of the court's ruling would in effect create a lease relation
between the parties that would commence beyond the lapse of the lease period provided for in the MOA.

Whether or not RCAM is still obliged to deliver the premise to LPI.

Yes. A lessee unlawfully evicted by the lessor is entitled to be restored to the possession of the property
leased for the "unused period" of the lease contract, counted from his eviction; such "unexpired portion'' of the
contract cannot be affected by the lapse of the period pending the final resolution of the complaint
for ejectment filed by the lessor. It bears stressing that in a reciprocal contract, like a lease, the period of the lease
must be deemed to have been agreed upon for the benefit of both parties, absent any language therein showing
that the term was deliberately fixed for the benefit of either the lessor or the lessee alone. Its continuance,
effectivity or fulfillment cannot be made to depend exclusively upon the free and uncontrolled choice of just one
party to a lease contract. In this case, RCAM unilaterally rescinded the contract; it had the billboards of LPI on the
spaces/areas leased by the latter dismantled on October 5, 1996, without wailing for the final outcome of
the ejectment case. The MTC, RTC and the CA found this unilateral recission of the MOA unlawful. Indisputably,
RCAM was obliged to deliver to LPI the premises which it forcibly took over on the said dale. It bears stressing that
LPI had occupied the leased properly from August 1, 1993 to October 6, 1996, or only three (3) years, two months
and two days. Thus, LPI is entitled to remain in the property, as lessee, for the unused portion of the four-year
period provided for in the MOA. By so ruling, the Court would thereby be merely enforcing the same. As
covenanted, LPI must remain in possession of the property, as lessee, for a period of four (4) years - not a day
less. For the Court to do otherwise would be to enrich RCAM at the expense of LPI, allowing the former to profit
by its misdeeds.

Narvaez vs Alciso
594 SCRA 60

Larry A. Ogas (Ogas) owned a parcel of land and a portion was subject to a 30-year lease agreement4 with
Esso Standard Eastern, Inc. Ogas sold the property to his daughter Rose O. Alciso (Alciso). In 1979, Alciso entered
into a Deed of Sale with Right to Repurchase, selling the property to Jaime Sansano (Sansano) for P10,000. Alciso
later repurchased the property from Sansano and, on she entered into another Deed of Absolute Sale, this time
selling the property to Celso S. Bate (Bate) for P50,000. The Deed stated that: “The SELLER warrants that her title
to and ownership of the property herein conveyed are free from all liens and encumbrances except those as
appear on the face of the title, specifically, that lease over the said property in favor of ESSO STANDARD EASTERN,
INC., the rights over which as a lessor the SELLER likewise hereby transfers in full to the buyer”. Bate entered into a
Deed of Sale of Realty,10 selling the property to the spouses Narvaez where they built a commercial building on
the property amounting to P300,000. Alciso demanded that a stipulation be included in the 14 August 1981 Deed
of Sale of Realty allowing her to repurchase the property from the Spouses Narvaez. Alciso alleged that she
informed the Spouses Narvaez that she wanted to repurchase the property. The Spouses Narvaez
demanded P300,000, but Alciso was willing to pay only P150,000. Alciso and the Spouses Narvaez failed to reach
an agreement on the repurchase price.

Whether or not the spouses Narvaez were right in claiming that Alciso did not communicate her
acceptance of the favor contained in the stipulation pour autrui; thus, she could not repurchase the property.

The petition is unmeritorious. Article 1311, paragraph 2, of the Civil Code states the rule on
stipulations pour autrui: If a contract should contain some stipulation in favor of a third person, he may demand its
fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental
benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately
conferred a favor upon a third person.
In Limitless Potentials, Inc. v. Quilala, the Court laid down the requisites of a stipulation pour autrui: All the
requisites are present in the instant case: (1) there is a stipulation in favor of Alciso; (2) the stipulation is a part, not
the whole, of the contract; (3) Bate and the Spouses Narvaez clearly and deliberately conferred a favor to Alciso;
(4) the favor is unconditional and uncompensated; (5) Alciso communicated her acceptance of the favor before its
revocation — she demanded that a stipulation be included in the Deed of Sale of Realty allowing her to repurchase
the property from the Spouses Narvaez, and she informed the Spouses Narvaez that she wanted to repurchase the
property; and (6) Bate and the Spouses Narvaez did not represent, and were not authorized by, Alciso. Alciso had
four years from 14 August 1981 to repurchase the property since there was no express agreement as to the period
when the right can be exercised. Tender of payment of the repurchase price is necessary in the exercise of the
right of redemption. Tender of payment is the seller’s manifestation of his or her desire to repurchase the property
with the offer of immediate performance. Alciso’s intimation to the Spouses Narvaez that she wanted to
repurchase the property was insufficient.


G.R. No. 167232
July 31, 2009

Subject of this controversy is a parcel of land identified as Lot Plan Psu-123169, containing an area of Two
Hundred Forty Thousand, One Hundred Forty-Six (240,146) square meters, and situated at Barangay (Brgy.) Pasong
Putik, Novaliches, Quezon City. The property is included in Transfer Certificate of Title (TCT) No. 200519, entered
on July 19, 1974 and issued in favor of B.C. Regalado & Co. (B.C. Regalado). It was conveyed by B.C. Regalado to
petitioner D.B.T. Mar-Bay Construction, Inc. (DBT) through a dacion en pago for services rendered by the latter to
the former. In the compliant filed by Ricadero Panes, he claims that he is the rightful and lawful owner of the said
property, that it was assessed in the amount of P2,602,190.00 by the City Assessor of Quezon City as of the year
1985. In essence, respondents alleged that B.C. Regalado and DBT used the derivative titles which covered
properties located far from Pasong Putik, Novaliches, Quezon City. On its part, DBT, traversing the complaint,
alleged that it is the legitimate owner and occupant of the subject property pursuant to a dacion en pago executed
by B.C. Regalado in the former’s favor. The RTC rendered a Decision in favor of the respondents. DBT filed a motion
for reconsideration but the RTC judge died. On Nov. 8, 2001, the RTC, through the new judge, Judge Juanson,
issued an Order reversing the earlier RTC Decision and dismissing the Complaint for lack of merit. The Court of
Appeals reversed the RTC’s decision.

Whether or not, the respondent is the lawful owner of the property in question.

Moreover, it may be stressed that there was no ample proof that DBT participated in the alleged fraud.
Dacion en pago is the delivery and transmission of ownership of a thing by the debtor to the creditor as an
accepted equivalent of the performance of the obligation. It is a special mode of payment where the debtor offers
another thing to the creditor, who accepts it as an equivalent of the payment of an outstanding debt. While the
Torrens system is not a mode of acquiring title, but merely a system of registration of titles to lands, justice and
equity demand that the titleholder should not be made to bear the unfavorable effect of the mistake or negligence
of the State's agents, in the absence of proof of his complicity in a fraud or of manifest damage to third persons.
The court granted the petition and the decision of the court of appeals is reversed.


G.R. No. 170674
August 24, 2009

The petitioner and the respondent entered in to three contracts for the delivery of ready mixed concrete
by Bentoval to FSI. The basic stipulations were: (a) for FSI to supply the cement to be made into ready mixed
concrete; (b) for FSI to pay Betonval within seven days after presentation of the invoices plus 30% interest p.a. in
case of overdue payments and (c) a credit limit of P600,000 for FSI. Bentoval delivered the concrete materials as
stipulated in the contracts, but the FSI has failed to pay the outstanding balance in 1992. On September 1, 1992,
Betonval demanded from FSI its balance of P2,349,460. Bentoval informed FSI that further defaults would leave it
no other choice but to impose the stipulated interest for late payments and take appropriate legal action to
protect its interest. FSI still failed to pay. Bentoval later brought the matter in action claiming the payment and its
interest of 30% per annum. On January 29, 1999, the RTC ruled for Betonval. FSI denied Bentovals allegation and
claimed that the amount claimed is not due and demandable because they are still reconciling. The case was
brought to the Court of Appeals and rendered a decision in favor of bentoval. FSI is ordered to pay for the interest
from 12% to 24% per annum. FSI filed a motion for reconsideration but it was denied.

Whether or not, Bentoval’s compliant is premature and the decisions of the CA and RTC in favor of the
respondent is invalid.

In view of FSI’s failure to dispute this finding of the RTC because of its failure to perfect its appeal, FSI is
now estopped from raising this issue. There is no cogent reason to depart from the RTC’s finding. There can be no
other conclusion but that Betonval had reduced the imposable interest rate from 30% to 24% p.a. and this reduced
interest rate was accepted, albeit impliedly, by FSI when it proposed a new schedule of payments and, in fact,
actually made payments to Betonval with 24% p.a. interest. By its own actions, therefore, FSI is estopped from
questioning the imposable rate of interest. The court likewise hold that the imposition of a 12% p.a. interest on the
award to Betonval (in addition to the 24% p.a. interest) in the assailed judgment is proper. It is clear that FSI is
liable for the damages it incurred from its delay to deliver a sum of money to bentoval. The court denied the

G.R. No. 157374, August 27, 2009

Spouses Pangan were the owners of the lot and two door apartments located at 1142 Casanas St., Sampaloc
Manila. On June 2, 1989, Consuelo agreed to sell the above property to respondents, for the price of P540,000. On
the same day, Consuelo received 20,000 as a down payment, evidenced by a receipt that also included the terms
of the parties’ agreement. Three days later, the parties agreed to increase the purchase price from 540,000 to
580,000. In compliance with the agreement, respondents issued two checks payable to Consuelo. Thereafter,
Consuelo refused to accept the checks because her children, being the co-owner of the property, upon the death
of her husband, did not want to sell the subject properties. For the same reason, Consuelo offered to return the
down payment but Perreras rejected it. Thus, Consuelo filed a complaint for consignation. The respondent who
insisted on enforcing the agreement in turn instituted an action for specific performance against Consuelo. In her
Answer, Consuelo claimed that she was justified in backing out from the agreement on the ground that the sale
was subject to the consent of the petitioners-heirs who became co-owners of the property upon the death of her
husband, Cayetano. Since the petitioners-heirs disapproved of the sale, Consuelo claimed that the contract
became ineffective for lack of the requisite consent. RTC ruled in the respondents’ favor; it upheld the existence of
a perfected contract of sale, at least insofar as the sale involved Consuelo’s conjugal and hereditary shares in the
subject properties. The trial court found that Consuelo’s receipt of the P20,000.00 earnest money was an
“eloquent manifestation of the perfection of the contract.” hence, this petition.

Whether or not there was a perfection of contracts

Yes. Article 1318 of the Civil Code declares that no contract exists unless the following requisites concur: (1)
consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of
the obligation established. Since the object of the parties’ agreement involves properties co-owned by Consuelo
and her children, the petitioners-heirs insist that their approval of the sale initiated by their mother, Consuelo, was
essential to its perfection. Accordingly, their refusal amounted to the absence of the required element of
consent.That a thing is sold without the consent of all the co-owners does not invalidate the sale or render it void.

The Supreme Court ruled that the terms of the parties’ agreement are clear and explicit; indeed, all the essential
elements of a perfected contract are present in this case. While the respondents required that the occupants
vacate the subject properties prior to the payment of the second installment, the stipulation does not affect the
perfection of the contract, but only its execution. In sum, the case contains no element, factual or legal, that
negates the existence of a perfected contract between the parties.


G.R. No. 151903 October 9, 2009

Petitioner Manuel Cinco obtained a commercial loan in the amount of P700,000.00 from respondent
MTLC. The loan was evidenced by a promissory note and secured by a real estate mortgage. His outstanding
obligation amounted to P1,071,256.66, included the principal, interest, and penalties. To be able to pay the loan in
favor of MTLC, the spouses Go Cinco applied for a loan with the Philippine National Bank, Maasin Branch and
offered as collateral the same properties they previously mortgaged to MTLC. The PNB approved the loan
application for P1.3 Million; the release of the amount, however, was conditioned on the cancellation of the
mortgage in favor of MTLC. Manuel informed Ester Servacio, MTLC’s President that there was money with the PNB
for the payment of his loan with MTLC. Manuel executed a Special Power of Attorney (SPA) authorizing Ester to
collect the proceeds of his PNB loan. Ester went to the bank and confirmed the existence of the P1.3 Million loan,
but required Ester to first sign a deed of release/cancellation of mortgage before they could release the proceeds
of the loan to her. Ester refused to sign the deed and did not collect the P1.3 Million loan proceeds. As the MTLC
loan was already due, Ester instituted foreclosure proceedings against the spouses Go Cinco. To prevent the
foreclosure of their properties, the spouses Go Cinco filed an action for specific performance, damages, and
preliminary injunction before the RTC, Branch 25. The RTC ruled in favor of the spouses Go Cinco. Through an
appeal with the CA, MTLC and Ester successfully secured a reversal of the RTC’s decision. And dismissed the
spouses Go Cinco’ complaint. From this dismissal, the spouses Go Cinco filed the present appeal by certiorari.

Whether the loan due the MTLC had been extinguished.
Yes. Under Article 1232 of the Civil Code, payment means not only the delivery of money but also the
performance, in any other manner, of an obligation. Article 1233 of the Civil Code states that “a debt shall not be
understood to have been paid unless the thing or service in which the obligation consists has been completely
delivered or rendered, as the case may be.” In contracts of loan, the debtor is expected to deliver the sum of
money due the creditor. These provisions must be read in relation with the other rules on payment under the Civil
Code, which rules impliedly require acceptance by the creditor of the payment in order to extinguish an
obligation. In the present case, Manuel sought to pay Ester by authorizing her, through an SPA, to collect the
proceeds of the PNB loan – an act that would have led to payment if Ester had collected the loan proceeds as
authorized. Admittedly, the delivery of the SPA was not, strictly speaking, a delivery of the sum of money due to
MTLC, and Ester could not be compelled to accept it as payment based on Article 1233. Nonetheless, the SPA
stood as an authority to collect the proceeds of the already-approved PNB loan that, upon receipt by Ester, would
have constituted as payment of the MTLC loan. Had Ester presented the SPA to the bank and signed the deed of
release/cancellation of mortgage, the delivery of the sum of money would have been effected and the obligation
extinguished. As the records show, Ester refused to collect and allow the cancellation of the mortgage.

Megaworld Globus Asia, Inc. V Mila S. Tanseco

G.R. No. 181206 October 9, 2009

Megaworld and respondent Tanseco entered into a contract to buy and sell a 224 square meter condo
unit at pre-selling price “The Salcedo Park” in Makati City. Tanseco paid all instalments due up to Jan, 1998, leaving
unpaid the balance of 2,520,305.63 pending delivery of the unit. Megaworld, however failed to deliver the unit
within the stipulated period. A few days shy of three years later, Megaworld, by notice dated April 23, 2002 (notice
of turnover), informed Tanseco that the unit was ready for inspection preparatory to delivery. Tanseco replied
through counsel, by letter of May 6, 2002, that in view of Megaworld’s failure to deliver the unit on time, she was
demanding the return of P14,281,731.70 representing the total installment payment she had made, with interest
at 12% per annum from April 30, 1999, the expiration of the six-month grace period. Tanseco pointed out that
none of the excepted causes of delay existed. Her demand having been unheeded, Tanseco filed on June 5, 2002
with the Housing and Land Use Regulatory Board’s (HLURB) Expanded National Capital Region Field Office a
complaint against Megaworld for rescission of contract, refund of payment, and damages. By Decision of May 28,
2003, the HLURB Arbiter dismissed Tanseco’s complaint for lack of cause of action, finding that Megaworld had
effected delivery by the notice of turnover before Tanseco made a demand. Tanseco was thereupon ordered to
pay Megaworld the balance of the purchase price, plus P25,000 as moral damages, P25,000 as exemplary
damages, and P25,000 as attorney’s fees. Her Motion for Reconsideration having been denied by Resolution dated
August 30, 2006, Tanseco filed a Petition for Review under Rule 43 with the Court of Appeals the appellate court
granted Tanseco’s petition.

Whether or not Tanseco is entitled to be reimbursed the total amount she paid Megaworld.

The Court affirmed the decision of the Court of Appeals with modification. As modified, the dispositive
portion of the Decision reads: The July 7, 1995 Contract to Buy and Sell between the parties is cancelled.
Petitioner, Megaworld Globus Asia, Inc., is directed to pay respondent, Mila S. Tanseco, the amount of
P14,281,731.70, to bear 6% interest per annum starting May 6, 2002 and 12% interest per annum from the time
the judgment becomes final and executory; and to pay P200,000 attorney’s fees, P100,000 exemplary damages,
and costs of suit.
Heirs of Sofia Quirong vs DBP (Development Bank of the Phil.)
G.R. No. 173441

A 589 square meter land was given to Felisa Dalope by her deceased husband. Felisa has nine children
one of them naming Rosa Dalope – Fucion. To enable Rosa and her husband Antonio Fucion get a loan from
respondent DBP, Felisa sold the whole lot to the Funcions. On February 12, 1979, after the Fucions failed to pay
their loan, DBP foreclosed the mortgage on the lot and consolidated ownership in its name on June 17, 1981. 4
years later, DBP conditionally sold the lot to Sofia Quirong. Felisa and her 8 children filed an action for partition
and decleration of nullity of documents with damages against the DBP and the Funions before the RTC.
Notwithstanding the suit, DBP executed a deed of absolute sale of the subject lot in Sofia Quirong Favor. When
Sofia died, heirs filed an answer in intervention. RTC decision, declaring the DBP’s sale to Sofia valid only with
respect to the shares of Felisa and Rosa Funcion in the Property.

Whether or not the Quirong heirs action for rescission of respondent DBP’s sale of the subject property to
Sofia Quirong was already barred by prescription.
In the negative, Whether or not the heirs of Quirong were entitled to the rescission of the DBP’s Sale of
the subject lot to the late Sofia Quirong as a consequence of her heirs having been from it.

The Court Affirms the decision of the Court of Appeals that the Quirong heirs’ action for rescission of the
sale between DBP and their predecessor, Sofia Quirong, is barred by prescription reckoned from the date of finality
of the December 16, 1992 RTC decision in Civil Case D-7159 and applying the prescriptive period of four years set
by Article 1389 of the Civil Code. Second issue was held, that DBP must reimbursed and pay the damages to

PNB vs Encina
G.R. No. 174055

Spouses Encina secured a loan in the amount of P500k from PNB Occidental Mindoro for their metal craft
business. They again secured P200k loan for their agricultural business. Both loans were secured by a promissory
note, a mortgaged property, and a credit agreement. On 4 Feb 1997 these loans were fully paid. Subsequently, a
loan of P400k was secured by spouses Encina for a common carrier business, secured by 2 mortgaged parcels of
land. PNB granted an all purpose credit to spouses Encina in the amount of P1.250M. The spouses availed of the
P1.050M. Upon maturity, spouses Encina failed to pay; the mortgaged properties were then published by PNB in a
local newspaper of general circulation in Mindoro named "The Island Observer". These mortgaged properties were
then auctioned, with PNB having the highest bid. Spouses Encina claim that the loan of P1.050M was used for
agriculture, not for metal craft business therefore PNB should not have foreclosed the mortgaged properties and
instead, restructured the loan for a longer gestation period. On the other hand, PNB claims that the loan was used
by the spouses for metal craft, therefore does not require to be restructured.

W/N the foreclosure and sale of the mortgaged properties are null and void
W/N the loan was used for agricultural business

Case remanded. The RTC should not have dismissed the complaint for lack of cause of action. Upon
petition for review, the CA erred in coming up with a decision for PNB. It is incumbent upon PNB to disprove the
averments of the complaint itself and not the allegations in the motion for review.
G.R. No. 158086

Respondents, under the name R.M. Sy Chicks are in the business of eggs and their by-products in Nueva
Ecija and Bulacan. They entered into a contract with petitioner for the incubation and hatching of these eggs. On 3
Feb 1993, respondent went to petitioner's hatchery in order to collect the eggs but the latter refused to part with
them due to unpaid balances. Respondent then gave P15,000 but was not able to collect the eggs. On 10 Feb 1993
respondent again went to petitioner but the latter refused because of the same reason. Respondent then handed
another P15,000. Petitioner warned respondent that unless he is paid in full, he will impound respondent's vehicle
and detain him in his compound.

W/N petitioner abused his rights in not parting with the eggs.

No for his retention was justified, i.e. he is not religiously paid by respondent. According to article 1248,
the creditor cannot be compelled to receive partial payments, or payments which are not of the same nature, i.e.
eggs and cash. It was respondents who violated the reciprocity of the contract. Ordered to pay P408,852.10, with
legal interest of 12% from the date of finality of this judgment until fully paid.

Jaguar Security and Investigation Agency vs. Sales

G.R No. 162420; April 22,2008

Petitioner Jaguar security and investigation agency a private Corporation engaged in the business of
providing security services to it's clients, one of whom is Delta Mining Industries Inc. Sales, Tamayo, Caranyagan,
Silva, Moron, and Fetalvero were hired as security guards by Jaguar and was assigned in Delata office Libis, Quezon
City. Caranyagan and Tamayo were terminated by Jaguar. They alleged that their dismissal were arbitrary and
illegal. All the guard-employees claim for monetary benefits such as underpayment, overtime pay, rest day and
holiday premium pay, underpaid 13th month pay, night shift differential, five days service and incentive leave pay .
Aside from those claims Caranyagan and Tamayo argue that they were entitled to separation pay and back wages,
for the time they were illegally dismissed until finality of decision. Furthermore, all the respondents claim for moral
and exemplary damages. The case was filed with the Labor Arbiter. The Labor Arbiter rendered a decision in favor
of the private respondents Sales et al., the charges of illegal dismissal on the part of Tamayo and Caranyagan was
dismissed for lack of merit and the respondents Jaguar Security Agency and Delta Milling Industries were ordered
to jointly and severally pay all the six complainants. On July, 1999, Jaguar filed a partial appeal because of the
failure of NLRC to resolve it's cross claim against Delta as the party Ultimately liable to pay the security guards. The
appeal was dismissed because it was not the proper forum to raise the issue, furthermore, Jaguar being the direct
employer is the one principally liable to the employees. Thus, the petitioner filed a separate civil action. Jaguar,
sought reconsideration of the dismissal but NLRC denied resulting to Jaguar filing for a petition for certiorari.

Whether or not Jaguar and Delta should be jointly and severally liable to the guards.Whether or not
Jaguar is already entitled for reimbursement from Delta Milling even there is no payment made yet.

Yes. Under the Labor code, the joint and several liability of the contractor and the principal is mandated
to assure compliance with the provisions of the Labor code including the statutory minimum wage. The contractor
petitioner (Jaguar) is made liable by virtue of his status as direct employer. On the other hand, Delta Milling, as
principal is made the indirect employer of the contractor's employees for the purposes of paying the employees
their wages should the contractor be unable to pay them.
No. The liability of Delta Milling to reimburse Jaguar will only arise if and when petitioner actually pays it's
employees the adjudged liabilities. payment which means not only the delivery of money but also the
performance, in any other manner, of the obligation, is the operative fact which will entitle either of the solidary
debtors to seek reimbursement for the share which corresponds to each of the debtors.


G.R. NO. 179337 APRIL 30, 2008

Saludaga was a sophomore law student in FEU when he was shot by Rosete, a security guard on duty at
the school premises. Petitioner was rushed to FEU-NRMF due to the wound he sustained. Rosete was brought to
the police station where he explained that the shooting was an accident wherein he was released considering that
no formal complaint was filed against him. Petitioner thereafter filed a complaint for damages against the
respondents on the ground that they breached their obligation to provide students with a safe and secure
environment and an atmosphere conducive for learning. Respondents, in turn, filed a complaint against the agency
contracted by the latter to provide security services within its premises and it's President, to indemnify them for
whatever would be adjudged in favor of the petitioner if any; and to pay attorney's fees and cost of the suit.

Whether or not the plaintiff be awarded judgment favorable to the latter thus proving FEU's negligence
was attendant.

The Court held that FEU breached the school-student contract for negligence on its obligation to ensure
and take adequate steps to maintain peace and order within the campus after it was found that FEU failed to
undertake steps to ascertain and confirm that the security guards assigned in the campus possess the
qualifications required in the Security Service Agreement between FEU and Galaxy. Article 1170 of the Civil Code
provides that those who are negligent in the performance of their obligations are liable for damages. Accordingly,
for breach of contract due to negligence in providing a safe learning environment, respondent FEU is liable to
petitioner for damages.


G.R NO. 158261

Petitioner is an international freight forwarder. Respondent, on the other hand, is one of the
concessionaires of the Subic Bay Metropolitan Authority (SBMA). It is principally engaged in the importation and
local sale of duty-free sporting goods and other similar products. Sometime in October 1993, Respondent engaged
the services of the petitioner to attend and undertake the former's brokerage and trucking requirements. On April
19, 1995, petitioner filed against respondent a Complaint for Collection of Sum of Money with the Regional Trial
Court (RTC) of Manila seeking the recovery of the amount of P248,449.63 plus legal interest as well as attorney's
fees and costs of suit. Respondent contended that since May 1994, they have never engaged the services of the
petitioner that they have no legal obligation. In the trial, petitioner presented as part of its evidence 34 carbon
copies of invoices, to prove respondent's indebtedness while respondent presented 28 original copies of the 34
invoices submitted by petitioner for the purpose of proving payment of the amount sought to be recovered by the

ISSUE: (1) Whether or not respondent, who is the debtor, has the burden of proving payment;
(2) Whether or not the subject invoices prove such payment or at least raise a disputable presumption that
payment has been made.

(1.) No. The settled rule is that one who pleads payment has the burden of proving it. Even where the
creditor alleges non-payment, the general rule is that the onus rests on the debtor to prove payment, rather than
on the creditor to prove non-payment. The debtor has the burden of showing with legal certainty that the
obligation has been discharged by payment. Where the debtor introduces some evidence of payment, the burden
of going forward with the evidence – as distinct from the general burden of proof – shifts to the creditor, who is
then under a duty of producing some evidence to show non-payment.
Since respondent claims that it had already paid petitioner for the services rendered by the latter, it follows that
the former carries the burden of proving such payment.
(2.) No. An invoice, in and by itself, and as opposed to a receipt, may not be considered evidence of
payment. In addition, it does not mean that possession by a debtor of an invoice raises the presumption that it has
already paid its obligation. An invoice is simply a list sent to a purchaser, factor, consignee, etc., containing the
items, together with the prices and charges, of merchandise sent or to be sent to him; a mere detailed statement
of the nature, quantity and cost or price of the things invoiced.




Jose Rene Mariano R. Cruel ATTY. ULAN SARMIENTO III
FEBRUARY 4, 2012