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JARDINE DAVIES INC. vs. C.A & FAR EAST MILLS SUPPLY CORP. (G.R. No. 128069, June 19, 2000)
Ponente: Bellosillo, J..:

THE FACTS OF THE CASE ARE AS FOLLOWS:

The petitioner PURE FOODS Corporation decided to install two 1500 KW generators on its food processing plant in
San Roque, Marikina City at the height of 1992 power crisis in the country in which seeks to put remedy and to curtail
further losses due to the series of power failures and interruptions. The Far East Mill Supply Corporation or the FEMSCO
won the award after the bidding for the supply and installation of generators, they were one of the three bidders who
submitted their proposals and gave bid bonds of 5 percent as required, in December 12, 1992.
FEMSCO submitted the performance bond and contractor’s all-risk policy which later acknowledged by the PURE
FOODS Vice President. However, the Senior Vice President of the latter unilaterally canceled the award as “significant
factors were uncovered and brought to (their) attention which dictate (the) cancellation and warrant a total review and re-bid
of (the) project.” The thing is, before FESCO protested such cancellation by sought for a meeting and meant to resolve such
issue, PUREFOODS already awarded the project and concluded contract with JARDINE Nell, which incidentally was not of
the bidders.
FEMSCO wrote the demand letter to PUREFOODS to honor its contract and to cease and desist its counterpart
JARDINE Nell from delivering and installing the two (2) generators at PUREFOODS, which latter not acted upon, thus, the
respondent filed a sue against petitioner for such: PUREFOODS for defaulting its contract and for JARDINE for such
interference and inducement.
The Regional Trial Court of Pasig ruled in favor to FEMSCO ordering the PUREFOODS to pay such damages and
obligations but the Trial Court also granted the Demurrer of Evidence filed by the JARDINE which resulting in the dismissal
of the complaint. The FEMSCO and PUREFOODS brought the decision to the Court of Appeals. The Appellate Court
rendered their decision, August 14, 1996, which confirmed the decision of the trial court.

ISSUE(S) OF THE CASE:

1. Whether or not, there is existed perfect contract between PUREFOODS AND FEMSCO.

THE SUPREME COURT RULED THAT:

Contracts are perfected by mere consent, upon the acceptance by the offeree of the offer made by the offeror. From
that moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage, and law. To produce a contract, the
acceptance must not qualify the terms of the offer. However, the acceptance may be expressed or implied. For a contract to
arise, the acceptance must be made known to the offeror. Accordingly, the acceptance can be withdrawn or revoked before it
is made known to the offeror.
The controversy lies in the consent – whether there was an acceptance of the offer, and if so, if it was
communicated, thereby perfecting the contract.
Since the petitioner PUREFOODS started the process of entering into the contract by conducting a bidding,
prescribe in Art. 1326 of the Civil Code, which provides that “[a]dvertisements for bidders are simply invitations to make
proposals”, applies. Accordingly, the Terms and Conditions of the Bidding disseminated by the petitioner PUREFOODS
constitutes the “advertisement” to bid on the project. The bid proposals or quotations submitted by the prospective suppliers
including the respondent FEMSCO, are the offers. And, the reply of petitioner PUREFOODS, the acceptance or rejection of
the respective offers.
Hence, for all intents and purposes, the contract at the point has been perfected.
Therefore, the petition is denied, which assailed the decision of the Court of Appeals ordering PUREFOODS
Corporation to pay the private respondent, FAR EAST MILLS SUPPLY CORPORATION at the corresponding sum of
damages.
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SPOUSES PANGILINAN VS. COURT OF APPEALS (G.R. No. 83588, September 29, 1997)
Ponente: Torres Jr., J.

THE FACTS OF THE CASE ARE AS FOLLOWS:

On May 18, 1968, the petitioners Pangilinan couple and private respondents Jose and Luis Canlas entered into a
Contract to Buy and Sell a subdivision lot located at Sto. Nino Village, San Fernando, Pampanga with an area of 577 square
meters with the total contract price of P17, 310 which payable on instalment basis for 120 months. The sum of P1, 731
representing 10 percent of the total price of the lot was paid by the petitioner to the private respondents and thereafter
monthly installments which amounted to about 85 percent of the total price were effect as of January, 1974; the last payment
thereof was made on May 14, 1975.
Paragraph 5 of the contract provided for automatic extrajudicial rescission upon default in payment of three (3)
consecutive monthly installment or to comply with any terms and conditions, with forfeitures of installment as rents and as
payment for damages. The said contract to buy and to sell as well as the receipts of various payments made by petitioners in
favor of private respondents were given Mr. Arcadio S. Mallari.
Equipped with Special Power of Attorney dated May 15, 1983 from Pangilinan spouses went personally to the
private respondents and request them to release the title of the lot as he would pay in full the alleged remaining balance of
P1,875. The private respondents told Arcadio to return after two weeks as they would confer each other. After Arcadio
returned, Jose Canlas told him that they were not in the position and capacity to release such title in the reason that title had
already been disposed of.
Hence, he discovered that lot was been mortgaged to the Rural Bank of Sta. Rita, which he forced to file a complaint
for Specific Performance and Damages at Regional Trial Court of San Fernando, Pampanga on July 25, 1983 which
rendered its decision in favor to Mr. Arcadio Mallari on December 12, 1985.
The private respondents appealed to the Court of Appeals on January 14, 1988 which reversed and set aside the
decision of the trial court.

ISSUE(S) OF THE CASE: Whether or not that the creditor can unilaterally rescind a contract to sell.

THE SUPREME COURT RULED THAT:

Yes. The Court is not persuaded to the Petitioner’s argument that automatic recission of a contract extrajudicially
undertaken by a creditor maybe effected only if the defaulter was duly informed of the intention of the creditor to rescind the
contract. If the defaulter will not object, then the creditor may proceed to extrajudicially rescind or cancel the contract,
however, if the defaulter will manifest his objection, then the matter of rescission will be subjected to judicial determination.
The Court reiterate the fifth paragraph of the Contract to Buy and Sell that the said contract shall be considered
automatically rescinded and canceled and of no further force or effect, upon failure of the Vendee to pay when due, three (3)
consecutive monthly installments or to comply with any of the terms and conditions hereof, in which case the Vendors shall
have the right to resell the said parcel of land to any person or purchaser, as if this contract has never been entered into.
Article 1592 of the Civil Code, requiring demand by suit or by notarial act in case the vendor of realty wants to
cancel does not apply to contract of sell but only contract of sale. In contracts of sell, where ownership is retained is a
positive suspensive condition, the failure of which is not a breach, casual or serious, but simple an event that prevented the
obligation of the vendor to convey title from acquiring binding force.
The Court also cited that applicable provision at this case at bar as Article 1191 stated that the power to rescind
obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.
Thus, rescission stated by the mentioned provision was inevitable due to petitioner’s failure to pay stipulated price within the
original period fixed in the agreement.
Therefore, the petition for review seeks to set aside the decision of the Appellate Court was hereby denied and
affirmed the decision of the latter.
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VICENTE GOMEZ vs. COURT OF APPEALS (G.R. no. 120747, September 21, 2000)
Ponente: Buena, J.

FACTS OF THE CASE ARE AS FOLLOWS:

May 17, 1978 when the City of Manila issued Resolution No. 16-A Series of 1978 which effectively set guidelines
and criteria for the award of city home lots to qualified and deserving applicants. Attached to said resolution and made as
integral part was a Contract to Sell 4 that further laid down terms and conditions which the lot awardee must comply with.
Through the City Tenants Security Committee (CTSC), they passed Resolution 17-78 5 which in effect awarded to
46 applicants, 37 homelots in the former Ampil-Gorospe estate located in Tondo, Manila. Luisa Gomez, predecessor-in-
interest of herein petitioner Vicente Gomez, was awarded Lot 4, Block 1, subject to the provision of Resolution No. 3-78 of
the CTSC and building, subdivision, and zoning rules and regulations. Consequently, a certificate of award 6 was granted in
favor to Luisa Gomez by the CTSC on July 2, 1978, who paid the purchase price of the lot amounting of P3, 556 on
installment basis.
Luisa finally paid in full purchase price of the lot, but despite such full payment, she still paid in installment an
amount of P8, 244 in excess of the purchase price, which accepted on the part of CTSC. Lately, Luis died in the US and had
her side was her husband Daniel and four children.
Subsequently, in a memorandum by the CTSC, they directed the Western Police District to conduct an investigation
regarding reported violations of the terms and conditions of the award committed by the lot awardees. It was confirmed that
awardee Daniel Gomez, the brother of petitioner and husband of Luisa, violated the terms and conditions of their respective
awards. Thus, the CTSC, through Resolution No. 15-86, ordered the cancellation of the lot awards of Daniel Gomez and
other awardees who found to have committed violations, and further declaring the forfeiture of payments made by said
awardees as reasonable compensation for the use of homelots. However, Daniel died and his children who executed an
affidavit of adjudication in favor of their uncle, Vicente Gomez.
Vicente filed a memorandum before CTSC praying that Resolution 15-86 to set aside and that award of the lot be
restored to Luisa Gomez, which later denied. He filed petition for certiorari, prohibition and mandamus before the RTC
which later ordered the CTSC to refund to the petitioner his overpayment but the Court of Appeals reversed the Trial Court’s
decision.

ISSUE(S) OF THE CASE:

Whether or not the contract between the CTSC and Luisa was rescinded by the virtue of the violations in the award.

THE SUPREME COURT RULED THAT:

In light of existing law and jurisprudence and based on the evidence adduced, the Court finds difficulty giving
credence and weight to petitioner’s submissions. Therefore, the cancellation of such award through Resolution 15-86 was
proper. Pointin out, it was contract to sell not a sale was concluded between City of Manila, through CTSC and deceased
Luisa Gomez which has its own attributes, peculiarities, and effects, the Court reiterated their ruling in Adelfa Properties,
Inc. vs Court of Appeals about the bold distinctions between the two.
Applying the Article 1306 of the Civil Code, the contracting parties are accorded the liberality and freedom to
establish such stipulation, clauses, terms and conditions as they may deemed convenient, provided the same are not contrary
to the law, morals, good custom, public order or public policy. In the law on contracts, such fundamental principle is known
as the autonomy of contracts. Therefore, the Court saw no hindrance that prohibits the parties from stipulating other law
conditions, aside from full payment of the purchase price, which they pledge to bind themselves and upon which transfer of
ownership depends.
For a contract, like a contract to sell, involves a meeting of the minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service. Contracts, in general, are perfected by mere
consent, which is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to
constitute the contract. The offer must be certain and the acceptance is absolute.
In the Contract to Sell, it was clearly laid down the terms and conditions which the awardee-vendee must comply
with. Hence, Luisa Gomez, her heirs and successors-in-interest alike, are duty bound to perform the correlative obligations
embodied in the contract.
The petitioner urges that awardee Luisa Gomez did not commit anu violation of the lot award. In contrast, the
records showed that the camp of Luisa Gomez, acted on the violation of the terms and conditions of the contract in the
investigation submitted which accordingly revealed that the lot was actually occupied and leased by a certain Erlinda Perez
and Mignony Lorghas who were paying rentals to petitioner Vicente Gomez for the lease of the subject premises which,
therefore, constitute a brazen transgression and clear contravention of the Contract to Sell. And such kind of stipulation was
upheld by this Court in the Adelfa case where categorically declared that Article 1592 of the Civil Code, which requires
rescission either by juridical action, or notarial act, does not apply to a contract to sell.
Therefore, the petition for review on certiorari is dismissed and assailed the decision of the Court of Appeals,
however, they ordered the City of Manila to refund the overpayment plus interest made by the petitioner.
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ALLIED BANKING CORPORATION vs. COURT OF APPEALS (G.R. No. 124290, January 16, 1998)
Ponente: Bellosillo, J.:

FACTS OF THE CASE:

Spouses Filemon and Lucia Tanqueco owned a 512-square meter lot located at No. 2 Sarmiento Street corner
Quirino High-way, Novaliches, Quezon City and they leased the said property to petitioner Allied Banking Corporation for a
monthly rental of P1,000 for the first three years which escalated by 25 percent. The specific provision saying in Provision 1,
“the term of this lease shall be 14 years commencing from April 1, 1978 and may be renewed for a like term at the option of
the lessee. With that, the Allied Bank introduced an improvement to construct the building that serves as branch office which
subjected to the ownership for the lessors once the contract expires.
However, in February 1988, the Tanqueco couple executed a deed of donation in favor to their four children. Next,
in February 13, 1991, the couple notified the petitioner that they are no longer interested in renewing the lease. As the
contract expired in 1992, the respondents demanded the bank company to vacate the premises but the petitioner asserted its
sole option to renew the lease enclosed to the letter a cashier’s check which eventually not accepted by the respondents.
An action of ejectment was commenced in the Metropolitan Trial Court of Quezon City, later, the MTC declared the
Provision 1 on the lease contract void for being in violation of the Article 1308 of the Civil Code. The appeal was made
before the Regional Trial Court which later assailed the decision to be affirmed, and affirmed the same by the Court of
Appeals. Eventually, on February 20, 1993, while the case pending at bar, the Allied Bank vacated the leased premises for
the reason of controversy but still they insisted that Provision 1 of the lease contract was mutually agreed upon hence valid
binding on both parties.
ISSUE(S):
Whether or not the Provision No. 1 of the lease contract is valid.

SUPREME COURT RULES THAT:

The Highest Court agreed with the petitioner reiterating the Article 1308 of the Civil Code that expressed “the
contract must bind both the contracting parties; its validity or compliance cannot be left to the will of one of them.” It is
based on the principle that the obligations arising from the contracts have the force of law between the contracting parties
which must be mutuality between the contracting parties based on the essentially on their equality. The purpose is to render
void a contract containing a condition which makes it fulfilment dependent solely upon the uncontrolled will of one of the
contracting parties.
The lease contract was mutually agreed upon and was hence valid and binding upon on both parties. Afterall, the
lessor is free to give or not to give the option to the lessee while the latter has a right to elect whether to continue with the
lease or not, once he exercises his option to continue and the lessor accepts, both parties are thereafter bound by the new
lease agreement.
The decision of the Court of Appeals was reversed and set aside and required the Allied Banking Corporation to pay
the pending rentals to the respondents in the corresponding computations since they vacate the premises and terminated the
renewed lease contract.
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INTERGRATED PACKAGING CORP vs. COURT OF APPEALS (G.R. No. 115117, June 8, 2000)
Ponente: Quisumbing, J:

FACTS OF THE CASE:

Sometime in May 5, 1978 the petitioner and the respondent executed an order agreement wherein the private
respondent was bound itself to deliver the 3,450 reams of printing paper to petitioner worth P1,040,060 on the schedule on
the basis of the contract and the materials were to be paid within the minimum of thirty days and maximum of ninety days
from delivery.
On June 7, 1978, the petitioner entered into a contract with Philippine Appliance Corporation (Philacor) to print
three volumes of “Philacor Cultural Books” for delivery on the date they agreed upon at the price of P10 per copy or a total
cost of P3,000,000.
On July 30, 1979, the private respondent had delivered the petitioner 1,097 reams of printing out of 3,450 reams as
stated in the agreement. Turns out that the petitioner alleged it wrote private respondent to immediately deliver the balance
because further delay would greatly prejudice petitioner. From June 5, 1980 until July 23, 1981, private respondent delivered
again to petitioner various quantities of printing paper amounting to P766,101.10, but the petitioner encountered difficulties
in paying such amount.
The Petitioner entered into an additional printing contract with Philacor but the petitioner failed to fully comply with
its contract for the printing of books. Hence, Philacor demanded the petitioner for compensation for the delay and damage it
suffered on account of petitioner’s failure in such obligation.
The collection suit was initiated before the Regional Trial Court of Caloocan City. In answer, petitioner denied the
material allegations of the complaint by countered by the petitioner that the private respondent was able to deliver only 1,097
reams with 2,875 reams remaining based on the agreement, hence the private respondent failed to deliver the balance despite
demand. In response to the counterclaim, the private respondent moved for admission of its supplemental complaint as they
alleged that subsequent to the enumerate purchase invoices in the original complain, petitioner made additional purchases of
printing paper amounting P94,200. They alleged the petitioner for failure and refusal to pay its outstanding obligation
although it made partial payments.
Later, the RTC rendered judgment declaring that petitioner should pay private respondent in addition that the
petitioner’s counterclaim was meritorious as they ruled that were it not for the failure or delay to deliver papers, petitioner
could have sold books to Philacor and realized profit from the sale, the petitioner suffered a dislocation of business on
account of loss of contracts and goodwill as a result of private respondent’s violation of its obligation. On appeal, the
respondent Court of Appeals reversed and set aside the judgment of the trial court, as they appellate court ordered petitioner
to pay private respondent.

ISSUE(S) OF THE CASE:

Whether or not private respondent violated the order of agreement.

THE SUPREME COURT RULED:

Yes. The Supreme Court reiterated that petitioner’s contention lack of factual and legal basis. The transaction
between parties a contract of sale whereby private respondent (seller) obligates itself to deliver printing to petitioner which
binds itself to pay thereof a sum of money and its equivalent price. Both parties concede that the order agreement gives rise
to a reciprocal obligation such that the obligation of one is dependent upon the obligation of the other. Reciprocal obligation
is to be performed simultaneously, so that the performance of one is conditioned upon the simultaneous fulfilment of the
other. Thus, private respondent undertakes to deliver printing paper of various quantities subject to petitioner’s
corresponding obligation to pay, on a maximum 90-day credit for the papers. Clearly, petitioner did not fulfill its obligation
as its last payment in August 1981 could cover only materials covered by delivery notices dated September and October
1980.
Accordingly, the private respondent’s suspension of its deliveries to petitioner whenever the latter failed to pay on
time, is legally justified as what Article 1583 of the Civil Code stated which entails about the installment payments based on
the contract.
Therefore, the petition for review to reverse the Court of Appeals’ decision was denied, hence, it was affirmed.
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ANG YU ASUNCION vs COURT OF APPEALS (G.R. No. 109125, December 2, 1994)

Ponente: Vitug, J.:

FACTS OF THE CASE:

July 29, 1987 when Ang Yu Asuncion and Keh Tiong filed a second amended complaint for Specific Performance
against Bobby Cu Unjieng, et al before the Regional Trial Court of Manila. The plaintiffs were the tenants or lessees of
residential and commercial spaces owned by the defendants located in Ongpin Street, Tondo, Manila, and they occupied the
space since 1935 and religiously paying the rental and complying with all the conditions of the lease contract.
The defendants informed sometime in October 9, 1986 that they are offering to sell the premises and are giving them
priority to acquire the same. Bobby Co Unjieng offered P6 million while the plaintiffs countered it to P5 million, after, the
plaintiff asked the defendants to put the offer in writing heeded. The plaintiffs asked to specify the terms and conditions of
the offer to sell, that when petitioners did not receive any reply so they sent another letter. Due to failure in response, added
the information received that defendants were about to sell the property, the plaintiff compelled to file the complain to
compel Unjieng to sell the property to them.
The trial court found that defendants’ offer to sell was never accepted by the plaintiffs for the reason that the parties
did not agree upon the terms and conditions of the proposed sale, then, no contract of sale concluded at all. Later, the trail
court rendered the decision in favor of the defendants and against the plaintiffs.
It was appealed in the Court of Appeals but was affirmed the decision of the trial court adding the there was no
meeting of the minds between the parties concerning the sale of the property and the absent of such requirement, the claim of
specific performance will not constitute. The decision was brought to the Supreme Court but later denied due to
insufficiency in form and substances.
However, while this was in pending consideration, the Unjieng spouses executed a Deed of Sale to the Beun Realty
and Development Corporation (petitioner) which later on wrote a letter to the petitioners to vacate the premises. The lessees
replied stating the they brought the property subject to the notice of lis pendens in the name of Cu Unjiengs. They filed a
Motion of Execution to the RTC who ordered defendants to execute the necessary Deed of Sale of the Property in litigation
in favor of the Petitioners for the consideration of P15 million and ordering Register of Deeds of the City of Manila, to
cancel and set aside the title already issued in favor of the Private Defendant. The appellate court set aside and declared
without force and effect the questioned orders.

ISSUE(S):
Whether or not the Buen Realty can be held bound by the write of execution by virtue of the notice of lis pendens.

THE SUPREME COURT RULED:

No. The Supreme Court, affirmed the decision of the Court of Appeals to set aside the decision and declared
without force and effect of the Writ of Execution ordering the defendants to comply within period of one week to execute the
necessary Deed of Sale in favor to the plaintiffs.
An obligation is a juridical necessity to give, to do or to do based on Art. 1156 of the Civil Code. Hence, the
obligation constitutes the concurrence of the essential elements that a) vincilum juris or juridical tie which is the efficient
cause established by the various obligations, b) the object which is the presentation or conduct required to be observed; and
c) the subject-person who are active and the passive subjects.
In the case of contract, as what Article 1157 stated, which is a meeting of minds between two persons whereby one
binds himself, with respect to the another, to give something or to render some service.
The final judgment in the case has merely accorded a “right of first refusal” in favor of petitioners. The consequence
of such declaration entails no more than what has been said. The petitioners are aggrieved by the failure of the private
respondents to honor the right of first refusal which the remedy is not answered by the writ of execution on the judgment.
Whether the Buen Realty acted on good or bad faith, it is considered to be bound to respect the registration of the lis
pendens in the case are matters that must be independently addressed in appropriate proceedings. They cannot be held
subject to the writ of execution.
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PHILIPPINE NATIONAL BANK vs. COURT OF APPEALS (G.R. No. 107569, November 8, 1994)
Ponente: Puno, J.:
FACTS OF THE CASE:
The private respondents as owners of NACIDA – a registered enterprise, obtained a loan under the Cottage Industry
Guaranty Loan Fund from the Philippine National Bank (PNB) amounting P50,000 as evidenced by a Credit Agreement in
April 7, 1982. The promissory note covering the load amortized over a period of three year to end on March 29, 1985 at 12
percent interest annually. To secure the load, the private respondents executed a Real Estate Mortgage over a parcel of
unregistered agricultural land that appraised by the PNB at P1,062.52 and given a loan value of P531.26 by the bank. In
addition, they executed a Chattel Mortgage over a thermo plastic-forming machine with the appraisal value of P8,800 and
loan value of P4,400.
February 17, 1983, the private respondents were granted an additional NACIDA loan amounted to P50,000 from the
PNB and executed another promissory note, which become matured while executed another matured promissory note which
contains the same terms and stipulations. They executed a new Credit Agreement, that changed the amount of loan from
P50,000 to P100,000. To secure another loan, the private respondents constitute another real estate mortgage over 2 parcels
of registered land located at Cebu that appraised by the PNB with the value of P40,000 and loan value of P28,000.
The PNB informed the private respondents that the interest of CIGLF loan account was raised to 25 percent per
annum plus a penalty of 6 percent on the past dues as the PNB further increased this interest rate to 30 percent in October 15
and to 42 percent on October, 25, 1984. After accounting their financial dues to PNB, the private respondents talked to get
the PNB to readopt the 12 percent interest and to condone the past interest and penalties due.
December 15, 1987, the private respondents filed a suit for specific performance against petitioner PNB and the
NACIDA to the Regional Trial Court which later on February 26, 1990 dismissed the respondent’s complaint. However,
upon the appeal before the Court of Appeals, they reversed the dismissal with respect to PNB and disallowed the increased
in interest rates.

ISSUE(S):
Whether or not the creditor raise the rate of interest with the basis on the certain clause in the contract without
consent from the debtor to the amount and rate of increase.

THE SUPREME COURT RULED:

No. The laws and circulars stated by the Supreme Court in reiterating the legal basis of the clause did not authorize
either party to unilaterally raise the interest rate without the consent of the counterpart. In fact, there can be no contract in the
true sense in the absence of the element of agreement of the parties. If this assent is wanting on the part of the one who
contracts, his act has no more efficacy than if it had been done under duress or by person or unsound mind.
The minds of all of all parties must meet as to the proposed modification, especially when it affects an important
aspect of the agreement. In case of loan contract, it must be mutually agreed upon if any changes of rate of interest, which
the vital component of the said contract.
The unilateral action of the PNB in increasing the interest rate on the private respondent’s loan violated the
mutuality of contracts ordained in Article 1308 of the Civil Code.
Hence, the petition for review is denied, affirmed the decision of the Court of Appeals.
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ENRICO S. EULOGIO vs. SPOUCES CLEMENTE APELES (G.R. No. 167884, January 20, 2009)
Ponente: Chico-Nazario, J.:
THE FACTS OF THE CASE:
The real property consists of a house and lot located at Timog Avenue, Quezon City which issued in the name of the
spouses Apeles. In 1979, the Apeles couple leased the property to Arturo Eulogio, the Enrico’s father which succeed as
lessor’s of the subject property upon death of his father. Enrico was engaged in the business of buy and sell cars.
Both parties were concluded into Contract of Lease with Option to Purchase involving the subject property. The
contract purportedly afforded Enrico the option to purchase the subject property for a price not exceeding to P1.5 million.
ISSUE(S):
THE SUPREME COURT RULED THAT:

GAISANO CAGAYAN INC. vs. INSURANCE COMPANY OF NORTH AMERICA (G.R. No. 147839, June 8, 2006)
Ponente: Austria-Martinez, J.:

THE FACTS OF THE CASE ARE AS FOLLOWS:

Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans. Levi Strauss (Phils.) Inc. (LSPI) is
the local distributor of products bearing trademarks owned by Levi Strauss & Co.. IMC and LSPI separately obtained from
respondent fire insurance policies with book debt endorsements. The insurance policies provide for coverage on “book debts
in connection with ready-made clothing materials which have been sold or delivered to various customers and dealers of the
Insured anywhere in the Philippines.” The policies defined book debts as the “unpaid account still appearing in the Book of
Account of the Insured 45 days after the time of the loss covered under this Policy” with the additional conditions.
Petitioner is a customer and dealer of the products of IMC and LSPI. On February 25, 1991, the Gaisano Superstore
Complex in Cagayan de Oro City, owned by petitioner, was consumed by fire. Included in the items lost or destroyed in the
fire were stocks of ready-made clothing materials sold and delivered by IMC and LSPI.
On February 4, 1992, respondent filed a complaint for damages against petitioner. It alleges that IMC and LSPI filed
with respondent their claims under their respective fire insurance policies with book debt endorsements; that as of February
25, 1991, the unpaid accounts of petitioner on the sale and delivery of ready-made clothing materials with IMC was
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P2,119,205.00 while with LSPI it was P535,613.00; that respondent paid the claims of IMC and LSPI and, by virtue thereof,
respondent was subrogated to their rights against petitioner; that respondent made several demands for payment upon
petitioner but these went unheeded.
In its Answer with Counter Claim dated July 4, 1995, petitioner contends that it could not be held liable because the
property covered by the insurance policies were destroyed due to fortuities event or  force majeure; that respondent’s right of
subrogation has no basis inasmuch as there was no breach of contract committed by it since the loss was due to fire which it
could not prevent or foresee; that IMC and LSPI never communicated to it that they insured their properties; that it never
consented to paying the claim of the insured.

ISSUE(S) OF THE CASE:

1. Whether or not, the IMC and LSPI have insurable interest.
2. Whether or not, the petitioner is liable to the insurer.

THE SUPREME COURT RULED THAT:

Yes for both issues.  It is well-settled that when the words of a contract are plain and readily understood, there is no
room for construction. In this case, the questioned insurance policies provide coverage for “book debts in connection with
ready-made clothing materials which have been sold or delivered to various customers and dealers of the Insured anywhere
in the Philippines.” ; and defined book debts as the “unpaid account still appearing in the Book of Account of the Insured 45
days after the time of the loss covered under this Policy.” Nowhere is it provided in the questioned insurance policies that the
subject of the insurance is the goods sold and delivered to the customers and dealers of the insured.
Section 13 of our Insurance Code defines insurable interest as “every interest in property, whether real or personal,
or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the
insured.” Parenthetically, under Section 14 of the same Code, an insurable interest in property may consist in: (a) an existing
interest; (b) an inchoate interest founded on existing interest; or (c) an expectancy, coupled with an existing interest in that
out of which the expectancy arises.
Therefore, an insurable interest in property does not necessarily imply a property interest in, or a lien upon, or
possession of, the subject matter of the insurance, and neither the title nor a beneficial interest is requisite to the existence of
such an interest, it is sufficient that the insured is so situated with reference to the property that he would be liable to loss
should it be injured or destroyed by the peril against which it is insured.

DIZON vs. CTA (G.R. no. 140944, April 30, 2008)

Ponente: Nachura, J.:

THE FACTS OF THE CASE ARE AS FOLLOWS:

Decedent Jose P. Fernandez's estate was administered by Arsenio P. Dizon and petitioner Rafael Dizon (petitioner) as
Special and Assistant Special Administrator, respectively. Petitioner filed a request for extension with the BIR to determine
and collate the assets and claims of the estate, which the BIR granted. Jesus Gonzales, an agent of Arsenio filed the estate tax
return with the same BIR Regional Office, showing therein a NIL estate tax liability.
The BIR then issued Certifications allowing decedent's properties may be transferred to his heirs.
Petitioner requested the probate court's authority to sell several properties forming part of the Estate, for the purpose of
paying its creditors. Petitioner manifested that Manila Bank, a major creditor of the Estate was not included, as it did not file
a claim with the probate court since it had security over several real estate properties forming part of the Estate. However,
the BIR issued an Estate Tax Assessment Notice demanding the payment of P66,973,985.40 as deficiency estate tax.
Gonzales moved for the reconsideration but was denied.
The CTA and CA who affirmed, ruled that the evidence introduced by the BIR were admissible.
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ISSUE(S) OF THE CASE:

1. Whether or not the CTA and the CA gravely erred in allowing the admission of the pieces of evidence which were
not formally offered by the BIR.
2. Whether the CA erred in affirming the CTA in the latter's determination of the deficiency estate tax imposed against
the Estate.

THE SUPREME COURT RULED THAT:

YES (on the first issue). The CTA is categorically described as a court of record. As cases filed before it are litigated
de novo, party-litigants shall prove every minute aspect of their cases. As such, those evidence submitted by the BIR has no
evidentiary weight, as the rules on documentary evidence require that these documents must be formally offered before the
CTA. The Revised Rules on Evidence which reads: SEC. 34. Offer of evidence. The court shall consider no evidence which
has not been formally offered. The purpose for which the evidence is offered must be specified.
The CTA and the CA rely solely on the case of Vda. de Oate, which reiterated this Court's previous rulings in People
v. Napat-a and People v. Mate on the admission and consideration of exhibits which were not formally offered during the
trial.
The Court reiterates that Vda. de Oate is merely an exception to the general rule. Being an exception, it may be
applied only when there is strict compliance with the requisites mentioned therein; otherwise, the general rule in Section 34
of Rule 132 of the Rules of Court should prevail.
YES (on the second issue). The specific question is whether the actual claims of the aforementioned creditors may
be fully allowed as deductions from the gross estate of Jose despite the fact that the said claims were reduced or condoned
through compromise agreements entered into by the Estate with its creditors.
The Court agreed with an American ruling relating to the date-of-death valuation, a tax imposed on the act of
transferring property by will or intestacy and, because the act on which the tax is levied occurs at a discrete time, i.e., the
instance of death, the net value of the property transferred should be ascertained, as nearly as possible, as of that time, to be
followed. Also the Court, emphasized the definition of claims which are debts or demands of a pecuniary nature which could
have been enforced against the deceased in his lifetime, or liability contracted by the deceased before his death. Therefore,
the claims existing at the time of death are significant to, and should be made the basis of, the determination of allowable
deductions.

PNB MADECOR vs. UY (G.R. no. 129598, August 15, 2001)

Ponente: Quisumbing, J:

FACTS OF THE CASE ARE AS FOLLOWS:

Guillermo Uy assigned to respondent his receivables due from Pantranco North Express Inc. (PNEI). Respondent filed a
collection suit with an application for issuance of preliminary attachment against PNEI which was granted by the RTC. The
sheriff issued a notice of garnishment addressed to PNB and PNB MADECOR. The RTC rendered judgment against PNEI
with writ of execution causing the sheriff to garnish the amount therein from the credits and collectibles of PNEI from
petitioner and levy upon the assets of petitioner should its personal assets be insufficient to cover its debt with PNEI.
Petitioner claimed that as debtor, it is likewise a creditor for PNEI considering unpaid rentals of PNEI for its parcel of land
and by operation of law on compensation, it is actually the PNEI that still has outstanding obligations to it.
 
ISSUE(S) OF THE CASE:
Whether or not there was legal compensation between the petitioner and PNEI as a defense of the former.
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THE SUPREME COURT RULED THAT:
NO. There could not be any compensation between PNEI’s receivables from PNB MADECOR and the latter’s
obligation to the former because PNB MADECOR’s supposed debt to PNEI is the subject of attachment proceedings
initiated by a third party, herein respondent Gerardo Uy.  This is a controversy that would prevent legal compensation from
taking place, per the requirements set forth in Article 1279 of the Civil Code.
“ART. 1279. In order that compensation may be prosper, 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;
2. That both debts consists in a sum of money, or if the things due are consumable, they be of the same kind, and
also of the quality if the latter has been started;
3. That two debts be due;
4. That they be liquidated and demandable; and
5. That over neither of them there be retention or controversy, commenced by third persons and communicated in
due time to the debtor.”
Moreover, it was not clear whether, at the time compensation was supposed to have taken place, the rentals being
claimed by petitioner were indeed still unpaid.  Petitioner did not present evidence in this regard, apart from a statement of
account.

ADRIATICO CONSORTRIUM vs. LANDBANK OF THE PHILIPPINES (G.R. No. 187838, December 23, 2009)
Ponente: Velasco Jr., J:

THE FACTS OF THE CASE ARE AS FOLLOWS:

Respondent Land Bank approved the application of William Siy, the former president of ACI, for a credit line of
P200M. A Mortgage Trust Indenture (MTI) was created to secure the loan. The MTI was amended to include J.V. Williams
Realty and Development Corporation (JVWRDC), a majority-owned corporation of Siy, as borrower. It was later discovered
that Siy did not remit ACI’s payments of the loan. Land Bank obliged petitioners ACI and PRC, with Benito Cu-Uy-Gam,
ACI’s new president, to pay the maturing obligations of JVWRDC. Petitioners then filed a Petition for Declaration of
Nullity, Specific Performance, Injunction, and Damages with Prayer for a TRO against Land Bank and Siy with the RTC of
Manila.
The parties entered into a Partial Compromise Agreement wherein ACI agreed, among others, to pay and actually
paid to Land Bank the amount of loan plus interests. The said Agreement was approved by the RTC. Land Bank, however,
informed ACI that the JVWRDC loans were included in a sealed-bid public auction of Land Bank Non-Performing Assets
under the Special Purpose Vehicle Act. Petitioners filed a Motion for Execution before the RTC stating that Land Bank
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violated Section 5 of the Partial Compromise Agreement, which provides that the parties agree “to suspend all actions
against each other x x x”. The RTC granted petitioners’ Motions and issued the corresponding Writ of Execution and Writ of
Preliminary Injunction. Land Bank filed a Petition for Certiorari and Prohibition with Prayer for TRO and/or Preliminary
Injunction before the CA arguing that the sale of the MPCs is not prohibited by the Agreement. The CA granted the petition
and found that the compromise agreement sought to prohibit only legal actions.

ISSUE(S) OF THE CASE: Whether or not the act of Land Bank in selling the receivables violated the Partial Compromise
Agreement, specifically Section 5.

THE SUPREME COURT RULED THAT:

Yes. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an
end to one already commenced. In the construction or interpretation of a compromise agreement, the Court is guided by the
fundamental and cardinal rule that the intention of the parties is to be ascertained from the contract and effect should be
given to that intention. Likewise, it must be construed so as to give effect to all the provisions of the contract. Evidently, had
the parties intended to limit the application of Sec. 5 to legal actions only, they would have written a specific word or phrase
to pertain to legal actions and not just the word “actions” alone.
A contract must be interpreted from the language of the contract itself according to its plain and ordinary meaning.
In the case at bar, the word “action” should be defined according to its plain and ordinary meaning, i.e., as the process of
doing something; conduct or behavior; a thing done. It is not limited to actions before a court or a judicial proceeding.
Therefore, the only logical conclusion that can be derived from the use of the word “action” in Sec. 5 is that the parties
intentionally used it in its plain and ordinary sense and did not limit it to mean any specific legal term.
Furthermore, Sec. 5 of the Partial Compromise Agreement speaks of cooperation between the parties to determine
the person or persons ultimately liable. By selling the receivables, Land Bank did not cooperate with petitioners. Thus, it can
be safely concluded that the act of Land Bank is a clear and patent violation of Sec. 5 of the Partial Compromise Agreement.