Case 1

SPOUSES BELTRAN vs. SPOUSES CANGAYDA

G.R. No.225033 August 15, 2018

FACTS:
Sometime in August 1989, respondents verbally agreed to sell the disputed property to
petitioners for P35,000.00. After making an initial payment, petitioners took possession of
the disputed property and built their family home. Petitioners subsequently made
additional payments, which, together with their initial payment, collectively amounted to
P29,690.00. However, despite respondents' repeated demands, petitioners failed to pay
their remaining balance of P5,310.00. This prompted respondents to refer the matter to the
Office of the Barangay. Before the OBC, the parties signed an Amicable Settlement dated
August 24, 1992, Petitioners failed to pay within the period set forth in the Amicable
Settlement. On January 14, 2009, or nearly 17 years after the expiration of petitioners'
period to pay their remaining balance, respondents served upon petitioners a "Last and
Final Demand" to vacate the disputed property within 30 days from notice. This demand
was left unheeded. In so ruling, the RTC characterized the oral agreement between the
parties a contract to sell which the CA affirmed.

ISSUE:
Whether the CA erred when it affirmed the RTC Decision characterizing the oral agreement
between the parties as a contract to sell.

RULING:
The Petition is meritorious. The agreement between the parties is an oral contract of sale.
As a consequence, ownership of the disputed property passed to petitioners upon its
delivery. The CA's finding is erroneous. Jurisprudence defines the distinctions between a
contract of sale and a contract to sell to be as follows:
• In a contract of sale, title passes to the vendee upon the delivery of the thing sold;
whereas in a contract to sell, by agreement the ownership is reserved in the vendor and is
not to pass until the full payment of the price.
• In a contract of sale, the vendor has lost and cannot recover ownership until and unless
the contract is resolved or rescinded; whereas in a contract to sell, title is retained by the
vendor until the full payment of the price.

Case 2
D.M. RAGASA ENTERPRISES, INC. vs. BANCO DE ORO, INC. (FORMERLY EQUITABLE PCI
BANK, INC.)
G.R. No. 190512 June 20, 2018

FACTS:
On January 30, 1998, Ragasa and then Equitable Banking Corporation executed a Contract
of Lease as lessor and lessee, respectively, over the subject premises, for a period of five
years. The pertinent provisions of the Lease Contract state:
 8. The TENANT voluntarily binds himself and agrees to the following without any
coercion or force by the LESSOR;

m) The full deposit shall be forfeited in favor of the LESSOR upon non-compliance of
the Term of the Contract of Lease by the TENANT, and cannot be applied to Rental;

n) To pay a penalty of 3% of the monthly rental, for every month of delay of

payment of the monthly rental, [with] a fraction of the month x x x considered [as]
one month;

p) Breach or non-compliance of any of the provisions of this Contract, especially

non-payment of two consecutive monthly rentals on time, shall mean the
termination of this Contract, and within five (5) days from the date of breach, non-
compliance, or default, the TENANT shall vacate the premises quietly and peacefully
without need of the required judicial proceedings. If he does not vacate the
premises, the TENANT has agreed that the LESSOR has no liability whatsoever due
to the padlocking of the same;

10. In the event that a Court Litigation has been resorted to by the LESSOR or
LESSEE, due to non-compliance of any of the foregoing provisions, the aggrieved
party shall be paid by the other party, no less than fifteen thousand (P15,000) pesos,
Philippine Currency, for Attorney's fees, and other damages that the honorable
court may allow; the cost of litigations shall be born[e] or paid by the party in fault,
or in default. All unpaid accounts and obligations of the TENANT shall earn interest
or bear interest at the rate of 14% per annum or at the allowable rate of interest
from the date of default. The legal suits shall be brought in the town of Quezon City.

Pursuant to the Lease Contract, Equitable Bank three months advance rentals, and three
months rentals as security deposit. Meanwhile, Equitable Bank entered into a merger PCI
Bank thereby forming Equitable PCI Bank, Inc. The latter would eventually, pending the
present case, merge with Banco de Oro, Inc. to form the respondent bank. As a result of the
merger, the bank closed and joined the branches of its constituent banks which were in
close proximity with each other One of which is the branch located in the subject premises.

The bank sent a notice informing Ragasa that the former was pre-terminating their Lease
Contract Ragasa responded with a demand letter for payment of monthly rentals for the
remaining term of the Lease Contract which was countered by the bank that its only
liability for pre-terminating the contract is the forfeiture of its security deposit pursuant to
item 8(m) of the Lease Contract. The bank argued that item 8(m) of the Lease Contract is
actually a penalty clause which, in line with Article 1226 of the Civil Code, takes the place of
damages and interests in case of breach. Hence, for breaching the Lease Contract by pre-
terminating the same, the bank is liable to forfeit its security deposit in favor of Ragasa but
would not be liable for rentals corresponding to the remaining life of the Contract. The RTC
ruled in Ragasa's favor. CA reversed.

ISSUE:
What is the liability of the bank, if any, for its act of pre-terminating the Lease Contract?

RULING:
The stipulations between the parties are clear and show no contravention of law, morals,
good customs, public order or public policy. As such, they are valid, and the parties' rights
shall be adjudicated according to them, being the primary law between them. When the
terms of the contract are clear and leave no doubt as to the intention of the contracting
parties, the rule is settled that the literal meaning of its stipulations should control.

In the case at bar, there is no question that the bank breached the Lease Contract. It must
be noted that the Lease Contract does not contain a pre-termination clause. Thus, having
contravened the tenor of the Lease Contract regarding its term or period, the bank should
be liable for damages. However, how much in damages should the bank be liable?

In the present case, there is an express stipulation in item 8(p) of the Lease Contract that
"breach or non-compliance of any of the provisions of this Contract, especially non-
payment of two consecutive monthly rentals on time, shall mean the termination of this
Contract." The validity of an automatic termination clause such as the one quoted above is
well-settled. In Manila Bay Club Corp. v. Court of Appeals, the Court justified the validity of
the automatic termination clause for it is well to recall that contracts are respected as the
law between the contracting parties, and may establish such stipulations, clauses, terms
and conditions as they may want to include as long as such agreements are not contrary to
law, morals, good customs, public policy or public order they shall have the force of law
between them.

Pursuant to the automatic termination clause of the Lease Contract, which is in furtherance
of the autonomy characteristic of contracts, the Lease Contract was terminated upon its
unauthorized pre-termination by the bank on June 30, 2001. Ragasa is, thus, precluded
from availing of the second option which is to claim damages by reason of the breach and
allow the lease to remain in force. With the lease having been automatically resolved or
terminated by agreement of the parties, Ragasa is entitled only to indemnification for
damages.

Entitlement to rentals after the termination of the lease pursuant to an automatic

rescission or termination clause is possible in the case where the lessor invokes the clause
and the lessee refuses to vacate the leased premises. That is, however, not the situation
here. The bank did not continue to possess the Leased Premises after its automatic
termination, as it vacated the same on June 30, 2001.

Item 8(m) of the Lease Contract is an accessory obligation or prestation to the principal
obligation of lease. It specifies the stipulated amount of liquidated damages — the full
deposit — to be awarded to the injured party in case of breach of the Term or period of the
principal obligation. Hence, as to source, it is conventional. The amount of the liquidated
damages is purely contractual between the parties; and the courts will intervene only to
equitably reduce the liquidated damages, whether intended as an indemnity or a penalty, if
they are iniquitous or unconscionable, pursuant
to Articles 2227 and 1229 of the Civil Code. Also, proof of actual damages suffered by the
creditor is not necessary in order that the penalty may be demanded.

Item 8(m) does not expressly make a reservation for an additional claim for damages and
interests occasioned by the breach of the lease period. There is, however, another provision
of the Lease Contract that is triggered by a default in item 8(m), which is item 10. Being
provisions on default, item 8(m) and item 10 must be applied jointly and simultaneously.
Thus, aside from the forfeiture of the full deposit, the party at fault or in default is liable,
pursuant to item 10 of the Lease Contract, for the payment of attorney's fees in an amount
which is not less than P15,000.00, other damages that the court may allow, cost of
litigation, and 14% interest per annum on unpaid accounts and obligations.

From the foregoing, the Court accordingly rules that the bank is liable for the forfeiture of
the deposit and attorney's fees in the amount of P15,000.00 and such other damages which
Ragasa suffered by reason of the breach of the lease period by the bank. Clearly, the
requisites for the demandability of the penal clause are present in this case. These are: (1)
that the total non-fulfillment of the obligation or the defective fulfillment is chargeable to
the fault of the debtor; and (2) that the penalty may be enforced in accordance with the
provisions of law. Ragasa cannot insist on the performance of the lease, i.e., for the lease to
continue until expiration of its term, because the lease has been automatically terminated
when the bank breached it by pre-terminating its terms. Thus, Ragasa is only entitled to
damages.

Case 3
VICTORIA N. RACELIS, IN HER CAPACITY AS ADMINISTRATOR vs. SPOUSES GERMIL
JAVIER and REBECCA JAVIER
G.R. No. 189609 January 29, 2018

FACTS:
Before his death, the late Pedro Nacu, Sr. (Nacu) appointed his daughter, Racelis, to
administer his properties, among which was a residential house and lot located in Marikina
City. Nacu requested his heirs to sell this property first. Acting on this request, Racelis
immediately advertised it for sale.

In August 2001, the Spouses Javier offered to purchase the Marikina property. However,
they could not afford to pay the price of P3,500,000.00. The parties agreed on a month-to-
month lease and rent of P11,000.00 per month. The Spouses Javier used the property as
their residence and as the site of their tutorial school, the Niñ o Good Shepherd Tutorial
Center.

Sometime in July 2002, Racelis inquired whether the Spouses Javier were still interested to
purchase the property. The Spouses Javier reassured her of their commitment and even
promised to pay P100,000.00 to buy them more time within which to pay the purchase
price. On July 26, 2002, the Spouses Javier tendered the sum of P65,000.00 representing
"initial payment or goodwill money." On several occasions, they tendered small sums of
money to complete the promised P100,000.00, but by the end of 2003, they only delivered
a total of P78,000.00.

Meanwhile, they continued to lease the property. They consistently paid rent but started to
fall behind by February 2004. Realizing that the Spouses Javier had no genuine intention of
purchasing the property, Racelis wrote to inform them that her family had decided to
terminate the lease agreement and to offer the property to other interested buyers. In the
same letter, Racelis demanded that they vacate the property by May 30, 2004.

The Spouses Javier refused to vacate due to the ongoing operation of their tutorial
business. They insisted that the sum of P78,000.00 was advanced rent and proposed that
this amount be applied to their outstanding liability until they vacate the premises.
Disagreeing on the application of the P78,000.00, Racelis and the Spouses Javier brought
the matter to the barangay for conciliation. Unfortunately, the parties failed to reach a
settlement. During the proceedings, Racelis demanded the Spouses Javier to vacate the
premises by the end of April 30, 2004. However, the Spouses Javier refused to give up
possession of the property and even refused to pay rent for the succeeding months.

On May 12, 2004, Racelis caused the disconnection of the electrical service over the
property forcing the Spouses Javier to purchase a generator. This matter became the
subject of a complaint for damages filed by the Spouses Javier against Racelis. Racelis was
absolved from liability.

Meanwhile, Racelis filed a complaint for ejectment against the Spouses Javier before the
Metropolitan Trial Court in Marikina City. The case was docketed as Civil Case No. 04-7710.
Racelis alleged that she agreed to lease the property to the Spouses Javier based on the
understanding that they would eventually purchase it. Spouses Javier averred that they
never agreed to purchase the property from Racelis because they found a more affordable
property at Greenheights Subdivision in Marikina City. They claimed that the amount of
P78,000.00 was actually advanced rent. During trial, the Spouses Javier vacated the
property and moved to their new residence at Greenheights Subdivision

On August 19, 2005, the Metropolitan Trial Court rendered a Decision dismissing the
complaint. It ruled that the Spouses Javier were entitled to suspend the payment of rent
under Article 1658 of the Civil Code due to Racelis' act of disconnecting electric service
over the property.

The Metropolitan Trial Court declared that the Spouses Javier's obligation had been
extinguished. Their advanced rent and deposit were sufficient to cover their unpaid rent.
The Metropolitan Trial Court, however, did not characterize the P78,000.00 as advanced
rent but as earnest money.

On appeal, the Regional Trial Court rendered a Decision reversing the Metropolitan Trial
Court August 19, 2005 Decision. The Regional Trial Court held that the Spouses Javier were
not justified in suspending rental payments. However, their liability could not be offset by
the P78,000.00. The Regional Trial Court explained that the parties entered into two (2)
separate and distinct contracts—a lease contract and a contract of sale. Based on the
evidence presented, the P78,000.00 was not intended as advanced rent, but as part of the
purchase price of the property. The Spouses Javier moved for reconsideration. The
Regional Trial Court reduced the Spouses Javier's unpaid rentals by their advanced rental
deposit. They were ordered to pay P54,000.00 instead. The Spouses Javier appeal.

On January 13, 2009, the Court of Appeals rendered a Decision declaring the Spouses Javier
justified in withholding rental payments due to the disconnection of electrical service over
the property.

Nevertheless, the Court of Appeals stated that they were not exonerated from their
obligation to pay accrued rent. On the other hand, Racelis was bound to return the sum of
P78,000.00 in view of her waiver. Racelis moved for reconsideration but her motion was
denied in the Court of Appeals. On November 25, 2009, Racelis filed a Petition for Review

ISSUE:
Whether respondents Spouses Germil and Rebecca Javier can invoke their right to suspend
the payment of rent under Article 1658 of the Civil Code. (NO)

RULING:
A contract of lease is a "consensual, bilateral, onerous and commutative contract by which
the owner temporarily grants the use of his property to another who undertakes to pay
rent therefor."

Article 1658 of the Civil Code allows a lessee to postpone the payment of rent if the lessor
fails to either (1) "make the necessary repairs" on the property or (2) "maintain the lessee
in peaceful and adequate enjoyment of the property leased." This provision implements the
obligation imposed on lessors under Article 1654(3) of the Civil Code.

The failure to maintain the lessee in the peaceful and adequate enjoyment of the property
leased does not contemplate all acts of disturbance. Lessees may suspend the payment of
rent under Article 1658 of the Civil Code only if their legal possession is disrupted.

In this case, the disconnection of electrical service over the leased premises on May 14,
2004 was not just an act of physical disturbance but one that is meant to remove
respondents from the leased premises and disturb their legal possession as lessees.
Ordinarily, this would have entitled respondents to invoke the right accorded by Article
1658 of the Civil Code.

However, this rule will not apply in the present case because the lease had already expired
when petitioner requested for the temporary disconnection of electrical service. Petitioner
demanded respondents to vacate the premises by May 30, 2004. Instead of surrendering
the premises to petitioner, respondents unlawfully withheld possession of the property.
Respondents continued to stay in the premises until they moved to their new residence on
September 26, 2004. At that point, petitioner was no longer obligated to maintain
respondents in the "peaceful and adequate enjoyment of the lease for the entire duration of
the contract." Therefore, respondents cannot use the disconnection of electrical service as
justification to suspend the payment of rent.

Assuming that respondents were entitled to invoke their right under Article 1658 of the
Civil Code, this does exonerate them from their obligation under Article 1657 of the civil
Code "to pay the price of the lease according to the terms stipulated."

Lessees who exercise their right under Article 1658 of the Civil Code are not freed from the
obligations imposed by law or contract. Moreover, respondents' obligation to pay rent was
not extinguished when they transferred to their new residence. Respondents are liable for
a reasonable amount of rent for the use and continued occupation of the property upon the
expiration of the lease. To hold otherwise would unjustly enrich respondents at petitioner's
expense.

Case 4
LOURDES VALDERAMA vs. SONIA ARGUELLES AND LORNA ARGUELLES
G.R. No. 223660 April 2, 2018

FACTS:
Respondents alleged that on November 18, 2004, Conchita Amongo Francia, who was the
registered owner of a parcel of land consisting of one thousand (1000) square meters
located in Sampaloc, Manila (subject property), freely and voluntarily executed an absolute
deed of sale of the subject property in favor of respondents. The subject property was
subsequently registered in the names of respondents.

On November 14, 2007, Conchita filed an affidavit of adverse claim. On January 24, 2008,
Conchita died. As registered owners of the subject property, respondents prayed for the
cancellation of the adverse claim in the petition subject of this controversy.

On February 10, 2010, petitioner and Tarcila Lopez, as full-blooded sisters of Conchita, filed
an opposition to the petition. They claimed that upon Conchita's death, the latter's claims
and rights against the subject property were transmitted to her heirs by operation of law.
They also argued that the sale of the subject property to the respondents was simulated.

Meanwhile, while the petition to cancel adverse claim was pending before the RTC,
respondents filed a complaint for recovery of ownership and physical possession of a piece
of realty and its improvements with damages and with prayer for the issuance of
temporary restraining order and/or writ of preliminary injunction against petitioner and
Tarcila, among others.

In light of the respondent's filing of the complaint, petitioner and Tarcila filed a notice of lis
pendens with respect to the TCT No. 266311

Respondents filed a manifestation and motion praying for the outright cancellation of the
adverse claim annotated on the TCT No. 266311 on the ground that petitioner's subsequent
filing of notice of lis pendens rendered the issue moot and academic.
The RTC issued a Resolution ordering the cancellation of the adverse claim. In arriving at
the said ruling, the RTC reasoned, that it cannot disregard the pronouncement of the court
in Villaflor vs. Juerzan, G.R. No. 35205 which states that a Notice of Lis Pendens between
the parties concerning Notice of Adverse Claim calls for the cancellation thereof.

The CA rendered a decision dismissing petitioner's appeal for lack of merit. The CA held
that the issue on cancellation of adverse claim is a question of law since its resolution
would not involve an examination of the evidence but only an application of the law on a
particular set of facts. Having raised a sole question of law, the petition was dismissed by
the CA pursuant to Section 2, Rule 50 of the Rules of Court.

ISSUE:
Whether the subsequent annotation of a notice of lis pendens on a certificate of title
renders the case for cancellation of adverse claim on the same title moot and academic.
(NO)
RULING:
At the crux of the present controversy is this Court's ruling in the case of Villaflor.
Admittedly, the present case involves the same issue resolved by this Court in Villaflor.
However, the Villaflor ruling stemmed from a different factual milieu. As pointed out by the
petitioner, in the case at bar, the respondents are the ones who filed the case subject of the
notice of lis pendens. Further, the ruling in Villaflor specifically highlighted the fact that the
related civil case was already terminated and attained finality. Here, the civil case filed by
the respondents is still pending before the RTC.

An adverse claim and a notice of lis pendens under P.D. 1529 are not of the same nature
and do not serve the same purpose.

As distinguished from an adverse claim, the notice of lis pendens is ordinarily recorded
without the intervention of the court where the action is pending. Moreover, a notice of lis
pendens neither affects the merits of a case nor creates a right or a lien. The notice is but an
extrajudicial incident in an action. It is intended merely to constructively advise, or warn,
all people who deal with the property that they so deal with it at their own risk, and
whatever rights they may acquire in the property in any voluntary transaction are subject
to the results of the action. Corollarily, unlike the rule in adverse claims, the cancellation of
a notice lis pendens is also a mere incident in the action, and may be ordered by the Court
having jurisdiction of it at any given time. Its continuance or removal is not contingent on
the existence of a final judgment in the action, and ordinarily has no effect on the merits
thereof.
The law and jurisprudence provide clear distinctions between an annotation of an adverse
claim, on one hand, and an annotation of a notice of lis pendens on the other. In sum, the
main differences between the two are as follows: (1) an adverse claim protects the right of
a claimant during the pendency of a controversy while a notice of lis pendens protects the
right of the claimant during the pendency of the action or litigation; and (2) an adverse
claim may only be cancelled upon filing of a petition before the court which shall conduct a
hearing on its validity while a notice of lis pendens may be cancelled without a court
hearing.

The ruling of this Court in the case of Ty Sin Tei v. Dy Piao is applicable in this case. The
aforecited rationale of this Court in Ty Sin Tei is more in accordance with the basic tenets of
fair play and justice. As previously discussed, a notice of lis pendens is a mere incident of an
action which does not create any right nor lien. It may be cancelled without a court hearing.
In contrast, an adverse claim constitutes a lien on a property. As such, the cancellation of an
adverse claim is still necessary to render it ineffective, otherwise, the inscription will
remain annotated and shall continue as a lien upon the property. Given the different
attributes and characteristics of an adverse claim vis-a-vis a notice of lis pendens, this
Court is led to no other conclusion but that the said two remedies may be availed of at the
same time.

Case 5
ISLA vs ESTORGA
G.R. No. 233974 July 02, 2018

FACTS:
On December 6, 2004, petitioners obtained a loan in the amount of P100,000.00 from
respondent, payable anytime from six months to one year and subject to interest at the rate
of 10% per month, payable on or before the end of each month. As security, a real estate
mortgage was constituted over a land located in Pasay City registered under the name of
Edilberto Isla, who is married to Catalina. When petitioners failed to pay the said loan,
respondent sought assistance from the barangay, and consequently, a Kasulatan ng
Pautang was executed. Petitioners, however, failed to comply with its terms, prompting
respondent to send a demand letter in 2006. Once more, petitioners failed to comply with
the demand, causing respondent to file a Petition for Judicial Foreclosure against them
before the RTC. Petitioners maintained that the subject mortgage was not a real estate
mortgage but a mere loan, and that the stipulated interest of 10 per month was exorbitant
and grossly unconscionable. The RTC granted the Petition for Judicial Foreclosure and
directed petitioners to pay respondent the amounts of P100,000.00 with twelve percent
12% interest per annum from December 2007 until fully paid and P20,000.00 as attorney's
fees. In the event that petitioners fail to pay the said amounts the subject property will be
foreclosed and sold at public auction to satisfy the mortgage debt. Aggrieved, respondent
appealed to the CA. The CA affirmed with modification the RTC Decision.

ISSUE:
Whether or not the CA erred in awarding 12% interest on the principal obligation until full
payment

RULING:
No. There are two types of interest, namely, monetary interest and compensatory interest.
Monetary interest is the compensation fixed by the parties for the use or forbearance of
money. On the other hand, compensatory interest is that imposed by law or by the courts
as penalty or indemnity for damages. Accordingly, the right to recover interest arises only
either by virtue of a contract (monetary interest) or as damages for delay or failure to pay
the principal loan on which the interest is demanded (compensatory interest). Anent
monetary interest, the parties are free to stipulate their preferred rate. However, courts are
allowed to equitably temper interest rates that are found to be excessive, iniquitous,
unconscionable, and/or exorbitant, such as stipulated interest rates of three percent (3%)
per month or higher. In such instances, it is well to clarify that only the unconscionable
interest rate is nullified and deemed not written in the contract; whereas the parties'
agreement on the payment of interest on the principal loan obligation subsists. It is as if the
parties failed to specify the interest rate to be imposed on the principal amount, in which
case the legal rate of interest prevailing at the time the agreement was entered into is
applied by the Court.

Case 6
SECURITY BANK CORPORATION vs. SPOUSES RODRIGO and ERLINDA MERCADO
G.R. No. 192934 June 27, 2018

FACTS:
On September 13, 1996, Security Bank granted spouses Mercado a revolving credit line in
the amount of P1,000,000.00. To secure the credit line, the spouses Mercado executed a
Real Estate Mortgage in favor of Security Bank over their properties covered by Transfer
Certificate of Title (TCT) No. T-103519 (located in Lipa City, Batangas), and TCT No. T-
89822 (located in San Jose, Batangas). The spouses Mercado executed another Real Estate
Mortgage in favor of Security Bank this time over their properties located in Batangas City,
Batangas covered by TCT Nos. T-33150, T- 34288, and T-34289 to secure an additional
amount of P7,000,000.00 under the same revolving credit agreement.

Subsequently, the spouses Mercado defaulted in their payment under the revolving credit
line agreement. Security Bank requested the spouses Mercado to update their account, and
sent a final demand letter on March 31, 1999.12 Thereafter, it filed a petition for
extrajudicial foreclosure pursuant to Act No. 3135,13 as amended, with respect to the
parcel of land situated in Lipa City. Security Bank likewise filed a similar petition with the
Office of the Clerk of Court and Ex-Officio Sheriff of the RTC of Batangas City with respect to
the parcels of land located in San Jose, Batangas and Batangas City.

The respective notices of the foreclosure sales of the properties were published in
newspapers of general circulation once a week for three consecutive weeks as required by
Act No. 3135, as amended. However, the publication of the notices of the foreclosure of the
properties in Batangas City and San Jose, Batangas contained errors with respect to their
technical description. Security Bank caused the publication of an erratum in a newspaper
to correct these errors. The corrections consist of the following: (1) TCT No. 33150 – "Lot
952-C-1" to "Lot 952-C-1-B;" and (2) TCT No. 89822 – "Lot 1931 Cadm- 164-D" to "Lot
1931 Cadm 464-D." The erratum was published only once, and did not correct the lack of
indication of location in both cases.

The foreclosure sale of the parcel of land in Lipa City, Batangas was held wherein Security
Bank was adjudged as the winning bidder. A similar foreclosure sale was conducted over
the parcels of land in Batangas City and San Jose, Batangas where Security Bank was
likewise adjudged as the winning bidder. The spouses Mercado offered to redeem the
foreclosed properties for P10,000,000.00. However, Security Bank allegedly refused the
offer and made a counter-offer in the amount of P15,000,000.00.

The spouses Mercado filed a complaint for annulment of foreclosure sale, damages,
injunction, specific performance, and accounting with application for temporary
restraining order and/or preliminary injunction with the RTC of Batangas City. In the
complaint, the spouses Mercado averred that: (1) the parcel of land in San Jose, Batangas
should not have been foreclosed together with the properties in Batangas City because they
are covered by separate real estate mortgages; (2) the requirements of posting and
publication of the notice under Act No. 3135, as amended, were not complied with; (3)
Security Bank acted arbitrarily in disallowing the redemption of the foreclosed properties
for P10,000,000.00; (4) the total price for all of the parcels of land only amounted to
P4723,620.00; and (5) the interests and the penalties imposed by Security Bank on their
obligations were iniquitous and unconscionable.

Meanwhile, Security Bank, after having consolidated its titles to the foreclosed parcels of
land, filed an ex-parte petition for issuance of a writ of possession over the parcels of land
located in Batangas City and San Jose, Batangas.

RTC declared that: (1) the foreclosure sales of the five parcels of land void; (2) the interest
rates contained in the revolving credit line agreement void for being potestative or solely
based on the will of Security Bank; and (3) thesum of P8,000,000.00 as the true and correct
obligation of the spouses Mercado to Security Bank. RTC modified its Decision in an
Amendatory Order where it declared that: (1) only the foreclosure sales of the parcels of
land in Batangas City and San Jose, Batangas are void as it has no jurisdiction over the
properties in Lipa City, Batangas; (2) theobligation of the spouses Mercado is
P7,500,000.00, after deducting P500,000.00 from the principal loan of P1,000,000.00; and
(3) as "cost of money," the obligation shall bear the interest at the rate of 6% from the time
of date of the Amendatory Order until fully paid. The CA, on appeal, affirmed with
modifications the RTC Amended Decision.

ISSUE:
(1) Whether the provisions on interest rate in the revolving credit line agreement and its
addendum are void for being violative of the principle of mutuality of contracts. (YES)

(2) Whether interest and penalty are due and demandable from date of auction sale until
finality of the judgment declaring the foreclosure void under the doctrine of operative facts.
(NO)

RULING:
(1) The interest rate provisions in the parties' agreement violate the principle of mutuality
of contracts.
The principle of mutuality of contracts is found in Article 1308 of the New Civil Code, which
states that contracts must bind both contracting parties, and its validity or compliance
cannot be left to the will of one of them. The binding effect of any agreement between
parties to a contract is premised on two settled principles: (I) that any obligation arising
from contract has the force of law between the parties; and (2) that there must be
mutuality between the parties based on their essential equality. As such, any contract
which appears to be heavily weighed in favor of one of the parties so as to lead to an
unconscionable result is void. Likewise, any stipulation regarding the validity or
compliance of the contract that is potestative or is left solely to the will of one of the parties
is invalid. This holds true not only as to the original terms of the contract but also to its
modifications. Consequently, any change in a contract must be made with the consent of
the contracting parties, and must be mutually agreed upon. Otherwise, it has no binding
effect.

Stipulations as to the payment of interest are subject to the principle of mutuality of

contracts. As a principal condition and an important component in contracts of loan,
interest rates are only allowed if agreed upon by express stipulation of the parties, and only
when reduced into writing.

Here, the spouses Mercado supposedly: (1) agreed to pay an annual interest based on a
"floating rate of interest;" (2) to be determined solely by Security Bank; (3) on the basis of
Security Bank's own prevailing lending rate; (4) which shall not exceed the total monthly
prevailing rate as computed by Security Bank; and (5) without need of additional
confirmation to the interests stipulated as computed by Security Bank.

Notably, stipulations on floating rate of interest differ from escalation clauses. Escalation
clauses are stipulations which allow for the increase (as well as the mandatory decrease) of
the original fixed interest rate. Meanwhile, floating rates of interest refer to the variable
interest rate stated on a market-based reference rate agreed upon by the parties. The
former refers to the method by which fixed rates may be increased, while the latter
pertains to the interest rate itself that is not fixed. Nevertheless, both are contractual
provisions that entail adjustment of interest rates subject to the principle of mutuality of
contracts. Thus, while the cited cases involve escalation clauses, the principles they lay
down on mutuality equally apply to floating interest rate clauses.

The Banko Sentral ng Pilipinas (BSP) Manual of Regulations for Banks (MORB) allows
banks and borrowers to agree on a floating rate of interest, provided that it must be based
on market-based reference rates:

Floating rates of interest. The rate of interest on a floating rate loan during each
interest period shall be stated on the basis of Manila Reference Rates (MRRs), T-Bill
Rates or other market based reference rates plus a margin as may be agreed upon
by the parties.

The MRRs for various interest periods shall be determined and announced by the
Bangko Sentral every week and shall be based on the weighted average of the
 interest rates paid during the immediately preceding week by the ten (10) KBs with
the highest combined levels of outstanding deposit substitutes and time deposits, on
promissory notes issued and time deposits received by such banks, of P100,000 and
over per transaction account, with maturities corresponding to the interest periods
tor which such MRRs are being determined. Such rates and the composition of the
sample KBs shall be reviewed and determined at the beginning of every calendar
semester on the basis of the banks' combined levels of outstanding deposit
substitutes and time deposits as of 31 May or 30 November, as the case may be.

The rate of interest on floating rate loans existing and outstanding as of 23

December 1995 shall continue to be determined on the basis of the MRRs obtained
in accordance with the provisions of the rules existing as of 01 January 1989:
Provided, however, That the parties to such existing floating rate loan agreements
are not precluded from amending or modifying their loan agreements by adopting a
floating rate of interest determined on the basis of the TBR or other market based
reference rates.

Where the loan agreement provides for a floating interest rate, the interest period,
which shall be such period of time for which the rate of interest is fixed, shall be
such period as may be agreed upon by the parties.

For the purpose of computing the MRRs, banks shall accomplish the report forms,
RS Form 2D and Form 2E (BSP 5-17-34A).

This BSP requirement is consistent with the principle that the determination of interest
rates cannot be left solely to the will of one party. It further emphasizes that the reference
rate must be stated in writing, and must be agreed upon by the parties.

The authority to change the interest rate was given to Security Bank alone as the lender,
without need of the written assent of the spouses Mercado. This unbridled discretion given
to Security Bank is evidenced by the clause "I hereby give my continuing consent without
need of additional confirmation to the interests stipulated as computed by [Security
Bank]." The lopsidedness of the imposition of interest rates is further highlighted by the
lack of a breakdown of the interest rates imposed by Security Bank in its statement of
account accompanying its demand letter.

The interest rate to be imposed is determined solely by Security Bank for lack of a stated,
valid reference rate. The reference rate of "Security Bank's prevailing lending rate" is not
pegged on a market-based reference rate as required by the BSP. The stipulated interest
rate based on "Security Bank's prevailing lending rate" is not synonymous with "prevailing
market rate." For one, Security Bank is still the one who determines its own prevailing
lending rate. More, the argument that Security Bank is guided by other facts (or external
factors such as Singapore Rate, London Rate, Inter-Bank Rate) in determining its prevailing
monthly rate fails because these reference rates are not contained in writing as required by
law and the BSP.
Nevertheless, while we find that no stipulated interest rate may be imposed on the
obligation, legal interest may still be imposed on the outstanding loan. Eastern Shipping
Lines, Inc. v. Court of Appeals and Nacar v. Gallery Frames provide that in the absence of a
stipulated interest. a loan obligation shall earn legal interest from the time of default, i.e.,
from judicial or extrajudicial demand.

(2) For purposes of computing when legal interest shall run, it is enough that the debtor be
in default on the principal obligation. To be considered in default under the revolving credit
line agreement, the borrower need not be in default for the whole amount, but for any
amount due. The spouses Mercado never challenged Security Bank's claim that they
defaulted as to the payment of the principal obligation of P8,000,000.00. Thus, we find they
have defaulted to this amount at the time Security Bank made an extrajudicial demand on
March 31, 1999.
We also find no merit in their argument that penalty charges should not be imposed. While
we see no legal basis to strike down the penalty stipulation, however, we reduce the
penalty of 2% per month or 24% per annum for being iniquitous and unconscionable as
allowed under Article 1229 of the Civil Code.

In MCMP Construction Corp. v. Monark Equipment Corp.,103 we declared the rate of 36%
per annum unconscionable and reduced it to 6% per annum. We thus similarly reduce the
penalty here from 24% per annum to 6% per annum from the time of default, i.e.,
extrajudicial demand.

We also modify the amount of the outstanding obligation of the spouses Mercado to
Security Bank. To recall, the foreclosure sale over the parcel of land in Lipa City is not
affected by the annulment proceedings. We thus find that the proceeds of the foreclosure
sale over the parcel of land in Lipa City in the amount of P483,120.00 should be applied to
the principal obligation of P8,000,000.00 plus interest and penalty from extrajudicial
demand (March 31, 1999) until date of foreclosure sale (October 19, 1999). The resulting
deficiency shall earn legal interest at the rate of 12% from the filing of Security Bank's
answer with counterclaim105 on January 5, 2001 until June 30, 2013, and shall earn legal
interest at the present rate of 6% from July 1, 2013 until finality of judgment.

Case 7
SPOUSES GODFREY and MA. TERESA TEVES vs. INTEGRATED CREDIT & CORPORATE
SERVICES, CO. (now CAROL AQUI)
G.R. No. 216714 April 4, 2018

FACTS:
Sometime in 1996, Standard Chartered Bank extended various loans to petitioners Godfrey
and Ma. Teresa Teves. As security, petitioners mortgaged their property covered by
Transfer Certificate of Title No. 107520 (the subject property).

Petitioners defaulted in their loan payments. Standard extrajudicially foreclosed on the

mortgage, and the property was sold to Integrated Credit and Corporate Services Co.
(ICCS). A new certificate of title was issued in favor of ICCS after petitioners failed to
redeem the subject property upon the expiration of the redemption period on May 23,
2007.

ICCS filed a petition for the issuance of a wit of possession. During the proceedings, or in
May, 2010, ICCS was substituted by respondent Carol Aqui who appears to have acquired
the property from ICCS, and a new certificate of title was issued in Aqui's favor.
On July 14, 2010, the RTC issued two Orders.

The first, issued the writ of possession. The second, ordered the defendants to deliver to
petitioner and/or deposit with the Court the monthly rentals of the subject property
covering the period from May 24, 2007 up to the time they surrender the possession
thereof to the petitioner.

Petitioners filed a Partial Motion for Reconsideration of the Second Order, but RTC denied
the same.

Petitioners filed a Petition for Certiorari before the CA. The latter dismissed the Petition
filed under Rule 65 being an improper remedy. It ratiocinated that the orders subject of the
petition partakes the nature of a judgment or final order which is appealable under Rule 41
of the Rules of Court.

Petitioners, praying that this Court set aside the second order of the RTC, argue that Aqui
should file an independent action — and not simply seek the same in her petition for
issuance of a writ of possession, since (a) the RTC, sitting as a land registration court, does
not have jurisdiction to award back rentals or grant relief which should otherwise be
sought in an ordinary civil action; and (b) Act No. 3135, as amended by Act No. 4118,
contains no provision authorizing the award of back rentals to the purchaser at auction.

ISSUE:
Whether back rentals can be awarded in an ex parte application for writ of possession
under Act 3135. (YES)

RULING:
When the redemption period expired on May 23, 2007, ICCS became the owner of the
subject property and was, from then on, entitled to the fruits thereof. Petitioners ceased to
be the owners of the subject property, and had no right to the same as well as to its fruits.
Under Section 32, Rule 39 of the Rules, on Execution, Satisfaction and Effect of Judgments,
all rents, earnings and income derived from the property pending redemption shall belong
to the judgment obligor, but only until the expiration of his period of redemption. Thus, if
petitioners leased out the property to third parties after their period for redemption
expired, as was in fact the case here, the rentals collected properly belonged to ICCS or
Aqui, as the case may be. Petitioners had no right to collect them.

On the contention that the RTC — sitting as a land registration court — does not have
jurisdiction to award back rentals or grant relief which should otherwise be sought in an
ordinary civil action, this is no longer tenable. The distinction between the trial court acting
as a land registration court with limited jurisdiction, on the one hand, and a trial court
acting as an ordinary court exercising general jurisdiction, on the other, has already been
removed with the effectivity of Presidential Decree No. 1529, or the Property Registration
Decree. "The change has simplified registration proceedings by conferring upon the
designated trial courts the authority to act not only on applications for 'original
registration' but also 'over all petitions filed after original registration of title, with power
to hear and determine all questions arising from such applications or petition.'"

Moreover, under Section 6, Rule 135 of the Rules, on Powers and Duties of Courts and
Judicial Officers, it is provided that —

Sec. 6. Means to carry jurisdiction into effect. — When by law, jurisdiction is conferred on a
court or judicial officer, all auxiliary writs, processes and other means necessary to carry it
into effect may be employed by such court or officer; and if the procedure to be followed in
the exercise of such jurisdiction is not specifically pointed out by law or by these rules, any
suitable process or mode of proceeding may be adopted which appears conformable to the
spirit of said law or rules.

Given the above-cited rule and the pronouncement in China Banking Corporation v.
Spouses Lozada, it can be understood why the RTC issued the two separate Orders of July
14, 2010 The First Order was issued relative to the main remedy sought by ICCS — that is,
for the court to issue a writ of possession. The Second Order was issued pursuant to the
court's authority under Section 6 of Rule 135 of the Rules, to the end that a patent inequity
may be immediately remedied and justice served in accordance with the objective of the
Rules to secure a just, speedy and inexpensive disposition of every action and proceeding.
In the eyes of the law, petitioners clearly had no right to collect rent from the lessee of the
subject property; they were no longer the owners thereof, yet they continued to collect and
appropriate for themselves the rentals on the property to which ICCS was entitled. This is a
clear case of unjust enrichment that the courts may not simply ignore.

Case 8
SPOUSES FRANCISCO ONG and BETTY LIM ONG, and SPOUSES JOSEPH ONG CHUAN
and ESPERANZA ONG CHUANvs. BPI FAMILY SAVINGS BANK, INC.
G.R. No. 208638 January 24, 2018

FACTS:
Spouses Francisco Ong and Betty Lim Ong and Spouses Joseph Ong Chuan and Esperanza
Ong Chuan (collectively referred to as the petitioners) are engaged in the business of
printing under the name and style "MELBROS PRINTING CENTER.

Sometime in December 1996, Bank of Southeast Asia's (BSA) managers, Ronnie Denila and
Rommel Nayve, visited petitioners' office and discussed the various loan and credit
facilities offered by their bank. In view of petitioners' business expansion plans and the
assurances made by BSA's managers, they applied for the credit facilities offered by the
latter.
Sometime in April 1997, they executed a real estate mortgage (REM) over their property
situated in Paco, Manila, covered by Transfer Certificate of Title No. 143457, in favor of BSA
as security for a P15,000,000.00 term loan and P5,000,000.00 credit line or a total of
P20,000,000.00. With regard to the term loan, only P10,444,271.49 was released by BSA.
With regard to the P5,000,000.00 credit line, only P3,000,000.00 was released. BSA
promised to release the remaining P2,000,000.00 conditioned upon the payment of the
P3,000,000.00 initially released to petitioners.

Petitioners acceded to the condition and paid the P3,000,000.00 in full. However, BSA still
refused to release the P2,000,000.00. Petitioners then refused to pay the amortizations due
on their term loan. Later on, BPI Family Savings Bank (BPI) merged with BSA, thus,
acquired all the latter's rights and assumed its obligations. BPI filed a petition for
extrajudicial foreclosure of the REM for petitioners' default in the payment of their term
loan.

In order to enjoin the foreclosure, petitioners instituted an action for damages with
Temporary Restraining Order and Preliminary Injunction against BPI. On November 10,
2008, the trial court resolves in favor of the plaintiffs and against the defendant bank for
the latter to pay the former. BPI thereafter appealed to the CA averring that the court a quo
erred when it ruled that petitioners were entitled to damages. BPI posited that petitioners
are liable to them on the principal balance of the mortgage loan agreement. The CA
reversed the decision of the lower court and ruled in favor of BPI. Petitioners filed a Motion
for Reconsideration but the same was denied by the CA. Aggrieved, petitioners filed the
present petition.

ISSUE:
Whether BSA incurred delay in the performance of its obligations. (YES)

RULING:
Loan is a reciprocal obligation, as it arises from the same cause where one party is the
creditor and the other the debtor. The obligation of one party in a reciprocal obligation is
dependent upon the obligation of the other, and the performance should ideally be
simultaneous. This means that in a loan, the creditor should release the full loan amount
and the debtor repays it when it becomes due and demandable.

In this case, BSA did not only incur delay in releasing the pre-agreed credit line of
P5,000,000.00 but likewise violated the terms of its agreement with petitioners when it
deliberately failed to release the amount of P2,000,000.00 after petitioners complied with
their terms and paid the first P3,000,000.00 in full. The default attributed to petitioners
when they stopped paying their amortizations on the term loan cannot be sustained by this
Court because long before they sent a Letter to BSA informing the latter of their refusal to
continue paying amortizations, BSA had already reneged on its obligation to release the
amount previously agreed upon, i.e., the P5,000,000.00 covered by the credit line.

Article 1170 of the Civil Code enumerates the instances when parties to a contract may be
held liable for damages, viz.:
Article 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof, are liable
for damages.

The direct consequences therefore of the acts of BSA are: the machinery and equipment
that were essential to petitioners' business and requisite for its operations had to be
procured so late in time and had crippled the printing of school supplies, hence, petitioners
were constrained to cancel purchase orders of their clients to petitioners' damage.

BSA claims that the release of the amount covered by the credit line was subject to the
"availability of funds" thus only a part of the proceeds of the entire omnibus line was
released. Assuming for the sake of discussion that the funds at the time were insufficient to
cover the entire P5,000,000.00, BSA should have at least informed petitioners in advance
so that the latter could have resorted to other means to secure the amount needed for their
printing business. The omnibus line was approved and became effective on January 1997
yet BSA did not allow petitioners to draw from the line until November 1997. Moreover,
BSA downgraded petitioners' drawdown to only P3,000,000.00 despite the clear wordings
of their credit agreement whereby petitioners were allowed to draw any portion or all of
the omnibus line not to exceed P5,000,000.00. The almost 10 months delay in releasing the
amount applied for by petitioners negates good faith on the part of BSA.

Since BSA incurred delay in the performance of its obligations and subsequently cancelled
the omnibus line without petitioners' consent, its successor BPI cannot be permitted to
foreclose the loan for the reason that its successor BSA violated the terms of the contract
even prior to petitioners' justified refusal to continue paying the amortizations.

Case 9
D.M. RAGASA ENTERPRISES, INC. vs. BANCO DE ORO, INC. (FORMERLY EQUITABLE PCI
BANK, INC.)
G.R. No. 190512 June 20, 2018

FACTS:
On January 30, 1998, Ragasa and then Equitable Banking Corporation executed a Contract
of Lease as lessor and lessee, respectively, over the subject premises, for a period of five
years. The pertinent provisions of the Lease Contract state:

8. The TENANT voluntarily binds himself and agrees to the following without any
coercion or force by the LESSOR;

m) The full deposit shall be forfeited in favor of the LESSOR upon non-compliance of
the Term of the Contract of Lease by the TENANT, and cannot be applied to Rental;

n) To pay a penalty of 3% of the monthly rental, for every month of delay of

payment of the monthly rental, [with] a fraction of the month x x x considered [as]
one month;
 p) Breach or non-compliance of any of the provisions of this Contract, especially
non-payment of two consecutive monthly rentals on time, shall mean the
termination of this Contract, and within five (5) days from the date of breach, non-
compliance, or default, the TENANT shall vacate the premises quietly and peacefully
without need of the required judicial proceedings. If he does not vacate the
premises, the TENANT has agreed that the LESSOR has no liability whatsoever due
to the padlocking of the same;

10. In the event that a Court Litigation has been resorted to by the LESSOR or
LESSEE, due to non-compliance of any of the foregoing provisions, the aggrieved
party shall be paid by the other party, no less than fifteen thousand (P15,000) pesos,
Philippine Currency, for Attorney's fees, and other damages that the honorable
court may allow; the cost of litigations shall be born[e] or paid by the party in fault,
or in default. All unpaid accounts and obligations of the TENANT shall earn interest
or bear interest at the rate of 14% per annum or at the allowable rate of interest
from the date of default. The legal suits shall be brought in the town of Quezon City.

Pursuant to the Lease Contract, Equitable Bank three months advance rentals, and three
months rentals as security deposit. Meanwhile, Equitable Bank entered into a merger PCI
Bank thereby forming Equitable PCI Bank, Inc. The latter would eventually, pending the
present case, merge with Banco de Oro, Inc. to form the respondent bank. As a result of the
merger, the bank closed and joined the branches of its constituent banks which were in
close proximity with each other One of which is the branch located in the subject premises.

The bank sent a notice informing Ragasa that the former was pre-terminating their Lease
Contract Ragasa responded with a demand letter for payment of monthly rentals for the
remaining term of the Lease Contract which was countered by the bank that its only
liability for pre-terminating the contract is the forfeiture of its security deposit pursuant to
item 8(m) of the Lease Contract. The bank argued that item 8(m) of the Lease Contract is
actually a penalty clause which, in line with Article 1226 of the Civil Code, takes the place of
damages and interests in case of breach. Hence, for breaching the Lease Contract by pre-
terminating the same, the bank is liable to forfeit its security deposit in favor of Ragasa but
would not be liable for rentals corresponding to the remaining life of the Contract. The RTC
ruled in Ragasa's favor. CA reversed.

ISSUE:
What is the liability of the bank, if any, for its act of pre-terminating the Lease Contract?

RULING:
The stipulations between the parties are clear and show no contravention of law, morals,
good customs, public order or public policy. As such, they are valid, and the parties' rights
shall be adjudicated according to them, being the primary law between them. When the
terms of the contract are clear and leave no doubt as to the intention of the contracting
parties, the rule is settled that the literal meaning of its stipulations should control.
In the case at bar, there is no question that the bank breached the Lease Contract. It must
be noted that the Lease Contract does not contain a pre-termination clause. Thus, having
contravened the tenor of the Lease Contract regarding its term or period, the bank should
be liable for damages. However, how much in damages should the bank be liable?

In the present case, there is an express stipulation in item 8(p) of the Lease Contract that
"breach or non-compliance of any of the provisions of this Contract, especially non-
payment of two consecutive monthly rentals on time, shall mean the termination of this
Contract." The validity of an automatic termination clause such as the one quoted above is
well-settled. In Manila Bay Club Corp. v. Court of Appeals, the Court justified the validity of
the automatic termination clause for it is well to recall that contracts are respected as the
law between the contracting parties, and may establish such stipulations, clauses, terms
and conditions as they may want to include as long as such agreements are not contrary to
law, morals, good customs, public policy or public order they shall have the force of law
between them.

Pursuant to the automatic termination clause of the Lease Contract, which is in furtherance
of the autonomy characteristic of contracts, the Lease Contract was terminated upon its
unauthorized pre-termination by the bank on June 30, 2001. Ragasa is, thus, precluded
from availing of the second option which is to claim damages by reason of the breach and
allow the lease to remain in force. With the lease having been automatically resolved or
terminated by agreement of the parties, Ragasa is entitled only to indemnification for
damages.

Entitlement to rentals after the termination of the lease pursuant to an automatic

rescission or termination clause is possible in the case where the lessor invokes the clause
and the lessee refuses to vacate the leased premises. That is, however, not the situation
here. The bank did not continue to possess the Leased Premises after its automatic
termination, as it vacated the same on June 30, 2001.

Item 8(m) of the Lease Contract is an accessory obligation or prestation to the principal
obligation of lease. It specifies the stipulated amount of liquidated damages — the full
deposit — to be awarded to the injured party in case of breach of the Term or period of the
principal obligation. Hence, as to source, it is conventional. The amount of the liquidated
damages is purely contractual between the parties; and the courts will intervene only to
equitably reduce the liquidated damages, whether intended as an indemnity or a penalty, if
they are iniquitous or unconscionable, pursuant

to Articles 2227 and 1229 of the Civil Code. Also, proof of actual damages suffered by the
creditor is not necessary in order that the penalty may be demanded.

Item 8(m) does not expressly make a reservation for an additional claim for damages and
interests occasioned by the breach of the lease period. There is, however, another provision
of the Lease Contract that is triggered by a default in item 8(m), which is item 10. Being
provisions on default, item 8(m) and item 10 must be applied jointly and simultaneously.
Thus, aside from the forfeiture of the full deposit, the party at fault or in default is liable,
pursuant to item 10 of the Lease Contract, for the payment of attorney's fees in an amount
which is not less than P15,000.00, other damages that the court may allow, cost of
litigation, and 14% interest per annum on unpaid accounts and obligations.

From the foregoing, the Court accordingly rules that the bank is liable for the forfeiture of
the deposit and attorney's fees in the amount of P15,000.00 and such other damages which
Ragasa suffered by reason of the breach of the lease period by the bank. Clearly, the
requisites for the demandability of the penal clause are present in this case. These are: (1)
that the total non-fulfillment of the obligation or the defective fulfillment is chargeable to
the fault of the debtor; and (2) that the penalty may be enforced in accordance with the
provisions of law. Ragasa cannot insist on the performance of the lease, i.e., for the lease to
continue until expiration of its term, because the lease has been automatically terminated
when the bank breached it by pre-terminating its terms. Thus, Ragasa is only entitled to
damages.

Case 10
JOSE T. ONG BUN vs. BANK OF THE PHILIPPINE ISLANDS
G.R. No. 212362 March 14, 2018

FACTS:
In 1989, Ma. Lourdes Ong (Ma. Lourdes), the wife of petitioner Jose Ong Bun, purchased
three (3) silver custodian certificates (CC) in the spouses' name from the Far East Bank &
Trust Company (FEBTC): (a) CC No. 131157 for P100,000; (b) CC No. 131200 for P500,000;
and (c) CC No. 224826 for P150,000. The CCs have the following common provisions:

This instrument is transferable only in the books of the Custodian by the holder, or
in the event of transfer, by the transferee or buyer thereof in person or by a duly
authorized attorney-in-fact upon surrender of this instrument together with an
acceptable deed of assignment.

The Holder hereof or transferee can withdraw at anytime during office hours
his/her Silver Certificate of Deposit herein held in custody.

This instrument shall not be valid unless duly signed by the authorized signatories
of the Bank, and shall cease to have force and effect upon payment under the terms
hereof.

Thereafter, FEBTC merged with BPI after about 11 years since the said CCs were
purchased. After the death of Ma. Lourdes in 2002, petitioner discovered that the three CCs
bought from FEBTC were still in the safety vault of his deceased wife and were not
surrendered to FEBTC. As such, petitioner sent a letter to BPI to advise him [petitioner Jose
Ong] on the procedure for the claim of the said certificates. BPI informed the petitioner that
upon its merger with FEBTC in 2000, there were no Silver Certificates of Deposit
outstanding, which meant that the certificates were fully paid on their respective
participation's maturity dates which did not go beyond 1991. BPI refused to pay
petitioner's claim because the latter’s certificates were no longer outstanding in its records.
After about three years from his discovery of the certificates, petitioner filed a complaint
for collection of sum of money and damages against BPI before the RTC.

BPI insists that as early as 1991, all the Silver Certificates of Deposits, including those
issued to petitioner and his wife, were already paid. It claimed that the CCs had terms of
only 25 months and that by the year 2000, when it merged with FEBTC, there were no
longer any outstanding CCs in its books. It also claimed that FEBTC had fully paid all of its
silver certificates of time deposit on their maturity dates. According to BPI, contrary to
petitioner's assertion, the presentation or surrender of the certificates is not a condition
precedent for its payment by FEBTC.

The RTC ruled in favor of petitioner. It ordered BPI to pay petitioner, among others, the
respective amounts of the Custodian Certificates. However, the CA reversed and set aside
the RTC Decision. The CA ruled that petitioner failed to prove that the deposits, which he
claims to be unpaid, are still outstanding. According to the appellate court, the custodian
certificates, standing alone, do not prove an outstanding deposit with the bank, but merely
certify that FEBTC had in its custody for and in behalf of either petitioner or his late wife
the corresponding Silver Certificates of Deposit and nothing more. The CA further ruled
that the surrender of the custodian certificates is not required for the withdrawal of the
certificates of deposits themselves or for the payment of the Silver Certificates of Deposit,
hence, even if the holder has in his possession the said custodian certificates, this does not
ipso facto mean that he is an unpaid depositor of the bank. DEAN’S CIRCLE 2019 – UST FCL
100

Petitioner, however, insists that the CCs are evidence that the Silver Certificates of Deposit
in his name are in the possession of the Trust Investments Group of FEBTC and constitute
an outstanding obligation of respondent BPI with whom FEBTC merged. He adds that since
it has been proved that the CCs remained in the possession of the petitioner and has not
been converted or shown to be non-existing, the said CCs remain incontrovertible and
unrebutted evidence of indebtedness of the respondent because said CCs all openly admit
that the Silver Certificates of Deposit in varying amounts owned by the petitioner are in its
possession and has not been discharged by payment.

ISSUE:
Whether the Custodian Certificates, as evidence of indebtedness of the respondent, remains
unpaid as it was still in the possession of the petitioner. (YES)

RULING:
It is undisputed that petitioner is in possession of three (3) CCs from FEBTC. Simply put,
the said CCs are proof that Silver Certificates of Deposits are in the custody of a custodian,
which is, in this case, FEBTC. The CA therefore, erred in suggesting that the possession of
petitioner of the same CCs does not prove an outstanding deposit because the latter are not
the certificates of deposit themselves. What proves the deposits of the petitioner are the
Silver Certificates of Deposits that have been admitted by the Trust Investments Group of
the FEBTC to be in its custody as clearly shown by the wordings used in the subject CCs.
When the existence of a debt is fully established by the evidence contained in the record,
the burden of proving that it has been extinguished by payment devolves upon the debtor
who offers such defense to the claim of the creditor. Even where it is the plaintiff
(petitioner herein) who alleges nonpayment, the general rule is that the burden rests on
the defendant (respondent herein) to prove payment, rather than on the plaintiff to prove
non-payment. Verily, an obligation may be extinguished by payment. However, two
requisites must concur: (1) identity of the prestation, and (2) its integrity. The first means
that the very thing due must be delivered or released; and the second, that the prestation
be fulfilled completely. In this case, no acknowledgment nor proof of full payment was
presented by respondent but merely a pronouncement that there are no longer any
outstanding Silver Certificates of Deposits in its books of accounts.

A promise had been obtained by petitioner from BPI that the custodian certificates would
be paid upon maturity. Hence, the latter reneged on its promise when it refused payment
thereof after demands were made by petitioner for such payment. The claim of BPI that the
certificates had been paid, is not supported by credible evidence and, therefore,
unsubstantiated. Its position that the Silver Certificates of Time Deposits in question had
been paid by the FEBTC as early as the year 1991, when the same matured considering that
at the time of the merger between FEBTC and the BPI, no such Silver Certificates of Time
Deposits were outstanding on the books of Far FEBTC, is simply unconvincing.

The fact that the petitioner still has a copy of the Custodian Certificate of the Silver
Certificates of Time Deposit is material as it is inconceivable that the bank would make
payment without requiring the surrender thereof. Hence, the conclusion that the Silver
Certificates of Deposit may have been withdrawn by the petitioner or his wife although
they failed to surrender the custodian certificates is speculative and replete of any proof or
evidence.

The CA further ruled that the surrender of the CCs is not required for the withdrawal of the
certificates of deposit themselves or for the payment of the Silver Certificates of Deposit,
hence, even if the holder has in his possession the said custodian certificates, this does not
ipso facto mean that he is an unpaid depositor of the bank. Such conclusion is illogical
because the very wordings contained in the CCs would suggest otherwise.

This instrument is transferable only in the books of the Custodian by the holder, or
in the event of transfer, by the transferee or buyer thereof in person or by a duly
authorized attorney-in-fact upon surrender of this instrument together with an
acceptable deed of assignment.

Furthermore, the surrender of such certificates would have promoted the protection of the
bank and would have been more in line with the high standards expected of any banking
institution. Banks, their business being impressed with public interest, are expected to
exercise more care and prudence than private individuals in their dealings.

Case 11
DESIDERIO DALISAY INVESTMENTS, INC. vs. SOCIAL SECURITY SYSTEM
G.R. No. 231053 April 04, 2018

FACTS:
Involved is a parcel of land covered by Transfer Certificate of Title (TCT) Nos. T-18203, T-
18204, T-255986, and T-255985, with an aggregate area of 2,450 sq.m., including the
building erected thereon, situated in Agdao, Davao City.

Sometime in the year 1976, respondent Social Security System (SSS) filed a case before the
Social Security Commission (SSC) against the Dalisay Group of Companies (DGC) for the
collection of unremitted SSS premium contributions of the latter's employees.

On March 11, 1977, Desiderio Dalisay, then President of petitioner Desiderio Dalisay
Investments, Inc. (DDII) part of the DGC, sent a Letter to SSS offering the subject land and
building to offset DGC's liabilities at P3,500,000. The parties, however, failed to arrive at an
agreement as to the appraised value thereof. Thus, no negotiation took place.

Later, or on December 15, 1981, Desiderio Dalisay sent another Letter seeking further
negotiation with SSS by recommending that the appraisal be done by Asian Appraisal, Co.
Inc. SSC agreed, but it later turned out that Asian Appraisal, Inc. did not respond to
Dalisay's request. Thus, Atty. Honesto Cabarroguis, DGC's lawyer, suggested that the
appraisal be done by Joson, Capili and Associates instead. The suggestion was later
approved.

On July 24, 1982, DDII's Special Board of Directors issued a Resolution stating that the
subject properties together with all improvements thereon be sold to SSS in order to settle
the unremitted premiums and penalty obligations of DDII, Davao Stevedore Terminal Co.,
and Desidal Fruits, Inc. In the same Board Resolution, Desiderio Dalisay, or in his absence,
Veronica Dalisay-Tirol (Dalisay-Tirol), was authorized to sign in behalf of the corporation
any and all papers pertinent to effect full and absolute transfer of said properties to the SSS.
The offer for dacion was accepted at the appraised value of P2,000,000. DDII's total
liabilities with SSS covering unpaid premium contributions, inclusive of penalties and
salary/calamity loan amortizations, amounted to P4,421,321.62.

The SSC issued a Resolution indicating its acceptance of DDII's proposed dacion en pago
pegged at the appraised value of P2,000,000. The SSC then informed DDII of its acceptance
of the proposed dacion in payment, including its specified terms and conditions, via a
Letter.
Dalisay-Tirol, then Acting President and General Manager of Dalisay Investment, informed
SSS that the company is preparing the subject property, especially the building, for its
turnover.

Later, or on July 31, 1982, An Affidavit of Consent for the Sale of Real Property was
executed by the surviving heirs of the late Regina L. Dalisay, stating that in order to settle
the companies' obligations to SSS, they expressly agree to the sale thereof to the SSS for its
partial settlement. Thereafter, Desiderio Dalisay passed away.
As of November 30, 1995, the company's total obligations allegedly amounted to
P15,689,684.93. Later, or on December 29, 1995, the Philippine National Bank (PNB)
executed a Deed of Confirmatory Sale in favor of DDII for properties that it reacquired,
including the property subject of the present dispute.

Eddie A. Jara (Jara), Assistant Vice-President of the SSS - Davao I Branch, executed an
Affidavit of Adverse Claim over the properties subject of the instant case because of the
companies' failure to turn over the certificates of title to SSS.

DDII, through its Managing Director Edith L. Dalisay-Valenzuela (Dalisay-Valenzuela),

wrote a letter addressed to SSS President and Chief Executive Officer Carlos A. Arellano,
requesting the reevaluation and reconsideration of their problem. DDII issued a Letter to
SSS proposing the "offset of SSS obligations with back rentals on occupied land and
building of the obligor." It alleged that SSS is bound to pay back rentals totaling
P34,217,988.19 for its use of the subject property from July 1982 up to the present. It
likewise demanded for the return of the said property.

Meanwhile, despite repeated written and verbal demands made by SSS for DDII to deliver
the titles of the subject property, free from all liens and encumbrances, DDII still failed to
comply. On October 8, 2002, DDII filed a complaint for Quieting of Title, Recovery of
Possession and Damages against SSS with the Regional Trial Court. RTC resolved the case
in favor of DDII, holding that there was no perfected dacionin payment between the parties.
SSS appealed the case to the CA, and the latter reversed the ruling of the RTC.

ISSUE:
Whether there was a perfected dacion en pago. (YES)

RULING:
In dacion en pago, property is alienated to the creditor in satisfaction of a debt in money.
The debtor delivers and transmits to the creditor the former's ownership over a thing as an
accepted equivalent of the payment or performance of an outstanding debt. In such cases,
Article 1245 provides that the law on sales shall apply, since the undertaking really
partakes—in one sense—of the nature of sale; that is, the creditor is really buying the thing
or property of the debtor, the payment for which is to be charged against the debtor's
obligation.

As a mode of payment, dacion en pago extinguishes the obligation to the extent of the value
of the thing delivered, either as agreed upon by the parties or as may be proved, unless the
parties by agreement—express or implied, or by their silence—consider the thing as
equivalent to the obligation, in which case the obligation is totally extinguished. It requires
delivery and transmission of ownership of a thing owned by the debtor to the creditor as
an accepted equivalent of the performance of the obligation. There is no dacion in payment
when there is no transfer of ownership in the creditor's favor, as when the possession of
the thing is merely given to the creditor by way of security.
Agreeing with SSS, the CA held that the agreement on dacion en pago was consummated by
DDII's delivery of the property to SSS. We agree.

The third stage of a contract of sale is consummation which begins when the parties
perform their respective undertakings under the contract of sale, culminating in the
extinguishment thereof.

While a contract of sale is perfected by mere consent, ownership of the thing sold is
acquired only upon its delivery to the buyer. Upon the perfection of the sale, the seller
assumes the obligation to transfer ownership and to deliver the thing sold, but the real
right of ownership is transferred only "by tradition" or delivery thereof to the buyer.

Under the Civil Code, ownership does not pass by mere stipulation but only by delivery.
Manresa explains, "the delivery of the thing . . . signifies that title has passed from the seller
to the buyer." According to Tolentino, the purpose of delivery is not only for the enjoyment
of the thing but also a mode of acquiring dominion and determines the transmission of
ownership, the birth of the real right. The delivery under any of the forms provided by
Articles 1497 to 1505 of the Civil Code signifies that the transmission of ownership from
vendor to vendee has taken place.

Here, petitioner DDII insists that its delivery of the property to SSS was only to show its
goodwill in the negotiations. The records, however, reveal otherwise.

It is well to emphasize that nowhere in their communications or during the discussions at

the meeting is it stated that the company will turn over possession of the property to SSS to
show its goodwill while the negotiations were pending.

The turnover of the properties to SSS was tantamount to delivery or "tradition" which
effectively transferred the real right of ownership over the properties from DDII to
SSS.94Even after a review of the records of the case, this Court is unable to find any
indication that when they turned over the properties to SSS, the company reserved its
ownership over the property and only transferred the jus possidendi thereon to SSS.

Case 12
BENEDICTO V. YUJUICO vs. FAR EAST BANK ANDTRUST COMPANY (NOW BANK OF
THE PHILIPPINE ISLANDS),SUBSTITUTED BY PHILIPPINE INVESTMENT ONE (SPV-
AMC), INC.
GR No. 186196 Aug 15, 2018

FACTS:
On May 14, 1993, appellant then Far East Bank and Trust Company (appellant bank, for
brevity) approved the renewal of appellee GTI Sportswear Corporation's Omnibus Credit
Line (OCL) with a total amount of P35,000,000.00. The credit line was available in the form
of letters of credit, trust receipts, margin loan, export packing credit line, bills purchase line
and export bills purchase line. This was secured by a Comprehensive Surety Agreement
executed by appellee Benedicto V. Yujuico in his personal capacity. He was also the
president of appellee GTI.

Sometime in May 1995, negotiations were undertaken to settle appellee GTI's trust receipt
obligation under the OCL. During these negotiations, appellee GTI made known to appellant
bank its request for the conversion of its peso loan to US dollar-denominated loan. An
exchange of communications concerning the conversion transpired but no definite
agreement on the said conversion was put into writing.

On June 26, 1995, appellee Yujuico, in behalf of appellee GTI and in his personal capacity as
surety, and appellant's First Vice President Ricardo G. Lazatin, in behalf of appellant bank,
signed a Loan Restructuring Agreement (LRA), the subject of which was appellee GTI's
outstanding balance on its Omnibus Credit Line in the amount of P25,208,[874].84[5] as of
May 31, 1995. The agreement expressly stated that the restructured loan continues to be
secured by the Comprehensive Surety Agreement previously executed by appellee Yujuico
in favor of appellant bank.

After the signing of the restructuring agreement, appellee GTI, reiterated its request for the
re-denomination of its loan obligation to US dollars. Appellant bank, however, denied the
request and informed appellees that the conversion was not deemed workable in view of
the following considerations: appellant bank requires long-term FCDU loans to be fully
collateralized and appellee GTI, as borrower, must have adequate FCDU placements with
appellant bank as well as maintain substantial deposit ADB levels.

In a letter dated September 22, 1997, appellant bank demanded that appellee GTI update
all its unpaid amortizations on the outstanding restructured loan with a principal balance
of P11,376,666.25 not later than September 30, 1997 and to settle all its other past due
obligations to avert any legal action.

On October 29, 1997, appellees filed against appellant bank a Complaint for Specific
Performance with Preliminary Injunction with the Regional Trial Court of Makati City.
Appellees alleged that during the signing of the loan restructuring agreement, they were
assured by the officers of appellant bank, namely: Paul Regondola and Jacqueline
Fernandez, that after a few payments on its obligation, appellee GTI's peso loan would be
converted to US dollars. Also, sometime in October 1996, Paul Regondola confirmed by
phone that the conversion of appellee GTI's loan from peso to US Dollars had been
approved by appellant bank. This prompted appellee GTFs financial consultant Bermundo
to send appellant bank a letter dated October 31, 1996 acknowledging appellant bank's
alleged confirmation of the approval of the conversion of the restructured loan. This letter
was not denied by appellant bank until December 18, 1996 when it informed appellees that
the conversion of the restructured loan to US dollars was not deemed workable because of
certain considerations. These considerations, however, were not conveyed to appellees
beforehand.

Hence, appellees prayed that appellant bank be directed to convert GTI's loan to US dollars
retroactively effective October 1, 1996 and that appellant bank be directed to pay appellees
P2,844,228.00 representing savings that could have accrued in favor of appellees in terms
of the difference in interest payments.

Appellant bank denied that it made assurances to appellees that it would approve the
latter's request for conversion of the peso loan to US dollar. Appellant bank informed
appellees that the request for conversion would be considered depending on appellee's
performance on the restructuring agreement and their compliance with the requisites set
by appellant bank. Sometime in October 1996, Regondola informed appellee GTI's financial
consultant, Pablito Bermundo, that the request was approved in principle, subject to some
conditions which appellant bank imposes before approving similar requests for conversion.
Appellee GTI, however, was not able to comply with the requirements resulting in the
denial of their request for conversion. Hence, appellant bank prayed that the complaint be
dismissed.

The court a quo ruled that appellant bank indeed agreed to convert to US dollar appellee
GTI's peso loan obligation. The conversion also resulted in the novation of appellee GTI's
loan obligation. As a result, appellee Yujuico was accordingly released from his obligations
as surety pursuant to Article 1215 of the New Civil Code in conjunction with paragraph 1 of
Article 1291 of the same Code. On the other hand, the CA ruled that the Omnibus Credit
Line and the Loan Restructuring Agreement between appellee GTI Sportswear Corporation
(GTI) and appellant bank were not novated and appellee Yujuico remained to be liable as a
surety under the Comprehensive Surety Agreement.

ISSUE:
Whether the CA has legal basis to resolve and declare that there was no novation between
GTI and respondent. (YES)

RULING:
Novation is governed principally by Articles 1291 and 1292 of the Civil Code, which
provide:

ART. 1291. Obligations may be modified by:

(1) Changing their object or principal conditions;
(2) Substituting the person of the debtor;
(3) Subrogating a third person in the rights of the creditor.

ART. 1292. In order that an obligation may be extinguished by another which substitutes
the same, it is imperative that it be so declared in unequivocal terms, or that the old and the
new obligations be on every point incompatible with each other.

Noted civilist Justice Eduardo P. Caguioa elucidated on the concept of novation as follows:

x x x Novation has been defined as the substitution or alteration of an obligation by a

subsequent one that cancels or modifies the preceding one. Unlike other modes of
extinction of obligations, novation is a juridical act of dual function, in that at the time it
extinguishes an obligation, it creates a new one in lieu of the old. This is not to say however,
that in every case of novation the old obligation is necessarily extinguished. Our Civil Code
now admits of the so-called imperfect or modificatory novation where the original
obligation is not extinguished but modified or changed in some of the principal conditions
of the obligation. Thus, article 1291 provides that obligations may be modified.

In this case, the Court agrees with the finding of the CA that "the attendant facts do not
make out a case of novation" in the sense of a total or extinctive novation. As explained by
the CA:

A perusal of the records reveals that there is no document that states in unequivocal terms
that the agreement to convert the loan from peso to US dollar would abrogate the loan
restructuring agreement or the omnibus credit line. Instead what is readily apparent from
the exchange of communications concerning the request for conversion is that the parties
recognize the subsistence of the loan restructuring agreement. In fact, in the letter dated
September 5, 1995 sent by x x x GTI to respondent reiterating the former's request to re-
dominate its loan obligation from peso to US dollar, x x x GTI even assured respondent that
the other terms of the restructuring agreement would be complied with. Verily, where the
parties to the new obligation expressly recognize the continuing existence and validity of
the old one, there can be no novation.

Neither is there any substantial incompatibility between the obligations of the parties
under the restructuring agreement and the agreement to convert the loan as to warrant a
finding of an implied novation. Implied novation necessitates that the incompatibility
between the old and new obligations be total on every point such that the old obligation is
completely superseded by the new one. This is not the case here. The only modification that
the conversion agreement introduced was that GTI's and petitioner Yujuico's loan
obligation would be payable in US dollars instead of Philippine pesos. Incidentally, the
applicable interest rate is lower on account of the change in currency. These alterations,
however, do not suffice to constitute novation. The well-settled rule is that, with respect to
obligations to pay a sum of money, the obligation 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. At
most, the changes introduced by the conversion of the loan obligation amount merely to
modificatory novation, which results from the alteration of the terms and conditions of an
obligation without altering its essence.

From the foregoing, it can be gathered that, at best, the agreement to convert the Peso-
denominated restructured loan into a US Dollar-denominated one is an implied or tacit,
partial, modificatory novation. There was merely a change in the method of payment.

Furthermore, without a total or extinctive novation, the surety agreement subsists. Aside
from the absence of a "perfect" novation, it must be noted that "another circumstance that
militates against the release of Yujuico as surety is the fact that he executed a
comprehensive or continuing surety, one which is not limited to a single transaction, but
which contemplates a future course of dealing, covering a series of transactions, generally
for an indefinite time or until revoked."
Case 13
NATIONAL POWER CORPORATION vs. THE COURT OF APPEALS, HON. JOSE D.
AZARRAGA, IN HIS CAPACITY AS PRESIDING JUDGE OF BRANCH 37, RTC, ILOILO CITY,
AND ATTY. REX C. MUZONES
G.R. No. 206167 March 19, 2018

A petition for certiorari under Rule 65 of the Rules of Court is a special civil action that may
be resortedto only in the absence of appeal or any plain, speedy and adequate remedy in
the ordinary course of law.In the instant case, NPC has a plain, speedy and adequate
remedy to appeal the CA decision, which is tofile a Petition for Review on Certiorari under
Rule 45 of the Rules of Court.

Here, the Decision dated April 14, 2011 of the CA dismissed the NPC's petition for being
filed out of time, thus it was a final judgment rendered by the CA. There is nothing left to be
done by the CA in respect tothe said case. Thus, NPC should have filed an appeal by petition
for review on certiorari under Rule 45before this Court, not a petition for certiorari under
Rule65.

FACTS:
The case stemmed from a civil case filed by Spouses Romulo and Elena Javellana (Spouses
Javellana)to fix lease rental and just compensation, collect sum of money and damages
against NPC andNational Transmission Corporation (Transco). The RTC rendered a
Decision in favor of the SpousesJavellana. NPC and Transco filed their respective appeal. On
the otherhand, Spouses Javellana filed aMotion for Execution Pending Appeal. The RTC
granted the motion for execution pending appeal.

Thereafter, Atty. Rex C. Muzones (Atty. Muzones), the counsel of the Spouses Javellana filed
a Noticeof Attorney's lien. Later, Transco filed a Motion to Dismiss the case in view of the
extra-judicialsettlement it had reached with SpousesJavellana. On his part, Atty. Muzones
filed a Motion for PartialSatisfaction of Judgment and Opposition to the Motion to Dismiss.

The respondent judge issued an Order ordering NPC and Transco to pay Atty. Muzones the
amountof P52,469,660.00 as his attorney's lien. The respondent judge deniedthe motion
for reconsiderationof Transco and the comment of NPC. Aggrieved, NPC filed a Petition for
Certiorari with the CAassailing the RTC Orders. In its Decision, the CA dismissed NPC's
petition for being filed beyond the60-day reglementary period.

NPC filed the instant Petition for Certiorariunder Rule 65 of the Rules of Court.

ISSUE:
Whether or not the Petition for Certiorari was proper (NO)

RULING:
A petition for certiorari under Rule 65 of the Rules of Court is a special civil action that
mayberesorted to only in the absence of appeal or any plain, speedy and adequate remedy
in the ordinarycourse of law. In the instant case, NPC has a plain, speedy and adequate
remedy to appeal the CAdecision, which is to file a Petition for Review on Certiorari under
Rule 45 of the Rules of Court.

Section 1 of Rule 45 states that "A party desiring to appeal by certiorari from a judgment or
final orderor resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial
Court or other courtswhenever authorized by law, may file with the Supreme Court a
verified petition for review on certiorari.The petition shall raise only questions of law
which must be distinctly set forth."

Here, the Decision dated April 14, 2011 of the CA dismissed the NPC's petition for being
filed out oftime, thus it was a final judgment rendered by the CA. There is nothing left to be
done by the CA inrespect to the said case. Thus, NPC should have filed an appeal by petition
for review on certiorariunder Rule 45 before this Court, not a petition for certiorari under
Rule 65.

In the case of MalayangManggagawa ng Stay fast Phils., Inc. v. NLRC, et al., it is stated that
the existenceof an appeal prohibits the parties' resort to a petition for certiorari, thus:

The proper remedy to obtain a reversal of judgment on the merits, final order or
resolution is appeal. This holds true even if the error ascribed to the court rendering
the judgment is its lack of jurisdiction over the subject matter, or the exercise of
power in excess thereof, or grave abuse of discretion in the findings of fact or of law
set out in the decision, order or resolution.The existence and availability of the right of
appeal prohibits the resort to certiorari because one ofthe requirements for the latter
remedy is that there should be no appeal.

Case 14
EXCELLENT ESSENTIALS INTERNATIONAL CORPORATION vs. EXTRA
EXCELINTERNATIONAL PHILIPPINES, INC.
G.R. No. 192797 April 18, 2018

In So Ping Bun v. CA, we laid out the elements of tortuous interference: (1) existence of a
validcontract; (2) knowledge on the part of the third person of the existence of contract;
and (3)interference of the third person is without legal justification or excuse.

Contrary toExcellent Essentials' argument in the instant petition, its participation in the
schemeagainst Excel Philippines transgressed the bounds of permissible financial interest.
Its merecorporateexistence played an important factor for Stewart to revoke Excel
Philippines'exclusive right todistribute E. Excel products in the Philippines. For without it,
or the participation of its incorporators,Excel International would not have the means to
connect with the marketing network ExcelPhilippines established. Excellent
Essentialsbecame the vessel for the breach of Excel International'scontractual undertaking
with Excel Philippines.

FACTS:
Excel International and Excel Philippines entered into an exclusive rights contract wherein
thelatter was granted exclusive rights to distribute E. Excel products in the Philippines.
Over the years,Excel International experienced intra-corporate struggle over the control of
the corporation and theoperations of its various exclusive distributors in Asia. Eventually,
JauHwa Stewart, a principalstakeholder of Excel International, somehow succeeded in
gaining control of the company.

Stewart, in her capacity as president of Excel International, revoked Excel

Philippines'exclusiverights contract and appointed Excellent Essentials as its new exclusive
distributor in thePhilippines. Excel International, through counsel, demanded that Excel
Philippines cease fromselling, importing, distributing, or advertising any and all of E. Excel
products.With its demandunheeded, Excel International and Excellent Essentials filed a
complaint for injunction and damagesagainst Excel Philippines.

Excel Philippines filed its answer with counterclaims saying that Excel International had no
right tounilaterally revoke its exclusive right to distribute E. Excel products in the
Philippines. Attached toits answer was an agreement dated 22 May 1995 between
ExcelInternational and Bright VisionConsultants, Ltd. showing that Excel Philippines'
exclusive distributorship was irrevocable. In fact,it was because of this agreement that
ExcelPhilippines was incorporated so that it would becomeExcel International's
exclusivedistributor within the Philippines.

The RTC rendered a decision dismissing Excellent Essentials' complaint. It found the issue
on whowas Excel International's exclusive distributor in the Philippines moot and
academic after the UtahCourt came out with a decision annulling Stewart's actions, as
president of Excel International, inrevoking Excel Philippines' exclusive distributorship and
designatingExcellent Essentials as its newdistributor in the Philippines.

As for Excel Philippines' counterclaims for damages, it held that there was no bad faith and
maliceon the part of Excellent Essentials who merely relied on the actions of Stewart, who
was then actingin her capacity as president of Excel International. Unsatisfied with the
outcome, Excel Philippinesappealed from this decision before the CA. The CA granted the
appeal and ordered ExcellentEssentials to pay Excel Philippines temperate and exemplary
damages, attorney's fees, and costs ofsuit:

ISSUE:
Whether Excellent Essentials was guilty of tortious interference (YES)

RULING:
Under the principle of relativity of contracts, only those who are parties to a contract
areliable toits breach. Under Article 1314 of the Civil Code, however, any third person
whoinduces another toviolate his contract shall be liable to damages to the other
contracting party. Said provision of lawembodies what we often refer to as tortuous or
contractualinterference. In So Ping Bun v. CA, welaid out the elements of tortuous
interference: (1) existence of a valid contract; (2) knowledge onthe part of the third person
of the existence of contract; and (3) interference of the third person iswithout legal
justification or excuse.

Prior to the revocation of its exclusive distributorship, Excel International had an existing
contractwith Bright Vision wherein they agreed to set up a corporation to exclusively
distribute E. Excelproducts within the Philippines. This corporation, eventually, turned out
to be Excel Philippineswho was given the irrevocable and exclusive right to
distribute,market, and/or sell. Under itsagreement with Bright Vision, Excel Philippines'
exclusive distributorship right was irrevocable andmay only be modified, transferred, or
terminatedupon the mutual consent of both parties. Thisagreement was effective from 22
May 1995until 21 May 2005.

The relationship between Excel International and Excel Philippines took an unexpected
turnwhenStewart, acting as Excel International's president, unilaterally revoked Excel
Philippines' right andconferred it to Excellent Essentials. Although Stewart's actions
werelater considered unlawful bythe Utah Court, whose opinion was adopted by both the
RTC and the CA, Excellent Essentials wasable to set up shop and disrupt Excel
Philippines'distribution of E. Excel products in thePhilippines.

At this point, Excel International had already breached its contractual obligations
byunilaterallyrevoking Excel Philippines' exclusive distributorship even if it was prohibited
from doing so underthe 22 May 1995 agreement. Stewart, as Excel International's interim \
president, was bound by thecompany's grant of exclusive distributorship to Excel
Philippines and the conditions that came withit.

Having established the first element of tortuous interference, we now have to determine if
ExcellentEssentials had knowledge of Excel Philippines' exclusive right. On this score, we
note that theexclusive distributorship right was granted to Excellent Essentials before it
existed. Thiscircumstance suggests that even before Excellent Essentials was organized,
itsincorporators hadthe preconceived plan to maneuver around Excel Philippines.
Worse,there is evidence showing thatExcellent Essentials' incorporators were officers of
and/oraffiliated with Excel Philippines. In fact,these incorporators remained at work with
ExcelPhilippines during this time and started to pirateits supervisors, employees, and
agents to join Excellent Essentials' multi-level marketing system.

Under these circumstances, we can conclude that those behind Excellent Essentials not
onlyhadknowledge that Excel International had the obligation to honor Excel
Philippines'exclusive right,but also conspired with Stewart to undermine Excel Philippines.

On the last element, therefore, we cannot ascribe to Excellent Essentials' claim that it was
not guiltyof malice or bad faith.

A duty which the law of torts is concerned with is respect for the property of others, and
cause ofaction ex delicto may be predicated by an unlawful interference by any person of
the enjoyment ofthe other of his private property. This may pertain to a situation where
athird person induces aperson to renege on or violate his undertaking under a contract.
To sustain a case for tortuous interference, the defendant must have acted with malice or
must havebeen driven by purely impure reasons to injure plaintiff; otherwise, his act
ofinterference cannotbe justified. We further explained that the word induce refers
tosituations where a person causesanother to choose one course of conduct by persuasion
or intimidation.

Contrary to Excellent Essentials' argument in the instant petition, its participation in the
schemeagainst Excel Philippines transgressed the bounds of permissible financial
interest.Its merecorporate existence played an important factor for Stewart to revoke
ExcelPhilippines' exclusiveright to distribute E. Excel products in the Philippines. For
without it,or the participation of itsincorporators, Excel International would not have the
means toconnect with the marketingnetwork Excel Philippines established. Excellent
Essentialsbecame the vessel for the breach ofExcel International's contractual undertaking
with Excel Philippines.

Case 15
METRO RAIL TRANSIT DEVELOPMENT CORPORATION vs.GAMMONPHILIPPINES, INC.
G.R. No. 200401 January 17, 2018

A contract is perfected when both parties have consented to the object and cause of the
contract.There is consent when the offer of one party is absolutely accepted by the other
party. The acceptanceof the other party may be express or implied. However, the
offeringparty may impose the time, place, and manner of acceptance by the other party,
and the other party must comply. In bidding contracts,this Court has ruled that the award
of the contract to the bidder is an acceptance of the bidder's offer.Its effect is to perfect a
contract between the bidder and the contractor upon notice of the award tothe
bidder.Thus, the award of a contract to a bidder perfects the contract. Failure to sign the
physicalcontract does not affectthe contract's existence or the obligations arising from it.

Applying this principle to the case at bar, this Court finds that there is a perfected contract
betweenthe parties. MRT has already awarded the contract to Gammon, and Gammon's
acceptance of theaward was communicated to MRT before MRT rescinded the contract.

FACTS:
This case involves MRT's MRT-3 North Triangle Description Project (Project), covering
54hectaresof land, out of which hectares were allotted for a commercial center. Parsons
Interpro JV(Parsons) was the Management Team authorized to oversee the construction’s
execution.

On April 30, 1997, Gammon received from Parsons an invitation to bid for the complete
concreteworks of the Podium. Gammon submitted three (3) separate bids. Gammon won
the bid. On August27, 1997, Parsons issued a Letter of Award and Notice to Proceed (First
Notice to Proceed) toGammon. It was accompanied by the formal contract documents.
Gammon signed and returnedthe First Notice to Proceed without the contract documents.
Gammon transmitted to Parsons asigned Letter of Comfort to guarantee its obligations in
the Project. However, in a Letter datedSeptember 8, 1997, MRT wrote Gammon that it
would need one (1) or two (2) weeks before itcould issue the latter the Formal Notice to
Proceed:

In a facsimile transmission sent on the same day, Parsons directed Gammon "to hold any
furthermobilization activities. On April 2, 1998, MRT issued in favor of Gammon another
Notice of Awardand Notice to Proceed (Third Notice to Proceed). Gammon received from
Parsons the Contract forthe Construction and Development of the Superstructure, MRT-3
North Triangle - Amended Noticeto Proceed dated June 10, 1998 (Fourth Notice to
Proceed). Gammon wrote MRT, acknowledgingthe latter's intent to grant the Fourth Notice
to Proceed to another party despite having granted theFirst Notice to Proceed to Gammon.
Thus, it notified MRT of its claims for reimbursement for costs,losses, charges, damages,
and expenses it had incurred due to the rapid mobilization program inresponse to MRT's
additional work instructions, suspension order, ongoing discussions, and theconsequences
of its award to another party.

In a Letter dated July 15, 1998, MRT expressed its disagreement with Gammon and its
amenabilityto discussing claims for reimbursement. Gammon filed a Notice of Claim before
CIAC against MRT.CIAC ruled in favor of Gammon. CA affirmed the decision.

ISSUE:
Whether there was a perfected contract of sale between MRT and Gammon. (YES)

RULING:
This Court rules that there is a perfected contract between MRT and Gammon.

The requisites of a valid contract are provided for in Article 1318 of the Civil Code:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.

A contract is perfected when both parties have consented to the object and cause of the
contract.There is consent when the offer of one party is absolutely accepted by the other
party. Theacceptance of the other party may be express or implied. However, the offering
party may imposethe time, place, and manner of acceptance by the other party, and the
other party must comply. Inbidding contracts, this Court has ruled that the award of the
contract to the bidder is an acceptanceof the bidder's offer. Its effect is to perfect a contract
between the bidder and the contractor uponnotice of the award to the bidder. Thus, the
award of a contract to a bidder perfects thecontract. Failure to sign the physical contract
does not affect the contract's existence or theobligations arising from it.Applying this
principle to the case at bar, this Court finds that there is a perfected contract betweenthe
parties. MRT has already awarded the contract to Gammon, and Gammon's acceptance of
theaward was communicated to MRT before MRT rescinded the contract. The Invitation to
Bid issuedto Gammon stated that MRT "will select the Bidder that [MRT] judges to be the
most suitable,mostqualified, most responsible and responsive, and with the most attractive
Price and will enter intoearnest negotiations to finalize and execute the Contract."
On May 30, 1997, Gammon tendered its bids. In a Letter dated July 14, 1997, Gammon
submittedanother offer to MRT in response to the latter's invitation to submit a final offer
considering thefluctuation in foreign exchange rates and an odd-and-even vehicle
restriction plan. Parsonsthereafter issued the First Notice to Proceed In its First Letter,
Gammon signed and returned theFirst Notice to Proceed to signify its consent to
itsprestations. In its Second Letter, Gammontransmitted to Parsons the signed Letter
ofComfort to guarantee its obligations in the Project.

On September 9, 1997, Gammon returned to Parsons the contract documents. MRT argues
that thereturn of the contract documents occurred after it had already revoked its offer
However, MRT hadalready accepted the offered bid of Gammon and had made known to
Gammon its acceptance whenit awarded the contract and issued it the First Notice to
Proceed on August 27, 1997. The FirstNotice to Proceed clearly laid out the object and the
cause of the contract. In exchange forP1,401,672,095.00, Gammon was to furnish
"labor,supervision, materials, plant, equipment andother facilities and appurtenances
necessary to perform all the works in accordance with [its bid]."

This acceptance is also manifested in the First Notice to Proceed when it authorized
Gammon toproceed with the work seven (7) days from its receipt or from the time the site
is dewatered andcleaned up. Thus, Gammon's receipt of the First Notice to Proceed
constitutes the acceptance that isnecessary to perfect the contract.

Case 16
NORTHERN MINDANAO INDUSTRIAL PORT and SERVICES CORPORATION vs. ILIGAN
CEMENT CORPORATION
G.R. No. 215387 April 23, 2018

Article 1326 of the Civil Code, which specifically tackles offer and acceptance of
bids,provides thatadvertisements for bidders are simply invitations to make proposals, and
thatan advertiser is notbound to accept the highest bidder unless the contrary appears.

ICC had the right to reject bids, and it cannot be compelled to accept a bidder's proposal,
andexecute acontract in its favour.

FACTS:
Iligan Cement Corporation (ICC) invited Northern Mindanao Industrial & Port Services
Corporation(NOMIPSCO) to a pre-bidding conference for a two-year cargo handling
contract. NOMIPSCOthereafter submitted its proposal in which it offered the lowest bid of
P1.788 per a 40 kilogram bag.

ICC, however, awarded the cargo handling contract to Europort Logistics and Equipment
Incorporated (Europort).

NOMIPSCO filed a complaint for damages alleging that upon inquiry, it was revealed that
the bidaward was based on a new company policy to prioritize new contractors which was
never madeknown to the bidders. NOMIPSCO claimed that ICC was guilty of bad faith when
it still invitedNOMIPSCO to join the pre-bidding conference despite knowledge of its status
as old contractor.NOMIPSCO contended that the acts of ICC amounted to an abuse of its
rights or authority.

ICC counters that NOMIPSCO had no cause of action against it.

ISSUE:
Whether NOMIPSCO has a cause of action against ICC (NONE)

RULING:
The Court finds nothing wrong in the policy of ICC to award the contract to a new
contractor.This isthe prerogative of ICC and NOMIPSCO had no right to interfere in the
exercise thereof. Anadvertisement to possible bidders is simply an invitation to make
proposals, and that anadvertiseris not bound, to accept the lowest bidder unless the
contrary appears; ICC had theright to rejectbids, and it cannot be compelled to accept a
bidder's proposal, and execute a contract in its favor.Indeed, under Article 1326 of the Civil
Code, ''advertisements for bidders are simply invitations tomake proposals, and the
advertiser is not bound to accept the highest or lowest bidder, unless thecontrary appears."
"As the discretion to accept orreject bids and award contracts is of such widelatitude,
courts will not interfere, unless it isapparent that such discretion is exercised arbitrarily or
used as a shield to a fraudulentaward. The exercise of that discretion is a policy decision
thatnecessitates prior inquiry, investigation, comparison, evaluation, and deliberation."

Article 1326 of the Civil Code, which specifically tackles offer and acceptance of bids,
provides thatadvertisements for bidders are simply invitations to make proposals, and that
an advertiser is notbound to accept the highest bidder unless the contrary appears.
InLeoquinco v. The Postal SavingsBank and C & C Commercial Corporation v. Menor,
weexplained that this right to reject bids signifies that the participants of the bidding
process cannot compel the party who called for bids to acceptthe bid or execute a deed of
sale in the former's favor.

Case 17
PHILIPPINE NATIONAL BANK vs. ANTONIO BACANI, RODOLFO BACANI, ROSALIA VDA.
DE BAYAUA, JOSE BAYAUA and JOVITA VDA. DE BAYAUA
G.R. No. 194983 June 20, 2018

FACTS:
Respondent Rodolfo was the registered owner of a parcel of land located in Centro East,
Santiago, Isabela, covered by Transfer Certificate of Title. The other respondents in this
case were the occupants of the subject property. On July 16, 1980, the subject property was
used to secure the Php 80,000.00 loan that Spouses Bacani obtained from PNB. When
Spouses Bacani failed to pay their loan, PNB extrajudicially foreclosed the subject property
which was awarded to PNB as the highest bidder.
The Spouses Bacani failed to redeem the property. Consequently, on June 6, 1989, Rodolfo's
title was cancelled, and in its place, TCT No. T-185028 was issued in the name of PNB.

On November 29, 1989, PNB issued SEL Circular No. 8-7/89 in which former owners or
their heirs, as the case may be, were given priority in the re-acquisition of their foreclosed
assets '"on negotiated basis without public bidding." Spouses Bacani initiated negotiations
with PNB regarding the re-acquisition of their property. Initially, the Spouses Bacani's
written offer to purchase the subject property was fixed at Php 150,000.00. On November
25, 1991, the Spouses Bacani sent another letter, increasing the offer to Php 220,000.00.
Mr. Santos advised them to increase their offer because their initial proposal was low.
Spouses Bacani accordingly offered to repurchase the subject property for Php 200,000.00
in cash and Php 100,000.00 payable in installments for two years. PNB later informed the
Spouses Bacani that the request for repurchase was refused and instead, the subject
property would be sold in a public auction. It stated that the reason for the rejection was
the low offer from the Spouses Bacani. Spouses Bacani increased their offer to Php
350,000.00. Their efforts, however, remained unsuccessful.

On January 29, 1996, the Spouses Bacani received a notice that the PNB had begun to
accept offers for the purchase of various properties, including the subject property. They
were provided with a copy of the Invitation to Bid. PNB set the floor bid price to Php
4,000,000.00. PNB sold the subject property through a negotiated sale to Renato de Leon
(Renata), for the price of Php1,500,000.00. Renato later on filed an ejectment case against
the respondents which was favorably granted by the Municipal Trial Court. On March 19,
1997, the respondents filed a complaint for the annulment of the sale and Renato's title.
The respondents alleged that PNB schemed to prevent the Spouses Bacani from buying
back the subject property.

RTC ruled in favor of the respondents, and found that PNB acted in bad faith. The RTC ruled
that PNB failed to observe its own policy granting priority right to the former owners of its
acquired assets. The CA affirmed the trial court 's findings that the sale of the subject
property to Renato was fraudulent because the Spouses Bacani were unable to exercise
their right to buy back their foreclosed property at the scheduled public bidding. The CA
also applied the doctrine on constructive trust as regards Renato's acquisition of title over
the subject property, in order to justify its reconveyance to the Spouses Bacani. PNB's
motion for reconsideration was denied.

ISSUE:
Whether respondent-spouses have the right to repurchase the subject property. (NO)

RULING:
Both the RTC and the CA gravely erred in relying on PNB SEL Circular No. 8-7/89 to nullify
the sale of the subject property. Upon the expiration of the period to redeem, the Spouses
Bacani do not have an enforceable right to repurchase the subject property. The effect of
the consolidation of title over a foreclosed property was satisfactorily explained by the
Court in Spouses Marquez v. Spouses Alindog, wherein the court ruled that the buyer in a
foreclosure sale becomes the absolute owner of the property purchased if it is not
redeemed during the period of one year after the registration of the sale. As such, he is
entitled to the possession of the said property and can demand it at any time following the
consolidation of ownership in his name and the issuance to him of a new transfer
certificate of title.

In this case, PNB's certificate of sale was registered on October 10, 1986 and one year
lapsed from this date without the Spouses Bacani exercising their right to redeem the
subject property. Due to the unfortunate failure of the Spouses Bacani to exercise their
redemption right, the title of Rodolfo over the subject property was cancelled and a new
one was issued in the name of PNB. At this point, PNB became the absolute owner of the
property and Rodolfo, as well as his wife, lost all their rights and interests over it. Verily,
PNB not only had the right to its possession, but also all the other rights considered as
essential attributes of ownership—including the right to dispose or alienate the subject
property.

When the Spouses Bacani made its initial offer to repurchase the subject property on
August 26, 1991, almost four (4) years passed since the redemption period expired. Thus,
by the time the parties started negotiating the Spouses Bacani's reacquisition of the subject
property, PNB was already the absolute owner.

The Spouses Bacani, however, anchored their claim on PNB SEL Circular No. 8-7/89, which
embodied the bank's policy of giving priority to former owners in the disposition of its
acquired assets. But when the circular was issued on November 29, 1989, the redemption
period has expired and the title over the subject property was already consolidated in favor
of PNB as its purchaser during the foreclosure sale. For this reason, any offer on the part of
the Spouses Bacani is merely an offer to repurchase, and PNB was not statutorily or
contractually bound to accept such offer.

In addition, said circular was an internal memorandum intended for the information of
bank employees and personnel. Thus, as an internal bank policy, the Spouses Bacani do not
have a legally enforceable right to be prioritized over all other buyers of the subject
property. Even if the Court considers the bank circular as a binding obligation on the part
of PNB to prioritize the former owners of its acquired assets, the circular provides several
terms and conditions before former owners are able to repurchase their foreclosed
properties. The circular pertinently states:
1. Selling price of assets shall be based on total Bank's claim or fair market value,
whichever is higher. x x x
7. The former owners or their heirs shall exercise their right to repurchase their
properties within ninety (90) days from receipt of notice from the Bank.

Spouses Bacani were clearly unable to fulfill the very first condition of PNB SEL Circular No.
8-7/89. The offer was lower than either the total claim of PNB, or the fair market value of
the property. PNB duly communicated the rejection of their offer, including the grounds for
the rejection, in several letters sent and received by the Spouses Bacani. Neither does the
publication of the Invitation to Bid constitute a binding obligation on the part of PNB to sell
the subject property to the Spouses Bacani.
The publication of the Invitation to Bid, which included the subject property, was not a
binding obligation on the part of PNB. Article 1326 of the Civil Code clearly provides that:

ART. 1326. Advertisements for bidders are simply invitations to make proposals,
and the advertiser is not bound to accept the highest or lowest bidder, unless the
contrary appears.

Thus, the fact that the Invitation to Bid was published cannot bind PNB to any offer from
any party. PNB merely notified interested parties to submit their proposals for the
purchase of the subject property, which PNB may either accept or reject as the absolute
owner thereof. In the same manner, the published bidding schedule was not an offer from
PNB, notice and acceptance of which would compel the bank to sell the subject property to
such party.

Case 18
LOLITA ESPIRITU SANTO MENDOZA and SPS. ALEXANDER AND ELIZABETH
GUTIERREZ vs. RAMON, SR. AND NATIVIDAD PALUGOD
G.R. No. 220517 June 20, 2018

FACTS:
Petitioner Lolita Espiritu Santo Mendoza and Jasminia Palugod were close friends. In 1991,
Lolita and Jasminia bought the subject lot on installment for one year until they decided to
pay the balance in full. In 1995, Jasminia became afflicted with breast cancer. Sometime in
1996, Lolita and Jasminia constructed a residential house on the subject lot. Although Lolita
has no receipts, she shared in the cost of the construction of the house from her income in
the catering business and selling of various products. On May 11, 2004, Jasminia executed a
Deed of Absolute Sale in favor of Lolita, who eventually mortgaged the subject property to
Elizabeth Gutierrez as a security for a loan in the amount of Php800,000.00.

On the other hand, respondent spouses Palugod alleged that their daughter, the late
Jasminia, acquired the property located in Sagana Homes, Habay, Bacoor, Cavite. Prior to
and after the said acquisition of the subject property, Jasminia was living with Lolita, a
lesbian. Unfortunately, Jasminia was afflicted with Stage IV breast cancer. When she was
nearing her death, she told her mother, respondent Natividad Palugod, that her house and
lot shall go to her brother Ramonito Palugod, but petitioner shall be allowed to stay therein
Meanwhile, Lolita, taking advantage of her relationship with Jasminia, caused the latter to
sign a Deed of Absolute Sale in her favor. Upon learning from the Office of the Registry of
Deeds that Jasminia's certificate of title has been cancelled, respondents executed an
Affidavit of Adverse Claim of their right and interest over the property as the only
compulsory and legitimate heirs of Jasminia. However, Lolita, knowing fully well of the
impending suit, made it appear that she mortgaged the property to Spouses Gutierrez as a
security for a loan amounting to Php800,000.00.

Thus, respondents filed a complaint for Declaration of Nullity of the Deed of Absolute Sale
and the Deed of Real Estate Mortgage with the RTC. The RTC declared that there can be no
contract unless the following concur: (a) consent; (2) object certain; and (3) cause of the
obligation. It held that the respondents were able to prove by preponderance of evidence
that the Deed of Sale involved no actual monetary consideration. CA affirmed. Hence, the
present Petition

ISSUE:
Whether the conveyance was void for lack of monetary consideration. (NO)

RULING:
The Petition is meritorious. Both the RTC and the CA declared the DAS void on the ground
that it was fictitious or simulated on account of lack of consideration. While petitioner
Lolita concedes that she did not pay the consideration for the purchase of the subject
property before Notary Public Atty. Jesus Bongon, she asserts that the payment was made
prior to the notarization of the DAS as shown in her testimony taken on February 23, 2010.
The lower courts failed to properly consider the foregoing argument and evidence that
petitioner Lolita raised and adduced. The outcome of the case would have been different
had the lower courts given them the due consideration they deserved.

As correctly pointed out by petitioner Lolita, the DAS is itself the proof that the sale of the
property is supported by sufficient consideration. This is anchored on the disputable
presumption of consideration inherent in every contract. Thus, Article 1354 of the Civil
Code provides: "Although the cause is not stated in the contract, it is presumed that it exists
and is lawful, unless the debtor proves the contrary.” Petitioners stand to benefit from the
disputable presumption of consideration with the presentation of the DAS.

With the presumption in favor of petitioner Lolita who is the vendee, it became incumbent
upon respondents to present preponderant evidence to prove lack of consideration.
Respondents' mere assertion that the DAS has no consideration is inadequate.

As mentioned earlier, respondents relied solely on the testimony of respondent Natividad

to prove the lack of consideration. Respondent Natividad simply reiterated the allegations
in the Affidavit of Adverse Claim that she and her husband, respondent Ramon, executed.
On the other hand, petitioner Lolita disputed the assertion that she has no income and
means of livelihood, and presented documents in support thereof. The testimony of
petitioner Lolita and the documentary evidence in support thereof show that she had
income and the means to pay the consideration stated in the DAS. It is evident to the Court
that petitioner Lolita's proof of payment of the DAS' consideration was her sworn
testimony. Testimony, given under oath, and subjected to cross-examination is proof.
Unfortunately, both the CA and the RTC brushed this aside only because the RTC zeroed in
on the lack of receipts.

Since the evidence of the parties are mainly testimonial, the Court is called upon weigh the
version of respondents against that of petitioners. Before the narrations of respondent
Natividad and petitioner Lolita are pitted against each other to determine which one
preponderates over the other, the Court notes the glaring inconsistencies in respondent
Natividad's testimony. Given the significant inconsistencies in the testimony of respondent
Natividad, the credibility of her testimony is, to the Court, doubtful. To be sure, a witness'
credibility is determined by the probability or improbability of his testimony. The
improbability of respondent Natividad's assertions is demonstrated by the evidence, both
documentary and testimonial, that petitioner Lolita adduced to rebut the same. The RTC
and the CA also did not even mention the glaring inconsistencies noted above, which if
properly considered, would have seriously affected the outcome of the case.

Given the foregoing, contrary to the findings of the CA and the RTC, which evidently arose
from their misapprehension and non-consideration of relevant facts, respondents have not
discharged their burden of proof to rebut either the presumption of sufficient
consideration of the DAS or the evidence of petitioner Lolita. In fine, respondents failed to
establish their cause of action by preponderance of evidence. Consequently, the DAS
executed by Jasminia in favor of petitioner Lolita over the subject property is valid, the
presumption that it has sufficient consideration not having been rebutted. The same holds
true regarding the Real Estate Mortgage between petitioner Lolita and petitioners spouses
Alexander and Elizabeth Gutierrez.

Case 19
MAKATI TUSCANY CONDOMINIUM CORPORATION vs. MULTI-REALTY DEVELOPMENT
CORPORATION
G.R. No. 185530 April 18, 2018.

FACTS:
In 1974, Multi-Realty built Makati Tuscany, a 26-storey condominium building located in
Makati City. In 1975, Multi-Realty, through its president Henry Sy, Sr., executed and signed
Makati Tuscany's Master Deed and Declaration of Restrictions (Master Deed), which was
registered with the Register of Deeds of Makati in 1977.

Pursuant to RA No. 4726 or the Condominium Act, Multi-Realty created and incorporated
Makati Tuscany Condominium Corporation (MATUSCO) sometime in 1977 to hold title
over and manage Makati Tuscany's common areas. That same year, Multi-Realty executed a
Deed of Transfer of ownership of Makati Tuscany's common areas to MATUSCO.

In 1990, Multi-Realty filed a complaint for damages and/or reformation of instrument with
prayer for temporary restraining order and/or preliminary injunction against MATUSCO
before the Makati RTC. Multi-Realty alleged in its complaint that of the 106 parking slots
designated in the Master Deed as part of the common areas, only eight (8) slots were
actually intended to be guest parking slots; thus, it retained ownership of the remaining 98
parking slots. Multi-Realty claimed that its ownership over the 98 parking slots was
mistakenly not reflected in the Master Deed. RTC dismissed Multi-Realty's complaint,
noting that Multi-Realty itself prepared the Master Deed and Deed of Transfer. It also
emphasized that Multi-Realty's prayer for the reformation of the Master Deed could not be
granted absent proof that MATUSCO acted fraudulently or inequitably towards Multi-
Realty. Finally, it ruled that Multi-Realty was guilty of estoppel by deed.
Both parties appealed to the CA. In dismissing Multi-Realty's appeal, the CA held that an
action for reformation of an instrument must be brought within 10 years from the
execution of the contract. As to the dismissal of MATUSCO's appeal, CA ruled that its claim
was based on a personal right to collect a sum of money, which had a prescriptive period of
four (4) years, and not based on a real right, with a prescriptive period of 30 years.

Multi-Realty moved for reconsideration, but its motion was denied. It then filed a petition
for review before the Supreme Court. The Supreme Court granted Multi-Realty's petition,
set aside the assailed CA’s Decision, and directed the latter to resolve Multi-Realty's appeal.
Thereafter, the CA initially denied both appeals. On Multi-Realty’s motion for
reconsideration, however, CA reversed its Decision and directed the reformation of the
Master Deed and Deed of Transfer. MATUSCO moved for the reconsideration of the
Amended Decision, but its motion was denied. Hence, MATUSCO filed its Petition for
Review on Certiorari before this Court.

ISSUES:
(1) Whether there is a need to reform the Master Deed and the Deed of Transfer. (YES)
(2) Whether respondent is barred by the doctrine of estoppel. (NO)

RULING:
(1) An action for reformation of an instrument finds its basis in Article 1359 of the Civil
Code. The National Irrigation Administration v. Gamit stated that there must be a
concurrence of the following requisites for an action for reformation of instrument to
prosper:

(1) there must have been a meeting of the minds of the parties to the contract;
(2) the instrument does not express the true intention of the parties; and
(3) the failure of the instrument to express the true intention of the parties is due to
mistake, fraud, inequitable conduct or accident.

The burden of proof then rests upon the party asking for the reformation of the instrument
to overturn the presumption that a written instrument already sets out the true intentions
of the contracting parties.

A plain and literal reading of Section 7(d) in relation to Section 5 shows that all parking
areas which are not assigned to units come under petitioner's authority because they are
part of the common areas. Respondent argues that what was written in the Master Deed
and Deed of Transfer failed to fully capture what was actually intended by the parties.
However, intentions involve a state of mind, making them difficult to decipher; therefore,
the subsequent and contemporaneous acts of the parties must be presented into evidence
to reflect the parties' intentions. To substantiate its claim that there was a difference
between the written terms in the Master Deed and Deed of Transfer and the parties'
intentions, respondent refers to their prior and subsequent acts:

First, respondent points out that in the color-coded floor plans for the ground floor,
upper basement, and lower basement, only eight (8) guest parking slots were
 indicated as part of the common areas. However, respondent alleges that due to its
inexperience with documenting condominium developments, it failed to reflect the
correct number of guest parking slots in the Master Deed and Deed of Transfer.

Second, acting under the honest belief that it continued to own the 98 parking slots,
respondent sold 26 of them to Makati Tuscany's unit owners from 1977 to 1986,
without any hint of a complaint or opposition from petitioner. Respondent also
states that petitioner repeatedly cooperated and supported its sales by issuing
Certificates of Management for the condominium units and parking slots sold by
respondent.

Third, petitioner's Board of Directors made repeated offers to purchase the parking
slots from respondent, signifying petitioner's recognition of respondent's retained
ownership over the disputed parking slots. This was made evident in an excerpt
from the minutes of the June 14, 1979 meeting of MATUSCO's Board of Directors.
DEAN’S CIRCLE 2019 – UST FCL
122

Finally, respondent highlights that it was only in September 1989, when the value of
the 72 remaining unallocated parking slots had risen to approximately P250,000.00
each or approximately P18,000,000.00 for the 72 parking slots, that petitioner first
claimed ownership of the remaining parking slots.

The totality of the undisputed evidence proving the parties' acts is consistent with the
conclusion that the parties never meant to include the 98 parking slots among the common
areas to be transferred to petitioner. The evidence is consistent to support the view that
petitioner was aware of this fact. At this juncture, it must be pointed out that petitioner
never rebutted in its Reply any of respondent's statements regarding the subsequent acts
of the parties after the execution and registration of the Master Deed and Deed of Transfer.

Petitioner claims that it was confusion and not bad faith that caused its belated assertion of
ownership over the parking slots. Whether or not it acted in bad faith was never in issue.
Further, it is difficult to impute confusion and bad faith, which are states of mind
appropriate for a natural individual person, to an entire corporation. To grant the
argument that a corporation, like a natural person, was confused or not in bad faith is to
extend to it too much analogy and to endow it more of the human characteristics beyond its
legal fiction. The Court is not endowed with such god-like qualities of a creator or should
allow illicit extensions of legal fiction to cause injustice.

(2) Petitioner asserts that respondent's admission of committing a mistake in drafting the
Master Deed and Deed of Transfer makes it liable to suffer the consequences of its mistake
and should be bound by the plain meaning and import of the instruments. It contends that
respondent should be estopped from claiming that the Master Deed and Deed of Transfer
failed to show the parties' true intentions. Again, petitioner fails to convince. In Philippine
National Bank v. Court of Appeals, the Court held: "The doctrine of estoppel is based upon
the grounds of public policy, fair dealing, good faith and justice, and its purpose is to forbid
one to speak against his own act, representations, or commitments to the injury of one to
whom they were directed and who reasonably relied thereon. The doctrine of estoppel
springs from equitable principles and the equities in the case.”

In this case, except for the words in the contract, all of respondent's acts were consistent
with its position in the case. In addition, petitioner cannot claim the benefits of estoppel. It
was never made to rely on any false representations. It knew from its inception as a
corporation that ownership of the parking slots remained with respondent. Its dealings
with respondent and the actuations of its Board of Directors convincingly show that it was
aware of and respected respondent's ownership.

Case 20
HEIRS OF JOSE MARIANO and HELEN S. MARIANO, REPRESENTED BY DANILO DAVID
S. MARIANO, MARY THERESE IRENE S. MARIANO, MA. CATALINA SOPHIA S. MARIANO,
JOSE MARIO S. MARIANO, MA. LENOR S. MARIANO, MACARIO S. MARIANO AND HEIRS
OF ERLINDA MARIANO-VILLANUEVA, REPRESENTED IN THIS ACT BY IRENE LOURDES
M. VILLANUEVA THROUGH HER ATTORNEY-IN-FACT EDITHA S. SANTUYO and
BENJAMIN B. SANTUYO vs. CITY OF NAGA
G.R. No. 197743 March 12, 2018

FACTS:
Eusebio M. Lopez, Sr., Soledad L. Dolor, Jose A. Gimenez and Eusebio Lopez, Jr., as the
President, Secretary, Treasurer, and General Manager of the City Heights Subdivision
(Subdivision), respectively, wrote to the mayor of the City of Naga (City), offering to
construct the Naga City Hall within the premises of the Subdivision. Their letter indicated
that the City Hall would be built on an area of not less than two (2) hectares within the
Subdivision, which would be designated as the open space reserved for a public purpose.

The City's Municipal Board subsequently passed Resolution No. 75, asking the Subdivision
for a bigger area on which the City Hall would stand. Consequently, the Subdivision
amended its offer and agreed to donate five (5) hectares to the City. The area is a portion of
the land registered in the names of Macario Mariano (Macario) and Jose Gimenez
(Gimenez) under TCT No. 671 of the Registry of Deeds for Naga City, measuring a total of
22.9301 hectares.
The amended offer was signed by Macario and Gimenez to indicate their conforme, and by
their respective spouses, Irene Mariano (Irene) and Rose Fitzgerald De Gimenez (through
one Josie Gimenez), to indicate their marital consent.

The Municipal Board adopted Resolution No. 89 accepting the Subdivision's offer of
donation and its proposed contract. The Resolution also authorized the City Mayor to
execute the deed of donation on the City's behalf. The parties, however, submitted
divergent accounts on what happened after Resolution No. 89 was passed.

According to the City, the City Mayor of Naga, Monico Imperial (Mayor Imperial), and the
registered landowners, Macario and Gimenez, executed a Deed of Donation, whereby the
latter donated five hectares of land (subject property), two hectares of which to be used as
the City Hall site, another two hectares for the public plaza, and the remaining hectare for
the public market. By virtue of said Deed, the City entered the property and began
construction of the government center. It also declared the five-hectare property in its
name for tax purposes.

In contrast, petitioners averred that the landowners' plan to donate five hectares to the City
did not materialize as the contract to build the City Hall was not awarded to the
Subdivision. Petitioners alleged that the construction contract was eventually awarded by
the Bureau of Public Works (BPW) to a local contractor, Francisco Sabaria (Sabaria), who
won in a public bidding. Thereafter, the Municipal Board adopted Resolution No. 11
authorizing the City Mayor to enter into a contract with Sabaria for the construction of the
City Hall.

Petitioners claimed that Macario and officers of the Subdivision met with Mayor Imperial to
demand the return of the five-hectare lot as the condition for the donation was not
complied with. Mayor Imperial purportedly assured them that the City would buy the
property from them. The purchase, however, did not materialize. Petitioners alleged that
10 years later, Macario wrote to Lopez Jr., instructing him to make a follow-up on the City's
payment for the subject lot. However, Macario died without receiving payment from the
City.

Irene, the wife of Macario, later on died. Jose [son of Macario and Irene] also died the
following year. After a protracted litigation, Jose, then represented by his heirs, and Erlinda
[daughter of Macario and Irene] were declared as Irene's heirs. The probate court issued
letters of administration to Danilo David S. Mariano (Danilo), for the administration of
Irene's estate. Thereafter, Danilo demanded upon the City Mayor of Naga to vacate and
return the subject property. When the City did not comply, petitioners, as heirs of Jose and
Erlinda, filed a Complaint for unlawful detainer against the City.

Petitioners averred that there was no donation of the subject property to the City as the
obligation to donate on the part of Macario and Gimenez, conditioned on the Subdivision
undertaking the construction of the City Hall therein, was abrogated when the City
eventually awarded the construction contract to Sabaria. Petitioners further alleged that
Macario thereafter demanded the return of the property, but was assured by Mayor
Imperial that the City would buy the same. The purchase, however, never materialized.
Petitioners, thus, argued that the City's possession of the subject property was by mere
tolerance which ceased when they required its return.

The City countered that the donation actually took place, as evidenced by a Deed of
Donation, making the City the owner and lawful possessor of the subject property. Further,
the subject property had long been declared in the City's name for tax purposes. Granting
there was no donation, the City stressed that ownership of the premises automatically
vested in it when they were designated as open spaces of the subdivision-project, donation
thereof being a mere formality. The City also argued that since the property was already
occupied by several government offices for about 50 years, recovery thereof was no longer
feasible, and the landowners may simply demand just compensation from the City. The City
further contended that the complaint was dismissible on the grounds of laches and
prescription. In any case, the City averred that it could not be ejected from the premises as
it possessed the rights of a builder in good faith.

Petitioners, in turn, denied that laches had set in because Macario supposedly made a
demand for the City to return the property, and subsequently, to abide by Mayor Imperial's
commitment to purchase the same. Furthermore, as heirs of Macario and Irene, they
themselves sought to recover the subject property after learning of their rights thereto.

Petitioners also argued that title to the property, which remained registered in the names
of Macario and Gimenez, was indefeasible and could not be lost by prescription or be
defeated by tax declarations. They further asserted that the requirement of open space in
the subdivision for public use was already satisfied with the landowners' donation of road
lots to the City as annotated on TCT No. 671. Petitioners contended that the City was a
builder in bad faith because it continued to construct the City Hall and allowed other
government agencies to build their offices on the subject property, knowing that the
donation had been aborted when the condition therefor was not fulfilled and that its
avowed purchase of the property was not forthcoming.

ISSUE:
Whether the petitioners have the better right of possession over the subject property.
(YES)

RULING:
Generally, contracts are obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present. However, when the law
requires that a contract be in some form to be valid, such requirement is absolute and
indispensable. Its non-observance renders the contract void and of no effect. One such law
is Article 749 of the Civil Code of the Philippines which requires that, in order for the
donation of an immovable to be valid, it must be made in a public document, specifying
therein the property donated and the value of the charges which the donee must satisfy.
Thus, donation of real property, which is a solemn contract, is void without the formalities
specified in the foregoing provision.

The purported Deed of Donation submitted by the City cannot be considered a public
document. While it contains an Acknowledgment before a notary public, the same is
manifestlydefective as it was made neither by the alleged donors and their respective
spouses, or by the donee, but only by the Subdivision's President, Vice President, Secretary,
and General Manager.

Said Deed also shows that Mayor Imperial affixed his signature thereon only four days after
it was notarized, thus he could not have acknowledged the same before the notary public.
Verily, the notary public could not have certified to knowing the parties to the donation, or
to their execution of the instrument, or to the voluntariness of their act. This glaring defect
is fatal to the validity of the alleged donation. Not being a public document, the purported
Deed of Donation is void. A void or inexistent contract has no force and effect from the very
beginning, as if it had never been entered into. Since void contracts cannot be the source of
rights, the City has no possessory right over the subject property. In this light, to resolve
whether to admit the copy of the purported Deed of Donation as secondary evidence will
be futile as the instrument in any case produces no legal effect.

Indeed, title to the subject property remains registered in the names of Macario and
Gimenez. The alleged Deed of Donation does not appear to have been registered and TCT
No. 671 does not bear any inscription of said Deed.

A fundamental principle in land registration is that the certificate of title serves as evidence
of an indefeasible and incontrovertible title to the property in favor of the person whose
name appears therein. It is conclusive evidence as regards ownership of the land therein
described, and the titleholder is entitled to all the attributes of ownership of the property,
including possession. Thus, the Court has time and again reiterated the age-old rule that the
person who has a Torrens title over a parcel of land is entitled to possession thereof.
Furthermore, it has been held that a certificate of title has a superior probative value as
against that of an unregistered deed of conveyance in ejectment cases. Accordingly, as
against the City's unregistered claim, the Torrens title in the name of Macario and Gimenez
must prevail, conferring upon the registered owners the better right of possession. This
superior or preferred right of possession applies to petitioners as Macario's hereditary
successors who have stepped into said decedent's shoes by operation of law.

As to the open space in the subdivision, contrary to the position of petitioners, the use of
the subdivision roads by the general public does not strip it of its private character. The
road is not converted into public property by mere tolerance of the subdivision owner of
the public's passage through it. To repeat, the local government should first acquire them
by donation, purchase, or expropriation, if they are to be utilized as a public road.

As to the defense of the City that it is a builder in good faith, it must be noted that, under
the law, one is considered in good faith if he is not aware that there exists in his title or
mode of acquisition any flaw which invalidates it. By these standards, the City cannot be
deemed a builder in good faith.

The evidence shows that the contract for the construction of the City Hall by the
Subdivision was an integral component of the latter's offer of donation, constituting an
essential condition for the intended conveyance. However, the Municipal Board issued
Resolution No. 11 authorizing the City Mayor to enter into a contract with Sabaria for the
construction of the City Hall. Thus, the City could not have been unaware that by awarding
the same construction contract to Sabaria, it no longer had any cause to continue occupying
the subject property as the condition for the proposed donation had not been satisfied.
Accordingly, it cannot be considered to have acted in good faith. Thus, petitioners, as
hereditary successors of the registered owners of the subject property, have the right to
appropriate what has been built on the property, without any obligation to pay indemnity
therefor, and the City has no right to a refund of any improvement built therein.
As to the matter regarding laches, Macario, through his letters, has been shown to have
taken steps to have the City act on Mayor Imperial's proposal to "buy instead" the subject
property. Furthermore, petitioners had been engaged in litigation to establish their right to
inherit from Macario and Irene. Given these circumstances, the Court is not disposed to
conclude that there was an unreasonable or unexplained delay that will render petitioners'
claim stale.
Thus, it has been consistently held that registered owners have the right to evict any
person unlawfully occupying their property, and this right is imprescriptible and can never
be barred by laches. Even if it be supposed that they were aware of the occupant's
possession of the property, and regardless of the length of that possession, the lawful
owners have a right to demand the return of their property at any time as long as the
possession was unauthorized or merely tolerated, if at all. Moreover, it is well settled that
the rule on imprescriptibility of registered lands not only applies to the registered owner
but extends to the heirs of the registered owner as well.

Lastly, it must be emphasized that the ruling in this case is limited only to the
determination of who between the parties has a better right to possession. This
adjudication is not a final determination on the issue of ownership and, thus, will not bar or
prejudice an action between the same parties involving title to the property, if and when
such action is brought seasonably before the proper forum.

Case 21
AMERICAN POWER CONVERSION CORPORATION ET. AL. V. JASON YU LIM
G.R. NO. 214291 JANURY 11, 2018

FACTS:
Respondent Lim was hired by an American corporation (APCC) and who handled
the sales and marketing operations of APCC in parts of Southeast Asia. Notably,
APCC is not registered with the Securities and Exchange Commission, and the
employee was being paid salaries and benefits by a separate entity licensed to
do business in thePhilippines (APCP BV). Furthermore, his work was supervised by
and controlled by officers of other companies located in Singapore (APCS) and
Japan (APC Japan).In October 2005, after Lim discovered and reported irregularities
committed by his supervisor, Lim was terminated on the ground of redundancy
due to a supposed company restructuring.

ISSUE:
Whether or not the petitioners are liable to respondent on account of unjust enrichment.

RULING:
YES. Since they all benefited from his services and knowingly aided and abetted each other
in the commission of wrong, they should all be held responsible, under the principle of
quasi-contract, for respondent's money claims, including damages and attorney's
fees."Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-
contract to the end that no one shall be unjustly enriched or benefited at the expense of
another."
Case 22
VICTORIA N. RACELIS, IN HER CAPACITY AS ADMINISTRATOR vs. SPOUSES GERMIL
JAVIER and REBECCA JAVIER
G.R. No. 189609 January 29, 2018

VICTORIA N. RACELIS V. SPOUSES GERMIL JAVIER AND REBECCA JAVIER

G.R. NO. 189609
JANUARY 29, 2018

FACTS:
Victoria Racelis, is the administrator of the properties of her late father, among of which is
the subject residential house and lot, specifically requested by the latter to be sold first. The
respondents offered to purchase the property but meantime offered to lease the same
while they raise enough money. Sometime after, Racelis inquired whether the respondents
were still interested to purchase the property and the latter in assuring the former,
promised to pay P100,000.00 as earnest money. However, respondents were only able to
pay a total of P78,000.00 and they also started to fall behind the payment of their monthly
rental. Realizing that the Spouses Javier had no genuine intention of purchasing the
property, Racelis wrote to inform them that her family had decided to terminate the lease
agreement and to offer the property to other interested buyers and further stated that the
earnest money will be returned to respondents after the property will be sold to another
buyer.

Spouses refused to vacate and insisted that the P78,000.00 was advanced rent.

ISSUE:
Whether or not the P78,000.00 initial payment can be used to offset Spouses Germil and
Rebecca Javier's accrued rent otherwise, it will constitute unjust enrichment.

RULING:
NO. The P78,000.00 initial payment cannot be characterized as advanced rent.In a contract
of sale, the non-payment of the purchase price is a resolutory condition that entitles the
seller to rescind the sale. In a contract to sell, the payment of the purchase price is a
positive suspensive condition that gives rise to the prospective seller's obligation to convey
title. Based on the evidence on record, petitioner and respondents executed a contract to
sell, not a contract of sale. Since respondents failed to deliver the purchase price at the
specified period, the contract to sell was deemed cancelled. The contract's cancellation
entitles petitioner to retain the earnest money given by respondents.
There is no unjust enrichment on the part of the seller should the initial payment be
deemed forfeited. After all, the owner could have found other offers or a better deal. The
earnest money given by respondents is the cost of holding this search in abeyance.
Case 23
VILLARICA PAWNSHOP, INC. V. SOCIAL SECURITY COMMISSION
G.R. NO. 228087 JANUARY 24, 2018

FACTS:
On January 7, 2010, Congress enacted R.A. No. 9903, otherwise known as the Social
Security Condonation Law of 2009, which took effect on February 1, 2010. The said law
offered delinquent employers the opportunity to settle, without penalty, their
accountabilities or overdue contributions within six (6) months from the date of its
effectivity. Petitioners paid their delinquent contributions and accrued penalties with the
different branches of the SSS in 2009 before the aforementioned law was enacted.

Consequent to the enactment of R.A. NO. 9903, respondents wrote SSS seeking
reimbursement of the accrued penalties, which they have paid in 2009.

ISSUE:
Whether or not SSS may avail of the condonation for obligations which were already paid.

RULING:
NO. Logically, only existing obligations can be extinguished either by payment, loss of the
thing due, remission or condonation, confusion or merger or rights, compensation,
novation, annulment of contract, rescission, fulfillment of a resolutory condition, or
prescription. Interpreting R.A. No. 9903 in such a way that it extinguishes an obligation
which is already extinguished is simply absurd and unreasonable.
Case 24
ROLANDO DE ROCA V. EDUARDO DABUYAN
G.R. NO. 215281 MARCH 5, 2018

FACTS:
Private respondents filed a complaintfor illegal dismissal against "RAF Mansion Hotel Old
Management and New Management and Victoriano Ewayan.Later, private respondents
amended the complaint and included petitioner Rolando De Roca as [co]-
respondent.Despite service of summons, petitioner did not attend the subsequent hearings
prompting the labor arbiter to direct private respondents to submit their position paper.
Petitioner filed his motion to dismiss and alleged that, while he was the owner of RA.F
Mansion Hotel building, the same was being leased by Victoriano Ewayan., the owner of
Oceanics Travel and Tour Agency. Petitioner further claimed that Ewayan was the
employer of private respondents. Consequently, he asserted that there was no employer-
employee relationship between him and private respondents
.
ISSUE:
Whether or not Rolando De Roca is a party to the employment contract.

RULING:
NO. The contract of employment between respondents, on the one hand, and Oceanic and
Ewayan on the other, is effective only between them; it does not extend to petitioner, who
is not a party thereto. His only role is as lessor of the premises which Oceanic leased to
operate as a hotel; he cannot be deemed as respondent's employer - not even under the
pretext that he took over as the "new management" of the hotel operated by Oceanic.

Case 25
VILLA CRISTA MONTE REALTY & DEVELOPMENT CORPORATION vs EQUITABLE PCI
BANK (NOW KNOWN AS BANCO DE ORO UNIBANK, INC.)
G.R. No. 208336 November 21, 2018

FACTS:
Sometime in 1994, plaintiff-appellant Villa Crista Monte Realty Corporation was organized
to engage in the business of real estate development. In order to fully develop its
subdivision project, appellant applied for and was granted a credit line of P80 Million by
then Equitable Philippine Commercial International Bank (E-PCIB), now Banco De Oro. By
way of security for the said credit line, appellant executed a Real Estate Mortgage over the
80,000 square meters of its properties. Appellant subsequently applied for an additional
P50 Million credit accommodation from E-PCIB to which the latter readily acceded. Under
its approved P130 Million credit line, appellant separately obtained several loans covered
by a promissory note in the prescribed form of the E-PCIB. Eventually, E-PCIB wrote
several times to appellant apprising it of the increased rates in the interest to be imposed
on its loans covered by the promissory notes. The increased rates ranged from 21% to 36%
and were ostensibly anchored on the uniform provision in the promissory notes on
monthly repricing. Appellant reneged on paying its loan obligations amounting to
P129,700,00.00, prompting E-PCIB to initiate foreclosure proceedings on the mortgaged
properties. This led to appellant's filing of a complaint with the RTC Quezon City assailing
the said auction sale and the amount claimed therein. Appellant contended, among others,
that E-PCIB unilaterally made and imposed the increases in interest rates on appellant's
loan without them being discussed and negotiated with, much less agreed upon by,
appellant and, thus, invalid.

ISSUE:
Whether the escalation clause provided for in the promissory notes are valid.

RULING:
YES. The agreement between the parties on the imposition of increasing interest rates on
the loan is commonly known as the escalation clause. Generally, the escalation clause refers
to the stipulation allowing increases in the interest rates agreed upon by the contracting
parties. There is nothing inherently wrong with the escalation clause because it is validly
stipulated in commercial contracts as one of the means adopted to maintain fiscal stability
and to retain the value of money in long term contracts. In short, the escalation clause is not
void per se. Yet, the escalation clause that "grants the creditor an unbridled right to adjust
the interest independently and upwardly, completely depriving the debtor of the right to
assent to an important modification in the agreement" is void. Such escalation clause
violates the principle of mutuality of contracts, and should be annulled.

Case 26
NORMA M. DIAMPOC vs. JESSIE BUENAVENTURA and THE REGISTRY OF DEEDS FOR
THE CITY OF TAGUIG
G.R. No. 200383 March 19, 2018

FACTS:
Petitioner Norma M. Diampoc and her husband Wilbur L. Diampoc (the Diampocs) filed a
Complaint for annulment of deed of sale and recovery of duplicate original copy of title,
with damages, against respondent Jessie Buenaventura (Buenaventura) and the Registry of
Deeds for the Province of Rizal.

The Diampocs alleged in their Complaint that they owned a parcel of land (subject
property). Buenaventura asked to borrow the owner's copy of the TCT to be used as
security for a P1 million loan she wished to secure. The Diampocs acceded on the condition
that Buenaventura should not sell the subject property and that Buenaventura promised to
give them P300,000.00 out of the P1 million loan proceeds.

Further, the Diampocs alleged that Buenaventura caused them to sign a folded document
without giving them the opportunity to read its contents. However, Buenaventura failed to
give them a copy of the document which they signed. The Diampocs later discovered that
Buenaventura became the owner of a one-half portion of the subject property by virtue of a
supposed deed of sale in her favor. When the Diampocs proceeded to the notary public who
notarized the said purported deed of sale, they discovered that the said 87-square meter
portion was purportedly sold to Buenaventura for P200,000.00.

The Diampocs alleged that the purported deed of sale is spurious and that the deed was
secured through fraud and deceit, and thus null and void. The Diampocs thus prayed that
the purported deed of sale be annulled and the annotation thereof on the TCT be canceled
and that the owner's duplicate copy of the TCT be returned to them.

In her Answer, Buenaventura claimed that the Diampocs have no cause of action; that the
case is a rehash of an estafa case they previously filed against her but which was dismissed;
and that the case is dismissible for lack of merit and due to procedural lapses.

The RTC and the CA ruled in favor of respondent Buenaventura essentially ruling that
notarized documents, like the deed in question, enjoy the presumption of regularity which
can be overturned only by clear, convincing and more than merely preponderant evidence.
Miserably, appellants failed to discharge this burden.

ISSUE:
Whether the CA erred in applying the prima facie presumption of regularity of notarized
documents and upholding the validity of the notarized deed of sale. (NO)

RULING:
The RTC and the CA are unanimous in declaring that the deed should be sustained on
account of petitioner's failure to discredit it with her evidence. The CA further found that
petitioner and her husband received in full the consideration of P200,000.00 for the sale.
As far as the lower courts are concerned, the three requirements of cause, object, and
consideration concurred. This Court is left with no option but to respect the lower courts'
findings, for its jurisdiction in a petition for review on certiorari is limited to reviewing only
errors of law since it is not a trier of facts. This is especially so in view of the identical
conclusions arrived at by them.

Indeed, petitioner and her husband conceded that there was such a deed of sale, but only
that they were induced to sign it without being given the opportunity to read its contents
— believing that the document they were signing was a mere authorization to obtain a
bank loan. According to petitioner, the document was "folded" when she affixed her
signature thereon; on the other hand, her husband added that at the time he signed the
same, it was "dark." These circumstances, however, did not prevent them from discovering
the true nature of the document; being high school graduates and thus literate, they were
not completely precluded from reading the contents thereof, as they should have done if
they were prudent enough. Petitioner's excuses are therefore flimsy and specious.

Petitioner and her husband's admission that they failed to exercise prudence can only be
fatal to their cause. They are not unlettered people possessed with a modicum of
intelligence; they are educated property owners capable of securing themselves and their
property from unwarranted intrusion when required. They knew the wherewithal of
property ownership. Their failure to thus observe the care and circumspect expected of
them precludes the courts from lending a helping hand, and so they must bear the
consequences flowing from their own negligence.

The rule that one who signs a contract is presumed to know its contents has been applied
even to contracts of illiterate persons on the ground that if such persons are unable to read,
they are negligent if they fail to have the contract read to them. If a person cannot read the
instrument, it is as much his duty to procure some reliable persons to read and explain it to
him, before he signs it, as it would be to read it before he signed it if he were able to do so
and his failure to obtain a reading and explanation of it is such gross negligence as will
estop him from avoiding it on the ground that he was ignorant of its contents.

Case 27
AMPARO S. CRUZ; ERNESTO HALILI; ALICIA H. FLORENCIO; DONALD HALILI; EDITHA
H. RIVERA; ERNESTO HALILI, JR.; and JULITO HALILI vs.ANGELITO S. CRUZ,
CONCEPCION S. CRUZ, SERAFIN S. CRUZ, and VICENTE S. CRUZ
G.R. No. 211153 February 28, 2018

FACTS:
In an Amended Complaint filed on April 6, 1999 with the RTC, respondents Angelito,
Concepcion, and Serafin alleged that they - together with their siblings, petitioner Amparo
and Antonia inherited a 940-square-meter parcel of land from their late parents. On July
31, 1986, the parties executed a deed of extrajudicial settlement of estate covering the
subject property, on the agreement that each heir was to receive an equal portion of the
subject property as mandated by law.

However, in 1998, when the subject property was being subdivided and the subdivision
survey plan was shown to respondents, they discovered that Antonia was allocated 2 lots,
as against 1 each for the respondents. They alleged that petitioner Amparo and Antonia
were able to perpetrate the fraud by inducing Concepcion - who was illiterate - to sign the
deed of extrajudicial settlement of estate, which was written in the English language,
without previously reading and explaining the contents thereof to the latter. Respondents
prayed to declare null and void the extra-judicial settlement.

In their Answer, petitioners prayed for dismissal, claiming that the July 31, 1986 deed of
extrajudicial settlement of estate had been voluntarily and freely executed by the parties
and that respondents' cause of action has prescribed. The RTC dismissed the complaint.
The CA reversed and set aside the RTC's judgment and the parties' deed of extrajudicial
settlement.

ISSUE:
Whether the CA erred in setting aside the deed of extrajudicial settlement of the estate.
(NO)

RULING:
The present action involves a situation where one heir was able - through the expedient of
an extrajudicial settlement that was written in a language that is not understood by one of
her co-heirs - to secure a share in the estate of her parents that was greater than that of her
siblings, in violation of the principle in succession that heirs should inherit in equal shares.

Thus, Antonia received 2 lots as against her siblings, including respondent Concepcion, who
respectively received only 1 lot each in the subject property. This she was able to achieve
through the subject 1986 deed of extrajudicial settlement - which was written in English, a
language that was not known to and understood by Concepcion given that she finished only
Grade 3 elementary education. With the help of Amparo, Antonia was able to secure
Concepcion's consent and signature without the benefit of explaining the contents of the
subject deed of extrajudicial settlement.

For this reason, Concepcion did not have adequate knowledge of the contents and
ramifications of the subject deed of extrajudicial settlement; she was left unaware of the
sharing arrangement contained therein, and realized it only when Antonia attempted to
subdivide the subject property in 1998, and the plan of subdivision survey was shown to
Concepcion- which revealed that Antonia obtained 2 lots.
In short, this is a simple case of exclusion in legal succession, where co-heirs were
effectively deprived of their rightful share to the estate of their parents who died without a
will - by virtue of a defective deed of extrajudicial settlement or partition which granted a
bigger share to one of the heirs and was prepared in such a way that the other heirs would
be effectively deprived of discovering and knowing its contents.

Under the law, "[t]he children of the deceased shall always inherit from him in their own
right, dividing the inheritance in equal shares." In this case, two of Concepcion's co-heirs
renounced their shares in the subject property; their shares therefore accrued to the
remaining co-heirs, in equal shares as well.

In The Roman Catholic Bishop of Tuguegarao v. Prudencio, it was held that —

Considering that respondents-appellees have neither knowledge nor participation

in the Extra-Judicial Partition, the same is a total nullity. It is not binding upon them.
Thus, in Neri v. Heirs of Hadji Yusop Uy, which involves facts analogous to the
present case, we ruled that:

[I]n the execution of the Extra-Judicial Settlement of the Estate with Absolute Deed
of Sale in favor of spouses Uy, all the heirs of Anunciacion should have participated.
Considering that Eutropia and Victoria were admittedly excluded and that then
minors Rosa and Douglas were not properly represented therein, the settlement
was not valid and binding upon them and consequently, a total nullity.

The effect of excluding the heirs in the settlement of estate was further elucidated in
Segura v. Segura, thus:

It is clear that Section 1 of Rule 74 does not apply to the partition in question
which was null and void as far as the plaintiffs were concerned. The rule
covers only valid partitions. The partition in the present case was invalid
because it excluded six of the nine heirs who were entitled to equal shares in
the partitioned property. Under the rule 'no extrajudicial settlement shall be
binding upon any person who has not participated therein or had no notice
thereof.' As the partition was a total nullity and did not affect the excluded
heirs, it was not correct for the trial court to hold that their right to challenge
the partition had prescribed after two years from its execution.

Case 28
SOCORRO CLEMENTE vs. REPUBLIC OF THE PHILIPPINES
G.R. No. 220008, February 20, 2019

FACTS:
On March 16, 1963, siblings Amado, Ramon, and Milagros, all surnamed Clemente, donated
more than one hectare land to the Republic of the Philippines. Said donation was reflected
in a Deed of Donation signed by all of them and accepted by the Republic through the
Department of Public Works and Highways (DPWH). Said deed provide in part that the
donors voluntarily and unconditionally donate the property to the done, Republic of the
Philippines, for the construction and maintenance of a hospital site. There was, however,
no time allotted. In 2003, Socorro Clemente, sole heir of Amado, wrote to the DPWH
inquiring as to the status of the construction of the hospital. It turns out that after 40 years,
only the foundations of the hospital were made. In response to the letter, the DPWH wrote
that they have no budget for the project and the same will not be constructed anymore. In
2004, Socorro instituted in the RTC an action for Revocation of Donation, Reconveyance
and Recovery of Possession alleging that the Republic of the Philippines failed to comply
with the condition imposed on the Deed of Donation, which was to use the property "solely
for hospital site only and for no other else. The RTC denied the complaint. It said that the
complaint is premature as the parties in the Deed clearly intended a period. Thus, by virtue
of Art. 1197 of the New Civil Code, the courts may fix the period for the obligor to perform
his end of the bargain. However, since Socorro failed to pray for the fixing of the period, the
same is dismissible. On appeal to the CA, the decision of the RTC was affirmed. Hence, this
present recourse at bench.

ISSUE:
WON the donation can be revoked without the fixing of the period for the donor to comply?

RULING:
Yes. The nature of the donation made by the Clemente Siblings is a donation subject to a
condition - the condition being the construction of a government hospital and the use of the
Subject Property solely for hospital purposes. Upon the non-fulfillment of the condition, the
donation may be revoked and all the rights already acquired by the donee shall be deemed
lost and extinguished. This is a resolutory condition because it is demandable at once by
the donee but the non-fulfillment of the condition gives the donor the right to revoke the
donation. In this case, upon the execution of the Deed of Donation and the acceptance of
such donation in the same instrument, ownership was transferred to the Republic, as
evidenced by the new certificate of title issued in the name of the Province of Quezon.
Because the condition in the Deed of Donation is a resolutory condition, until the donation
is revoked, it remains valid. However, for the donation to remain valid, the donee must
comply with its obligation to construct a government hospital and use the Subject Property
as a hospital site. The failure to do so gives the donor the right to revoke the donation
under Article 764 of the New Civil Code. When the parties provided in the Deed of Donation
that the donee should construct a government hospital, their intention was to have such
hospital built and completed, and to have a functioning hospital on the Subject Property.

Case 29
FOOD FEST LAND INC. AND JOYFOODS CORP vs. ROMULADO C. SIAPNO, ET AL.
G.R. No. 226088 February 27, 2019

FACTS:
Respondents Romualdo C. Siapno, Teodoro C. Siapno and Felipe C. Siapno are the
registered owners of a 521-square-meter parcel of land (subject land) in Dagupan City.
On April 14, 1997, respondents entered into a Contract of Lease involving the subject land
with petitioner Food Fest Land, Inc. (Food Fest), a local corporation who wanted to use
such land as the site of a fastfood restaurant subject to different particulars.

The Contract of Lease also featured a non- waiver clause saying No waiver by the parties of
any of their rights under this Contract of Lease shall be deemed to have been made unless
expressed in writing and signed by the party concerned.

In October 1998, Food Fest assigned all its rights and obligations to one Tucky Foods, Inc.
(Tucky Foods) which the latter assigned all the said rights and obligations under such
contract to petitioner Joyfoods Corporation (Joyfoods).

In the succeeding year, petitioner failed to pay the exact monthly rental as stipulated in the
contract.

Respondents lodged before the RTC of Dagupan a complaint for sum of money against Food
Fest and Joyfoods which subsequently ordered the petitioner to pay respondents the
unpaid balance of P988,907.74; a decision that CA affirmed.

Food Fest and Joyfoods submit that both of them cannot be held liable for the said balance,
in light of Food Fest's assignment of its rights and obligations under the Contract of Lease
to another. Under such circumstances, it is postulated that the liability for the unpaid
balance now solely rests with Joyfoods.

ISSUE:
W/N novation can be enforced in the case at bar.

RULING:
No. To validly effect such kind of novation, however, it is not enough for the debtor to
merely assign his debt to a third person, or for the latter to assume the debt of the former;
the consent of the creditor to the substitution of the debtor is essential and must be had.
No waiver by the parties of any of their rights under this Contract of Lease shall be deemed
to have been made unless expressed in writing and signed by the party concerned.

Case 30
MA. LUISA A. PINEDA vs. VIRGINIA ZUNIGA VDA. DE VEGA
G.R. No. 233774 April 10, 2019

FACTS:
Petitioner filed a complaint dated June 10, 2005 against respondent, praying for the
payment of the latter's principal obligation and the interest thereon or, in default of such
payment, the foreclosure of the property subject of a real estate mortgage.

In her complaint, petitioner alleged that, on March 25, 2003, respondent borrowed from
her P500,000.00 payable within one year with an interest rate of 8% per month. To secure
the loan, respondent executed a real estate mortgage (2003 Agreement) over a parcel of
land covered by Transfer Certificate of Title No. T-339215, together with all the buildings
and improvements existing thereon (Property), in petitioner's favor. On the loan's
maturity, respondent failed to pay her loan despite demand. As of May 2005, the unpaid
accumulated interest amounted to P232,000.00.

RTC ruled in favor of the petitioner.

Respondent appealed the case in the CA which was subsequently granted, saying that
petitioner failed to prove that prior demand had been made upon respondent for the full
payment of the latter's obligation and that a mere photocopy of the face of a registry return
card which was claimed to refer to the said letter is not sufficient.

ISSUE:
W/N an extrajudicial demand is required before the debtor can be held in default

RULING:
No. when petitioner filed her complaint dated June 10, 2005,such filing constituted the
judicial demand upon respondent to pay the latter's principal obligation and the interest
thereon. Respondent, having thus incurred in delay (counted from the filing of the
complaint), is liable for damages pursuant to Article 1170 of the Civil Code.

Case 31
HEIRS OF SOLEDAD ALIDO vs. FLORA CAMPANO AND THE REGISTER OF DEEDS
ILOILO
GR No. 22605 July 29, 2019
FACTS:
On March 17, 1975, Alido was able to register a parcel of land under her name. In 1978,
Flora Campano (respondent) was able to take possession of the land and the owner's
duplicate title and paid its realty taxes as the land was allegedly sold to her. The heirs of
Alido (herein respondents) demanded to recover the property and to register the same
under their names claiming that the sale was not valid as it was only an oral sale and that
the law requires that the sale of real property must appear in a public instrument. It
expounded that the delivery of the certificate of title did not create a valid sale. 

The RTC favored the petitioners. CA reversed the decision and favored the respondent.

ISSUES:
W/N there was a valid sale of real property between Alido and the respondent.
W/N petitioners’ action had been barred by laches.

RULING:
No. The court ruled that a sale of a parcel of land in violation of the five-year prohibition on
the alienation of land acquired via a free patent application is void and produces no legal
effect. As successors-in-interest of Alido, petitioners' right to challenge the sale between
Alido and respondent cannot be barred by laches as it was in violation of the restriction on
the sale of land acquired through free patent.
Consequently, petitioners may recover the parcel of land Alido had sold to respondent.
However, as a result of the annulment of the sale between Alido and respondent, the latter
may claim the purchase price and interest.

Case 32
RICARDO O. VASQUEZ vs. PHILIPPINE NATIONAL BANK
G.R. No. 228355 August 28, 2019

FACTS:
Engineer Ricardo Vasquez applied for and was granted a loan by the Philippine National
Bank in the amount of Six Hundred Thousand Pesos, as evidenced by Promissory Note.
Later on, Vasquez again obtained another loan in the sum of Eight Hundred Thousand
Pesos evidenced by a promissory note. The loans were secured by four parcels of land
owned and registered under the name of Vasquez, by way of a Real Estate Mortgage
Agreement. However, Vasquez filed a Complaint against PNB and the notary public who
was assigned by PNB as the public auction sale officer, for specific performance, annulment
of foreclosure proceedings and damages with prayer for the issuance of a preliminary
injunction. Vasquez alleged that PNB unilaterally escalated upwardly the interest rate from
the stipulated rate of 17% even without his prior knowledge and conformity, and that such
is illegal.

ISSUE:
Whether or not the interest rate scheme imposed by PNB under the Credit Agreement and
other loan documents is valid.

RULING:
NO. Without a doubt, the interest rate scheme imposed upon Vasquez under the loan
agreement is clearly one-sided, unilateral, and violative of one of the fundamental
characteristics of contracts - which is the essential equality of the contracting parties,
oftentimes called the principle of mutuality of contracts. The principle of mutuality of
contracts is pronounced in Article 1308 of the Civil Code, which states that a contract "must
bind both contracting parties; its validity or compliance cannot be left to the will of one of
them." The principle of mutuality of contracts dictates that a contract must be rendered
void when the execution of its terms is skewed in favor of one party.

Case 33
Philippine National Bankvs. Engr. Ricardo O. Vasquez
G.R. No. 228397 August 28, 2019

FACTS:
Engineer Ricardo Vasquez applied for and was granted a loan by the Philippine National
Bank totaled to P1.4M evidenced by Promissory Note secured by four (4) parcels of land as
REM owned by the former.
However, Vasquez filed a complaint against PNB for annulment of foreclosure proceedings
and damages with prayer for the issuance of a preliminary injunction who claimed that due
to the unilateral escalation of interest rates, it resulted to a rapid surge of his actual
monetary obligation, thus, placing him in a situation where he could no longer pay his
obligations with the bank, hence, his properties were being subjected to foreclosure
proceedings which might later result to his ejectment.

PNB averred that Vasquez had no cause of action because the increases in the interest rate
in the loan agreements were freely, voluntarily and mutually agreed upon by the parties.

The CA held that the unilateral imposition of increased interest rates is violative of the
principle of mutuality of contracts and declared the same void. It also held that the penalty
interest of 36% is unconscionable which was reduced to 12% per annum. PNB filed for
motion for reconsideration.

ISSUE:
Whether or not the CA erred in concluding that the interests applied on the subject loans
were void and penalty interest is unconscionable.

RULING:
The Court finds that the interest rates imposed by PNB on the subject loans are not, in
reality, fixed because the rates are subject to modification based on the unilateral
determination of PNB. It is clearly one-sided, unilateral, and violative of one of the
fundamental characteristics of contracts - which is the essential equality of the contracting
parties, oftentimes called the principle of mutuality of contracts. Therefore, the interest
rate scheme provided under the Credit Agreement and the promissory notes is null and
void.

Case 34
Camp John Hay Development Corporationvs. Charter Chemical And
CoatingCorporation
G.R. No. 198849 August 07, 2019

FACTS:
Camp John Hay Development entered into a Contractor’s Agreement with Charter
Chemical, the company awarded to complete the interior and exterior painting works of
Camp John Hay Manor for the contract price of P15.5M, inclusive of the price of two (2)-
studio type units at Camp John Hay Suites, based on the units chosen by Charter Chemical.
Although the Contractor’s Agreement contained no date of the units’ turnover, it allowed
Charter Chemical to choose the units for offsetting under an offsetting scheme. Charter
Chemical chose Units 102 and 104 studio type in the second phase of Camp John Hay
Suites.
Due to the subsisting construction delay even up to the new expected completion in 2006,
Charter Chemical, through counsel, wrote Camp John Hay Development, demanding that it
transfer the units or pay the value of these units in the sum of P6,996,517.48.

ISSUE:
Which the following remedies are proper in this case: Rescission under Art. 1191 of the
Civil Code, or the fixing of the period by the court under Art. 1197 of the same law?

RULING:
Rescission is proper. The court cannot fix the period in this case. Rescission on account of
breach of reciprocal obligations is provided under Article 1191 of the Civil Code. Rescission
under Article 1191 will be ordered when a party to a contract fails to comply with his or
her obligation. In the instant case, it is clear that only petitioner benefited from the
contract. Respondent has already performed the painting works in 2003, and it was
accepted by petitioner as satisfactory. Since this service cannot be undone and petitioner
has already enjoyed the value of the painting services over the years, respondent is entitled
to the payment of the painting services with interest in accordance with Articles 1191 and
2210 of the Civil Code. The interest shall be computed from the date of extrajudicial
demand by respondent in accordance with Article 1169 of the Civil Code.

Case 35
Ma. Luisa A. Pinedavs. Virginia Zuñiga Vda. De Vega
G.R. No. 233774 April 10, 2019

FACTS:
Petitioner filed a complaint dated against respondent that, on March 25, 2003, respondent
borrowed from her P500,000.00 payable within one year with an interest rate of 8% per
month. To secure the loan, respondent executed a real estate mortgage over a parcel of
land together with all the buildings and improvements existing thereon, in petitioner's
favor. On the loan's maturity, respondent failed to pay her loan despite demand.

Respondent denied petitioner's material allegations and countered that the complaint was
dismissible for lack of prior barangay conciliation proceeding and for failure to join her
husband as a party. She also argued that the interest rate agreed upon was excessive and
unconscionable, thus illegal. She further denied receiving P500,000.00 from petitioner and
claimed that the said amount was the accumulated amount of another obligation she
earlier secured from petitioner.

ISSUE:
Whether or not the demand letter sent by petitioner to respondent and was it received by
the latter?

RULING:
While delay on the part of respondent was not triggered by an extrajudicial demand
because petitioner had failed to so establish receipt of her demand letter, this delay was
triggered when petitioner judicially demanded the payment of respondent's loan from
petitioner. While the CA was correct in observing that default generally begins from the
moment the creditor demands the performance of the obligation, and without such
demand, judicial or extrajudicial, the effects of default will not arise,45 it failed to
acknowledge that when petitioner filed her complaint dated June 10, 2005,46 such filing
constituted the judicial demand upon respondent to pay the latter's principal obligation
and the interest thereon. Respondent, having thus incurred in delay (counted from the
filing of the complaint), is liable for damages pursuant to Article 1170 of the Civil Code.

Case 36
Luis G. Gemudiano, Jr.vs. Naess Shipping Philippines, Inc. And/Or Royal Dragon
Ocean Transport, Inc. And/Or Pedro Miguel F. Oca
G.R. No. 223825 January 20, 2020

FACTS:
In December 2012, Petitioner applied with Naess Shipping for possible employment as
seaman upon learning of a job opening in its domestic vessel operations. He had an
interview with Naess Shipping and completed the training on International Safety
Management (ISM) Code.

On February 18, 2013, petitioner and respondents entered into a contract of employment
stipulating that it shall take effect on March 12, 2013. Subsequently, the parties executed an
Addendum with an agreement that said Addendum shall form of employment. But
respondents cancelled petitioner's embarkation and informed him that he would not be
deployed because of his existing medical condition which he failed to disclose. Thus,
petitioner was not able to leave even though he duly passed the PEME and was declared fit
for sea service. Hence, he filed a complaint for breach of contract against respondents.

ISSUE:
Whether or not there was a breach of his employment contract that warrants his claim for
unpaid wages, damages, and attorney's fees against respondents.

RULING:
Yes.In the instant case, there is no doubt that there was already a perfected contract of
employment between petitioner and respondents. The contract had passed the negotiation
stage or "the time the prospective contracting parties manifest their interest in the
contract." It had reached the perfection stage or the so-called " birth of the contract" as it
was clearly shown that the essential elements of a contract, i.e., consent, object, and cause,
were all present at the time of its constitution. Petitioner and Fetero, respondents' Crewing
Manager, freely entered into the contract of employment, affixed their signatures thereto
and assented to the terms and conditions of the contract (consent), under which petitioner
binds himself to render service (object) to respondents on board the domestic vessel " M/V
Meiling 11" for the gross monthly salary of P30,000.00 (cause). An examination of the
terms and conditions agreed upon by the parties will show that their relationship as
employer and employee is encapsulated in the perfected contract of employment. Thus, by
virtue of said contract, respondents and petitioner as s u m ed obligations which pertain to
those of an employer and an employee.