201910384

SATURDAY (1-4PM)

GAITE vs. FONACIER (G.R. No. L-11827, July 31, 1961)

Ponente: Reyes, J.B.L., J.:

THE FACTS OF THE CASE ARE AS FOLLOWS:

The defendant Isabelo Fonacier was the owner and/or holder of 11 iron lode mineral claims, known as Dawahan
Group that situated in the municipality of Jose Panganiban, Camarines Norte. In September 29, 1952, Fonacier constituted
and appointed through “Deed of Assignment” Fernando Gaote as his true and lawful attorney-in-fact to enter into a contract
with any individual or juridical person for the exploration and development of the mining claims with royalty basis of not
less than P0.50 per ton of ore that might be extracted from.
On March 19, 1954, Gaite executed the assignment for the development and exploitation of mining claims into the
Larap Iron Mines, which solely owned as single proprietorship by Gaite, on the same royalty basis. Thus, the assignment
was exercise in favour to Gaite as he want for the development and exploitation of the mining claims, in addition to the
opening and paving roads within and outside the mining boundaries, making other improvements, and installing facilities for
the use in the development of the mines which already extracted approximately 24,000 metric tons of iron ore.
After knowing action sought for the some personal advantage on the part of Gaite, Fonacier decided to revoke the
authority granted on his part to Gaite in such exploitation and development through Revocation of Power of Attorney and
Contract that executed on December 8, 1954. Noting in that document that Gaite will transfer to Fonacier all his rights and
interest on all the roads, improvements, and facilities in or outside said claims, including the right to use the business name
Larap Iron Mines for such goodwill, with the consideration of P20,000 plus 10% of the royalties. Furthermore, the rights and
interest over to exploited 24,000 tons of iron ore shall obliged Gaite to transfer those to Fonacier upon the said document.
That 24,000 ton extracted was amounting to P75,000, in which P10,000 of it was paid upon signing the agreement. Thus, the
remaining P65,000 should settle at that point.
To secure the payment of the balance, Fonacier delivered to Gaite a surety bond dated December 8, 1954 as
principal and the Larap Mines and Smelting Co. with its stockholders and another surety attested from the Far Eastern Surety
and Insurance. However, the defendant failed to renew the bond of surety that why the plaintiff filed a complaint against
Fonacier, et al in the Court of First Instance of Manila for the payment of P65,000 balance of the ore price, consequential
damage, and attorney’s fees.

ISSUE(S) OF THE CASE:

1. Whether or not the obligation of Fonacier and his sureties to pay Gaite of P65,000 become due and demandable
when the defendants failed to renew the surety bond underwritten by the Far Eastern Surety and Insurance Co., Inc.

THE SUPREME COURT RULED THAT:

Yes, the obligation becomes demandable once become due. The Highest Court concurred the ruling of the lower
court that the obligation of the defendant to pay the plaintiff P65,000 balance of the price extracted from the 24,000 tons of
iron ore with a term that it would be paid upon the sale of sufficient iron ore by defendants such sale should effective within
one year or before December 8, 1955, that giving such surety bond was significance of sufficient security beyond condition
precedent to Gaite’s giving of credit to defendants, and the later become a failure to put up a good and sufficient security in
lieu of the Far Eastern Surety Bond. Thus upon the expiration of the said bond on December 8. 1955 the obligation become
due and demandable under Article 1198 of the New Civil Code.
ART.1198. The debtor shall lose every right to make use of the period:
(2) When he does not furnish to the creditor the guaranties or securities which he has promised
(3) When by his own acts he has impaired said guaranties or securities after their establishment, and when through
fortuitous event they disappear, unless he immediately gives new ones equally satisfactory.

Fonacier, et al (appellant) failure to renew or extend the surety company’s bond upon expiration plainly impaired the
securities given to Gaite (appellee). Therefore, the Supreme Court found no error in the decisions appealed as they affirmed
and concurred the lower’s decision.
201910384
SATURDAY (1-4PM)

CENTRAL PHILIPPINE UNIVERSITY vs. COURT OF APPEALS (G.R. No. 112127, July 17, 1995)
Ponente: Bellosillo, J.

THE FACTS OF THE CASE ARE AS FOLLOWS:

Don Ramon Lopez Sr., who once a member of Board of Trustees of the Central Philippine College (now, Central
Philippine University or CPU) made a deed of donation in favour of the latter of a parcel of land identified as Lot No. 3174-
B-1 of the subdivision plan Psd-1144, then a portion of Lot No. 3174-B, with Transfer Certificate of Title No. T-3910-A was
issued in the name of the donee CPU. However, there are some conditions for such donations that includes the land shall be
utilized by the CPU exclusively for the establishment and use of a medical college with all its buildings as part of the
curriculum; it should be not sell, transfer, or convey to any third party; and shall be called as Ramon Lopez Campus.
However on May 31, 1989, the private respondents who were the heirs of Don Ramon Lopez Sr filed an action for
such annulment of donation sought the fact that the CPU did not able to comply with the conditions within the deed. Hence,
the respondents alleged of failure of establish college of medicine within the university and furthermore, the heirs argued
that petitioner had negotiated with the National Housing Authority to exchange the donated property with another land
owned by the latter. In response, the petitioner denied the allegation, pointing that it did not violate any conditions annotated
within the deed because it never used the donated property for any other purpose than it was intended.
May 31, 1991, the trial court held that the petitioner was failed in compliance with the conditions of the donations
that declared it null and void, hence it directed the petitioner to execute the deed of the reconveyance of the property in
favour of the heirs of the donor (private respondents). However, it was affirmed by the Court of Appeals on June 18, 1993
declaring that the annotations that expressed the conditions of the donation was resolutory conditions that breach by the
donee that eventually making the donation revocable.

ISSUE(S) OF THE CASE:

Whether or not all the rights of the donee are deemed lost and extinguished because of the non-fulfilment such
conditions.

THE SUPREME COURT RULED THAT:

The Highest Court of the land confirmed the decision of the appellate court finding that first condition mandated the
petitioner to utilize the donated property for the establishment of a medical school, the donor did not fix a period within
which condition must be fulfilled, therefore, it has failed to comply with its obligation as done, in order words, CPU has
slept its obligation constitute in the deed of donation for unreasonable length of time so it is only and equitable to declare the
donation ineffective.
Article 1181 of the Civil Code stated that:
“In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall
depend upon the happening of the event which constitutes condition”.

Thus, when Don Ramon Lopez Sr. donated the portion of land to the Central Philippine University on the condition
that the university would build upon land a school prior for the establishment of medical school within the university, hence
the condition imposed was not a condition precedent or a suspensive condition but a resolutory one. The donation had to be
valid before the fulfilment of the condition. However, there was no fulfilment for such compliance, the donation may now
revoked and all rights which the donee may have acquired under it shall be deemed lost and extinguished.
Therefore, the decision of the Regional Trial Court of Iloilo who handled first the case is reinstated and affirmed, as
well for Court of Appeals that modified its decisions, by the Supreme Court.
201910384
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HEIRS OF ANTONIO BERNABE vs. COURT OF APPEALS (G.R. no. 154402, July 21, 2008)
Ponente: Tinga, J.

FACTS OF THE CASE ARE AS FOLLOWS:

It was all start from the complaint of specific performance filed by the Titan Construction Corporation on September
11, 1990 before the Regional Trial Court against the petitioners, Antonio F. Bernabe and his siblings, who are co-owners of
an undivided one-half share in two parcels of land located in La Huerta, Paranaque City, Metro Manila.
They entered into undated Deed of Sale of Real Estate entered into by Titan and the defendants, the latter sold their
one-half share in the properties of Titan for P17,700,000 in the following manner: ONE MILLION (P1,000,000.00) PESOS
upon the signing by the VENDORS for this DEED OF SALE and the balance shall be paid within 60 days after the
acquisition by the Vendee at the latter’s expenses.
Titan seek for the judgment ordering defendants to comply with their obligations under the contract and to pay
damages, alleging that it had already paid a substantial portion of the down payment. However, they were being sent from
the camp of Bernabe cancelling and revoking the deed of sale in which reasoned of Titan’s failure to comply with the terms
of deed and sought to award such damages.
A compromised agreement was subsequently entered into by Titan and the remaining defendants, whereby the latter
agreed to the sale of their one-half (1/2) share in the properties to Titan and waived whatever cause of action for damages
they might have against each other. By virtue of the compromised agreement, similar Deeds of Conditional Sale were
separately entered into. However it was been denied by the opposing camp denying of entering of any compromised
agreements arranged.
After the contesting of compromised agreements entered into by Titan and the defendant, the RTC decided in favour
of Titan in its decision rendered on December 1, 1998 as they upheld the validity of both Deed of Sale of Real Estate and
Deed of Conditional Sale that there was no basis to rescind the contracts since petitioners had not proven that Titan had
failed to comply with the undertaking under them.
The petitioners appealed the decision of the Court of Appeals, but it was dismissed which eventually went for the
petition for review by the Supreme Court.

ISSUE(S) OF THE CASE:

(1) May the vendors in a deed of conditional sale ask for rescission of contract for failure of the vendee to pay in full
agreed considerations?

THE SUPREME COURT RULED THAT:

No, the vendors cannot ask for rescission of contract for failure of the vendee to pay in full agreed considerations.
The demand for rescission is based on Article 1191 of the New Civil Code in which it is refer to the reciprocal obligations.
The latter refers to the arise from the same cause, and in which each party is a debtor and creditor of the other, such as that
the obligation of one is dependent upon the obligation of the other that they are to be performed simultaneously such that the
performance of one is conditioned upon the simultaneous fulfilment of the other. The petitioners cannot for the rescission of
the Deed of Conditional Sale since it has proven that far from violating the conditions of the deed, Titan was ready and
willing to perform its contractual obligations.
Thus, the petition denied and the respondent, Titan Construction Corporation, is ordered to pay the petitioners within
60 days of finality of this decision and they ordered the petitioners are ordered to accept the payment and execute proper
deed of absolute sale.
201910384
SATURDAY (1-4PM)

ROMERO vs. COURT OF APPEALS (G.R. 107207 – November 23, 1995)

Ponente: Vitug, J.

The Facts of the case are as follows:

Civil Engineer Virgilio R. Romero was engaged in the business prior for production, manufacturing, and exportation
of perlite filter aids, permalite insulation, and processed perlite ore and they decided, with his foreign partners, to put up their
central warehouse somewhere in Metro Manila on the land area of approximately 2,000 square meters in 1988 which the
project been advertised to several freelance real estate broker. Days after the announcement, Alfonso Flores and his wife,
accompanied by the broker, offered a parcel land measuring 1,952 square meters located in Barangay San Dionisio,
Paranaque City. As the communication continues, Romero decided to look around the property and he satisfied that it suited
for the establishment of their central warehouse.
Later on the Flores spouses contacted Romero to propose in advance the amount of P50, 000 for the ejectment case
against the squatter near of the parcel which agreed by the petitioner, and they executed the Deed of Conditional Sale
between Romero and the Flores spouses in June 9, 1988.
The respondent filed of ejectment case against the squatters in the parcel which later granted by the Metropolitan
Court of Paranaque given 60 day period to vacate the premises and issued writ of execution. However, the Regional Director
from Presidential Commission for Urban Poor asked for the grace period for relocation which later on granted by the Court
with only 45-day grace period of such relocation.
On June 19, 1989 – the counsel for private respondent reminded the camp of the petitioner that the Deed of
Conditional Sale rendered null and void due to the respondent’s failure to eliminate all the squatters within the premises in
the given 60-day period by the writ of execution. Before that, the petitioner still refused to receive the amount rendered as
advance payment before the Deed was executed.
June 26, 1990 – the Makati Regional Court of Makati rendered the ruling that the respondent has no right to rescind
the contract since the respondent failed the obligation on her part to evict all the squatters within the premises and gave the
authority, in accordance to Article 1191 of the Civil Code, to the petitioner, the injured party, to rescind the deed.
The private respondent went to the Court of Appeals and the Appellate Court rendered its decision on May 29, 1992
ruled in reversed to the Trial Court’s decision ordering petitioner to receive the downpayment of P50,000. The petitioner
went before Supreme Court to file review for certiorari.
Issue(s) Whether or not, the vendor demand rescission of a contract for the sale of a parcel of land for a cause traceable to his
own failure to have the squatters on the subject property evicted within contractually-stipulated period?
Supreme Court rules that:
No. From the moment that contract is perfected, the parties are bound not only to fulfil of what has been expressly
stipulated but to all consequence which, according to their nature, may be in keeping with good faith, usage, and law. Under
the agreement, private respondent is obligated to evict the squatters within the property – considered as condition the
operative act of which sets into motion the period of compliance by petitioner of his own obligation. Private respondent’s
failure to remove the squatters from the property within the given period constitute the right of whether the petitioner
proceed to the agreement or waive it as provided in Article 1545 of the Civil Code. Thus, the right is on the petitioner, not
the private respondent.
“Art. 1545. Where the obligation of either party to a contract of sale is subject to any condition which is not performed,
such party may refuse to proceed with the contract or he may waive performance of the condition. X x x”
Therefore, private respondent’s action for rescission is not warranted because she is not the injured party and the one who
has failed in her obligations under the contract. Hence, the petitioner did not breach the agreement.
The Supreme Court ruled in reversed that set aside the earlier ruling of the Court of Appeals.
201910384
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UNIVERSITY OF THE PHILIPINES vs. DE LOS ANGELES (G.R. No. L-28602 September 29, 1970)
Ponente: Reyes J.B.L., J.:

The Facts of the Case are as follows:

On November 2, 1960, the University of the Philippines (UP), pursuant to Act 3608, entered into a logging
agreement with the Associated Lumber Manufacturing Company (ALUMCO) granting the latter logging rights, that last for
five years, to cut, collect, and remove timber from the Land Grant, in consideration of payment to UP of royalties, forest
fees, etc. The ALUMCO already cut and removed the timbers but they owed incurred debts accounting to P219,362.94
which were remained unpaid after several urgencies which on the part of ALUMCO failed to pay.
The lumber manufacturing company executed an instrument called “Acknowledgement of Debt and Proposed
Manner of Payments on December 9, 1964 after they hear that UP would rescind or terminate the logging agreement.
However, they remained unpaid to the account and decided thereof the UP was informed the respondent that agreement was
considered as rescinded and no further legal effect.
The petitioner forced to file an action for preliminary injunction and action for preliminary attachment of the
respondent’s debts after ALUMCO continued its operations despite that the logging agreement already rescinded. During the
pendency of suit, the petitioner entered agreement with logging another company, Sta. Clara Lumber Company, Inc. on
February 25, 1966 but on April 2, 1966, ALUMCO filed the petition against Sta. Clara Company to refrain from exercising
logging rights or operations which technically contested that UP cannot unilaterally rescind the contract without judicial
action.

Issue(s) of the case: Whether or not UP can extra-judicially rescind the logging agreement with ALUMCO.

The Supreme Court ruled that:

Yes. The Highest Court of the land cited their ruling in Froilan vs. Pan Oriental Shipping Co., et al, (L-11897,
October 31, 1964, 12 SCRA 276):
“ x x x there is nothing in the law that prohibits the parties from entering into agreement that violation of the terms
of contract would cause cancellation thereof, even without court intervention. In other word, it is not always necessary for
the injured party to resort to court for rescission of the contract.”
In the first place, UP and ALUMCO had expressly stipulated in the “Acknowledgement of Debt and Proposed
Manner of Payments” that, upon default by the debtor, the creditor (UP) has the “the right and power to consider, the
Logging Agreement dated December 2, 1960 as rescinded without the necessity of any judicial suit.
201910384
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DY-DUMALASA vs. FERNANDEZ (G.R. no. 178760, July 23, 2009)

Ponente: Carpio Morales, J.

The Facts of the case are as follows:

On October 23, 2001 – Domingo Sabado S. Fernandez , et al (respondents) filed a complaint against their former
employer, Helios Manufacturing Corporation, a closed domestic engaged in soap manufacturing located in Muntinlupa
which the petitioner is a stockholder, for illegal dismissal or illegal closure of business, non-payment of salaries and other
money claims. The Labor arbiter found that the closure of manufacturing plant was a sham because they simply relocate
their office at Carmona, Cavite and change their name from Helios under the name of – Pat Suzara, in response to the newly-
established local union. Hence, Helios and its Board of Directions and stockholders were held liable and hereby directed to
pay the complainants’ their full backwages from the time they were illegally dismissed, separation pay for one month’s
salary for every of service; to pay complainant’s service incentive leave for three years; and to pay proportionate 13 th month
pay for 2001.
On January 27, 2005, the NLRC through their issued Resolution, modified the arbiter’s order holding that petitioner
is not jointly and severally liable with Helios for respondents’ claims, there being no showing that she acted in bad faith nor
that Helios cannot pay its obligations. The petitioner filed for motion for reconsideration which later denied that forced to
appeal to the Court of Appeals on March 16, 2005.
The Appellate Court reversed and set aside the resolution holding that what the NLRC modified was not the Order
but the Labor Arbiter’s Decision itself – which constitutes the impressible act knowing that the decision become final and
executory, therefore, it could be no longer be reversed or modified.
Respecting NLRC’s pronouncement that Dumalasa was not jointly and severally liable, the appellate court held that
the same is a superfluity since there was no statement, either in the main case or in the Writ of Execution that liability is
solidary. Therefore, Dumalas is merely jointly for the judgement award. The petitioner filed for motion for reconsideration
by it was denied, went to Supreme Court in seeking review on certiorari.

Issue(s) of the case:

1. Whether or not the Labor Arbiter acquired jurisdiction over Dumalasa.
2. Whether or not Dumalasa is solitarily liable with Helios for the judgment award.

The Supreme Court ruled that:

On first issue, the Labor Arbiter acquired jurisdiction over her person regardless of the fact that there was allegedly
no valid service of summons. It bears nothing that, in quasi-judicial proceedings, procedural rules governing service of
summons are not strictly construed. Substantial compliance therewith is sufficient. At this case, Dumalasa and her husband
and other three relatives were all individually impleaded in the complaint. The Labor Arbiter furnished her with notices of
the scheduled hearings and other processes.
It is undisputed that Helios, of which she and her therein co-respondents in the subject cases were the stockhodlers
and managers, was in fact heard together with counsel in one such scheduled hearing and the Arbiter’s consideration of their
position paper in arriving at the Decision.
Clearly, Dumalasa was adequately represented in the procedings conducted by the Labor Arbiter by the lawyer
retained by Helios.
Petitioner cannot question the implementation of the Writ of Execution on her on the pretext that jurisdiction was
not validly acquired over her person or that Helios has a separate and distinct personality as a corporation entity. To apply
the normal precepts on corporate fiction and technical rules on service of summons would be to overturn the bias of the
Constitution and the laws in favour of labor.
On the second issue, the Court in fact finds that the present action is actually a last ditch attempt on the part of
petitioner to wriggle its way out of her share in the judgement obligation and to discuss the defences which she failed to
interpose when the given opportunity. Even as petitioner avers that she is not questioning the final and executory decision of
the arbiter and admits liability in joint portion, still, she proceeds to interpose the defences that jurisdiction was not acquired
over her person and the Helios has a separate juridical personality.
As Dumalasa’s questioning the levy upon her house and lot, she conveniently omits to mention that the same are
actually conjugal property belonging to her and her husband. Whether petitioner is jointly or solitarily liable for the
judgment obligation, the levied property is not fully absolved.
The Supreme Court denied the petition for certiorari favouring the Appellant Court’s decision.
201910384
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PRYCE CORPORATION vs. PHILIPPINE AMUSEMENT AND GAMING CORP. (G.R. No. 157480, May 6, 2005)
Ponente: Jose Panganiban
The Facts of the Case are as follows:
In the first half of 1992, representatives from Pryce Properties Corporation (PPC) made representations with the
Philippine Amusement and Gaming Corporation on the possibility of setting up and casino within Pryce Holtel in Cagayan
De Oro City and then series of negotiations followed. The representatives from PAGCOR went to the city to survey the
citizens whether the presence of casino would be welcome or not. Some local government officials showed keen interest in
the operation of casino and expressed the view that possible problems were resolved.
On November 11, 1992, both parties executed Contract of Lease involving the ballroom of the hotel for a period of
three starting Dec. 1, 1992 – November 30, 1995, they added in the lease contract of an additional 1000 sq.m. of the hotel
grounds as living headquarters and playground of the casino personnel.
However, the Sangguinang Panlungsod og Cagayan De Oro City passed Resolution No. 2295 declared a matter of
policy prohibits the establishment of a gambling casino in the city and banning casinos within the city. They enacted an
Ordinance No. 3353 prohibiting the issuance of business permits and cancelling existing business permits to any
establishment for using, or allowing to be used, it premises or any portion in operation of a casino.
Afternoon of December 18, 1992, hours before the actual opening of casino operations, a public rally in front of the
hotel was staged by some local officials, residents and religious leader. Barricades were placed preventing some casino
personnel and hotel guest from entering and existing from the Hotel. In response, PAGCOR was constrained to suspend their
operations. On January 4, 1993, an ordinance was passed by the Sangguniang Panlungsod, prohibiting the operation of
casinos and providing for the penalty in violation. On, January 7, the PPC filed a Petition for Prohibition with Preliminary
Injunction against them before the Court of Appeals praying for the unconstitutionality of the ordinance which the Appellant
Court declared the said measures unconstitutional, and eventually elevated this case to the Supreme Court which later
declared unconstitutional.
Despite the ruling of the Supreme Court ruling, the demonstrations were not stopped which led for the PACGOR to
cease its operations on July 15, 1993. PPC sent PAGCOR a letter which summed to collect the full rental in case of pre-
termination of lease. In defense, PAGCOR states that it was not amenable to the payment of full rental due to unforeseen
legal other circumstance which prevent them in complying with their obligations. PAGCOR asked PPC to refund the
reimbursable rental deposits and expenses for the permanent improvement of the Hotel’s parking lot.
The Court of Appeals reiterated that PAGCOR’s pre-termination of the lease contract is unjustified noting that
public demonstration cannot constitute as fortuitous event that exempt them from complying with their contractual
obligations. Therefore the Contract was still on effect until PPC elected to terminate under Article 1659 of the Civil Code.
As they ended the contract on November 25, 1993, PCC could no longer demand payment of the remaining rentals as part of
actual damages.

Issue(s) of the case: Whether or not Pryce was entitled to future rentals or lease payments for the unexpired period of the
Contract of Lease between Pryce and PAGCOR.

The Supreme Court ruled that:

No. PPC anchors it right to collect future rentals upon the provisions. PAGCOR contends that Article 1659 of the
Civil Code governs, PPC has no longer entitled to future rentals because they chose rescind the contract.
Article 1159 of the Civil Codes refers the obligations arising from contracts have the force of law between
contracting parties and should be complied in good faith. In deference to the right of the parties, the law allows them to enter
into stipulations, clauses, terms and conditions they may deem convenient; that is, as long as these are not contrary to the
law, morals, good customs, public order, or public policy. The provision in the lease contract give the PPC the right to
terminate and cancel the Contract in the event of a default or breach by the lessee and to make PAGCOR fully liable for
rentals for the remaining term of the lease, despite the exercise of such right to terminate. Plainly, the parties have
voluntarily bound themselves to require strict compliance with the provisions of the Contract by stipulating that a default or
breach shall give the lessee the termination option.
In this case, the actions and pleadings of petitioner show that never intended to rescind the lease contract from the
beginning. This fact was evident when it first sought to collect the accrued rentals. Hence, such abrogation is no rescission
under Article 1659 of Civil Code but a cancelation or termination.
201910384
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ROYAL CARGO CORPORATION vs. DFS SPORTS UNLIMITED, INC. (G.R. No. 158621, December 10, 2008)
Ponente: Austria – Martinez, J.:
THE FACTS OF THE CASE ARE AS FOLLOWS:
Royal Cargo Corporation is an international freight forwarder, which offers trucking, brokerage, storage, and other
services to the public, and serves as conduit between shippers, consignees, and carriers for the transportation of cargos from
one point of the globe to another. DFS Sports is one the concessionaries of the Subic Bay Metropolitan Authority (SBMA).
It is principally engaged in the importation and local sale of duty-free sporting goods and other similar products.
October 1993, the respondent engaged the services of the petitioner to attend and undertake the former’s brokerage
and trucking requirements. Before the period from April to July 1994, the petitioner rendered trucking, brokerage, storage
and other services to the respondent in connection with the latter’s importation business, and as a consequence it incurred
expenses for brokerage forms, stamps, notarial fees, arrastre charges, wharfage fees, storage charges, guarding fees,
telegrams, LCL cgarges, photostate copies, trucking charges, and others services mentioned in the amount of P248,449.63
which the respondent failed and refuses to pay despite demands.
In respond, Royal Cargo the Collection of Sum Money against DFS before the Regional Trial Court in manila
seeking the recovery of the amount mentioned plus legal interest as well as attorney’s fee and costs of suit. The petitioner
presented as part of its evidence the 34 carbon copies of invoices to prove respondent’s indebtedness. These were objected to
by respondent on the ground that they are self-serving, immaterial and have no factual and legal basis which later admitted
by the RTC.
The DFS presented 28 original copies of the 34 invoices submitted by the petitioner for the purpose of proving
payment of the amount sought to be recovered by the latter.
ISSUE(S) OF THE CASE:
1. Whether or not respondent, the debtor, has the burden of proving payment
2. Whether or not the subject invoices prove such payment or at least raise a disputable presumption that payment has
been made.
THE SUPREME COURT RULED THAT:
Yes. On the first issue, the settled rule is that the one who pleads payment has the burden of proving it. Even where
the creditor alleges non-payment, the general rule is that the onus rests on the debtor to prove payment, rather than on the
creditor to prove non-payment. The debtor introduces some evidence of payment, the burden of proof shifts to the creditor,
who is then under a duty of producing some evidence to show non-payment.
For the second issue, it answered no. An invoice or bill is commercial document issued by a seller to the buyer
indicating the products, quantities and agreed prices for product or services the seller has provided the buyer. An invoice
indicates the buyer must pay seller according to payment terms.
Sales or commercial invoice is defined as a written account of goods sold or services rendered indicating the prices
charged therefor or a list by whatever name it is known which is used in the ordinary course of business evidencing sale and
transfer or agreement to sell or transfer goods and services.
201910384
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GAISANO CAGAYAN INC. vs. INSURANCE COMPANY OF NORTH AMERICA (G.R. No. 147839, June 8, 2006)
Ponente: Austria-Martinez, J.:

THE FACTS OF THE CASE ARE AS FOLLOWS:

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

ISSUE(S) OF THE CASE:

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

THE SUPREME COURT RULED THAT:

Yes for both issues.  It is well-settled that when the words of a contract are plain and readily understood, there is no
room for construction. In this case, the questioned insurance policies provide coverage for “book debts in connection with
ready-made clothing materials which have been sold or delivered to various customers and dealers of the Insured anywhere
in the Philippines.” ; and defined book debts as the “unpaid account still appearing in the Book of Account of the Insured 45
days after the time of the loss covered under this Policy.” Nowhere is it provided in the questioned insurance policies that the
subject of the insurance is the goods sold and delivered to the customers and dealers of the insured.
Section 13 of our Insurance Code defines insurable interest as “every interest in property, whether real or personal,
or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril might directly damnify the
insured.” Parenthetically, under Section 14 of the same Code, an insurable interest in property may consist in: (a) an existing
interest; (b) an inchoate interest founded on existing interest; or (c) an expectancy, coupled with an existing interest in that
out of which the expectancy arises.
Therefore, an insurable interest in property does not necessarily imply a property interest in, or a lien upon, or
possession of, the subject matter of the insurance, and neither the title nor a beneficial interest is requisite to the existence of
such an interest, it is sufficient that the insured is so situated with reference to the property that he would be liable to loss
should it be injured or destroyed by the peril against which it is insured.
201910384
SATURDAY (1-4PM)

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

Ponente: Nachura, J.:

THE FACTS OF THE CASE ARE AS FOLLOWS:

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

ISSUE(S) OF THE CASE:

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

THE SUPREME COURT RULED THAT:

YES (on the first issue). The CTA is categorically described as a court of record. As cases filed before it are litigated
de novo, party-litigants shall prove every minute aspect of their cases. As such, those evidence submitted by the BIR has no
evidentiary weight, as the rules on documentary evidence require that these documents must be formally offered before the
CTA. The Revised Rules on Evidence which reads: SEC. 34. Offer of evidence. The court shall consider no evidence which
has not been formally offered. The purpose for which the evidence is offered must be specified.
The CTA and the CA rely solely on the case of Vda. de Oate, which reiterated this Court's previous rulings in People
v. Napat-a and People v. Mate on the admission and consideration of exhibits which were not formally offered during the
trial.
The Court reiterates that Vda. de Oate is merely an exception to the general rule. Being an exception, it may be
applied only when there is strict compliance with the requisites mentioned therein; otherwise, the general rule in Section 34
of Rule 132 of the Rules of Court should prevail.
YES (on the second issue). The specific question is whether the actual claims of the aforementioned creditors may
be fully allowed as deductions from the gross estate of Jose despite the fact that the said claims were reduced or condoned
through compromise agreements entered into by the Estate with its creditors.
The Court agreed with an American ruling relating to the date-of-death valuation, a tax imposed on the act of
transferring property by will or intestacy and, because the act on which the tax is levied occurs at a discrete time, i.e., the
instance of death, the net value of the property transferred should be ascertained, as nearly as possible, as of that time, to be
followed. Also the Court, emphasized the definition of claims which are debts or demands of a pecuniary nature which could
have been enforced against the deceased in his lifetime, or liability contracted by the deceased before his death. Therefore,
the claims existing at the time of death are significant to, and should be made the basis of, the determination of allowable
deductions.
201910384
SATURDAY (1-4PM)

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

Ponente: Quisumbing, J:

FACTS OF THE CASE ARE AS FOLLOWS:

Guillermo Uy assigned to respondent his receivables due from Pantranco North Express Inc. (PNEI). Respondent filed a
collection suit with an application for issuance of preliminary attachment against PNEI which was granted by the RTC. The
sheriff issued a notice of garnishment addressed to PNB and PNB MADECOR. The RTC rendered judgment against PNEI
with writ of execution causing the sheriff to garnish the amount therein from the credits and collectibles of PNEI from
petitioner and levy upon the assets of petitioner should its personal assets be insufficient to cover its debt with PNEI.
Petitioner claimed that as debtor, it is likewise a creditor for PNEI considering unpaid rentals of PNEI for its parcel of land
and by operation of law on compensation, it is actually the PNEI that still has outstanding obligations to it.
 
ISSUE(S) OF THE CASE:
Whether or not there was legal compensation between the petitioner and PNEI as a defense of the former.
 
THE SUPREME COURT RULED THAT:
NO. There could not be any compensation between PNEI’s receivables from PNB MADECOR and the latter’s
obligation to the former because PNB MADECOR’s supposed debt to PNEI is the subject of attachment proceedings
initiated by a third party, herein respondent Gerardo Uy.  This is a controversy that would prevent legal compensation from
taking place, per the requirements set forth in Article 1279 of the Civil Code.
“ART. 1279. In order that compensation may be prosper, it is necessary:
1. That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the
other;
2. That both debts consists in a sum of money, or if the things due are consumable, they be of the same kind, and
also of the quality if the latter has been started;
3. That two debts be due;
4. That they be liquidated and demandable; and
5. That over neither of them there be retention or controversy, commenced by third persons and communicated in
due time to the debtor.”
Moreover, it was not clear whether, at the time compensation was supposed to have taken place, the rentals being
claimed by petitioner were indeed still unpaid.  Petitioner did not present evidence in this regard, apart from a statement of
account.
201910384
SATURDAY (1-4PM)

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

THE FACTS OF THE CASE ARE AS FOLLOWS:

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

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

THE SUPREME COURT RULED THAT:

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