Case Digest

Civil Law Review II

Submitted by:
Jeffrey B. Oliveros
Sunday/ 8 am 12 noon
 Table of Contents

Obligations

Kinds of Civil Obligations

As to Perfection and Extinguishment

With a term or period

BONIFACIO DANAN vs. SPOUSES GREGORIO SERRANO AND ADELAIDA

REYES (G.R. No. 195072, August 1, 2016)

As to rights and obligations of multiple parties

Solidary

JAKERSON G. GARGALLO vs. DOHLE SEAFRONT CREWING (MANILA),

INC., DOHLE MANNING AGENCIES, INC., AND MR. MAYRONILO B. PADIZ
(G.R. No. 215551, August 17, 2016)

OYSTER PLAZA HOTEL, ROLITO GO, AND JENNIFER AMPEL vs. ERROL
O. MELIVO (G.R. No. 217455, October 5, 2016)

As to performance of prestation

SPOUSES ALEXANDER AND JULIE LAM, Doing Business Under the Name
and Style "COLORKWIK LABORATORIES" AND "COLORKWIK PHOTO
SUPPLY" vs. KODAK PHILIPPINES, LTD. (G.R. No. 167615, January 11,
2016)

Breach of Civil Obligations

CATHAY PACIFIC AIRWAYS, LTD. vs. SPOUSES ARNULFO AND EVELYN

FUENTEBELLA (G. R. No. 188283, July 20, 2016)

ELIZABETH SY-VARGAS vs. THE ESTATE OF ROLANDO OGSOS, SR. AND

OGSOS, JR. (G.R. No. 221062, October 5, 2016)

SPOUSES ROMEO PAJARES and IDA T. PAJARES vs. REMARKABLE

LAUNDRY AND DRY CLEANING, represented by ARCHEMEDES G. SOLIS
(GR. No. 212690, February 20, 2017)

Manner of Breach

Negligence

TRAVEL & TOURS ADVISERS, INCORPORATED vs. ALBERTO

CRUZ, SR., EDGAR HERNANDEZ AND VIRGINIA MUOZ (G.R. No.
199282, March 14, 2016)

Delay

LYLITH B. FAUSTO, JONATHAN FAUSTO, RICO ALVIA, ARSENIA

TOCLOY, LOURDES ADOLFO AND ANECITA MANCITA vs. MULTI
AGRI-FOREST AND COMMUNITY DEVELOPMENT COOPERATIVE
(FORMERLY MAF CAMARINES SUR EMPLOYEES COOPERATIVE,
INC.) (G.R.No. 213939, October 12, 2016)

Excuses for non-performance

Fortuitous Event

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 SPOUSES JAIME AND MATILDE POON vs. PRIME SAVINGS BANK
REPRESENTED BY THE PHILIPPINE DEPOSIT INSURANCE
CORPORATION AS STATUTORY LIQUIDATOR (G.R. No. 183794,
June 13, 2016)

Modes of Extinguishment of Obligation

Payment or performance

SPOUSES JUAN CHUY TAN AND MARY TAN (DECEASED) SUBSTITUTED

BY THE SURVIVING HEIRS, JOEL TAN AND ERIC TAN vs. CHINA BANKING
CORPORATION (G.R. No. 200299, August 17, 2016)

PHILIPPINE SCIENCE HIGH SCHOOL-CAGAYAN VALLEY CAMPUS vs.

PIRRA CONSTRUCTION ENTERPRISES (G.R. No. 204423, September 14,
2016)

DR. RESTITUTO C. BUENVIAJE vs. SPOUSES JOVITO R. AND LYDIA B.

SALONGA, JEBSON HOLDINGS CORPORATION AND FERDINAND JUAT
BAEZ (G.R. No. 216023, October 5, 2016)

Contracts

Kinds of Contracts as to validity

Valid and binding

SPOUSES ROBERTO and ADELAIDA PEN vs. SPOUSES SANTOS and

LINDA JULIAN (G.R. No. 160408, January 11, 2016)

MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY [MCIAA] vs. HEIRS

OF GAVINA IJORDAN, NAMELY, JULIAN CUISON, FRANCISCA CUISON,
DAMASTNA CUISON, PASTOR CUISON, ANGELINA CUISON, MANSUETO
CUISON, BONIFACIA CUISON, BASILIO CUISON, MOISES CUISON, AND
FLORENCIO CUISON, (G.R. No. 173140, January 11, 2016)

Void or inexistent

TIMOTEO BACALSO and DIOSDADA BACALSO vs. GREGORIA B. ACA-

AC, EUTIQUIA B. AGUILA, JULIAN BACUS and EVELYN SYCHANGCO (G.R.
No. 172919, January 13, 2016)

TERESITA I. BUENAVENTURA vs. METROPOLITAN BANK AND TRUST

COMPANY (G.R. No. 167082, August 3, 2016)

DAMASO T. AMBRAY AND CEFERINO T. AMBRAY, JR. vs .SYLVIA A.

TSOUROUS, CARMENCITA AMBRAY-LAUREL, HEDY AMBRAY-AZORES,
VIVIEN AMBRAY-YATCO, NANCY AMBRAY-ESCUDERO, MARISTELA
AMBRAY-ILAGAN, ELIZABETH AMBRAY-SORIANO, MA. LUISA FE
AMBRAY-ARCILLA AND CRISTINA AMBRAY-LABIT (G.R. No. 209264, July
5, 2016)

MAE FLOR GALIDO vs. NELSON P. MAGRARE, EVANGELINE M. PALCAT,

RODOLFO BAYOMBONG, and REGISTER OF DEEDS OF ANTIQUE, San
Jose, Antique (GR No. 206584, January 11, 2016)

Resistible Contracts

RCBC SAVINGS BANK vs. NOEL M. ODRADA (G.R. No. 219037, October 19, 2016)

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Sales

Elements of Contract of Sale

Essential Elements
Determinate subject matter (thing or right)

ANITA U. LORENZANA vs. RODOLFO LELINA (G.R. No. 187850, August

17, 2016)

Price certain in money or its equivalent

TOMAS P. TAN, JR. vs. JOSE G. HOSANA (G.R. No. 190846, February 3,
2016)

DASMARIAS T. ARCAINA and MAGNANI T. BANTA vs. NOEMI L.

INGRAM, represented by MA. NENETTE L. ARCHINUE (G.R. No.
196444, February 15, 2017)

Rights and obligations of the vendor

To transfer ownership
Double Sales

DESIDERIO RANARA, JR. vs. ZACARIAS DE LOS ANGELES, JR

(G.R. No. 200765, August 8, 2016)

GIL MACALINO, JR., TERESITA MACALINO, ELPIDIO MACALINO,

PILAR MACALINO, GILBERTO MACALINO, HERMILINA MACALINO,
EMMANUEL MACALINO, EDELINA MACALINO, EDUARDO
MACALINO, LEONARDO MACALINO, EDLLANE** MACALINO,
APOLLO MACALINO, MA. FE MACALINO, AND GILDA MACALINO
vs. ARTEMIO PIS-AN (G.R. No. 204056, June 1, 2016)

FABIO CAHAYAG and CONRADO RIVERA vs. COMMERCIAL

CREDIT CORPORATION, represented by its President, LEONARDO
B. ALEJANDRO; TERESITA T. QUA, assisted by her husband
ALFONSO MA. QUA; and the REGISTER OF DEEDS OF LAS PINAS,
METRO MANILA, DISTRICT IV (G.R. No. 168078, January 13,
2016)/DULOS REALTY & DEVELOPMENT CORPORATION,
represented by its President, JUANITO C. DULOS; and MILAGROS
E. ESCALONA, and ILUMINADA D. BALDOZA vs. COMMERCIAL
CREDIT CORPORATION, represented by its President, LEONARDO
B. ALEJANDRO; TERESITA T. QUA, assisted by her husband
ALFONSO MA. QUA; and the REGISTER OF DEEDS OF LAS PINAS,
METRO MANILA, DISTRICT IV (G.R. No. 168357, January 13, 2016)

Lease

Rights and obligations of the Lessor and Lessee

RAMON PACON, THROUGH HIS WIFE FELINA PACON, ANTONIO PACON,

THROUGH HIS WIFE NENITA PACON, EULOGIO PACON, THROUGH HIS SON
JORGE PACON, LEONARDO PACON, MANUEL IGOS, JOSE COLORES, LOLITA
COLORES, AND ESTANISLAO BUENDIA vs. BENJAMIN TAN (G.R. No. 185365,
March 2, 2016)

Credit Transactions: Pledge, Mortgage and Antichresis

Chattel and Real Estate Mortgage

In general

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 Extent/coverage of the Mortgage

PHILIPPINE NATIONAL BANK vs. HEIRS OF BENEDICTO AND

AZUCENA ALONDAY (G.R. No. 171865, October 12, 2016)

Essential Requisites

Formal Requisites: Affidavit Good Faith

PHILIPPINE NATIONAL BANK vs. JUAN F. VILA (G.R. No. 213241,

August 1, 2016)

Rights and obligations of the Mortgagee

METROPOLITAN BANK & TRUST COMPANY vs. CHUY LU TAN, MR.

ROMEO TANCO, DR. SY SE HIONG, and TAN CHU HSIU YEN (G.R. No.
202176, August 1, 2016)

4
BONIFACIO DANAN vs. SPOUSES GREGORIO SERRANO AND ADELAIDA REYES
(G.R. No. 195072, August 1, 2016)

Facts: Respondents spouses Gregorio Serrano and Adelaida Reyes (Spouses Serrano) are the
registered owners of a parcel of land consisting of a total area of 23,981 square meters, situated
in Sta. Cruz, Lubao, Pampanga, and covered by Original Certificate of Title (OCT) No. 6947.4
Sometime in the years 1940 and 1950, when the property was still co-owned by respondent
Gregorio and his siblings, Gregorio's sisters, Marciana and Felicidad, gave petitioner Bonifacio
Danan and a certain Artemio Vitug permission to possess 400 square meters each of the total
estate and to build their homes thereon in exchange for one cavan of palay every year.
Thereafter, in separate documents denominated as "Agreement in Receipt Form" dated June
27, 1976, Gregorio sold to Bonifacio and Artemio their respective 400-square-meter portions of
the property. While Bonifacio and Artemio paid the P2, 000.00 upon the signing of the
Agreement, they were both unable to pay the balance of the purchase price when they fell due
on June 30, 1977 and June 30, 1978. Nevertheless, they remained in possession of their
respective lots. In a Complaint dated September 10, 1998, the Spouses Serrano, through their
son and attorney-in-fact, Arnel Francisco Serrano, instituted ejectment proceedings against
Bonifacio and Artemio, alleging: (1) that they are the owners of the subject properties; (2) that
Bonifacio and Artemio were merely caretakers thereof; and (3) that demand was made for the
latter to vacate, but to no avail. Thus, they prayed that Bonifacio and Artemio be ordered to
vacate the premises and to pay monthly rentals and attorney's fees

Meanwhile, in a Complaint for specific performance dated November 3, 1998, Bonifacio and
Artemio alleged that they purchased their respective portions of land via the Agreement in
Receipt Form dated June 27, 1976 and since then, stopped paying the yearly rental of one
cavan of palay. While they admitted to their failure to pay the remaining balance of the purchase
price in the amount of P4, 000.00, they claimed that such was due to the continuous absence of
the Spouses Serrano. Despite their ability and willingness to pay the aforesaid amount,
however, Bonifacio and Artemio were shocked to have found that as early as September 1994,
the Spouses Serrano had already obtained the title over the subject properties in their names.
According to Bonifacio and Artemio, Gregorio intentionally deceived them into signing the
documents in May 1992 purportedly intended to facilitate the processing and issuance of their
titles over their respective portions of land but which turned out to be a declaration that they
were merely caretakers of the same.14 Said documents were eventually used for the ejectment
case against them.

In their Answer, respondents spouses asserted that they are the owners of the subject
properties; that the possession thereof by Bonifacio and Artemio are merely by tolerance; and,
that the Agreements in Receipt Form dated June 27, 1976 are mere contracts to sell, of which
failure by the vendees to fully pay the price agreed thereon prevents the transfer of ownership
from the vendor to the vendees. As special and administrative defenses, the Spouses Serrano
raised prescription, alleging that any right of action, if any, arising from the agreements dated
June 27, 1976, had long prescribed when the complaint was filed in 1998. The Spouses
Serrano likewise raised the defense of laches on the part of Bonifacio and Artemio for their
neglect to assert their right for an unreasonable and unexplained length of time. As their
counterclaim, moreover, the Spouses Serrano claimed to be entitled to the payment of monthly
rentals in the amount of P3,000.00, moral damages, exemplary damages, and attorney's fees.

Issue: Whether or not the Petitioner can demand the respondent spouses to transfer the
subject property despite his failure to comply with the suspensive condition of full payment of
the purchase price.

Ruling: It is imperative to note, however, that in view of the nature of the agreement herein, a
contract to sell real property on installment basis, the provisions of RA No. 6552 must be taken
into account insofar as the rights of the parties in cases of default are concerned. In conditional
sales of all kinds of real estate (industrial, commercial, residential), RA No. 6552 not only
recognizes the right of the seller to cancel the contract upon non-payment of an installment by
the buyer, an event that prevents the obligation of the seller to convey title from acquiring
binding force, it also provides for the rights of the buyer in case of such cancellation

5
Accordingly, the Court, in multiple occasions, emphasized the importance of the foregoing
provisions of RA No. 6552 and upheld sales of land as valid and subsisting due to the absence
and/or impropriety of the requisite notice of cancellation. In Pagtalunan v. Dela Cruz Vda. de
Manzano, for instance, the Court ordered the seller to transfer the title to the buyer upon the
latter's payment of the balance of the purchase price because of the invalidity of the seller's
cancellation of their contract. Contrary to the seller's contention, the letter he sent demanding
the buyer to vacate the premises due to the latter's failure to pay did not sufficiently conform to
the conditions imposed by law. What is required, the Court explained, is a "notice of cancellation
or demand for rescission by notarial act," which is not the same as a demand letter. In another
instance, the Court, in Spouses Ramos v. Spouses Heruela, held that in view of the absence of
the requisite notice of cancellation, as well as a demand for rescission by notarial act to the
buyer, the contract to sell remained effective. Consequently, said buyer had not lost the
statutory grace period within which to pay the remaining installments even after the date
stipulated in their agreement. The Court added that the action for reconveyance of property filed
by the seller cannot be deemed the same as an action for rescission.

Thus, when there is failure on the part of the seller to comply with the requirements prescribed
by RA No. 6552 insofar as the cancellation of a contract to sell is concerned, the Court shall not
hesitate in upholding the sale, albeit being subject to the full payment by the buyer of the
purchase price.34 In fact, in Fabrigas v. San Francisco del Monte, Inc.,35 the Court even went
as far as nullifying a clause in a contract providing for automatic rescission immediately upon
default of the buyer notwithstanding the statutory grace periods permitted by the Act.

In the instant case, there is no showing that the Spouses Serrano complied with the
requirements prescribed by RA No. 6552. As the records reveal, after entering into the sale
under the "Agreement in Receipt Form" on June 27, 1976, the Spouses Serrano filed their
Complaint for unlawful detainer dated September 10, 1998, attaching therewith the May 1992
document as well as a Notice to Vacate dated April 21, 1998. Jurisprudence dictates, however,
that none of these documents constitutes as the requisite "notice of cancellation or demand for
rescission by notarial act" mandated by law.36 In fact, nowhere in the said documents was the
sale or its rescission ever mentioned. In their ejectment complaint, the Spouses Serrano merely
alleged that on May 6, 1992, they entered into an agreement whereby Bonifacio was to act as
caretaker of the subject land and that he shall voluntarily vacate the same within three (3)
months from the receipt of a notice to vacate.

Notwithstanding the failure by the spouses to comply with the cancellation requirements under
RA No. 6552, however, Bonifacio's action for specific performance must nonetheless fail on the
ground of prescription.

6
JAKERSON G. GARGALLO vs. DOHLE SEAFRONT CREWING (MANILA), INC., DOHLE
MANNING AGENCIES, INC., AND MR. MAYRONILO B. PADIZ
(G.R. No. 215551, August 17, 2016)

Facts: On July 20, 2012, petitioner filed a complaint for permanent total disability benefits
against respondents before the National Labor Relations Commission (NLRC). The complaint
stemmed from his claim that: (a) he accidentally fell on deck while lifting heavy loads of lube oil
drum, with his left arm hitting the floor first, bearing his full body weight; (b) he has remained
permanently unfit for further sea service despite major surgery and further treatment by the
company-designated physicians; and (c) his permanent total unfitness to work was duly certified
by his chosen physician whose certification must prevail over the palpably self-serving and
biased assessment of the company-designated physicians.

For their part, respondents countered that the fit-to-work findings of the company-designated
physicians must prevail over that of petitioner's independent doctor, considering that: (a) they
were the ones who continuously treated and monitored petitioner's medical condition; and (b)
petitioner failed to comply with the conflict-resolution procedure under the Philippine Overseas
Employment Administration-Standard Employment Contract (POEA-SEC). Respondents further
averred that the filing of the disability claim was premature since petitioner was still undergoing
medical treatment within the allowable 240-day period at the time the complaint was filed.

Issue: Whether or not Padiz should be absolved from joint and several liabilities with Dchle
Seafront and Dohle Manning for the payment of the income benefit arising from his temporary
total disability

Ruling: Applicable laws form part of, and are read into, contracts without need for any express
reference thereto; more so, when it pertains to a labor contract which is imbued with public
interest. Each contract thus contains not only what was explicitly stipulated therein, but also the
statutory provisions that have any bearing on the matter." As applied herein, Section 10 of RA
8042, as amended, and the pertinent POEA Rules are deemed incorporated in petitioner's
employment contract with respondents. These provisions are in line with the State's policy of
affording protection to labor and alleviating the workers' plight, and are meant to assure OFWs
immediate and sufficient payment of what is due them. Thus, as the law provides, corporate
directors and officers are themselves solidarily liable with the recruitment/placement agency for
all money claims or damages that may be awarded to OFWs.

Based on the foregoing premises, the Court, therefore, finds Padiz jointly and solidarily liable
with Dohle Seafront and Dohle Manning for the payment of the income benefit arising from
petitioner's temporary total disability, and, to such extent, grants petitioner's motion for
reconsideration, and, in consequence, modifies the September 16, 2015 Decision accordingly.

7
OYSTER PLAZA HOTEL, ROLITO GO, AND JENNIFER AMPEL vs. ERROL O. MELIVO
(G.R. No. 217455, October 5, 2016)

Facts: On October 22, 2009, respondent Errol O. Melivo (Melivo) filed before the NLRC a
Complaint for illegal dismissal with prayers for reinstatement and payment of back wages,
holiday pay, overtime pay, service incentive leave, and, 13th month pay against petitioners
Oyster Plaza Hotel (Oyster Plaza), Rolito Go (Go), and Jennifer Ampel (Ampel).

The Summons, dated October 26, 2009, together with a copy of the complaint, was served on
the petitioners thru registered mail. The said summons ordered the petitioners to appear before
the Labor Arbiter (LA) for mandatory conciliation/mediation conferences on November 23, 2009
and December 1, 2009. The registry return receipt, dated November 27, 2009, showed that the
summons and the copy of the complaint were duly served. The petitioners, however, failed to
appear during the scheduled conferences. Thereafter, the case was set for formal hearing on
January 14, 2010 and a notice of hearing7 was sent to the petitioners, requiring them to appear
before the LA and file their position paper, with a warning that failure to appear therein would be
construed as a waiver of the opportunity to be heard. The notice, however, was returned
unserved as there was no one to receive the same.8 The formal hearing was, thus, reset to
February 17, 2010, and a notice of hearing9 was again sent to the petitioners, wherein they
were reminded to file their position paper. The registry return receipt showed that the said notice
was received by a certain Charlie Miraa(Miraa) on January 25, 2010. At the February 17,
2010 hearing, however, only Melivo appeared.

On even date, Melivo filed his Position Paper, alleging the following: that Oyster Plaza was a
business entity engaged in the business of hotel operation, under the ownership/management
of Go and Ampel; that in August 2008, Oyster Plaza hired him as a trainee room boy; that in
November 2008, Oyster Plaza hired him as a probationary room boy and he was made to sign
an employment contract but he was not furnished a copy, that the said contract expired in
March 2009 and his work ended; that on April 7, 2009, Oyster Plaza hired him again as a room
boy, but without any employment contract or document; and that in September 2009, his
supervisor Ampel verbally told him that his contract was expiring, thus, he must stop reporting
for work.

For the last time, another notice of hearing for the March 24, 2010, was again sent to the
petitioners with a directive to file their position paper, but it was again returned unserved.

Issue: WHETHER OR NOT GO AND AMPEL ARE SOLIDARILY LIABLE WITH OYSTER
PLAZA/MDC

Ruling: Go and Ampel cannot be held Solidarity Liable with Oyster Plaza/MDC. A corporation,
being a juridical entity, may act only through its directors, officers and employees. Obligations
incurred by them, acting as such corporate agents, are not theirs but the direct accountabilities
of the corporation they represent. Pursuant to this principle, a director, officer or employee of a
corporation is generally not held personally liable for obligations incurred by the corporation; it is
only in exceptional circumstances that solidary liability will attach to them. Thus, in labor cases,
corporate directors and officers are held solidarity liable with the corporation for the employee's
termination only when the same is done with malice or in bad faith. In the present case, there is
nothing substantial on record which can justify Go and Ampel's solidary liability with Oyster
Plaza or MDC. As to Ampel, records reveal that her participation in the illegal dismissal was her
verbally informing Melivo that his services were being terminated; and the said act could hardly
be considered malicious enough to make Ampel solidarity liable with Oyster Plaza or MDC. With
regard to Go, aside from the assertion that he was the owner of Oyster Plaza, no other act,
relating to Melivo's illegal dismissal, was ever averred against him. Besides, Go's relation with
Oyster Plaza or MDC was only based from the bare allegations of Melivo who failed to provide
substantial evidence to prove them. It is of no moment that Go failed to produce evidence to
show that he was no longer connected with MDC or Oyster Plaza. Melivo should have relied on
the strength of his evidence and not on the weakness of the defense offered by the
petitioners.Clearly, without any participation in the illegal dismissal of Melivo, no malice or bad
faith can be attributed to Go to justify his solidary liability with Oyster Plaza. In fine, the petition
must be partially granted to the effect that only Oyster Plaza/MDC should be adjudged liable to
Melivo

8
SPOUSES ALEXANDER AND JULIE LAM, Doing Business Under the Name and Style
"COLORKWIK LABORATORIES" AND "COLORKWIK PHOTO SUPPLY" vs. KODAK
PHILIPPINES, LTD.
(G.R. No. 167615, January 11, 2016)

Facts: On January 8, 1992, the Lam Spouses and Kodak Philippines, Ltd. entered into an
agreement (Letter Agreement) for the sale of three (3) units of the Kodak Minilab System 22XL6
(Minilab Equipment). On January 15, 1992, Kodak Philippines, Ltd. delivered one (1) unit of the
Minilab Equipment in Tagum, Davao Province. The delivered unit was installed by Noritsu
representatives on March 9, 1992.10 The Lam Spouses issued postdated checks amounting to
35,000.00 each for 12 months as payment for the first delivered unit, with the first check due
on March 31, 1992. The Lam Spouses requested that Kodak Philippines, Ltd. not negotiate the
check dated March 31, 1992 allegedly due to insufficiency of funds. The same request was
made for the check due on April 30, 1992. However, both checks were negotiated by Kodak
Philippines, Ltd. and were honored by the depository bank. The 10 other checks were
subsequently dishonored after the Lam Spouses ordered the depository bank to stop payment.
Kodak Philippines, Ltd. canceled the sale and demanded that the Lam Spouses return the unit it
delivered together with its accessories. The Lam Spouses ignored the demand but also
rescinded the contract through the letter dated November 18, 1992 on account of Kodak
Philippines, Ltd.s failure to deliver the two (2) remaining Minilab Equipment units.

Issue: Whether or not the contract between petitioners Spouses Alexander and Julie Lam and
respondent Kodak Philippines, Ltd. pertained to obligations that are severable, divisible, and
susceptible of partial performance under Article 1225 of the New Civil Code.

Ruling: An obligation is indivisible when it cannot be validly performed in parts, whatever may
be the nature of the thing which is the object thereof. The indivisibility refers to the prestation
and not to the object thereof. In the present case, the Deed of Sale of January 29, 1970
supposedly conveyed the six lots to Natividad. The obligation is clearly indivisible because the
performance of the contract cannot be done in parts, otherwise the value of what is transferred
is diminished. Petitioners are therefore mistaken in basing the indivisibility of a contract on the
number of obligors.

There is no indication in the Letter Agreement that the units petitioners ordered were covered by
three (3) separate transactions. The factors considered by the Court of Appeals are mere
incidents of the execution of the obligation, which is to deliver three units of the Minilab
Equipment on the part of respondent and payment for all three on the part of petitioners. The
intention to create an indivisible contract is apparent from the benefits that the Letter Agreement
afforded to both parties. Petitioners were given the 19% discount on account of a multiple order,
with the discount being equally applicable to all units that they sought to acquire. The provision
on "no downpayment" was also applicable to all units. Respondent, in turn, was entitled to
payment of all three Minilab Equipment units, payable by installments

9
CATHAY PACIFIC AIRWAYS, LTD. vs. SPOUSES ARNULFO AND EVELYN FUENTEBELLA
(G. R. No. 188283, July 20, 2016)

Facts: In 1993, the Speaker of the House authorized Congressmen Arnulfo Fuentebella
(respondent Fuentebella), Alberto Lopez (Cong. Lopez) and Leonardo Fugoso (Cong. Fugoso)
to travel on official business to Sydney, Australia, to confer with their counterparts in the
Australian Parliament from 25 October to 6 November 1993. On 22 October 1993, respondents
bought Business Class tickets for Manila to Sydney via Hong Kong and back. They changed
their minds, however, and decided to upgrade to First Class. From this point, the parties
presented divergent versions of facts. The overarching disagreement was on whether
respondents should have been given First Class seat accommodations for all the segments of
their itinerary. According to respondents, their travel arrangements, including the request for the
upgrade of their seats from Business Class to First Class, were made through Cong. Lopez.
The congressman corroborated this allegation. On the other hand, petitioner claimed that a
certain Carol Dalag had transacted on behalf of the congressmen and their spouses for the
purchase of airline tickets for Manila-Hong Kong-Sydney-Hong Kong- Manila. According to
petitioner, on 23 October 1993, one of the passengers called to request that the booking be
divided into two: one for the Spouses Lopez and Spouses Fugoso, and a separate booking for
respondents. Cong. Lopez denied knowing a Carol Dalag. He was not questioned regarding the
request for two separate bookings. However, in his testimony, he gave the impression that the
travel arrangements had been made for them as one group. He admitted that he had called up
petitioner, but only to request an upgrade of their tickets from Business Class to First Class. He
testified that upon assurance that their group would be able to travel on First Class upon cash
payment of the fare difference, he sent a member of his staff that same afternoon to pay.
Petitioner admits that First Class tickets were issued to respondents, but clarifies that the tickets
were open-dated (waitlisted). There was no showing whether the First Class tickets issued to
Sps. Lopez and Sps. Fugoso were open-dated or otherwise, but it appears that they were able
to fly First Class on all the segments of the trip, while respondents were not.

On 25 October 1993, respondents queued in front of the First Class counter in the airport. They
were issued boarding passes for Business Class seats on board CX 902 bound for Hong Kong
from Manila and Economy Class seats on board CX 101 bound for Sydney from Hong Kong.
They only discovered that they had not been given First Class seats when they were denied
entry into the First Class lounge. Respondent Fuentebella went back to the check-in counter to
demand that they be given First Class seats or at the very least, access to the First Class
Lounge. He recalled that he was treated by the ground staff in a discourteous, arrogant and
rude manner. He was allegedly told that the plane would leave with or without them. Both the
trial court and the CA gave credence to the testimony of respondent Fuentebella.

During trial, petitioner offered the transcript of the deposition of its senior reservation supervisor,
Nenita Montillana (Montillana). She said that based on the record locator, respondents had
confirmed reservations for Business Class seats for the Manila-Hong Kong, Sydney-Hong Kong,
and Hong Kong-Manila flights; but the booking for Business Class seats for the Hong Kong-
Sydney leg was "under request;" and due to the flight being full, petitioner was not able to
approve the request. Montillana admitted that First Class tickets had been issued to
respondents, but qualified that those tickets were open-dated. She referred to the plane tickets,
which bore the annotations "OPEN F OPEN" for all sectors of the flight. Petitioner explained that
while respondents expressed their desire to travel First Class, they could not be accommodated
because they had failed to confirm and the sections were full on the date and time of their
scheduled and booked flights. Petitioner also denied that its personnel exhibited arrogance in
dealing with respondents; on the contrary, it was allegedly respondent Fuentebella who was
hostile in dealing with the ground staff. Respondents alleged that during transit through the
Hong Kong airport on 25 October 1993, they were treated with far less respect and courtesy by
the ground staff. In fact, the first employee they approached completely ignored them and
turned her back on them The second one did not even give them any opportunity to explain why
they should be given First Class seats, but instead brushed aside their complaints and told them
to just fall in line in Economy Class. The third employee they approached shoved them to the
line for Economy Class passengers in front of many people. Petitioner used the deposition of
Manuel Benipayo (Benipayo), airport service officer, and Raquel Galvez-Leonio (Galvez-
Leonio), airport services supervisor, to contradict the claims of respondents. Benipayo identified

10
himself as the ground staff who had dealt with respondents' complaint. He testified that around
five o'clock on 25 October 1993, respondent Fuentebella loudly insisted that he be
accommodated on First Class. But upon checking their records, he found out that respondents
were only booked on Business Class. Benipayo tried to explain this to respondents in a very
polite manner, and he exerted his best effort to secure First Class seats for them, but the plane
was already full. He presented a telex sent to their Hong Kong office, in which he requested
assistance to accommodate respondents in First Class for the Hong Kong-Sydney flight. He
claimed that he was intimidated by respondent Fuentebella into making the notations
"Involuntary Downgrading" and "fare difference to be refunded" on the tickets.

For her part, Galvez-Leonio testified that it was company policy not to engage passengers in
debates or drawn-out discussions, but to address their concerns in the best and proper way.
She admitted, however, that she had no personal knowledge of compliance in airports other
than NAIA.

Respondents narrated that for their trip from Hong Kong to Sydney, they were squeezed into
very narrow seats for eight and a half hours and, as a result, they felt groggy and miserable
upon landing. Respondents were able to travel First Class for their trip from Sydney to Hong
Kong on 30 October 1993. However, on the last segment of the itinerary from Hong Kong to
Manila on 2 November 1993, they were issued boarding passes for Business Class.

Upon arrival in the Philippines, respondents demanded a formal apology and payment of
damages from petitioner. The latter conducted an investigation, after which it maintained that no
undue harm had been done to them.

Issue: Whether or not there was breach of contract

Ruling: There was a breach of contract. In Air France v. Gillego this Court ruled that in an
action based on a breach of contract of carriage, the aggrieved party does not have to prove
that the common carrier was at fault or was negligent; all that he has to prove is the existence of
the contract and the fact of its nonperformance by the carrier. In this case, both the trial and
appellate courts found that respondents were entitled to First Class accommodations under the
contract of carriage, and that petitioner failed to perform its obligation. We shall not delve into
this issue more deeply than is necessary because We have decided to accord respect to the
factual findings of the trial and appellate courts. We must, however, point out a crucial fact We
have uncovered from the records that further debunks petitioner's suggestion that two sets of
tickets were issued to respondents - one for Business Class and another for open-dated First
Class tickets. In FGU Insurance Corporation v. G.P. Sarmiento Trucking Corporation. We
recognized the interests of the injured party in breach of contract cases:

xxx. The law, recognizing the obligatory force of contracts, will not permit a party to be set free
from liability for any kind of misperformance of the contractual undertaking or a contravention of
the tenor thereof. A breach upon the contract confers upon the injured party a valid cause for
recovering that which may have been lost or suffered. The remedy serves to preserve the
interests of the promissee that may include his " expectation Interest," which is his interest in
having the benefit of his bargain by being put in as good a position as he would have been in
had the contract been performed, or his " reliance interest." which is his interest in being
reimbursed for loss caused by reliance on the contract by being put in as good a position as he
would have been in had the contract not been made; or his "restitution interest." which is his
interest in having restored to him any benefit that he has conferred on the other party.

According to Montillana, a reservation is deemed confirmed when there is a seat available on

the plane. When asked how a passenger was informed of the confirmation, Montillana replied
that computer records were consulted upon inquiry. By its issuance of First Class tickets on the
same day of the flight in place of Business Class tickets that indicated the preferred and
confirmed flight, petitioner led respondents to believe that their request for an upgrade had been
approved

11
ELIZABETH SY-VARGAS vs. THE ESTATE OF ROLANDO OGSOS, SR. AND ROLANDO
OGSOS, JR.
(G.R. No. 221062, October 5, 2016)

Facts: On February 10, 1994, Ogsos, Sr. and the Heirs of Fermina Pepico (Fermina),
represented by their Attorney-in-Fact, Catalino V. Noel, entered into a Contract of Lease (lease
contract) covering five (5) parcels of agricultural land owned by the latter, with an aggregate
area of 23 hectares, more or less, situated in Maaslum Manjuyod, Negros Oriental (leased
premises). Based on the contract, Ogsos, Sr. agreed to pay the Heirs of Fermina 230 piculs or
290.95 liquid-kilogram (lkg.) of centrifugal sugar every crop year, starting from crop year 1994-
1995 to crop year 2000-2001, as lease rental.

On June 5, 1996, the term of the lease contract was extended for three (3) years, or until the
end of crop year 2004, due to Ogsos, Sr.'s introduction of improvements on the leased
premises. Thereafter, or on December 30, 1996, the said contract was amended, modifying the
lease rental from 230 piculs or 290.95 lkg. of centrifugal sugar every crop year to P150, 000.00
cash, beginning the crop year 1996-1997.

Petitioner and Kathryn, who are among the heirs of Fermina, claimed that the lease rentals from
crop year 1994-1995 to crop year 1998-1999 were not paid. Thus, on April 27, 2000, they filed a
Complaint for Specific Performance and Damages against respondents, before the RTC,
docketed as Civil Case No. 12708, to recover the unpaid lease rentals. Pertinently, they did not
include in their claim the lease rental for crop year 1999-2000 because respondents had already
abandoned the leased premises since the said crop year.

In their answer, respondents alleged that they had faithfully complied with their obligations as
embodied in the lease contract and its subsequent amendments. They denied abandoning the
leased premises and claimed that sometime in December 1998, petitioner and Kathryn
unlawfully took possession of the leased premises and appropriated for themselves the
sugarcane ready for harvest under the pretext that they would apply the proceeds thereof to the
unpaid rent. They likewise alleged that in the same year, Ogsos, Sr. and his wife fell ill, which
incidents forced respondents to obtain loans from several businessmen, namely: Emiliano
"Nonette" Bacang, Zaldy Roleda, and Pastor Domocol. The arrangement regarding the
foregoing loans was that the said creditors would be allowed to harvest the sugarcane from the
leased premises and apply the proceeds thereof to the loans. However, when the creditors were
about to harvest the sugarcane, they were prevented by petitioner and Kathryn; resulting in
respondents' default in the payment of their debts. On March 22, 2000, Ogsos, Sr. died.

Respondents also averred that since crop years 1994 to 1997-1998, the average production of
sugarcane is 1,308.68 lkg. of sugar and 30.409 tons of molasses per year, as computed on the
basis of the Planter's Production Reports. Thus, when petitioner and Kathryn took possession of
the leased premises, respondents lost their profits equivalent to the aforesaid production
starting from crop year 1999-2000 until the termination of the lease contract on crop year 2003-
2004. Accordingly, respondents filed a counterclaim for these lost profits plus damages.

Issue: whether or not the respondents are entitled to be indemnified for loss of profit

Ruling: In this case, the RTC found that under the lease contract, petitioner and Kathryn were
bound to keep respondents in peaceful and adequate enjoyment of the leased premises for the
entire duration of the lease and that respondents faithfully paid their lease rentals for a period of
four (4) years, or until crop year 1998. Despite the foregoing, petitioner and Kathryn unlawfully
took possession (sometime in December 1998) and harvested respondents' crops over their
objections. The RTC further found that due to such unlawful dispossession of the leased
premises, respondents were deprived of profits for six (6) crop years (i.e., from crop year 1999
to crop year 2004, which was the last crop year of the lease) in the amount of P1, 731,996.96
per year, or a grand total of P10, 391,987.76.60 Such factual findings were then affirmed by the
CA in its assailed ruling. It has long been settled that factual findings of the trial court, affirmed
by the CA, are final and conclusive and may not be reviewed on appeal,61 save for certain
exceptions, which petitioner failed to show in this case. As such, the grant of said counterclaim
is upheld.

12
SPOUSES ROMEO PAJARES and IDA T. PAJARES vs. REMARKABLE LAUNDRY AND
DRY CLEANING, represented by ARCHEMEDES G. SOLIS
(GR. No. 212690, February 20, 2017)

Facts: On September 3, 2012, Remarkable Laundry and Dry Cleaning (respondent) filed a
Complaint denominated as "Breach of Contract and Damages" against spouses Romeo and Ida
Pajares (petitioners) before the RTC of Cebu City, which was docketed as Civil Case No. CEB-
39025 and assigned to Branch 17 of said court. Respondent alleged that it entered into a
Remarkable Dealer Outlet Contract with petitioners whereby the latter, acting as a dealer outlet,
shall accept and receive items or materials for laundry which are then picked up and processed
by the former in its main plant or laundry outlet; that petitioners violated Article IV (Standard
Required Quota & Penalties) of said contract, which required them to produce at least 200 kilos
of laundry items each week, when, on April 30, 2012, they ceased dealer outlet operations on
account of lack of personnel; that respondent made written demands upon petitioners for the
payment of penalties imposed and provided for in the contract, but the latter failed to pay; and,
that petitioners' violation constitutes breach of contract

Issue: the CA erred in declaring that the RTC had jurisdiction over respondent's Complaint
which, although denominated as one for breach of contract, is essentially one for simple
payment of damages.

Ruling: Respondent's complaint denominated as one for "Breach of Contract & Damages" is
neither an action for specific performance nor a complaint for rescission contract. In ruling that
respondent's Complaint is incapable of pecuniary estimation and that the RTC has jurisdiction,
the CA comported itself with the following ratiocination:

A case for breach of contract [sic] is a cause of action either for specific performance or
rescission of contracts. An action for rescission of contract, as a counterpart of an action for
specific performance, is incapable of pecuniary estimation, and therefore falls under the
jurisdiction of the RTC. Without, however, determining whether, from the four corners of the
Complaint, respondent actually intended to initiate an action for specific performance or an
action for rescission of contract. Specific performance is "[t]he remedy of requiring exact
performance of a contract in the specific form in which it was made, or according to the precise
terms agreed upon. [It is t]he actual accomplishment of a contract by a party bound to fulfill it."
Rescission of contract under Article 1191 of the Civil Code, on the other hand, is a remedy
available to the obligee when the obligor cannot comply with what is incumbent upon him. It is
predicated on a breach of faith by the other party who violates the reciprocity between them.
Rescission may also refer to a remedy granted by law to the contracting parties and sometimes
even to third persons in order to secure reparation of damages caused them by a valid contract,
by means of restoration of things to their condition in which they were prior to the celebration of
the contract.

13
TRAVEL & TOURS ADVISERS, INCORPORATED vs. ALBERTO CRUZ, SR., EDGAR
HERNANDEZ AND VIRGINIA MUOZ
(G.R. No. 199282, March 14, 2016)

Facts: Respondent Edgar Hernandez was driving an Isuzu Passenger Jitney (jeepney) that he
owns with plate number DSG-944 along Angeles-Magalang Road, Barangay San Francisco,
Magalang, Pampanga, on January 9, 1998, around 7:50 p.m. Meanwhile,. a Daewoo passenger
bus (RCJ Bus Lines) with plate number NXM-116, owned by petitioner Travel and Tours
Advisers, Inc. and driven by Edgar Calaycay travelled in the same direction as that of
respondent Edgar Hernandez vehicle. Thereafter, the bus bumped the rear portion of the
jeepney causing it to ram into an acacia tree which resulted in the death of Alberto Cruz, Jr. and
the serious physical injuries of Virginia Muoz.

Thus, respondents Edgar Hernandez, Virginia Muoz and Alberto Cruz, Sr., father of the
deceased Alberto Cruz, Jr., filed a complaint for damages, docketed as Civil Case No. 9006
before the RTC claiming that the collision was due to the reckless, negligent and imprudent
manner by which Edgar Calaycay was driving the bus, in complete disregard to existing traffic
laws, rules and regulations, and praying that judgment be rendered ordering Edgar Calaycay
and petitioner Travel & Tours Advisers, Inc.

Issue: WHETHER OR NOT THE PETITIONER EXERCISED EXTRAORDINARY DILIGENCE

OF A GOOD FATHER OF A FAMILY IN ITS SELECTION AND SUPERVISION OF DRIVER
CALAYCAY

Ruling: In the selection of prospective employees, employers are required to examine them as
to their qualifications, experience, and service records. On the other hand, due diligence in the
supervision of employees includes the formulation of suitable rules and regulations for the
guidance of employees, the issuance of proper instructions intended for the protection of the
public and persons with whom the employer has relations through his or its employees and the
imposition of necessary disciplinary measures upon employees in case of breach or as may be
warranted to ensure the performance of acts indispensable to the business of and beneficial to
their employer. To this, we add that actual implementation and monitoring of consistent
compliance with said rules should be the constant concern of the employer, acting through
dependable supervisors who should regularly report on their supervisory functions. In this case,
as shown by the above findings of the RTC, petitioner was not able to prove that it exercised the
required diligence needed in the selection and supervision of its employee.

Be that as it may, this doesn't erase the fact that at the time of the vehicular accident, the
jeepney was in violation of its allowed route as found by the RTC and the CA, hence, the owner
and driver of the jeepney likewise, are guilty of negligence as defined under Article 2179 of the
Civil Code, which reads as follows:

When the plaintiffs negligence was the immediate and proximate cause of his injury, he cannot
recover damages. But if his negligence was only contributory, the immediate and proximate
cause of the injury being the defendant's lack of due care, the plaintiff may recover damages,
but the courts shall mitigate the damages to be awarded.

The petitioner and its driver, therefore, are not solely liable for the damages caused to the
victims. The petitioner must thus be held liable only for the damages actually caused by his
negligence. It is, therefore, proper to mitigate the liability of the petitioner and its driver. The
determination of the mitigation of the defendant's liability varies depending on the circumstances
of each case

14
LYLITH B. FAUSTO, JONATHAN FAUSTO, RICO ALVIA, ARSENIA TOCLOY, LOURDES
ADOLFO AND ANECITA MANCITA vs. MULTI AGRI-FOREST AND COMMUNITY
DEVELOPMENT COOPERATIVE (FORMERLY MAF CAMARINES SUR EMPLOYEES
COOPERATIVE, INC.)
(G.R.No. 213939, October 12, 2016)

Facts: Multi Agri-Forest and Community Development Cooperative4 (respondent) is a

registered credit cooperative wherein Lylith Fausto (Lylith), Jonathan Fausto (Jonathan), Rico
Alvia (Rico), Arsenia Tocloy (Arsenia), Lourdes Adolfo (Lourdes) and Anecita Mancita (Anecita)
(collectively, the petitioners) are active members.

On September 10, 1998, Lylith obtained a loan from the respondent in the amount of
P80,000.00, with due date on January 8, 1999.7 Subsequently, she secured another loan in the
amount of P50,000.00 which will fall due on March 14, 1999.8 Shortly thereafter, she procured a
third loan from the respondent also in the amount of P50,000.00. All of the mentioned
transactions were evidenced by separate promissory notes, with Anecita and Lourdes signing
as co-makers in the first and second loans, and Rico and Glicerio Barce (Glicerio) in the third
loan.

Similarly, on October 27, 1998, Jonathan obtained a loan from the respondent in the amount of
P60,000.00 to fall due on February 24, 1999, with Lylith and Glicerio as co-makers. Thereafter,
on December 10, 1998, he obtained a second loan in the amount of P100,000.00, with Lylith
and Arsenia as his co-makers. All five loans obtained by Lylith and Jonathan were imposed with
an interest of 2.3% per month, with surcharge of 2% in case of default in payment of any
installment due.

Lylith and Jonathan, however, failed to pay their loans despite repeated demands. Thus, on
December 12, 2000, the respondent, through its Acting Manager Ma. Lucila G. Nacario
(Nacario), filed five separate complaints for Collection of Sum of Money before the Municipal
Trial Court in Cities (MTCC) of Naga City against the petitioners

Issue: Whether or not demand or notice upon the co-makers of Lylith was still required to be
considered in delay

Ruling: The requirement for demand or notice may be waived. Anent the petitioners' claim that
no notice or demand was sent to them, the CA correctly ruled that the instant case falls under
the exceptions to the necessity of demand. Specifically, Article 1169, paragraph 1 of the Civil
Code provides that demand is not necessary when the obligation or the law expressly so
declares. In the promissory notes signed by the petitioners, there is a uniform provision which
states that "in case of default in payment of any installment due as herein agreed, the entire
balance of this note shall immediately become due and payable at the option of the
[respondent]without any notice or demand." This amounts to the express waiver of the need for
demand before the debtor incurs in delay.

The petitioners cannot evade liability by invoking that the stipulation on the waiver of notice
applies only to the principal. It bears noting that the promissory notes state that the petitioners
bound themselves jointly and severally liable with the principal debtor for the entire amount of
the obligation. A solidary or joint and several obligation is one in which each debtor is liable for
the entire obligation. The petitioners being co-makers, their liability is immediate and absolute
as the principal debtor. The terms of the promissory notes apply to co-makers in equal force as
with the principal debtors. This includes stipulation on the waiver of notice from the creditor
before the obligation becomes due and demandable.

15
SPOUSES JAIME AND MATILDE POON, vs. PRIME SAVINGS BANK REPRESENTED BY
THE PHILIPPINE DEPOSIT INSURANCE CORPORATION AS STATUTORY LIQUIDATOR
(G.R. No. 183794, June 13, 2016)

Facts: Petitioners owned a commercial building in Naga City, which they used for their bakery
business. On 3 November 2006, Matilde Poon and respondent executed a 10-year Contract of
Lease4 (Contract) over the building for the latter's use as its branch office in Naga City. They
agreed to a fixed monthly rental of P60, 000, with an advance payment of the rentals for the first
100 months in the amount of P6, 000,000. As agreed, the advance payment was to be applied
immediately, while the rentals for the remaining period of the Contract were to be paid on a
monthly basis.

On the basis of the report of Mr. Candon B. Guerrero, Director of Thrift Banks and Non-Bank
Financial Institutions (DTBNBF1), in his memorandum dated January 3, 2000, which report
showed that the Prime Savings Bank, Inc. (a) is unable to pay its liabilities as they became due
in the ordinary course of business; (b) has insufficient realizable assets as determined by the
Bangko Sentral ng Pilipinas to meet its liabilities; (c) cannot continue in business without
involving probable losses to its depositors and creditors; and (d) has willfully violated cease and
desist orders under Section 37 that has become final, involving acts or transactions which
amount to fraud or a dissipation of the assets of the institution. The BSP eventually ordered
respondent's liquidation under Monetary Board Resolution No. 664. On 12 May 2000,
respondent vacated the leased premises and surrendered them to petitioners.10Subsequently,
the PDIC issued petitioners a demand letter asking for the return of the unused advance rental
amounting to P3, 480,000 on the ground that paragraph 24 of the lease agreement had become
inoperative, because respondent's closure constituted force majeure. The PDIC likewise
invoked the principle of rebus sic stantibus under Article 1267 of Republic Act No. 386 (Civil
Code) as alternative legal basis for demanding the refund.

Petitioners, however, refused the PDIC's demand. They maintained that they were entitled to
retain the remainder of the advance rentals following paragraph 24 of their Contract.

Issues: Whether or not the respondent may be released from its contractual obligations to
petitioners on grounds of fortuitous event under Article 1174 of the Civil Code and unforeseen
event under Article 1267 of the Civil Code.

Ruling: The closure of respondent's business was neither a fortuitous nor an unforeseen event
that rendered the lease agreement functus officio.

The period during which the bank cannot do business due to insolvency is not a fortuitous
event, unless it is shown that the government's action to place a bank under receivership or
liquidation proceedings is tainted with arbitrariness, or that the regulatory body has acted
without jurisdiction.

As an alternative justification for its premature termination of the Contract, respondent lessee
invokes the doctrine of unforeseen event under Article 1267 of the Civil Code, which provides:

Art. 1267. When the service has become so difficult as to be manifestly beyond the
contemplation of the parties, the obligor may also be released therefrom, in whole or in part.

The theory of rebus sic stantibus in public international law is often cited as the basis of the
above article. Under this theory, the parties stipulate in light of certain prevailing conditions, and
the theory can be made to apply when these conditions cease to exist. The Court, however, has
once cautioned that Article 1267 is not an absolute application of the principle of rebus sic
stantibus, otherwise, it would endanger the security of contractual relations. After all, parties to a
contract are presumed to have assumed the risks of unfavorable developments. It is only in
absolutely exceptional changes of circumstance, therefore, that equity demands assistance for
the debtor. The difficulty of performance should be such that the party seeking to be released
from a contractual obligation would be placed at a disadvantage by the unforeseen event. Mere
inconvenience, unexpected impediments, increased expenses, or even pecuniary inability to
fulfil an engagement, will not relieve the obligor from an undertaking that it has knowingly and
freely contracted

16
SPOUSES JUAN CHUY TAN AND MARY TAN (DECEASED) SUBSTITUTED BY THE
SURVIVING HEIRS, JOEL TAN AND ERIC TAN vs. CHINA BANKING CORPORATION
(G.R. No. 200299, August 17, 2016)

Facts: Petitioner Lorenze Realty and Development Corporation (Lorenze Realty) is a domestic
corporation duly authorized by Philippine laws to engage in real estate business. It is
represented in this action by petitioners Joel Tan and Eric Tan as substitutes for their deceased
parents, Spouses Juan Chuy Tan and Mary Tan (Spouses Tan).

Respondent China Banking Corporation (China Bank), on the other hand, is a universal banking
corporation duly authorized by Bangko Sentral ng Pilipinas (BSP) to engage in banking
business. On several occasions in 1997, Lorenze Realty obtained from China Bank various
amounts of loans and credit accommodations amount of 1/10 of 1% per day of the total amount
of obligation due as penalty to be computed from the day that the default was incurred up to the
time that the loan obligations are fully paid. The debtor also undertook pay an additional 10% of
the total amount due including interests, surcharges and penalties as attorney's fees.

As a security for the said obligations, Lorenze Realty executed Real Estate Mortgages (REM)
over 11 parcels of land covered by Transfer Certificates of Title (TCT) Nos. B-44428, B-44451,
B-44452, V-4J275: V-44276, V-44277, V-44278, V-44280, V-44281, V-44283 and V-44284
registered by the Registry of Deeds of Valenzuela City. Subsequently, Lorenze Realty incurred
in default in the payment of its amortization prompting China Bank to cause the extra-judicial
foreclosure of the REM constituted on the securities after the latter failed to heed to its demand
to settle the entire obligation. After the notice and publication requirements were complied with,
the mortgaged properties were sold at a public auction wherein China emerged as the highest
bidder for the amount of P85, 000,000.0u as evidenced by a certificate of sale.

After deducting from the total amount of loan obligation the P85, 000,000.00 proceeds of the
public sale, there remains a balance in the amount of P29, 258,179.81. In its effort to collect the
deficiency obligation, China Bank demanded from Lorenze Realty for the payment of the
remaining loan but such demand just went to naught. Consequently, China Bank initiated an
action for the collection of sum of money against the Lorenze Realty and its officers, namely,
Lawrence Ong, Victoria Ong, Juan Chuy Tan and Mary Tan before the RTC of Makati City,
Branch 142. In its Complaint docketed as Civil Case No. 98-3069, China Bank alleged that it is
entitled to deficiency judgment because the purchase price of the securities pledged by the
debtor is not sufficient to settle the entire obligation incurred by the latter including the interest,
penalties and surcharges that had accrued from the time of default. China Bank thus prayed
that defendants be ordered to pay the amount of P29, 25 8,179.81, representing the deficiency
in its obligation in accordance with the express terms of the promissory notes

Issue: WHETHER OR NOT LORENZE REALTY'S OBLIGATION IS FULLY SETTLED WHEN

THE REAL PROPERTIES CONSTITUTED AS SECURITIES FOR THE LOAN WERE SOLD AT
THE PUBLIC AUCTION FOR P85, 000,000.00

Ruling: Obligations are extinguished, among others, by payment or performance, the mode
most relevant to the factual situation in the present case. Under Article 1232 of the Civil Code,
payment means not only the delivery of money but also the performance, in any other manner,
of an obligation. Article 1233 of the Civil Code states that a debt shall not be understood to have
been paid unless the thing or service in which the obligation consists has been completely
delivered or rendered, as the case may be. In contracts of loan, the debtor is expected to deliver
the sum of money due the creditor. These provisions must be read in relation with the other
rules on payment under the Civil Code, such as the application of payment, to wit:

Art. 1252. He who has various debts of the same kind in favor of one and the same creditor may
declare at the time of making the payment, to which of them the same must be applied. Unless
the parties so stipulate, or when the application of payment is made by the party for whose
benefit the term has been constituted, application shall not be made as to debts which are not
yet due. If the debtor accepts from the creditor a receipt in which an application of the payment
is made, the former cannot complain of the same, unless there is a cause for invalidating the
contract

17
PHILIPPINE SCIENCE HIGH SCHOOL-CAGAYAN VALLEY CAMPUS vs. PIRRA
CONSTRUCTION ENTERPRISES
(G.R. No. 204423, September 14, 2016)

Facts: IRRA Construction Enterprises (PIRRA) is a business engaged in general contracting

and a licensed contractor registered with the Philippine Domestic Construction Board. On the
other hand, PSHS is a government academic institution under the Department of Science and
Technology (DOST) and is located in Bayombong, Nueva Vizcaya. Artemio R. Perez is the
owner of PIRRA4 while Dir. Salvador Romo (Dir. Romo) is PSHS' Campus Director. On April 19,
2010, PIRRA tiled with the CIAC a Complaint for Damages against PSHS relative to the
construction contracts for PSHS' Project A (Academic Building I - Phases IV and V, and Girls'
Dormitory Building I - Phase IV); and its Project C (Academic Building II - Phase I, Boys'
Dormitory Building - Phase I, and School Canteen - Phase I). PSHS contends that the CA
Decision is based on a misapprehension of facts, such that recourse to the Court, through a
Rule 45 Petition, is proper. PSHS reiterates that it did not consider Project A as substantially
completed, and that it is not liable for the residual value of PB No. 5. It further asserts that even
assuming that there was substantial completion of Project A, it is still not liable for the residual
value of PP No. 5. It insists that after deducting from PB No. 5 the 30% mobilization fee,
withholding tax; awning windows, liquidated damages, and plywood and lumber, PIRRA still
owed PSHS P487, 315.02. As regards Project C, PSHS assorts that it already paid the value of
the work done for Project C. It likewise claims that it is not liable for the value of the fabricated
steel bars, steel awning windows with security grills and steel railings being claimed by PIRRA.

Finally, PSHS alleges that attorney's fees should not be awarded to PIRRA since the latter has
no valid claim as far as PB No. 5 on Project A is concerned; and PSHS already paid the value of
work done on Project C. It also posits that even if it is ultimately held liable for the residual value
of PB No. 5 for Project A, and of the value of the work done on Project C, its funds, being
government funds, cannot be seized under a writ of execution. PIRRA counters that PSHS
should be held liable for PB No. 5 because when PSHS created the Inspectorate Team, PSHS
treated Project A as substantially completed. It also questions PSHS5 belated submission of the
Summary of Progress Billings when it filed a Motion for Reconsideration with the CA, and
argues that PSHS' claim for overpayment is without merit. In fine, PIRRA argues that PSHS
never contested its Monthly Certificate of Payment attached to its letter dated July 29, 2009, and
which was submitted during the proceedings with the CIAC.

With regard to Project C, PIRRA maintains that PSHS invalidly terminated the contract as the
latter failed to submit the required drawings and to issue a VO for the project. It insists that it
was PSHS which incurred delay and breached the contract for Project C.

Lastly, PIRRA claims mat it is entitled to moral and exemplary damages as PSHS unjustifiably
failed to pay its PB No. 5 for Project A, and invalidly terminated the contract for Project C as
well. It also claims that it is entitled to the value of the fabricated steel bar, awning windows with
security grills and railing as well attorney's fees awarded by the CIAC, and which awards were
affirmed by the CA

Issue: whether PSHS treated Project A as substantially completed such that it is liable for the
residual value of PB No. 5

Ruling: the Court sustains the finding that PSHS accepted and treated Project A as a
substantially completed project, and for which reason, PSHS' takeover thereof is of no moment.

When PIRRA requested substantial acceptance and completion of Project A, PSHS did not
object to such a request. It acted upon it and even created an Inspectorate Team for punch
listing, and for the purpose of determining PIRRA's PB No. 5. Notably, PSHS repeatedly
referred to PB No. 5 as the final billing for Project A. In fact, PSHS initially expressed its
willingness to pay only to put it on hold because of the COA Report. Nonetheless, as correctly
explained by the CIAC, such Report cannot affect PSHS' obligation to pay PIRRA because the
existence of the defective or undelivered items was not an excuse to avoid payment of the
progress billing, as the payment was due on the performed items that were completed or were
otherwise performed, save for the defects.

18
DR. RESTITUTO C. BUENVIAJE vs. SPOUSES JOVITO R. AND LYDIA B. SALONGA,
JEBSON HOLDINGS CORPORATION AND FERDINAND JUAT BAEZ
(G.R. No. 216023, October 5, 2016)

Facts: On May 29, 1997, Jebson, an entity engaged in the real estate business, through its
Executive Vice President, Baez, entered into a Joint Venture Agreement6 (JVA) with Sps.
Salonga. Under the JVA, Sps. Salonga, who owned three (3) parcels of land with an area of
2,935 square meters situated in Tagaytay City, and covered by Transfer Certificate of Title
(TCT) No. T-9000, agreed for Jebson to construct thereon ten (10) high-end single detached
residential units, to be known as Brentwoods Tagaytay Villas (Brentwoods) They likewise
assumed to subdivide the property into individual titles upon which Jebson shall assume the
liability to pay their mortgage loan with the Metropolitan Bank and Trust Company. On the other
hand, Jebson undertook to construct the units at its own expense, secure the building and
development permits, and the license to sell from the HLURB, as well as the other permits
required. Out of the ten (10) units, seven (7) units, i.e., Units 3, 4, 5, 6, 8, 9, and 10, will belong
to Jebson while the remaining three (3) units, i.e., Units 1, 2, and 7, will correspond to Sps.
Salonga's share.9 The units allocated to Sps. Salonga were to be delivered within six (6)
months after Jebson's receipt of the down payment for the units allocated to it. Jebson was also
allowed to sell its allocated units under such terms as it may deem fit, subject to the condition
that the price agreed upon was with the conformity of Sps. Salonga.

On June 9, 1997, Jebson entered into a Contract to Sell12 (subject CTS) with Buenviaje over
Unit 5 for a total consideration of P10,500,000.00, without the conformity of Sps. Salonga.13
Out of the purchase price, P7,800,000.00 was paid through a "swapping arrangement," whereby
Buenviaje conveyed to Jebson a house and lot located in Garden Villas, Tagaytay valued at
P5,800,000.00 (house and lot) and Tagaytay Highlands Golf share No. 0722 (golf share) worth
P2,000,000.00 on July 1, 1997, while the remaining balance was paid periodically. An additional
sum of P125,000.00 for the retaining wall (P70,000.00) and air-conditioning system
(P55,000.00) was likewise paid for by Buenviaje. However, despite full payment of the contract
price, Jebson was unable to complete Unit 5 in violation of its contractual stipulation to finish the
same within twelve (12) months from the date of issuance of the building permit. Thus, in April
1999, Buenviaje formally demanded the immediate completion and delivery of Unit 5, to which
Jebson cited the 1997 financial crisis as the reason for the delay. Accordingly, Jebson asked to
be given until the early part of the year 2000 to complete the same but still failed to do so.

Issue: The essential issues for the Court's resolution are whether or not the remedy of specific
performance in Buenviaje's favor was proper under the prevailing circumstances of the case.

Ruling: Specific performance and "rescission" (more accurately referred to as resolution) are
alternative remedies available to a party who is aggrieved by a counter-party's breach of a
reciprocal obligation. This is provided for in Article 1191 of the Civil Code, which partly reads:

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him. The injured party may choose
between the fulfillment and the rescission of the obligation, with the payment of damages in
either case. He may also seek rescission, even after he has chosen fulfillment, if the latter
should become impossible. Specific performance is defined as "[t]he remedy of requiring exact
performance of a contract in the specific form in which it was made, or according to the precise
terms agreed upon." It pertains to "[t]he actual accomplishment of a contract by a party bound to
fulfill it." On the other hand, resolution is defined as the "unmaking of a contract for a legally
sufficient reason x x x." "[Resolution] does not merely terminate the contract and release the
parties from further obligations to each other, but abrogates the contract from its inception and
restores the parties to their original positions as if no contract has been made. Consequently,
mutual restitution, which entails the return of the benefits that each party may have received as
a result of the contract, is thus required." Notably, resolution under Article 1191 of the Civil Code
"will not be permitted for a slight or casual breach, but only for such substantial and fundamental
violations as would defeat the very object of the parties in making the agreement. Ultimately, the
question of whether a breach of contract is substantial depends upon the attending
circumstances.

19
MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY [MCIAA] vs. HEIRS OF GAVINA
IJORDAN, NAMELY, JULIAN CUISON, FRANCISCA CUISON, DAMASTNA CUISON,
PASTOR CUISON, ANGELINA CUISON, MANSUETO CUISON, BONIFACIA CUISON,
BASILIO CUISON, MOISES CUISON, AND FLORENCIO CUISON,
(G.R. No. 173140, January 11, 2016)

Facts: On October 14, 1957, Julian Cuizon (Julian) executed a Deed of Extrajudicial Settlement
and Sale (Deed) covering Lot No. 4539 (subject lot) situated in Ibo, Municipality of Opon (now
Lapu-Lapu City) in favor of the Civil Aeronautics Administration ((CAA), the predecessor-in-
interest of petitioner Manila Cebu International Airport Authority (MCIAA). Since then until the
present, MCIAA remained in material, continuous, uninterrupted and adverse possession of the
subject lot through the CAA, later renamed the Bureau of Air Transportation (BAT), and is
presently known as the Air Transportation Office (ATO). The subject lot was transferred and
conveyed to MCIAA by virtue of Republic Act No. 6958 in 1980, the respondents caused the
judicial reconstitution of the original certificate of title covering the subject lot (issued by virtue of
Decree No. 531167). Consequently, Original Certificate of Title (OCT) No. RO-2431 of the
Register of Deeds of Cebu was reconstituted for Lot No. 4539 in the names of the respondents'
predecessors-in-interest, namely, Gavina Ijordan, and Julian, Francisca, Damasina, Marciana,
Pastor, Angela, Mansueto, Bonifacia, Basilio, Moises and Florencio, all surnamed Cuison.5 The
respondents' ownership of the subject lot was evidenced by OCT No. RO-2431. They asserted
that they had not sold their shares in the subject lot, and had not authorized Julian to sell their
shares to MCIAA's predecessor-in-interest.

The failure of the respondents to surrender the owner's copy of OCT No. RO-2431 prompted
MCIAA to sue them for the cancellation of title in the RTC,7 alleging in its complaint that the
certificate of title conferred no right in favor of the respondents because the lot had already been
sold to the Government in 1957; that the subject lot had then been declared for taxation
purposes under Tax Declaration No. 00387 in the name of the BAT; and that by virtue of the
Deed, the respondents came under the legal obligation to surrender the certificate of title for
cancellation to enable the issuance of a new one in its name.

Issue: Whether or not the subject lot was validly conveyed in its entirety to the petitioner?

Ruling: Hence, the conveyance by Julian of the entire property pursuant to the Deed did not
bind the respondents for lack of their consent and authority in his favor. As such, the Deed had
no legal effect as to their shares in the property. Article 1317 of the Civil Code provides that no
person could contract in the name of another without being authorized by the latter, or unless he
had by law a right to represent him; the contract entered into in the name of another by one who
has no authority or legal representation, or who has acted beyond his powers, is unenforceable,
unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed,
before it is revoked by the other contracting party. But the conveyance by Julian through the
Deed had full force and effect with respect to his share of 1/22 of the entire property consisting
of 546 square meters by virtue of its being a voluntary disposition of property on his part.
MCIAA's assertion of estoppel or ratification to bar the respondents' contrary claim of ownership
of their shares in the subject lot is bereft of substance. The doctrine of estoppel applied only to
those who were parties to the contract and their privies or successors-in-interest. Moreover, the
respondents could not be held to ratify the contract that was declared to be null and void with
respect to their share, for there was nothing for them to ratify. Verily, the Deed, being null and
void, had no adverse effect on the rights of the respondents in the subject lot.

Lastly, MCIAA's contention on acquisitive prescription in its favor must fail. Aside from the
absence of the satisfactory showing of MCIAA's supposed possession of the subject lot, no
acquisitive prescription could arise in view of the indefeasibility of the respondents' Torrens title.
Under the Torrens System, no adverse possession could deprive the registered owners of their
title by prescription. The real purpose of the Torrens System is to quiet title to land and to stop
any question as to its legality forever. Thus, once title is registered, the owner may rest secure,
without the necessity of waiting in the portals of the court, or sitting on the mirador su casa to
avoid the possibility of losing his land.

20
 SPOUSES ROBERTO and ADELAIDA PEN vs. SPOUSES SANTOS and LINDA JULIAN
(G.R. No. 160408, January 11, 2016)

Facts: On April 9, 1986, the appellees (the Julians) obtained a P60,000.00 loan from appellant
Adelaida Pen. On May 23, 1986 and on the (sic) May 27, 1986, they were again extended loans
in the amounts of P50,000.00 and P10,000.00, respectively by appellant Adelaida. The initial
interests were deducted by appellant Adelaida, (1) P3,600.00 from the P60,000.00 loan; (2)
P2,400.00 from the P50,000.00 loan; and (3) P600.00 from the P10,000.00 loan. Two (2)
promissory notes were executed by the appellees in favor of appellant Adelaida to evidence the
foregoing loans, one dated April 9, 1986 and payable on June 15, 1986 for the P60,000.00 loan
and another dated May 22, 1986 payable on July 22, 1986 for the P50,000.00 loan. Both Joans
were charged interest at 6% per month. As security, on May 23, 1986, the appellees executed a
Real Estate Mortgage over their property covered by TCT No. 327733 registered under the
name of appellee Santos Julian, Jr. The owner's duplicate of TCT No. 327733 was delivered to
the appellants.

Appellant's version of the subsequent events run as follows: When the loans became due and
demandable, appellees failed to pay despite several demands. As such, appellant Adelaida
decided to institute foreclosure proceedings. However, she was prevailed upon by appellee
Linda not to foreclose the property because of the cost of litigation and since it would cause her
embarrassment as the proceedings will be announced in public places at the City Hall, where
she has many friends. Instead, appellee Linda offered their mortgaged property as payment in
kind. After the ocular inspection, the parties agreed to have the property valued at P70,000.00.
Thereafter, on October 22, 1986 appellee executed a two (2) page Deed of Sale duly signed by
her on the left margin and over her printed name. After the execution of the Deed of Sale,
appellant Pen paid the capital gains tax and the required real property tax. Title to the property
was transferred to the appellants by the issuance of TCT No. 364880 on July 17, 1987. A
reconstituted title was also issued to the appellants on July 09, 1994 when the Quezon City
Register of Deeds was burned.

On July 1989, appellants allege that appellee Linda offered to repurchase the property to which
the former agreed at the repurchase price of P436,115.00 payable in cash on July 31, 1989.
The appellees failed to repurchase on the agreed date. On February 1990, appellees again
offered to repurchase the property for the same amount, but they still failed to repurchase. On
June 28, 1990, another offer was made to repurchase the property for the same amount.
Appellee Linda offered to pay P100,000.00 in cash as sign of good faith. The offer was rejected
by appellant Adelaida. The latter held the money only for safekeeping upon the pleading of
appellee Linda. Upon the agreement of the parties, the amount of P100,000.00 was deducted
from the balance of the appellees' indebtedness, so that as of October 15, 1997, their unpaid
balance amounted to P319,065.00. Appellants allege that instead of paying lthe] said balance,
the appellees instituted on September 8, 1994 the civil complaint and filed an adverse claim and
lis pendens which were annotated at the back of the title to the property.

On the other hand, the appellees aver the following: At the time the mortgage was executed,
they were likewise required by the appellant Adelaida to sign a one (1) page document
purportedly an "Absolute Deed of Sale". Said document did not contain any consideration, and
was "undated, unfilled and unnotarized". They allege that their total payments amounted to
P115,400.00 and that their last payment was on June 28, 1990 in the amount of P100,000.00.

In December 1992, appellee Linda Julian offered to pay appellant Adelaida the amount of
P150,000.00. The latter refused to accept the offer and demanded that she be paid the amount
of P250,000.00. Unable to meet the demand, appellee Linda desisted from the offer and
requested that she be shown the land title which she conveyed to the appellee Adelaida, but the
latter refused. Upon verification with the Registry of Deeds of Quezon City, she was informed
that the title to the mortgaged property had already been registered in the name of appellee
Adelaida under TCT No. 364880, and that the transfer was entered on July 17, 1987. A
reconstituted title, TCT No. RT-45272 (364880), also appeared on file in the Registry of Deeds
replacing TCT No. 364880.

By reason of the foregoing discoveries, appellee filed an Affidavit of Adverse Claim on January
1993.1avvphi1 Counsel for the appellees, on August 12, 1994, formally demanded the

21
reconveyance of the title and/or the property to them, but the appellants refused. In the process
of obtaining other documents; the appellees also discovered that the appellants have obtained
several Declarations of Real Property, and a Deed of Sale consisting of two (2) pages which
was notarized by one Atty. Cesar Ching. Said document indicates a consideration of
P70,000.00 for the lot, and was made to appear as having been executed on October 22, 1986.
On September 8, 1994, appellees filed a suit for the Cancellation of Sale, Cancellation of Title
issued to the appellants; Recovery of Possession; Damages with Prayer for Preliminary
Injunction. The complaint alleged that appellant Adelaida, through obvious bad faith, maliciously
typed, unilaterally filled up, and caused to be notarized the Deed of Sale earlier signed by
appellee Julian, and used this spurious deed of sale as the vehicle for her fraudulent transfer
unto herself the parcel of land covered by TCT No. 327733

Issue: Whether or not the deed of sale was valid?

Ruling: Article 2088 of the Civil Code prohibits the creditor from appropriating the things given
by way of pledge or mortgage, or from disposing of them; any stipulation to the contrary is null
and void. The elements for pactum commissorium to exist are as follows, to wit: (a) that there
should be a pledge or mortgage wherein property is pledged or mortgaged by way of security
for the payment of the principal obligation; and (b) that there should be a stipulation for an
automatic appropriation by the creditor of the thing pledged or mortgaged in the event of non-
payment of the principal obligation within the stipulated period.9 The first element was present
considering that the property of the respondents was mortgaged by Linda in favor of Adelaida
as security for the farmer's indebtedness. As to the second, the authorization for Adelaida to
appropriate the property subject of the mortgage upon Linda's default was implied from Linda's
having signed the blank deed of sale simultaneously with her signing of the real estate
mortgage. The haste with which the transfer of property was made upon the default by Linda on
her obligation, and the eventual transfer of the property in a manner not in the form of a valid
dacion en pago ultimately confirmed the nature of the transaction as a pactum commissorium

22
TIMOTEO BACALSO and DIOSDADA BACALSO vs. GREGORIA B. ACA-AC, EUTIQUIA B.
AGUILA, JULIAN BACUS and EVELYN SYCHANGCO
(G.R. No. 172919, January 13, 2016)

Facts: The Bacus siblings were the registered owners of a parcel of land described as Lot No.
1809-G-2 located in San Roque, Talisay, Cebu with an area of 1,200 square meters and
covered by Transfer Certificate of Title (TCT) No. 59260. The Bacus siblings inherited the said
property from their mother Matea Bacalso (Matea).

On October 15, 1987, the Bacus siblings executed a Deed of Absolute Sale conveying a portion
of Lot No. 1809-G-2 with an area of 271 sq m, described as Lot No. 1809-G-2-C, in favor of their
cousin, Timoteo for and in consideration of the amount of P8, 000.00.

On March 4, 1988, however, Timoteo, together with his sisters Lucena and Victoria and some of
his cousins filed a complaint for declaration of nullity of documents, certificates of title,
conveyance of real property and damages against the Bacus siblings and four other persons
before the RTC of Cebu City, Branch 12, and was docketed as Civil Case No. CEB-6693. They
claimed that they are co-owners of the three-fourths portion of Lot No. 1809-G (which Lot No.
1809-G-2-C was originally part of) as Matea had paid for the said property for and in behalf of
her brother Alejandro (father of petitioner Timoteo) and sisters Perpetua and Liberata, all
surnamed Bacalso.

On November 29, 1989, the RTC found that Matea was the sole owner of Lot No. 1809-G and
affirmed the validity of the conveyances of portions of Lot No. 1809-G made by her children.
The same was affirmed by the CA in a Decision dated March 23, 1992 and became final and
executory on April 15, 1992.

Undaunted, Timoteo and Diosdada Bacalso (petitioners) filed on October 26, 1995, a complaint
for declaration of nullity of contract and certificates of title, reconveyance and damages against
the Bacus siblings, this time claiming ownership over Lot No. 1809-G-2-C by virtue of the Deed
of Absolute Sale dated October 15, 1987. They claimed, however, that the Bacus siblings
reneged on their promise to cause the issuance of a new TCT in the name of the petitioners.

Moreover, the petitioners alleged that the Bacus siblings have caused the subdivision of Lot No.
1809-G-2 into four lots and one of which is Lot No. 1809-G-2-C which is now covered by TCT
No. 70783. After subdividing the property, the Bacus siblings, on February 11, 1992, without
knowledge of the petitioners, sold Lot No. 1809-G-2-C again to respondent Evelyn Sychangco
(Sychangco) and that TCT No. 74687 covering the same property was issued in her name.

In their answer, the Bacus siblings denied the allegations of the petitioners and claimed that the
alleged sale of Lot No. 1809-G-2-C in favor of the petitioners did not push through because the
petitioners failed to pay the purchase price thereof.

For her part, Sychangco averred that she is a buyer in good faith and for value as she relied on
what appeared in the certificate of title of the property which appeared to be a clean title as no
lien or encumbrance was annotated therein.

On April 19, 2000, the RTC issued a Decision declaring the Deed of Absolute Sale dated
October 15, 1987 void for want of consideration after finding that the petitioners failed to pay the
price of the subject property. Moreover, the RTC held that even granting that the sale between
the Bacus siblings and the petitioners was valid, the petitioners still cannot ask for the rescission
of the sale of the disputed portion to Sychangco as the latter was a buyer in good faith, thus has
a better right to the property

Issue: Whether or not the Deed of Absolute Sale dated October 15, 1987 is void for want of
consideration.

Ruling: Contrary to the petitioners' claim, this is not merely a case of failure to pay the purchase
price which can only amount to a breach of obligation with rescission as the proper remedy. As
correctly observed by the RTC, the disputed sale produces no effect and is considered void ab
initio for failure to or want of consideration since the petitioner failed to pay the consideration
stipulated in the Deed of Absolute Sale.

23
To begin with, the Court hereby states that, from the totality of the evidence adduced in this
case which it scrutinized and evaluated, it has come up with a finding that there was failure or
want of consideration of the Deed of Sale of Lot 1809-G-2-C executed in favor of the
[petitioners] on October 15, 1987. The Court is morally and sufficiently convinced that [Timoteo]
had not paid to the [Bacus siblings] the price for the said land. This fact has been competently
and preponderantly established by the testimony in court of [Julian]. [Julian] made the following
narration in his testimony:

Thus, it is evident from all the foregoing circumstances that there was a failure to or want of
consideration of the supposed sale of the land in question to the [petitioners] on October 15,
1987. So, the said sale could not be given effect. Article 1352 of the New Civil Code of the
Philippines is explicit in providing that 'contracts without cause produce no effect whatsoever'. If
there is no cause, the contract is void. x x x There being no price paid, there is no cause or
consideration; hence, the contract is void as a sale. x x x Consequently, in the case at bench,
the plaintiffs have not become absolute owners of Lot 1809-G-2-C of Psd-07-022093 by virtue
of the Deed of Sale thereof which was executed on October 15, 1987 by the [Bacus siblings] in
their favor.

24
TERESITA I. BUENAVENTURA vs. METROPOLITAN BANK AND TRUST COMPANY
(G.R. No. 167082, August 3, 2016)

Facts: On January 20, 1997 and April 17, 1997, Teresita Buenaventura (or "appellant")
executed Promissory Note (or "PN") Nos. 232663 and 232711, respectively, each in the amount
of PI,500,000.00 and payable to Metropolitan Bank and Trust Company (or "appellee"). PN No.
232663 was to mature on July 1, 1997, with interest and credit evaluation and supervision fee
(or "CESF") at the rate of 17.532% per annum, while PN No. 232711 was to mature on April 7,
1998, with interest and CESF at the rate of 14.239% per annum. Both PNs provide for penalty
of 18% per annum on the unpaid principal from date of default until full payment of the
obligation.

Despite demands, there remained unpaid on PN Nos. 232663 and 232711 the amounts of P2,
061,208.08 and PI, 492,236.37, respectively, as of July 15, 1998, inclusive of interest and
penalty. Consequently, appellee filed an action against appellant for recovery of said amounts,
interest, penalty and attorney's fees before the Regional Trial Court of Makati City (Branch 61).

In answer, appellant averred that in 1997, she received from her nephew, Rene Imperial (Or
"Imperial"), three postdated checks drawn against appellee (Tabaco Branch), i.e., Check No. TA
1270484889PA dated January 5, 1998 in the amount of PI, 200,000.00, Check No.
1270482455PA dated March 31, 1998 in the amount of PI, 197,000.00 and Check No.
TA1270482451PA dated March 31, 1998 in the amount of P500, 000.00 (or "subject checks"),
as partial payments for the purchase of her properties; that she rediscounted the subject checks
with appellee (Timog Branch), for which she was required to execute the PNs to secure
payment thereof; and that she is a mere guarantor and cannot be compelled to pay unless and
until appellee shall have exhausted all the properties of Imperial.

Issue: The promissory notes executed by petitioner are null and void for being simulated and
fictitious.

Ruling: Based on Article 1345 of the Civil Code, simulation of contracts is of two kinds, namely:
(1) absolute; and (2) relative. Simulation is absolute when there is color of contract but without
any substance, the parties not intending to be bound thereby. It is relative when the parties
come to an agreement that they hide or conceal in the guise of another contract.

The effects of simulated contracts are dealt with in Article 1346 of the Civil Code, to wit:

Art. 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it
does not prejudice a third person and is not intended for any purpose contrary to law, morals,
good customs, public order or public policy binds the parties to their real agreement.

The burden of showing that a contract is simulated rests on the party impugning the contract.
This is because of the presumed validity of the contract that has been duly executed. The proof
required to overcome the presumption of validity must be convincing and preponderant. Without
such proof, therefore, the petitioner's allegation that she had been made to believe that the
promissory notes would be guaranties for the rediscounted checks, not evidence of her primary
and direct liability under loan agreements, could not stand.

25
DAMASO T. AMBRAY AND CEFERINO T. AMBRAY, JR. vs. SYLVIA A. TSOUROUS,
CARMENCITA AMBRAY-LAUREL, HEDY AMBRAY-AZORES, VIVIEN AMBRAY-YATCO,
NANCY AMBRAY-ESCUDERO, MARISTELA AMBRAY-ILAGAN, ELIZABETH AMBRAY-
SORIANO, MA. LUISA FE AMBRAY-ARCILLA AND CRISTINA AMBRAY-LABIT
(G.R. No. 209264, July 5, 2016)

Facts: During their lifetime, Ceferino, Sr. and Estela owned several properties, one of which
was a parcel of land located in San Pablo City, Laguna denominated as Lot 2 of subdivision
plan Pcs-12441, with an area of 4,147 square meters, more or less, covered by TCT No. T-
112599 of the Register of Deeds of San Pablo City (Lot 2). On December 28, 1977, Ceferino,
Sr. mortgaged Lot 2 with Manila Bank for the amount of P180, 000.00. The mortgage was
discharged on September 16, 1984.

Prior to the discharge of the mortgage or sometime in August 1984, Lot 2 was subdivided into
three (3) lots: Lot 2-A, Lot 2-B, and the subject property, Lot 2-C, resulting in the cancellation of
TCT No. T-11259. Lot 2-C was registered in Ceferino, Sr.'s name in accordance with his letter
dated August 29, 1984 requesting the Register of Deeds of San Pablo City to register Lot 2-C in
his name. Thus, TCT No. T-2274912 was issued covering the said parcel under the name of
Ceferino, Sr., married to Estela.

In June 1996, Maristela discovered that TCT No. T-22749 covering Lot 2-C had been cancelled
and in its stead, TCT No. T-41382 was issued in the name of petitioners. It appears that by
virtue of a notarized Deed of Absolute Sale (Deed of Sale) dated January 16, 1978, Ceferino,
Sr., with the consent of Estela, allegedly sold "a portion of lot 2 of the consolidation subd. plan
(LRC) Pcs-12441"15 to petitioners for a consideration of P150, 000.00. The Deed of Sale was
registered with the Register of Deeds of San Pablo City only on February 5, 1996.

This prompted respondents to file a criminal case for falsification of public document against
petitioners, entitled "People of the Philippines v. Damaso T. Ambray and Ceferino T. Ambray"
and docketed as Criminal Case No. 39153 (falsification case) before the Municipal Trial Court in
Cities (MTCC) of San Pablo City. In a Decision17 dated October 30, 2000, the MTCC acquitted
petitioners of the charge for failure of the prosecution to prove their guilt beyond reasonable
doubt.

Thereafter, respondents filed the instant complaint for annulment of title, reconveyance, and
damages against petitioners and Estela (defendants) docketed as Civil Case No. SP-5831(01),
alleging that TCT No. T-41382 and the Deed of Sale were null and void because the signatures
of Ceferino, Sr. and Estela thereon were forgeries.

Issue: Whether or not the CA erred in affirming the RTC's nullification of the Deed of Sale dated
January 16, 1978 and TCT No. T-41382 covering Lot 2-C in the name of petitioners.

Ruling: As a rule, forgery cannot be presumed and must be proved by clear, positive and
convincing evidence, and the burden of proof lies on the party alleging forgery. One who alleges
forgery has the burden to establish his case by a preponderance of evidence, or evidence which
is of greater weight or more convincing than that which is offered in opposition to it. The fact of
forgery can only be established by a comparison between the alleged forged signature and the
authentic and genuine signature of the person whose signature is theorized to have been forged

Further lending credence to the validity of the Deed of Sale is the well-settled principle that a
duly notarized contract enjoys the prima facie presumption of authenticity and due execution as
well as the full faith and credence attached to a public instrument. To overturn this legal
presumption, evidence must be clear, convincing, and more than merely preponderant to
establish that there was forgery that gave rise to a spurious contract.

26
MAE FLOR GALIDO vs. NELSON P. MAGRARE, EVANGELINE M. PALCAT, RODOLFO
BAYOMBONG, and REGISTER OF DEEDS OF ANTIQUE, San Jose, Antique
(GR No. 206584, January 11, 2016)

Facts: On 19 August 2004, Mae Flor Galido (petitioner) filed before the RTC of San Jose,
Antique a petition5 to cancel all entries appearing on Transfer Certificate of Title (TCT) Nos. T-
22374, T-22375 and T-22376, all in the name of Isagani Andigan (Andigan), and to annul TCT
No. T-24815 and all other TCTs issued pursuant to the Order dated 18 October 2011 of RTC
Branch 11, San Jose, Antique (Branch 11) in RTC Civil Case No. 2001-2-3230. The petition was
raffled to RTC Branch 12, San Jose, Antique (trial court) and docketed as RTC Cad. Case No.
2004-819 Cad. Record No. 936.

The controversy revolves around three parcels of land, designated as Lot 1052-A-1, Lot 1052-A-
2 and Lot 1052-A-3, all of the San Jose, Antique Cadastre. These parcels of land were, prior to
subdivision in 1999, part of Lot 1052-A which was covered by TCT No. T-21405 in the name of
Andigan.

On 28 December 1998, Andigan sold undivided portions of Lot 1052-A to Nelson P. Magrare
(Magrare), Evangeline M. Palcat (Palcat) and Rodolfo Bayombong (Bayombong). To Magrare
was sold an undivided portion with an area of 700 square meters, more or less; to Palcat, 1,000
square meters, more or less; and to Bayombong, 500 square meters, more or less.

Andigan caused the subdivision of Lot 1052-A into five lots, namely: Lot 1052-A-1, Lot 1052-A-
2, Lot 1052-A-3, Lot 1052-A-4 and Lot 1052-A-5. On 18 October 1999, TCT No. T-21405 was
cancelled and new certificates were issued for the subdivided portions. Pertinent to the case are
TCT No. T-22374 which was issued for Lot 1052-A-1, TCT No. T-22375 for Lot 1052-A-2 and
TCT No. T-22376 for Lot 1052-A-3, all in the name of Andigan. Andigan did not turn over the
new TCTs to Magrare, Palcat and Bayombong, and the latter were unaware of the subdivision.

On 8 May 2000, Andigan mortgaged the same three lots to petitioner and the latter came into
possession of the owners duplicate copies of TCT Nos. T-22374, T-22375 and T-22376.

On 6 February 2001, at 11:00 a.m., Magrare, Palcat and Bayombong registered their respective
adverse claims on TCT Nos. T-22374, T-22375 and T-22376. On the same day, at 3:00 p.m.,
petitioner also registered her mortgage on the same TCTs, such that the certificates in the
custody of the Register of Deeds were annotated

Issues: Who has a better right to the properties concerned: petitioner on the one hand, and
Magrare, Palcat and Bayombong on the other?

Ruling: No Valid Mortgage in Favor of Petitioner

Petitioner derives her title from Andigan, as mortgagor. However, at the time Andigan
mortgaged the lots to petitioner he had already sold the same to Magrare, Palcat and
Bayombong. Indeed, petitioners case is negated by Civil Case No. 2001-2-3230. There,
Andigan admitted that Lot Nos. 1052-A-1, 1052-A-2 and 1052-A-3 were the parcels of land he
sold to Magrare, Palcat and Bayombong, respectively, on 28 December 1998. Hence, when
Andigan mortgaged the lots to petitioner on 8 May 2000, he no longer had any right to do so.
We quote with approval the discussion of the trial court:

Finally, when the spouses Andigan mortgaged to the herein petitioner Galido Lot Nos. 1052-A-1
and 1052-A-2, the said lots were already sold to the respondents Palcat and Magrare. It is
therefore as if nothing was mortgaged to her because Isagani Andigan was no longer the owner
of the mortgaged real property. Under Art. 2085 of the Civil Code, two of the prescribed
requisites for a valid mortgage are, that, the mortgagor be the absolute owner of the thing
mortgaged and, that, he has the free disposal thereof. These requisites are absent when
Isagani Andigan and his wife mortgaged the lots alluded to above to the herein petitioner.

A spring cannot rise higher than its source. Since Andigan no longer had any interest in the
subject properties at the time he mortgaged them to her, petitioner had nothing to foreclose.

27
 RCBC SAVINGS BANK vs. NOEL M. ODRADA
(G.R. No. 219037, October 19, 2016)

Facts: In April 2002, respondent Noel M. Odrada (Odrada) sold a secondhand Mitsubishi
Montero (Montero) to Teodoro L. Lim (Lim) for One Million Five Hundred Ten Thousand Pesos
(P1,510,000). Of the total consideration, Six Hundred Ten Thousand Pesos (P610,000) was
initially paid by Lim and the balance of Nine Hundred Thousand Pesos (P900,000) was financed
by petitioner RCBC Savings Bank (RCBC) through a car loan obtained by Lim.4 As a requisite
for the approval of the loan, RCBC required Lim to submit the original copies of the Certificate of
Registration (CR) and Official Receipt (OR) in his name. Unable to produce the Montero's OR
and CR, Lim requested RCBC to execute a letter addressed to Odrada informing the latter that
his application for a car loan had been approved.

On 5 April 2002, RCBC issued a letter that the balance of the loan would be delivered to Odrada
upon submission of the OR and CR. Following the letter and initial down payment, Odrada
executed a Deed of Absolute Sale on 9 April 2002 in favor of Lim and the latter took possession
of the Montero.

When RCBC received the documents, RCBC issued two manager's checks dated 12 April 2002
payable to Odrada for Nine Hundred Thousand Pesos (P900,000) and Thirteen Thousand Five
Hundred Pesos (P13,500). After the issuance of the manager's checks and their turnover to
Odrada but prior to the checks' presentation, Lim notified Odrada in a letter dated 15 April 2002
that there was an issue regarding the roadworthiness of the Montero.

Odrada did not go to the slated meeting and instead deposited the manager's checks with
International Exchange Bank (Ibank) on 16 April 2002 and redeposited them on 19 April 2002
but the checks were dishonored both times apparently upon Lim's instruction to RCBC.
Consequently, Odrada filed a collection suit9 against Lim and RCBC in the Regional Trial Court
of Makati.

In his Answer, Lim alleged that the cancellation of the loan was at his instance, upon discovery
of the misrepresentations by Odrada about the Montero's roadworthiness. Lim claimed that the
cancellation was not done ex parte but through a letter dated 15 April 2002. He further alleged
that the letter was delivered to Odrada prior to the presentation of the manager's checks to
RCBC.

On the other hand, RCBC contended that the manager's checks were dishonored because Lim
had cancelled the loan. RCBC claimed that the cancellation of the loan was prior to the
presentation of the manager's checks. Moreover, RCBC alleged that despite notice of the
defective condition of the Montero, which constituted a failure of consideration, Odrada still
proceeded with presenting the manager's checks.

Issue: The court a quo gravely erred in finding that as between Odrada as seller and Lim as
buyer of the vehicle, only the former has the right to rescind the contract of sale finding failure to
perform an obligation under the contract of sale on the part of the latter only despite the
contested roadworthiness of the vehicle, subject matter of the sale.

Ruling: Under the law on sales, a contract of sale is perfected the moment there is a meeting of
the minds upon the thing which is the object of the contract and upon the price which is the
consideration. From that moment, the parties may reciprocally demand performance.33
Performance may be done through delivery, actual or constructive. Through delivery, ownership
is transferred to the vendee. However, the obligations between the parties do not cease upon
delivery of the subject matter. The vendor and vendee remain concurrently bound by specific
obligations. The vendor, in particular, is responsible for an implied warranty against hidden
defects. Article 1547 of the Civil Code states: "In a contract of sale, unless a contrary intention
appears, there is an implied warranty that the thing shall be free from any hidden faults or
defects." Article 1566 of the Civil Code provides that "the vendor is responsible to the vendee
for any hidden faults or defects in the thing sold, even though he was not aware thereof." As a
consequence, the law fixes the liability of the vendor for hidden defects whether known or
unknown to him at the time of the sale.

28
The law defines a hidden defect as one which would render the thing sold unfit for the use for
which it is intended, or would diminish its fitness for such use to such an extent that, had the
vendee been aware thereof, he would not have acquired it or would have given a lower price for
it. In this case, Odrada and Lim entered into a contract of sale of the Montero. Following the
initial down payment and execution of the deed of sale, the Montero was delivered by Odrada to
Lim and the latter took possession of the Montero. Notably, under the law, Odrada's warranties
against hidden defects continued even after the Montero's delivery. Consequently, a
misrepresentation as to the Montero's roadworthiness constitutes a breach of warranty against
hidden defects.

29
 ANITA U. LORENZANA vs. RODOLFO LELINA
(G.R. No. 187850, August 17, 2016)

Facts: On April 1, 1975, Ambrosia Lelina (Ambrosia), married to Aquilino Lelina (Aquilino),
executed a Deed of Absolute Sale over one-half (1/2) of an undivided parcel of land covered by
Tax Declaration (TD) No. 14324-C (property) in favor of her son, the respondent. The Deed of
Absolute Sale, however, specified only an area of 810 sq. m. as the one-half (1/2) of the
property covered by the tax declaration.7 Nevertheless, the Deed of Absolute Sale contained
the description of the land covered by TD No. 14324-C, as follows: "[b]ounded on the: North by
Constancio Batac-& National highway [,] East by Cecilio Lorenzana, South by Cr[ee] k, and
West by Andres Cuaresma."]

Immediately after the execution of the Deed of Absolute Sale, respondent took possession of
the property. Since then, the tenants of the property, Fidel Labiano, Venancio Lagria, and
Magdalena Lopez, continued to deliver his share of the produce of the property as well as
produce of the remaining half of the land covered by TD No. 14324-C until December 1995.

Around August 1996,10 respondent and his three tenants were invited at the Municipal Agrarian
Office of Tagudin, Ilocos Sur for a conference where they were informed that the property is
already owned by petitioner by virtue of a Deed of Final Conveyance and TD No. 11-21367-A
both in the name of petitioner.11 Alerted by the turn of events, respondent filed a complaint for
quieting of title and cancellation of documents12 on September 24, 1996, with the RTC Branch
25, Tagudin, Ilocos Sur, claiming that there appears to be a cloud over his ownership and
possession of the property.

In her Answer, petitioner alleged that she acquired a land with an area of 16,047 sq. m. through
a foreclosure sale. Petitioner claims that she became the judgment creditor in a case for
collection of sum of money (collection case) she filed against Aquilino, and the decision in her
favor became final on March 20, 1975, with an Entry of Judgment issued on April 10, 1975.
Thereafter, by virtue of a writ of execution to enforce the decision in the collection case, the
sheriff levied on a land with an area of 16,047 sq. m. covered by the TD No. 11-05370-A16
(levied property) under the name of Ambrosia. Petitioner claimed that she emerged as the sole
and highest bidder when the levied property was auctioned. An auction sale was conducted on
September 29, 1977 and a Certificate of Sale was issued in favor of petitioner. The same
Certificate of Sale was registered with the Register of Deeds on October 18, 1977. No
redemption having been made despite the lapse of the one year period for redemption, a Deed
of Final Conveyance was issued in her favor on October 9, 1978. The same was registered with
the Register of Deeds of Ilocos Sur on October 16, 1978.

Issue: Whether or not the respondent is the owner of one-half (1/2) of the levied property
comprising of 16,047 sq. m.

Ruling: At any rate, we have consistently ruled that what really defines a piece of land is not the
area, calculated with more or less certainty mentioned in the description, but its boundaries laid
down, as enclosing the land and indicating its limits. Where land is sold for a lump sum and not
so much per unit of measure or number, the boundaries of the land stated in the contract
determine the effects and scope of the sale, and not its area. This is consistent with Article 1542
of the Civil Code which provides:

Art. 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain sum for
a unit of measure or number, there shall be no increase or decrease of the price, although there
be a greater or lesser areas or number than that stated in the contract.

The same rule shall be applied when two or more immovables are sold for a single price; but if,
besides mentioning the boundaries, which is indispensable in every conveyance of real estate,
its area or number should be designated in the contract, the vendor shall be bound to deliver all
that is included within said boundaries, even when it exceeds the area or number specified in
the contract; and, should he not be able to do so, he shall suffer a reduction in the price, in
proportion to what is lacking in the area or number, unless the contract is rescinded because the
vendee does not accede to the failure to deliver what has been stipulated.

30
 TOMAS P. TAN, JR. vs. JOSE G. HOSANA
(G.R. No. 190846, February 3, 2016)

Facts: he respondent Jose G. Hosana (Jose) married Milagros C. Hosana (Milagros) on

January 14, 1979. During their marriage, Jose and Milagros bought a house and lot located at
Tinago, Naga City, which lot was covered by Transfer Certificate of Title (TCT) No. 21229.

On January 13, 1998, Milagros sold to the petitioner Tomas P. Tan, Jr. (Tomas) the subject
property, as evidenced by a deed of sale executed by Milagros herself and as attorney-in-fact of
Jose, by virtue of a Special Power of Attorney (SPA) executed by Jose in her favor. The Deed of
Sale stated that the purchase price for the lot was P200, 000.00. After the sale, TCT No. 21229
was cancelled and TCT No. 32568 was issued in the name of Tomas.

On October 19, 2001, Jose filed a Complaint for Annulment of Sale/Cancellation of

Title/Reconveyance and Damages against Milagros, Tomas, and the Register of Deeds of Naga
City. The complaint was filed before the Regional Trial Court (RTC), Branch 62, Naga City. In
the complaint, Jose averred that while he was working in Japan, Milagros, without his consent
and knowledge, conspired with Tomas to execute the SPA by forging Jose's signature making it
appear that Jose had authorized Milagros to sell the subject property to Tomas.

Issue: The core issues is whether the deed of sale can be used as the basis for the amount of
consideration paid

Ruling: An offer to prove the regular execution of the deed of sale is basis for the court to
determine the presence of the essential elements of the sale, including the consideration paid.
Tomas argues that the Deed of Sale was not specifically offered to prove the actual
consideration of the sale and, hence, cannot be considered by the court. Tomas is incorrect.
The deed of sale in the present case was formally offered by both parties as evidence. Tomas,
in fact, formally offered it for the purpose of proving its execution and the regularity of the sale.
The offer of the deed of sale to prove its regularity necessarily allowed the; lower courts to
consider the terms written therein to determine whether all the essential elements59 for a valid
contract of sale are present, including the consideration of the sale. The fact that the sale was
declared null and void does not prevent the court from relying on consideration stated in the
deed of sale to determine the actual amount paid by the petitioner for the purpose of preventing
unjust enrichment. Hence, the specific offer of the Deed of Sale to prove the actual
consideration of the sale is not necessary since it is necessarily included in determining the
regular execution of the sale. The consideration stated in the notarized Deed of Sale is prima
facie evidence of the amount paid by the petitioner. The notarized deed of sale is a public
document and is prima facie evidence of the truth of the facts stated therein.

In the present case, the consideration stated in the deed of sale constitutes prima facie
evidence of the amount paid by Tomas for the transfer of the property to his name. Tomas failed
to adduce satisfactory evidence to rebut or contradict the consideration stated as the actual
consideration and amount paid to Milagros and Jose. The deed of sale was declared null and
void by a positive provision of law requiring the consent of both spouses for the sale of conjugal
property. There is, however, no question on the presence of the consideration of the sale,
except with respect to the actual amount paid. While the deed of sale has no force and effect as
a contract, it remains prima facie evidence of the actual consideration paid.

As earlier discussed, Tomas failed to substantiate his claim that he paid to Milagros the amount
of P700, 000.00, instead of the amount of P200, 000.00 stated in the deed of sale. No
documentary or testimonial evidence to prove payment of the higher amount was presented,
apart from Tomas' sole testimony. Tomas' sole testimony of payment is self-serving and
insufficient to unequivocally prove that Milagros received P700, 000.00 for the subject property.

31
DASMARIAS T. ARCAINA and MAGNANI T. BANTA vs. NOEMI L. INGRAM, represented
by MA. NENETTE L. ARCHINUE
(G.R. No. 196444, February 15, 2017)

Facts: Arcaina is the owner of Lot No. 3230 (property) located at Salvacion, Sto. Domingo,
Albay. Sometime in 2004, her attorney-in-fact, Banta, entered into a contract with Ingram for the
sale of the property. Banta showed Ingram and the latter's attorney-in-fact, respondent Ma.
Nenette L. Archinue (Archinue), the metes and bounds of the property and represented that Lot
No. 3230 has an area of more or less 6,200 square meters (sq. m.) per the tax declaration
covering it. The contract price was P1,860,000.00, with Ingram making installment payments for
the property from May 5, 2004 to February 10, 2005 totaling P1,715,000.00. Banta and Ingram
thereafter executed a Memorandum of Agreement acknowledging the previous payments and
that Ingram still had an obligation to pay the remaining balance in the amount of P145,000.00.
They also separately executed deeds of absolute sale over the property in Ingram's favor.
Subsequently, Ingram caused the property to be surveyed and discovered that Lot No. 3230
has an area of 12,000 sq. m. Upon learning of the actual area of the property, Banta allegedly
insisted that the difference of 5,800 sq. m. remains unsold. This was opposed by Ingram who
claims that she owns the whole lot by virtue of the sale. Thus, Archinue, on behalf of Ingram,
instituted the recovery case, docketed as Civil Case No. S-241, against petitioners before the
MCTC.

Issue: We now resolve the main issue in this case and hold that Lot No. 3230 was sold for a
lump sum

Ruling: We now resolve the main issue in this case and hold that Lot No. 3230 was sold for a
lump sum. In sales involving real estate, the parties may choose between two types of pricing
agreement: a unit price contract wherein the purchase price is determined by way of reference
to a stated rate per unit area (e.g., P1,000.00 per sq. m.) or a lump sum contract which states a
full purchase price for an immovable the area of which may be declared based on an estimate
or where both the area and boundaries are stated (e.g., P1 million for 1,000 sq. m., etc.). Here,
the Deed of Sale executed by Banta on March 21, 2005 and the Deed of Sale executed by
Arcaina on April 13, 2005 both show that the property was conveyed to Ingram at the
predetermined price of P1,860,000.00. There was no indication that it was bought on a per-
square-meter basis. Thus, Article 1542 of the Civil Code governs the sale

32
 DESIDERIO RANARA, JR. vs. ZACARIAS DE LOS ANGELES, JR
(G.R. No. 200765, August 8, 2016)

Facts: Sometime in October 1989, Leonor Parada (Parada) loaned from Zacarias de los
Angeles, Sr. (Zacarias, Sr.) money amounting to P60, 000.00 to finance her migration to
Canada. It was agreed that the loan would be payable within a period of 10 years. At the same
time, Zacarias, Sr. informed Parada that the money came from his son, the respondent. As
security, Parada mortgaged a parcel of agricultural land which would eventually be covered by
Original Certificate of Title (OCT) No. 10020. It was stipulated that the respondent would take
Possession of and farm the land as payment for the loan interest. Parada, thus, executed a
Deed of Sale with Right to Repurchase dated October 26, 1989, during which time the OCT had
not yet been issued.

The respondent took possession of the land, paid taxes due and converted the forested portion
into irrigated land, without objection from Parada.

In 1991, OCT No. 10020 was issued in the name of Parada, who brought with her to Canada
the original owner's duplicate copy when she left in 1992. Later, Parada gave the owner's
duplicate to Zacarias Sr. upon reports that someone attempted to enter the land. Parada also
requested her tenant from another parcel of land, Salvador Romero, to remit to the respondent
her share of the harvest for the years 1992 to 1994. She also sent $250.00 and P20, 000.00.

When Zacarias, Sr. fell sick in 2001, the respondent pleaded with Noel Parada (Noel), Parada's
son, to repurchase the property to finance his father's hospital and medical bills. The
respondent later wrote a letter to Parada demanding that she repurchase the property. Parada
paid P40, 000.00 delivered personally to Zacarias Sr. by Noel at the hospital. The respondent
found the amount unacceptable and returned the P40, 000.00 and along with P10, 000.00 to
Parada.

On February 16, 2001, the respondent sold the land to the petitioner for P300, 000.00. Two
documents of sale were executed: 1) for the actual sale price of P300, 000.00; and 2) for P130,
000.00 to be used as basis for the computation of taxes, registration of the deed and transfer of
ownership. The respondent then sent Parada a letter dated July 17, 2001, enforcing the Deed of
Sale with Right of Repurchase giving her 15 days to repurchase the property. The Deed of
Absolute Sale with the purchase price of P150, 000.00 between the petitioner and the
respondent was signed on December 10, 2001.

Parada insisted, in her response to the letter dated July 17, 2001, that there was no pacto de
retro sale and then tendered P60, 000.00 as payment for the loan, but it was refused by the
respondent. She also learned that the respondent fraudulently registered with the Register of
Deeds of Camarines Sur the Deed of Sale with Right to Repurchase falsified the Affidavit of
Seller/Transferor and that the respondent sold the property to the petitioner.

After exerting all efforts to settle and to no avail, Parada filed a Complaint against the petitioner
and the respondent for Reformation of Instrument, Consignation, Recovery of Possession with a
Prayer for a Writ of Preliminary Mandatory Injunction and Damages.

In his Answer with Cross-Claim and Counterclaim, the petitioner denied any knowledge of any
defect in the title of the property, since the respondent was in the possession of and cultivating
the land. The petitioner claimed that he is an innocent purchaser for value. The petitioner also
claimed that aside from paying the purchase price of P300, 000.00, he had introduced
permanent improvements on the property amounting to P150, 000.00 consisting of deep-well
irrigation facilities and another P150, 000.00 for levelling portions of the property and converting
the same to rice land. The petitioner prayed that if the case be resolved in favor of Parada, he
be reimbursed by the respondent for his actual expenses plus the legal rate of interest.

For his part, the respondent insisted that the contract he entered with Parada was one of sale.
He claimed that he introduced the improvements in the property and sought reimbursement for
the same. Moreover, the respondent claimed that the petitioner failed to pay the full purchase
price of the property and still owed him a balance of P50, 000.00 and took advantage of his lack
of education and dire need of money

33
Issue: Whether or not DESIDERIO RANARA, JR. was a purchaser in good faith

Ruling: Generally, the question of whether a person is a purchaser in good faith is a factual
matter that generally will not be delved into by the Court as it is not a trier of facts. Factual
findings of the trial court on the matter, especially if affirmed by the appellate court, are binding
and conclusive upon the Court save for specific instances. However, none of the exceptions
apply to the instant case.

Here, both the RTC and CA have ruled that the petitioner and the respondent are both in bad
faith and such finding is binding on the Court since none of the exceptions warranting the
Court's review are availing.

In any event, the Court agrees with the courts a quo that the petitioner was in bad faith in
purchasing the land since it was his duty to investigate. A purchaser of land that is in the actual
possession of the seller must make some inquiry in the rights of the possessor of the land. The
rule of caveat emptor requires the purchaser to be Ware of the supposed title of the vendor and
one who buys without checking the vendor's title takes all the risks and losses consequent to
such failure.

34
GIL MACALINO, JR., TERESITA MACALINO, ELPIDIO MACALINO, PILAR MACALINO,
GILBERTO MACALINO, HERMILINA MACALINO, EMMANUEL MACALINO, EDELINA
MACALINO, EDUARDO MACALINO, LEONARDO MACALINO, EDLLANE** MACALINO,
APOLLO MACALINO, MA. FE MACALINO, AND GILDA MACALINO vs. ARTEMIO PIS-AN
(G.R. No. 204056, June 1, 2016)

Facts: Under Original Certificate of Title (OCT) No, 2393-A, Emeterio Jumento (Emeterio) was
the owner of the half portion, and his children Hospicio Jumento (Hospicio) and Severina
Jumento (Severina) of the other half in equal shares, of Lot 3154 consisting of 469 square
meters and located in Junob, Dumaguete City, Negros Oriental. When Hospicio and Severina
died single and without issue, Emeterio as their sole heir inherited the portions pertaining to
them and thus became the owner of the whole lot. Subsequently, Emeterio also passed away.

Apparently, the City of Dumaguete built in the 1950's a barangay road which cut across said lot.
As a result, Lot 3154 was divided into three portions, to wit: the portion which was converted
into a barangay road and the portions on both sides of said barangay road. Sometime in the
1970's, Artemio, a grandson-in-law of Emeterio, commissioned Geodetic Engineer Rodolfo B.
Ridad (Engr. Ridad) to survey Lot 3154 so that taxes would be assessed only on the portions of
the subject property which remained as private property. Accordingly, Engr. Ridad came up with
a sketch plan (sketch plan) where the three portions of Lot 3154 were denominated as Lot
3154-A (the portion on the left side of the road), Lot 3154-B (the portion which was converted
into a barangay road), and Lot 3154-C (the portion on the right side of the road). The sketch
plan also revealed that the portion occupied by Artemio, i.e., Lot 3154-A as enclosed by points
1, 2, 3, 4, 5, and 6,6 together with a section of a dried creek, contained an area of 207 square
meters.

On May 3, 1995, Artemio and the other heirs of Emeterio executed an Extra Judicial Settlement
of Estate and Absolute Sale8 (Absolute Sale) adjudicating among themselves Lot 3154 and
selling a 207-square meter portion of the same to the spouses Wilfredo and Judith Sillero
(spouses Sillero). The document, did not, however, identify the portion being sold as Lot No.
3154-A but simply stated as follows:

That for and in consideration of the sum of TWELVE THOUSAND PESOS (P12,000.00)
Philippine currency to them in hand paid by spouses WILFREDO SILLERO and JUDITH
SILLERO, both of legal age, Filipino, with residence at Taclobo, Dumaguete City, the
aforementioned heirs hereby SELL, TRANSFER and CONVEY absolutely and unconditionally,
unto the said WILFREDO SILLERO and JUDITH SILLEROW their heirs and assigns a portion
of the above-described parcel of land [Lot 3154] which is TWO HUNDRED SEVEN (207) square
meters and which shall have access to and [to which] belong the existing road right of way,
together with the building and improvements thereon.

The spouses Sillero, immediately after the sale, fenced Lot No. 3154-A and built a house
thereon. Not long after, they sold Lot 3154-A to petitioner Gil Macalino, Jr. (Gil) by virtue of a
Deed of Sale (Deed of Sale) dated December 27,1996 which states in part, viz.:

The Vendors are the absolute owners of TWO HUNDRED SEVEN (207) square [meter-part] of
[L]ot 3154 x x x known as Sub[-]lot 3154-A x x x [T]he whole [L]ot 3154 is covered by Original
Certificate of Title No. 2393-A situated at Junob, Dumaguete City On July 2, 1998, Transfer
Certificate of Title (TCT) No. 2765812 in the names of Artemio and the other heirs of Emeterio
was issued in lieu of OCT No. 2393-A. Annotated therein was the sale made by the heirs of
Emeterio to the spouses Sillero and also of the latter to Gil.

Intending to have Lot 3154-A registered in his name, Gil caused the survey of the same by
Geodetic Engineer Rilthe P. Dorado (Engr. Dorado) sometime in 1998. Engr. Dorado, however,
discovered that the portion occupied by Gil consists of 140 square meters only and not 207.
Believing that he was deceived, Gil filed a complaint for estafa against the spouses Sillero.

On January 31, 2001, the Land Management Bureau issued an approved Subdivision Plan
(Subdivision Plan) wherein Lot 3154 was subdivided into four sub-lots, to wit: (1) Lot 3154-A
with an area of 140 square meters; (2) Lot 3154-B or the existing barangay road with an area of
215 square meters; (3) Lot 3154-C with an area of 67 square meters; and (4) Lot 3154-D with

35
an area of 47 square meters. Notably, the Subdivision Plan which was based on the survey
conducted by Engr. Dorado refers not only to Lot 3154-A as Gil's property but also to Lot 3154-
C. Likewise, the document does not bear the conformity of Artemio and his co-heirs but only
that of Gil.

A few years later or on January 18, 2005, Gil, joined by his children and their respective
spouses, namely: petitioners Gil Macalino, Jr., Teresita Macalino, Elpidio Macalino, Pilar
Macalino, Gilberto Macalino, Hermilina Macalino, Emmanuel Macalino, Edelina Macalino,
Eduardo Macalino, Leonardo Macalino, Eillane Macalino, Apollo Macalino, Ma. Fe Macalino,
and Hilda Macalino, filed against Artemio a Complaint for Quieting of Title and Damages with
the RTC, docketed as Civil Case No. 13725.

Issue: Who between petitioners and Artemio has a right over Lot 3154-C.

Ruling: Petitioners, in order to further their case, rely on the failure of the Absolute Sale to state
that the 207-square meter portion conveyed by Artemio and his coheirs to the spouses Sillero
was Lot 3154-A. Artemio, on the other hand, puts emphasis on the fact that the Deed of Sale
between Gil and the spouses Sillero expressly stated that the lot subject of the sale was Lot
3154-A only. Plainly, the parties' respective arguments hinge on two relevant documents which
they adopted as common exhibits - (1) the Absolute Sale subject of which, among others, is the
conveyance made by Artemio and his co-heirs to the spouses Sillero; and (2) the Deed of Sale
between the spouses Sillero and Gil. It is worthy to note that there is no dispute regarding the
contents of these documents, that is, neither of the parties contests that the Absolute Sale did
not state that the 207-square meter portion sold to the spouses Sillero was Lot 3154-A nor that
the Deed of Sale between Gil and the spouses Sillero expressly mentioned that the subject of
the sale between them was Lot 3154-A. What is really in issue therefore is whether the admitted
contents of the said documents adequately and correctly express the true intention of the
parties to the same. It has been held that "[w]hen the parties admit the contents of written
documents but put in issue whether these documents adequately and correctly express the true
intention of the parties, the deciding body is authorized to look beyond these instruments and
into the contemporaneous and subsequent actions of the parties in order to determine such
intent." In view of this and since the Parol Evidence Rule 32 is inapplicable in this case,33 and
examination of the parties' respective parol evidence is in order. Indeed, examination of
evidence is necessarily factual34 and not within the province of a petition for review on
certiorari35 which only allows questions of law to be raised. However, this case falls under one
of the recognized exceptions to such rule, i.e., when the CA's findings are contrary to that of the
trial court.

As mentioned, the Absolute Sale did not specifically indicate that Artemio and his co-heirs were
conveying to the spouses Sillero Lot 3154-A, It simply stated that they were selling to the said
spouses a 207-square meter portion of Lot 3154. However, mere should be no question that the
sale was only specific to Lot 3154-A since none other than the parties to the said transaction
acknowledged this. At any rate, the testimonial evidence presented by Artemio sufficiently
supports the conclusion that what was sold to the spouses Sillero was indeed Lot 3154-A only.

36
FABIO CAHAYAG and CONRADO RIVERA vs. COMMERCIAL CREDIT CORPORATION,
represented by its President, LEONARDO B. ALEJANDRO; TERESITA T. QUA, assisted
by her husband ALFONSO MA. QUA; and the REGISTER OF DEEDS OF LAS PINAS,
METRO MANILA, DISTRICT IV
(G.R. No. 168078, January 13, 2016)

x-----------------------x

DULOS REALTY & DEVELOPMENT CORPORATION, represented by its President,

JUANITO C. DULOS; and MILAGROS E. ESCALONA, and ILUMINADA D. BALDOZA vs.
COMMERCIAL CREDIT CORPORATION, represented by its President, LEONARDO B.
ALEJANDRO; TERESITA T. QUA, assisted by her husband ALFONSO MA. QUA; and the
REGISTER OF DEEDS OF LAS PINAS, METRO MANILA, DISTRICT IV
(G.R. No. 168357, January 13, 2016)

Facts: Petitioner Dulos Realty was the registered owner of certain residential lots covered by
Transfer Certificate of Title (TCT) Nos. S-39767, S-39775, S-28335, S-39778 and S-29776,
located at Airmen's Village Subdivision, Pulang Lupa II, Las Pinas, Metro Manila.

On 20 December 1980, Dulos Realty obtained a loan from respondent CCC in the amount of
P300,000. To secure the loan, the realty executed a Real Estate Mortgage over the subject
properties in favor of respondent. The mortgage was duly annotated on the certificates of title on
3 February 1981.

On 29 March 1981, Dulos Realty entered into a Contract to Sell with petitioner Cahayag over
the lot covered by TCT No. S-39775.

On 12 August 1981, Dulos Realty entered into another Contract to Sell, this time with petitioner
Rivera over the lot covered by TCT No. S-28335.

Dulos Realty defaulted in the payment of the mortgage loan, prompting respondent CCC to
initiate extrajudicial foreclosure proceedings. On 17 November 1981, the auction sale was held,
with respondent CCC emerging as the highest bidder.

On 23 November 1981, a Certificate of Sale covering the properties, together with all the
buildings and improvements existing thereon, was issued in favor of CCC. The Certificate of
Sale was annotated on the corresponding titles to the properties on 8 March 1982.

Thereafter, or on 13 January 1983, Dulos Realty entered into a Contract to Sell with petitioner
Escalona over the house and lot covered by TCT No. S-29776.

On 10 November 1983, an Affidavit of Consolidation in favor of respondent CCC dated 26

August 1983 was annotated on the corresponding titles to the properties. By virtue of the
affidavit, TCT Nos. S-39775, S-28335, S-39778 and S-29776 - all in the name of Dulos Realty -
were cancelled and TCT Nos. 74531, 74532, 74533 and 74534 were issued in the name of
respondent CCC on the same day.

On 10 December 1983, Dulos Realty entered into a Deed of Absolute Sale with petitioner
Baldoza over the property covered by TCT No. S-39778, together with the improvements
existing thereon.

On 21 December 1983, respondent CCC, through a Deed of Absolute Sale, sold to respondent
Qua the same subject properties, now covered by TCT Nos. 74531, 74532, 74533 and 74534,
which were in the name of respondent CCC. The sale was duly annotated on the corresponding
titles to the properties on 5 January 1984.

Accordingly, TCT Nos. 74531, 74532, 74533 and 74534 were cancelled; and TCT Nos. 77012,
77013, 77014 and 770015 were issued to respondent Qua on 5 January 1984.

37
Subsequently, respondent Qua filed ejectment suits individually against petitioners Du1os
Realty, Cahayag,18Esca1ona, and Rivera before the Metropolitan Trial Court (MTC) of Las
Pias, Metro Manila.

The MTC rendered Decisions in favor of respondent Qua. It ordered Dulos Realty, Escalona,
Cahayag, and Rivera to vacate the properties.

On 8 March 1988, the MTC issued a Writ of Execution to enforce its Decision dated 20 October
1986 in Civil Case No. 2257 against Dulos Realty "and all persons claiming right under
defendant." The subject of the writ of execution was Lot 11 Block II, which was the lot sold by
Dulos Realty to petitioner Baldoza.

Issue: Who Has a Better Right over the Properties

Ruling: Registration of the mortgage establishes a real right or lien in favor of the mortgagee,
as provided by Articles 131261and 212662 of the Civil Code. Corollary to the rule, the lien has
been treated as "inseparable from the property inasmuch as it is a right in rem." In other words,
it binds third persons to the mortgage.

The purpose of registration is to notify persons other than the parties to the contract that a
transaction concerning the property was entered into. Ultimately, registration, because it
provides constructive notice to the whole world, makes the certificate of title reliable, such that
third persons dealing with registered land need only look at the certificate to determine the
status of the property.

In this case, the Real Estate Mortgage over the property was registered on 3 February 1981. On
the other hand, the Contracts to Sell were all executed after the registration of the mortgage.
The Contract to Sell in favor of petitioner Cahayag was executed on 29 March 1981, or almost
two months after the registration of the mortgage. The corresponding Contract to Sell in favor of
Rivera was executed only on 12 August 1981, roughly six months after the registration of the
mortgage contract. Lastly, the Contract to Sell in favor of Escalona was executed on 13 January
1983, or nearly two years after the registration of the mortgage on 3 February 1981.

Consequently, petitioners Cahayag, Rivera and Escalona, were bound to the mortgage
executed between mortgagor Dulos Realty and mortgagee CCC, by virtue of its registration.
Definitely, the buyers each had constructive knowledge of the existence of the mortgage
contract when they individually executed the Contracts to Sell.

38
RAMON PACON, THROUGH HIS WIFE FELINA PACON, ANTONIO PACON, THROUGH HIS
WIFE NENITA PACON, EULOGIO PACON, THROUGH HIS SON JORGE PACON,
LEONARDO PACON, MANUEL IGOS, JOSE COLORES, LOLITA COLORES, AND
ESTANISLAO BUENDIA vs. BENJAMIN TAN
(G.R. No. 185365, March 2, 2016)

Facts: Respondent Benjamin Tan ("Tan") is a registered co-owner of a parcel of land located in
Gaognan-Tara, Sipocot, Camarines Sur, with an area of 302,302 square meters covered by
Transfer Certificate of Title (TCT) No. 3958 issued by the Registry of Deeds for the Province of
Camarines Sur.

Sometime in July 1997, Tan, with the other co-owners, filed several complaints for ejectment
against petitioners, who they claim were occupying approximately four (4) hectares of the
property. According to Tan, et al., petitioners, after harvesting the various trees and crops
planted on the property and despite repeated demands, have failed to remit any amount or part
of the harvest gathered. They also claimed that petitioners have sold and encumbered their
rights to third persons who are now in actual possession of their portion of the property.

Disputing the foregoing allegations, petitioners prayed for the dismissal of the complaints. They
countered that they have a tenancy agreement with Tan, et al. wherein the former bound
themselves to give to the latter an amount equivalent to two-thirds (2/3) share of the produce or
income in the property. They further claim that they have been religiously remitting said share to
Tan and his co-owners, through their overseer Sandy Nuez. According to petitioners, the
payments were "always withheld and deposited with [Tan et al.'s] 'authorized comprador' and
these deposited payments with the comprador were being withdrawn by [Tan, et al.'s] above-
named overseer."

Issue: Whether or not failure to pay lease rentals is indeed a ground for the dispossession of a
tenant or termination of the tenancy relationship, the non-payment of lease rentals must be
shown to be deliberate and intentional.

Ruling: The burden of proving sufficient cause for eviction of tenants rests on the landowner

At the outset, we note from the challenged Decision the following statement of the Court of
Appeals:

xxx The [petitioners] should have endeavored to fully substantiate their claim of payment
considering that [Tan] disputes or fails to acknowledge the fact of payment. Well-settled is the
rule that one who pleads payment has the burden of proving it. Even where the plaintiff must
allege non-payment, the general rule is that the burden rests on the defendant to prove non-
payment. The debtor has the burden of showing with legal certainty that the obligation has been
discharged by payment.

In this case, [petitioners] failed to discharge their burden. They failed to prove the fact of
payment. No evidence was presented showing receipt and acknowledgement by [Tan, et al.] of
payment of rentals or their rightful share in the harvest/produce

39
PHILIPPINE NATIONAL BANK vs. HEIRS OF BENEDICTO AND AZUCENA ALONDAY
(G.R. No. 171865, October 12, 2016)

Facts: On September 26, 1974, the Spouses Benedicto and Azucena Alonday (Spouses
Alonday) obtained an agricultural loan of P28,000.00 from the petitioner at its Digos, Davao del
Sur Branch, and secured the obligation by constituting a real estate mortgage on their parcel of
land situated in Sta. Cruz, Davao del Sur registered under Original Certificate of Title (OCT) No.
P-3599 of the Registry of Deeds of Davao del Sur. On June 11, 1980, the Spouses Alonday
obtained a commercial loan for P16, 700.00 from the petitioner's Davao City Branch, and
constituted a real estate mortgage over their 598 square meter residential lot situated in Ulas,
Davao City registered under Transfer Certificate of Title (TCT) No. T-66139 of the Registry of
Deeds of Davao City. The Spouses Alonday made partial payments on the commercial loan,
which they renewed on December 23, 1983 for the balance of P15, 950.00. The renewed
commercial loan, although due on December 25, 1984, was fully paid on July 5, 1984.

On August 6, 1984, respondents Mercy and Alberto Alonday, the children of the Spouses
Alonday, demanded the release of the mortgage over the property covered by TCT No. T-
66139. The petitioner informed them, however, that the mortgage could not be released
because the agricultural loan had not yet been fully paid, and that as the consequence of the
failure to pay, it had foreclosed the mortgage over the property covered by OCT No. P-3599 on
August 17, 1984. It appeared that notwithstanding such foreclosure, a deficiency balance of
P91, 525.22 remained. Hence, the petitioner applied for the extrajudicial foreclosure of the
mortgage on the property covered by TCT No. T-66139. A notice of extra-judicial sale was
issued on August 20, 1984, and the property covered by TCT No. T-66139 was sold on
September 28, 1984 to the petitioner in the amount of P29, 900.00. Since the Alondras were
unable to redeem the property, the petitioner consolidated its ownership. Later on, the property
was sold for P48, 000.00 to one Felix Mallis on November 10, 1989.

According to the petitioner, the deed of mortgage relating to the property covered by TCT No. T-
66139 included an "all-embracing clause" whereby the mortgage secured not only the
commercial loan contracted with its Davao City Branch but also the earlier agricultural loan
contracted with its Digos Branch.

Issue: Whether or not the Court of Appeals grievously erred in restricting and delimiting the
scope and validity of the standard "all-embracing clause" in real estate mortgage contracts
solely to future indebtedness and not to prior ones, contrary to leading Supreme Court decisions
on the matter.

Ruling: The mortgage provision relied upon by appellant is known in American jurisprudence as
a "dragnet" clause, which is specifically phrased to subsume all debts of past or future origin.
Such clauses pursuant to the pronouncement of the Supreme Court in DBP vs. Mirang must be
"carefully scrutinized and strictly construed.

The petitioner wrongly insists that the CA, through the foregoing ratiocination, held that the all-
embracing or dragnet clauses were altogether invalid as to prior obligations. What the CA,
although reiterating that the Court upheld the validity of using real estate mortgages to secure
future advancements, only thereby pointed out that it could not find similar rulings as to
mortgages executed to secure prior loans.

There is no question, indeed, that all-embracing or dragnet clauses have been recognized as
valid means to secure debts of both future and past origins. Even so, we have likewise
emphasized that such clauses were an exceptional mode of securing obligations, and have held
that obligations could only be deemed secured by the mortgage if they came fairly within the
terms of the mortgage contract. For the all-embracing or dragnet clauses to secure future loans,
therefore, such loans must be sufficiently described in the mortgage contract. If the requirement
could be imposed on a future loan that was uncertain to materialize, there is a greater reason
that it should be applicable to a past loan, which is already subsisting and known to the parties.

40
 PHILIPPINE NATIONAL BANK vs. JUAN F. VILA
(G.R. No. 213241, August 1, 2016)

Facts: PNB is a universal banking corporation duly authorized by Bangko Sentral ng Pilipinas
(BSP) to engage in banking business. Sometime in 1986, Spouses Reynaldo Cormsta and
Erlinda Gamboa Cornista (Spouses Cornista) obtained a loan from Traders Royal Bank
(Traders Bank).5 To secure the said obligation, the Spouses Cornista mortgaged to the bank a
parcel of land with an area of 451 square meters designated as Lot 555-A-2 and registered
under Transfer Certificate of Title (TCT) No. 131498 in their names by the Register of Deeds of
Pangasinan. For failure of the Spouses Cornista to make good of their loan obligation after it
has become due, Traders Bank foreclosed the mortgage constituted on the security of the loan.
After the notice and publication requirements were complied with, the subject property was sold
at the public auction on 23 December 1987. During the public sale, respondent Juan F. Vila
(Vila) was declared as the highest bidder after he offered to buy the subject property for P50,
000.00. The Certificate of Sale dated 13 January 1988 was duly recorded in TCT No. 131498
under Entry No. 623599. To exercise his right of ownership, Vila immediately took possession of
the subject property and paid the real estate taxes corresponding thereon. On 11 February
1989, a Certificate of Final Sale was issued to Vila after the one-year redemption period had
passed without the Spouses Cornista exercising their statutory right to redeem the subject
property. He was, however, prevented from consolidating the ownership of the property under
his name because the owner's copy of the certificate of title was not turned over to him by the
Sheriff. Despite the lapse of the redemption period and the fact of issuance of a Certificate of
Final Sale to Vila, the Spouses Cormsta were nonetheless allowed to buy back the subject
property by tendering the amount of P50, 000.00. A Certificate of Redemption dated 14 March
1989 was issued for this purpose and was duly annotated in the title under Entry No. 708261.

Claiming that the Spouses Cornista already lost their right to redeem the subject property, Vila
filed an action for nullification of redemption, transfer of title and damages against the Spouses
Cornista and Alfredo Vega in his capacity as the Register of Deeds of Pangasinan. The case
was docketed as Civil Case No. V-0242 on 10 January 1992 and was raffled to Branch 50. A
Notice of Lis Pendens was issued for this purpose and was duly recorded in the certificate of
title of the property on 19 October 1992 under Entry No. 759302.

Issue: WHETHER OR NOT PNB IS A MORTGAGEE IN GOOD FAITH

Ruling: Clearly, the PNB failed to observe the exacting standards required of banking
institutions which are behooved by statutes and jurisprudence to exercise greater care and
prudence before entering into a mortgage contract. No credible proof on the records could
substantiate the claim of PNB that a physical inspection of the property was conducted. We
agree with, both the RTC and CA that if in fact it were true that ocular inspection was
conducted; a suspicion could have been raised as to the real status of property. By failing to
uncover a crucial fact that the mortgagors were not the possessors of the subject property. We
could not lend credence to claim of the bank that an ocular inspection of the property was
conducted. What further tramples upon PNB's claim is the fact that, as shown on the records, it
was Vila who was religiously paying the real property tax due on the property from 1989 to
1996, another significant fact that could have raised a red flag as to the real ownership of the
property. The failure of the mortgagee to take precautionary steps would mean negligence on
his part and would thereby preclude it from invoking that it is a mortgagee in good faith.

Before approving a loan application, it is standard operating procedure for banks and financial
institutions to conduct an ocular inspection of the property offered for mortgage and to
determine the real owner(s) thereof The apparent purpose of an ocular inspection is to protect
the "true owner" of the property as well as innocent third parties with a right, interest or claim
thereon from a usurper who may have acquired a fraudulent certificate of title thereto.

In this case, it was adjudged by the courts of competent jurisdiction in a final and executory
decision that the Spouses Cornista's reacquisition of the property after the lapse of the
redemption period is fraudulent and the property used by the mortgagors as collateral rightfully
belongs to Vila, an innocent third party with a right, could have been protected if PNB only
observed the degree diligence expected from it.

41
METROPOLITAN BANK & TRUST COMPANY vs. CHUY LU TAN, MR. ROMEO TANCO, DR.
SY SE HIONG, and TAN CHU HSIU YEN
(G.R. No. 202176, August 1, 2016)

Facts: Between February 26, 1996 and May 8, 1996, herein respondents Chuy Lu Tan (Chuy)
and Romeo Tanco (Tanco) obtained five loans from herein petitioner Metropolitan Bank & Trust
Company (Metrobank) with an aggregate amount of Nineteen Million Nine Hundred Thousand
Pesos (Pl9,900,000.00). These loans are evidenced by five Promissory Notes executed by
Chuy and Tanco on various dates. As security for the said loans, Chuy executed a Real Estate
Mortgage on February 26, 1996 over a 1,449.70 square meter parcel of land in Quezon City
covered by Transfer Certificate of Title No. RT-53314 (288923). In addition to the said
mortgage, herein respondents Sy Se Hiong (Sy) and Tan Chu Hsiu Yen (Tan) also executed a
Continuing Surety Agreement whereby they bound themselves to be solidarity liable with Chuy
and Tanco for the principal amount of Pl 9,900,000.00 "plus interests thereon at the rate or rates
stated in the obligation secured thereby, any or all penalties, costs and expenses which may be
incurred by [Metrobank] in granting and/or collecting the aforesaid
obligations/indebtedness/instruments, and including those for the custody, maintenance, and
preservation of the securities given therefor, as may be incurred by [Metrobank] before or after
the date of [the] Surety Agreement. " Subsequently, Chuy and Tanco failed to settle their loans
despite Metrobank's repeated demands for payment. In a final demand letter dated October 27,
1999, Metrobank's counsel notified respondent Chuy that as of October 15, 1999, their
obligations, comprising the principal amount loaned, together with interest and penalties,
amounted to P24, 353,062.03. Consequently, on December 14, 1999, Metrobank extra judicially
foreclosed the mortgage and the property was sold to it (Metrobank) as the highest bidder for
the amount of P24, 572,268.00. However, in separate letters to the respondents, which were all
dated January 26, 2000, Metrobank claimed that after application of the bid price to the
respondents' outstanding obligation and the payment of the costs of foreclosure, accrued
interest, penalty charges, attorney's fees and other related expenses, there remained a
deficiency of Pl, 641,815.00, as of January 15, 2000. As such, Metrobank demanded from
respondents the payment of the said deficiency. For respondents' failure to heed Metro bank's
demand, the latter filed a suit for collection of a sum of money with the RTC of Makati.

Issue: Whether or not the deficiency claim on the ground that such claim, which allegedly
consisted almost entirely of interest and penalties, is iniquitous, unconscionable and exorbitant.

Ruling: Settled is the rule that a creditor is not precluded from recovering any unpaid balance
on the principal obligation if the extrajudicial foreclosure sale of the property subject of the real
estate mortgage results in a deficiency. 1Indeed, the fact that the mortgaged property was sold
at an amount less than its actual market value should not militate against the right to such
recovery. This Court has likewise ruled that in deference to the rule that a mortgage is simply a
security and cannot be considered payment of an outstanding obligation, the creditor is not
barred from recovering the deficiency even if it bought the mortgaged property at the
extrajudicial foreclosure sale at a lower price than its market value notwithstanding the fact that
said value is more than or equal to the total amount of the debtor's obligation.

42