Professional Documents
Culture Documents
MERCADO VS ESPINOCILLA
GR# 184109, February 1, 2012
FACTS:
Doroteo Espinocilla owned a parcel of land with an area of 552 sq. meters. After he died,
his five children divided the lot equally among themselves. Mercado sued to recover two
portions totaling 57 sq. meters. He avers that his is entitled to own and possess the lot having
inherited it from his mother and bought 28.5 sq. m. from his aunt (one of the five heirs). He
claims that Espinocilla encroached on his land by 39 sq. m. After trial, the court decided in favor
of Mercado. Espinocilla appealed and the Court of appeals reversed the RTC decision on the
ground that extraordinary acquisitive prescription has already set in.
ISSUE:
W/N Mercados action to recover the subject portion of the land is barred by prescription.
HELD:
Prescription as a mode of acquiring ownership and other real rights over immovable
property, is concerned with lapse of time in the manner and under conditions laid down by law,
namely, that the possession should be in the concept of an owner, public, peaceful, uninterrupted
and adverse. Acquisitive prescription of real rights may be ordinary and extraordinary. Ordinary
acquisitive prescription requires possession in good faith and with just title for 10 years. In
extraordinary prescription,
ownership and other real rights over immovable property are
acquired through uninterrupted adverse possession for 30 years without need of title or of good
faith.
Here, the petitioner admits the adverse nature of respondents possession with his assertion
that Macarios fraudulent acquisition of Dionisias share created a constructive trust. In a
constructive trust, there is neither a promise nor any fiduciary relation to speak of and the socalled trustee neither accepts any trust nor intends holding the property for the beneficiary. The
relation of trustee and cestui que trust does not in fact exist and the holding of a constructive
trust is for the trustee himself and therefore, at all times adverse.
evidence that Master Tours pulled out the buses at some point, signifying the pre-termination of
the lease agreement, then brought them back to RCJs garage, this time for safekeeping. This
circumstance rules out any notion that an agreement for RCJ to hold the buses for safekeeping
had overtaken the lease agreement.
Second, it did not make sense for Master Tours to pre-terminate its lease of the junked buses to
RCJ, which would earn Master Tours P600,000.00, in exchange for having to pay RCJ storage
fees for keeping those buses just the same. As pointed out above, the lease already implied an
obligation on RCJs part to safekeep the buses while they were being rented.
This refers to the account of my wife, Lina (Beng) Sola, with Mondragon Personal Sales,
Inc. in the amount of P3,463,173.88. Of this total amount, we are initially confirming the
total amount ofP1,973,154.73 as due from Lina (Beng) Sola, while the remaining balance
of P1,490,091.15 will be subject to a reconciliation on or before February 5, 1995.
In recognition of Lina (Beng) Sola's account, we undertake to pay P100,000.00 on or
before February 01, 1995 and the balance of P1,873,154.73 plus interest of 18% per
annum and 2% administrative charge per month on the diminishing balance will be
covered by postdated checks of not less thanP100,000.00 per month starting February
28, 1995 and every end of the month thereafter but not to exceed eighteen (18) months or
July 31, 1996.
With regards to the remaining balance of P1,490,019.15, we agree that upon final
verification of these accounts, we will issue additional postdated checks subject to the
same terms and conditions as stated above.
We further agree that all subsequent orders that will be released to us will be covered by
postdated checks.
I fully understand and voluntarily agree to the above undertaking with full knowledge of
the consequences which may arise therefrom.
Very truly yours,
(signed)
Victoriano S. Sola
A reading of the letter shows that Respondent becomes a co-debtor of his wife's
accountabilities with Petitioner. Notably, the last paragraph of his letter which states "I fully
understand and voluntarily agree to the above undertaking with full knowledge of the
consequences which may arise therefrom" and which was signed by respondent alone, shows that
he solidarily bound himself to pay such debt. Based on the letter, respondent's wife had an
account with petitioner in the amount of P3,463,173.88, out of which only the amount
of P1,973,154.73 was confirmed while the remaining amount of P1,490,019.15 would still be
subject to reconciliation. As respondent bound himself to pay the amount of P1,973,154.73, he
becomes petitioner's principal debtor to such amount.
We find that petitioner's act of withholding respondent's service fees/commissions and
applying them to the latter's outstanding obligation with the former is merely an
acknowledgment of the legal compensation that occurred by operation of law between the
parties. Compensation is a mode of extinguishing to the concurrent amount the obligations of
persons who in their own right and as principals are reciprocally debtors and creditors of each
other. Legal compensation takes place by operation of law when all the requisites are present, as
opposed to conventional compensation which takes place when the parties agree to compensate
their mutual obligations even in the absence of some requisites. Legal compensation requires the
concurrence of the following conditions:
(1) That each one of the obligors be bound principally, and that he be at the same
time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the latter has
been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced
by third persons and communicated in due time to the debtor.
We find the presence of all the requisites for legal compensation. Petitioner and
respondent are both principal obligors and creditors of each other. Their debts to each other
consist in a sum of money. Respondent acknowledged and bound himself to pay petitioner the
amount of P1,973,154.73 which was already due, while the service fees owing to respondent by
petitioner become due every month. Respondent's debt is liquidated and demandable, and
petitioner's payments of service fees are liquidated and demandable every month as they fall due.
Finally, there is no retention or controversy commenced by third persons over either of the debts.
Thus, compensation is proper up to the concurrent amount where petitioner owes
respondent P125,040.01 for service fees, while respondent owes petitioner P1,973,154.73.
FACTS:
On January 24, 1995, Respondent-Spouses Eugenio and Angelina Fajardo (Sps. Fajardo)
entered into a Contract to Sell (contract) with petitioner-corporation Gotesco Properties, Inc.
(GPI) for the purchase of a 100-square meter lot identified as Lot No. 13, Block No.6, Phase No.
IV of Evergreen Executive Village, a subdivision project owned and developed by GPI located at
Deparo Road, Novaliches, Caloocan City. The subject lot is a portion of a bigger lot covered by
Transfer Certificate of Title (TCT) No. 244220 (mother title).
Under the contract, Sps. Fajardo undertook to pay the purchase price of P126,000.00
within a 10-year period, including interest at the rate of nine percent (9%) per annum. GPI, on
the other hand, agreed to execute a final deed of sale (deed) in favor of Sps. Fajardo upon full
payment of the stipulated consideration. However, despite its full payment of the purchase price
on January 17, 2000 and subsequent demands, GPI failed to execute the deed and to deliver the
title and physical possession of the subject lot.
On May 3, 2006, Sps. Fajardo filed before the Housing and Land Use Regulatory BoardExpanded National Capital Region Field Office (HLURBENCRFO) a complaint for specific
performance or rescission of contract with damages against GPI. They averred that GPI violated
Section 20 of Presidential Decree No. 957 (PD 957) due to its failure to execute the deed, to
deliver the corresponding certificate of title and the physical possession of the subject lot within
a reasonable period, and to develop Evergreen Executive Village.
GPI argued that the provision on which Sps. Fajardo anchor their right of rescission
remained inapplicable since they were actually willing to comply with their obligation but were
only prevented from doing so because while GPI's petition for inscription of technical
description was favorably granted by the RTC, the same was reversed by the CA, thus causing
the delay in the subdivision of the property into individual lots with individual titles.
The HLURBENCRFO ruled in favor of the Respondent. The OP, on appeal, affirmed the
HLURBs ruling. The CA, on appeal, affirmed the decision of the OP.
ISSUE:
W/N Sps. Fajardo have no right to rescind the contract considering that GPI's inability to
comply therewith was due to reasons beyond its control and thus, should not be held liable to
refund the payments they had received.
HELD:
It is settled that in a contract to sell, the seller's obligation to deliver the corresponding
certificates of title is simultaneous and reciprocal to the buyer's full payment of the purchase
price. In this relation, Section 25 of PD 957, which regulates the subject transaction, imposes on
the subdivision owner or developer the obligation to cause the transfer of the corresponding
certificate of title to the buyer upon full payment, to wit:
Sec. 25. Issuance of Title. The owner or developer shall deliver the title of the lot or unit
to the buyer upon full payment of the lot or unit. No fee, except those required for the
registration of the deed of sale in the Registry of Deeds, shall be collected for the
issuance of such title. In the event a mortgage over the lot or unit is outstanding at the
time of the issuance of the title to the buyer, the owner or developer shall redeem the
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mortgage or the corresponding portion thereof within six months from such issuance in
order that the title over any fully paid lot or unit may be secured and delivered to the
buyer in accordance herewith. (Emphasis supplied.)
Clearly, the long delay in the performance of GPI's obligation from date of demand on
September 16, 2002 was unreasonable and unjustified. It cannot therefore be denied that GPI
substantially breached its contract to sell with Sps. Fajardo which thereby accords the latter the
right to rescind the same pursuant to Article 1191 of the Code, viz:
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.
The court shall decree the rescission claimed, unless there be just cause authorizing the
fixing of a period.
This is understood to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage Law.
At this juncture, it is noteworthy to point out that rescission 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. To be sure, it has been settled that
the effects of rescission as provided for in Article 1385 of the Code are equally applicable to
cases under Article 1191.
In this light, it cannot be denied that only GPI benefited from the contract, having received full
payment of the contract price plus interests as early as January 17, 2000, while Sps. Fajardo
remained prejudiced by the persisting non-delivery of the subject lot despite full payment. As a
necessary consequence, considering the propriety of the rescission as earlier discussed, Sps.
Fajardo must be able to recover the price of the property pegged at its prevailing market value
consistent with the Courts pronouncement in Solid Homes.
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REYES VS ROSSI
GR# 159823, February 18, 2013
FACTS:
On October 31, 1997, Petitioner Teodoro A. Reyes (Reyes) and Advanced Foundation
Construction Systems Corporation (Advanced Foundation), represented by its Executive Project
Director, Respondent Ettore Rossi (Rossi), executed a deed of conditional sale involving the
purchase by Reyes of equipment consisting of a Warman Dredging Pump HY 300A
worth P10,000,000.00. The parties agreed therein that Reyes would pay the sum
of P3,000,000.00 as downpayment, and the balance of P7,000,000.00 through four post-dated
checks. Reyes complied, but in January 1998, he requested the restructuring of his obligation
under the deed of conditional sale by replacing the four post-dated checks with nine post-dated
checks that would include interest at the rate of P25,000.00/month accruing on the unpaid
portion of the obligation on April 30, 1998 up to October 31, 1998. Advanced Foundation
assented to Reyes request, and returned the four checks. In turn, Reyes issued and delivered nine
postdated checks in the aggregate sum of P7,125,000.00
Rossi deposited three of the post-dated checks on their maturity dates in Advanced
Foundations bank account. Two of the checks were denied payment ostensibly upon Reyes
instructions to stop their payment, while the third was dishonored for insufficiency of funds. It
likewise deposited two more checks in Advanced Foundations account, but the checks were
returned with the notation Account Closed stamped on them. He did not anymore deposit the
three remaining checks on the assumption that they would be similarly dishonored.
On July 29, 1998, Reyes commenced an action for rescission of contract and damages in
the Regional Trial Court (RTC). The complaint sought for judgment declaring the deed of
conditional sale "rescinded and of no further force and effect," and ordering Advanced
Foundation to return the P3,000,000.00 downpayment with legal interest from June 4, 1998 until
fully paid; and to pay to him attorneys fees, and various kinds and amounts of damages.
On September 8, 1998, Rossi charged Reyes with five counts of estafa and five counts of
violation of Batas Pambansa Blg. 22 in the Office of the City Prosecutor. On September 29,
1998, Reyes, in his counter-affidavit claims that the criminal proceedings for estafa and BP 22
should be suspended because of the pendency in the RTC of the civil action for rescission of
contract that posed a prejudicial question as to the criminal proceedings.
The City Prosecutor recommended the dismissal of the complaint for estafa and to
suspend the procceding for BP 22 until the prejudicial question raised in the Civil Case for
Rescission of Contract and Damages which is now pending with the RTC has been duly
resolved. The DOJ, on appeal, affirmed the decision of the City Prosecutor. The CA, on appeal,
affirmed the decision of the DOJ but lifted the suspension of the proceeding in the BP 22 case.
ISSUE:
W/N the civil action for rescission of the contract of sale raised a prejudicial question that
required the suspension of the criminal prosecution for violation of BP 22
HELD:
For a civil action to be considered prejudicial to a criminal case as to cause the
suspension of the criminal proceedings until the final resolution of the civil, the following
requisites must be present: (1) the civil case involves facts intimately related to those upon which
the criminal prosecution would be based; (2) in the resolution of the issue or issues raised in the
civil action, the guilt or innocence of the accused would necessarily be determined; and (3)
jurisdiction to try said question must be lodged in another tribunal.
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If both civil and criminal cases have similar issues or the issue in one is intimately related
to the issues raised in the other, then a prejudicial question would likely exist, provided the other
element or characteristic is satisfied. It must appear not only that the civil case involves the same
facts upon which the criminal prosecution would be based, but also that the resolution of the
issues raised in the civil action would be necessarily determinative of the guilt or innocence of
the accused. If the resolution of the issue in the civil action will not determine the criminal
responsibility of the accused in the criminal action based on the same facts, or there is no
necessity "that the civil case be determined first before taking up the criminal case," therefore,
the civil case does not involve a prejudicial question. Neither is there a prejudicial question if the
civil and the criminal action can, according to law, proceed independently of each other.
The action for the rescission of the deed of sale on the ground that Advanced Foundation
did not comply with its obligation actually seeks one of the alternative remedies available to a
contracting party under Article 1191 of the Civil Code, to wit:
Article 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 fulfilment and the rescission of the
obligation, with the payment of damages in either case. He may also seek rescission,
even after he has chosen fulfilment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have
acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law.
Article 1191 of the Civil Code recognizes an implied or tacit resolutory condition in
reciprocal obligations. The condition is imposed by law, and applies even if there is no
corresponding agreement thereon between the parties. The explanation for this is that in
reciprocal obligations a party incurs in delay once the other party has performed his part of the
contract; hence, the party who has performed or is ready and willing to perform may rescind the
obligation if the other does not perform, or is not ready and willing to perform.
It is true that the rescission of a contract results in the extinguishment of the obligatory
relation as if it was never created, the extinguishment having a retroactive effect. The rescission
is equivalent to invalidating and unmaking the juridical tie, leaving things in their status before
the celebration of the contract.20 However, until the contract is rescinded, the juridical tie and the
concomitant obligations subsist.
To properly appreciate if there is a prejudicial question to warrant the suspension of the
criminal actions, reference is made to the elements of the crimes charged. The violation of Batas
Pambansa Blg. 22 requires the concurrence of the following elements, namely: (1) the making,
drawing, and issuance of any check to apply for account or for value; (2) the knowledge of the
maker, drawer, or issuer that at the time of issue he does not have sufficient funds in or credit
with the drawee bank for the payment of the check in full upon its presentment; and (3) the
subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit or
dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to
stop payment. The issue in the criminal actions upon the violations of Batas Pambansa Blg. 22
is, therefore, whether or not Reyes issued the dishonoured checks knowing them to be without
funds upon presentment. On the other hand, the issue in the civil action for rescission is whether
or not the breach in the fulfilment of Advanced Foundations obligation warranted the rescission
of the conditional sale. If, after trial on the merits in the civil action, Advanced Foundation would
be found to have committed material breach as to warrant the rescission of the contract, such
result would not necessarily mean that Reyes would be absolved of the criminal responsibility
for issuing the dishonored checks because, as the aforementioned elements show, he already
committed the violations upon the dishonor of the checks that he had issued at a time when the
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conditional sale was still fully binding upon the parties. His obligation to fund the checks or to
make arrangements for them with the drawee bank should not be tied up to the future event of
extinguishment of the obligation under the contract of sale through rescission. Indeed,
under Batas Pambansa Blg. 22, the mere issuance of a worthless check was already the offense
in itself. Under such circumstances, the criminal proceedings for the violation of Batas
Pambansa Blg. 22 could proceed despite the pendency of the civil action for rescission of the
conditional sale.
14
15
Hong Cheng, had no more properties in his name. Hence, the case reached the Supreme Court
which ruled that the action for rescission has not yet prescribed, ratiocinating as follows:
"Essentially, the issue for resolution posed by petitioners is this: When did the
four (4) year prescriptive period as provided for in Article 1389 of the Civil Code for
respondent Philam to file its action for rescission of the subject deeds of donation
commence to run?
The petition is without merit.
Article 1389 of the Civil Code simply provides that, The action to claim
rescission must be commenced within four years. Since this provision of law is silent as
to when the prescriptive period would commence, the general rule, i.e, from the moment
the cause of action accrues, therefore, applies. Article 1150 of the Civil Code is
particularly instructive:
ARTICLE 1150. The time for prescription for all kinds of actions, when there is
no special provision which ordains otherwise, shall be counted from the day they may be
brought.
Indeed, this Court enunciated the principle that it is the legal possibility of
bringing the action which determines the starting point for the computation of the
prescriptive period for the action. Article 1383 of the Civil Code provides as follows:
ARTICLE 1383. An action for rescission is subsidiary; it cannot be instituted
except when the party suffering damage has no other legal means to obtain reparation
for the same.
It is thus apparent that an action to rescind or an accion pauliana must be of last
resort, availed of only after all other legal remedies have been exhausted and have been
proven futile. For an accion pauliana to accrue, the following requisites must concur:
1) That the plaintiff asking for rescission, has a credit prior to the alienation,
although demandable later; 2) That the debtor has made a subsequent contract
conveying a patrimonial benefit to a third person; 3) That the creditor has no other legal
remedy to satisfy his claim, but would benefit by rescission of the conveyance to the third
person; 4) That the act being impugned is fraudulent; 5) That the third person who
received the property conveyed, if by onerous title, has been an accomplice in the fraud.
From the foregoing, it is clear that the four-year prescriptive period commences to run
neither from the date of the registration of the deed sought to be rescinded nor from the date the
trial court rendered its decision but from the day it has become clear that there are no other legal
remedies by which the creditor can satisfy his claims.
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CONTRACTS
MCA-MBF COUNTDOWN CARDS PHIL. INC. VS MBF CARD INTL.
LTD.
GR# 173586, March 14 2012
FACTS:
In 1993, MBF Card entered into negotiations for the execution of a Joint Venture
Agreement to conduct a business of selling Discount Cards. For this reason, MBF cards (a
foreign registered company) remitted $74,074.00 to be applied as MBF Cards payment of its
40% shareholding in the Joint Venture Agreement where they will have a joint venture company.
Even before the Joint Venture Agreement could be signed and while the parties were still in the
process of incorporating their group into a company, MCA-MBF started advertising, marketing
and selling its products to the public. For this reason, MBF Card filed a complaint for recovery
of money, unfair competition and damages. On the other hand, MCA alleged that hey could sell
the products considering that when MBF remitted the $74,074.00 to them, there was already a
perfected contract.
ISSUE:
W/N there was a perfected contract between MBF Card and MCA, after the former
remitted the amount of $74,074.00 which would allow the latter to advertise, market and sell the
products of the former?
HELD:
The parties were yet negotiating the terms and conditions of the contract. There was yet
no meting of the minds as to the subject matter. Contracts shall be obligatory in whatever form
they may have been entered into, provided all the essential requisites for their validity are
present. In the case at bar, the joint venture company which the parties were supposed to
incorporate, has not been formed. No shares of stocks have been delivered to MBF Card. As
such, there is no perfected contract to be proven since there was yet no meeting of the minds of
the parties.
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18
BEUMER VS AMORES
GR# 195670, DECEMBER 12, 2012
FACTS:
Petitioner, a Dutch national, married respondent, a Filipina. However, thw marriage was
nullified on the basis of petitioners psychological incapacity. Consequently, petitioner filed for
dissolution of Conjugal Partnership praying for the distribution of their properties acquired
during their marriage. One of the disputed properties in the said petition were two lands that
petitioner alleged that he has ownership because such lands were acquired by his own money. By
her defense, respondent said that she acquired the same through inheritance. The RTC of Negros
Oriental awarded the parcels of land to the respondent as her paraphernal properties. It ruled that
petitioner could not have acquired any right whatsoever over these properties as petitioner still
attempted to acquire them notwithstanding his knowledge of the constitutional prohibition
against foreign ownership of private lands. The Court of Appeals rendered judgment affirming in
toto the decision of the RTC.
ISSUE:
W/N petitioners acquisition of the lands are valid.
HELD:
The issue to be resolved is not of first impression. In In Re: Petition For Separation of
Property-Elena Buenaventura Muller v. Helmut Muller the Court had already denied a claim for
reimbursement of the value of purchased parcels of Philippine land instituted by a foreigner
Helmut Muller, against his former Filipina spouse, Elena Buenaventura Muller. It held that
Helmut Muller cannot seek reimbursement on the ground of equity where it is clear that he
willingly and knowingly bought the property despite the prohibition against foreign ownership of
Philippine land24 enshrined under Section 7, Article XII of the 1987 Philippine Constitution
which reads:
Section 7. Save in cases of hereditary succession, no private lands shall be transferred or
conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the
public domain.
be done indirectly which, because of public policy, cannot be done directly. Surely, a contract
that violates the Constitution and the law is null and void, vests no rights, creates no obligations
and produces no legal effect at all. Corollary thereto, under Article 1412 of the Civil Code,
petitioner cannot have the subject properties deeded to him or allow him to recover the money he
had spent for the purchase thereof. The law will not aid either party to an illegal contract or
agreement; it leaves the parties where it finds them.
20
22
DIEGO VS DIEGO
GR# 179965, Februaury 20, 2013
FACTS:
On 1993, Petitioner Nicolas P. Diego (Nicolas) and his brother Rodolfo, Respondent
herein, entered into an oral contract to sell covering Nicolass share, fixed at P500,000.00, as coowner of the familys Diego Building situated in Dagupan City. Rodolfo made a downpayment
of P250,000.00. It was agreed that the deed of sale shall be executed upon payment of the
remaining balance of P250,000.00. However, Rodolfo failed to pay the remaining balance.
Meanwhile, the building was leased out to third parties, but Nicolass share in the rents were not
remitted to him by herein Respondent Eduardo, another brother of Nicolas and designated
administrator of the Diego Building. Instead, Eduardo gave Nicolass monthly share in the rents
to Rodolfo. Despite demands and protestations by Nicolas, Rodolfo and Eduardo failed to render
an accounting and remit his share in the rents and fruits of the building, and Eduardo continued
to hand them over to Rodolfo.
On May 17, 1999, Nicolas filed a Complaint against Rodolfo and Eduardo before the
RTC. Nicolas prayed that Eduardo be ordered to render an accounting of all the transactions over
the Diego Building; that Eduardo and Rodolfo be ordered to deliver to Nicolas his share in the
rents; and that Eduardo and Rodolfo be held solidarily liable for attorneys fees and litigation
expenses. Nicolas contention is that there was no perfected contract of sale even though Rodolfo
had partially paid the price; that in the absence of the third element in a sale contract the price
there could be no perfected sale; that failing to pay the required price in full, Nicolas had the
right to rescind the agreement as an unpaid seller; and based on his agreement with Rodolfo,
there was to be no transfer of title over his share in the building until Rodolfo has effected full
payment of the purchase price, thus, giving no right to the latter to collect his share in the rentals.
Rodolfo and Eduardo filed their Answer with Counterclaim for damages and attorneys
fees. They argued that Nicolas had no more claim in the rents in the Diego Building since he had
already sold his share to Rodolfo. Rodolfo admitted having remitted only P250,000.00 to
Nicolas. He asserted that he would pay the balance of the purchase price to Nicolas only after the
latter shall have executed a deed of absolute sale.
The RTC ruled in favor of Respondent. The CA, on appeal, affirmed the decision of the
RTC.
ISSUE:
W/N Petitioner Nicolas Diego acted legally and correctly when he unilaterally rescinded
and revoked his agreement of sale with Respondent Rodolfo Diego considering Rodolfos
material and substantial breach of the contract.
HELD:
The stipulation to execute a deed of absolute sale upon full payment of the purchase
price, is a unique and distinguishing characteristic of a contract to sell. In Reyes v. Tuparan,15 this
Court ruled that a stipulation in the contract, "[w]here the vendor promises to execute a deed of
absolute sale upon the completion by the vendee of the payment of the price," indicates that the
parties entered into a contract to sell. According to this Court, this particular provision is
tantamount to a reservation of ownership on the part of the vendor. Explicitly stated, the Court
ruled that the agreement to execute a deed of sale upon full payment of the purchase price
"shows that the vendors reserved title to the subject property until full payment of the purchase
price."
23
Having established that the transaction was a contract to sell, the remedy of rescission is
not available in contracts to sell. As explained in Spouses Santos v. Court of Appeals:
In view of our finding in the present case that the agreement between the parties
is a contract to sell, it follows that the appellate court erred when it decreed that a
judicial rescission of said agreement was necessary. This is because there was no
rescission to speak of in the first place. As we earlier pointed out, in a contract to sell,
title remains with the vendor and does not pass on to the vendee until the purchase price
is paid in full. Thus, in a contract to sell, the payment of the purchase price is a positive
suspensive condition. Failure to pay the price agreed upon is not a mere breach, casual
or serious, but a situation that prevents the obligation of the vendor to convey title from
acquiring an obligatory force. This is entirely different from the situation in a contract of
sale, where non-payment of the price is a negative resolutory condition. The effects in
law are not identical. In a contract of sale, the vendor has lost ownership of the thing
sold and cannot recover it, unless the contract of sale is rescinded and set aside. In a
contract to sell, however, the vendor remains the owner for as long as the vendee has not
complied fully with the condition of paying the purchase price. If the vendor should eject
the vendee for failure to meet the condition precedent, he is enforcing the contract and
not rescinding it. When the petitioners in the instant case repossessed the disputed house
and lot for failure of private respondents to pay the purchase price in full, they were
merely enforcing the contract and not rescinding it. As petitioners correctly point out, the
Court of Appeals erred when it ruled that petitioners should have judicially rescinded the
contract pursuant to Articles 1592 and 1191 of the Civil Code. Article 1592 speaks of
non-payment of the purchase price as a resolutory condition. It does not apply to a
contract to sell. As to Article 1191, it is subordinated to the provisions of Article 1592
when applied to sales of immovable property. Neither provision is applicable in the
present case.
Similarly, we held in Chua v. Court of Appeals that "Article 1592 of the Civil Code
permits the buyer to pay, even after the expiration of the period, as long as no demand for
rescission of the contract has been made upon him either judicially or by notarial act. However,
Article 1592 does not apply to a contract to sell where the seller reserves the ownership until full
payment of the price," as in this case.
Applying the above jurisprudence, we hold that when Rodolfo failed to fully pay the
purchase price, the contract to sell was deemed terminated or cancelled. As we have held
in Chua v. Court of Appeals, "[s]ince the agreement x x x is a mere contract to sell, the full
payment of the purchase price partakes of a suspensive condition. The non-fulfillment of the
condition prevents the obligation to sell from arising and ownership is retained by the seller
without further remedies by the buyer." Similarly, we held in Reyes v. Tuparan that "petitioners
obligation to sell the subject properties becomes demandable only upon the happening of the
positive suspensive condition, which is the respondents full payment of the purchase
price.Without respondents full payment, there can be no breach of contract to speak of because
petitioner has no obligation yet to turn over the title. Respondents failure to pay in full the
purchase price in full is not the breach of contract contemplated under Article 1191 of the New
Civil Code but rather just an event that prevents the petitioner from being bound to convey title
to respondent." Otherwise stated, Rodolfo has no right to compel Nicolas to transfer ownership
to him because he failed to pay in full the purchase price. Correlatively, Nicolas has no
obligation to transfer his ownership over his share in the Diego Building to Rodolfo.
24
CRUZ VS GRUSPE
GR# 191431, March 13, 2013
FACTS:
On October 24, 1999, the mini bus owned and operated by Cruz and driven by one Arturo
Davin collided with the Toyota Corolla car of Gruspe resulting to it being a total wreck. The next
day, on October 25, 1999, Cruz, along with Leonardo Q. Ibias went to Gruspes office,
apologized for the incident, and executed a Joint Affidavit of Undertaking promising jointly and
severally to replace the Gruspes damaged car in 20 days, or until November 15, 1999, of the
same model and of at least the same quality; or, alternatively, they would pay the cost of
Gruspes car amounting to P350,000.00, with interest at 12% per month for any delayed payment
after November 15, 1999, until fully paid. Cruz and Leonardo failed to comply with their
undertaking.
On November 19, 1999, Gruspe filed a complaint for collection of sum of money against
them before the RTC. In their answer, Cruz and Leonardo denied Gruspes allegation, claiming
that the Joint Affidavit of Undertaking is not a contract that can be the basis of an obligation to
pay a sum of money in favor of Gruspe because an affidavits purpose is simply to attest to facts
that are within his knowledge, while a contract requires that there be a meeting of the minds
between the two contracting parties. That even if the Joint Affidavit of Undertaking was
considered as a contract, Cruz and Esperanza claim that it is invalid because Cruz and
Leonardos consent thereto was vitiated; the contract was prepared by Gruspe who is a lawyer,
and its contents were never explained to them and they were simply forced to affix their
signatures, otherwise, the mini van would not be released.
The RTC ruled in favor of Gruspe . The CA, on appeal, affirmed the decision of the RTC.
ISSUE:
1. W/N a Joint Affidavit of Undertaking is considered a contract.
2. W/N the consent of Petitioners was vitiated when they signed the Joint Affidavit of
Undertaking.
HELD:
1. Contracts are obligatory no matter what their forms may be, whenever the essential
requisites for their validity are present. In determining whether a document is an affidavit
or a contract, the Court looks beyond the title of the document, since the denomination or
title given by the parties in their document is not conclusive of the nature of its
contents. In the construction or interpretation of an instrument, the intention of the parties
is primordial and is to be pursued. If the terms of the document are clear and leave no
doubt on the intention of the contracting parties, the literal meaning of its stipulations
shall control. If the words appear to be contrary to the parties evident intention, the latter
shall prevail over the former.
A simple reading of the terms of the Joint Affidavit of Undertaking readily discloses that
it contains stipulations characteristic of a contract. The Joint Affidavit of Undertaking
contained a stipulation where Cruz and Leonardo promised to replace the damaged car of
Gruspe, 20 days from October 25, 1999 or up to November 15, 1999, of the same model
and of at least the same quality. In the event that they cannot replace the car within the
same period, they would pay the cost of Gruspes car in the total amount ofP350,000.00,
with interest at 12% per month for any delayed payment after November 15, 1999, until
fully paid. These are very simple terms that both Cruz and Leonardo could easily
understand.
2. Although the undertaking in the affidavit appears to be onerous and lopsided, this does
not necessarily prove the alleged vitiation of consent. They, in fact, admitted the
25
genuineness and due execution of the Joint Affidavit and Undertaking when they said that
they signed the same to secure possession of their vehicle. If they truly believed that the
vehicle had been illegally impounded, they could have refused to sign the Joint Affidavit
of Undertaking and filed a complaint, but they did not. That the release of their mini bus
was conditioned on their signing the Joint Affidavit of Undertaking does not, by itself,
indicate that their consent was forced they may have given it grudgingly, but it is not
indicative of a vitiated consent that is a ground for the annulment of a contract.
26
SALES
STARBRIGHT SALES ENTERPRISES, INC. VS PHILIPPINE REALTY
CORPORATION
GR# 177936, January 18, 2012
FACTS:
Ramon Licup wrote Msgr. Cirilos offering to buy three parcels of land in Paranaque that
the Holy See and Philippine Realty Corp. owned for P1,240.00 per square meter. Licup accepted
the responsibility of removing illegal settlers on the land and enclosed a P100,000.00 to close
the transaction ass earnest money and undertook to pay the balance once the property has been
cleared of its occupants. Msgr. Cirilos agreed but Licup ordered a stop payment order of the
check because it requested that the land be transferred to Starbright Sales enterprises instead and
enclosed a new check for the same amount.
Later, Msgr. Cirilos requested Starbright to remove the occupants on the property,
otherwise, he would return the P100,000.00 that he received. Starbright replied that it would be
willing to do so provided it lowered the price of the land to P1,150.00. Msgr. Rejected the
proposal saying that there were other buyers who were willing to acquire the property at
P1,400.00 per square meters on an as is where is basis and returned the P100.000.00 to
Starbright. The latter objected saying that they already had a perfected contract but it learned
later that the land was sold to another entity, hence it filed for an annulment of sale. The trial
court agreed with Starbright: that there was already a perfected contract of sale. However, the
Court of Appeals reversed the decision saying no perfected contract of sale happened at all.
ISSUE:
W/N the Court of Appeals erred in holding that no perfected contract of sale existed
between Starbright and Msgr. Cirilos.
HELD:
Under the law on sales, a contract of sale is perfected when the seller obligates himself
for a price certain, to deliver and to transfer ownership of a thing or right to the buyer, over
which the latter agrees. From that moment, the parties may demand reciprocal performance.
In the case at bar, the proposed substitution of Licup by Starbright as buyer, opened the
negotiation stage for a new contract of sale. Where the parties merely exchanged offers and
counter-offers, no contract is perfected since they did not give their consent to such offers.
Earnest money applies to a perfected sale.
VILLAMAR VS MANGAOIL
27
of breaches which the parties may commit. To hold otherwise would render Article 1191 of the
NCC as useless.
30
31
Clearly, the foregoing statements constituted ratification of the settlement of the estate and the
subsequent sale, thus, purging all the defects existing at the time of its execution and legitimizing
the conveyance of Rosas 1/16 share in the estate of Anunciacion to spouses Uy.
32
33
SANTIAGO VS VILLAMOR
GR# 168499, November 26, 2012
FACTS:
Respondents mortgaged their land to the Rural bank of San Jacinto, Masbate as security
for a P10,000 loan. For non-payment of the loan, the San Jacinto Bank extrajudicially foreclosed
the mortgage, and, as the highest bidder at the public auction, bought the land. When the spouses
Villamor, Sr. failed to redeem the property within the prescribed period, the San Jacinto Bank
obtained a final deed of sale in its favor sometime in 1991. The San Jacinto Bank then offered
the land for sale to any interested buyer.
On July 19, 1994 the San Jacinto Bank issued a deed of sale in favor of Domingo, Sr.12
On July 21, 1994, the spouses Villamor, Sr. sold the land to the petitioners for P150,000.00. After
the respondents and Catalina refused the petitioners demand to vacate the land, the petitioners
filed on October 20, 1994 a complaint for quieting of title and recovery of possession against the
respondents.
The RTC declared the petitioners as the legal and absolute owners of the land, finding
that the petitioners were purchasers in good faith. The CA found that the petitioners action to
quiet title could not prosper because the petitioners failed to prove their legal or equitable title to
the land. It noted that there was no real transfer of ownership since neither the spouses Villamor,
Sr. nor the petitioners were placed in actual possession and control of the land after the execution
of the deeds of sale.
ISSUE:
W/N petitioners have any legal title over the disputed land.
HELD:
Article 1477 of the Civil Code recognizes that the ownership of the thing sold shall be
transferred to the vendee upon the actual or constructive delivery thereof. Related to this article
is Article 1497 which provides that [t]he thing sold shall be understood as delivered, when it is
placed in the control and possession of the vendee.
With respect to incorporeal property, Article 1498 of the Civil Code lays down the
general rule: the execution of a public instrument shall be equivalent to the delivery of the thing
which is the object of the contract, if from the deed the contrary does not appear or cannot
clearly be inferred. However, the execution of a public instrument gives rise only to a prima
facie presumption of delivery, which is negated by the failure of the vendee to take actual
possession of the land sold. [A] person who does not have actual possession of the thing sold
cannot transfer constructive possession by the execution and delivery of a public instrument.
In this case, no constructive delivery of the land transpired upon the execution of the deed
of sale since it was not the spouses Villamor, Sr. but the respondents who had actual possession
of the land. The presumption of constructive delivery is inapplicable and must yield to the reality
that the petitioners were not placed in possession and control of the land.
Moreover, petitioners are not purchasers in good faith.
A purchaser in good faith is one who buys property without notice that some other
person has a right to or interest in such property and pays its fair price before he has notice of the
adverse claims and interest of another person in the same property.However, where the land
sold is in the possession of a person other than the vendor, the purchaser must be wary and must
34
investigate the rights of the actual possessor; without such inquiry, the buyer cannot be said to be
in good faith and cannot have any right over the property.
In this case, the spouses Villamor, Sr. were not in possession of the land. The petitioners,
as prospective vendees, canied the burden of investigating the rights of the respondents and
respondent John who were then in actual possession of the land. The petitioners cannot take
refuge behind the allegation that, by custom and tradition in San Jacinto, Masbate, the children
use their parents' property, since they offered no proof supporting their bare allegation. The
burden of proving the status of a purchaser in good faith lies upon the party asserting that status
and cannot be discharged by reliance on the legal presumption of good faith. The petitioners
failed to discharge this burden.
35
DIEGO VS DIEGO
GR# 179965, Februaury 20, 2013
FACTS:
On 1993, Petitioner Nicolas P. Diego (Nicolas) and his brother Rodolfo, Respondent
herein, entered into an oral contract to sell covering Nicolass share, fixed at P500,000.00, as coowner of the familys Diego Building situated in Dagupan City. Rodolfo made a downpayment
of P250,000.00. It was agreed that the deed of sale shall be executed upon payment of the
remaining balance of P250,000.00. However, Rodolfo failed to pay the remaining balance.
Meanwhile, the building was leased out to third parties, but Nicolass share in the rents were not
remitted to him by herein Respondent Eduardo, another brother of Nicolas and designated
administrator of the Diego Building. Instead, Eduardo gave Nicolass monthly share in the rents
to Rodolfo. Despite demands and protestations by Nicolas, Rodolfo and Eduardo failed to render
an accounting and remit his share in the rents and fruits of the building, and Eduardo continued
to hand them over to Rodolfo.
On May 17, 1999, Nicolas filed a Complaint against Rodolfo and Eduardo before the
RTC. Nicolas prayed that Eduardo be ordered to render an accounting of all the transactions over
the Diego Building; that Eduardo and Rodolfo be ordered to deliver to Nicolas his share in the
rents; and that Eduardo and Rodolfo be held solidarily liable for attorneys fees and litigation
expenses. Nicolas contention is that there was no perfected contract of sale even though Rodolfo
had partially paid the price; that in the absence of the third element in a sale contract the price
there could be no perfected sale; that failing to pay the required price in full, Nicolas had the
right to rescind the agreement as an unpaid seller; and based on his agreement with Rodolfo,
there was to be no transfer of title over his share in the building until Rodolfo has effected full
payment of the purchase price, thus, giving no right to the latter to collect his share in the rentals.
Rodolfo and Eduardo filed their Answer with Counterclaim for damages and attorneys
fees. They argued that Nicolas had no more claim in the rents in the Diego Building since he had
already sold his share to Rodolfo. Rodolfo admitted having remitted only P250,000.00 to
Nicolas. He asserted that he would pay the balance of the purchase price to Nicolas only after the
latter shall have executed a deed of absolute sale.
The RTC ruled in favor of Respondent. The CA, on appeal, affirmed the decision of the
RTC.
ISSUE:
W/N no perfected contract of sale between Petitioner Nicolas Diego and Respondent
Rodolfo Diego over Nicolas share of the building because the suspensive condition has not been
fulfilled.
HELD:
The stipulation, to execute a deed of absolute sale upon full payment of the purchase
price, is a unique and distinguishing characteristic of a contract to sell. In Reyes v. Tuparan, this
Court ruled that a stipulation in the contract, "[w]here the vendor promises to execute a deed of
absolute sale upon the completion by the vendee of the payment of the price," indicates that the
parties entered into a contract to sell. According to this Court, this particular provision is
tantamount to a reservation of ownership on the part of the vendor. Explicitly stated, the Court
ruled that the agreement to execute a deed of sale upon full payment of the purchase price"shows
that the vendors reserved title to the subject property until full payment of the purchase price."
In Tan v. Benolirao, this Court, speaking through Justice Brion, ruled that the parties
entered into a contract to sell as revealed by the following stipulation:
36
d) That in case, BUYER has complied with the terms and conditions of this
contract, then the SELLERS shall execute and deliver to the BUYER the appropriate
Deed of Absolute Sale;
The Court further held that "[j]urisprudence has established that where the seller
promises to execute a deed of absolute sale upon the completion by the buyer of the payment of
the price, the contract is only a contract to sell."
The acknowledgement receipt signed by Nicolas as well as the contemporaneous acts of
the parties show that they agreed on a contract to sell, not of sale. The absence of a formal deed
of conveyance is indicative of a contract to sell. The records show that Nicolas signed a mere
receipt acknowledging partial payment ofP250,000.00 from Rodolfo. It states:
July 8, 1993
Received the amount of [P250,000.00] for 1 share of Diego Building as partial
payment for Nicolas Diego.
(signed)
Nicolas Diego
LEASE
37
38
x x x. The lease can be renewed only by a new negotiation between the parties upon
written notice by the LESSEE to be given to the LESSOR at least 90 days prior to termination of
the above lease period.
As the lease was set to expire on 28 February 2006, Respondent had until 30 November
2005 within which to express its interest in negotiating an extension of the lease with Petitioner.
However, respondent failed to communicate its intention to negotiate for an extension of the
lease within the time agreed upon by the parties. Thus, by its own provisions, the Contract of
Lease expired on 28 February 2006. Under the Civil Code, the expiry of the period agreed upon
by the parties is likewise a ground for judicial ejectment.
FACTS:
Spouses Benjamin C. Mamaril and Sonia P. Mamaril (Sps. Mamaril) are jeepney
operators. They would park their six (6) passenger jeepneys every night at the Boy Scout of the
Philippines' (BSP) compound for a fee of P300.00 per month for each unit. On May 26, 1995 at 8
o'clock in the evening, all these vehicles were parked inside the BSP compound. The following
morning, one of the vehicles with Plate No. DCG 392 was missing and was never
recovered. According to the security guards Cesario Pea (Pea) and Vicente Gaddi (Gaddi) of
AIB Security Agency, Inc. (AIB) with whom BSP had contracted for its security and protection,
a male person who looked familiar to them took the subject vehicle out of the compound.
On November 20, 1996, Sps. Mamaril filed a complaint for damages before the Regional
Trial Court against BSP, AIB, Pea and Gaddi for They therefore prayed that Pea and Gaddi,
together with AIB and BSP, be held liable for the: (a) the value of the subject vehicle and its
accessories in the aggregate amount of P300,000.00; (b) P275.00 representing daily loss of
income/boundary reckoned from the day the vehicle was lost; (c) exemplary damages; (d) moral
damages; (e) attorney's fees; and (f) cost of suit, on the contention that the loss of the subject
vehicle was due to the gross negligence of the above-named security guards on-duty who
allowed the subject vehicle to be driven out by a stranger despite their agreement that only
authorized drivers duly endorsed by the owners could do so.
In its Answer, BSP denied any liability contending that not only did Sps. Mamaril directly
deal with AIB with respect to the manner by which the parked vehicles would be handled, but the
parking ticket itself expressly stated that the "Management shall not be responsible for loss of
vehicle or any of its accessories or article left therein." It also claimed that Sps. Mamaril
erroneously relied on the Guard Service Contract. Apart from not being parties thereto, its
provisions cover only the protection of BSP's properties, its officers, and employees. In addition
to the foregoing defenses, AIB alleged that it has observed due diligence in the selection, training
and supervision of its security guards while Pea and Gaddi claimed that the person who drove
out the lost vehicle from the BSP compound represented himself as the owners' authorized driver
and had with him a key to the subject vehicle.
The RTC ruled in favor of Petitioners. The CA, on appeal, affirmed the decision of the
RTC but absolved BSP of its liability and deleted the award of damages.
ISSUE:
W/N the agreement between BSP and Sps Mamaril is a contract of lease, whereby BSP is
not duty bound to protect or take care of Sps Mamarils vehicle.
HELD:
The contract between the parties herein was one of lease as defined under Article 1643 of
the Civil Code. It has been held that the act of parking a vehicle in a garage, upon payment of a
fixed amount, is a lease. Even in a majority of American cases, it has been ruled that where a
customer simply pays a fee, parks his car in any available space in the lot, locks the car and takes
the key with him, the possession and control of the car, necessary elements in bailment, do not
pass to the parking lot operator, hence, the contractual relationship between the parties is one of
lease.
In the instant case, the owners parked their six (6) passenger jeepneys inside the BSP
compound for a monthly fee of P300.00 for each unit and took the keys home with them. Hence,
a lessor-lessee relationship indubitably existed between them and BSP. On this score, Article
1654 of the Civil Code provides that "the lessor (BSP) is obliged: (1) to deliver the thing which
is the object of the contract in such a condition as to render it fit for the use intended; (2) to make
on the same during the lease all the necessary repairs in order to keep it suitable for the use to
which it has been devoted, unless there is a stipulation to the contrary; and (3) to maintain the
lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the contract."
40
In relation thereto, Article 1664 of the same Code states that "the lessor is not obliged to answer
for a mere act of trespass which a third person may cause on the use of the thing leased; but the
lessee shall have a direct action against the intruder." Here, BSP was not remiss in its obligation
to provide Sps. Mamaril a suitable parking space for their jeepneys as it even hired security
guards to secure the premises; hence, it should not be held liable for the loss suffered by Sps.
Mamaril.
41
On March 1994, Respondents leased out several fishponds to Petitioners. The lease was
to be for five years, or from March 1, 1994 up to June 30, 1999. The Contract of Lease of the
parties provided for the following salient provisions:
1. For the entire duration of the lease, the Castro spouses shall pay a total consideration of
P14,126,600.00, via postdated checks and according to the following schedule:
a. Upon signing of the lease agreement, petitioners shall pay P842,300.00 for the lease period
March 1, 1994 to June 30, 1994;
b.
On or before June 1, 1994, petitioners shall pay P2,520,000.00 for the one-year lease
period July 1, 1994 to June 30, 1995;
c.
On or before June 1, 1995, petitioners shall pay P2,520,000.00 for the one-year lease
period July 1, 1995 to June 30, 1996;
d.
On or before June 1, 1996, petitioners shall pay P2,520,000.00 for the one-year lease
period July 1, 1996 to June 30, 1997;
e.
On or before June 1, 1997, petitioners shall pay P2,796,000.00 for the one-year lease
period July 1, 1997 to June 30, 1998; and
f.
On or before June 1, 1998, petitioners shall pay P2,928,300.00 for the one-year lease
period July 1, 1998 to June 30, 1999.
2. Petitioners committed to pay respondents the amount of P500,000.00 in five yearly
installments from June 1, 1994. The amount represents arrears of the previous lessee, which
petitioners
agreed
to
assume;
3. Petitioners shall exercise extraordinary care and diligence in the maintenance of the
leased premises, with the obligation to maintain in good order, repair and condition, among
others,
two
warehouses
found
thereon;
4. Necessary repairs, licenses, permits, and other fees necessary and incidental to the
operation
of
the
fishpond
shall
be
for
petitioners
account;
5.
Petitioners
shall
not
sublease
the
premises
to
third
parties; and,
6. Should respondents be constrained to file suit against petitioners on account of the lease,
the latter agrees to pay liquidated damages in the amount of P1,000,000.00, 25% as
attorneys fees, and costs of the suit.
The lease expired on June 30, 1999, but petitioners did not vacate and continued
to occupy and operate the fishponds until August 11, 1999, or an additional 41 days
beyond the contract expiration date. On July 22, 1999, Respondents sent a letter to
Petitioners declaring the latter as trespassers and demanding the settlement of the latters
outstanding obligations, including rent for Petitioners continued stay within the
premises, in the amount of P378,451.00.
On June 8, 2000, Respondents instituted Civil Case for collection of a sum of
money with damages in the Regional Trial Court (RTC), claiming that Petitioners
committed violations of their lease agreement which are non-payment of rents as
stipulated, subletting the fishponds, failure to maintain the warehouses, and refusal to
vacate the premises on expiration of the lease which caused Respondents to incur actual
and liquidated damages and other expenses in the respective amounts of P570,101.00 for
unpaid rent, P275,430.00 for unpaid additional rent for petitioners one-month extended
stay beyond the contract date, and P2,000,000.00 for expenses incurred in restoring and
repairing their damaged warehouses. Petitioners were declared in default for its failure to
file an answer.
42
The RTC ruled in favor of Respondents. The CA, on appeal, affirmed the decision of
the RTC.
ISSUE:
W/N Respondent is authorized to charge Petitioner additional rent for their
extended stay.
HELD:
As for petitioners submission that respondents were not authorized to charge
additional rent for their extended stay, this issue should be deemed settled by their very
reliance on the July 22, 1999 demand letter, where a charge for additional rent for their
extended stay in the amount of P244,025.00 is included. By adopting the letter as their
own evidence in seeking a reduction in the award of unpaid rent, petitioners are
considered to have admitted liability for additional rent as stated therein, in the amount of
P244,025.00. Petitioners may not simultaneously accept and reject the demand letter; this
would go against the rules of fair play. Besides, respondents are correct in saying that
when the lease expired on June 30, 1999 and petitioners continued enjoying the premises
without objection from the respondents, an implied new lease was created pursuant to
Article 1670 of the Civil Code, which placed upon petitioners the obligation to pay
additional rent.
On 1997 and 1998, Respondent was hired by Liberty to do various projects in their
commercial centers, mainly at the LCC Central Mall, Naga City, for the supply, fabrication, and
installation of air-conditioning ductworks. During the awarding of the work, Petitioners wanted
the aircon ducts changed from rectangular to round ducts. The changing of the rectangular ducts
to round ducts entailed additional cost in labor and materials.
After Respondent completed the project which included some changes and revisions of
the original plan at the behest of Liberty, accomplishment reports had been submitted by
Respondent and approved by ESCA, project was turned over in 1998 but Respondent was not
paid the balance corresponding to the changed plan of work and additional work performed by it.
Series of communications demanding payment were made but Petitioner refused to pay.
Respondent filed an action for sum of money and damages against Liberty Commercial
Center, Inc. (Liberty) for its failure to pay the remaining balance due on the project in the sum of
P1,777,202.80 which was incurred due to the changes made in the original plan. Petitioner
denied the material allegations of the complaint and raised the defense of Article 1724 of the
Civil Code.
The RTC ruled in favor of Respondent. The CA, on appeal, affirmed the decision of the
RTC.
ISSUE:
W/N the Petitioner is liable for the additional costs incurred for labor, materials, and
equipment on the revised project.
HELD:
Art. 1724. The contractor who undertakes to build a structure or any other work for a
stipulated price, in conformity with plans and specifications agreed upon with the landowner,
can neither withdraw from the contract nor demand an increase in the price on account of the
higher cost of labor or materials, save when there has been a change in the plans and
specifications, provided:
(1) Such change has been authorized by the proprietor in writing; and
(2) The additional price to be paid to the contractor has been determined in writing by
both parties.
Article 1724 of the Civil Code is not applicable to this case. It is evident from the
records that the original contract agreement, submitted by Respondent as evidence, which
stated a total contract price of P5,300,000, was never signed by the parties considering
that there were substantial changes in the plan imposed by Petitioner in the course of the
work on the project. Petitioner admitted paying P6,700,000 to Respondent which was
allegedly the agreed cost of the project. However, Petitioner did not submit any written
contract signed by both parties which would substantiate its claim that the agreed cost of
the project was only P6,700,000. Clearly, Petitioner cannot invoke Article 1724 of the
Civil Code to avoid paying its obligation considering that the alleged original contract
was never even signed by both parties because of the various changes imposed by
Petitioner on the original plan. The fact that Petitioner paid P1,400,000 more than the
amount stated in the unsigned contract agreement clearly indicates that there were indeed
additional costs during the course of the work on the project. It is just unfortunate that
Petitioner is now invoking Article 1724 of the Civil Code to avoid further payment of the
additional costs incurred on the project.
44
LOAN
45
LLENADO VS PEOPLE
GR# 193279, March 14, 2012
46
FACTS:
Llenado was convicted by MTC Valenzuela for four counts of violation of BP 22.
However, she settled the loans subject matter of three criminal cases by using the funds of Mary
Immaculate College, thereby leaving P1.5M as balance. After hearing, Llenado was ordered to
pay 1.5M plus P200,000.00 fine with subsidiary imprisonment in case of insolvency. It also
made Mary Immaculate College liable for the value of the check for being the drawer thereof.
Llenado appealed to the RTC but it affirmed the MTC decision, so Llenado appealed to
the Court of Appeals. The CA ruled that the elements of BP 22 were established but it held that
the trial court erred in holding Mary Immaculate College civilly liable. It modified the judgment
by awarding 12% interest per annum based on P1.5M from the date of judicial demand plus
attorneys fees of P20,000.00 and litigation expenses.
Llenado then appealed to the Supreme Court alleging that the ruling of the Court of Appeals is
not correct.
ISSUE:
W/N the computation with respect to the imposition of interests is correct.
HELD:
In the absence of stipulation the rate of interest shall be 12% per annum to be computed
from default, that is, from judicial or extrajudicial demand under and subject to the provisions of
Art. 1169 of the Civil Code.
In this case, Llenado should be held liable for the amount of the dishonored check which
is P1.5m pus 12% legal interest covering the period from the date of receipt of the demand letter
to the finality of this Decision. All the other monetary awards were affirmed.
ESTORES VS SUPANGAN
GR# 175139, April 18, 2012
47
FACTS:
Petitioner Estores and respondents Supangan entered into a Conditional Deed of Sale
whereby Estores offered to sell to spouses Supangan a parcel of land located in Naic, Cavite for P4.7
million. However, for almost seven years, petitioner failed to comply with her obligation. Respondents
demanded via letter the return of P3.5 million within 15 daysfrom receipt of such demand. Petitioner
replied acknowledging the return of P3.5 million and promised to return it within 120 days. Respondents
were amenable to said proposal but subject to an interest of 12% compounded annually shall be imposed
on the principal. When petitioner still failed to return the amount despite demand, respondent-spouses
were constrained to file a Complaint for sum of money before the Regional Trial Court (RTC) of
Malabon. In their Answer with Counterclaim, petitioner and Arias averred that they are willing to return
the principal amount of P3.5 million but without any interest as the same was not agreed upon. They
argued that since the Conditional Deed of Sale provided only for the return of the downpayment in case
of breach, they cannot be held liable to pay legal interest as well. The RTC rendered a decision in favour
of respondents but only at the rate of 6%. The Court of Appeals affirmed the decision of the RTC but
adjusted the period from which the interest would start.
ISSUE:
W/N the imposition of interest is proper.
HELD:
The interest rate of 12% is applicable in this case.
Anent the interest rate, the general rule is that the applicable rate of interest shall be computed in
accordance with the stipulation of the parties. Absent any stipulation, the applicable rate of interest shall
be 12% per annum when the obligation arises out of a loan or a forbearance of money, goods or
credits. In other cases, it shall be six percent (6%). In this case, the parties did not stipulate as to the
applicable rate of interest. The only question remaining therefore is whether the 6% as provided under
Article 2209 of the Civil Code, or 12% under Central Bank Circular No. 416, is due.
The contract involved in this case is admittedly not a loan but a Conditional Deed of
Sale. However, the contract provides that the seller (petitioner) must return the payment made by the
buyer (respondent-spouses) if the conditions are not fulfilled. There is no question that they have in fact,
not been fulfilled as the seller (petitioner) has admitted this. Notwithstanding demand by the buyer
(respondent-spouses), the seller (petitioner) has failed to return the money and should be
considered in default from the time that demand was made on September 27, 2000.
AGENCY
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TRUST
GOYANCO JR. VS UCPB
GR# 179096, February 6, 2013
FACTS:
On 1995, the late Joseph Goyanko, Sr. (Goyanko) invested Two Million Pesos
(P2,000,000.00) with Philippine Asia Lending Investors, Inc. (PALII) family, represented by the
Petitioner, and his illegitimate family presented conflicting claims to PALII for the release of the
investment. Pending the investigation of the conflicting claims, PALII deposited the proceeds of
the investment with UCPB on October 29, 1996 under the name "Phil Asia: ITF (In Trust For)
The Heirs of Joseph Goyanko, Sr." (ACCOUNT). On September 27, 1997, the deposit under the
ACCOUNT was P1,509,318.76. On December 11, 1997, UCPB allowed PALII to withdraw One
Million Five Hundred Thousand Pesos (P1,500,000.00) from the Account, leaving a balance of
only P9,318.76. The Petitoners demanded that UCPB restore the amount withdrawn plus legal
interest but UCPB refused.
The petitioner filed a complaint before the RTC. Their contention is that an express trust
was created, as clearly shown by PALIIs March 28, 1996 and November 15, 1996 letters. Citing
jurisprudence, the petitioner emphasizes that from the established definition of a trust, PALII is
clearly the trustor as it created the trust; UCPB is the trustee as it is the party in whom
confidence is reposed as regards the property for the benefit of another; and the HEIRS are the
beneficiaries as they are the persons for whose benefit the trust is created and UCPB was
negligent and in bad faith in allowing the withdrawal and in failing to inquire into the nature of
the ACCOUNT.
In its answer to the complaint, UCPB admitted, among others, the opening of the
ACCOUNT under the name "ITF (In Trust For) The Heirs of Joseph Goyanko, Sr.," (ITF
HEIRS) and the withdrawal on December 11, 1997 and argued that that the ACCOUNT involves
an ordinary deposit contract between PALII and UCPB only, which created a debtor-creditor
relationship obligating UCPB to return the proceeds to the account holder-PALII. Thus, it was
not negligent in handling the ACCOUNT when it allowed the withdrawal. The mere designation
of the ACCOUNT as "ITF" is insufficient to establish the existence of an express trust or charge
it with knowledge of the relation between PALII and the HEIRS.
The RTC ruled in favor of Respondent. The CA, on appeal, affirmed the decision of the
RTC.
ISSUE:
W/N UCPB should be held liable for the amount withdrawn because a trust agreement
existed between PALII and UCPB, in favor of the HEIRS, when PALII opened the ACCOUNT
with UCPB.
HELD:
A trust, either express or implied, is the fiduciary relationship "x x x between one person
having an equitable ownership of property and another person owning the legal title to such
property, the equitable ownership of the former entitling him to the performance of certain duties
and the exercise of certain powers by the latter." Express or direct trusts are created by the direct
and positive acts of the trustor or of the parties. No written words are required to create an
express trust. This is clear from Article 1444 of the Civil Code, but, the creation of an express
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trust must be firmly shown; it cannot be assumed from loose and vague declarations or
circumstances capable of other interpretations.
In Rizal Surety & Insurance Co. v. CA, we laid down the requirements before an express
trust will be recognized:
Basically, these elements include a competent trustor and trustee, an
ascertainable trust res, and sufficiently certain beneficiaries. xxx each of the
above elements is required to be established, and, if any one of them is missing, it
is fatal to the trusts (sic). Furthermore, there must be a present and complete
disposition of the trust property, notwithstanding that the enjoyment in the
beneficiary will take place in the future. It is essential, too, that the purpose be an
active one to prevent trust from being executed into a legal estate or interest, and
one that is not in contravention of some prohibition of statute or rule of public
policy. There must also be some power of administration other than a mere duty
to perform a contract although the contract is for a thirdparty beneficiary. A
declaration of terms is essential, and these must be stated with reasonable
certainty in order that the trustee may administer, and that the court, if called
upon so to do, may enforce, the trust. [emphasis ours]
Under these standards, we hold that no express trust was created. First, while an
ascertainable trust res and sufficiently certain beneficiaries may exist, a competent trustor and
trustee do not. Second, UCPB, as trustee of the ACCOUNT, was never under any equitable duty
to deal with or given any power of administration over it. On the contrary, it was PALII that
undertook the duty to hold the title to the ACCOUNT for the benefit of the HEIRS.Third, PALII,
as the trustor, did not have the right to the beneficial enjoyment of the ACCOUNT. Finally, the
terms by which UCPB is to administer the ACCOUNT was not shown with reasonable certainty.
While we agree with the petitioner that a trusts beneficiaries need not be particularly identified
for a trust to exist, the intention to create an express trust must first be firmly established, along
with the other elements laid above; absent these, no express trust exists.
UCPBs records and the testimony of UCPBs witness likewise lead us to the same
conclusion. While the words "ITF HEIRS" may have created the impression that a trust account
was created, a closer scrutiny reveals that it is an ordinary savings account. We give credence to
UCPBs explanation that the word "ITF" was merely used to distinguish the ACCOUNT from
PALIIs other accounts with UCPB. A trust can be created without using the word "trust" or
"trustee," but the mere use of these words does not automatically reveal an intention to create a
trust. If at all, these words showed a trustee-beneficiary relationship between PALII and the
HEIRS.
Contrary to the petitioners position, UCPB did not become a trustee by the mere opening
of the ACCOUNT. While this may seem to be the case, by reason of the fiduciary nature of the
banks relationship with its depositors, this fiduciary relationship does not "convert the contract
between the bank and its depositors from a simple loan to a trust agreement, whether express or
implied." It simply means that the bank is obliged to observe "high standards of integrity and
performance" in complying with its obligations under the contract of simple loan. Per Article
1980 of the Civil Code, a creditor-debtor relationship exists between the bank and its
depositor. The savings deposit agreement is between the bank and the depositor; by receiving the
deposit, the bank impliedly agrees to pay upon demand and only upon the depositors order.
Since the records and the petitioners own admission showed that the ACCOUNT was
opened by PALII, UCPBs receipt of the deposit signified that it agreed to pay PALII upon its
demand and only upon its order. Thus, when UCPB allowed PALII to withdraw from the
ACCOUNT, it was merely performing its contractual obligation under their savings deposit
agreement. No negligence or bad faith can be imputed to UCPB for this action. As far as UCPB
was concerned, PALII is the account holder and not the HEIRS. As we held in Falton Iron Works
Co. v. China Banking Corporation. the banks duty is to its creditor-depositor and not to third
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persons. Third persons, like the HEIRS here, who may have a right to the money deposited,
cannot hold the bank responsible unless there is a court order or garnishment.
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QUASI-DELICT
The aforementioned requisites having been met, there now arises a presumption of negligence
against Oscar Jr. which he could have overcome by evidence that he exercised due care and diligence in
preventing strangers from using his jeep. Unfortunately, he failed to do so.
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refute Sps. Mamaril's contention that they readily admitted being at fault during the investigation
that ensued.
Neither will the vicarious liability of an employer under Article 2180 of the Civil Code
apply in this case. It is uncontested that Pea and Gaddi were assigned as security guards by AIB
to BSP pursuant to the Guard Service Contract. Clearly, therefore, no employer-employee
relationship existed between BSP and the security guards assigned in its premises. Consequently,
the latter's negligence cannot be imputed against BSP but should be attributed to AIB, the true
employer of Pea and Gaddi.
In the case of Soliman, Jr. v. Tuazon, the Court enunciated thus:
It is settled that where the security agency, as here, recruits, hires and assigns the work of its
watchmen or security guards, the agency is the employer of such guards and watchmen. Liability for
illegal or harmful acts committed by the security guards attaches to the employer agency, and not to the
clients or customers of such agency. As a general rule, a client or customer of a security agency has no
hand in selecting who among the pool of security guards or watchmen employed by the agency shall be
assigned to it; the duty to observe the diligence of a good father of a family in the selection of the guards
cannot, in the ordinary course of events, be demanded from the client whose premises or property are
protected by the security guards. The fact that a client company may give instructions or directions to the
security guards assigned to it, does not, by itself, render the client responsible as an employer of the
security guards concerned and liable for their wrongful acts or omissions. Those instructions or
directions are ordinarily no more than requests commonly envisaged in the contract for services entered
into with the security agency.
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its own validation procedure, it nevertheless ruled that the plaintiff depositor (private respondent)
must share in the loss on account of its contributory negligence. Thus:
The foregoing notwithstanding, it cannot be denied that, indeed, private
respondent was likewise negligent in not checking its monthly statements of account. Had
it done so, the company would have been alerted to the series of frauds being committed
against RMC by its secretary. The damage would definitely not have ballooned to such
an amount if only RMC, particularly Romeo Lipana, had exercised even a little vigilance
in their financial affairs. This omission by RMC amounts to contributory negligence
which shall mitigate the damages that may be awarded to the private respondent under
Article 2179 of the New Civil Code, to wit:
"x x x. When the plaintiffs own 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."
In view of this, we believe that the demands of substantial justice are satisfied
by allocating the damage on a 60-40 ratio. Thus, 40% of the damage awarded by the
respondent appellate court, except the award ofP25,000.00 attorneys fees, shall be borne by
private respondent RMC; only the balance of 60% needs to be paid by the petitioners. The award
of attorneys fees shall be borne exclusively by the petitioners.
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