QUEENIE

G.R. No. 164985, January 15, 2014

FIRST UNITED CONSTRUCTORS CORPORATION and BLUE STAR
CONSTRUCTION CORPORATION,Petitioners, vs. BAYANIHAN AUTOMOTIVE
CORPORATION, Respondent.
Interest Rates / legal principles of recoupment and compensation.
Facts: Petitioner First United Constructors Corporation (FUCC) and petitioner Blue Star
Construction Corporation (Blue Star) business associates, ordered six units of dump
trucks from the respondent on May 27, 1992 to July 8, 1992.
Sometime in September 1992, FUCC ordered again from the respondent one unit of Hino
Prime Mover and one unit of Isuzu Transit Mixer. For the two purchases, FUCC partially
paid in cash, and the balance through post-dated checks. Upon presentment of the checks
for payment, the respondent learned that FUCC had ordered the payment stopped. The
respondent immediately demanded the full settlement of their obligation from the
petitioners, but to no avail. Instead, the petitioners informed the respondent that they were
withholding payment of the checks due to the breakdown of one of the dump trucks they
had earlier purchased from respondent in the month of May 1992, to which the
respondents refused to repair. Their main contention was that there was breach of
warranty of the purchases. To this, the respondent commenced this action for collection
on April 29, 1993, seeking payment of the unpaid balance in the amount of P735,000.00
represented by the two checks.
Reiterating their contentions in their answers and adding reedy of recoupment and legal
compensation, the petitioners prayed that the respondent return the price of the defective
dump truck worth P830,000.00 minus the amounts of their two checks
worth P735,000.00, with 12% per annum interest on the difference of P90,000.00 from
December 16, 1992, the date of demand, until fully paid. The RTC found petitioners
liable to pay for the unpaid balance of the purchase price of the 2 units and that they
could not avail themselves of legal compensation because the claims they had set up in
the counterclaim were not liquidated and demandable. CA affirmed the judgment of the
RTC. It held that the remedy of recoupment could not be properly invoked since the
transactions were different; that the expenses incurred for the repair and spare parts of the
second dump truck were not a proper subject of recoupment because they did not arise
out of the purchase of the Mover and the Mixer; and that the petitioners claim could not
also be the subject of legal compensation or set-off, because the debts in a set-off should
be liquidated and demandable. Hence the case before the Supreme Court.
Issues: May the right of recoupment under Article 1599(1) of the Civil Code be exercised
by a buyer as against another involving a different transaction? No
When can there be legal compensation?
Held: Recoupment (reconvencion) is the act of rebating or recouping a part of a claim
upon which one is sued by means of a legal or equitable right resulting from a
counterclaim arising out of the same transaction.7 It is the setting up of a demand arising
from the same transaction as the plaintiffs claim, to abate or reduce that claim.
Article 1599. Where there is a breach of warranty by the seller, the buyer may, at his
election: (1) Accept or keep the goods and set up against the seller, the breach of warranty
by way of recoupment in diminution or extinction of the price; xxx
When the buyer has claimed and been granted a remedy in anyone of these ways, no
other remedy can thereafter be granted, without prejudice to the provisions of the second
paragraph of article 1191. (Emphasis supplied) xxx
Paragraph (1) of Article 1599 of the Civil Code which provides for the remedy of
recoupment in diminution or extinction of price in case of breach of warranty by the

seller should therefore be interpreted as referring to the reduction or extinction of the

price of the same item or unit sold and not to a different transaction or contract of sale.
This is more logical interpretation of the said article considering that it talks of breach of
warranty with respect to a particular item sold by the seller. Necessarily, therefore, the
buyers remedy should relate to the same transaction and not to another.
Legal compensation was permissible:Legal compensation takes place when the
requirements set forth in Article 1278 and Article 1279 of the Civil Code are present, to
wit: Article 1278. Compensation shall take place when two persons, in their own right,
are creditors and debtors of each other."
Article 1279. In order that compensation may be proper, it is necessary:
(1) That each of the obligors be bound principally, and that he be at the same time
a principal creditor of the other;
(2) That both debts consists in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the 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.
A debt is liquidated when its existence and amount are determined. 12 Accordingly, an
unliquidated claim set up as a counterclaim by a defendant can be set off against the
plaintiffs claim from the moment it is liquidated by judgment. 13 Article 1290 of the Civil
Code provides that when all the requisites mentioned in Article 1279 of the Civil Code
are present, compensation takes effect by operation of law, and extinguishes both debts to
the concurrent amount. With petitioners expenses for the repair of the dump truck being
already established and determined with certainty by the lower courts, it follows that
legal compensation could take place because all the requirements were present. Hence,
the amount of P71,350.00 should be set off against petitioners unpaid obligation
of P735,000.00, leaving a balance of P663,650.00, the amount petitioners still owed to
respondent.
On interest: Article 2209. If the obligation consists in the payment of a sum of money,
and the debtor incurs in delay, the indemnity for damages, there being no stipulation to
the contrary, shall be the payment of the interest agreed upon, and in the absence of
stipulation, the legal interest, which is six per cent per annum.
QUEENIE
G.R. No. 162365, January 15, 2014
ROBERTO R. DAVID, Petitioner, v. EDUARDO C. DAVID, Respondent.
Sales/Sale with Right of Repurchase
Facts: In 1995, Eduardo and his brother Edwin C. David, acting on their own and in
behalf of their co-heirs, sold their inherited properties to Roberto, specifically: (a) a
parcel of land, located in Baguio City (b) two units International CO 9670 Truck Tractor
with two Mi-Bed Trailers. Their deed of sale with assumption of mortgage agreement
stipulated that the consideration for the sale was P6,000,000.00, of which P2,000,000 was
to be paid to Eduardo and Edwin, and the remaining P4,000,000.00 to be paid to DBP in
Baguio City to settle the outstanding obligation secured by a mortgage on such
properties. The deed of sale entered into by Eduardo and Roberto contained the following
stipulation on the right to repurchase, to wit: x x x the Vendors are given the right to
repurchase the aforesaid described real property, and the two (2) motor vehicles, together
with their respective trailers from the Vendee within a period of three (3) years from the
execution of this document on the purchase price agreed upon by the parties after
considering the amount previously paid to the Vendors in the amount of P2,000,000.00,

with an interest of 12% per annum and the amount paid with the DBP with an interest of
12% per annum.
Roberto and Edwin executed a MOA with the Spouses Marquez Go, by which they
agreed to sell the Baguio City lot to the latter for a consideration of P10,000,000.00. The
Spouses Go then deposited the amount of P10,000,000.00 to Robertos account. Hence,
Roberto gave Eduardo P2,800,000.00 and returned to him one of the truck tractors and
trailers subject of the deed of sale. Eduardo demanded for the return of the other truck
tractor and trailer, but Roberto refused to heed the demand. For this, Eduardo initiated
this replevin suit against Roberto, alleging that he was exercising the right to repurchase
under the deed of sale; and that he was entitled to the possession of the other motor
vehicle and trailer. In his answer, Roberto denied that Eduardo could repurchase the
properties in question; and insisted that the MOA had extinguished their deed of sale by
novation. RTC ruled that the stipulation giving Eduardo the right to repurchase had made
the deed of sale a conditional sale; that Eduardo had fulfilled the conditions for the
exercise of the right to repurchase; that the ownership of the properties in question had
reverted to Eduardo; that Robertos defense of novation had no merit. The CA affirmed
the RTCs decision. It opined that although there was no express exercise of the right to
repurchase, the sum of all the relevant circumstances indicated that there was an exercise
of the right to repurchase pursuant to the deed of sale.
Issues: when can the right of redemption be exercised?
What is the effect of sales with the right to repurchase?
When does novation takes place?
Held: A sale with right to repurchase is governed by Article 1601 of the Civil Code,
which provides that: Conventional redemption shall take place when the vendor reserves
the right to repurchase the thing sold, with the obligation to comply with the provisions of
Article 1616 and other stipulations which may have been agreed upon. Conformably
with Article 1616,14 the seller given the right to repurchase may exercise his right of
redemption by paying the buyer: (a) the price of the sale, (b) the expenses of the contract,
(c) legitimate payments made by reason of the sale, and (d) the necessary and useful
expenses made on the thing sold.
It should be noted that the alleged repurchase was exercised within the stipulated period
of three (3) years from the time the Deed of Sale with Assumption of Mortgage was
executed. The only question now, therefore, which remains to be resolved is whether or
not the conditions set forth in the Deed of Sale with Assumption of Mortgage, i.e. the
tender of the purchase price previously agreed upon, which is Php2.0 Million, plus 12%
interest per annum, and the amount paid by the defendant to DBP, had been satisfied.
From the testimony of the defendant himself, these preconditions for the exercise of
plaintiffs right to repurchase were adequately satisfied by the latter. Thus, as stated, from
the Php10 Million purchase price which was directly paid to the defendant, the latter
deducted his expenses plus interests and the loan, and the remaining amount he turned
over to the plaintiff. This testimony is an unequivocal acknowledgement from defendant
that plaintiff and his co-heirs exercised their right to repurchase the property within the
agreed period by satisfying all the conditions stipulated in the Deed of Sale with
Assumption of Mortgage. Moreover, defendant returned to plaintiff the amount of Php2.8
Million from the total purchase price of Php10.0 Million. This only means that this is the
excess amount pertaining to plaintiff and co-heirs after the defendant deducted the
repurchase price of Php2.0 Million plus interests and his expenses. Add to that is the fact
that defendant returned one of the trucks and trailers subject of the Deed of Sale with
Assumption of Mortgage to the plaintiff. This is, at best, a tacit acknowledgement of the
defendant that plaintiff and his co-heirs had in fact exercised their right to repurchase. x x
x.

In Metropolitan Bank and Trust Company v. Tan, the Court ruled that a redemption
within the period allowed by law is not a matter of intent but of payment or valid tender
of the full redemption price within the period. Verily, the tender of payment is the sellers
manifestation of his desire to repurchase the property with the offer of immediate
performance. As we stated in Legaspi v. Court of Appeals, a sincere tender of payment is
sufficient to show the exercise of the right to repurchase. Here, Eduardo paid the
repurchase price to Roberto by depositing the proceeds of the sale of the Baguio City lot
in the latters account. Such payment was an effective exercise of the right to repurchase.
In sales with the right to repurchase, the title and ownership of the property sold are
immediately vested in the vendee, subject to the resolutory condition of repurchase by the
vendor within the stipulated period. Accordingly, the ownership of the affected properties
reverted to Eduardo once he complied with the condition for the repurchase, thereby
entitling him to the possession of the other motor vehicle with trailer.
On Novation:
The issue of novation involves a question of fact, as it necessarily requires the factual
determination of the existence of the various requisites of novation, namely: (a) there
must be a previous valid obligation; (b) the parties concerned must agree to a new
contract; (c) the old contract must be extinguished; and (d) there must be a valid new
contract. With both the RTC and the CA concluding that the MOA was consistent with
the deed of sale, novation whereby the deed of sale was extinguished did not occur.
QUEENIE
G.R. No. 160600, January 15, 2014
DOMINGO GONZALO, Petitioner, v. JOHN TARNATE, JR., Respondent.
In pari delicto/ unjust enrichment
Facts: the DPWH awarded to Gonzalo Construction the Sadsadan-Maba-ay Road project
in Mountain Province. Petitioner Domingo Gonzalo (Gonzalo), the owner of said
construction firm subcontracted to respondent John Tarnate, Jr. (Tarnate) the supply of
materials and labor for the project. In furtherance of the subcontract, Gonzalo executed a
deed of assignment whereby he, as the contractor, was assigning to Tarnate an amount
equivalent to 10% of the total collection from the DPWH for the project. In the deed of
assignment, Gonzalo further authorized Tarnate to use the official receipt of Gonzalo
Construction in the processing of the documents relative to the collection of the 10%
retention fee and in encashing the check to be issued by the DPWH for that purpose. This
deed of assignment was submitted to the DPWH. During the processing of the documents
for the retention fee, however, Tarnate learned that Gonzalo had unilaterally rescinded the
deed of assignment and the same was filed to DPWH. The disbursement voucher for the
10% retention fee had then been issued in the name of Gonzalo, and the retention fee was
released to him.
Tarnate demanded the payment of the retention fee from Gonzalo, but to no avail. Thus,
he brought this suit against Gonzalo. Gonzalo admitted the deed of assignment and the
authority given therein to Tarnate, but averred that the project had not been fully
implemented because of its cancellation by the DPWH, and that he had then revoked the
deed of assignment. He insisted that the assignment could not stand independently due to
its being a mere product of the subcontract that had been based on his contract with the
DPWH; and that Tarnate, having been fully aware of the illegality and ineffectuality of
the deed of assignment from the time of its execution, could not go to court with unclean
hands to invoke any right based on the invalid deed of assignment or on the product of
such deed of assignment. The RTC, opined that the deed of assignment was a valid and
binding contract, and that Gonzalo must comply with it. The CA affirmed the RTCs

decision, holding that the agreement between them was illegal, hence they were guilty of
entering into the illegal contract in violation of Section 6 of Presidential Decree No.
1594; and that the deed of assignment, being a product of and dependent on the
subcontract, was also illegal and unenforceable. The CA, however, did not apply the
doctrine of in pari delicto, explaining that the doctrine applied only if the fault of one
party was more or less equivalent to the fault of the other party. It found Gonzalo to be
more guilty than Tarnate, whose guilt had been limited to the execution of the two illegal
contracts while Gonzalo had gone to the extent of violating the deed of assignment. It
declared that the crediting of the 10% retention fee to his account had unjustly enriched
Gonzalo, and ruled, accordingly, that Gonzalo should reimburse Tarnate therefor.
Issues: May a valid subcontract be given effect despite that the contract to which it
depends is illegal? No
May one party recover from another in cases where both of them are in pari delicto? Yes.
Unjust enrichment
Held: No. Every contractor is prohibited from subcontracting with or assigning to
another person any contract or project that he has with the DPWH unless the DPWH
Secretary has approved the subcontracting or assignment. This is pursuant to Section 6 of
Presidential Decree No. 1594.
Their subcontract was illegal, therefore, because it did not bear the approval of the
DPWH Secretary. Necessarily, the deed of assignment was also illegal, because it sprung
from the subcontract. The intention of the parties in executing the Deed of Assignment
was merely to cover up the illegality of the sub-contract agreement. They knew for a fact
that the DPWH will not allow plaintiff-appellee to claim in his own name under the SubContract Agreement. Obviously, without the Sub-Contract Agreement there will be no
Deed of Assignment to speak of. The illegality of the Sub-Contract Agreement
necessarily affects the Deed of Assignment because the rule is that an illegal agreement
cannot give birth to a valid contract. To rule otherwise is to sanction the act of entering
into transaction the object of which is expressly prohibited by law and thereafter execute
an apparently valid contract to subterfuge the illegality. The legal proscription in such an
instance will be easily rendered nugatory and meaningless to the prejudice of the general
public.
Under Article 1409 (1) of the Civil Code, a contract whose cause, object or purpose is
contrary to law is a void or inexistent contract. As such, a void contract cannot produce a
valid one. To the same effect is Article 1422 of the Civil Code, which declares that "a
contract, which is the direct result of a previous illegal contract, is also void and
inexistent."
We do not concur with the CAs finding that the guilt of Tarnate xxx was lesser than that
of Gonzalo. According to Article 1412 (1) of the Civil Code, the guilty parties to an
illegal contract cannot recover from one another and are not entitled to an affirmative
relief because they are in pari delicto or in equal fault. The doctrine of in pari delicto is a
universal doctrine that holds that no action arises, in equity or at law, from an illegal
contract; no suit can be maintained for its specific performance, or to recover the property
agreed to be sold or delivered, or the money agreed to be paid, or damages for its
violation; and where the parties are in pari delicto, no affirmative relief of any kind will
be given to one against the other.

Nonetheless, the application of the doctrine of in pari delicto is not always rigid. An
accepted exception arises when its application contravenes well-established public
policy. In this jurisdiction, public policy has been defined as "that principle of the law
which holds that no subject or citizen can lawfully do that which has a tendency to be
injurious to the public or against the public good."
Unjust enrichment exists xxx when a person unjustly retains a benefit at the loss of
another, or when a person retains money or property of another against the fundamental
principles of justice, equity and good conscience." The prevention of unjust enrichment is
a recognized public policy of the State, for Article 22 of the Civil Code explicitly
provides that "[e]very person who through an act of performance by another, or any other
means, acquires or comes into possession of something at the expense of the latter
without just or legal ground, shall return the same to him." It is well to note that Article
22 "is part of the chapter of the Civil Code on Human Relations, the provisions of which
were formulated as basic principles to be observed for the rightful relationship between
human beings and for the stability of the social order; designed to indicate certain norms
that spring from the fountain of good conscience; guides for human conduct that should
run as golden threads through society to the end that law may approach its supreme ideal
which is the sway and dominance of justice."
Tarnate provided the equipment, labor and materials for the project in compliance with
his obligations under the subcontract and the deed of assignment; and that it was Gonzalo
as the contractor who received the payment for his contract with the DPWH as well as the
10% retention fee that should have been paid to Tarnate pursuant to the deed of
assignment. Gonzalo would be unjustly enriched at the expense of Tarnate if the latter
was to be barred from recovering because of the rigid application of the doctrine of in
pari delicto. The prevention of unjust enrichment called for the exception to apply in
Tarnates favor. Consequently, the RTC and the CA properly adjudged Gonzalo liable to
pay Tarnate the equivalent amount of the 10% retention fee.
The doctrine of in pari delicto which stipulates that the guilty parties to an illegal contract
are not entitled to any relief, cannot prevent a recovery if doing so violates the public
policy against unjust enrichment.
QUEENIE
28. G.R. No. 185798, January 13, 2014
FIL-ESTATE
PROPERTIES,
INC.
AND
FIL-ESTATE
INC., Petitioners, v. SPOUSES
CONRADO
AND
MARIA
RONQUILLO, Respondents.
Fortuitous event/ Article. 1191/ Award of moral damages

NETWORK,
VICTORIA

Facts: Petitioner Fil-Estate Properties, Inc. is the owner and developer of the Central
Park Place Tower while co-petitioner Fil-Estate Network, Inc. is its authorized marketing
agent. Respondent Spouses Conrado and Maria Victoria Ronquillo purchased from
petitioners an 82-square meter condominium unit at Central Park Place Tower in
Mandaluyong City for a pre-selling contract price. As agreed upon, respondents paid the
full downpayment and had since 1997, been paying the monthly amortizations until
September 1998.
Upon learning that construction works had stopped, respondents likewise stopped paying
their monthly amortization. To this, respondents demanded a full refund of their payment
with interest. When their demands went unheeded, respondents were constrained to file a
Complaint for Refund and Damages before the HLURB. Petitioners on the other hand,

insisted that have not committed any act of misrepresentation amounting to bad faith
which could entitle respondents to a refund. Petitioners claim that there was a mere delay
in the completion of the project and that they only resorted to suspension and
reformatting as a testament to their commitment to their buyers. Petitioners attribute the
delay to the 1997 Asian financial crisis that befell the real estate industry. Invoking
Article 1174 of the New Civil Code, petitioners maintain that they cannot be held liable
for a fortuitous event. Lastly, petitioners aver that they should not be ordered to pay
moral damages because they never intended to cause delay, and again blamed the Asian
economic crisis as the direct, proximate and only cause of their failure to complete the
project. Petitioners submit that moral damages should not be awarded unless so stipulated
except under the instances enumerated in Article 2208 of the New Civil Code.
Issues: Is the Asian financial crisis constitute a fortuitous event which would justify delay
by petitioners in the performance of their contractual obligation? No
What are the remedies available to a buyer of a condominium unit? 1191, PD 957 sec. 23
When can there be a claim for moral damages sans any ground provided for under Article
2208 of the New Civil Code? Wanton bad faith.
Held: We cannot generalize that the Asian financial crisis in 1997 was unforeseeable and
beyond the control of a business corporation. Xxx A real estate enterprise engaged in the
pre-selling of condominium units is concededly a master in projections on commodities
and currency movements and business risks. The fluctuating movement of the Philippine
peso in the foreign exchange market is an everyday occurrence, and fluctuations in
currency exchange rates happen every day, thus, not an instance of caso fortuito.
Indeed, the non-performance of petitioners obligation entitles respondents to rescission
under Article 1191 of the New Civil Code which states: 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 fulfillment and the rescission of the obligation,
with payment of damages in either case. He may also seek rescission, even after he has
chosen fulfillment, if the latter should become impossible.
More in point is Section 23 of Presidential Decree No. 957, the rule governing the sale of
condominiums, which provides: Section 23. Non-Forfeiture of Payments. No installment
payment made by a buyer in a subdivision or condominium project for the lot or unit he
contracted to buy shall be forfeited in favor of the owner or developer when the buyer,
after due notice to the owner or developer, desists from further payment due to the failure
of the owner or developer to develop the subdivision or condominium project according
to the approved plans and within the time limit for complying with the same. Such buyer
may, at his option, be reimbursed the total amount paid including amortization interests
but excluding delinquency interests, with interest thereon at the legal rate.
Conformably with these provisions of law, respondents are entitled to rescind the contract
and demand reimbursement for the payments they had made to petitioners.
Finally, we sustain the award of moral damages. In order that moral damages may be
awarded in breach of contract cases, the defendant must have acted in bad faith, must be
found guilty of gross negligence amounting to bad faith, or must have acted in wanton
disregard of contractual obligations.19 The Arbiter found petitioners to have acted in bad
faith when they breached their contract, when they failed to address respondents
grievances and when they adamantly refused to refund respondents payment.
QUEENIE
29. G.R. No. 183204, January 13, 2014

THE METROPOLITAN BANK AND TRUST COMPANY, Petitioner, vs. ANA

GRACE ROSALES AND YO YUK TO, Respondents.
Damages/Exemplary Damages/Banks and Banking
Facts: In May 2002, respondent Rosales, a travel agency owner, accompanied her client
Liu Chiu Fang, a Taiwanese National to petitioners branch in Escolta to open a savings
account, as a requirement for her application of PLRA Philippine retirees visa.
Respondent Rosales acted as an interpreter for her. The following year, respondents
opened with petitioners Pritil-Tondo Branch a Joint Dollar Account with an initial
deposit of US$14,000.00 but petitioner issued a "Hold Out" order against her accounts in
line with a criminal case for Estafa, filed by petitioner against her. Petitioner accused
respondent Rosales and an unidentified woman as the ones responsible for the
unauthorized and fraudulent withdrawal of US$75,000.00 from Liu Chiu Fangs dollar
account with petitioners Escolta Branch. Petitioner alleged that respondent Rosales
accompanied an unidentified impostor of Liu Chiu Fang to the bank; that the impostor
was able to withdraw Liu Chiu Fangs dollar deposit in the amount of US$75,000.00; that
the following month, respondents opened a dollar account with petitioner; and that the
bank later discovered that the serial numbers of the dollar notes deposited by respondents
in the amount of US$11,800.00 were the same as those withdrawn by the impostor.
Respondent Rosales, however, denied taking part in the fraudulent and unauthorized
withdrawal from the dollar account of Liu Chiu Fang.
For her part, respondents filed before the RTC of Manila a Complaint for Breach of
Obligation and Contract against petitioner. Respondents alleged that they attempted
several times to withdraw their deposits but were unable to because petitioner had placed
their accounts under "Hold Out" status. No explanation, however, was given by petitioner
as to why it issued the "Hold Out" order. RTC found petitioner liable for breach of
contract and ordered the release of respondents deposit. The CA affirmed the ruling of
the RTC. Both the RTC and the CA held that the "Hold Out" clause does not apply in the
instant case. Hence, the case before the Supreme Court.
Issues: When is a "Hold Out" clause applicable?
What is the nature of the contract of deposit in a ban to warrant the latter liable for breach
of contract?
When can moral and exemplary damages be awarded sans any ground under the Civil
Code?
Held: The "Hold Out" clause applies only if there is a valid and existing obligation
arising from any of the sources of obligation enumerated in Article 1157 of the Civil
Code, to wit: law, contracts, quasi-contracts, delict, and quasi-delict. In this case,
petitioner failed to show that respondents have an obligation to it under any law, contract,
quasi-contract, delict, or quasi-delict. And although a criminal case was filed by
petitioner against respondent Rosales, this is not enough reason for petitioner to issue a
"Hold Out" order as the case is still pending and no final judgment of conviction has been
rendered against respondent Rosales. Thus, considering that respondent Rosales is not
liable under any of the five sources of obligation, there was no legal basis for petitioner to
issue the "Hold Out" order. Accordingly, we agree with the findings of the RTC and the
CA that the "Hold Out" clause does not apply in the instant case.

Xxx Petitioner is guilty of breach of contract when it unjustifiably refused to release

respondents deposit despite demand. Having breached its contract with respondents,
petitioner is liable for damages.
Bank deposits, which are in the nature of a simple loan or mutuum, must be paid upon
demand by the depositor.
Respondents are entitled to moral and exemplary damages and attorneys fees.1wphi1In
cases of breach of contract, moral damages may be recovered only if the defendant acted
fraudulently or in bad faith, or is "guilty of gross negligence amounting to bad faith, or in
wanton disregard of his contractual obligations."
xxx Petitioner issued the "Hold Out" order in bad faith. First of all, the order was issued
without any legal basis. Second, petitioner did not inform respondents of the reason for
the "Hold Out." Third, the order was issued prior to the filing of the criminal complaint.
All these taken together lead us to conclude that petitioner acted in bad faith when it
breached its contract with respondents. As we see it then, respondents are entitled to
moral damages.
As to the award of exemplary damages, Article 2229 of the Civil Code provides that
exemplary damages may be imposed "by way of example or correction for the public
good, in addition to the moral, temperate, liquidated or compensatory damages." They are
awarded only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner.
Xxx Petitioner indeed acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner when it refused to release the deposits of respondents without any legal basis. We
need not belabor the fact that the banking industry is impressed with public interest. As
such, "the highest degree of diligence is expected, and high standards of integrity and
performance are even required of it." It must therefore "treat the accounts of its depositors
with meticulous care and always to have in mind the fiduciary nature of its relationship
with them." For failing to do this, an award of exemplary damages is justified to set an
example.
QUEENIE
30. G.R. No. 191516 June 4, 2014
REPUBLIC OF THE PHILIPPINES, Petitioner, vs. FRANCISCA, GERONIMO
and CRISPIN, all surnamed SANTOS, Respondents.
Land Registration/Alienable and Disposable Lands
Facts: The respondents, all surnamed Santos, filed an Application for Registration of title
for four parcels of land in Taguig. The Application of the respondents was accompanied
by Technical Description, survey plans, Surveyor's Certificate, Tax Declaration, Deed of
Extrajudicial Settlement.
Trial on the merits followed. The court a quo was satisfied that the respondents have
discharged their burden of proving their registrable right over the said properties by
presenting and formally offering the above pieces of evidence. Accordingly, the court a
quo ordered the registration of the said properties in the names of the respondents.
The Solicitor General did not agree with the foregong Decision of the court a quo, filed
its Appellants' Brief before the CA. The respondents, however, failed to submit a
corresponding Appellees' Brief. Due to the failure of the respondents to submit the
Appellees' Brief, despite notice from the CA, the Appeal was considered submitted for
decision. CA merely affirmed the Decision of the RTC.

Issue: Whether the above evidence are sufficient to show that the subject lots had been
declared alienable and disposable lands of the public domain at the time the application
was filed?
Held: No. In Republic v. Medida, the Court emphasized that "anyone who applies for
registration of ownership over a parcel of land has the burden of overcoming the
presumption that the land sought to be registered forms part of the public
domain." Expounding on the kind of evidence required to overcome said presumption,
the Court stated, thus:
As the rule now stands, an applicant must prove that the land subject of an application for
registration is alienable and disposable by establishing the existence of a positive act of
the government such as a presidential proclamation or an executive order; an
administrative action; investigation reports of Bureau of Lands investigators; and a
legislative act or a statute. The applicant may also secure a certification from the
government that the land claimed to have been possessed for the required number of
years is alienable and disposable. In a line of cases, we have ruled that mere notations
appearing in survey plans are inadequate proof of the covered properties alienable and
disposable character. x x x To prove that the land subject of an application for registration
is alienable, an applicant must establish the existence of a positive act of the government
such as a presidential proclamation or an executive order, an administrative action,
investigation reports of Bureau of Lands investigators, and a legislative act or statute. The
applicant may also secure a certification from the Government that the lands applied for
are alienable and disposable. x x x
Our Constitution, no less, embodies the Regalian doctrine that all lands of the public
domain belong to the State, which is the source of any asserted right to ownership of
land. The courts are then empowered, as we are duty-bound, to ensure that such
ownership of the State is duly protected by the proper observance by parties of the rules
and requirements on land registration.
QUEENIE
31. G.R. No. 185092, June 4, 2014
REPUBLIC OF THE PHILIPPINES, Petitioner, vs. CORAZON C. SESE and FE C.
SESE, Respondents.
Land Registration/Land Titles/Acquisitive Prescription
Facts: In 2002, Corazon C. Sese and Fe C. Sese (respondents) filed with the MTC an
application for original registration of land over a parcel of land, situated in Pulilan,
Bulacan. They alleged that in 1972 they acquired, through a donation inter vivos from
their mother, Resurreccion L. Castro the subject agricultural land; that they, through their
predecessors-in-interest, had been in possession of the subject property; and that the
property was not within a reservation.
In support of their application, respondents submitted the following documents, namely:
Tax Declaration in their names; Certificate of Technical Description approved by the
DENR; Certification from the Office of the Municipal Treasurer of Pulilan, stating that
the registered owners of a property under said Tax Declaration were Corazon Sese and
others; and (6) Survey plan approved by the DENR, stating that the land subject of the
survey was alienable and disposable.

Finding the application sufficient in form and substance, the MTC proceeded with trial on
the merits of the application. The OSG did not present any evidence to oppose the
application. Hence, the MTC ordered the registration of the subject property in the name
of respondents. The MTC reasoned out that there was evidence to show that the subject
lots had been in open, continuous, adverse, and public possession, either by the applicants
themselves or their predecessor-in-interest. Such possession since time immemorial
conferred an effective title on the applicants, whereby the land ceased to be public and
became private property. It had been the accepted norm that open, adverse and
continuous possession for at least 30 years was sufficient. The OSG interposed an appeal,
presented the following assignment of errors: a) only alienable lands of the public domain
occupied and possessed in concept of owner for a period of at least thirty (30) years is
entitled to confirmation of title; and b) respondents failed to prove specific acts of
possession. The CA affirmed the decision of the lower court, reasoning out, that the
approved survey plan of the subject property with an annotation, stating that the subject
property was alienable and disposable land, was a public document, having been issued
by the DENR, a competent authority. Its contents were prima facie evidence of the facts
stated therein. Thus, the evidence was sufficient to establish that the subject property was
indeed alienable and disposable.
Issue: what is the proof that a land is alienable and disposable, hence, subject to private
occupation?
Held: Section 14(1) of Presidential Decree (P.D.)No. 1529, xxxx provides:
SECTION 14. Who may apply. The following persons may file in the proper Court of
First Instance an application for registration of title to land, whether personally or through
their duly authorized representatives:
(1) Those who by themselves or through their predecessors in-interest have been in open,
continuous, exclusive and notorious possession and occupation of alienable and
disposable lands of the public domain under a bona fide claim of ownership since June
12, 1945, or earlier. x x x x
Section 48. The following described citizens of the Philippines, occupying lands of the
public domain or claiming to own any such lands or an interest therein, but whose titles
have not been perfected or completed, may apply to the Court of First Instance now
Regional Trial Court of the province where the land is located for confirmation of their
claims and the issuance of a certificate of title therefor, under the Land Registration Act,
to wit: x x x x
(b) Those who by themselves or through their predecessors in-interest have been in open,
continuous, exclusive and notorious possession and occupation of agricultural lands of
the public domain, under a bona fide claim of acquisition of ownership, since June 12,
1945, or earlier, immediately preceding the filing of the application for confirmation of
title except when prevented by war or force majeure. These shall be conclusively
presumed to have performed all the conditions essential to a Government grant and shall
be entitled to a certificate of title under the provisions of this chapter.
Based on the above-quoted provisions, applicants for registration of land title must
establish and prove: (1) that the subject land forms part of the disposable and alienable
lands of the public domain; (2) that the applicant and his predecessors-in-interest have
been in open, continuous, exclusive and notorious possession and occupation of the same;
and (3) that it is under a bona fide claim of ownership since June 12, 1945, or

earlier. Compliance with the foregoing requirements is indispensable for an application

for registration of land title, under Section 14(1) of P.D. No. 1529, to validly prosper. The
absence of any one requisite renders the application for registration substantially
defective. Xxx
The burden of proof in overcoming the presumption of State ownership of the lands of
the public domain is on the person applying for registration (or claiming ownership), who
must prove that the land subject of the application is alienable or disposable. To
overcome this presumption, incontrovertible evidence must be established that the land
subject of the application (or claim) is alienable or disposable. The applicant must
establish the existence of a positive act of the government such as a presidential
proclamation or an executive order; an administrative action; investigation reports of
Bureau of Lands investigators; or a legislative act or a statute. The applicant may also
secure a certification from the government that the land claimed to have been possessed
for the required number of years is alienable and disposable.
Thus, the present rule is that an application for original registration must be accompanied
by (1) a CENRO or PENRO Certification; and (2) a copy of the original classification
approved by the DENR Secretary and certified as a true copy by the legal custodian of
the official records.
Here, the only evidence presented by respondents to prove the disposable and alienable
character of the subject land was an annotation by a geodetic engineer in a survey plan.
Although this was certified by the DENR, it clearly falls short of the requirements for
original registration.
With regard to the third requisite, it must be shown that the possession and occupation of
a parcel of land by the applicant, by himself or through his predecessors-in-interest,
started on June 12, 1945 or earlier. A mere showing of possession and occupation for 30
years or more, by itself, is not sufficient.
QUEENIE
32.G.R.No. 171286, June 2, 2014
DOLORES CAMPOS, Petitioner v. DOMINADOR ORTEGA, SR. and JAMES
SILOS, Respondents.
Reconveyance/Prescription/Vested right
Facts: Petitioner Dolores Campos filed a case for specific performance against
respondents. In her complaint , she alleged that Ortega and his family occupied the entire
second level as well as the front portion of the ground level of a residential structure
located on Blumentritt Street, Mandaluyong City. The lot on which the structure itself is
owned by Dominga Boloy from whom plaintiff leased the same beginning in 1966.
Pursuant to the Zonal Improvement Program (ZIP) of the then Metro Manila
Commission, in coordination with the Local Government of Mandaluyong City, a census
of the Hulo estate, where plaintiffs dwelling is located, was conducted wherein plaintiff
was among those censused and qualified as bona fide occupant. As a consequence of
having qualified, plaintiff assigned an identifying house tag number of 77-000070-08 on
August 20, 1977. The daughter in law of Dominga Boloy (the owner), managed the
leased premises after her death. Later, one Walter Boloy demanded from the plaintiff and
the family immediate vacation of the subject premises. An Ejectment case was filed, but
was dismissed by the lower court.
After receiving the said decision, and after having verified her husbands status as a bona
fide occupant, plaintiff follow up with the NHA. She learned that all bona fide occupants

may be allowed to buy the structure if the owner had already died. Plaintiff was given one
month to exercise the option of buying the property denominated as Lot 17, Block 7,
Phase III. Plaintiff acceded since the property they are occupying was Lot 18, Block 7.
Lot 18, Block 7, Phase III was awarded to defendants. As a result of the bypassing of
plaintiffs right, she was dislocated. Respondents countered that the complaint stated no
cause of action, and that, if any, such cause of action is already barred by prior judgment.
Petitioner admitted in the Verification that an action for recovery of possession was
commenced against her by respondents before the RTC of Pasig, involving the same
property and that it was resolved in respondents favour; and that such decision was
affirmed by the CA and became final and executory.
The RTC of Mandaluyong ruled in favor of petitioner and declared the acquisition of
respondents of the Lot 18, Block 7 of the Hulo estate void for being violative of the right
of the plaintiff. Further, NHA is ordered to recognize plaintiffs right to purchase the
structure and give her reasonable time within which to exercise said right. The CA
reversed the trial courts decision. It ruled that petitioner has no vested right over the
subject parcel of land and the residential structure standing thereon. Hence, this case.
Issue: what is the nature of a vested right?
May the tagging/marking of a real property pursuant to census creates a vested right? No
Held: A vested right is one that is absolute, complete and unconditional and no obstacle
exists to its exercise. It is immediate and perfect in itself and not dependent upon any
contingency. To be vested, a right must have become a title legal or equitable to the
present or future enjoyment of property.
Contrary to petitioner's position, the issuance of a tag number in her favor did not grant
her irrefutable rights to the subject property. The "tagging of structures" in the Bagong
Barrio area was conducted merely to determine the qualified beneficiaries and bona fide
residents within the area. It did not necessarily signify an assurance that the tagged
structure would be awarded to its occupant as there were locational and physical
considerations that must be taken into account, as in fact, the area where petitioner's
property was located had been classified as Area Center (open space). The assignment of
a tag number was a mere expectant or contingent right and could not have ripened into a
vested right in favor of petitioner. Her possession and occupancy of the said property
could not be characterized as fixed and absolute. As such, petitioner cannot claim that she
was deprived of her vested right when the NHA ordered her relocation to another area.