Pg.

11 - Ben Vs O’brien

FACTS: On December 12, 1917, an action was instituted in the Court of First Instance of Manila by P.J. O’Brien
to recover of Leung Ben the sum of P15,000, all alleged to have been lost by the plaintiff to the defendant in
a series of gambling, banking, and percentage games conducted during the two or three months prior to the
institution of the suit. The plaintiff asked for an attachment against the property of the defendant, on the
ground that the latter was about to depart from the Philippines with intent to defraud his creditors. This
attachment was issued. The provision of law under which this attachment was issued requires that there
should be a cause of action arising upon contract, express or implied. The contention of the petitioner is that
the statutory action to recover money lost at gaming is not such an action as is contemplated in this
provision, and he insists that the original complaint shows on its face that the remedy of attachment is not
available in aid thereof; that the Court of First Instance acted in excess of its jurisdiction in granting the writ
of attachment; that the petitioner has no plain, speedy, and adequate remedy by appeal or otherwise; and
that consequently the writ of certiorari supplies the appropriate remedy for this relief.

ISSUE: Whether or not the statutory obligation to restore money won at gaming is an obligation arising from
contract, express or implied.

RULING: Yes. In permitting the recovery money lost at play, Act No. 1757 has introduced modifications in
the application of Articles 1798, 1801, and 1305 of the Civil Code.

The first two of these articles relate to gambling contracts, while article 1305 treats of the nullity of contracts
proceeding from a vicious or illicit consideration. Taking all these provisions together, it must be apparent
that the obligation to return money lost at play has a decided affinity to contractual obligation; and the Court
believes that it could, without violence to the doctrines of the civil law, be held that such obligations is an
innominate quasi-contract.

It is however, unnecessary to place the decision on this ground. In the opinion of the Court, the cause of
action stated in the complaint in the court below is based on a contract, express or implied, and is therefore
of such nature that the court had authority to issue the writ of attachment. The application for the writ of
certiorari must therefore be denied and the proceedings dismissed.

Pg. 12 - Navales vs Rias

Pg.12 Dela Cruz vs Northern Theatrical Enterprises

Facts: 1941, The Northern Theatrical Enterprises Inc., a domestic corporation operated a movie house in
Laoag, Ilocos Norte. Domingo De La Cruz was employed whose duties were to guard the main entrance, to
maintain peace and order and to report the commission of disorders within premises. He carried a revolver.
Benjamin Martin wanted to crash the gate or entrance of the movie house. Infuriated by the refusal of De la
Cruz to let him in without first providing himself with a ticket, Martin attacked him with a bolo. De la Cruz
defendant himself as best he could until he was cornered, at which moment to save himself he shot Martin,
resulting in Benjamin Martin’s death.
De la Cruz was charged with homicide. After a re-investigation conducted by the Provincial Fiscal the latter
filed a motion to dismiss the complaint, which was granted by the court. De la Cruz was again accused of the
same crime of homicide. After trial, he was finally acquitted of the charge.
He then demanded from former employer to repay the expenses but was refused thus filed present action
against the Northern Theatrical Enterprises Inc company and to three members of its Board of Directors to
recover amounts he had paid his lawyers including moral damages said to have been suffered due to his

Page 1 of 12
worry, neglect of his interests and his family as well in the supervision of the cultivation of his land, a total
of P 15,000.
Court of First Instance of Ilocos Norte rejected the theory of De la Cruz because he was an agent of Northern
Theatrical Enterprises Inc. and that as such agent he was entitled to compensate the expenses incurred by
him in connection with the agency.
The court found and decided that De La Cruz had no cause of action and dismissed the complaint without
costs.

Issue:

Whether or not an agent who’s in the line of duty performs an act that resulted in his incurring expenses
caused by a stranger. May the latter recover the said expenses against his former employer.

Held:

No, because the relationship between the Northern Theatrical Enterprises Inc. and plaintiff was not that of
principal and agent because the principle of representation as a characteristic of agency was in no way
involved. Plaintiff was not employed to represent corporation in its dealings with third parties. Plaintiff is a
mere employee hired to perform a certain specific duty or task, that of acting as a special guard and staying
at the main entrance of the movie house to stop gate crashers and to maintain peace and order within the
premises.

Pg. 13 – Pelayo vs Lauron

- Husband is liable for medical assistance rendered to his wife but contracted by his parents

Pg.14 –
- Title to property purchased by a person for his own benefit but paid by another

Pg. 14 – Tiu Peck vs Court of Appeals

In his lifetime, Joaquin Tiu Singco, father of petitioner Tiu Peck, owned and operated the Argentina Trading,
a business engaged in the buying and selling of lumber, hardware and general merchandise in San Marcelino,
Zambales. Helping him run the business were private respondents: Tan King who helped manage the store
and receiving P200.00 a month, while his wife Conchita M. Rubiato did the marketing and cooking for which
work she received a salary of around P180.00 to P240.00 a month. The business license was, however, in the
name of Conchita M. Rubiato.

After the death of Joaquin Tiu Singco in 1974, Tiu Peck took over and continued the business left by his
father. Tan King and Conchita M. Rubiato continued to help him in the management of the said business,
eventually becoming partners thereof.

Sometime in 1983, petitioners and private respondents decided to end their business partnership.
Accordingly, they sought the help of five (5) respected members of the Filipino Chinese Chamber of
Commerce and Industry of Olongapo City (of which petitioners and private respondents are members) to act
as middlemen. Together with the five (5) middlemen, Tiu Peck and Tan King discussed the manner of their
separation and the liquidation of the partnership properties. As a result of the discussion, an "Agreement on
the Apportionment of Partnership Business" was drawn up.

Tui Peck, also known as Lim fan Chiao, and Tan King, also known as Tiu To Suan, both signed the Agreement
to which the five (5) middlemen also affixed their signatures as witnesses.
Page 2 of 12
Immediately thereafter, Tiu Peck took possession of the lumber and hardware business including the lot and
building as well as the merchandise therein. On the other hand, Tan King and Conchita M. Rubiato took
possession of the piggery business, the lot and all the improvements thereon as well as the hogs.

After three (3) years, or specifically on 21 April 1986, private respondents wrote petitioners demanding
partition of the same properties subject of the Agreement of 31 August 1983. Eventually, private
respondents filed an action against petitioners for partition of the parcel of land covered by TCT No. T-24999
where the lumber and hardware business was conducted and the parcel of land covered by Tax Declaration
No. 10985 where the piggery business was located.

After trial, the Regional Trial Court of the Third Judicial Region, Branch 72, Olongapo City, rendered
judgment, declaring, among other, things, that the parcels of land covered by Transfer Certificate of Title No.
T-24999 and Tax Declaration No. 1098 are owned in common by the plaintiffs (private respondents) and the
defendants in pro-indiviso equal shares; that the plaintiffs (private respondents) are the owners of the
building covered by Tax Declaration No. 59345 built on the parcel of land covered by TCT No. T-24999; and
ordering plaintiffs and defendants to partition the said parcels of land among themselves.

Petitioners (as defendants) appealed the above decision to respondent Court of Appeals. On 11 October
1991, respondent Court promulgated the challenged decision modifying the trial court's judgment.

Undaunted, petitioners are now before us seeking a review of respondent court's decision.

We agree with the resolution of the respondent court on this issue.

To begin with, it cannot be said that there was a business partnership between the appellants on the one
hand and the appellees on the other, absent the required public instrument constituting the partnership,
immovable properties having been contributed by the parties (Article 1771, Civil Code) and recording thereof
in the Securities and Exchange Commission (Article 1772, Civil Code).

Nonetheless, the parties may be deemed as co-owners of the real properties and the businesses they are
engaged in mentioned in the agreement aforequoted (Exhibits 62 and 63). (Underscoring supplied)

But the parties be (they) partners or co-owners as the case may be, the parcel of land mentioned in the
agreement (Exhibits 62 and 63) where the lumber and hardware business was conducted, covered by TCT
No. 24999 (Exhibit A), and the building erected thereon covered by Tax Declaration No. 59345 (Exhibit B);
and the parcel of land where their piggery business was located, covered by Tax Declaration No. 10985
(Exhibit I), including the building and lot and all the goods including the feeds therein belong to appellants
on the one hand and appellees on the other. 5

Following the abovequoted ratiocination of respondent court, we expected it to then rule on the validity and
binding effect of the partition of the subject properties between the two (2) contending parties as co-owners.
Unfortunately, it diverted from the trend of its position when it disregarded the real intention of the parties
which was to divide the businesses and properties owned by them in common. Respondent court itself
perceived this intention when it stated:

. . . Such is the import of their agreement where appellant Tiu Peck and appellee Tan King agreed to terminate
their partnership in business and apportion their lumber and hardware business valued P1,600,000,
including (the) building and lot, and all the merchandise and piggery valued P1,000,000, including the
building and lot and all the goods including the feeds (Exhibits 62 and 63). 6 (Emphasis supplied)

It should be noted that private respondent Conchita M. Rubiato initiated the move to terminate the so-called
partnership when she informed Tiu Peck that since their children were already grown-up, it was a propitious
Page 3 of 12
time for them to separate their businesses. To this proposal, Tiu Peck agreed. With the help of five (5)
respected middlemen, they drew-up on 31 August 1983 the Agreement on the Apportionment of
Partnership Businesses which they all signed. There can be no doubt, therefore, that the two (2) parties
wanted to go their separate ways in their business and to get their respective shares of the properties which
they owned in common when they drew up and executed the 31 August 1983 agreement.

This brings us to the second issue: whether or not the agreement of 31 August 1983 is valid and binding
between the petitioners and private respondents.

There is no question that petitioners and the private respondents voluntarily entered into the agreement to
apportion or divide their businesses, whether as partners or co-owners. That agreement is the law between
them. Contracts shall be obligatory in whatever form they may have been entered into, provided all the
essential requisites for their validity are present.7 The fact that after signing the agreement both parties
immediately took possession of their respective shares is the most compelling evidence that there was
indeed a binding partition of the properties. Contracts, once perfected, have the force of law between the
parties who are bound to comply therewith in good faith, and neither one may, without the consent of the
other, renege therefrom. 8

And, as held by respondent court, even though petitioner Lee Yok Yan and respondent Conchita M. Rubiato
were not actual signatories to the agreement, nonetheless, such agreement is persuasive for or against
them. Indeed, private respondents have no justification to refuse delivery of TCT No. T-24999 to petitioners
after they agreed to the partition and consequently took possession of the piggery business and operated it
for three (3) years before changing their minds and seeking a new partition. It has not been explained by
them — as perhaps explanation is not possible — why it took them three (3) years before they decided for
another partition of the same properties subject of their agreement on 31 August 1983.

. . . Contracts solemnly and deliberately entered into may not be overturned by inconclusive proof or by
reason of mistake of one of the parties to which the other in no way has contributed. 9

The respondent court, in our view, erred in ordering another partition after ruling that there is no partnership
but a co-ownership of the real properties and businesses between the petitioners and private respondents.

Moreover, the title of the contract does not necessarily determine its true nature.

The acts of the contracting parties, subsequent to, and in connection with, the performance of the contract
must be considered in the interpretation of the contract. . . . To determine the nature of a contract, courts
do not have or are not bound to rely upon the name or title given it by the contracting parties . . . but the
way the contracting parties do or perform their respective obligations, stipulated or agreed upon may be
shown and inquired into, and should such performance conflict with the name or title given the contract by
the parties, the former must prevail over the latter. 10

WHEREFORE, in view of the foregoing, the decision appealed from ordering the partition of the properties
in question is hereby SET ASIDE.

William Golangco Construction Corp. (WGCC) vs Phil Commercial Intl Bank (PCIB)

Facts:
• William Golangco Construction Corporation (WGCC) and the Philippine Commercial
International Bank (PCIB) entered into a contract for the construction of the extension
of PCIB Tower II.
• The project included, among others, the application of a granitite wash-out finish on
Page 4 of 12
the exterior walls of the building
• To answer for any defect arising within a period of one year, WGCC submitted a
guarantee bond dated July 1, 1992.
• Portions of the granitite wash-out finish of the exterior of the building began peeling
off and falling from the walls in 1993. WGCCmade minor repairs after PCIB requested
it to rectify the construction defects.
• PCIB entered into another contract with Brains and Brawn Construction and
Development Corporation to re-do the entire granitite wash-out finish after WGCC
manifested that it was "not in a position to do the new finishing work," though it was
willing to share part of the cost. PCIB incurred expenses amounting to P11,665,000 for
the repair work.
• PCIB filed for the reimbursement of its expenses for the repairs made byanother
contractor. It complained of WGCC’s alleged non-compliance with their contractual
terms on materials and workmanship.

ISSUE: Whether or not petitioner WGCC is liable for defects in the granitite washout finish that
occurred after the lapse of the one year defects liabilities period provided.

HELD:
• No. The autonomous nature of contracts is enunciated in Article 1306 of the Civil Code.
Article 1306. The contracting parties may establish such stipulations, clauses, terms
and conditions as they may deem convenient, provided they are not contrary to
law, morals, good customs, public order, or public policy.
• The provision/stipulation in the construction contract providing for a defects liability
period was not shown as contrary to law, morals, good customs, pubic order or public
policy.
• In characterizing the contract as having the force of law between the parties, the law
stresses the obligatory nature of a binding and valid agreement. The courts will not
relieve a party from the effects of unwise, unfavorable, and confused contract freely
entered into.
• After the lapse of the period agreed upon therein, he may no longer &e held
accountable for whatever defects, deficiencies or imperfections that may be discovered
in the work executed by him.

FGU insurance vs GP Sarmiento Trucking Corp.

FACTS OF THE CASE: G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty
(30) units of Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert Eroles. While
the truck was traversing the north diversion road along McArthur highway in Barangay Anupol, Bamban,
Tarlac, it collided with an unidentified truck, causing it to fall into a deep canal, resulting in damage to the
cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries, Inc., the value
of the covered cargoes: P204, 450.00. FGU, in turn, being the subrogee of the rights and interests of the
insured sought reimbursement of the amount, from GPS. Since GPS failed to heed the claim, FGU filed a
complaint for damages and breach of contract of carriage against GPS and its driver with the Regional Trial
Court, Branch 66, of Makati City. In its answer, respondents asserted that GPS was the exclusive hauler only
of Concepcion Industries, Inc., since 1988, and it was not so engaged in business as a common carrier.
Respondents further claimed that the cause of damage was purely accidental. GPS, instead of submitting its
evidence, filed with leave of court a motion to dismiss the complaint by way of demurrer to evidence on the
ground that petitioner had failed to prove that it was a common carrier. The RTC and CA both ruled in favor
of the Respondent.
Page 5 of 12
ISSUES OF THE CASE: WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE CARRIER,
MAY BE PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE GOODS IT UNDERTOOK TO TRANSPORT SAFELY
WERE SUBSEQUENTLY DAMAGED WHILE IN ITS PROTECTIVE CUSTODY AND POSSESSION.

- In culpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion
Industries, Inc., the mere proof of the existence of the contract and the failure of its compliance justify, prima
facie, a corresponding right of relief. Thus, FGU has a claim for the amount paid out.
- The law, recognizing the obligatory force of contracts, will not permit a party to be set free from liability
for any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof
- GPS recognizes the existence of a contract of carriage between it and petitioner’s assured, and admits that
the cargoes it has assumed to deliver have been lost or damaged while in its custody. In such a situation, a
default on, or failure of compliance with, the obligation in this case, the delivery of the goods in its custody
to the place of destination - gives rise to a presumption of lack of care and corresponding liability on the part
of the contractual obligor the burden being on him to establish otherwise. GPS has failed to do so.

HELD:
The decision of the lower courts insofar as Lambert M. Eroles is concerned is affirmed but assailed decision
with regard to GPS trucking is reversed. It, is hereby ordered to pay FGU Insurance Corporation the value of
the damaged and lost cargoes in the amount of P204, 450.00

Obligations and Contracts Terms:

• expectation interest- the interest in having the benefit of his bargain by being put in as good a position as
he would have been in had the contract been performed
• reliance interest- the interest in being reimbursed for loss caused by reliance on the contract by being put
in as good a position as he would have been in had the contract not been made
• Restitution interest- which is his interest in having restored to him any benefit that he has conferred on
the other party.
• Subrogee- the person or entity that assumes the legal right to attempt to collect a claim of another
(subrogor) in return for paying the other's expenses or debts which the other claims against a third party. A
subrogee is usually the insurance company which has insured the party whose expenses were paid.

FGU INSURANCE CORP. VS. G.P. SARMIENTO TRUCKING CORP.

Facts: GPS is an exclusive contractor and hauler of Concepcion Industries, Inc. One day, it was to deliver
certaingoods of Concepcion Industries, Inc. aboard one of its trucks. On its way, the truck collided with an
unidentifiedtruck, resulting in damage to the cargoes.FGU, insurer of the shipment paid to Concepcion
Industries, Inc. the amount of the damage and filed a suit againstGPS. GPS filed a motion to dismiss for failure
to prove that it was a common carrier.
Issue: Whether or not GPS falls under the category of a common carrier.
Held: Note that GPS is an exclusive contractor and hauler of Concepcion Industries, Inc. offering its service
to noother individual or entity. A common carrier is one which offers its services whether to the public in
general or to a limited clientele in particular but never on an exclusive basis. Therefore, GPS does not fit the
category of a common carrier although it is not freedfrom its liability based on culpa contractual

Dio vs St. Ferdinand Memorial Park

On December 11, 1973, Teresita Dio agreed to buy, on installment basis, a memorial lot from the St.
Ferdinand Memorial Park, Inc. (SFMPI) induce City. The purchase was evidenced by a Pre-Need Purchase
Agreement. She obliged herself to abide by all such rules and regulations governing the SFMPI dated May
25, 1972. SFMPI issued a Deed of Sale and Certificate of Perpetual. The ownership of Dio over the property
was made subject to the rules and regulations of SFMPI, as well as the government, including all
Page 6 of 12
amendments, additions and modifications that may later be adopted. According to the Rules (Rule 69)
Mausoleum building and memorials should be constructed by the Park Personnel. Lot Owners cannot
contract other contractors for the construction of the said buildings and memorial, however, the lot owner
is free to give their own design for the mausoleum to be constructed, as long as it is in accordance with the
park standards. The construction shall be under the close supervision of the Park Superintendent. The mortal
remains of Dio’s husband, father and daughter were interred in the lot at her own expense, without the
knowledge and intervention of SFMPI..
In October 1986, Dio informed SFMPI, through its president and controlling stockholder, Mildred F. Tantoco,
that she was planning to build a mausoleum on her lot and sought the approval thereof. Dio showed to
Tantoco the plans and project specifications accomplished by her private contractor at an estimated cost of
P60,000.00. The plans and specifications were approved, but Tantoco insisted that the mausoleum be built
by it or its agents at a minimum cost of P100,000.00 as provided in Rule 69 of the Rules and Regulations the
SFMPI issued on May 25,1972. The total amount excluded certain specific designs in the approved plan which
if included would cost Dio much more. Dio, through counsel, demanded that she be allowed to construct the
mausoleum within 10days, otherwise, she would be impelled to file the necessary action/s against SFMPI
and Tantoco. Dio filed a Complaint for Injunction with Damages against SFMPI and Tantoco before the RTC.
She averred that she was not aware of Rule 69 of the SFMPI Rules and Regulations; the amount of
P100,000.00 as construction cost of the mausoleum was unconscionable and oppressive. She prayed that,
after trial, judgment be rendered in her favor, granting a final injunction perpetually restraining defendant
from enforcing the invalid Rule 69 of SFMPI’s “Rules for Memorial Work in the Mausoleum of the Park” or
from refusing or preventing the construction of any improvement upon her property in the park. The court
issued a cease and desist order against defendants. The trial court rendered judgment in favor of defendants.
On appeal, the CA affirmed the decision of the trial court.

ISSUE: Whether or not petitioner had knowledge of Rule 69 of SFMPI Rules and Regulations for memorial
works in the mausoleum areas of the park when the Pre-Need Purchase Agreement and the Deed of Sale
was executed and whether the said rule is valid and binding upon petitioner.

RULING: Plaintiff’s allegation that she was not aware of the said Rules and Regulations lacks credence.
Admittedly, in her Complaint and during the trial, plaintiff testified that she informed the defendants of her
intention to construct a mausoleum. Even counsel for the plaintiff, who is the son of the plaintiff, informed
the Court during the trial in this case that her mother, the plaintiff herein, informed the defendants of her
plan to construct and erect a mausoleum.
This act of the plaintiff clearly shows that she was fully aware of the said rules and regulations
otherwise she should not consult, inform and seek permission from the defendants of her intention to build
a mausoleum if she is not barred by the rules and regulations to do the same. When she signed the contract
with the defendants, she was estopped to question and attack the legality of said contract later on. Further,
a contract of adhesion, wherein one party imposes a ready-made form of contract on the other, is not strictly
against the law. A contract of adhesion is as binding as ordinary contracts, the reason being that the party
who adheres to the contract is free to reject it entirely. Contrary to petitioner’s contention, not every
contract of adhesion is an invalid agreement. Thus, the petition was denied.

Blade International Marketing Corp. vs Court of Appeals

The Case

The case under consideration is a petition to annul the decision[1] of the Court of Appeals that ordered
petitioners Blade International Marketing Corporation, Evan J. Borbon, Edgar J. Borbon, and Marcial
Geronimo to pay, jointly and severally, the total amount of their obligation to respondent Metropolitan Bank
and Trust Company, including interest, penalty charge and attorneys fees.

The Facts
Page 7 of 12
The facts, as stated in the petition, are as follows:

1. The instant complaint for a Sum of Money was instituted by the Metropolitan Bank & Trust Co. with an
application for issuance of a Writ of Preliminary Attachment against the petitioners Blade International
Marketing Corporation, Evan J. Borbon, Edgar J. Borbon, Marcial Geronimo and Elenito G. Santos. The
complaint consisted of eight (8) causes of actions involving the delivery, shipment of merchandise, and tools.
Private Respondent alleged, that it paid the suppliers thereof by way of letters of credit against bills of
exchange and that said merchandise or shipment were delivered in trust and/or accepted by the petitioner/s
under the condititions of the trust receipt which required the said petitioner/s as entrustee/s to hold the
goods, merchandise, documents and/or instrument as well as the proceeds thereof, for the payment of
petitioner/s obligations acceptances, indebtedness and liabilities and that without justifiable reason, they
allegedly failed and refused to account for and turn over to the private respondent the proceeds of sale of
the above mentioned goods or merchandise, documents and instruments subject matter of the trust, the
details of which are as follows:

x x x.

2. On 20 November 1987, petitioners BLADE, Evan J. Borbon, Edgar J. Borbon and Marcial Geronimo filed a
Joint Answer with Counterclaim, and which answer was anchored on the following grounds:

1. That defendant corporation thru its authorized officers applied for and in its own behalf for several
commercial letters of credit with the plaintiff in blank form;

2. That defendants further denied the material and ultimate facts of the eight (8) causes of actions in the
complaint and interposed Special and Affirmative Defenses, to wit:

x x x.

3. By way of Special and Affirmative Defenses, defendants also maintained, that individual defendants Evan
J. Borbon, Marcial Geronimo and Edgar J. Borbon never signed the letters of credit and related documents
in their personal capacities nor agreed to be bound thereon in anyway or as sureties or as entrustees to the
plaintiff, since they merely acted for and in behalf of defendant corporation in the execution of the
documents in question and therefore not liable thereon in their personal capacities; that defendants and/or
individual defendants never received the subject merchandise/goods in concept of a trust or as entrustees
to account or to hold and/or turn over the goods/merchandise, instruments or the proceeds of sale thereof
to the plaintiff and that they have not misused or converted the merchandise or proceeds thereof and that
plaintiff has not made any demand nor given any notice to defendants to account for or hold or turn over of
the merchandise, instruments, documents, as well as the proceeds thereof to the plaintiff, and further the
plaintiff has no causes of actions and that the trust receipts being simulated contracts are void and
unenforceable;

4. Defendant by way of counterclaim further maintained, that the suit was premature and filed maliciously
and in bad faith by making it appear that the defendant corporation and individual defendants committed
breaches of trust which are non-existent, since the documents supposedly the trust receipts were prepared
and executed for convenience purposes but not in concept of trust and therefore simulated contracts or
void ab initio. However, the plaintiff with full knowledge thereof maliciously instituted this suit, as a
consequence plaintiff unduly prejudiced and/or damaged defendants corporation as well as the individual
defendants business reputation and/or credit standing and further caused the individual defendants to
suffer unnecessary damages for which defendants are entitled moral damages in the sum of P100,000.00
and for having dragged the defendants before to court, who were compelled and to protect their rights and

Page 8 of 12
interest in the premises for which they agreed to pay counsel the sum of P25,000.00 as and for attorneys
fees;

5. After due hearing, the Trial Court rendered a decision on 10 February 1992 dismissing both the complaint
and counterclaim, the dispositive portion of which provides, as follows:

xxx

WHEREFORE, judgment is hereby rendered dismissing the complaint of plaintiff Metropolitan Bank and Trust
Company against defendants Blade International Marketing Corporation, Evan J. Borbon, Edgar J. Borbon
and Marcial Geronimo, as well as the counter claim of the latter against the former, without pronouncement
as to costs.

6. On 24 February 1992, the private respondent not satisfied with the said Decision filed a Notice of Appeal
before the Honorable Court of Appeals, upon the ground that said decision is contrary to the evidence
adduced by the parties and to the applicable laws and jurisprudence;

7. On 13 June 1997, the Honorable Court of Appeals (Third Division) rendered a Decision, which reversed
and set-aside the assailed decision and a new one was entered, copy of which was received by the petitioners
thru counsel on 20 June 1997, the dispositive portion of which are as follows:

WHEREFORE, finding reversible error in the assailed decision, the same is hereby REVERSED and SET ASIDE
and a new one is ENTERED finding the appellees liable, jointly and severally, with each other and ordering
them to pay the appellant the sum of P2,118,841.20 representing the total amount of the obligation as of
May 31, 1997, inclusive of 18% interest and 2% penalty charge until their obligation is fully paid, and the
payment of P50,000.00 as attorneys fees. No pronouncement as to costs.

SO ORDERED.

8. On 04 July 1997, petitioners filed a Motion for Reconsideration thereof, and the Honorable Court of
Appeals DENIED the same in its Resolution dated 24 October 1997, copy of which was received on 30 October
1997, the dispositive portion of which reads as follows:

WHEREFORE, the instant motion for reconsideration is hereby DENIED for lack of merit.

SO ORDERED.[2]

Hence, this appeal.[3]

The Issue

The issue raised is whether the petitioners Evan J. Borbon, Edgar J. Borbon, and Marcial Geronimo are
personally liable jointly and severally with Blade International for fulfillment of its obligations under the
letters of credit opened with Metrobank.

Petitioners Evan J. Borbon, Edgar J. Borbon, and Marcial Geronimo disclaim liability because they never
signed the letters of credit and related documents in their personal capacities.

The Courts Ruling

We hold petitioners liable solidarily.

Page 9 of 12
In this case, petitioners admit that they signed the letters of credit and related documents pertaining to the
transactions with Metrobank. However, petitioners claimed that they signed the forms in blank. The
documents show that the petitioners agreed to jointly and severally undertake payment of the obligations
and also consented to each and all of the stipulated conditions on the documents. An experienced
businessman who signs important legal papers cannot disclaim the consequent liabilities therefor after being
a signatory thereon. [4]

Thus, the Court of Appeals was correct in finding that petitioners contractually agreed to hold themselves
personally solidarily liable with the corporation in the fulfillment of its obligations to Metrobank.

The Fallo

WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals in toto.

Asia World Recruitment Inc. vs National Labor Relations Commission

FACTS:
“As a final consequence of the final and executory decision of the Supreme Court in Rizalino P. Uy v. National
Labor Relations Commission, et. al. (GR No. 117983, September 6, 1996), hearings were conducted to
determine the amount of wage differentials due the eight (8) complainants therein, now [petitioners]. As
computed, the award amounted to P1,487,312.69 x x x.

“On February 3, 1997, [petitioners] filed a Motion for Issuance of Writ of Execution.

“On May 19, 1997, [respondent] Rizalino Uy filed a Manifestation requesting that the cases be terminated
and closed, stating that the judgment award as computed had been complied with to the satisfaction of
[petitioners].Said Manifestation was also signed by the eight (8) [petitioners]. Together with the
Manifestation is a Joint Affidavit dated May 5, 1997 of [petitioners], attesting to the receipt of payment from
[respondent] and waiving allot her benefits due them in connection with their complaint.

“On June 3, 1997, [petitioners] filed an Urgent Motion for Issuance of Writ of Execution wherein they
confirmed that each of them received P40,000 from [respondent] on May 2, 1997.

“On June 9, 1997, [respondent] opposed the motion on the ground that the judgment award had been fully
satisfied. In their Reply, [petitioners] claimed that they received only partial payments of the judgment
award.

Labor Arbiter
issued an order denying the motion for issuance of writ of execution.

NLRC:
reversed, holding that a final and executory judgment can no longer be altered and that quitclaims and
releases are normally frowned upon as contrary to public policy.
CA
held that compromise agreements may be entered into even after a final judgment. Thus, petitioners validly
released respondent from any claims, upon the voluntary execution of a waiver pursuant to the compromise
agreement.

ISSUES:
1)Whether or not the final and executory judgment of the Supreme Court could be subject to compromise
settlement;
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2)Whether or not the petitioners’ affidavit waiving their awards in the labor case executed without the
assistance of their counsel and labor arbiter is valid;

HELD:
1)Yes
A compromise agreement is a contract whereby the parties make reciprocal concessions in order to resolve
their differences and thus avoid or put an end to a lawsuit. The issue involving the validity of a compromise
agreement notwithstanding a final judgment is not novel. Jesalva v. Bautista upheld a compromise
agreement that covered cases pending trial, on appeal, and with final judgment. The Court noted that Article
2040 impliedly allowed such agreements; there was no limitation as to when these should be entered into.
There is no justification to disallow a compromise agreement, solely because it was entered into after final
judgment. The validity of the agreement is determined by compliance with the requisites and principles of
contracts, not by when it was entered into. As provided by the law on contracts, a valid compromise must
have the following elements: (1) consent of the parties to the compromise, (2) an object certain that is the
subject matter of the compromise, and (3) the cause of the obligation that is established.

In the present factual milieu, compliance with the elements of a valid contract is not in issue. Pensioners do
not challenge the factual finding that they entered into a compromise agreement with respondent. There
are no allegations of vitiated consent. Instead, petitioners base their argument on the sole fact that the
agreement was executed despite a final judgment, which the Court had previously ruled to be allowed by
law. The principle of novation supports the validity of a compromise after final judgment. Novation, a mode
of extinguishing an obligation, is done by changing the object or principal condition of an obligation,
substituting the person of the debtor, or surrogating a third person in the exercise of the rights of the
creditor.
For an obligation to be extinguished by another, the law requires either of these two conditions: (1) the
substitution is unequivocally declared, or (2) the old and the new obligations are incompatible on every
point. A compromise of a final judgment operates as a novation of the judgment obligation, upon compliance
with either requisite. In the present case, the incompatibility of the final judgment with the compromise
agreement is evident, because the latter was precisely entered into to supersede the former.

2) Yes
The presence or the absence of counsel when a waiver is executed does not determine its validity. There is
no law requiring the presence of a counsel to validate a waiver. The test is whether it was executed
voluntarily, freely and intelligently; and whether the consideration for it was credible and reasonable. Where
there is clear proof that a waiver was wangled from an unsuspecting or a gullible person, the law must step
in to annul such transaction. In the present case, petitioners failed to present any evidence to show that
their consent had been vitiated.

The law is silent with regard to the procedure for approving a waiver after a case has been terminated.
Relevant, however, is this reference to the NLRC’s New Rules of Procedure:

“Should the parties arrive at any agreement as to the whole or any part of the dispute, the same shall be
reduced to writing and signed by the parties and their respective counsel, or authorized representative, if
any, before the Labor Arbiter.

“The settlement shall be approved by the Labor Arbiter after being satisfied that it was voluntarily entered
into by the parties and after having explained to them the terms and consequences thereof.

“A compromise agreement entered into by the parties not in the presence of the Labor Arbiter before whom
the case is pending shall be approved by him, if after confronting the parties, particularly the complaints, he
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is satisfied that they understand the terms and conditions of the settlement and that it was entered into
freely and voluntarily by them and the agreement is not contrary to law, morals, and public policy.”

This provision refers to proceedings in a mandatory/conciliation conference during the initial stage of the
litigation. Such provision should be made applicable to the proceedings in the pre—execution conference,
for which the procedure for approving a waiver after final judgment is not stated. There is no reason to make
a distinction between the proceedings in mandatory/conciliation and those in pre-execution conferences.

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioners.

Phoenix Assurance Co., Ltd. Vs U.S. Lines

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