Case Digest Civil Law Review II
Submitted by: Jeffrey B. Oliveros Sunday/ 8 am – 12 noon
Table of Contents Obligations Kinds of Civil Obligations As to Perfection and Extinguishment Extinguishment With a term or period
BONIFACIO DANAN vs. SPOUSES GREGORIO SERRANO AND ADELAIDA REYES (G.R. No. 195072, August 1, 2016) As to rights and obligations of multiple multiple parties Solidary
JAKERSON G. GARGALLO vs. DOHLE SEAFRONT CREWING (MANILA), INC., DOHLE MANNING AGENCIES, INC., AND MR. MAYRONILO B. PADIZ (G.R. No. 215551, August 17, 2016) OYSTER PLAZA HOTEL, ROLITO GO, AND JENNIFER AMPEL vs. ERROL O. MELIVO (G.R. No. 217455, October 5, 2016) As to performance of prestation prestation
SPOUSES ALEXANDER AND JULIE LAM, Doing Business Under the Name and Style "COLORKWIK LABORATORIES" AND "COLORKWIK PHOTO SUPPLY" vs. KODAK PHILIPPINES, LTD. (G.R. No. 167615, January 11, 2016) Breach of Civil Obligations
CATHAY PACIFIC AIRWAYS, LTD. vs. SPOUSES ARNULFO AND EVELYN FUENTEBELLA (G. R. No. 188283, July 20, 2016) ELIZABETH SY-VARGAS vs. THE ESTATE OF ROLANDO OGSOS, SR. AND OGSOS, JR. (G.R. No. 221062, October 5, 2016) SPOUSES ROMEO PAJARES and IDA T. PAJARES vs. REMARKABLE LAUNDRY AND DRY CLEANING, represented by ARCHEMEDES G. SOLIS (GR. No. 212690, February 20, 2017) Manner of Breach Negligence
TRAVEL & TOURS ADVISERS, INCORPORATED vs. ALBERTO CRUZ, SR., EDGAR HERNANDEZ AND VIRGINIA MUÑOZ (G.R. No. 199282, March 14, 2016) Delay
LYLITH B. FAUSTO, JONATHAN FAUSTO, RICO ALVIA, ARSENIA TOCLOY, LOURDES ADOLFO AND ANECITA MANCITA vs. MULTI AGRI-FOREST AND COMMUNITY DEVELOPMENT COOPERATIVE (FORMERLY MAF CAMARINES SUR EMPLOYEES COOPERATIVE, INC.) (G.R.No. 213939, October 12, 2016) Excuses for non-performance Fortuitous Event
1
SPOUSES JAIME AND MATILDE POON vs. PRIME SAVINGS BANK REPRESENTED BY THE PHILIPPINE DEPOSIT INSURANCE CORPORATION AS STATUTORY LIQUIDATOR (G.R. No. 183794, June 13, 2016) Modes of Extinguishment of Obligation Payment or performance
SPOUSES JUAN CHUY TAN AND MARY TAN (DECEASED) SUBSTITUTED BY THE SURVIVING HEIRS, JOEL TAN AND ERIC TAN vs. CHINA BANKING CORPORATION (G.R. No. 200299, August 17, 2016) PHILIPPINE SCIENCE HIGH SCHOOL-CAGAYAN VALLEY CAMPUS vs. PIRRA CONSTRUCTION ENTERPRISES (G.R. No. 204423, September 14, 2016) DR. RESTITUTO C. BUENVIAJE vs. SPOUSES JOVITO R. AND LYDIA B. SALONGA, JEBSON HOLDINGS CORPORATION AND FERDINAND JUAT BAÑEZ (G.R. No. 216023, October 5, 2016)
Contracts Kinds of Contracts as to validity Valid and binding
SPOUSES ROBERTO and ADELAIDA PEN vs. SPOUSES SANTOS and LINDA JULIAN (G.R. No. 160408, January 11, 2016) MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY [MCIAA] vs. HEIRS OF GAVINA IJORDAN, NAMELY, JULIAN CUISON, FRANCISCA CUISON, DAMASTNA CUISON, PASTOR CUISON, ANGELINA CUISON, MANSUETO CUISON, BONIFACIA CUISON, BASILIO CUISON, MOISES CUISON, AND FLORENCIO CUISON, (G.R. No. 173140, January 11, 2016)
Void or inexistent
TIMOTEO BACALSO BACALSO and DIOSDADA DIOSDADA BACALSO BACALSO vs. GREGORIA B. ACAAC, EUTIQUIA B. AGUILA, JULIAN BACUS and EVELYN SYCHANGCO (G.R. No. 172919, January 13, 2016) TERESITA I. BUENAVENTURA vs. METROPOLITAN BANK AND TRUST COMPANY (G.R. No. 167082, August 3, 2016) DAMASO T. AMBRAY AND CEFERINO T. AMBRAY, JR. vs .SYLVIA A. TSOUROUS, CARMENCITA AMBRAY-LAUREL, HEDY AMBRAY-AZORES, VIVIEN AMBRAY-YATCO, NANCY AMBRAY-ESCUDERO, MARISTELA AMBRAY-ILAGAN, ELIZABETH AMBRAY-SORIANO, MA. LUISA FE AMBRAY-ARCILLA AND CRISTINA AMBRAY-LABIT (G.R. No. 209264, July 5, 2016) MAE FLOR GALIDO vs. NELSON P. MAGRARE, EVANGELINE M. PALCAT, RODOLFO BAYOMBONG, and REGISTER OF DEEDS OF ANTIQUE, San Jose, Antique (GR No. 206584, January 11, 2016)
Resistible Contracts
RCBC SAVINGS BANK vs. NOEL M. ODRADA (G.R. No. 219037, October 19, 2 016) 2
Sales Elements of Contract of Sale Essential Elements Determinate subject matter (thing or right)
ANITA U. LORENZANA vs. RODOLFO LELINA (G.R. No. 187850, August 17, 2016) Price certain in money or its equivalent
TOMAS P. TAN, JR. vs. JOSE G. HOSANA (G.R. No. 190846, February 3, 2016) DASMARIÑAS T. ARCAINA and MAGNANI T. BANTA vs. NOEMI L. INGRAM, represented by MA. NENETTE L. ARCHINUE (G.R. No. 196444, February 15, 2017)
Rights and obligations of the vendor To transfer ownership Double Sales
DESIDERIO RANARA, JR. vs. ZACARIAS DE LOS ANGELES, JR (G.R. No. 200765, August 8, 2016) GIL MACALINO, JR., TERESITA MACALINO, ELPIDIO MACALINO, PILAR MACALINO, GILBERTO MACALINO, HERMILINA MACALINO, EMMANUEL MACALINO, EDELINA MACALINO, EDUARDO MACALINO, LEONARDO MACALINO, EDLLANE** MACALINO, APOLLO MACALINO, MA. FE MACALINO, AND GILDA MACALINO vs. ARTEMIO PIS-AN (G.R. No. 204056, June 1, 2016) FABIO CAHAYAG and CONRADO RIVERA vs. COMMERCIAL CREDIT CORPORATION, represented by its President, LEONARDO B. ALEJANDRO; TERESITA T. QUA, assisted by her husband ALFONSO MA. QUA; and the REGISTER OF DEEDS OF LAS PINAS, METRO MANILA, DISTRICT IV (G.R. No. 168078, January 13, 2016)/DULOS REALTY & DEVELOPMENT CORPORATION, represented by its President, JUANITO C. DULOS; and MILAGROS E. ESCALONA, and ILUMINADA D. BALDOZA vs. COMMERCIAL CREDIT CORPORATION, represented by its President, LEONARDO B. ALEJANDRO; TERESITA T. QUA, assisted by her husband ALFONSO MA. QUA; and the REGISTER OF DEEDS OF LAS PINAS, METRO MANILA, DISTRICT IV (G.R. No. 168357, January 13, 2016) Lease Rights and obligations of the Lessor and Lessee
RAMON PACON, THROUGH HIS WIFE FELINA PACON, ANTONIO PACON, THROUGH HIS WIFE NENITA PACON, EULOGIO PACON, THROUGH HIS SON JORGE PACON, LEONARDO PACON, MANUEL IGOS, JOSE COLORES, LOLITA COLORES, AND ESTANISLAO BUENDIA vs. BENJAMIN TAN (G.R. No. 185365, March 2, 2016) Credit Transactions: Pledge, Mortgage and Antichresis Chattel and Real Estate Mortgage In general 3
Extent/coverage of the Mortgage
PHILIPPINE NATIONAL BANK vs. HEIRS OF BENEDICTO AND AZUCENA ALONDAY (G.R. No. 171865, October 12, 2016) Essential Requisites Formal Requisites: Affidavit Good Faith
PHILIPPINE NATIONAL BANK vs. JUAN F. VILA (G.R. No. 213241, August 1, 2016) Rights and obligations of the Mortgagee
METROPOLITAN BANK & TRUST COMPANY vs. CHUY LU TAN, MR. ROMEO TANCO, DR. SY SE HIONG, and TAN CHU HSIU YEN (G.R. No. 202176, August 1, 2016)
4
BONIFACIO DANAN vs. SPOUSES GREGORIO SERRANO AND ADELAIDA REYES (G.R. No. 195072, August 1, 2016) Facts: Respondents spouses Gregorio Serrano and Adelaida Reyes (Spouses Serrano) are the registered owners of a parcel of land consisting of a total area of 23,981 square meters, situated in Sta. Cruz, Lubao, Pampanga, and covered by Original Certificate of Title (OCT) No. 6947.4 Sometime in the years 1940 and 1950, when the property was still co-owned by respondent Gregorio and his siblings, Gregorio's sisters, Marciana and Felicidad, gave petitioner Bonifacio Danan and a certain Artemio Vitug permission to possess 400 square meters each of the total estate and to build their homes thereon in exchange for one cavan of palay every year. Thereafter, in separate documents denominated as "Agreement in Receipt Form" dated June 27, 1976, Gregorio sold to Bonifacio and Artemio their respective 400-square-meter portions of the property. While Bonifacio and Artemio paid the P2, 000.00 upon the signing of the Agreement, they were both unable to pay the balance of the purchase price when they fell due on June 30, 1977 and June 30, 1978. Nevertheless, they remained in possession of their respective lots. In a Complaint dated September 10, 1998, the Spouses Serrano, through their son and attorney-in-fact, Arnel Francisco Serrano, instituted ejectment proceedings against Bonifacio and Artemio, alleging: (1) that they are the owners of the subject properties; (2) that Bonifacio and Artemio were merely caretakers thereof; and (3) that demand was made for the latter to vacate, but to no avail. Thus, they prayed that Bonifacio and Artemio be ordered to vacate the premises and to pay p ay monthly rentals and attorney's fees Meanwhile, in a Complaint for specific performance dated November 3, 1998, Bonifacio and Artemio alleged that they purchased their respective portions of land via the Agreement in Receipt Form dated June 27, 1976 and since then, stopped paying the yearly rental of one cavan of palay. While they admitted to their failure fa ilure to pay the remaining balance of the purchase price in the amount of P4, 000.00, they claimed that such was due to the continuous absence of the Spouses Serrano. Despite their ability and willingness to pay the aforesaid amount, however, Bonifacio and Artemio were shocked to have found that as early as September 1994, the Spouses Serrano had already obtained the title over the subject properties in their names. According to Bonifacio and Artemio, Gregorio intentionally deceived them into signing the documents in May 1992 purportedly intended to facilitate the processing and issuance of their titles over their respective portions of land but which turned out to be a declaration that they were merely caretakers of the same.14 Said documents were eventually used for the ejectment case against them. In their Answer, respondents spouses asserted that they are the owners of the subject properties; that the possession thereof by Bonifacio and Artemio are merely by tolerance; and, that the Agreements in Receipt Form dated June 27, 1976 are mere contracts to sell, of which failure by the vendees to fully pay the price agreed thereon prevents the transfer of ownership from the vendor to the vendees. As special and administrative defenses, the Spouses Serrano raised prescription, alleging that any right of action, if any, arising from the agreements dated June 27, 1976, had long prescribed when the complaint was filed in 1998. The Spouses Serrano likewise raised the defense of laches on the part of Bonifacio and Artemio for their neglect to assert their right for an unreasonable and unexplained length of time. As their counterclaim, moreover, the Spouses Serrano claimed to be entitled to the payment of monthly rentals in the amount of P3,000.00, moral damages, exemplary damages, and attorney's fees.
Issue: Whether or not the Petitioner can demand the respondent spouses to transfer the subject property despite his failure to comply with the suspensive condition of full payment of the purchase price.
Ruling: It is imperative to note, however, that in view of the nature of the agreement herein, a contract to sell real property on installment basis, the provisions of RA No. 6552 must be taken into account insofar as the rights of the parties in cases of default are concerned. In conditional sales of all kinds of real estate (industrial, commercial, residential), RA No. 6552 not only recognizes the right of the seller to cancel the contract upon non-payment of an installment by the buyer, an event that prevents the obligation of the seller to convey title from acquiring binding force, it also provides for the rights of the buyer in case of such cancellation
5
Accordingly, the Court, in multiple occasions, emphasized the importance of the foregoing provisions of RA No. 6552 and upheld sales of land as valid and subsisting due to the absence and/or impropriety of the requisite notice of cancellation. In Pagtalunan v. Dela Cruz Vda. de Manzano, for instance, the Court ordered the seller to transfer the title to the buyer upon the latter's payment of the balance of the purchase price because of the invalidity of the seller's cancellation of their contract. Contrary to the seller's contention, the letter he sent demanding the buyer to vacate the premises due to the latter's failure to pay did not sufficiently conform to the conditions imposed by law. What is required, the Court explained, is a "notice of cancellation or demand for rescission by notarial act," which is not the same as a demand letter. In another instance, the Court, in Spouses Ramos v. Spouses Heruela, held that in view of the absence of the requisite notice of cancellation, as well as a demand for rescission by notarial act to the buyer, the contract to sell remained effective. Consequently, said buyer had not lost the statutory grace period within which to pay the remaining installments even after the date stipulated in their agreement. The Court added that the action for fo r reconveyance of property filed by the seller cannot be deemed the same as an action for rescission. Thus, when there is failure on the part of the seller to comply with the requirements prescribed by RA No. 6552 insofar as the cancellation of a contract to sell is concerned, the Court shall not hesitate in upholding the sale, albeit being subject to the full payment by the buyer of the purchase price.34 In fact, in Fabrigas v. San Francisco del Monte, Inc.,35 the Court even went as far as nullifying a clause in a contract providing for automatic rescission immediately upon default of the buyer notwithstanding the statutory grace periods permitted by the Act. In the instant case, there is no showing that the Spouses Serrano complied with the requirements prescribed by RA No. 6552. As the records reveal, after entering into the sale under the "Agreement in Receipt Form" on June 27, 1976, the Spouses Serrano filed their Complaint for unlawful detainer dated September 10, 1998, attaching therewith the May 1992 document as well as a Notice to Vacate dated April 21, 1998. Jurisprudence dictates, however, that none of these documents constitutes as the requisite "notice of cancellation or demand for rescission by notarial act" mandated by law.36 In fact, nowhere in the said documents was the sale or its rescission ever mentioned. In their ejectment complaint, the Spouses Serrano merely alleged that on May 6, 1992, they entered into an agreement whereby Bonifacio was to act as caretaker of the subject land and that he shall voluntarily vacate the same within three (3) months from the receipt of a notice to vacate. Notwithstanding the failure by the spouses to comply with the cancellation requirements under RA No. 6552, however, Bonifacio's action for specific performance must nonetheless fail on the ground of prescription.
6
JAKERSON G. GARGALLO vs. DOHLE SEAFRONT CREWING (MANILA), INC., DOHLE MANNING AGENCIES, INC., AND MR. MAYRONILO B. PADIZ (G.R. No. 215551, August 17, 2016) Facts: On July 20, 2012, petitioner filed a complaint for permanent total disability benefits against respondents before the National Labor Relations Commission (NLRC). The complaint stemmed from his claim that: (a) he accidentally fell on deck while lifting heavy loads of lube oil drum, with his left arm hitting the floor first, bearing his full body weight; (b) he has remained permanently unfit for further sea service despite major surgery and further treatment by the company-designated physicians; and (c) his permanent p ermanent total unfitness to work was duly certified by his chosen physician whose certification must prevail over the palpably self-serving and biased assessment of the company-designated physicians. For their part, respondents countered that the fit-to-work findings of the company-designated physicians must prevail over that of petitioner's independent doctor, considering that: (a) they were the ones who continuously treated and monitored petitioner's medical condition; and (b) petitioner failed to comply with the conflict-resolution procedure under the Philippine Overseas Employment Administration-Standard Employment Contract (POEA-SEC). Respondents further averred that the filing of the disability claim was premature since petitioner was still undergoing medical treatment within the allowable 240-day period at the time the complaint was filed.
Issue: Whether or not Padiz should be absolved from joint and several liabilities with Dchle Seafront and Dohle Manning for the payment of the income benefit arising from his temporary total disability
Ruling: Applicable laws form part of, and are read into, contracts without need for any express reference thereto; more so, when it pertains to a labor contract which is imbued with public interest. Each contract thus contains not only what was explicitly stipulated therein, but also the statutory provisions that have any bearing on the matter." As applied herein, Section 10 of RA 8042, as amended, and the pertinent POEA Rules are deemed incorporated in petitioner's employment contract with respondents. These provisions are in line with the State's policy of affording protection to labor and alleviating the workers' plight, and are meant to assure OFWs immediate and sufficient payment of what is due them. Thus, as the law provides, corporate directors and officers are themselves solidarily liable with the recruitment/placement agency for all money claims or damages that may be awarded to OFWs. Based on the foregoing premises, the Court, therefore, finds Padiz jointly and solidarily liable with Dohle Seafront and Dohle Manning for the payment of the income benefit arising from petitioner's temporary total disability, and, to such extent, grants petitioner's motion for reconsideration, and, in consequence, modifies the Septe mber 16, 2015 Decision accordingly.
7
OYSTER PLAZA HOTEL, ROLITO GO, AND JENNIFER AMPEL vs. ERROL O. MELIVO (G.R. No. 217455, October 5, 2016) Facts: On October 22, 2009, respondent Errol O. Melivo (Melivo) filed before the NLRC a Complaint for illegal dismissal with prayers for reinstatement and payment of back wages, holiday pay, overtime pay, service incentive leave, and, 13th month pay against petitioners Oyster Plaza Hotel (Oyster Plaza), Rolito Go (Go), and Jennifer Ampel (Ampel). The Summons, dated October 26, 2009, together with a copy of the complaint, was served on the petitioners thru registered mail. The said summons ordered the petitioners to appear before the Labor Arbiter (LA) for mandatory conciliation/mediation conferences on November 23, 2009 and December 1, 2009. The registry return receipt, dated November 27, 2009, showed that the summons and the copy of the complaint were duly served. The petitioners, however, failed to appear during the scheduled conferences. Thereafter, the case was set for formal hearing on January 14, 2010 and a notice of hearing7 was sent to the petitioners, requiring them to appear before the LA and file their position paper, with a warning that failure to appear therein would be construed as a waiver of the opportunity to be heard. The notice, however, was returned unserved as there was no one to receive the same.8 The formal hearing was, thus, reset to February 17, 2010, and a notice of hearing9 was again sent to the petitioners, wherein they were reminded to file their position paper. The registry return receipt showed that the said notice was received by a certain Charlie Miraña(Miraña) on January 25, 2010. At the February 17, 2010 hearing, however, only Melivo appeared. On even date, Melivo filed his Position Paper, alleging the following: that Oyster Plaza was a business entity engaged in the business of hotel operation, under the ownership/management of Go and Ampel; that in August 2008, Oyster Plaza hired him as a trainee room boy; that in November 2008, Oyster Plaza hired him as a probationary room boy and he was made to sign an employment contract but he was not furnished a copy, that the said contract expired in March 2009 and his work ended; that on April 7, 2009, Oyster Plaza hired him again as a room boy, but without any employment contract or document; and that in September 2009, his supervisor Ampel verbally told him that his contract was expiring, thus, he must stop reporting for work. For the last time, another notice of hearing for the March 24, 2010, was again sent to the petitioners with a directive to file their position paper, but it was again returned unserved.
Issue: WHETHER OR NOT GO AND AMPEL ARE SOLIDARILY LIABLE WITH OYSTER PLAZA/MDC
Ruling: Go and Ampel cannot be held Solidarity Liable with Oyster Plaza/MDC. A corporation, being a juridical entity, may act only through its directors, officers and employees. Obligations incurred by them, acting as such corporate agents, are not theirs but the direct accountabilities of the corporation they represent. Pursuant to this principle, a director, officer or employee of a corporation is generally not held personally liable for obligations incurred by the corporation; it is only in exceptional circumstances that solidary liability will attach to them. Thus, in labor cases, corporate directors and officers are held solidarity liable with the corporation for the employee's termination only when the same is done with malice or in bad faith. In the present case, there is nothing substantial on record which can justify Go and Ampel's solidary liability with Oyster Plaza or MDC. As to Ampel, records reveal that her participation in the illegal dismissal was her verbally informing Melivo that his services were being terminated; and the said act could hardly be considered malicious enough to make Ampel solidarity liable with Oyster Plaza or MDC. With regard to Go, aside from the assertion that he was the owner of Oyster Plaza, no other act, relating to Melivo's illegal dismissal, was ever averred against him. Besides, Go's relation with Oyster Plaza or MDC was only based from the bare allegations of Melivo who failed to provide substantial evidence to prove them. It is of no moment that Go failed to produce evidence to show that he was no longer connected with MDC or Oyster Plaza. Melivo should have relied on the strength of his evidence and not on the weakness of the defense offered by the petitioners.Clearly, without any participation in the illegal dismissal of Melivo, no malice or bad faith can be attributed to Go to justify his solidary liability with Oyster Plaza. In fine, the petition must be partially granted to the effect that only Oyster Plaza/MDC should be adjudged liable to Melivo 8
SPOUSES ALEXANDER AND JULIE LAM, Doing Business Under the Name and Style "COLORKWIK LABORATORIES" AND "COLORKWIK PHOTO SUPPLY" vs. KODAK PHILIPPINES, LTD. (G.R. No. 167615, January 11, 2016) Facts: On January 8, 1992, the Lam Spouses and Kodak Philippines, Ltd. entered into an agreement (Letter Agreement) for the sale of three (3) units of the Kodak Minilab System 22XL6 (Minilab Equipment). On January 15, 1992, Kodak Philippines, Ltd. delivered one (1) unit of the Minilab Equipment in Tagum, Davao Province. The delivered unit was installed by Noritsu representatives on March 9, 1992.10 The Lam Spouses issued postdated checks amounting to ₱35,000.00 each for 12 months as payment for the first delivere d unit, with the first check due on March 31, 1992. The Lam Spouses requested that Kodak Philippines, Ltd. not negotiate the check dated March 31, 1992 allegedly due to insufficiency of funds. The same request was made for the check due on April 30, 1992. However, both checks were negotiated by Kodak Philippines, Ltd. and were honored by the depository bank. The 10 other checks were subsequently dishonored after the Lam Spouses ordered the depository bank to stop payment. Kodak Philippines, Ltd. canceled the sale and an d demanded that the Lam Spouses return the t he unit it delivered together with its accessories. The Lam Spouses ignored the demand but also rescinded the contract through the letter dated November 18, 1992 on account of Kodak Philippines, Philippines, Ltd.’s failu re to deliver the two (2) remaining Minilab Equipment units.
Issue: Whether or not the contract between petitioners Spouses Alexander and Julie Lam and respondent Kodak Philippines, Ltd. pertained to obligations that are severable, divisible, and susceptible of partial performance under Article 1225 of the New Civil Code.
Ruling: An obligation is indivisible when it cannot be validly performed in parts, whatever may be the nature of the thing which is the object thereof. The indivisibility refers to the prestation and not to the object thereof. In the present case, the Deed of Sale of January 29, 1970 supposedly conveyed the six lots to Natividad. The obligation is clearly indivisible because the performance of the contract cannot be done in parts, otherwise the value of what is transferred is diminished. Petitioners are therefore mistaken in basing the indivisibility of a contract on the number of obligors. There is no indication in the Letter Agreement that the units petitioners ordered were covered by three (3) separate transactions. The factors considered by the Court of Appeals are mere incidents of the execution of the obligation, which is to deliver three units of the Minilab Equipment on the part of respondent and payment for all three on the part of petitioners. The intention to create an indivisible contract is apparent from the benefits that the Letter Agreement afforded to both parties. Petitioners were given g iven the 19% discount on account of a multiple order, with the discount being equally applicable to all units that they sought to acquire. The provision on "no downpayment" was also applicable to all units. Respondent, in turn, was entitled to payment of all three Minilab Equipment units, payable by installments
9
CATHAY PACIFIC AIRWAYS, LTD. vs. SPOUSES ARNULFO AND EVELYN FUENTEBELLA (G. R. No. 188283, July 20, 2016) Facts: In 1993, the Speaker of the House authorized Congressmen Arnulfo Fuentebella (respondent Fuentebella), Alberto Lopez (Cong. Lopez) and Leonardo Fugoso (Cong. Fugoso) to travel on official business to Sydney, Australia, to confer with their counterparts in the Australian Parliament from 25 October to 6 November 1993. On 22 October 1993, respondents re spondents bought Business Class tickets for Manila to Sydney via Hong Kong and back. They changed their minds, however, and decided to upgrade to First Class. From this point, the parties presented divergent versions of facts. The overarching disagreement was on whether respondents should have been given First Class seat accommodations for all the segments of their itinerary. According to respondents, their travel arrangements, including the request for the upgrade of their seats from Business Class to First Class, were made through Cong. Lopez. The congressman corroborated this allegation. On the other hand, petitioner claimed that a certain Carol Dalag had transacted on behalf of the congressmen and their spouses for the purchase of airline tickets for Manila-Hong Kong-Sydney-Hong Kong- Manila. According to petitioner, on 23 October 1993, one of the passengers called to request that the booking be divided into two: one for the Spouses Lopez and Spouses Fugoso, and a separate booking for respondents. Cong. Lopez denied knowing a Carol Dalag. He was not questioned regarding the request for two separate bookings. However, in his testimony, he gave the impression that the travel arrangements had been made for them them as one group. He admitted that he had called up petitioner, but only to request an upgrade of their tickets from Business Class Class to First Class. He testified that upon assurance that their group would be able to travel on First Class upon cash payment of the fare difference, he sent a member of his staff that same afternoon to pay. Petitioner admits that First Class tickets were issued to respondents, but clarifies that the tickets were open-dated (waitlisted). There was no showing whether the First Class tickets issued to Sps. Lopez and Sps. Fugoso were open-dated or otherwise, but it appears that they were able to fly First Class on all the segments of the trip, while respondents resp ondents were not. On 25 October 1993, respondents queued in front of the First Class counter in the airport. They were issued boarding passes for Business Class seats on board CX 902 bound for Hong Kong from Manila and Economy Class seats on board CX 101 bound for Sydney from Hong Kong. They only discovered that they had not been given First Class seats when they were denied entry into the First Class lounge. Respondent Fuentebella went back to the check-in counter to demand that they be given First Class seats or at the very least, access to the First Class Lounge. He recalled that he was treated by the ground staff in a discourteous, arrogant and rude manner. He was allegedly told that the plane would leave with or without them. Both the trial court and the CA gave credence to the testimony of respondent Fuentebella. During trial, petitioner offered the transcript of the deposition of its senior reservation supervisor, Nenita Montillana (Montillana). She said that based on the record locator, respondents had confirmed reservations for Business Class seats for the Manila-Hong Kong, Sydney-Hong Kong, and Hong Kong-Manila flights; but the booking for Business Class seats for the Hong KongSydney leg was "under request;" and due to the flight being full, petitioner was not able to approve the request. Montillana admitted that First Class tickets had been issued to respondents, but qualified that those tickets were open-dated. She referred to the plane tickets, which bore the annotations "OPEN F OPEN" for all sectors of the flight. Petitioner explained that while respondents expressed their desire to travel First Class, they could not be accommodated because they had failed to confirm and the sections were full on the date and time of their scheduled and booked flights. Petitioner also denied that its personnel exhibited arrogance in dealing with respondents; on the contrary, it was allegedly respondent Fuentebella who was hostile in dealing with the ground staff. Respondents alleged that during transit through the Hong Kong airport on 25 October 1993, they were treated with far less respect and courtesy by the ground staff. In fact, the first employee they approached completely ignored them and turned her back on them The second one did not even give them any opportunity to explain why they should be given First Class seats, but instead brushed aside their complaints and told them to just fall in line in Economy Class. The third employee they approached shoved them to the line for Economy Class passengers in front of many people. Petitioner used the deposition of Manuel Benipayo (Benipayo), airport service officer, and Raquel Galvez-Leonio (GalvezLeonio), airport services supervisor, to contradict the claims of respondents. Benipayo identified 10
himself as the ground staff who had dealt with respondents' complaint. He testified that around five o'clock on 25 October 1993, respondent Fuentebella loudly insisted that he be accommodated on First Class. But upon checking their records, he found out that respondents were only booked on Business Class. Benipayo tried to explain this to respondents in a very polite manner, and he exerted his best effort to secure First Class seats for them, but the plane was already full. He presented a telex sent to their Hong Kong office, in which he requested assistance to accommodate respondents in First Class for the Hong Kong-Sydney flight. He claimed that he was intimidated by respondent Fuentebella into making the notations "Involuntary Downgrading" and "fare difference to be refunded" on the tickets. For her part, Galvez-Leonio testified that it was company policy not to engage passengers in debates or drawn-out discussions, but to address their concerns in the best and proper way. She admitted, however, that she had no personal knowledge of compliance in airports other than NAIA. Respondents narrated that for their trip from Hong Kong to Sydney, they were squeezed into very narrow seats for eight and a half hours and, as a result, they felt groggy and miserable upon landing. Respondents were able to travel First Class for their trip from Sydney to Hong Kong on 30 October 1993. However, on the last segment of the itinerary from Hong Kong to Manila on 2 November 1993, they were issued boarding passes for Business Class. Upon arrival in the Philippines, respondents demanded a formal apology and payment of damages from petitioner. The latter conducted an investigation, after which it maintained that no no undue harm had been done to them.
Issue: Whether or not there was breach of contract Ruling: There was a breach of contract. In Air France v. Gillego this Court ruled that in an action based on a breach of contract of carriage, the aggrieved party does not have to prove that the common carrier was at fault or was negligent; all that he has to prove is the existence of the contract and the fact of its nonperformance by the carrier. In this case, both the trial and appellate courts found that respondents were entitled to First Class accommodations under the contract of carriage, and that petitioner failed to perform its obligation. We shall not delve into this issue more deeply than is necessary because We have decided to accord respect to the factual findings of the trial and appellate courts. We must, however, point out a crucial fact We have uncovered from the records that further debunks petitioner's suggestion that two sets of tickets were issued to respondents - one for Business Class and another for open-dated First Class tickets. In FGU Insurance Corporation v. G.P. Sarmiento Trucking Corporation. We recognized the interests of the injured party in breach of contract cases: xxx. The law, recognizing the obligatory force of contracts, will not permit a party to be set free from liability for any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof. A breach upon the contract confers upon the injured party a valid cause for recovering that which may have been lost or suffered. The remedy serves to preserve the interests of the promissee that may include his " expectation Interest," which is his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed, or his " reliance interest." which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made; or his "restitution interest." which is his interest in having restored to him any benefit that he has conferred on the other party. According to Montillana, a reservation is deemed confirmed when there is a seat available on the plane. When asked how a passenger was informed of the confirmation, Montillana replied that computer records were consulted upon inquiry. By its issuance of First Class tickets on the same day of the flight in place of Business Class tickets that indicated the preferred and confirmed flight, petitioner led respondents to believe that their request for an upgrade had been approved
11
ELIZABETH SY-VARGAS vs. THE ESTATE OF ROLANDO ROLANDO OGSOS, SR. AND ROLANDO OGSOS, JR. (G.R. No. 221062, October 5, 2016) Facts: On February 10, 1994, Ogsos, Sr. and the Heirs of Fermina Pepico (Fermina), represented by their Attorney-in-Fact, Catalino V. Noel, entered into a Contract of Lease (lease contract) covering five (5) parcels of agricultural land owned by the latter, with an aggregate area of 23 hectares, more or less, situated in Maaslum Manjuyod, Negros Oriental (leased premises). Based on the contract, Ogsos, Sr. agreed to pay the Heirs of Fermina 230 piculs or 290.95 liquid-kilogram (lkg.) of centrifugal sugar every crop year, starting from crop year 19941995 to crop year 2000-2001, as lease rental. On June 5, 1996, the term of the lease contract was extended for three (3) years, or until the end of crop year 2004, due to Ogsos, Sr.'s introduction of improvements on the leased premises. Thereafter, or on December 30, 1996, the said contract was amended, modifying the lease rental from 230 piculs or 290.95 lkg. of centrifugal sugar every crop year to P150, 000.00 cash, beginning the crop year 1996-1997. Petitioner and Kathryn, who are among the heirs of Fermina, claimed that th at the lease rentals from crop year 1994-1995 to crop year 1998-1999 were not paid. Thus, on April 27, 2000, they filed a Complaint for Specific Performance and Damages against respondents, before the RTC, docketed as Civil Case No. 12708, to recover the unpaid lease rentals. Pertinently, they did not include in their claim the lease rental for crop year 1999-2000 because respondents had already abandoned the leased premises since the said crop year. In their answer, respondents alleged that they had faithfully complied with their obligations as embodied in the lease contract and its subsequent amendments. They denied abandoning the leased premises and claimed that sometime in December 1998, petitioner and Kathryn unlawfully took possession of the leased premises and appropriated for themselves the sugarcane ready for harvest under the pretext that they would apply the proceeds thereof to the unpaid rent. They likewise alleged that in the same year, Ogsos, Sr. and his wife fell ill, which incidents forced respondents to obtain loans from several businessmen, namely: Emiliano "Nonette" Bacang, Zaldy Roleda, and Pastor Domocol. The arrangement regarding the foregoing loans was that the said creditors would be allowed to harvest the sugarcane from the leased premises and apply the proceeds thereof to th e loans. However, when the creditors were about to harvest the sugarcane, they were prevented by petitioner and Kathryn; resulting in respondents' default in the payment of their debts. On March 22, 2000, Ogsos, Sr. died. Respondents also averred that since crop years 1994 to 1997-1998, the average production of sugarcane is 1,308.68 lkg. of sugar and 30.409 tons of molasses per year, as computed on the basis of the Planter's Production Reports. Thus, when petitioner and Kathryn took possession of the leased premises, respondents lost their profits equivalent to the aforesaid production starting from crop year 1999-2000 until the termination of the lease contract on crop year 20032004. Accordingly, respondents filed a counterclaim for these lost profits plus damages.
Issue: whether or not the respondents are entitled to be indemnified for loss of profit Ruling: In this case, the RTC found that under the lease contract, petitioner and Kathryn were bound to keep respondents in peaceful and adequate enjoyment of the leased premises for the entire duration of the lease and that respondents faithfully paid their lease rentals for a period of four (4) years, or until crop year 1998. Despite the foregoing, petitioner and Kathryn unlawfully took possession (sometime in December 1998) and harvested respondents' crops over their objections. The RTC further found that due to such unlawful dispossession of the leased premises, respondents were deprived of profits for six (6) crop years (i.e., from crop year 1999 to crop year 2004, which was the last crop year of the lease) in the amount of P1, 731,996.96 per year, or a grand total of P10, 391,987.76.60 Such factual findings were then affirmed by the CA in its assailed ruling. It has long been settled that factual findings of the trial court, affirmed by the CA, are final and conclusive and may not be reviewed on appeal,61 save for certain exceptions, which petitioner failed to show in this case. As such, the grant of said counterclaim is upheld.
12
SPOUSES ROMEO PAJARES and IDA T. PAJARES vs. REMARKABLE LAUNDRY AND DRY CLEANING, represented by ARCHEMEDES G. SOLIS (GR. No. 212690, February 20, 2017) Facts: On September 3, 2012, Remarkable Laundry and Dry Cleaning (respondent) filed a Complaint denominated as "Breach of Contract and Damages" against spouses Romeo and Ida Pajares (petitioners) before the RTC of Cebu City, which was docketed as Civil Case No. CEB39025 and assigned to Branch 17 of said court. Respondent alleged that it entered into a Remarkable Dealer Outlet Contract with petitioners whereby the latter, acting as a dealer outlet, shall accept and receive items or materials for laundry which are then picked up and processed by the former in its main plant or laundry outlet; that petitioners violated Article IV (Standard Required Quota & Penalties) of said contract, which required them to produce at least 200 kilos of laundry items each week, when, on April 30, 2012, they ceased dealer outlet operations on account of lack of personnel; that respondent made written demands upon petitioners for the payment of penalties imposed and provided for in the contract, but the latter failed to pay; and, that petitioners' violation constitutes breach of contract
Issue: the CA erred in declaring that the RTC had jurisdiction over respondent's Complaint which, although denominated as one for breach of contract, is essentially one for simple payment of damages.
Ruling: Respondent's complaint denominated as one for "Breach of Contract & Damages" is neither an action for specific performance nor a complaint for rescission contract. In ruling that respondent's Complaint is incapable of pecuniary estimation and that the RTC has jurisdiction, the CA comported itself with the following ratiocination: r atiocination: A case for breach of contract [sic] is a cause of action either for specific performance or rescission of contracts. An action for rescission of contract, as a counterpart of an action for specific performance, is incapable of pecuniary estimation, and therefore falls under the jurisdiction of the RTC. Without, however, determining whether, from the four corners of the Complaint, respondent actually intended to initiate an action for specific performance or an action for rescission of contract. Specific performance is "[t]he remedy of requiring exact performance of a contract in the specific form in which it was made, or according to the precise terms agreed upon. [It is t]he actual accomplishment of a contract by a party bound to fulfill it." Rescission of contract under Article 1191 of the Civil Code, on the other hand, is a remedy available to the obligee when the obligor cannot comply with what is incumbent upon him. It is predicated on a breach of faith by the other party who violates the reciprocity between them. Rescission may also refer to a remedy granted by law to the contracting parties and sometimes even to third persons in order to secure reparation of damages caused them by a valid contract, by means of restoration of things to their condition in which they were prior to the celebration of the contract.
13
TRAVEL & TOURS ADVISERS, INCORPORATED vs. ALBERTO CRUZ, SR., HERNANDEZ AND VIRGINIA MUÑOZ (G.R. No. 199282, March 14, 2016)
EDGAR
Facts: Respondent Edgar Hernandez was driving an Isuzu Passenger Jitney (jeepney) that he owns with plate number DSG-944 along Angeles-Magalang Road, Barangay San Francisco, Magalang, Pampanga, on January 9, 1998, around 7:50 p.m. Meanwhile,. a Daewoo passenger bus (RCJ Bus Lines) with plate number NXM-116, owned by petitioner Travel and Tours Advisers, Inc. and driven by Edgar Calaycay travelled in the same direction as that of respondent Edgar Hernandez vehicle. Thereafter, the bus bumped the rear portion of the jeepney causing it to ram into an acacia tree which resulted in the death of Alberto Cruz, Jr. and the serious physical injuries of Virginia Muñoz. Thus, respondents Edgar Hernandez, Virginia Muñoz and Alberto Cruz, Sr., father of the deceased Alberto Cruz, Jr., filed a complaint for damages, docketed as Civil Case No. 9006 before the RTC claiming that the collision was due to the reckless, negligent and imprudent manner by which Edgar Calaycay was driving the bus, in complete disregard to existing traffic laws, rules and regulations, and praying that judgment be rendered ordering Edgar Calaycay and petitioner Travel & Tours Advisers, Inc.
Issue: WHETHER OR NOT THE PETITIONER EXERCISED EXTRAORDINARY DILIGENCE OF A GOOD FATHER OF A FAMILY IN ITS SELECTION AND SUPERVISION OF DRIVER CALAYCAY
Ruling: In the selection of prospective employees, employers are required to examine them as to their qualifications, experience, and service records. On the other hand, due diligence in the supervision of employees includes the formulation of suitable rules and regulations for the guidance of employees, the issuance of proper instructions intended for the protection of the public and persons with whom the employer has relations through his or its employees and the imposition of necessary disciplinary measures upon employees in case of breach or as may be warranted to ensure the performance of acts indispensable to the business of and beneficial to their employer. To this, we add that actual implementation and monitoring of consistent compliance with said rules should be the constant concern of the employer, acting through dependable supervisors who should regularly report on their supervisory functions. In this case, as shown by the above findings of the RTC, petitioner was not able t o prove that it exercised the required diligence needed in the selection and supervision of its employee. Be that as it may, this doesn't erase the fact that at the time of the vehicular accident, the jeepney was in violation of its allowed a llowed route as found by the th e RTC and the CA, hence, the owner and driver of the jeepney likewise, are guilty of negligence as defined under Article 2179 of the Civil Code, which reads as follows: When the plaintiff’s negligence was the immediate and proximate cause of his injury, he cannot
recover damages. But if his negligence was only contributory, the immediate and proximate cause of the injury being the defendant's lack of due care, the plaintiff may recover damages, but the courts shall mitigate the damages to be awarded. The petitioner and its driver, therefore, are not solely liable for the damages caused to the victims. The petitioner must thus be held liable only for the damages actually caused by his negligence. It is, therefore, proper to mitigate the liability of the petitioner and its driver. The determination of the mitigation of the defendant's liability varies depending on the circumstances of each case
14
LYLITH B. FAUSTO, JONATHAN FAUSTO, RICO ALVIA, ARSENIA TOCLOY, LOURDES ADOLFO AND ANECITA MANCITA vs. MULTI AGRI-FOREST AND COMMUNITY DEVELOPMENT COOPERATIVE (FORMERLY MAF CAMARINES SUR EMPLOYEES COOPERATIVE, INC.) (G.R.No. 213939, October 12, 2016) Facts: Multi Agri-Forest and Community Development Cooperative4 (respondent) is a registered credit cooperative wherein Lylith Fausto (Lylith), Jonathan Fausto (Jonathan), Rico Alvia (Rico), Arsenia Tocloy (Arsenia), Lourdes Adolfo (Lourdes) and Anecita Mancita (Anecita) (collectively, the petitioners) are active members. On September 10, 1998, Lylith obtained a loan from the respondent in the amount of P80,000.00, with due date on January 8, 1999.7 Subsequently, she secured another loan in the amount of P50,000.00 which will fall due on March 14, 1999.8 Shortly thereafter, she procured a third loan from the respondent also in the amount of P50,000.00. All of the mentioned transactions were evidenced by separate promissory notes, with Anecita and Lourdes signing as co-makers in the first and second loans, and Rico and Glicerio Barce (Glicerio) in the third loan. Similarly, on October 27, 1998, Jonathan obtained a loan from the respondent in the amount of P60,000.00 to fall due on February 24, 1999, with Lylith and Glicerio as co-makers. Thereafter, on December 10, 1998, he obtained a second loan in the amount of P100,000.00, with Lylith and Arsenia as his co-makers. All five loans obtained by Lylith and Jonathan were imposed with an interest of 2.3% per month, with surcharge of 2% in case of default in payment of any installment due. Lylith and Jonathan, however, failed to pay their loans despite repeated demands. Thus, on December 12, 2000, the respondent, through its Acting Manager Ma. Lucila G. Nacario (Nacario), filed five separate complaints for Collection of Sum of Money before the Municipal Trial Court in Cities (MTCC) of Naga City against the petitioners
Issue: Whether or not demand or notice upon the co-makers of Lylith was still required to be considered in delay
Ruling: The requirement for demand or notice may be waived. Anent the petitioners' claim that no notice or demand was sent to them, the CA correctly ruled that the instant case falls under the exceptions to the necessity of demand. Specifically, Article 1169, paragraph 1 of the Civil Code provides that demand is not necessary when the obligation or the law expressly so declares. In the promissory notes signed by the petitioners, there is a uniform provision which states that "in case of default in payment of any installment due as herein agreed, the entire balance of this note shall immediately become due and payable at the option of the [respondent]without any notice or demand." This amounts to the express waiver of the need for demand before the debtor incurs in delay. The petitioners cannot evade liability by invoking that the stipulation on the waiver of notice applies only to the principal. It bears noting that the promissory notes state that the petitioners bound themselves jointly and severally liable with the principal debtor for the entire amount of the obligation. A solidary or joint and several obligation is one in which each debtor is liable for the entire obligation. The petitioners being co-makers, their liability is immediate and absolute as the principal debtor. The terms of the promissory notes apply to co-makers in equal force as with the principal debtors. This includes stipulation on the waiver of notice from the creditor before the obligation becomes due and demandable.
15
SPOUSES JAIME AND MATILDE POON, vs. PRIME SAVINGS BANK REPRESENTED BY THE PHILIPPINE DEPOSIT INSURANCE CORPORATION AS STATUTORY LIQUIDATOR (G.R. No. 183794, June 13, 2016) Facts: Petitioners owned a commercial building in Naga City, which they used for their bakery business. On 3 November 2006, Matilde Poon and respondent executed a 10-year Contract of Lease4 (Contract) over the building for the latter's use as its branch office in Naga City. They agreed to a fixed monthly mo nthly rental of P60, 000, with an advance advanc e payment of the rentals for the first f irst 100 months in the amount of P6, 000,000. As agreed, the advance payment was to be applied immediately, while the rentals for the remaining period of the Contract were to be paid on a monthly basis. On the basis of the report of Mr. Candon B. Guerrero, Director of Thrift Banks and Non-Bank Financial Institutions (DTBNBF1), in his memorandum dated January 3, 2000, which report showed that the Prime Savings Bank, Inc. (a) is unable to pay its liabilities as they became due in the ordinary course of business; (b) has insufficient realizable assets as determined by the Bangko Sentral ng Pilipinas to meet its liabilities; (c) cannot continue in business without involving probable losses to its depositors and creditors; and (d) has willfully violated cease and desist orders under Section 37 that has become final, involving acts or transactions which amount to fraud or a dissipation of the assets of the institution. The BSP eventually ordered respondent's liquidation under Monetary Board Resolution No. 664. On 12 May 2000, respondent vacated the leased premises and surrendered them to petitioners.10Subsequently, the PDIC issued petitioners a demand letter asking for the return of the unused advance rental amounting to P3, 480,000 on the ground that paragraph 24 of the lease agreement had become inoperative, because respondent's closure constituted force majeure. The PDIC likewise invoked the principle of rebus sic stantibus under Article 1267 of Republic Act No. 386 (Civil Code) as alternative legal basis for demanding the refund. Petitioners, however, refused the PDIC's demand. They maintained that they were entitled to retain the remainder of the advance rentals following paragraph 24 of their Contract.
Issues: Whether or not the respondent may be released from its contractual obligations to petitioners on grounds of fortuitous event under Article 1174 of the Civil Code and unforeseen event under Article 1267 of the Civil Code.
Ruling: The closure of respondent's business was neither a fortuitous nor an unforeseen event that rendered the lease agreement functus officio. The period during which the bank cannot do business due to insolvency is not a fortuitous event, unless it is shown that the government's action to place a bank under receivership or liquidation proceedings is tainted with arbitrariness, or that the regulatory body has acted without jurisdiction. As an alternative justification for its premature termination of the Contract, respondent lessee invokes the doctrine of unforeseen event under Article 1267 of the Civil Code, which provides: Art. 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part. The theory of rebus sic stantibus in public international law is often cited as the basis of the above article. Under this theory, the parties stipulate in light of certain prevailing conditions, and the theory can be made ma de to apply when these conditions cease to exist. The Court, however, has once cautioned that Article 1267 is not an absolute application of the principle of rebus sic stantibus, otherwise, it would endanger the security of contractual relations. After all, parties to a contract are presumed to have assumed the risks of unfavorable developments. It is only in absolutely exceptional changes of circumstance, therefore, that equity demands assistance for the debtor. The difficulty of performance should be such that the party seeking to be released from a contractual obligation would be placed at a disadvantage by the unforeseen event. Mere inconvenience, unexpected impediments, increased expenses, or even pecuniary inability to fulfil an engagement, will not relieve the obligor from an undertaking that it has knowingly and freely contracted 16
SPOUSES JUAN CHUY TAN AND MARY TAN (DECEASED) SUBSTITUTED BY THE SURVIVING HEIRS, JOEL TAN AND ERIC TAN vs. CHINA BANKING CORPORATION (G.R. No. 200299, August 17, 2016) Facts: Petitioner Lorenze Realty and Development Corporation (Lorenze Realty) is a domestic corporation duly authorized by Philippine laws to engage in real estate business. It is represented in this action by petitioners Joel Tan and Eric Tan as substitutes for their deceased parents, Spouses Juan Chuy Tan and Mary Tan (Spouses Tan). Respondent China Banking Corporation (China Bank), on the other hand, is a universal banking corporation duly authorized by Bangko Sentral ng Pilipinas (BSP) to engage in banking business. On several occasions in 1997, Lorenze Realty obtained from China Bank various amounts of loans and credit accommodations amount of 1/10 of 1% per day of the total amount of obligation due as penalty to be computed from the day that the default was incurred up to the time that the loan obligations are fully paid. The debtor also undertook pay an additional 10% of the total amount due including interests, surcharges and penalties as attorney's fees. As a security for the said obligations, Lorenze Realty executed Real Estate Mortgages (REM) over 11 parcels of land covered by Transfer Certificates of Title (TCT) Nos. B-44428, B-44451, B-44452, V-4J275: V-44276, V-44277, V-44278, V-44280, V-44281, V-44283 and V-44284 registered by the Registry of Deeds of Valenzuela City. Subsequently, Lorenze Realty incurred in default in the payment of its amortization prompting China Bank to cause the extra-judicial foreclosure of the REM constituted on the securities after the latter failed to heed to its demand to settle the entire obligation. After the notice and publication requirements were complied with, the mortgaged properties were sold at a public auction wherein China emerged as the highest bidder for the amount of P85, 000,000.0u as evidenced by a certificate of sale. After deducting from the total amount of loan obligation the P85, 000,000.00 proceeds of the public sale, there remains a balance in the amount of P29, 258,179.81. In its effort to collect the deficiency obligation, China Bank demanded from Lorenze Realty for the payment of the remaining loan but such demand just went to naught. Consequently, China Bank initiated an action for the collection of sum of money against the Lorenze Realty and its officers, namely, Lawrence Ong, Victoria Ong, Juan Chuy Tan and Mary Tan before the RTC of Makati City, Branch 142. In its Complaint docketed as Civil Civil Case No. No. 98-3069, China Bank Bank alleged that it is entitled to deficiency judgment because the purchase price of the securities pledged by the debtor is not sufficient to settle the entire obligation incurred by the latter including the interest, penalties and surcharges that had accrued from the time of default. China Bank thus prayed that defendants be ordered to pay the amount of P29, 25 8,179.81, representing the deficiency in its obligation in accordance with the express terms of the promissory notes
Issue: WHETHER OR NOT LORENZE REALTY'S OBLIGATION IS FULLY SETTLED WHEN THE REAL PROPERTIES CONSTITUTED AS SECURITIES FOR THE LOAN WERE SOLD AT THE PUBLIC AUCTION FOR P85, 000,000.00
Ruling: Obligations are extinguished, among others, by payment or performance, the mode most relevant to the factual situation in the present case. Under Article 1232 of the Civil Code, payment means not only the delivery of money but also the performance, in any other manner, of an obligation. Article 1233 of the Civil Code states that a debt shall not be understood to have been paid unless the thing or service in which the obligation consists has been completely delivered or rendered, as the case may be. In contracts of loan, the debtor is expected to deliver the sum of money due the creditor. These provisions must be read in relation with the other rules on payment under the Civil Code, such as the application of payment, to wit: Art. 1252. He who has various debts of the same same kind in favor of one and the same creditor may declare at the time of making the payment, to which of them the same must be applied. Unless the parties so stipulate, or when the application of payment is made by the party for whose benefit the term has been constituted, application shall not be made as to debts which are not yet due. If the debtor accepts from the creditor a receipt in which an application of the payment is made, the former cannot complain of the same, unless there is a cause for invalidating the contract
17
PHILIPPINE SCIENCE HIGH SCHOOL-CAGAYAN VALLEY CAMPUS vs. PIRRA CONSTRUCTION ENTERPRISES (G.R. No. 204423, September 14, 2016) Facts: IRRA Construction Enterprises (PIRRA) is a business engaged in general contracting and a licensed contractor registered with the Philippine Domestic Construction Board. On the other hand, PSHS is a government academic institution under the Department of Science and Technology (DOST) and is located in Bayombong, Nueva Vizcaya. Artemio R. Perez is the owner of PIRRA4 while Dir. Salvador Romo (Dir. Romo) is PSHS' Campus Director. On April 19, 2010, PIRRA tiled with the CIAC a Complaint for Damages against PSHS relative to the construction contracts for PSHS' Project A (Academic Building I - Phases IV and V, and Girls' Dormitory Building I - Phase IV); and its Project C (Academic Building II - Phase I, Boys' Dormitory Building - Phase I, and School Canteen - Phase I). PSHS contends that the CA Decision is based on a misapprehension of facts, such that recourse to the Court, through a Rule 45 Petition, is proper. PSHS reiterates that it did not consider Project A as substantially completed, and that it is not liable for the residual value of PB No. 5. It further asserts that even assuming that there was substantial completion of Project A, it is still not liable for the residual value of PP No. 5. It insists that after deducting from PB No. 5 the 30% mobilization fee, withholding tax; awning windows, liquidated damages, and plywood and lumber, PIRRA still owed PSHS P487, 315.02. As regards Project C, PSHS assorts that it already paid the value of the work done for Project C. It likewise claims that it is not liable for the value of the fabricated steel bars, steel awning windows with security grills a nd steel railings being claimed by PIRRA. Finally, PSHS alleges that attorney's fees should not be awarded to PIRRA since the latter has no valid claim as far as PB No. 5 on Project A is concerned; and PSHS already paid the value of work done on Project C. It also posits that even if it is ultimately held liable for the residual value of PB No. 5 for Project A, and of the value of the work done on Project C, its funds, being government funds, cannot be seized under a writ of execution. PIRRA counters that PSHS should be held liable for PB No. 5 because when PSHS created the Inspectorate Team, PSHS treated Project A as substantially completed. It also questions PSHS5 belated submission of the Summary of Progress Billings when it filed a Motion for Reconsideration with the CA, and argues that PSHS' claim for overpayment is without merit. In fine, PIRRA argues that PSHS never contested its Monthly Certificate of Payment attached to its letter dated July 29, 2009, and which was submitted during the proceedings with the CIAC. With regard to Project C, PIRRA maintains that PSHS invalidly terminated the contract as the latter failed to submit the required drawings and to issue a VO for the project. It insists that it was PSHS which incurred delay and breached the contract for Project C. Lastly, PIRRA claims mat it is entitled to moral and exemplary damages as PSHS unjustifiably failed to pay its PB No. 5 for Project A, and invalidly terminated the contract for Project C as well. It also claims that it is entitled to the value of the fabricated steel bar, awning windows with security grills and railing as well attorney's fees awarded by the CIAC, and which awards were affirmed by the CA
Issue: whether PSHS treated Project A as substantially completed such that it is liable for the residual value of PB No. 5
Ruling: the Court sustains the finding that PSHS accepted and treated Project A as a substantially completed project, and for which reason, PSHS' takeover thereof is of no moment. When PIRRA requested substantial acceptance and completion of Project A, PSHS did not object to such a request. It acted upon it and even created an Inspectorate Team for punch listing, and for the purpose of determining PIRRA's PB No. 5. Notably, PSHS repeatedly referred to PB No. 5 as the final billing for Project A. In fact, PSHS initially expressed its willingness to pay only to put it on hold because of the COA Report. Nonetheless, as correctly explained by the CIAC, such Report cannot affect PSHS' obligation to pay PIRRA because the existence of the defective or undelivered items was not an excuse to avoid payment of the progress billing, as the payment was due on the performed items that were completed or were otherwise performed, save for the defects.
18
DR. RESTITUTO C. BUENVIAJE vs. SPOUSES JOVITO R. AND LYDIA B. SALONGA, JEBSON HOLDINGS CORPORATION AND FERDINAND JUAT BAÑEZ (G.R. No. 216023, October 5, 2016) Facts: On May 29, 1997, Jebson, an entity engaged in the real estate business, through its Executive Vice President, Bañez, entered into a Joint Venture Agreement6 (JVA) with Sps. Salonga. Under the JVA, Sps. Salonga, who owned three (3) parcels of land with an area of 2,935 square meters situated in Tagaytay City, and covered by Transfer Certificate of Title (TCT) No. T-9000, agreed for Jebson to construct thereon ten (10) high-end single detached residential units, to be known as Brentwoods Tagaytay Villas (Brentwoods) They likewise assumed to subdivide the property into individual titles upon which Jebson shall assume the liability to pay their mortgage mortgage loan with the Metropolitan Bank and Trust Company. On the other hand, Jebson undertook to construct the units at its own expense, secure the building and development permits, and the license to sell from the HLURB, as well as the other permits required. Out of the ten (10) units, seven (7) units, i.e., Units 3, 4, 5, 6, 8, 9, and 10, will belong to Jebson while the remaining three (3) units, i.e., Units 1, 2, and 7, will correspond to Sps. Salonga's share.9 The units allocated to Sps. Salonga were to be delivered within six (6) months after Jebson's receipt of the down payment for the units allocated to it. Jebson was also allowed to sell its allocated units under such terms as it may deem fit, subject to the condition that the price agreed upon was with the conformity of Sps. Salonga. On June 9, 1997, Jebson entered into a Contract to Sell12 (subject CTS) with Buenviaje over Unit 5 for a total consideration of P10,500,000.00, without the conformity of Sps. Salonga.13 Out of the purchase price, P7,800,000.00 was paid through a "swapping arrangement," whereby Buenviaje conveyed to Jebson a house and lot located in Garden Villas, Tagaytay valued at P5,800,000.00 (house and lot) and Tagaytay Highlands Golf share No. 0722 (golf share) worth P2,000,000.00 on July 1, 1997, while the remaining balance was paid periodically. An additional sum of P125,000.00 for the retaining wall (P70,000.00) and air-conditioning system (P55,000.00) was likewise paid for by Buenviaje. However, despite full payment of the contract price, Jebson was unable to complete Unit 5 in violation of its contractual stipulation to finish the same within twelve (12) months from the date of issuance of the building permit. Thus, in April 1999, Buenviaje formally demanded the immediate completion and delivery of Unit 5, to which Jebson cited the 1997 financial crisis as the reason for the delay. Accordingly, Jebson asked to be given until the early part of the year 2000 to complete the same but still failed to do so.
Issue: The essential issues for the Court's resolution are whether or not the remedy of specific performance in Buenviaje's favor was proper under the prevailing circumstances of the case.
Ruling: Specific performance and "rescission" (more accurately referred to as resolution) are alternative remedies available to a party who is aggrieved by a counter-party's breach of a reciprocal obligation. This is provided for in Article 1191 of the Civil Code, which partly reads: Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. Specific performance is defined as "[t]he remedy of requiring exact performance of a contract in the specific form in which it was made, or according to the precise terms agreed upon." It pertains to "[t]he actual accomplishment of a contract by a party boun d to fulfill it." On the other hand, resolution is defined as the "unmaking of a contract for a legally sufficient reason x x x." "[Resolution] does not merely terminate the contract and release the parties from further obligations to each other, but abrogates the contract from its inception and restores the parties to their original positions as if no contract has been made. Consequently, mutual restitution, which entails the return of the benefits that each party may have received as a result of the contract, is thus required." Notably, resolution under Article 1191 of the Civil Code "will not be permitted for a slight or casual breach, but only for such substantial and fundamental violations as would defeat the very object of the parties in making the agreement. Ultimately, the question of whether a breach of contract is substantial depends upon the attending circumstances.
19
MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY [MCIAA] vs. HEIRS OF GAVINA IJORDAN, NAMELY, JULIAN CUISON, FRANCISCA CUISON, DAMASTNA CUISON, PASTOR CUISON, ANGELINA CUISON, MANSUETO CUISON, BONIFACIA CUISON, BASILIO CUISON, MOISES CUISON, AND FLORENCIO CUISON, (G.R. No. 173140, January 11, 2016) Facts: On October 14, 1957, Julian Cuizon (Julian) executed a Deed of Extrajudicial Settlement and Sale (Deed) covering Lot No. 4539 (subject lot) situated in Ibo, Municipality of Opon (now Lapu-Lapu City) in favor of the Civil Aeronautics Administration ((CAA), the predecessor-ininterest of petitioner Manila Cebu International Airport Authority (MCIAA). Since then until the present, MCIAA remained in material, continuous, uninterrupted and adverse possession of the subject lot through the CAA, later renamed the Bureau of Air Transportation (BAT), and is presently known as the Air Transportation Office (ATO). The subject lot was transferred and conveyed to MCIAA by virtue of Republic Act No. 6958 in 1980, the respondents caused the judicial reconstitution of the original certificate of title covering the subject lot ( issued by virtue of Decree No. 531167). Consequently, Original Certificate of Title (OCT) No. RO-2431 of the Register of Deeds of Cebu was reconstituted for Lot No. 4539 in the names of the respondents' predecessors-in-interest, namely, Gavina Ijordan, and Julian, Francisca, Damasina, Marciana, Pastor, Angela, Mansueto, Bonifacia, Basilio, Moises and Florencio, all surnamed Cuison.5 The respondents' ownership of the subject lot was evidenced by OCT No. RO-2431. They asserted that they had not sold their shares in the subject lot, and had not authorized Julian to sell their shares to MCIAA's predecessor-in-interest. The failure of the respondents to surrender the owner's copy of OCT No. RO-2431 prompted MCIAA to sue them for the cancellation of title in the RTC,7 alleging in its complaint that the certificate of title conferred no right in favor of the respondents because the lot had already been sold to the Government in 1957; that the subject lot had then been declared for taxation purposes under Tax Declaration No. 00387 in the name of the BAT; and that by virtue of the Deed, the respondents came under the legal obligation to surrender the certificate of title for cancellation to enable the issuance of a new one in its name.
Issue: Whether or not the subject lot was validly conveyed in its entirety to the petitioner? Ruling: Hence, the conveyance by Julian of the entire property pursuant to the Deed did not bind the respondents for lack of their consent and authority in his favor. As such, the Deed had no legal effect as to their shares in the property. Article 1317 of the Civil Code provides that no person could contract in the name of another without being authorized by the latter, or unless he had by law a right rig ht to represent him; the contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers, is unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the other contracting party. But the conveyance by Julian through the Deed had full force and effect with respect to his share of 1/22 of the entire property consisting of 546 square meters by virtue of its being a voluntary disposition of property on his part. MCIAA's assertion of estoppel or ratification to bar the respondents' contrary claim of ownership of their shares in the subject lot is bereft of substance. The doctrine of estoppel applied only to those who were parties to the contract and their privies or successors-in-interest. Moreover, the respondents could not be held to ratify the contract that was declared to be null and void with respect to their share, for there was nothing for them to ratify. Verily, the Deed, being null and void, had no adverse effect on the rights of the respondents in the subject lot. Lastly, MCIAA's contention on acquisitive prescription in its favor must fail. Aside from the absence of the satisfactory showing of MCIAA's supposed possession of the subject lot, no acquisitive prescription could arise in view of the indefeasibility of the respondents' Torrens title. Under the Torrens System, no adverse possession could deprive the registered owners of their title by prescription. The real purpose of the Torrens System is to quiet title to land and to stop any question as to its legality forever. Thus, once title is registered, the owner may rest secure, without the necessity of waiting in the portals of the court, or sitting on the mirador su casa to avoid the possibility of losing his land.
20
SPOUSES ROBERTO and ADELAIDA PEN vs. SPOUSES SANTOS and LINDA JULIAN (G.R. No. 160408, January 11, 2016) Facts: On April 9, 1986, the appellees (the Julians) obtained a P60,000.00 loan from appellant Adelaida Pen. On May 23, 1986 and on the (sic) May 27, 1986, they were again extended loans in the amounts of P50,000.00 and P10,000.00, respectively by appellant Adelaida. The initial interests were deducted by appellant Adelaida, (1) P3,600.00 from the P60,000.00 loan; (2) P2,400.00 from the P50,000.00 loan; and (3) P600.00 from the P10,000.00 loan. Two (2) promissory notes were executed by the appellees in favor of appellant Adelaida to evidence the foregoing loans, one dated April 9, 1986 and payable on June 15, 1986 for the P60,000.00 loan and another dated May 22, 1986 payable on July 22, 1986 for the P50,000.00 loan. Both Joans were charged interest at 6% per month. As security, on May 23, 1986, the appellees executed a Real Estate Mortgage over their property covered by TCT No. 327733 registered under the name of appellee Santos Julian, Jr. The owner's duplicate of TCT No. 327733 was delivered to the appellants. Appellant's version of the subsequent events run r un as follows: When the loans became due and demandable, appellees failed to pay despite several demands. As such, appellant Adelaida decided to institute foreclosure proceedings. However, she was prevailed upon by appellee Linda not to foreclose the property because of the cost of litigation and since it would cause her embarrassment as the proceedings will be announced in public places at the City Hall, where she has many friends. Instead, appellee Linda offered their mortgaged property as payment in kind. After the ocular inspection, the parties agreed to have the property valued at P70,000.00. Thereafter, on October 22, 1986 appellee executed a two (2) page Deed of Sale duly signed by her on the left margin and over her printed name. After the execution of the Deed of Sale, appellant Pen paid the capital gains tax and the required real property tax. Title to the property was transferred to the appellants by the issuance of TCT No. 364880 on July 17, 1987. A reconstituted title was also issued to the appellants on July 09, 1994 when the Quezon City Register of Deeds was burned. On July 1989, appellants allege that appellee Linda offered to repurchase the property to which the former agreed at the repurchase price of P436,115.00 payable in cash on July 31, 1989. The appellees failed to repurchase on the agreed date. On February 1990, appellees again offered to repurchase the property for the same amount, but they still failed to repurchase. On June 28, 1990, another offer was made to repurchase the property for the same amount. Appellee Linda offered to pay P100,000.00 in cash as sign of good faith. The offer was rejected by appellant Adelaida. The latter held the money only for safekeeping upon the pleading of appellee Linda. Upon the agreement of the parties, the amount of P100,000.00 was deducted from the balance of the appellees' indebtedness, so that as of October 15, 1997, their unpaid balance amounted to P319,065.00. Appellants allege that instead of paying lthe] said balance, the appellees instituted on September 8, 1994 the civil complaint and filed an adverse claim and lis pendens which were annotated at the back of the title to the property. On the other hand, the appellees aver the following: At the time the mortgage was executed, they were likewise required by the appellant Adelaida to sign a one (1) page document purportedly an "Absolute Deed of Sale". Said document did not contain any consideration, and was "undated, unfilled and unnotarized". They allege that their total payments amounted to P115,400.00 and that their last payment was on June 28, 1990 in the amount of P100,000.00. In December 1992, appellee Linda Julian offered to pay appellant Adelaida the amount of P150,000.00. The latter refused to accept the offer and demanded that she be paid the amount of P250,000.00. Unable to meet the demand, appellee Linda desisted from the offer and requested that she be shown the land title which she conveyed to the appellee Adelaida, b ut the latter refused. Upon verification with the Registry of Deeds of Quezon City, she was informed that the title to the mortgaged property had already been registered in the name of appellee Adelaida under TCT No. 364880, and that the transfer was entered on July 17, 1987. A reconstituted title, TCT No. RT-45272 (364880), also appeared on file in the Registry of Deeds replacing TCT No. 364880. By reason of the foregoing discoveries, appellee filed an Affidavit of Adverse Claim on January 1993.1avvphi1 Counsel for the appellees, on August 12, 1994, formally demanded the 21
reconveyance of the title and/or the property to them, but the appellants refused. In the process of obtaining other documents; the appellees also discovered that the appellants have obtained several Declarations of Real Property, and a Deed of Sale consisting of two (2) pages which was notarized by one Atty. Cesar Ching. Said document indicates a consideration of P70,000.00 for the lot, and was made to appear as having been executed on October 22, 1986. On September 8, 1994, appellees filed a suit for the Cancellation of Sale, Cancellation of Title issued to the appellants; Recovery of Possession; Damages with Prayer for Preliminary Injunction. The complaint alleged that appellant Adelaida, through obvious bad faith, maliciously typed, unilaterally filled up, and caused to be notarized the Deed of Sale earlier signed by appellee Julian, and used this spurious deed of sale as the vehicle for her fraudulent transfer unto herself the parcel of land covered by TCT No. 327733
Issue: Whether or not the deed of sale was valid? Ruling: Article 2088 of the Civil Code prohibits the creditor from appropriating the things given by way of pledge or mortgage, or from disposing of them; any stipulation to the contrary is null and void. The elements for pactum commissorium to exist are as follows, to wit: (a) that there should be a pledge or mortgage wherein property is pledged or mortgaged by way of security for the payment of the principal obligation; and (b) that there should be a stipulation for an automatic appropriation by the creditor of the thing pledged or mortgaged in the event of nonpayment of the principal obligation within the stipulated period.9 The first element was present considering that the property of the respondents was mortgaged by Linda in favor of Adelaida as security for the farmer's indebtedness. As to the second, the authorization for Adelaida to appropriate the property subject of the mortgage upon Linda's default was implied from Linda's having signed the blank deed of sale simultaneously with her signing of the real estate mortgage. The haste with which the transfer of property was made upon the default by Linda on her obligation, and the eventual transfer of the property in a manner not in the form of a valid dacion en pago ultimately u ltimately confirmed the nature of the transaction as a pactum commissorium
22
TIMOTEO BACALSO and DIOSDADA DIOSDADA BACALSO vs. GREGORIA B. ACA-AC, ACA-AC, EUTIQUIA B. AGUILA, JULIAN BACUS and EVELYN SYCHANGCO (G.R. No. 172919, January 13, 2016) Facts: The Bacus siblings were the registered owners of a parcel of land described as Lot No. 1809-G-2 located in San Roque, Talisay, Cebu with an area of 1,200 square meters and covered by Transfer Certificate of Title (TCT) No. 59260. The Bacus siblings inherited the said property from their mother Matea Bacalso (Matea). On October 15, 1987, the Bacus siblings executed a Deed of Absolute Sale conveying a portion of Lot No. 1809-G-2 with an area of 271 sq m, described as Lot No. 1809-G-2-C, in favor of their cousin, Timoteo for and in consideration of the amount of P8, 000.00. On March 4, 1988, however, Timoteo, together with his sisters Lucena and Victoria and some of his cousins filed a complaint for declaration of nullity of documents, certificates of title, conveyance of real property and damages against the Bacus siblings and four other persons before the RTC of Cebu City, Branch 12, and was docketed as Civil Case No. CEB-6693. They claimed that they are co-owners of the three-fourths portion of Lot No. 1809-G (which Lot No. 1809-G-2-C was originally part of) as Matea had paid for the said property for and in behalf of her brother Alejandro (father of petitioner Timoteo) and sisters Perpetua and Liberata, all surnamed Bacalso. On November 29, 1989, the RTC found that Matea was the sole owner of Lot No. 1809-G and affirmed the validity of the conveyances of portions of Lot No. 1809-G made by her children. The same was affirmed by the CA in a Decision dated March 23, 1992 and became final and executory on April 15, 1992. Undaunted, Timoteo and Diosdada Bacalso (petitioners) filed on October 26, 1995, a complaint for declaration of nullity of contract and certificates of title, reconveyance and damages against the Bacus siblings, this time claiming ownership over Lot No. 1809-G-2-C by virtue of the Deed of Absolute Sale dated October 15, 1987. They claimed, however, that the Bacus siblings reneged on their promise to cause the issuance of a new TCT in the name of the petitioners. Moreover, the petitioners alleged that the Bacus siblings have caused the subdivision of Lot No. 1809-G-2 into four lots and one of which is Lot No. 1809-G-2-C which is now covered by TCT No. 70783. After subdividing the property, the Bacus siblings, on February 11, 1992, without knowledge of the petitioners, sold Lot No. 1809-G-2-C again to respondent Evelyn Sychangco (Sychangco) and that TCT No. 74687 covering the same property was issued in her name. In their answer, the Bacus siblings denied the allegations of the petitioners and claimed that the alleged sale of Lot No. 1809-G-2-C in favor of the petitioners did not push through because the petitioners failed to pay the purchase price thereof. For her part, Sychangco averred that she is a buyer in good faith and for value as she relied on what appeared in the certificate of title of the property which appeared to be a clean title as no lien or encumbrance was annotated therein. On April 19, 2000, the RTC issued a Decision declaring the Deed of Absolute Sale dated October 15, 1987 void for want of consideration after finding that the petitioners failed to pay the price of the subject property. Moreover, the RTC held that even granting that the sale between the Bacus siblings and the petitioners was valid, the petitioners still cannot ask for the rescission of the sale of the disputed portion to Sychangco as the latter was a buyer in good faith, thus has a better right to the property
Issue: Whether or not the Deed of Absolute Sale dated October 15, 1987 is void for want of consideration.
Ruling: Contrary to the petitioners' claim, this is not merely a case of failure to pay the purchase price which can only amount to a breach of obligation with rescission as the proper remedy. As correctly observed by the RTC, the disputed sale produces no effect and is considered void ab initio for failure to or want of consideration since the petitioner failed to pay the consideration stipulated in the Deed of Absolute Sale. 23
To begin with, the Court hereby states that, from the totality of the evidence adduced in this case which it scrutinized and evaluated, it has come up with a finding that there was failure or want of consideration of the Deed of Sale of Lot 1809-G-2-C executed in favor of the [petitioners] on October 15, 1987. The Court is morally and sufficiently convinced that [Timoteo] had not paid to the [Bacus siblings] the price for the said land. This fact has been competently and preponderantly established by the testimony in court of [Julian]. [Julian] made the following narration in his testimony: Thus, it is evident from all the foregoing circumstances that there was a failure to or want of consideration of the supposed sale of the land in question to the [petitioners] on October 15, 1987. So, the said sale could not be given effect. Article 1352 of the New Civil Code of the Philippines is explicit in providing that 'contracts without cause produce no effect whatsoever'. If there is no cause, the contract is void. x x x There being no price paid, there is no cause or consideration; hence, the contract is void as a sale. x x x Consequently, in the case at bench, the plaintiffs have not become absolute owners of Lot 1809-G-2-C of Psd-07-022093 by virtue of the Deed of Sale thereof which was executed on October 15, 1987 by the [Bacus siblings] in their favor.
24
TERESITA I. BUENAVENTURA vs. METROPOLITAN BANK AND TRUST COMPANY (G.R. No. 167082, August 3, 2016) Facts: On January 20, 1997 and April 17, 1997, Teresita Buenaventura (or "appellant") executed Promissory Note (or "PN") Nos. 232663 and 232711, respectively, each in the amount of PI,500,000.00 and payable to Metropolitan Bank and Trust Company (or "appellee"). PN No. 232663 was to mature on July 1, 1997, with interest and credit evaluation and supervision fee (or "CESF") at the rate of 17.532% per annum, while PN No. 232711 was to mature on April 7, 1998, with interest and CESF at the rate of 14.239% per annum. Both PNs provide for penalty of 18% per annum on the unpaid principal from date of default until full payment of the obligation. Despite demands, there remained unpaid on PN Nos. 232663 and 232711 the amounts of P2, 061,208.08 and PI, 492,236.37, respectively, as of July 15, 1998, inclusive of interest and penalty. Consequently, appellee filed an action against appellant for recovery of said amounts, interest, penalty and attorney's fees before the Regional Trial Court of Makati City (Branch 61). In answer, appellant averred that in 1997, she received from her nephew, Rene Imperial (Or "Imperial"), three postdated checks drawn against appellee (Tabaco Branch), i.e., Check No. TA 1270484889PA dated January 5, 1998 in the amount of PI, 200,000.00, Check No. 1270482455PA dated March 31, 1998 in the amount of PI, 197,000.00 and Check No. TA1270482451PA dated March 31, 1998 in the amount of P500, 000.00 (or "subject checks"), as partial payments for the purchase of her properties; that she rediscounted the subject checks with appellee (Timog Branch), for which she was required to execute the PNs to secure payment thereof; and that she is a mere guarantor and cannot be compelled to pay unless and until appellee shall have exhausted all the properties of Imperial.
Issue: The promissory notes executed by petitioner are null and void for being simulated and fictitious.
Ruling: Based on Article 1345 of the Civil Code, simulation of contracts is of two kinds, namely: (1) absolute; and (2) relative. Simulation is absolute when there is color of contract but without any substance, the parties not intending to be bound thereby. It is relative when the parties come to an agreement that they hide or conceal in the guise of another contract. The effects of simulated contracts are dealt with in Article 1346 of the Civil Code, to wit: Art. 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement. The burden of showing that a contract is simulated rests on the party impugning the contract. This is because of the presumed validity of the contract that has been duly executed. The proof required to overcome the presumption of validity must be convincing and preponderant. Without such proof, therefore, the petitioner's allegation that she had been made to believe that the promissory notes would be guaranties for the rediscounted checks, not evidence of her primary and direct liability under loan agreements, could not stand.
25
DAMASO T. AMBRAY AND CEFERINO T. AMBRAY, JR. vs. SYLVIA A. TSOUROUS, CARMENCITA AMBRAY-LAUREL, HEDY AMBRAY-AZORES, VIVIEN AMBRAY-YATCO, NANCY AMBRAY-ESCUDERO, MARISTELA AMBRAY-ILAGAN, ELIZABETH AMBRAYSORIANO, MA. LUISA FE AMBRAY-ARCILLA AND CRISTINA AMBRAY-LABIT (G.R. No. 209264, July 5, 2016) Facts: During their lifetime, Ceferino, Sr. and Estela owned several properties, one of which was a parcel of land located in San Pablo City, Laguna denominated as Lot 2 of subdivision plan Pcs-12441, with an area of 4,147 square meters, more or less, covered by TCT No. T112599 of the Register of Deeds of San Pablo City (Lot 2). On December 28, 1977, Ceferino, Sr. mortgaged Lot 2 with Manila Bank for the amount of P180, 000.00. The mortgage was discharged on September 16, 1984. Prior to the discharge of the mortgage or sometime in August 1984, Lot 2 was subdivided into three (3) lots: Lot 2-A, Lot 2-B, and the subject property, Lot 2-C, resulting in the cancellation of TCT No. T-11259. Lot 2-C was registered in Ceferino, Sr.'s name in accordance with his letter dated August 29, 1984 requesting the Register of Deeds of San Pablo City to register Lot 2-C in his name. Thus, TCT No. T-2274912 was issued covering the said parcel under the name of Ceferino, Sr., married to Estela. In June 1996, Maristela discovered that TCT No. T-22749 covering Lot 2-C had been cancelled and in its stead, TCT No. T-41382 was issued in the name of petitioners. It appears that by virtue of a notarized Deed of Absolute Sale (Deed of Sale) dated January 16, 1978, Ceferino, Sr., with the consent of Estela, allegedly sold "a portion of lot 2 of the consolidation subd. plan (LRC) Pcs-12441"15 to petitioners for a consideration of P150, 000.00. The Deed of Sale was registered with the Register of Deeds of San Pablo City only on February 5, 1996. This prompted respondents to file a criminal case for falsification of public document against petitioners, entitled "People of the Philippines v. Damaso T. Ambray and Ceferino T. Ambray" and docketed as Criminal Case No. 39153 (falsification case) before the Municipal Trial Court in Cities (MTCC) of San Pablo City. In a Decision17 dated October 30, 2000, the MTCC acquitted petitioners of the charge for failure of the prosecution to prove their guilt beyond reasonable doubt. Thereafter, respondents filed the instant complaint for annulment of title, reconveyance, and damages against petitioners and Estela (defendants) docketed as Civil Case No. SP-5831(01), alleging that TCT No. T-41382 and the Deed of Sale were null and void because the signatures of Ceferino, Sr. and Estela thereon were forgeries.
Issue: Whether or not the CA erred in affirming the RTC's nullification of the Deed of Sale dated January 16, 1978 and TCT No. T-41382 covering Lot 2-C in the name of petitioners.
Ruling: As a rule, forgery cannot be presumed and must be proved by clear, positive and convincing evidence, and the burden of proof p roof lies on the party alleging forgery. One who alleges forgery has the burden to establish his case by a preponderance of evidence, or evidence which is of greater weight or more convincing than that which is offered in opposition to it. The fact of forgery can only be established by a comparison between the alleged forged signature and the authentic and genuine signature of the person whose signature is theorized to have been forged Further lending credence to the validity of the Deed of Sale is the well-settled principle that a duly notarized contract enjoys the prima facie presumption of authenticity and due execution as well as the full faith and credence attached to a public instrument. To overturn this legal presumption, evidence must be clear, convincing, and more than merely preponderant to establish that there was forgery that gave g ave rise to a spurious contract.
26
MAE FLOR GALIDO vs. NELSON P. MAGRARE, EVANGELINE M. PALCAT, RODOLFO BAYOMBONG, and REGISTER OF DEEDS OF ANTIQUE, San Jose, Antique (GR No. 206584, January 11, 2016) Facts: On 19 August 2004, Mae Flor Galido (petitioner) filed before the RTC of San Jose, Antique a petition5 to cancel all entries appearing on Transfer Certificate of Title (TCT) Nos. TT22374, T-22375 and T-22376, all in the name of Isagani Andigan (Andigan), and to annul TCT No. T-24815 and all other TCTs issued pursuant to the Order dated 18 October 2011 of RTC Branch 11, San Jose, Antique (Branch 11) in RTC Civil Case No. 2001-2-3230. The petition was raffled to RTC Branch 12, San Jose, Antique (trial court) and docketed as RTC Cad. Case No. 2004-819 Cad. Record No. 936. The controversy revolves around three parcels of land, designated as Lot 1052-A-1, Lot 1052-A2 and Lot 1052-A-3, all of the San Jose, Antique Cadastre. These parcels of land were, prior to subdivision in 1999, part of Lot 1052-A which was covered by TCT No. T-21405 in the name of Andigan. On 28 December 1998, Andigan sold undivided portions of Lot 1052-A to Nelson P. Magrare (Magrare), Evangeline M. Palcat (Palcat) and Rodolfo Bayombong (Bayombong). To Magrare was sold an undivided portion with an area of 700 square meters, more or less; to Palcat, 1,000 square meters, more or less; and to Bayombong, 500 square meters, more or less. Andigan caused the subdivision of Lot 1052-A into five lots, namely: Lot 1052-A-1, Lot L ot 1052-A2, Lot 1052-A-3, Lot 1052-A-4 and Lot 1052-A-5. On 18 October 1999, TCT No. T-21405 was cancelled and new certificates were issued for the subdivided portions. Pertinent to the case are TCT No. T-22374 which was issued for Lot 1052-A-1, TCT No. T-22375 for Lot 1052-A-2 and TCT No. T-22376 for Lot 1052-A-3, all in the name of Andigan. Andigan did not turn over the new TCTs to Magrare, Palcat and Bayombong, and the latter were unaware of the subdivision. On 8 May 2000, Andigan mortgaged the same three lots to petitioner and the latter came into possession of the owner’s duplicate copies of TCT Nos. T -22374, T-22375 and T-22376. On 6 February 2001, at 11:00 a.m., Magrare, Palcat and Bayombong registered their respective adverse claims on TCT Nos. T-22374, T-22375 and T-22376. On the same day, at 3:00 p.m., petitioner also registered her mortgage on the same TCTs, such that the certificates in the custody of the Register of Deeds were annotated
Issues: Who has a better right to the properties concerned: petitioner on the one hand, and Magrare, Palcat and Bayombong on the other?
Ruling: No Valid Mortgage in Favor of Petitioner Petitioner derives her title from Andigan, as mortgagor. However, at the time Andigan mortgaged the lots to petitioner he had already sold the same to Magrare, Palcat and Bayombong. Indeed, petitioner’s case is neg ated by Civil Case No. 2001-2-3230. There, Andigan admitted that Lot Nos. 1052-A-1, 1052-A-2 and 1052-A-3 were the parcels of land he sold to Magrare, Palcat and Bayombong, respectively, on 28 December 1998. Hence, when Andigan mortgaged the lots to petitioner on 8 May 2000, he no longer had any right to do so. We quote with approval the discussion of the trial court: Finally, when the spouses Andigan mortgaged to the herein petitioner Galido Lot Nos. 1052-A-1 and 1052-A-2, the said lots were already sold to the respondents Palcat and Magrare. It is therefore as if nothing was mortgaged to her because Isagani Andigan was no longer the owner of the mortgaged real property. Under Art. 2085 of the Civil Code, two of the prescribed requisites for a valid mortgage are, that, the mortgagor be the absolute owner of the thing mortgaged and, that, he has the free disposal thereof. These requisites are absent when Isagani Andigan and his wife mortgaged the lots alluded to above to the herein petitioner. A spring cannot rise higher than its source. Since Andigan no longer had any interest in the subject properties at the time he mortgaged them to her, petitioner had nothing to foreclose.
27
RCBC SAVINGS BANK vs. NOEL M. ODRADA (G.R. No. 219037, October 19, 2016) Facts: In April 2002, respondent Noel M. Odrada (Odrada) sold a second¬hand Mitsubishi Montero (Montero) to Teodoro L. Lim (Lim) for One Million Five Hundred Ten Thousand Pesos (P1,510,000). Of the total consideration, Six Hundred Ten Thousand Pesos (P610,000) was initially paid by Lim and the balance of Nine Hundred Thousand Pesos (P900,000) was financed by petitioner RCBC Savings Bank (RCBC) through a car loan obtained by Lim.4 As a requisite for the approval of the loan, RCBC required Lim to submit the original copies of the Certificate of Registration (CR) and Official Receipt (OR) in his name. Unable to produce the Montero's OR and CR, Lim requested RCBC to execute a letter addressed to Odrada informing the latter that his application for a car loan had been approved. On 5 April 2002, RCBC issued a letter that the balance of the loan would be delivered to Odrada upon submission of the OR and CR. Following the letter and initial down payment, Odrada executed a Deed of Absolute Sale on 9 April 2002 in favor of Lim and the latter took possession of the Montero. When RCBC received the documents, RCBC issued two manager's checks dated 12 April 2002 payable to Odrada for Nine Hundred Thousand Pesos (P900,000) and Thirteen Thousand Five Hundred Pesos (P13,500). After the issuance of the manager's checks and their turnover to Odrada but prior to the checks' presentation, Lim notified Odrada in a letter dated 15 April 2002 that there was an issue regarding the roadworthiness of the Montero. Odrada did not go to the slated meeting and instead deposited the manager's checks with International Exchange Bank (Ibank) on 16 April 2002 and redeposited them on 19 April 2002 but the checks were dishonored both times apparently upon Lim's instruction to RCBC. Consequently, Odrada filed a collection suit9 against Lim and RCBC in the Regional Trial Court of Makati. In his Answer, Lim alleged that the cancellation of the loan was at his instance, upon discovery of the misrepresentations by Odrada about the Montero's roadworthiness. Lim claimed that the cancellation was not done ex parte but through a letter dated 15 April 2002. He further alleged that the letter was delivered to Odrada prior to the presentation of the manager's checks to RCBC. On the other hand, RCBC contended that the manager's checks were dishonored because had cancelled the loan. RCBC claimed that the cancellation of the loan was prior to presentation of the manager's checks. Moreover, RCBC alleged that despite notice of defective condition of the Montero, which constituted a failure of consideration, Odrada proceeded with presenting the manager's checks.
Lim the the still
Issue: The court a quo gravely erred in finding that as between Odrada as seller and Lim as buyer of the vehicle, only the former f ormer has the right to rescind the th e contract of sale finding failure to perform an obligation under the contract of sale on the part of the latter only despite the contested roadworthiness of the vehicle, subject matter of the sale.
Ruling: Under the law on sales, a contract of sale is perfected the moment there is a meeting of the minds upon the thing which is the object of the contract and upon the price which is the consideration. From that moment, the parties may reciprocally demand performance.33 Performance may be done through delivery, actual or constructive. Through delivery, ownership is transferred to the vendee. However, the obligations between the parties do not cease upon delivery of the subject matter. The vendor and vendee remain concurrently bound by specific obligations. The vendor, in particular, is responsible for an implied warranty against hidden defects. Article 1547 of the Civil Code states: "In a contract of sale, unless a contrary intention appears, there is an implied warranty that the thing shall be free from any hidden faults or defects." Article 1566 of the Civil Code provides that "the vendor is responsible to the vendee for any hidden faults or defects in the thing sold, even though he was not aware thereof." As a consequence, the law fixes the liability of the vendor for hidden defects whether known or unknown to him at the time of the sale.
28
The law defines a hidden defect as one which would render the thing sold unfit for the use for which it is intended, or would diminish its fitness for such use to such an extent that, had the vendee been aware thereof, he would not have acquired it or would have given a lower price for it. In this case, Odrada and Lim entered into a contract of sale of the Montero. Following the initial down payment and execution of the deed of sale, the Montero was delivered by Odrada O drada to Lim and the latter took possession of the Montero. Notably, under the law, Odrada's warranties against hidden defects continued even after the Montero's delivery. Consequently, a misrepresentation as to the Montero's roadworthiness constitutes a breach of warranty against hidden defects.
29
ANITA U. LORENZANA vs. RODOLFO LELINA (G.R. No. 187850, August 17, 2016) Facts: On April 1, 1975, Ambrosia Lelina (Ambrosia), married to Aquilino Lelina (Aquilino), executed a Deed of Absolute Sale over one-half (1/2) of an undivided undivided parcel of land covered by Tax Declaration (TD) No. 14324-C (property) in favor of her son, the respondent. The Deed of Absolute Sale, however, specified only an area of 810 sq. m. as the one-half (1/2) of the property covered by the tax declaration.7 Nevertheless, the Deed of Absolute Sale contained the description of the land covered by TD No. 14324-C, as follows: "[b]ounded on the: North by Constancio Batac-& National highway [,] East by Cecilio Lorenzana, South by Cr[ee] k, and West by Andres Cuaresma."] Immediately after the execution of the Deed of Absolute Sale, respondent took possession of the property. Since then, the tenants of the property, Fidel Labiano, Venancio Lagria, and Magdalena Lopez, continued to deliver his share of the produce of the property as well as produce of the remaining half of the land covered by TD No. 14324-C until December 1995. Around August 1996,10 respondent and his three tenants were invited at the Municipal Agrarian Office of Tagudin, Ilocos Sur for a conference where they were informed that the property is already owned by petitioner by virtue of a Deed of Final Conveyance and TD No. 11-21367-A both in the name of petitioner.11 Alerted by the turn of events, respondent filed a complaint for quieting of title and cancellation of documents12 on September 24, 1996, with the RTC Branch 25, Tagudin, Ilocos Sur, claiming that there appears to be a cloud over his ownership and possession of the property. In her Answer, petitioner alleged that she acquired a land with an area of 16,047 sq. m. through a foreclosure sale. Petitioner claims that she became the judgment creditor in a case for collection of sum of money (collection case) she filed against Aquilino, and the decision in her favor became final on March 20, 1975, with an Entry of Judgment issued on April 10, 1975. Thereafter, by virtue of a writ of execution to enforce the decision in the collection case, the sheriff levied on a land with an area of 16,047 sq. m. covered by the TD No. 11-05370-A16 (levied property) under the name of Ambrosia. Petitioner claimed that she emerged as the sole and highest bidder when the levied property was auctioned. An auction sale was conducted on September 29, 1977 and a Certificate of Sale was issued in favor of petitioner. The same Certificate of Sale was registered with the Register of Deeds on October 18, 1977. No redemption having been made despite the lapse of the one year period for redemption, a Deed of Final Conveyance was issued in her favor on October 9, 1978. The same was registered with the Register of Deeds of Ilocos Sur on October 16, 1978.
Issue: Whether or not the respondent is the owner of one-half (1/2) of the levied property comprising of 16,047 sq. m.
Ruling: At any rate, we have consistently ruled that what really defines a piece of land is not the area, calculated with more or less certainty mentioned in the description, but its boundaries laid down, as enclosing the land and indicating its limits. Where land is sold for a lump sum and not so much per unit of measure or number, the boundaries of the land stated in the contract determine the effects and scope of the sale, and not its area. This is consistent with Article 1542 of the Civil Code which provides: Art. 1542. In the sale of real estate, made for a lump sum and not at the rate of a certain sum for a unit of measure or number, there shall be no increase or decrease of the price, although there be a greater or lesser areas or number than that stated in the contract. The same rule shall be applied when two or more immovables are sold for a single price; but if, besides mentioning the boundaries, which is indispensable in every conveyance of real estate, its area or number should be designated in the contract, the vendor shall be bound to deliver all that is included within said boundaries, even when it exceeds the area or number specified in the contract; and, should he not be able to do so, he shall suffer a reduction in the price, in proportion to what is lacking in the area or number, unless the contract is rescinded because the vendee does not accede to the failure to deliver what has been stipulated.
30
TOMAS P. TAN, JR. vs. JOSE G. HOSANA (G.R. No. 190846, February 3, 2016) Facts: he respondent Jose G. Hosana (Jose) married Milagros C. Hosana (Milagros) on January 14, 1979. During their marriage, Jose and Milagros bought a house and lot located at Tinago, Naga City, which lot was covered by Transfer Certificate of Title (TCT) No. 21229. On January 13, 1998, Milagros sold to the petitioner Tomas P. Tan, Jr. (Tomas) the subject property, as evidenced by a deed of sale executed by Milagros herself and as attorney-in-fact of Jose, by virtue of a Special Power of Attorney (SPA) executed by Jose in her favor. The Deed of Sale stated that the purchase price for the lot was P200, 000.00. After the sale, TCT No. 21229 was cancelled and TCT No. 32568 was issued in the name of Tomas. On October 19, 2001, Jose filed a Complaint for Annulment of Sale/Cancellation of Title/Reconveyance and Damages against Milagros, Tomas, and the Register of Deeds of Naga City. The complaint was filed before the Regional Trial Court (RTC), Branch 62, Naga City. In the complaint, Jose averred that while he was working in Japan, Milagros, without his consent and knowledge, conspired with Tomas to execute the SPA by forging Jose's signature making it appear that Jose had authorized Milagros to sell the subject property to Tomas.
Issue: The core issues is whether the deed of sale can be used as the basis for the amount of consideration paid
Ruling: An offer to prove prove the regular execution of the deed of sale is basis for the court to determine the presence of the essential elements of the sale, including the consideration paid. Tomas argues that the Deed of Sale was not specifically offered to prove the actual consideration of the sale and, hence, cannot be considered by the court. Tomas is incorrect. The deed of sale in the present case was formally offered by both parties as evidence. Tomas, in fact, formally offered it for the purpose of proving its execution and the regularity of the sale. The offer of the deed of sale to prove its regularity necessarily allowed the; lower courts to consider the terms written therein to determine whether all the essential elements59 for a valid contract of sale are present, including the consideration of the sale. The fact that the sale was declared null and void does not prevent the court from relying on consideration stated in the deed of sale to determine the actual amount paid by the petitioner for the purpose of preventing unjust enrichment. Hence, the specific offer of the Deed of Sale to prove the actual consideration of the sale is not necessary since it is necessarily included in determining the regular execution of the sale. The consideration stated in the notarized Deed of Sale is prima facie evidence of the amount paid by the petitioner. The notarized deed of sale is a public document and is prima facie evidence of the truth of the facts f acts stated therein. In the present case, the consideration stated in the deed of sale constitutes prima facie evidence of the amount paid by Tomas for the transfer of the property to his name. Tomas failed to adduce satisfactory evidence to rebut or contradict the consideration stated as the actual consideration and amount paid to Milagros and Jose. The deed of sale was declared null and void by a positive provision of law requiring the consent of both spouses for the sale of conjugal property. There is, however, no question on the presence of the consideration of the sale, except with respect to the actual amount paid. While the deed of sale has no force and effect as a contract, it remains prima facie evidence of the actual consideration paid. As earlier discussed, Tomas failed to substantiate his claim that he paid to Milagros the amount of P700, 000.00, instead of the amount of P200, 000.00 stated in the deed of sale. No documentary or testimonial evidence to prove payment of the higher amount was presented, apart from Tomas' sole testimony. Tomas' sole testimony of payment is self-serving and insufficient to unequivocally prove that Milagros received P700 , 000.00 for the subject property. p roperty.
31
DASMARIÑAS T. ARCAINA and MAGNANI T. BANTA vs. NOEMI L. INGRAM, represented by MA. NENETTE L. ARCHINUE (G.R. No. 196444, February 15, 2017) Facts: Arcaina is the owner of Lot No. 3230 (property) located at Salvacion, Sto. Domingo, Albay. Sometime in 2004, her attorney-in-fact, Banta, entered into a contract with Ingram for the sale of the property. Banta showed Ingram and the latter's attorney-in-fact, respondent Ma. Nenette L. Archinue (Archinue), the metes and bounds of the property and represented that Lot No. 3230 has an area of more or less 6,200 square meters (sq. m.) per the tax declaration covering it. The contract price was P1,860,000.00, with Ingram making installment payments for the property from May 5, 2004 to February 10, 2005 totaling P1,715,000.00. Banta and Ingram thereafter executed a Memorandum of Agreement acknowledging the previous payments and that Ingram still had an obligation to pay the remaining balance in the amount of P145,000.00. They also separately executed deeds of absolute sale over the property in Ingram's favor. Subsequently, Ingram caused the property to be surveyed and discovered that Lot No. 3230 has an area of 12,000 sq. m. Upon learning of the actual area of the property, Banta allegedly insisted that the difference of 5,800 sq. m. remains unsold. This was opposed by Ingram who claims that she owns the whole lot by virtue of the sale. Thus, Archinue, on behalf of Ingram, instituted the recovery case, docketed as Civil Case No. S-241, against petitioners before the MCTC.
Issue: We now resolve the main issue in this case and hold that Lot No. 3230 was sold for a lump sum
Ruling: We now resolve the main issue in this case and hold that Lot No. 3230 was sold for a lump sum. In sales involving real estate, the parties may choose between two types of pricing agreement: a unit price contract wherein the purchase price is determined by way of reference to a stated rate per unit area (e.g., P1,000.00 per sq. m.) or a lump sum contract which states a full purchase price for an immovable the area of which may be declared based on an estimate or where both the area and boundaries are stated (e.g., P1 million for 1,000 sq. m., etc.). Here, the Deed of Sale executed by Banta on March 21, 2005 and the Deed of Sale executed by Arcaina on April 13, 2005 both show that the property was conveyed to Ingram at the predetermined price of P1,860,000.00. There was no indication that it was bought on a persquare-meter basis. Thus, Article 1542 of the Civil Code governs the sale
32
DESIDERIO RANARA, JR. vs. ZACARIAS DE LOS ANGELES, JR (G.R. No. 200765, August 8, 2016) Facts: Sometime in October 1989, Leonor Parada (Parada) loaned from Zacarias de los Angeles, Sr. (Zacarias, Sr.) money amounting to P60, 000.00 to finance her migration to Canada. It was agreed that the loan would be payable within a period of 10 years. At the same time, Zacarias, Sr. informed Parada that the money came from his son, the respondent. As security, Parada mortgaged a parcel of agricultural land which would eventually be covered by Original Certificate of Title (OCT) No. 10020. It was stipulated that the respondent would take Possession of and farm the land as payment for the loan interest. Parada, thus, executed a Deed of Sale with Right to Repurchase dated October 26, 1989, during d uring which time the OCT had not yet been issued. The respondent took possession of the land, paid taxes due and converted the forested portion into irrigated land, without objection from Parada. In 1991, OCT No. 10020 was issued in the name of Parada, who brought with her to Canada the original owner's duplicate copy when she left in 1992. Later, Parada gave the owner's duplicate to Zacarias Sr. upon reports that someone attempted to enter the land. Parada also requested her tenant from another parcel of land, Salvador Romero, to remit to the respondent her share of the harvest for the years 1992 to 1994. She also sent $250.00 and P20, 000.00. When Zacarias, Sr. fell sick in 2001, the respondent pleaded with Noel Parada (Noel), Parada's son, to repurchase the property to finance his father's hospital and medical bills. The respondent later wrote a letter to Parada demanding that she repurchase the property. Parada paid P40, 000.00 delivered personally to Zacarias Sr. by Noel at the hospital. The respondent found the amount unacceptable and returned the P40, 000.00 and along with P10, 000.00 to Parada. On February 16, 2001, the respondent sold the land to the petitioner for P300, 000.00. Two documents of sale were executed: 1) for the actual sale price of P300, 000.00; and 2) for P130, 000.00 to be used as basis for the computation of taxes, registration of the deed and transfer of ownership. The respondent then sent Parada a letter dated July 17, 2001, enforcing the Deed of Sale with Right of Repurchase giving her 15 days to repurchase the property. The Deed of Absolute Sale with the purchase price of P150, 000.00 between the petitioner and the respondent was signed on December 10, 2001. Parada insisted, in her response to the letter dated July 17, 2001, that there was no pacto de retro sale and then tendered P60, 000.00 as payment for the loan, but it was refused by the respondent. She also learned that the respondent fraudulently registered with the Register of Deeds of Camarines Sur the Deed of Sale with Right to Repurchase falsified the Affidavit of Seller/Transferor and that the respondent sold the property to the petitioner. After exerting all efforts to settle and to no avail, a vail, Parada filed a Complaint against the petitioner and the respondent for Reformation of Instrument, Consignation, Recovery of Possession with a Prayer for a Writ of Preliminary Mandatory Injunction and Damages. In his Answer with Cross-Claim and Counterclaim, the petitioner denied any knowledge of any defect in the title of the property, since the respondent was in the possession of and cultivating the land. The petitioner claimed that he is an innocent purchaser for value. The petitioner also claimed that aside from paying the purchase price of P300, 000.00, he had introduced permanent improvements on the property amounting to P150, 000.00 consisting of deep-well irrigation facilities and another P150, 000.00 for levelling portions of the property and converting the same to rice land. The petitioner prayed that if the case be resolved in favor of Parada, he be reimbursed by the respondent for his actual expenses plus the legal rate of interest. For his part, the respondent insisted that the contract he entered with Parada was one of sale. He claimed that he introduced the improvements in the property and sought reimbursement for the same. Moreover, the respondent claimed that the petitioner failed to pay the full purchase price of the property and still owed him a balance of P50, 000.00 and took advantage of his lack of education and dire need of money 33
Issue: Whether or not DESIDERIO RANARA, JR. was a purchaser in good faith Ruling: Generally, the question of whether a person is a purchaser in good faith is a factual matter that generally will not be delved into by the Court as it is not a trier of facts. Factual findings of the trial court on the matter, especially if affirmed by the appellate court, are binding and conclusive upon the Court save for specific instances. However, none of the exceptions apply to the instant case. Here, both the RTC and CA have ruled that the petitioner and the respondent are both in bad faith and such finding is binding on the Court since none of the exceptions warranting the Court's review are availing. In any event, the Court agrees with the courts a quo that the petitioner was in bad faith in purchasing the land since it was his duty to investigate. A purchaser of land that is in the actual possession of the seller must make some inquiry in the rights of the possessor of the land. The rule of caveat emptor requires the purchaser to be Ware of the supposed title of the vendor and one who buys without checking the vendor's title takes all the risks and losses consequent to such failure.
34
GIL MACALINO, JR., TERESITA MACALINO, ELPIDIO MACALINO, PILAR MACALINO, GILBERTO MACALINO, HERMILINA MACALINO, EMMANUEL MACALINO, EDELINA MACALINO, EDUARDO MACALINO, LEONARDO MACALINO, EDLLANE** MACALINO, APOLLO MACALINO, MA. FE MACALINO, AND GILDA MACALINO vs. ARTEMIO PIS-AN (G.R. No. 204056, June 1, 2016) Facts: Under Original Certificate of Title (OCT) No, 2393-A, Emeterio Jumento (Emeterio) was the owner of the half portion, and his children Hospicio Jumento (Hospicio) and Severina Jumento (Severina) of the other half in equal shares, of Lot 3154 consisting of 469 square meters and located in Junob, Dumaguete City, Negros Oriental. When Hospicio and Severina died single and without issue, Emeterio as their sole heir inherited the portions pertaining to them and thus became the owner of the whole lot. Subsequently, Emeterio also passed away. Apparently, the City of Dumaguete built in the 1950's a barangay road which cut across said lot. As a result, Lot 3154 was divided into three portions, to wit: the portion which was converted into a barangay road and the portions on both sides of said barangay road. Sometime in the 1970's, Artemio, a grandson-in-law of Emeterio, commissioned Geodetic Engineer Rodolfo B. Ridad (Engr. Ridad) to survey Lot 3154 so that taxes would be assessed only on the portions of the subject property which remained as private property. Accordingly, Engr. Ridad came up with a sketch plan (sketch plan) where the three portions of Lot 3154 were denominated as Lot 3154-A (the portion on the left side of the road), Lot 3154-B (the portion which was converted into a barangay road), and Lot 3154-C (the portion on the right side of the road). The sketch plan also revealed that the portion occupied by Artemio, i.e., Lot 3154-A as enclosed by points 1, 2, 3, 4, 5, and 6,6 together with a section of a dried creek, contained an area of 207 square meters. On May 3, 1995, Artemio and the other heirs of Emeterio executed an Extra Judicial Settlement of Estate and Absolute Sale8 (Absolute Sale) adjudicating among themselves Lot 3154 and selling a 207-square meter portion of the same to the spouses Wilfredo and Judith Sillero (spouses Sillero). The document, did not, however, identify the portion being sold as Lot No. 3154-A but simply stated as follows: That for and in consideration of the sum of TWELVE THOUSAND PESOS (P12,000.00) Philippine currency to them in hand paid by spouses WILFREDO SILLERO and JUDITH SILLERO, both of legal age, Filipino, with residence at Taclobo, Dumaguete City, the aforementioned heirs hereby SELL, TRANSFER and CONVEY absolutely and unconditionally, unto the said WILFREDO SILLERO and JUDITH SILLEROW their heirs and assigns a portion of the above-described parcel of land [Lot 3154] which is TWO HUNDRED SEVEN (207) square meters and which shall have access to and [to which] belong the existing road right of way, together with the building and improvements thereon. The spouses Sillero, immediately after the sale, fenced Lot No. 3154-A and built a house thereon. Not long after, they sold Lot 3154-A to petitioner Gil Macalino, Jr. (Gil) by virtue of a Deed of Sale (Deed of Sale) dated December 27,1996 which states in part, viz.: The Vendors are the absolute owners of TWO HUNDRED SEVEN (207) square [meter-part] of [L]ot 3154 x x x known as Sub[-]lot 3154-A x x x [T]he whole [L]ot 3154 is covered by Original Certificate of Title No. 2393-A situated at Junob, Dumaguete City On July 2, 1998, Transfer Certificate of Title (TCT) No. 2765812 in the names of Artemio and the other heirs of Emeterio was issued in lieu of OCT No. 2393-A. Annotated therein was the sale made by the heirs of Emeterio to the spouses Sillero and also of the latter to Gil. Intending to have Lot 3154-A registered in his name, Gil caused the survey of the same by Geodetic Engineer Rilthe P. Dorado (Engr. Dorado) sometime in 1998. Engr. Dorado, however, discovered that the portion occupied by Gil consists of 140 square meters only and not 207. Believing that he was deceived, Gil filed a complaint for estafa against the spouses Sillero. On January 31, 2001, the Land Management Bureau issued an approved Subdivision Plan (Subdivision Plan) wherein Lot 3154 was subdivided into four sub-lots, to wit: (1) Lot 3154-A with an area of 140 square meters; (2) Lot 3154-B or the existing barangay road with an area of 215 square meters; (3) Lot 3154-C with an area of 67 square meters; and (4) Lot 3154-D with 35
an area of 47 square meters. Notably, the Subdivision Plan which was based on the survey conducted by Engr. Dorado refers not only to Lot 3154-A as Gil's property but also to Lot 3154C. Likewise, the document does not bear the conformity of Artemio and his co-heirs but only that of Gil. A few years later or on January 18, 2005, Gil, joined by his children and their respective spouses, namely: petitioners Gil Macalino, Jr., Teresita Macalino, Elpidio Macalino, Pilar Macalino, Gilberto Macalino, Hermilina Macalino, Emmanuel Macalino, Edelina Macalino, Eduardo Macalino, Leonardo Macalino, Eillane Macalino, Apollo Macalino, Ma. Fe Macalino, and Hilda Macalino, filed against Artemio a Complaint for Quieting of Title and Damages with the RTC, docketed as Civil Case No. 13725.
Issue: Who between petitioners and Artemio has a right over Lot 3154-C. Ruling: Petitioners, in order to further their case, rely on the failure of the Absolute Sale to state that the 207-square meter portion conveyed by Artemio and his co¬heirs to the spouses Sillero was Lot 3154-A. Artemio, on the other hand, puts emphasis on the fact that the Deed of Sale between Gil and the spouses Sillero expressly stated that the lot subject of the sale was Lot 3154-A only. Plainly, the parties' respective arguments hinge on two relevant documents which they adopted as common exhibits - (1) the Absolute Sale subject of which, among others, is the conveyance made by Artemio and his co-heirs to the spouses Sillero; and (2) the Deed of Sale between the spouses Sillero and Gil. It is worthy to note that there is no dispute regarding the contents of these documents, that is, neither of the parties contests that the Absolute Sale did not state that the 207-square meter portion sold to the spouses Sillero was Lot 3154-A nor that the Deed of Sale between Gil and the spouses Sillero expressly mentioned that the subject of the sale between them was Lot 3154-A. 3154- A. What is really in issue therefore is whether the a dmitted contents of the said documents adequately and correctly express the true intention of the parties to the same. It has been held that "[w]hen the parties admit the contents of written documents but put in issue whether these documents adequately and correctly express the true intention of the parties, the deciding body is authorized to look beyond these instruments and into the contemporaneous and subsequent actions of the parties in order to determine such intent." In view of this and since the Parol Evidence Rule 32 is inapplicable in this case,33 and examination of the parties' respective parol evidence is in order. Indeed, examination of evidence is necessarily factual34 and not within the province of a petition for review on certiorari35 which only allows questions of law to be raised. However, this case falls under one of the recognized exceptions to such rule, i.e., when the CA's findings are contrary to that of the trial court. As mentioned, the Absolute Sale did not specifically indicate that Artemio and a nd his co-heirs co- heirs were conveying to the spouses Sillero Lot 3154-A, It simply stated that they were selling to the said spouses a 207-square meter portion of Lot 3154. However, mere should be no question that the sale was only specific to Lot 3154-A since none other than the parties to the said transaction acknowledged this. At any rate, the testimonial evidence presented by Artemio sufficiently supports the conclusion that what was sold to the spouses Sillero was indeed Lot 3154-A only.
36
FABIO CAHAYAG and CONRADO RIVERA vs. COMMERCIAL CREDIT CORPORATION, represented by its President, LEONARDO B. ALEJANDRO; TERESITA T. QUA, assisted by her husband ALFONSO MA. QUA; and the REGISTER OF DEEDS OF LAS PINAS, METRO MANILA, DISTRICT IV (G.R. No. 168078, January 13, 2016) x-----------------------x
DULOS REALTY & DEVELOPMENT CORPORATION, represented by its President, JUANITO C. DULOS; and MILAGROS E. ESCALONA, and ILUMINADA D. BALDOZA vs. COMMERCIAL CREDIT CORPORATION, represented by its President, LEONARDO B. ALEJANDRO; TERESITA T. QUA, assisted by her husband ALFONSO MA. QUA; and the REGISTER OF DEEDS OF LAS PINAS, METRO MANILA, DISTRICT IV (G.R. No. 168357, January 13, 2016) Facts: Petitioner Dulos Realty was the registered owner of certain residential lots covered by Transfer Certificate of Title (TCT) Nos. S-39767, S-39775, S-28335, S-39778 and S-29776, located at Airmen's Village Subdivision, Pulang Lupa II, Las Pinas, Metro Manila. On 20 December 1980, Dulos Realty obtained a loan from respondent CCC in the amount of P300,000. To secure the loan, the realty executed a Real Estate Mortgage over the subject properties in favor of respondent. The mortgage was duly annotated on the certificates of title on 3 February 1981. On 29 March 1981, Dulos Realty entered into a Contract to Sell with petitioner Cahayag over the lot covered by TCT No. S-39775. On 12 August 1981, Dulos Realty entered into another Contract to Sell, this time with petitioner Rivera over the lot covered by TCT No. S-28335. Dulos Realty defaulted in the payment of the mortgage loan, prompting respondent CCC to initiate extrajudicial foreclosure proceedings. On 17 November 1981, the auction sale was held, with respondent CCC emerging as the highest bidder. On 23 November 1981, a Certificate of Sale covering the properties, together with all the buildings and improvements existing thereon, was issued in favor of CCC. The Certificate of Sale was annotated on the corresponding titles to the properties on 8 March 1982. Thereafter, or on 13 January 1983, Dulos Realty entered into a Contract to Sell with petitioner Escalona over the house and lot covered by TCT No. S-29776. On 10 November 1983, an Affidavit of Consolidation in favor of respondent CCC dated 26 August 1983 was annotated on the corresponding titles to the properties. By virtue of the affidavit, TCT Nos. S-39775, S-28335, S-39778 and S-29776 - all in the name of Dulos Realty were cancelled and TCT Nos. 74531, 74532, 74533 and 74534 were issued in the name of respondent CCC on the same day. On 10 December 1983, Dulos Realty entered into a Deed of Absolute Sale with petitioner Baldoza over the property covered by TCT No. S-39778, together with the improvements existing thereon. On 21 December 1983, respondent CCC, through a Deed of Absolute Sale, sold to respondent Qua the same subject properties, now covered by TCT Nos. 74531, 74532, 74533 and 74534, which were in the name of respondent CCC. The sale was duly annotated on the corresponding titles to the properties on 5 January 1984. Accordingly, TCT Nos. 74531, 74532, 74533 and 74534 were cancelled; and TCT Nos. 77012, 77013, 77014 and 770015 were issued to respondent Qua on 5 January 1984.
37
Subsequently, respondent Qua filed ejectment suits individually against petitioners Du1os Realty, Cahayag,18Esca1ona, and Rivera before the Metropolitan Trial Court (MTC) of Las Piñas, Metro Manila. The MTC rendered Decisions in favor of respondent Qua. It ordered Dulos Realty, Escalona, Cahayag, and Rivera to vacate the properties. On 8 March 1988, the MTC issued a Writ of Execution to enforce its Decision dated 20 October 1986 in Civil Case No. 2257 against Dulos Realty "and all persons claiming right under defendant." The subject of the writ of execution was Lot 11 Block II, which was the lot sold by Dulos Realty to petitioner Baldoza.
Issue: Who Has a Better Right over the Properties Ruling: Registration of the mortgage establishes a real right or lien in favor of the mortgagee, as provided by Articles 131261and 212662 of the Civil Code. Corollary to the rule, the lien has been treated as "inseparable from the property inasmuch as it is a right in rem." In other words, it binds third persons to the mortgage. The purpose of registration is to notify persons other than the parties to the contract that a transaction concerning the property was entered into. Ultimately, registration, because it provides constructive notice to the whole world, makes the certificate of title reliable, such that third persons dealing with registered land need only look at the certificate to determine the status of the property. In this case, the Real Estate Mortgage over the property was registered on 3 February 1981. On the other hand, the Contracts to Sell were all executed after the registration of the mortgage. The Contract to Sell in favor of petitioner Cahayag was executed on 29 March 1981, or almost two months after the registration of the mortgage. The corresponding Contract to Sell in favor of Rivera was executed only on 12 August 1981, roughly six months after the registration of the mortgage contract. Lastly, the Contract to Sell in favor of Escalona was executed on 13 January 1983, or nearly two years after the registration of the mortgage on 3 February 1981. Consequently, petitioners Cahayag, Rivera and Escalona, were bound to the mortgage executed between mortgagor Dulos Realty and mortgagee CCC, by virtue of its registration. Definitely, the buyers each had constructive knowledge of the existence of the mortgage contract when they individually executed the Contracts to Sell.
38
RAMON PACON, THROUGH HIS WIFE FELINA PACON, ANTONIO PACON, THROUGH HIS WIFE NENITA PACON, EULOGIO PACON, THROUGH HIS SON JORGE PACON, LEONARDO PACON, MANUEL IGOS, JOSE COLORES, LOLITA COLORES, AND ESTANISLAO BUENDIA vs. BENJAMIN TAN (G.R. No. 185365, March 2, 2016) Facts: Respondent Benjamin Tan ("Tan") is a registered co-owner of a parcel of land located in Gaognan-Tara, Sipocot, Camarines Sur, with an area of 302,302 square meters covered by Transfer Certificate of Title (TCT) No. 3958 issued by the Registry of Deeds for the Province of Camarines Sur. Sometime in July 1997, Tan, with the other co-owners, filed several complaints for ejectment against petitioners, who they claim were occupying approximately four (4) hectares of the property. According to Tan, et al., petitioners, after harvesting the various trees and crops planted on the property and despite repeated demands, have failed to remit any amount or part of the harvest gathered. They also claimed that petitioners have sold and encumbered their rights to third persons who are now in actual possession of their portion of the property. Disputing the foregoing allegations, petitioners prayed for the dismissal of the complaints. They countered that they have a tenancy agreement with Tan, et al. wherein the former bound themselves to give to the latter an amount equivalent to two-thirds (2/3) share of the produce or income in the property. They further claim that they have been religiously remitting said share to Tan and his co-owners, through their overseer Sandy Nuñez. According to petitioners, the payments were "always withheld and deposited with [Tan et al.'s] 'authorized comprador' and these deposited payments with the comprador were being withdrawn by [Tan, et al.'s] abovenamed overseer."
Issue: Whether or not failure to pay lease rentals is indeed a ground for the dispossession of a tenant or termination of the tenancy relationship, the non-payment of lease rentals must be shown to be deliberate and intentional.
Ruling: The burden of proving sufficient cause for eviction of tenants rests on the landowner At the outset, we note from the challenged Decision the following statement of the Court of Appeals: xxx The [petitioners] should have endeavored to fully substantiate their claim of payment considering that [Tan] disputes or fails to acknowledge the fact of payment. Well-settled is the rule that one who pleads payment has the burden of proving it. Even where the plaintiff must allege non-payment, the general rule is that the burden rests on the defendant to prove nonpayment. The debtor has the burden of showing with legal certainty that the obligation has been discharged by payment. In this case, [petitioners] failed to discharge their burden. They failed to prove the fact of payment. No evidence was presented showing receipt and acknowledgement by [Tan, et al.] of payment of rentals or their rightful share in the harvest/produce
39
PHILIPPINE NATIONAL BANK vs. HEIRS OF BENEDICTO AND AZUCENA ALONDAY (G.R. No. 171865, October 12, 2016) Facts: On September 26, 1974, the Spouses Benedicto and Azucena Alonday (Spouses Alonday) obtained an agricultural loan of P28,000.00 from the petitioner at its Digos, Davao del Sur Branch, and secured the obligation by constituting a real estate mortgage on their parcel of land situated in Sta. Cruz, Davao del Sur registered under Original Certificate of Title (OCT) No. P-3599 of the Registry of Deeds of Davao del Sur. On June 11, 1980, the Spouses Alonday obtained a commercial loan for P16, 700.00 from the petitioner's Davao City Branch, and constituted a real estate mortgage over their 598 square meter residential lot situated in Ulas, Davao City registered under Transfer Certificate of Title (TCT) No. T-66139 of the Registry of Deeds of Davao City. The Spouses Alonday made partial payments on the commercial loan, which they renewed on December 23, 1983 for the balance of P15, 950.00. The renewed commercial loan, although due on December 25, 1984, was fully paid on July 5, 1984. On August 6, 1984, respondents Mercy and Alberto Alonday, the children of the Spouses Alonday, demanded the release of the mortgage over the property covered by TCT No. T66139. The petitioner informed them, however, that the mortgage could not be released because the agricultural loan had not yet been fully paid, and that as the consequence of the failure to pay, it had foreclosed the mortgage over the property covered by OCT No. P-3599 on August 17, 1984. It appeared that notwithstanding such foreclosure, a deficiency balance of P91, 525.22 remained. Hence, the petitioner applied for the extrajudicial foreclosure of the mortgage on the property covered by TCT No. T-66139. A notice of extra-judicial sale was issued on August 20, 1984, and the property covered by TCT No. T-66139 was sold on September 28, 1984 to the petitioner in the amount of P29, 900.00. Since the Alondra’s were unable to redeem the property, the petitioner consolidated its ownership. Later on, the property was sold for P48, 000.00 to one Felix Mallis on November 10, 1989. According to the petitioner, the deed of mortgage relating to the property covered by TCT No. No. T66139 included an "all-embracing clause" whereby the mortgage secured not only the commercial loan contracted with its Davao City Branch but also the earlier agricultural loan contracted with its Digos Branch.
Issue: Whether or not the Court of Appeals grievously erred in restricting and delimiting the scope and validity of the standard "all-embracing clause" in real estate mortgage contracts solely to future indebtedness and not to prior ones, contrary to leading Supreme Court decisions on the matter.
Ruling: The mortgage provision relied upon by b y appellant is known in American jurisprudence as a "dragnet" clause, which is specifically phrased to subsume all debts of past or future origin. Such clauses pursuant to the pronouncement of the Supreme Court in DBP vs. Mirang must be "carefully scrutinized and strictly construed”. The petitioner wrongly insists that the CA, through the foregoing ratiocination, held that the allembracing or dragnet clauses were altogether invalid as to prior obligations. What the CA, although reiterating that the Court upheld the validity of using real estate mortgages to secure future advancements, only thereby pointed out that it could not find similar rulings as to mortgages executed to secure prior loans. loan s. There is no question, indeed, that all-embracing or dragnet clauses have been recognized as valid means to secure debts of both future and past origins. Even so, we have likewise emphasized that such clauses were an exceptional mode of securing obligations, and have held that obligations could only be deemed secured by the mortgage if they came fairly within the terms of the mortgage contract. For the all-embracing or dragnet clauses to secure future loans, therefore, such loans must be sufficiently described in the mortgage contract. If the requirement could be imposed on a future loan that was uncertain to materialize, there is a greater reason that it should be applicable to a past loan, which is already subsisting and known to the parties.
40
PHILIPPINE NATIONAL BANK vs. JUAN F. VILA (G.R. No. 213241, August 1, 2016) Facts: PNB is a universal banking corporation duly authorized by Bangko Sentral ng Pilipinas (BSP) to engage in banking business. Sometime in 1986, Spouses Reynaldo Cormsta and Erlinda Gamboa Cornista (Spouses Cornista) obtained a loan from Traders Royal Bank (Traders Bank).5 To secure the said obligation, the Spouses Cornista mortgaged to the bank a parcel of land with an area of 451 square meters designated as Lot 555-A-2 and registered under Transfer Certificate of Title (TCT) No. 131498 in their names by the Register of Deeds of Pangasinan. For failure of the Spouses Cornista to make good of their loan obligation after it has become due, Traders Bank foreclosed the mortgage constituted on the security of the loan. After the notice and a nd publication requirements were complied with, the subject property was sold at the public auction on 23 December 1987. During the public sale, respondent Juan F. Vila (Vila) was declared as the highest bidder after he offered to buy the subject property for P50, 000.00. The Certificate of Sale dated 13 January 1988 was duly recorded in TCT No. 131498 under Entry No. 623599. To exercise his right of ownership, Vila immediately took possession of the subject property and paid the real estate taxes corresponding thereon. On 11 February 1989, a Certificate of Final Sale was issued to Vila after the one-year redemption period had passed without the Spouses Cornista exercising their statutory right to redeem the subject property. He was, however, prevented from consolidating the ownership of the property under his name because the owner's copy of the certificate of title was not turned over to him by the Sheriff. Despite the lapse of the redemption period and the fact of issuance of a Certificate of Final Sale to Vila, the Spouses Cormsta were nonetheless allowed to buy back the subject property by tendering the amount of P50, 000.00. A Certificate of Redemption dated 14 March 1989 was issued for this purpose and was duly annotated in the title under Entry No. 708261. Claiming that the Spouses Cornista already lost their right to redeem the subject property, Vila filed an action for nullification of redemption, transfer of title and damages against the Spouses Cornista and Alfredo Vega in his capacity as the Register of Deeds of Pangasinan. The case was docketed as Civil Case No. V-0242 on 10 January 1992 and was raffled to Branch 50. A Notice of Lis Pendens was issued for this purpose and was duly recorded in the certificate of title of the property on 19 October 1992 under Entry No. 759302.
Issue: WHETHER OR NOT PNB IS A MORTGAGEE IN GOOD FAITH Ruling: Clearly, the PNB failed to observe the exacting standards required of banking institutions which are behooved by statutes and jurisprudence to exercise greater care and prudence before entering into a mortgage contract. No credible proof on the records could substantiate the claim of PNB that a physical inspection of the property was conducted. We agree with, both the RTC and CA that if in fact it were true that ocular inspection was conducted; a suspicion could have been raised as to the real status of property. By failing to uncover a crucial fact that the mortgagors were not the possessors of the subject property. We could not lend credence to claim of the bank that an ocular inspection of the property was conducted. What further tramples upon PNB's claim is the fact that, as shown on the records, it was Vila who was religiously paying the real property tax due on the property from 1989 to 1996, another significant fact that could have raised a red flag as to the real ownership of the property. The failure of the mortgagee to take precautionary steps would mean negligence on his part and would thereby preclude it from invoking that it is a mortgagee in good faith. Before approving a loan application, it is standard operating procedure for banks and financial institutions to conduct an ocular inspection of the property offered for mortgage and to determine the real owner(s) thereof The apparent purpose of an ocular inspection is to protect the "true owner" of the property as well as innocent third parties with a right, interest or claim thereon from a usurper who may have acquired a fraudulent certificate of title thereto. In this case, it was adjudged by the courts of competent jurisdiction in a final and executory decision that the Spouses Cornista's reacquisition of the property after the lapse of the redemption period is fraudulent and the property used by the mortgagors as collateral rightfully belongs to Vila, an innocent third party with a right, could have been protected if PNB only observed the degree diligence expected from it.
41
METROPOLITAN BANK & TRUST COMPANY vs. CHUY LU TAN, MR. ROMEO TANCO, DR. SY SE HIONG, and TAN CHU HSIU YEN (G.R. No. 202176, August 1, 2016) Facts: Between February 26, 1996 and May 8, 1996, herein respondents Chuy Lu Tan (Chuy) and Romeo Tanco (Tanco) obtained five loans from herein petitioner Metropolitan Bank & Trust Company (Metrobank) with an aggregate amount of Nineteen Million Nine Hundred Thousand Pesos (Pl9,900,000.00). These loans are evidenced by five Promissory Notes executed by Chuy and Tanco on various dates. As security for the said loans, Chuy executed a Real Estate Mortgage on February 26, 1996 over a 1,449.70 square meter parcel of land in Quezon City covered by Transfer Certificate of Title No. RT-53314 (288923). In addition to the said mortgage, herein respondents Sy Se Hiong (Sy) and Tan Chu Hsiu Yen (Tan) also executed a Continuing Surety Agreement whereby they bound themselves to be solidarity liable with Chuy and Tanco for the principal amount of Pl 9,900,000.00 "plus interests thereon at the rate or rates stated in the obligation secured thereby, any or all penalties, costs and expenses which may be incurred by [Metrobank] in granting and/or collecting the aforesaid obligations/indebtedness/instruments, and including those for the custody, maintenance, and preservation of the securities given therefor, as may be incurred by [Metrobank] before or after the date of [the] Surety Agreement. " Subsequently, Chuy and Tanco failed to settle their loans despite Metrobank's repeated demands for payment. In a final demand letter dated October 27, 1999, Metrobank's counsel notified respondent Chuy that as of October 15, 1999, their obligations, comprising the principal amount loaned, together with interest and penalties, amounted to P24, 353,062.03. Consequently, on December 14, 1999, Metrobank extra judicially j udicially foreclosed the mortgage and the property was sold to it (Metrobank) as the highest bidder for the amount of P24, 572,268.00. However, in separate letters letters to the respondents, which were all dated January 26, 2000, Metrobank claimed that after application of the bid price to the respondents' outstanding obligation and the payment of the costs of foreclosure, accrued interest, penalty charges, attorney's fees and other related expenses, there remained a deficiency of Pl, 641,815.00, as of January 15, 2000. As such, Metrobank demanded from respondents the payment of the said deficiency. For respondents' failure to heed Metro bank's demand, the latter filed a suit for collection of a sum of money with the RTC of Makati.
Issue: Whether or not the deficiency claim on the ground that such claim, which allegedly consisted almost entirely of interest and penalties, is iniquitous, unconscionable and exorbitant.
Ruling: Settled is the rule that a creditor is not precluded from recovering any unpaid balance on the principal obligation if the extrajudicial foreclosure sale of the property subject of the real estate mortgage results in a deficiency. 1Indeed, the fact that the mortgaged property was sold at an amount less than its actual market value should not militate against the right to such recovery. This Court has likewise ruled that in deference to the rule that a mortgage is simply a security and cannot be considered payment of an outstanding obligation, the creditor is not barred from recovering the deficiency even if it bought the mortgaged property at the extrajudicial foreclosure sale at a lower price than its market value notwithstanding the fact that said value is more than or equal to the total amount of the debtor's obligation.
42
