CIVIL LAW REVIEW 2 CASE DIGEST 2016-2017
TO BE SUBMITTED TO: ATTY. CRISOSTOMO URIBE SUBMITTED BY: RUTHERFORD V. AMOR
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TABLE OF CONTENTS OBLIGATIONS: 1. SPOUSES ALEXANDER AND JULIE LAM vs. KODAK PHILIPPINES, LTD., (Indivisibility of obligation) 2. ROSALINA CARODAN vs. CHINA BANKING CORPORATION
(Solidary Liability)
3. SPOUSES VIRGILIO DE GUZMAN, JR. ET AL., v .COURT OF APPEALS, ET AL ( Prescription of action)-
4. TRAVEL & TOURS ADVISERS, INCORPORATED, v. ALBERTO CRUZ, SR, Et., Al (TOPIC: Solidary liability for damages of an employer) 5. DRA. MERCEDES OLIVER vs. PHILIPPINE SAVINGS BANK AND LILIA CASTRO, (TOPIC: Solidary Liability) 6. SPOUSES JAIME AND MATILDE POON, v. PRIME SAVINGS BANK ET AL
(TOPIC: Fortuitous event/penal clause)
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LAND BANK OF THE PHILIPPINES vs. SPOUSES ANTONIO (TOPIC: DELAY IN PAYMENT OBLIGATION)
8. OYSTER PLAZA HOTEL AND JENNIFER AMPEL v. ERROL O. MELIVO (TOPIC: SOLIDARY LIABILITY OF EMPLOYER) 9. SERGIO R. OSMEÑA III, vs. POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORPORATION, ET AL (TOPIC: Conditional Obligation)
CONTRACTS: 10. UNIVERSITY OF MINDANAO, INC., vs. BANGKO SENTRAL NG PILIPINAS, ET AL
(TOPIC: PRESCRIPTION/CONTRACTS)
11. NISSAN CAR LEASE PHILS., INC., VS. LICA MANAGEMENT, INC. ET AL
(TOPIC: RESCISSION OF CONTRACT)
12. REBECCA FULLIDO vs. GINO GRILLI
(TOPIC: VOID CONTRACT)
13. JUANA VDA. DE ROJALES,. ET AL, v. MARCELINO DIME., ET AL (TOPIC: Pacto de Retro Sale/ Privity of contract) 14. CATHAY PACIFIC AIRWAYS, LTD vs. SPOUSES FUENTEBELLA (TOPIC: Breach of contract of carriage) 15. THELMA RODRIGUEZ, v. SPOUSES JAIME SIOSON ET AL.,
(TOPIC: Contract of Sale vs. Contract to Sell)
16. BONIFACIO DANAN vs. SPOUSES GREGORIO SERRANO AND ADELAIDA REYES (TOPIC: Contract to Sell)
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SALES: 17. SPOUSES PEN vs. SPOUSES SANTOS and LINDA JULIAN
(TOPIC: PACTUM COMMISSORIUM)
18. FABIO CAHAYAG ET AL vs. COMMERCIAL CREDIT CORPORATIONET Al.
(TOPIC: Nemo dat quad non ha bet)
19. TIMOTEO BACALSO and DIOSDADA BACALSO vs. GREGORIA B. ACA-AC ET AL., (TOPIC: Sale Consideration) 20. HELEN B. LUKBAN vs. OPTIMUM DEVELOPMENT BANK
(TOPIC: Auction sale of tax delinquent real properties)
21. OSCAR S. VILLARTA vs. GAUDIOSO TALAVERA, JR., (TOPIC: Equitable Mortgage) 22. JOEY R. PEÑA, v. JESUS DELOS SANTOS et al
(TOPIC: Validity of Substitution)
23. GIL MACALINO ET AL, v. ARTEMIO PIS-AN,.
(TOPIC: SALES)
24. RCBC SAVINGS BANK vs. NOEL M. ODRADA (TOPIC: Warranty against hidden defects)
AGENCY: 25. BANK OF THE PHILIPPINE ISLANDS v. YOLANDA LAINGO,. (TOPIC: Agency)
26. THE HONGKONG & SHANGHAI BANKING CORPORATION, LIMITED v. NATIONAL
STEEL CORPORATION AND CITYTRUST BANKING CORPORATION (TOPIC: AGENCY)
PARTNERSHIP: 27. MICHAEL C. GUY, vs. ATTY. GLENN C. GACOTT (TOPIC: LIABILITY OF A PARTNER IN A PARTNERSHIP) 28. MELECIO DOMINGO, vs. SPOUSES GENARO MOLINA and ELENA B. MOLINA, ,
(TOPIC: Sale of conjugal partnership)
CREDIT TRANSACTIONS: 29. ORIX METRO LEASING AND FINANCE CORPORATION, vs. CARDLINE INC., ET AL (Topic: Benefit of Excussion) 30. PHILIPPINE NATIONAL BANK vs. HEIRS OF ALONDAY (TOPIC: Dragnet Clause or blanket mortgage clause)
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OBLIGATIONS SPOUSES ALEXANDER AND JULIE LAM vs. KODAK PHILIPPINES, LTD., G.R. No. 167615 January 11, 2016 NATURE OF ACTION: Complaint for replevin and/or recovery of sum of money TOPIC: Indivisibility of obligation PONENTE: LEONEN, J.: 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 (Minilab Equipment) in the amount of ₱1,796,000.00 per unit, 7 with the following terms: 1. Said Minilab Equipment packages will avail a total of 19% multiple order discount based on prevailing equipment price provided said equipment packages will be purchased not later than June 30, 1992. 2. 19% Multiple Order Discount shall be applied in the form of merchandise and delivered in advance immediately after signing of the contract. * Also includes start-up packages worth P61,000.00. 3. NO DOWNPAYMENT. 4. Minilab Equipment Packag e shall be payable in 48 monthly installments at THIRTY FIVE THOUSAND PESOS (P35,000.00) inclusive of 24% interest rate for the first 12 months; the balance shall be re-amortized for the remaining 36 months and the prevailing interest shall be applied. On January 15, 1992, Kodak Philippines, Ltd. delivered one (1) unit of the Minilab Equipment in Tagum, Davao Province. The Lam Spouses issued postdated checks amounting to ₱35,000.00 each for 12 months as payment for the first delivered unit, with the first check due on March 31, 1992.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 canceled the sale and demanded that the Lam Spouses return the unit it delivered together with its accessories. The Lam Spouses ignored the demand but also rescinded the contract for Kodak’s failure to deliver the two (2) remaining Minilab Equipment units.Kodak filed a Complaint for replevin and/or recovery of sum of money. The Regional Trial Court found that Kodak Philippines, Ltd. defaulted in the performance of its obligation under its Letter Agreement with the Lam Spouses. It held that
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Kodak Philippines, Ltd.’s failure to deliver two (2) out of the three (3) units of the Minilab Equipment caused the Lam Spouses to stop paying for the rest of the installments. The Court of Appeals modified the Decision of the Regional Trial Courtand ruled that the Letter Agreement executed by the parties showed that their obligations were susceptible of partial performance. Under Article 1225 of the New Civil Code, their obligations are divisible: In determining the divisibility of an obligation, the following factors may be considered, to wit: (1) the will or intention of the parties, which may be expressed or presumed; (2) the objective or purpose of the stipulated prestation; (3) the nature of the thing; and (4) provisions of law affecting the prestation. Petitioners assert that the obligations of the parties were not susceptible of partial performance since the Letter Agreement was for a package deal consisting of three (3) units.75 For the delivery of these units, petitioners were obliged to pay 48 monthly payments, the total of which constituted one debt. 76 Having relied on respondent’s assurance that the three units would be delivered at the same time, petitioners simultaneously rented and renovated three stores in anticipation of simultaneous operations.77 Petitioners argue that the divisibility of the object does not necessarily determine the divisibility of the obligation since the latter is tested against its susceptibility to a partial performance.78 They argue that even if the object is susceptible of separate deliveries, the transaction is indivisible if the parties intended the realization of all parts of the agreed obligation. Respondent argues that the parties’ Letter Agreement contained divisible obligations susceptible of partial performance as defined by Article 1225 of the New Civil Code.88 In respondent’s view, it was the intention of the parties to be bound separately for each individually priced Minilab Equipment unit to be delivered to different outlets: 89 The three (3) Minilab Equipment are intended by petitioners LAM for install[a]tion at their Tagum, Davao del Norte, Sta. Cruz, Manila and Cotabato City outlets. Each of these units [is] independent from one another, as many of them may perform its own job without the other. Clearly the objective or purpose of the prestation, the obligation is divisible. The nature of each unit of the three (3) Minilab Equipment is such that one can perform its own functions, without awaiting for the other units to perform and complete its job. So much so, the nature of the object of the Letter Agreement is susceptible of partial performance, thus the obligation is divisible.90 With the contract being severable in character, respondent argues that it performed its obligation when it delivered one unit of the Minilab Equipment. 91 Since each unit could perform on its own, there was no need to await the delivery of the other units to complete its job.92 Respondent then is of the view that when petitioners ordered the depository bank to stop payment of the issued checks covering the first delivered unit, they violated their obligations under the Letter Agreement since respondent was already entitled to full payment.93
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Petitioners argue that the Letter Agreement it executed with respondent for three (3) Minilab Equipment units was not severable, divisible, and susceptible of partial performance. Respondent’s recovery of the delivered unit was unjustified. ISSUES: Whether the contract between the parties are severable, divisible, and susceptible of partial performance? HELD: No. The Letter Agreement contained an indivisible obligation. Both parties rely on the Letter Agreement 97 as basis of their respective obligations. Based on the foregoing, the intention of the parties is for there to be a single transaction covering all three (3) units of the Minilab Equipment. Respondent’s obligation was to deliver all products purchased under a "package," and, in turn, petitioners’ obligation was to pay for the total purchase price, payable in installments. The intention of the parties to bind themselves to an indivisible obligation can be further discerned through their direct acts in relation to the package deal. There was only one agreement covering all three (3) units of the Minilab Equipment and their accessories. The Letter Agreement specified only one purpose for the buyer, which was to obtain these units for three different outlets. If the intention of the parties were to have a divisible contract, then separate agreements could have been made for each Minilab Equipment unit instead of covering all three in one package deal. Furthermore, the 19% multiple order discount as contained in the Letter Agreement was applied to all three acquired units. 99 The "no downpayment" term contained in the Letter Agreement was also applicable to all the Minilab Equipment units. Lastly, the fourth clause of the Letter Agreement clearly referred to the object of the contract as "Minilab Equipment Package." In ruling that the contract between the parties intended to cover divisible obligations, the Court of Appeals highlighted: (a) the separate purchase price of each item; (b) petitioners’ acceptance of separate deliveries of the units; and (c) the separate payment arrangements for each unit. However, through the specified terms and conditions, the tenor of the Letter Agreement indicated an intention for a single transaction. This intent must prevail even though the articles involved are physically separable and capable of being paid for and delivered individually, consistent with the New Civil Code: Article 1225. For the purposes of the preceding articles, obligations to give definite things and those which are not susceptible of partial performance shall be deemed to be indivisible.When the obligation has for its object the execution of a certain number of days of work, the accomplishment of work by metrical units, or analogous things which by their nature are susceptible of partial performance, it shall be divisible. However, even though the object or service may be physically divisible, an obligation is indivisible if so provided by law or intended by the parties. 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
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Appeals are mere incidents of the execution of the obligation, which is to deliver three units of the Minilab Equipment on the part of respondent and payment for all three on the part of petitioners. The intention to create an indivisible contract is apparent from the benefits that the Letter Agreement afforded to both parties. Petitioners were given the 19% discount on account of a multiple order, with the discount being equally applicable to all units that they sought to acquire. The provision on "no downpayment" was also applicable to all units. Respondent, in turn, was entitled to payment of all three Minilab Equipment units, payable by installments. WHEREFORE, the Petition is DENIED. The Amended Decision dated September 9, 2005 is AFFIRMED with MODIFICATION. Respondent Kodak Philippines, Ltd. is ordered to pay petitioners Alexander and Julie Lam: (a) P270,000.00, representing the partial payment made on the Minilab Equipment; (b) P130,000.00, representing the amount of the generator set, plus legal interest at 12% .per annum from December 1992 until fully paid; (c) P440,000.00 as actual damages; (d) P25,000.00 as moral damages; (e) P50,000.00 as exemplary damages; and (f) P20,000.00 as attorney's fees. Petitioners are ordered to return the Kodak Minilab System 22XL unit and its standard accessories to respondent.
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ROSALINA CARODAN vs. CHINA BANKING CORPORATION February 24, 2016 G.R. No. 210542 NATURE OF ACTION: Specific performance TOPIC: Solidary Liability PONENTE:SERENO, CJ: FACTS: Barbara Perez (Barbara), Rebecca Perez-Viloria (Rebecca), Rosalina Carodan (Rosalina) and Madeline Carodan (Madeline), obtained a loan from China Bank and for value received, executed and delivered promissory to respondent bank under which they promised therein to jointly and severally pay the amount of P2.8 million and as security for the payment of the loan, Barbara, Rebecca and Rosalina also executed a Real Estate Mortgage over a property registered in the name of Rosalina. Respondent alleged that a Surety Agreement in favor of China Bank as creditor was also executed by Barbara and Rebecca as principals and Rosalina and her niece Madeline as sureties. Through that agreement, the principals and sureties warranted the payment of the loan obligation amounting to P2.8 million including interests, penalties, costs, expenses, and attorney's fees. Barbara and Rebecca failed to pay their loan obligation despite repeated demands from China Bank. Their failure to pay prompted the bank institute extrajudicial foreclosure proceedings on the mortgaged property. From the extrajudicial sale, it realized only Pl.5 million as evidenced by a Certificate of Sale. This amount, when applied to the total outstanding loan obligation of Pl,865,345.77, would still leave a deficiency of P365,345.77. For that reason, the bank prayed that the court order the payment of the deficiency amount with interest at 12% per annum computed from January 2000; attorney's fees equal to 10% of the deficiency amount; and litigation expenses and costs of suit. Rosalina protests her liability for the deficiency. She claims that China Bank cancelled the mortgage lien and released the principal borrowers from liability. She contends that this act violated Article 2089 of the Civil Code on the indivisibility of mortgage and ultimately discharged her from liability as a surety. The trial court declared that respondent bank had therefore lawfully foreclosed the mortgage over the property of Rosalina, even if she was a mere accommodation mortgagor. The RTC also declared Rosalina's claim to be without merit and without basis in law and jurisprudence. She claimed that because the Real Estate Mortgage covering her property was a single and indivisible contract, China Bank's act of releasing the principal debtors' properties resulted in the extinguishment of the obligation. The CA found the appeal bereft of merit. It qualified Rosalina as a surety who had assumed or undertaken a principal debtor's responsibility or obligation. As such, she was supposed to be principally liable for the payment of the debt in case the principal debtors did not pay, regardless of their financial capacity to do so. As for the deficiency. ISSUE: Whether or not the petitioner Rosalina is liable jointly and severally with Barbara and Rebecca for the payment of respondent China Bank's claims
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HELD: Yes. We find that Rosalina is liable as an accommodation mortgagor. In Belo v. PNB, -an accommodation mortgage is not necessarily void simply because the accommodation mortgagor did not benefit from the same. The validity of an accommodation mortgage is allowed under Article 2085 of the New Civil Code which provides that third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property. An accommodation mortgagor, ordinarily, is not himself a recipient of the loan, otherwise that would be contrary to his designation as such. Apart from being an accommodation mortgagor, Rosalina is also a surety, defined under Article 2047 of the Civil Code in this wise: Art. 2047. By guaranty a person, called a guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3, Title I of this Book shall be observed. In such case the contract is called a suretyship. A contract of suretyship (second paragraph of Article 2047) has been juxtaposed against a contract of guaranty (first paragraph of Article 2047) as follows: A surety is an insurer of the debt, whereas a guarantor is an insurer of the solvency of the debtor. A suretyship is an undertaking that the debt shall be paid; a guaranty, an undertaking that the debtor shall pay. Stated differently, a surety promises to pay the principal's debt if the principal will not pay, while a guarantor agrees that the creditor, after proceeding against the principal, may proceed against the guarantor if the principal is unable to pay. A surety binds himself to perform if the principal does not, without regard to his ability to do so. A guarantor, on the other hand, does not contract that the principal will pay, but simply that he is able to do so. In other words, a surety undertakes directly for the payment and is so responsible at once if the principal debtor makes default, while a guarantor contracts to pay if, by the use of due diligence, the debt cannot be made out of the principal debtor.65Citations omitted) A resort to the terms of the Surety Agreement can easily settle the question of whether Rosalina should still be held liable. The agreement expressly contains the following stipulation: The Surety(ies) expressly waive all rights to demand for payment and notice of nonpayment and protest, and agree that the securities of every kind that are now and may hereafter be left with the Creditor its successors, indorsees or assigns as collateral to any evidence of debt or obligation, or upon which a lien may exist therefor, may be substituted, withdrawn or surrendered at any time, and the time for the payment of such obligations extended, without notice to or consent by the Surety(ies) x xx We therefore find no merit in Rosalina's protestations in this petition. As provided by the quoted clause in the contract, she not only waived the rights to demand payment and to receive notice of nonpayment and protest, but she also expressly agreed that the time for payment may be extended. More significantly, she agreed that the securities may be "substituted, withdrawn or surrendered at any time" without her consent or without notice to her. That China Bank indeed surrendered the properties of the principal debtors was precisely within the ambit of this provision in the contract. Rosalina cannot now contest that act in light of her express agreement to that stipulation.
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While we rule that Rosalina, along with the principal debtors, Barbara and Rebecca, is still liable as a surety for the deficiency amount, we modify the RTC's imposition of interest rate at 12% per annum, which the CA subsequently affirmed. We must modify the rates according to prevailing jurisprudence. Hence, the 12% legal interest should be imposed on the deficiency amount from 13 January 2000 until 30 June 2013 and 6% legal interest from 1 July 2013 until full payment.
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SPOUSES VIRGILIO DE GUZMAN, JR. [SUBSTITUTED BY HIS WIFE, LYDIA S. DE GUZMAN, AND CHILDREN, NAMELY, RUEL S. DE GUZMAN, ET AL. AND LYDIA S. DE GUZMAN, Petitioners, v.COURT OF APPEALS, MINDANAO STATION, LAMBERTO BAJAO, HEIR OF SPOUSES LEONCIO*BAJAO AND ANASTACIA Z. BAJAO, Respondents. G.R. No. 185757, March 02, 2016 NATURE OF ACTION: Reconveyance and Damages TOPIC: Prescription of action PONENTE: JARDELEZA, J.: FACTS: The property subject of this case (property) is a 480-square meter lot that formed part of Lot No. 532 which has a total area of 25,178 square meters, was acquired by Lamberto Bajao's (respondent) parent, Leoncio Bajao, through Free Patent issued on May 28, 1968. Spouses De Guzman acquired the property in two transactions. On May 24, 1969, Spouses Bajao sold 200 square meters of Lot No. 532 to them for P1,000.On June 18, 1970, Spouses Bajao sold another 280 square meters of Lot No. 532 to petitioners for P1,400. Both transactions were evidenced by separate Deeds of Absolute Sale. Spouses Bajao allegedly promised to segregate the property from the remaining area of Lot No. 532 and to deliver a separate title to petitioners covering it. However, because the promise was not forthcoming, petitioner Lydia S. de Guzman executed an Affidavit of Adverse Claim on April 21, 1980 covering the property. On September 26, 1980, or after the death of Leoncio Bajao on February 1, 1972, respondent and Anastacia Bajao executed an Extrajudicial Settlement Among Heirs (Extrajudicial Settlement), which subdivided Lot No. 532 into three parts. The property was included in Lot No. 532-C, which was adjudicated in favor of respondent. The Extrajudicial Settlement was registered on December 10, 1980. On December 16, 1980, respondent caused the cancellation of petitioners' annotated adverse claim over the property and later obtained Transfer Certificate of Title (TCT) No. T-7133 on February 13 and October 2, 1981. Petitioners thereafter requested respondent to deliver TCT No. T-7133 so they could present it to the Register of Deeds, respondent, however, refused to heed their request. Thus, on January 21, 2000, petitioners filed a Complaint for Reconveyance with Writ of Preliminary Mandatory Injunction and Damages. Spouses De Guzman alleged that they were innocent purchasers for value. They also alleged that respondent was in bad faith since he knew about the sale of the property between them and his parents, and the existing survey and segregation over the area, yet he fraudulently included the same in his share upon the issuance of TCT No. T-7133. Bajao argued that the action is time barred and there is no more trust to speak of. He pointed out that more than 10 years have lapsed from the date of the registration of the Extrajudicial Settlement on December 10, 1980 and the registration of TCT No. T-7133 on February and October 1981, to the date of filing of the Complaint.Respondent also countered that there was no mistake or fraud in including the property in TCT No. T-7133 since his rights arose from the Extrajudicial Settlement. The trial court ruled for the plaintiffs and hereby orders the defendantto reconvey to the plaintiffs the four hundred eighty square meter lot in question. The trial court found the two Deeds of Absolute Sale free from infirmities.
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The trial court also found respondent in bad faith. Respondent admitted that he was aware of the adverse claim annotated at the back of the title when he went to the Register of Deeds to register the Extrajudicial Settlement.The CA granted the appeal of the Bajao. The CA noted that an implied trust between the parties under Article 1456 53 of the Civil Code was created at the time Anastacia Bajao and respondent executed the Extrajudicial Settlement on September 26, 1980, with respondent becoming the trustee who holds the property in trust for the benefit of petitioners. The CA held that an action for reconveyance based on an implied trust prescribes in 10 years from the registration of title in the Office of the Register of Deeds.55 Thus, petitioners' action for reconveyance filed in January 2000 has already prescribed since more than 10 years have lapsed from October 1981, the date of registration of respondent's title. ISSUE: Whether or not the Complaint for reconveyance is barred by prescription. HELD: Yes. Article 1456 of the Civil Code provides that a person acquiring property through mistake or fraud becomes, by operation of law, a trustee of an implied trust for the benefit of the real owner of the property. An action for reconveyance based on an implied trust generally prescribes in 10 years, the reckoning point of which is the date of registration of the deed or the date of issuance of the certificate of title over the property. Thus, petitioners had 10 years from 1981 or until 1991 to file their complaint for reconveyance of property. The Complaint, however, was filed only on January 21, 2000, or more than 10 years from the issuance of TCT No. T-7133. Hence, the action is already barred by prescription. The exception to the ten-year rule on prescription is when the plaintiff is in possession of the land to be reconveyed. In such case, the action becomes one for quieting of title, which is imprescriptible. Here, petitioners allege that they were in juridical possession of the property from the time they put up a fence on it until the filing of the Complaint. Respondent disputes this claim, countering that petitioners are not in actual and material possession of the property. Whether petitioners have actual possession of the lot is a question of fact. xxxx We affirm the CA's finding that petitioners were not able to establish their actual possession of the lot except by bare allegations not substantiated by evidence.During trial, petitioners testified that they do not live on the property. They alleged putting up a fence alter they purchased the lot but there was no evidence to support their allegations as to when this fence was constructed. Also, the sale between the parties were null and void under Section 124 of the Public Land Act, any acquisition, conveyance, alienation, transfer, or other contract made or executed in violation of Sections 118 to 123 of the Public Land Act shall be unlawful and null and void from its execution. The violation shall also produce the effect of annulling and cancelling the grant, title, patent or permit originally issued, recognized or confirmed actually or presumptively. The violation shall also cause the reversion of the property and its improvements to the State. The contract executed in violation of these sections being void, it is not susceptible of ratification, and the action for the declaration of the absolute nullity of such a contract is imprescriptible.
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In this case, portions of Lot No. 532 were conveyed to petitioners by virtue of two Deeds of Absolute Sale executed on May 24, 1969 and June 18, 1970, or after the grant and issuance of Free Patent May 28, 1968. Both Deeds of Absolute Sale were executed within the prohibited period of five years. Consequently, following Section 124, these Deeds are null and void and produce no effect. They did not convey any right from Spouses Bajao to petitioners on the property. The parties could not have claimed ignorance of the free patent grant.Section 118 does not exempt patentees and their purported transferees who had no knowledge of the issuance of the patent from the prohibition against alienation; for the law does not say that the five years are to be counted "from knowledge or notice of issuance" ofthe patent or grant. WHEREFORE, in view of the foregoing, the petition is DENIED.
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TRAVEL & TOURS ADVISERS, INCORPORATED, Petitioner, v. ALBERTO CRUZ, SR., EDGAR HERNANDEZ AND VIRGINIA MUÑOZ, Respondents. G.R. No. 199282, March 14, 2016 NATURE OF ACTION: Action for Damages TOPIC: Solidary liability for damages of an employer PONENTE: PERALTA, J.: FACTS: Respondent Edgar Hernandez was driving an Isuzu Passenger Jitney (jeepney) 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) owned by petitioner Travel and Tours Advisers, Inc. (Travel) and driven by Edgar Calaycay travelled in the same direction. 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 Munñ oz. Thus, respondents Edgar Hernandez, Virginia Munñ oz and Alberto Cruz, Sr., father of the deceased Alberto Cruz, Jr., filed a complaint for damages, 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. The petitioner claimed that it exercised the diligence of a good father of a family in the selection and supervision of its employee Edgar Calaycay and further argued that it was Edgar Hernandez who was driving his passenger jeepney in a reckless and imprudent manner by suddenly entering the lane of the petitioner's bus without seeing to it that the road was clear for him to enter said lane. In addition, petitioner alleged that at the time of the incident, Edgar Hernandez violated his franchise by travelling along an unauthorized line/route and that the jeepney was overloaded with passengers, and the deceased Alberto Cruz, Jr. was clinging at the back thereof. The RTC rendered judgment in favor of the respondents. The CA PARTLY GRANTED the appeal of Travel. ISSUE: Whether or not the employer is solidarily liable with its employee despite its claim that it exercised extraordinary diligence of a good father of a family in its selection and supervision of driver. HELD: YES. Article 2176 of the Civil Code provides: Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict. Article 2176 is Article 2180 which states the following: The obligation imposed by Article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is responsible x x
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x.Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry x x x. Consequently, the petitioner, being the owner of the bus and the employer of the driver, Edgar Calaycay, cannot escape liability The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage.Article 2180, in relation to Article 2176, of the Civil Code provides that the employer of a negligent employee is liable for the damages caused by the latter. When an injury is caused by the negligence of an employee there instantly arises a presumption of the law that there was negligence on the part of the employer either in the selection of his employee or in the supervision over him after such selection. The presumption, however, may be rebutted by a clear showing on the part of the employer that it had exercised the care and diligence of a good father of a family in the selection and supervision of his employee. Hence, to escape solidary liability for quasi-delict committed by an employee, the employer must adduce sufficient proof that it exercised such degree of care. In this case, the petitioner failed to do so. The RTC and the CA exhaustively and correctly ruled as to the matter. Thus, whenever an employee's (defendant EDGAR CALAYCAY) negligence causes- damage or injury to another, there instantly arises a presumption that the employer (defendant-appellant) failed to exercise the due diligence of a good father of the family in the selection or supervision of its employees. To avoid liability for a quasi-delict committed by its employee, an employer must overcome the presumption by presenting convincing proof that it exercised the care and diligence of a good father of a family in the selection and supervision of its employee. The failure of the defendant-appellant to overturn this presumption was meticulously explained by the court a quo as follows: The position of the defendant company that it cannot be held jointly and severally liable for such damages because it exercised the diligence of a good father of a family, which does not merit great credence.As admitted, Edgar Calaycay was duly authorized by the defendant company to drive the bus at the time of the incident. Its claim that it has issued policies, rules and regulation's to be followed, conduct seminars and see to it that their drivers and employees imbibe such policies, rules and regulations, have their drivers and conductors medically checked-up and undergo drug-testing, did not show that all these rudiments were applied to Edgar Calaycay. No iota of evidence was presented that Edgar Calaycay had undergone all these activities to ensure that he is a safe and capable drivers. In fact, the defendant company did not put up a defense on the said driver. The defendant company did not even secure a counsel to defend the driver. It did not present any evidence to show it ever counseled such driver to be careful in his driving. As appearing from the evidence of the defendant corporation, the driver at the time of the incident was Calaycay Francisco (Exh. 9) and the conductor was Tejada. This shows that the defendant corporation does not exercise the diligence of a good father of a family in the selection and supervision of the employees. It does not even know the correct and true name of its drivers. The testimony of Rolando Abadilla, Jr. that they do not have the records of Edgar Calaycay because they ceased operation due to the death of his father is not credible. Why only the records of Edgar Calaycay? It has the inspection
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and dispatcher reports for January 9, 1998 and yet it could not find the records of Edgar Calaycay. Be that as it may, this does not erase the fact that at the time of the vehicular accident, the jeepney was in violation of its allowed route as found by the RTC and the CA, hence, the owner and driver of the jeepney likewise, are guilty of negligence as defined under Article 2179 of the Civil Code .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. In the present case, it has been established that the proximate cause of the death of Alberto Cruz, Jr. is the negligence of petitioner's bus driver, with the contributory negligence of respondent Edgar Hernandez, the driver and owner of the jeepney, hence, the heirs of Alberto Cruz, Jr. shall recover damages of only 50% of the award from petitioner and its driver. Necessarily, 50% shall be bourne by respondent Edgar Hernandez. This is pursuant to Rakes v. AG & P and after considering the circumstances of this case. WHEREFORE, the Petition for Review on Certiorari modification.
is DENIED with
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DRA. MERCEDES OLIVER vs. PHILIPPINE SAVINGS BANK AND LILIA CASTRO, G.R. No. 214567, April 04, 2016 TOPIC: Solidary Liability NATURE OF ACTION: Injunction and Damages PONENTE:MENDOZA, J.: FACTS: Petitioner Mercedes Oliver (Oliver) was a depositor of respondent Philippine Savings Bank Respondent Lilia Castro (Castro) was the Assistant Vice President of PSBank and the Acting Branch Manager of PSBank San Pedro, Laguna. Oliver alleged sometime in 1997, she made an initial deposit of P12 million into her PSBank account. During that time, Castro convinced her to loan out her deposit as interim or bridge financing for the approved loans of bank borrowers who were waiting for the actual release of their loan proceeds Oliver was convinced under this arrangement. Their arrangement went on smoothly for months. Due to the frequency of bank transactions, Oliver even entrusted her passbook to Castro. Because Oliver earned substantial profit, she was further convinced by Castro to avail of an additional credit line in the amount of P10 million. Beginning September 1998, Castro stopped rendering an accounting for Oliver. The latter then demanded the return of her passbook. When Castro showed her the passbook sometime in late January or early February 1999, she noticed several erasures and superimpositions therein. She became very suspicious of the many erasures pertaining to the December 1998 entries so she requested a copy of her transaction history register from PSBank.
When her transaction history register was shown to her, Oliver was surprised to discover that the amount of P4,491,250.00 (estimated at P4.5 million) was entered into her account on December 21, 1998. While a total of P7 million was withdrawn from her account on the same day, Oliver asserted that she neither applied for an additional loan of P4.5 million nor authorized the withdrawal of P7 million. She also discovered another loan for P1,396,310.45, acquired on January 5, 1999 and allegedly issued in connection with the P10 million credit line. Oliver received two collection letters from PSBank referring to the non-payment of unpaid loans, to wit: (1) P4,491,250.00 from the additional loan and (2) P1,396,310.45 from the P10 million credit line. In response, Oliver protested that she neither availed of the said loans nor authorized the withdrawal of P7 million from her account. She also claimed that the P10 million loan from her credit line was already paid in full. A final demand letter was sent to Oliver by PSBank, requiring her to pay the unpaid loans. Subsequently, Oliver received a notice of sale involving the property in Ayala Alabang, informing her of the impending extra-judicial foreclosure and sale of her house and lot. As a result, Oliver filed the subject complaint against PSBank and Castro. Castro's Position In her Answer,[15] Castro admitted that she and Oliver agreed that the latter would lend out money to borrowers at 4% to 5% interest per month provided that the former would screen them.She disclosed that she made some alterations and erasures in Oliver's passbook so as to reconcile the passbook with the computer printout of the bank, but denied any attempt to hide the passbook as she was able to return it sometime in January
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1999.Castro also denied the deceit imputed against her. She asserted that their arrangement was not "interim or bridge financing" inasmuch as the loans were entirely new and distinct from that granted by PSBank. Castro admitted that on October 19, 1999, she was terminated by PSBank because of certain problems regarding client accommodation and loss of confidence. PSBank's Position In its defense, PSBank averred that Oliver applied for a credit line of P10 million which was granted by the bank and which secured by a real estate mortgage. Because Oliver failed to pay the P10 million loan, she obtained another loan in the amount of P4.5 million, as evidenced by a promissory note. Days later, she again acquired a separate loan amounting to P1,396,310.45 as shown by another promissory note. Both loans were secured by a real estate mortgage. RTC dismissed the complaint and rendered judgment in favor of PSBank and Castro. According to the RTC, PSBank and Castro should not be held liable for the loan of P4.5 million and the withdrawal of the P7 million. Castro was able to submit the Debit Credit Memo and the Savings Account Check Deposit Slip to prove that there were some previous loan transactions between Oliver and Lim. Considering that neither PSBank nor Castro obtained the P7 million, there was no obligation on their part to return the amount. Oliver seasonably filed her motion for reconsideration.On July 22, 2010, the RTC resolved the motion and issued an order reversing its earlier decision. With regard to PSBank, the RTC stated that it failed to exercise utmost diligence in safekeeping Oliver's deposit. Had it not been for the unauthorized, withdrawal which was attributable to the bank and Castro. Thus held solidarily liable with Castro. The CA also found that PSBank exercised extraordinary diligence in handling Oliver's account, thus, the awards of damages were deleted. ISSUES: Whether or not the CA gravely erred when it failed to hold that the respondents are jointly and severally liable to the petitioner for damages. HELD: Yes. Under Article 2180 of the Civil Code, employers shall be held primarily and solidarily liable for damages caused by their employees acting within the scope of their assigned tasks.PSBank failed to exercise the highest degree of diligence required of banking institutions. Aside from Castro, PSBank must also be held liable because it failed to exercise utmost diligence in the improper withdrawal of the P7 million from Oliver's bank account. In the case of banks, the degree of diligence required is more than that of a good father of a family. Considering the fiduciary nature of their relationship with their depositors, banks are duty bound to treat the accounts of their clients with the highest degree of care. The point is that as a business affected with public interest and because of the nature of its functions, the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship.
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PSBank's failure to exercise the degree of diligence that it ought to have exercised in dealing with its clients. It could not prove that the withdrawal of P7 million was duly authorized by Oliver. As a banking institution, PSBank was expected to ensure that such substantial amount should only be transacted with the consent and authority of Oliver. PSBank, however, reneged on its fiduciary duty by allowing an encroachment upon its depositor's account without the latter's permission. Hence, PSBank must be held liable for such improper transaction. As discussed above, both Castro and PSBank failed to establish the burden of their defense. They failed to present proof that Oliver authorized the said transaction. They could have presented either the cash withdrawal slip for the P7 million on December 21, 1999 or Lim's testimony to prove the transfer of funds'to the latter's account, but they did neither. Without an iota of proof to substantiate the validity of the said transaction, the respondents unlawfully deprived Oliver of her funds.Indeed, the bank should be solidarily liable with its employee for the damages committed to its depositor. Castro, as acting branch manager of PSBank was able to facilitate the questionable transaction as she was also entrusted with Oliver's passbook. In other words, Castro was the representative of PSBank, and, at the same time, the agent of Oliver. Oddly, PSBank, either consciously or through sheer negligence, allowed the double dealings of its employee with its client. Such carelessness and lack of protection of the depositors from its own employees led to the unlawful withdrawal of the P7 million from Oliver's account. Although Castro was eventually terminated by PSBank because of certain problems regarding client accommodation and loss of confidence, the damage to Oliver had already been done. Thus, both Castro and PSBank must be held solidarily liable. WHEREFORE, the petition is GRANTED.
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SPOUSES JAIME AND MATILDE POON, Petitioners, v. PRIME SAVINGS BANK REPRESENTED BY THE PHILIPPINE DEPOSIT INSURANCE CORPORATION AS STATUTORY LIQUIDATOR, Respondent. G.R. No. 183794, June 13, 2016 NATURE OF ACTION: Rescission of Contract TOPIC: Fortuitous event/penal clause PONENTE: SERENO, C.J.: FACTS: Petitioners owned a commercial building in Naga City, Matilde Poon and Prime Saving Bank(PSB) executed a 10-year Contract of Lease (Contract) over the building for the latter's use as its branch office in Naga City. In paragraph 24 of the Contract, it provides: Should the lease[d] premises be closed, deserted or vacated by the LESSEE, the LESSOR shall have the right to terminate the lease without the necessity of serving a court order and to immediately repossess the leased premises. Thereafter the LESSOR shall open and enter the leased premises in the presence of a representative of the LESSEE (or of the proper authorities) for the purpose of taking a complete inventory of all furniture, fixtures, equipment and/or other materials or property found within the leased premises. The LESSOR shall thereupon have the right to enter into a new contract with another party. All advanced rentals shall be forfeited in favor of the LESSOR. Barely three years later, however, the BSP placed PSB under the receivership of the Philippine Deposit Insurance Corporation (PDIC) On 12 May 2000, PSB vacated the leased premises and surrendered them to petitioners. Subsequently, the PDIC issued petitioners a demand letter 11 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. Petitioners, however, refused the PDIC's demand. 12 They maintained that they were entitled to retain the remainder of the advance rentals following paragraph 24 of their Contract. Consequently, PSB sued petitioners before the RTC for a partial rescission of contract and/or recovery of a sum of money. RTC ordered the partial rescission of the lease Parties' respective claims for damages and attorney's fees are dismissed.
agreement
The CA affirmed the RTC Decision, but had a different rationale for applying Article 1229. The appellate court ruled that the closure of respondent's business was not a fortuitous event. Still, the CA sustained the trial court's interpretation of the proviso on the forfeiture of advance rentals as a penal clause and the consequent application of Article 1229. ISSUES: 1. Whether or not PSB may be released from its contractual obligations on the ground of fortuitous event under Article 1174 of the Civil Code and unforeseen event under Article 1267 of the Civil Code; 2. Whether or not the proviso in the parties' Contract allowing the forfeiture of advance rentals was a penal clause HELD:
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1. No. 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. Respondent posits that it should be released from its contract with petitioners, because the closure of its business upon the BSP's order constituted a fortuitous event as the Court held in Provident Savings Bank. The cited case, however, must always be read in the context of the earlier Decision in Central Bank v. Court of Appeals. The Court ruled in that case that the Monetary Board had acted arbitrarily and in bad faith in ordering the closure of Provident Savings Bank. Accordingly, in the subsequent case of Provident Savings Bank it was held that fuerza mayor had interrupted the prescriptive period to file an action for the foreclosure of the subject mortgage. In contrast, there is no indication or allegation that the BSP's action in this case was tainted with arbitrariness or bad faith. Instead, its decision to place respondent under receivership and liquidation proceedings was pursuant to Section 30 of Republic Act No. 7653. Moreover, respondent was partly accountable for the closure of its banking business. It cannot be said, then, that the closure of its business was independent of its will as in the case of Provident Savings Bank. The legal effect is analogous to that created by contributory negligence in quasi-delict actions. 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 fulfill an engagement, will not relieve the obligor from an undertaking that it has knowingly and freely contracted. Clearly, the closure of respondent's business was not an unforeseen event. As the lease was long-term, it was not lost on the parties that such an eventuality might occur, as it was in fact covered by the terms of their Contract. Besides, as We have previously discussed, the event was not independent of respondent's will. 2 Yes. The forfeiture clause in the Contract is penal in nature. It is settled that a provision is a penal clause if it calls for the forfeiture of any remaining deposit still in the possession of the lessor, without prejudice to any other obligation still owing, in the event of the termination or cancellation of the agreement by reason of the lessee's violation of any of the terms and conditions thereof. This kind of agreement may be validly entered into by the parties. The clause is an accessory obligation meant to ensure the performance of the principal obligation by imposing on the debtor a special prestation in case of nonperformance or inadequate performance of the principal obligation. It is evident from the above-quoted testimony of Jaime Poon that the stipulation on the forfeiture of advance rentals under paragraph 24 is a penal clause in the sense that it provides for liquidated damages. In effect, the penalty for the premature termination of the Contract works both ways. As the CA correctly found, the penalty was to compel respondent to complete the 10-year term of the lease. Petitioners, too, were similarly obliged to ensure the peaceful use of their building by respondent for the entire duration of the lease under pain of losing the remaining advance rentals paid by the latter. The forfeiture clauses of the Contract, therefore, served the two functions of a penal
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clause, i.e., (1) to provide for liquidated damages and (2) to strengthen the coercive force of the obligation by the threat of greater responsibility in case of breach. 47 As the CA correctly found, the prestation secured by those clauses was the parties' mutual obligation to observe the fixed term of the lease. For this reason, We sustain the lower courts' finding that the forfeiture clause in paragraph 24 is a penal clause, even if it is not expressly labelled as such. WHEREFORE, the Petition for Review on Certiorari is DENIED.
LAND BANK OF THE PHILIPPINES vs. SPOUSES ANTONIO AND CARMEN AVANCENA G.R. No. 190520 May 30, 2016 .
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NATURE OF ACTION: Action for specific performance TOPIC: DELAY IN PAYMENT (OBLIGATION) FACTS: Respondents Spouses Avancenñ a were the registered owners of a parcel of agricultural land situated at Sanghan, Cabadbaran, Agusan del Norte. In 1988, respondents spouses voluntarily offered to sell their land to the government under the Comprehensive Agrarian Reform Program (CARP. Initially valuation of the subject lot at Pl,877,516.. Upon recomputation the land was revalued at P3,337,672.78 but respondents rejected the valuation. Petitioner deposited the difference in the cash portion between the revalued amount and the initial valuation of P 1,877,516.09 in trust for the respondents on July 24, 1996. The parties brought the matter of valuation to the Department of Agrarian Reform Adjudication Board (DARAB), Caraga Regional Office, which affirmed petitioner's second valuation. Respondents-spouses filed with the Regional Trial Court, acting as a Special Agrarian Court a complaint for determination of just compensation. They prayed for a valuation of no less than P200,000.00 per hectare for the subject lot or in the alternative, to appoint Commissioners to determine the just compensation; and that they be allowed to withdraw the valuation amount that petitioner had deposited for them including the earned interest, pending the court's final valuation. Petitioner filed its Answer alleging that the valuation was computed based on the factors enumerated in Section 17 of Republic Act No. (R.A.) 6657, the Comprehensive Agrarian Reform Law. ISSUE: Whether the 6% interest was to be computed at the rate in the year 2000. HELD: xxx The CA found that the title to respondents spouses' land was canceled and a new title was issued in the name of the Republic of the Philippines in December 1991, but there was no showing that petitioner had made payments prior to the taking of the land. Thus, there was delay in the payment of just compensation which entitles the respondents spouses to the payment of interest from the time the property was transferred in the name of the government in December 1991 up to the time petitioner deposited the valuation in the account of the respondents-spouses in July 1996. We agree with the CA that petitioner should pay interest for the delay in the payment of just compensation. However, such payment of interest should be computed up to the full payment of just compensation. Thus, the CA did not err in imposing interest on the just compensation which will be determined after the remand of the case to the SAC. The interest should be computed from December 1991 up to the full payment of just compensation and not only up to the time petitioner deposited the valuation in 1996 as the CA ruled. The concept of just compensation embraces not only the correct determination of the amount to be paid to the owners of the land, but also payment within a reasonable time from its taking. Without prompt payment, compensation cannot be considered "just" inasmuch as the property owner is made to suffer the consequences of being immediately deprived of his land while being made to wait for a
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decade or more before actually receiving the amount necessary to cope with loss xxx.
OYSTER PLAZA HOTEL AND JENNIFER AMPEL v. ERROL O. MELIVO G.R. No. 217455, October 05, 2016 NATURE OF ACTION: Action for Illegal Dismissal TOPIC: SOLIDARY LIABILITY OF EMPLOYER
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PONENTE: MENDOZA, J.: FACTS: On October 22, 2009, respondent Errol O. Melivo (Melivo) filed before the NLRC a Complaint4 for illegal dismissal with prayers for reinstatement and payment of back wages, holiday pay, overtime pay, service incentive leave, and, 13 th month pay against petitioners Oyster Plaza Hotel (Oyster Plaza), Rolito Go (Go), and Jennifer Ampel (Ampel). The LA ruled that Melivo was illegally dismissed. Considering that Melivo had already rendered six (6) months of service for Oyster Plaza, the LA held that he had become a regular employee by operation of law. LA ordered Oyster Plaza to reinstate Melivo to his previous position and to pay him back wages IN SOLIDUM reckoned from his dismissal; his proportionate 13th month pay; and attorney's fees in the amount equivalent to 10% of the total money claims awarded. The NLRC affirmed the Decision of the LA. The CA dismissed the petition for lack of merit and affirmed the June 21, 2011 NLRC Decision. ISSUE: Whether or not petitioners go and ampel solidarily liable with oyster plaza. HELD: No. 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
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offered by the petitioners.39 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. WHEREFORE, the petition is PARTIALLY GRANTED with MODIFICATION in that only Oyster Plaza Hotel/Martyniuk Development Corporation is ORDERED to reinstate Melivo and to pay his backwages, proportionate 13th month pay, and attorney's fees equivalent to 10% of the monetary awards.
SERGIO R. OSMEÑA III, vs. POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORPORATION, EMMANUEL R. LEDESMA, JR., SPC POWER CORPORATION, AND THERMA POWER VISAYAS, INC., G.R. No. 212686, October 05, 2016 NATURE OF ACTION: Public Bidding
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TOPIC: Conditional Obligation PONENTE: VELASCO JR., J.: FACTS: On December 27, 2013, the Board of Directors of the Power Sector Assets and Liabilities Management Corporation (PSALM) approved the commencement of the 3 rd round of bidding for the sale of the 153.1MW NPPC. Respondents SPC Power Corporation (SPC) and TVPI submitted their respective bids for the project. The results PSALM issued a Notice of Award dated April 30, 2014 in favor of TPVI, declaring the latter as the Winning Bidder. The execution of a Land Lease Agreement (LLA) and Assets Purchase Agreement (APA) in favor of TPVI, however, was subject to SPC's non-exercise of its Right to Top. However,the Right to Top and the resultant agreements from its exercise, however, were subsequently nullified by the Court through its September 28, 2015 Decision. TPVI filed the instant Manifestation/Motion wherein it maintained that the nullification of SPC's Right to Top calls for the reinstatement of the cancelled April 30, 2014 Notice of Award in its favor. The Court resolved to deny with finality SPC's motion and those of PSALM they were nevertheless required to comment on TPVI's Manifestation/Motion that remained unresolved. ISSUE: Whether or not TVPI is entitled to the Notice of award upon nullification of SPC’s right to top. HELD: Yes. TPVI's motion is impressed with merit. Articles 1181 and 1185 of the Civil Code find application in this case. The award of the NPPC-LLA and NPPC-LLA to TPVI further finds justification under Arts. 1181 and 1185 of the Civil Code, viz: Article 1181. In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition. xxxx Article 1185. The condition that some event will not happen at a determinate time shall render the obligation effective from the moment the time indicated has elapsed, or if it has become evident that the event cannot occur. x x x The Court explained in The Wellex Group, Inc. v. U-Land Airlines, Co., Ltd.11 that, under Art. 1185, if an obligation is conditioned on the non-occurrence of a particular event at a determinate time, that obligation arises (a) at the lapse of the indicated time, or (b) if it has become evident that the event cannot occur. To illustrate: Petitioner Wellex and respondent U-Land bound themselves to negotiate with each other within a 40-day period to enter into a share purchase agreement. If no share purchase
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agreement was entered into, both parties would be freed from their respective undertakings. It is the non-occurrence or non-execution of the share purchase agreement that would give rise to the obligation to both parties to free each other from their respective undertakings. This includes returning to each other all that they received in pursuit of entering into the share purchase agreement. In the case at bar, PSALM's obligation to award the contract in TPVI's favor was dependent on the non-occurrence of an event: SPC's legal and valid exercise of its Right to Top. As phrased by PSALM: "the approval of the sale to TPVI was a conditional one, the consummation of which is dependent on the non-exercise by SPC of its right to top."13 It has become apparent, however, that such event will never occur. SPC can never legally and validly invoke its Right to Top in view of its nullity. The condition, therefore, is deemed complied with by operation of law, and the obligation to execute the purchase contracts in favor of TPVI, due and demandable. Our Decision nullifying SPC's Right to Top ought not then be construed as the nullification of the entire third round of the public bidding. It merely called for the application of the severability clause to prevent PSALM, as much as possible, from having to repeat the process for the fourth time. Consistently, the Court never expressly declared the third round of bidding as invalid. Clear from the language of the dispositive portion of the Court's Decision is that the nullification was limited only to SPC's Right to Top and the NPPCLLA and NPPC-APA in its favor, nothing more. The results of the prior conducted bidding process should then be upheld, and the Notice of Award dated April 30, 2014, reinstated. The Notice of Award dated April 30, 2014 is a perfected contract between PSALM and TPVI.As can be recalled, it states that the obligation of PSALM to execute the NPPC-APA and NPPC-LLA in favor of TPVI is conditioned on SPC's non-exercise or failure to legally and validly exercise its Right to Top. This agreement is the law between the contracting parties with which they are required to comply in good faith. In view of the Court's Decision, however, the condition in the Notice of Award should be deemed as not written, and the obligation to award the NPPC-LLA and NPPC-APA to TPVI, due and demandable. Furthermore, the mutual obligation of the parties to abide by their covenant in good faith remains, entitling TPVI to demand compliance from PSALM, including the award of the purchase contracts in its favor. This is but the proper application of the severability clause. WHEREFORE, premises considered, the Manifestation/Motion dated March 16, 2016 of respondent TPVI is hereby GRANTED
CONTRACTS UNIVERSITY OF MINDANAO, INC., vs. BANGKO SENTRAL NG PILIPINAS, ET AL., G.R. No. 194964-65 January 11, 2016 TOPIC: PRESCRIPTION/CONTRACTS NATURE OF THE ACTION: Foreclosure PONENTE: LEONEN, J.:
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Guillermo B. Torres and Dolores P. Torres incorporated and operated two (2) thrift banks: (1) First Iligan Savings & Loan Association, Inc. (FISLAI); and (2) Davao Savings and Loan Association, Inc. (DSLAI). Guillermo B. Torres chaired both thrift banks. Bangko Sentral ng Pilipinas issued a P1.9 million standby emergency credit to FISLAI as evidenced by three (3) promissory notes. On May 25, 1982, University of Mindanao’s (UM) Vice President for Finance, Saturnino Petalcorin, executed a deed of real estate mortgage over UM’s property in Cagayan de Oro City in favor of BSP served as security for FISLAI’s P1.9 Million loan. As proof of his authority to execute a real estate mortgage for University of Mindanao, Saturnino Petalcorin showed a Secretary’s Certificate Corporate Secretary, Aurora de Leon. Guillermo B. Torres died on March 2, 1989. On June 18, 1999, BSP sent a letter to UM, informing it that the bank would foreclose its properties if MSLAI’s total outstanding obligation of P12,534,907.73 remained unpaid. In its reply to BSP, UM, through its Vice President for Accounting, Gloria E. Detoya, denied that UMs properties were mortgaged. It also denied having received any loan proceeds from BSP. On July 16, 1999, UM filed two Complaints for nullification and cancellation of mortgage. UM alleged in its Complaints that it did not obtain any loan from Bangko Sentral ng Pilipinas. It also did not receive any loan proceeds from the bank and also alleged that Aurora de Leon’s certification was anomalous. It never authorized Saturnino Petalcorin to execute real estate mortgage contracts involving its properties to secure FISLAI’s debts. It never ratified the execution of the mortgage contracts. RTC rendered a Decision in favor of UM DECLARING the real estate mortgage Saturnino R. Petalcorin executed in favor of BSP as annulled as there was no board resolution giving Saturnino Petalcorin authority to execute mortgage contracts on behalf of UM. The trial court gave weight to Aurora de Leon’s testimony that UM’s Board of Trustees did not issue a board resolution that would support the Secretary’s Certificate she issued. She testified that she signed the Secretary’s Certificate only upon Guillermo B. Torres’ orders. Saturnino Petalcorin testified that he had no authority to execute a mortgage contract on University of Mindanao’s behalf. He merely executed the contract because of Guillermo B. Torres’ request. Also, BSP’ witness Daciano Pagui, Jr. also admitted that there was no board resolution giving Saturnino Petalcorin authority to execute mortgage contracts on behalf of University of Mindanao. The CA found in favor of BSP, It ruled that "although BSP failed to prove that the UM Board of Trustees actually passed a Board Resolution authorizing Petalcorin to mortgage the subject real properties," Aurora de Leon’s Secretary’s Certificate "clothed Petalcorin with apparent and ostensible authority to execute the mortgage deed on its behalf. "BSP merely relied in good faith on the Secretary’s Certificate. UM is estopped from denying Saturnino Petalcorin’s authority.The Court of Appeals also ruled that Bangko Sentral ng Pilipinas’ action for foreclosure had not yet prescribed because the due date extensions that Bangko Sentral ng Pilipinas granted to FISLAI extended the due date of payment to five (5) years from February 8, 1985.58 The bank’s demand letter to Dolores P. Torres on June 18, 1999 also interrupted the prescriptive period. ISSUES: 1. Whether BSP’S action to foreclose the mortgaged properties had already prescribed;
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2. Whether University of Mindanao is bound by the real estate mortgage contracts executed by Saturnino Petalcorin. HELD: I.
No.
The prescriptive period for actions on mortgages is ten (10) years from the day they may be brought Actions on mortgages may be brought not upon the execution of the mortgage contract but upon default in payment of the obligation secured by the mortgage. A debtor is considered in default when he or she fails to pay the obligation on due date and, subject to exceptions, after demands for payment were made by the creditor. Article 1169 of the Civil Code provides: ART. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. However, the demand by the creditor shall not be necessary in order that delay may exist: (1) When the obligation or the law expressly so declare; or (2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or (3) When demand would be useless, as when the obligor has rendered it beyond his power to perform. Article 1193 of the Civil Code provides that an obligation is demandable only upon due date. In other words, as a general rule, a person defaults and prescriptive period for action runs when (1) the obligation becomes due and demandable; and (2) demand for payment has been made.The prescriptive period neither runs from the date of the execution of a contract nor does the prescriptive period necessarily run on the date when the loan becomes due and demandable. Prescriptive period runs from the date of demand, subject to certain exceptions. In other words, ten (10) years may lapse from the date of the execution of contract, without barring a cause of action on the mortgage when there is a gap between the period of execution of the contract and the due date or between the due date and the demand date in cases when demand is necessary. In this case, the mortgage contracts in this case were executed by Saturnino Petalcorin in 1982. The maturity dates of FISLAI’s loans were repeatedly extended until the loans became due and demandable only in 1990. Respondent informed petitioner of its decision to foreclose its properties and demanded payment in 1999.The running of the prescriptive period of respondent’s action on the mortgages did not start when it executed the mortgage contracts with Saturnino Petalcorin in 1982.The prescriptive period for filing an action may run either (1) from 1990 when the loan became due, if the obligation was covered by the exceptions under Article 1169 of the Civil Code; (2) or from 1999 when
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respondent demanded payment, if the obligation was not covered by the exceptions under Article 1169 of the Civil Code. In either case, respondent’s Complaint with cause of action based on the mortgage contract was filed well within the prescriptive period. However, under Article 1155 of the Civil Code, prescription of actions may be interrupted by (1) the filing of a court action; (2) a written extrajudicial demand; and (3) the written acknowledgment of the debt by the debtor. Therefore, the running of the prescriptive period was interrupted when respondent sent its demand letter to petitioner on June 18, 1999. This eventually led to petitioner’s filing of its annulment of mortgage complaints before the Regional Trial Courts of Iligan City and Cagayan De Oro City on July 16, 1999. Assuming that demand was necessary, respondent’s action was within the ten (10)-year prescriptive period. Respondent demanded payment of the loans in 1999 and filed an action in the same year. 2. No. The mortgage contracts executed in favor of respondent do not bind petitioner. They were executed without authority from petitioner. The relationship between a corporation and its representatives is governed by the general principles of agency.Article 1317 of the Civil Code provides that there must be authority from the principal before anyone can act in his or her name: ART. 1317. No one may contract in the name of another without being authorized by the latter, or unless he has by law a right to represent him. Hence, without delegation by the board of directors or trustees, acts of a person— including those of the corporation’s directors, trustees, shareholders, or officers—executed on behalf of the corporation are generally not binding on the corporation. 114 Contracts entered into in another’s name without authority or valid legal representation are generally unenforceable. The Civil Code provides: ART. 1317. . . . A contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers, shall be 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. The unenforceable status of contracts entered into by an unauthorized person on behalf of another is based on the basic principle that contracts must be consented to by both parties.115 There is no contract without meeting of the minds as to the subject matter and cause of the obligations created under the contract. Consent of a person cannot be presumed from representations of another, especially if obligations will be incurred as a result. Thus, authority is required to make actions made on his or her behalf binding on a person. Contracts entered into by persons without authority from the corporation shall generally be considered ultra vires and unenforceable against the corporation. Two trial courts found that the Secretary’s Certificate and the board resolution were either non-existent or fictitious. The trial courts based their findings on the testimony of the Corporate Secretary, Aurora de Leon herself. She signed the Secretary’s Certificate and
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the excerpt of the minutes of the alleged board meeting purporting to authorize Saturnino Petalcorin to mortgage petitioner’s properties. There was no board meeting to that effect. Guillermo B. Torres ordered the issuance of the Secretary’s Certificate. Aurora de Leon’s testimony was corroborated by Saturnino Petalcorin.Even the Court of Appeals, which reversed the trial courts’ decisions, recognized that "BSP failed to prove that the UM Board of Trustees actually passed a Board Resolution authorizing Petalcorin to mortgage the subject real properties." Well-entrenched is the rule that this court, not being a trier of facts, is bound by the findings of fact of the trial courts and the Court of Appeals when such findings are supported by evidence on record. Hence, not having the proper board resolution to authorize Saturnino Petalcorin to execute the mortgage contracts for petitioner, the contracts he executed are unenforceable against petitioner. They cannot bind petitioner. Respondent argues that it may rely on the Secretary’s Certificate issued by Aurora de Leon because it was notarized. The Secretary’s Certificate was void whether or not it was notarized. Notarization creates a presumption of regularity and authenticity on the document. This presumption may be rebutted by "strong, complete and conclusive proof" to the contrary. While notarial acknowledgment "attaches full faith and credit to the document concerned[,]" it does not give the document its validity or binding effect. When there is evidence showing that the document is invalid, the presumption of regularity or authenticity is not applicable. Since the notarized Secretary’s Certificate was found to have been issued without a supporting board resolution, it produced no effect. It is not binding upon petitioner. It should not have been relied on by respondent especially given its status as a bank. Further, The banking institution is "impressed with public interest" such that the public’s faith is "of paramount importance." Thus, banks are required to exercise the highest degree of diligence in their transactions. In China Banking Corporation v. Lagon, this court found that the bank was not a mortgagee in good faith for its failure to question the due execution of a Special Power of Attorney that was presented to it in relation to a mortgage contract. For its failure to exercise the degree of diligence required of banks, respondent cannot claim good faith in the execution of the mortgage contracts with Saturnino Petalcorin. Banks cannot rely on assumptions. This will be contrary to the high standard of diligence required of them. The Petition is GRANTED. The CA's Decision is REVERSED and SET ASIDE.
NISSAN CAR LEASE PHILS., INC., vs. LICA MANAGEMENT, INC. ET AL G.R. No. 176986, January 13, 2016 NATURE OF ACTION: Extrajudicial foreclosure TOPIC: Rescission of contract PONENTE: JARDELEZA, J.:
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FACTS; Lica Management, Inc. (LMI) is the absolute owner of a property. On June 24, 1994, it entered into a contract with Nissan Car Lease Phils. (Nissan) for the latter to lease the property for a term of ten (10) years (or from July 1, 1994 to June 30, 2004) with a monthly rental of ₱308,000.00 and an annual escalation rate of ten percent (10%). Sometime in September 1994, NCLPI, with LMI’s consent, allowed its subsidiary Nissan Smartfix Corporation (NSC) to use the leased premises. Nissan became delinquent in paying the monthly rent. In May 1996, Nissan and Lica verbally agreed to convert the arrearages into a debt to be covered by a promissory note and twelve (12) postdated checks, each amounting to ₱162,541.95 as monthly payments starting June 1996 until May 1997. While Nissan was able to deliver the postdated checks per its verbal agreement with LMI, it failed to sign the promissory note and pay the checks for June to October 1996. Thus, in a letter dated October 16, 1996, LMI informed Nissan that it was terminating their Contract of Lease due to arrears in the payment of rentals. It also demanded that Nissan (1) pay the amount of ₱2,651,570.39 for unpaid rentals and (2) vacate the premises within five (5) days from receipt of the notice. In the meantime Nissan entered into a Memorandum of Agreement with Proton whereby the former agreed to allow Proton "to immediately commence renovation work even prior to the execution of the Contract of Sublease x x x. In consideration, Proton agreed to transmit to NCLPI a check representing three (3) months of rental payments, to be deposited only upon the due execution of their Contract of Sublease. Nissan through counsel, replied to LMI’s letter of October 16, 1996 acknowledging the arrearages incurred by it under their Contract of Lease. Claiming, however, that it has no intention of abandoning the lease and citing efforts to negotiate a possible sublease of the property. LMI filed a Complaint for sum of money with damages against for its unpaid rentals, with interest and penalties, as well as exemplary damages, attorney’s fees, and costs of litigation. In its Answer and Third-Party Complaint against Proton, Nissan alleged that LMI and Proton "schemed" and "colluded" to unlawfully force Nissan from the premises. Ruling of the Trial Court The trial court ruled in favor of LMI. The trial court found that Nissan purposely violated the terms of its contract with LMI when it failed to pay the required rentals and contracted to sublease the premises without the latter’s consent.The CA denied Nissan appeal and affirmed the trial court’s decision with modification. Nissan maintains that LMI cannot unilaterally and extrajudicially rescind their Contract of Lease in the absence of an express provision in their Contract to that effect because - the power to rescind is judicial in nature and the Supreme Court has allowed extrajudicial rescission if such remedy is specifically provided for in the contract. ISSUE: Whether or not a contract may be rescinded extrajudicially despite the absence of a special contractual stipulation therefor? HELD:
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Yes. It is true that Nissan and LMI’s Contract of Lease does not contain a provision expressly authorizing extrajudicial rescission. LMI can nevertheless rescind the contract, without prior court approval, pursuant to Art. 1191 of the Civil Code. Art. 1191 provides that the power to rescind is implied in reciprocal obligations, in cases where one of the obligors should fail to comply with what is incumbent upon him. Otherwise stated, an aggrieved party is not prevented from extrajudicially rescinding a contract to protect its interests, even in the absence of any provision expressly providing for such right. The rationale for this rule was explained in the case of University of the Philippines v. De los Angeles wherein this Court held: [T]he law definitely does not require that the contracting party who believes itself injured must first file suit and wait for a judgment before taking extrajudicial steps to protect its interest. Otherwise, the party injured by the other's breach will have to passively sit and watch its damages accumulate during the pendency of the suit until the final judgment of rescission is rendered when the law itself requires that he should exercise due diligence to minimize its own damages (Civil Code, Article 2203). (Emphasis and underscoring supplied) We are aware of this Court’s previous rulings in Tan v. Court of Appeals, Iringan v. Court of Appeals, and EDS Manufacturing, Inc. v. Healthcheck International, Inc., for example, wherein we held that extrajudicial rescission of a contract is not possible without an express stipulation to that effect. The seeming "conflict" between this and our previous rulings, however, is more apparent than real. Whether a contract provides for it or not, the remedy of rescission is always available as a remedy against a defaulting party. When done without prior judicial imprimatur, however, it may still be subject to a possible court review. In Golden Valley Exploration, Inc. v. Pinkian Mining Company, we explained: This notwithstanding, jurisprudence still indicates that an extrajudicial rescission based on grounds not specified in the contract would not preclude a party to treat the same as rescinded. The rescinding party, however, by such course of action, subjects himself to the risk of being held liable for damages when the extrajudicial rescission is questioned by the opposing party in court. This was made clear in the case of U.P. v. De los Angeles, wherein the Court held as follows: Of course, it must be understood that the act of a party in treating a contract as cancelled or resolved on account of infractions by the other contracting party must be made known to the other and is always provisional, being ever subject to scrutiny and review by the proper court. If the other party denies that rescission is justified, it is free to resort to judicial action in its own behalf, and bring the matter to court.Then, should the court, after due hearing, decide that the resolution of the contract was not warranted, the responsible party will be sentenced to damages; in the contrary case, the resolution will be affirmed, and the consequent indemnity awarded to the party prejudiced.
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In other words, the party who deems the contract violated may consider it resolved or rescinded, and act accordingly, without previous court action, but it proceeds at its own risk. For it is only the final judgment of the corresponding court that will conclusively and finally settle whether the action taken was or was not correct in law. x x x (Emphasis and underscoring in the original) The only practical effect of a contractual stipulation allowing extrajudicial rescission is "merely to transfer to the defaulter the initiative of instituting suit, instead of the rescinder."In fact, the rule is the same even if the parties’ contract expressly allows extrajudicial rescission. The other party denying the rescission may still seek judicial intervention to determine whether or not the rescission was proper. Having established that LMI can extrajudicially rescind its contract with Nissan even absent an express contractual stipulation to that effect, the question now to be resolved is whether this extrajudicial rescission was proper under the circumstances. As earlier discussed, Nissan’s non-payment of rentals and unauthorized sublease of the leased premises were both clearly proven by the records. We thus confirm LMI’s rescission of its contract with Nissan on account of the latter’s breach of its obligations. WHEREFORE, in view of the foregoing, the petition is DENIED.
REBECCA FULLIDO vs. GINO GRILLI G.R. No. 215014, February 29, 2016 NATURE OF ACTION: Unlawful Detainer TOPIC: VOID CONTRACT PONENTE: MENDOZA, J.: FACTS:
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Grilli financially assisted Fullido in procuring a lot from her parents which was registered in her name On the said property, they constructed a house, which was funded by Grilli. Upon completion, they maintained a common-law relationship and lived there whenever Grilli was on vacation in the Philippines twice a year. In 1998, Grilli and Fullido executed a contract of lease, to define their respective rights over the house and lot. The lease contract stipulated, among others, that Grilli as the lessee, would rent the lot, registered in the name of Fullido, for a period of fifty (50) years, to be automatically renewed for another fifty (50) years upon its expiration in the amount of P10,000.00 for the whole term of the lease contract; and that Fullido as the lessor, was prohibited from selling, donating, or encumbering the said lot without the written consent of Grilli. Their harmonious relationship turned sour after 16 years of living together. Both charged each other with infidelity. They could not agree who should leave the common property, and Grilli sent formal letters to Fullido demanding that she vacate the property, but these were unheeded. On September 8, 2010, Grilli filed a complaint for unlawful detainer with prayer for issuance of preliminary injunction against Fullido before the MCTC Fullido argues that she could not be ejected from her own lot based on the contract of lease and the MOA because those documents were null and void for being contrary to the Constitution, the law, public policy, morals and customs; that the MOA prevented her from disposing or selling her own land, while the contract of lease favoring Grilli, a foreigner, was contrary to the Constitution as it was a for a period of fifty (50) years, and, upon termination, was automatically renewable for another fifty (50) years. Grilli, on the other hand, contends that Fullido could not question the validity of the said contracts in the present ejectment suit unless she instituted a separate action for annulment of contracts. Thus, the Court is confronted with the issue of whether a contract could be declared void in a summary action of unlawful detainer. The MCTC dismissed the case after finding that Fullido could not be ejected from their house and lot. The MCTC opined that she was a co-owner of the house as she contributed to it by supervising its construction. The RTC reversed and set aside the MCTC decision. The RTC was of the view that Grilli had the exclusive right to use and possess the house and lot by virtue of the contract of lease executed by the parties. The CA upheld the decision of the RTC emphasizing that in an ejectment case, the only issue to be resolved would be the physical possession of the property. The CA was also of the view that as Fullido executed both the MOA and the contract of lease, which gave Grilli the possession and use of the house and lot, the same constituted as a judicial admission that it was Grilli who had the better right of physical possession. ISSUE: May patently null and void contracts be a basis of an ejectment order? HELD: No. A void or inexistent contract may be defined as one which lacks, absolutely either in fact or in law, one or some of the elements which are essential for its validity. It is one which
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has no force and effect from the very beginning, as if it had never been entered into; it produces no effect whatsoever either against or in favor of anyone. 21Quod nullum est nullum producit effectum. Article 1409 of the New Civil Code explicitly states that void contracts also cannot be ratified; neither can the right to set up the defense of illegality be waived. Accordingly, there is no need for an action to set aside a void or inexistent contract. A review of the relevant jurisprudence reveals that the Court did not hesitate to set aside a void contract even in an action for unlawful detainer. In Spouses Alcantara v. Nido, which involves an action for unlawful detainer, the petitioners therein raised a defense that the subject land was already sold to them by the agent of the owner. The Court rejected their defense and held that the contract of sale was void because the agent did not have the written authority of the owner to sell the subject land. Clearly, contracts may be declared void even in a summary action for unlawful detainer because, precisely, void contracts do not produce legal effect and cannot be the source of any rights. To emphasize, void contracts may not be invoked as a valid action or defense in any court proceeding, including an ejectment suit. The next issue that must be resolved by the Court is whether the assailed lease contract and MOA are null and void. WHEREFORE, the petition is GRANTED.
JUANA VDA. DE ROJALES, SUBSTITUTED BY HER HEIRS, REPRESENTED BY CELERINA ROJALES-SEVILLA, Petitioner, v. MARCELINO DIME, SUBSTITUTED BY HIS HEIRS, REPRESENTED BY BONIFACIA MANIBAY, Respondent G.R. No. 194548, February 10, 2016 NATURE OF ACTION: Petition for the Consolidation of Ownership and Title TOPIC: Pacto de Retro Sale (Privity of contract) PONENTE: PERALTA, J.:
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FACTS: Petitioner Juana Vda. de Rojales owned a parcel of land. Marcelino Dime alleged in a petition for the consolidation of ownership and title over Lot 4-A that on May 16, 1999, petitioner conveyed under a pacto de retro contract Lot 4-A in favor of respondent for and in consideration of the sum of P2,502,932.10. Petitioner reserved the right to repurchase the property for the same price within a period of nine (9) months from March 24, 1999 to December 24, 1999. Despite repeated verbal and formal demands to exercise her right, petitioner refused to exercise her right to repurchase the subject property. Petitioner denied the execution of the pacto de retro sale in favor of respondent and alleged that she had not sold the subject property. She claimed that the document presented by respondent was falsified since the fingerprint appearing therein was not hers and the signature of the Notary Public Modesto S. Alix was not his. She also averred that she filed falsification and use of falsified documents charges against respondent. the NBI submitted a copy of Dactyloscopic Report FP Case No. 2000-349 by Fingerprint Examiner Eriberto B. Gomez, Jr. to the court. It was concluded therein that the questioned thumbmark appearing on the original-duplicate copy of the notarized pacto de retro sale and the standard right thumbmark, taken by Police Officer Marcelo Quintin Sosing, were impressed by and belong to the same person, the petitioner The heirs of Dime filed a Manifestation and Motion to Dismiss the Complaint on the ground that it was Rufina Villamin, respondent's common law wife, who was the source of the fund in purchasing Lot 4-A. They alleged that the consolidation of ownership and title to respondent would be prejudicial to Villamin and would unjustly enrich them. Consequently, the RTC, dismissed the case with prejudice on the ground that the case was not filed by an indispensable party, Villamin and ratiocinated that it is a clear mistake to rule on the merits of the case knowing that such was not filed by the indispensable party, hence, the judgment will be void.The CA rejected the ruling of the court a quo that Villamin was an indispensable party. It ruled that the person who provided the funds for the purchase of the property is not considered as an indispensable party in a case of consolidation of title filed by respondent, the vendee, in whose favor the petitioner sold the subject property under the contract of sale con pacto de retro. ISSUE: Whether or not there is a pacto de retro sale. HELD:
NO. As relevant to the case at bar, Articles 1311 and 1607 of the Civil Code Article 1311. Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent. If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a
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person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person. As evidenced by the contract of Pacto de Retro sale, petitioner, the vendor, bound herself to sell the subject property to respondent, the vendee, and reserved the right to repurchase the same property for the same amount within a period of nine (9) months from March 24, 1999 to December 24, 1999.Therefore, in an action for the consolidation of title and ownership in the name of vendee in accordance with Article 1616 of the Civil Code, the indispensable parties are the parties to the Pacto de Retro Sale - the vendor, the vendee, and their assigns and heirs. In this case, Villamin, as the alleged source of the consideration, is not privy to the contract of sale between the petitioner and the respondent. Therefore, she could not maintain an action for consolidation of ownership and title of the subject property in her name since she was not a party to the said contract. We have consistently decreed that the nomenclature used by the contracting parties to describe a contract does not determine its nature. The decisive factor is their intention as shown by their conduct, words, actions and deeds - prior to, during, and after executing the agreement. Thus, even if a contract is denominated as a pacto de retro, the owner of the property may still disprove it by means of parole evidence, provided that the nature of the agreement is placed in issue by the pleadings filed with the trial court.Petitioner failed to specifically allege in all her pleadings that she did not intend to sell her property to respondent, instead, she maintained that there was no pacto de retro sale because her thumbmark and the notary public's signature were falsified. She should have raised the issue that respondent merely borrowed the title from her and promised to pay her in her pleadings and not belatedly claimed the same after the NBI ruled that the thumbmark in the contract was hers. In light of petitioner's inconsistent and bare allegations and the conflicting testimony of her other witness, we rule that petitioner failed to overcome the presumption of regularity of the notarized contract of Pacto de Retro sale. Moreover, this Court is unconvinced that petitioner has successfully proven that her agreement with respondent was not a pacto de retro sale but a contract of loan secured by a mortgage of the subject property. WHEREFORE, the petition is hereby DENIED.
CATHAY PACIFIC AIRWAYS, LTD vs. SPOUSES ARNULFO AND EVELYN FUENTEBELLA G. R. No. 188283, July 20, 2016 NATURE OF ACTION: Damages TOPIC: Breach of contract of carriage PONENTE: SERENO, C.J.: FACTS:
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In 1993, 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.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. Cathay admits that First Class tickets were issued to respondents, but clarifies that the tickets were open-dated (waitlisted). There was no showing whether the First Class tickets issued to Sps. Lopez and Sps. Fugoso were open-dated or otherwise, but it appears that they were able to fly First Class on all the segments of the trip, while respondents were not. On 25 October 1993, discovered that they had not been given First Class seats when they were denied entry into the First Class lounge. 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. Fuentebella filed Complaint for damages against Cathay Pacific Airways Ltd., a for PI3 million in damages for the alleged besmirched reputation and honor, as well as the public embarrassment they had suffered as a result of a series of involuntary downgrades of their trip from Manila to Sydney via Hong Kong on 25 October 1993 and from Hong Kong to Manila on 2 November 1993. Cathay admitted that First Class tickets had been issued to respondents, but qualified that those tickets were open-dated. 29 She referred to the plane tickets, which bore the annotations "OPEN F OPEN" for all sectors of the flight. 30 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.31 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. RTC ruled in favor of respondents and awarded P5 million as moral damages, PI million as exemplary damages, and P500,000 as attorney's fees. Petitioner prays that the Complaint be dismissed, or in the alternative, that the damages be substantially and equitably reduced. The CA affirmed the RTC Decision with the modification that the attorney's fees be reduced to P100,000. ISSUE: Whether or not there was a breach of contract. HELD: Yes. 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.
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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. The First Class tickets issued on 25 October 1993 indicate that they were "issued in exchange for Tickets correspond to the Business Class tickets issued on 23 October 1993, which in turn originated from Ticket No. 160-4011239858 issued on 22 October 1993.With this information, We can conclude that petitioner may have been telling the truth that the passengers made many changes in their booking. However, their claim that respondents held both Business Class tickets and the open-dated First Class tickets is untrue. We can also conclude that on the same day of the flight, petitioner still issued First Class tickets to respondents. The incontrovertible fact, therefore, is that respondents were holding First Class tickets on 25 October 1993. WHEREFORE, the Petition is PARTIALLY GRANTED. Moral and exemplary damages are hereby reduced to P500,000 and P50,000, respectively.
THELMA RODRIGUEZ, JOINED BY HER HUSBAND, Petitioners, v.SPOUSES JAIME SIOSON AND ARMI SIOSON, ET AL., Respondents. G.R. No. 199180, July 27, 2016 NATURE OF ACTION: TOPIC: Contract of Sale vs. Contract to Sell PONENTE: REYES, J.:
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FACTS: Sometime in 1997, the Municipality of Orani, Bataan (Municipality) purchased from Neri Lot 398, , it was agreed that upon full payment of the purchase price, Neri will surrender the mother title to the Municipality for subdivision of the property on the condition that Neri will equitably share in the expense thereof.Lot 398 was subsequently subdivided into 5 lots: Lot 398-A, Lot 398-B, Lot 398-C, Lot 398-D, and Lot 398-E. Lots 398C and 398-D pertain to the portions that were sold to the Municipality.The then Municipal Mayor Mario Zunñ iga suggested that he sell Lot 398-A to his aunt, petitioner Thelma Rodriguez (Thelma). Thelmaissued a check for said amount payable to Neri. When it fell due, no sufficient funds were available to cover the check. Consequently, it was agreed that Thelma would pay the purchase price in installments. Thelma, however, was only able to pay P442,293.50. After Thelma learned of the second sale of Lot 398-A, she filed against the respondents a complaint for the Declaration of Nullity of the Second Sale. In support of her claim, Thelma once again presented a deed of absolute sale executed by Neri in her favor. This time, the deed of sale she presented was duly signed by her and Neri, witnessed, notarized and dated April 10, 1997. The Siosons countered that they are innocent purchasers for value having bought Lot 398-A at the time when Thelma's adverse claim was already cancelled. The RTC rendered judgment in favor of Thelma. The RTC concluded that by Neri's admission that he sold the subject lot to Thelma for a consideration of P1,243,000.00, and his acknowledgement receipt of P442,293.50 as partial payment from the latter, the transaction between Thelma and Neri should be regarded as an executed contract of sale. Hence, Lot 398-A was subjected to a double sale when Neri sold the same property to the respondents. Contrary to the findings of the RTC, the CA found that the contract between Neri and Thelma was a mere contract to sell and not a contract of sale; hence, there was no double sale of Lot 93 8-A. According to the CA, the question of whether or not the respondents are buyers in good faith is unavailing since the concept of a "buyer in good faith" finds relevance only in cases of double sale. ISSUES: (1) Whether or not there was a double sale? (2) Whether or not the sale between Thelma and Neri is a mere contract to sell?; HELD: 1. No. The rule on double sale, as provided in Article 1544 of the Civil Code, does not apply to a case where there was a sale to one party of the land itself while the other contract was a mere promise to sell the land or at most an actual assignment of the right to repurchase the same land. 2. Yes. The real character of the contract is not the title given, but the intention of the parties. In determining the nature of the agreement between Thelma and Neri, the CA took note of these two documents, and, coupled with Thelma's own admissions, correctly found
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that it was a mere contract to sell. According to the CA:During trial, Thelma explained the apparent disparity between the two (2) "deeds of absolute sale" by testifying that the undated and unnotarized deed of sale served only as a "receipt" which was signed by Neri when the latter received the downpayment for the lot. The dated and notarized deed of sale, on the other hand, was signed by both Thelma and Neri upon Thelma's alleged full payment of the purchase price: Second, the execution of the "deed of absolute sale" dated August 10, 1997 and the transfer and delivery of the title to Thelma's name covering Lot No. 398-A were conditioned upon full payment of the purchase price. Thelma testified that the "deed of absolute sale" dated August 10, 1997 and which was attached to Thelma's complaint in Civil Case No. 7664 was signed by her, Neri and their witnesses only upon full payment of the purchase price. Thelma further testified that she and Neri agreed to place the amount of the purchase price on the deed of absolute sale only at the time when Thelma had fully paid the same: x x x Despite the denomination of their agreement as one of sale, the circumstances tend to show that Neri agreed to sell the subject property to Thelma on the condition that title and ownership would pass or be transferred upon the full payment of the purchase price. This is the very nature of a contract to sell, which is a "bilateral contract whereby the prospective seller, while expressly reserving the ownership of the property despite delivery thereof to the prospective buyer, binds himself to sell the property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, i.e., the full payment of the purchase price." As stated by the Court, the agreement to execute a deed of sale upon full payment of the purchase price "shows that the vendors reserved title to the subject property until full payment of the purchase price." WHEREFORE, the petition is DENIED.
BONIFACIO DANAN vs. SPOUSES GREGORIO SERRANO AND ADELAIDA REYES G.R. No. 195072, August 01, 2016 NATURE OF ACTION: Specific Performance TOPIC: Contract to Sell PONENTE: PERALTA, J.: FACTS:
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Respondents spouses Gregorio Serrano and Adelaida Reyes (Spouses Serrano) are the registered owners of a parcel of land. 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. 5 Thereafter, in separate documents denominated as "Agreement in Receipt Form" 6 dated June 27, 1976, Gregorio sold to Bonifacio and Artemio their respective 400-square-meter portions of the property. 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. A Complaint for specific performance was filed. Bonifacio and Artemio prayed that judgment be rendered ordering the Spouses Serrano to sign, execute, and deliver the proper deed of sale, together with the corresponding titles over the portions of land in their favor 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. The RTC granted the Complaint of Bonifacio and Artemio and ordered the Spouses Serrano to execute and sign the proper Deed of Sale, deliver the corresponding titles after receiving the P4,000.00 balance. The CA reversed and set aside the RTC Decision finding that the trial court seemed to have failed to properly determine the true nature of the agreement between the parties for being primarily impelled by supposed impulses of equity, stressing that Bonifacio and Artemio were allegedly unschooled and easily induced by the wealthy spouses. ISSUE: Whether or not petitioner cannot demand respondent spouses serrano to transfer the subject property because of his failure to comply with the suspensive condition of full payment of the purchase price. HELD: YES. The nature of the agreement between the parties in this case is one that is akin to a contract to sell.
Time and again, the Court had ruled that in a contract of sale, the title to the property passes to the vendee upon the delivery of the thing sold whereas in a contract to sell, the ownership is, by agreement, retained by the vendor and is not to pass to the vendee until full payment of the purchase price. In a contract of sale, the vendee's non-payment of the price is a negative resolutory condition, while in a contract to sell, the vendee's full payment of the price is a positive suspensive condition to the coming into effect of the agreement. Xxx 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.
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Thus, the rights of the buyer in the event he defaults in the payment of the succeeding installments depend upon whether he has paid at least two (2) years of installments or less. In the case at hand, it is undisputed that Bonifacio was only able to pay the first P2,000.00 installment upon the signing of their agreement, thereafter, failing to pay the balance of the purchase price when they fell due on June 30, 1977 and June 30, 1978. It is, therefore, Section 4 of RA No. 6552 that applies herein. Essentially, the said provision provides for three (3) requisites before the seller may actually cancel the subject contract: first, the seller shall give the buyer a sixty (60)-day grace period to be reckoned from the date the installment became due; second, the seller must give the buyer a notice of cancellation/demand for rescission by notarial act if the buyer fails to pay the installments due at the expiration of the said grace period; and, third, the seller may actually cancel the contract only after thirty (30) days from the buyer's receipt of the said notice of cancellation/demand for rescission by notarial act. 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. . In the instant case, there is no showing that the Spouses Serrano complied with the requirements prescribed by RA No. 6552. 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. such action to enforce said written contract herein prescribes in ten (10) years reckoned from the nonfulfillment of the obligation to pay on the last due date. Thus, Bonifacio should have filed the action before June 30, 1988. WHEREFORE, the instant petition is DENIED
SALES SPOUSES ROBERTO and ADELAIDA PEN vs. SPOUSES SANTOS and LINDA JULIAN G.R. No. 160408 January 11, 2016 NATURE OF THE ACTION: Foreclosure Proceedings TOPIC: PACTUM COMMISSORIUM
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PONENTE: BERSAMIN, J.: FACTS: The appellees (the Julians) obtained two (2) loans from appellant Adelaida Pen. Two (2) promissory notes were executed by the appellees in favor of Adelaida to evidence the foregoing loans. Both Joans were charged interest at 6% per month. As security, on May 23, 1986, the Julians executed a Real Estate Mortgage over their real property registered under the name of Santos Julian, which was delivered to Adelaida.When the loans became due and demandable, they failed to pay. Hence, Adelaida decided institute foreclosure proceedings. However, she was prevailed upon by Linda not to foreclose the property and instead offered their mortgaged property as payment in kind. The Julians executed a Deed of Sale. Title to the property was transferred to Adelaida. Linda offered twice to repurchase the property payable in cash but failed to repurchase the same. Linda offered to pay P100,000.00 in cash as sign of good faith. The offer was rejected by appellant Adelaida. However, Adelaida 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, however, allege that instead of paying their balance, the Julians instituted a civil complaint and filed an adverse claim and lis pendens. On the other hand, the Julians aver that at that time the mortgage was executed, they were likewise required by 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". 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, Linda desisted from the offer and requested that she be shown the land title which she conveyed to Adelaida, but the latter refused. Upon verification with the Registry of Deeds of Quezon City, she was informed that the title to the mortgaged property had already been registered in the name of Adelaida. Linda filed an Affidavit of Adverse Claim and formally demanded the reconveyance of the title and/or the property to them, but the appellants refused. Linda also discovered that Adelaida have obtained several Declarations of Real Property, and a Deed of Sale which indicates a consideration of P70,000.00 for the lot, and was made to appear as having been executed on October 22, 1986. The Julians 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 Julians and used this spurious deed of sale as the vehicle for her fraudulent transfer unto herself the parcel of land The RTC ruled in favor of the respondents that the parties had not agreed on the consideration for the sale at the time they signed the deed of sale; that in the absence of the consideration, the sale lacked one of the essential requisites of a valid contract. The CA pronounced the deed of sale as void but not because of the supposed lack of consideration as the R TC had indicated, but because of the deed of sale having been executed at the same time as the real estate mortgage, which rendered the sale as a prohibited pactum commissorium in light of the fact that the deed of sale was blank as to the consideration and the date, which details would be filled out upon the default by the respondents.
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ISSUE: Whether or not the deed of sale is valid? HELD: The Deed of Sale is void. 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. The first element was present considering that the property of the respondents was mortgaged by Linda in favor of Adelaida as security for the farmer's indebtedness. As to the second, the authorization for Adelaida to appropriate the property subject of the mortgage upon Linda's default was implied from Linda's having signed the blank deed of sale simultaneously with her signing of the real estate mortgage. The haste with which the transfer of property was made upon the default by Linda on her obligation, and the eventual transfer of the property in a manner not in the form of a valid dacion en pago ultimately confirmed the nature of the transaction as a pactum commissorium. It is notable that in reaching its conclusion that Linda's deed of sale had been executed simultaneously with the real estate mortgage, the CA first compared the unfilled deed of sale presented by Linda with the notarized deed of sale adduced by Adelaida. The CA justly deduced that the completion and execution of the deed of sale had been conditioned on the non-payment of the debt by Linda, and reasonably pronounced that such circumstances rendered the transaction pactum commissorium. The Court should not disturb or undo the CA's conclusion in the absence of the clear showing of abuse, arbitrariness or capriciousness on the part of the CA. The petitioners have theorized that their transaction with the respondents was a valid dacion en pago by highlighting that it was Linda who had offered to sell her property upon her default. Their theory cannot stand scrutiny. Dacion en pago is in the nature of a sale because property is alienated in favor of the creditor in satisfaction of a debt in money. For a valid dacion en pago to transpire, however, the attendance of the following elements must be established, namely: (a) the existence of a money obligation; (b) the alienation to the creditor of a property by the debtor with the consent of the former; and (c) the satisfaction of the money obligation of the debtor. To have a valid dacion en pago, therefore, the alienation of the property must fully extinguish the debt. Yet, the debt of the respondents subsisted despite the transfer of the property in favor of Adelaida. The petitioners insist that the parties agreed that the deed of sale would not yet contain the date and the consideration because they had still to agree on the price. Their insistence is not supported by the established circumstances. It appears that two days after the loan fell due on October 15, 1986, Linda offered to sell the mortgaged property; hence, the parties made the ocular inspection of the premises on October 18, 1986. By that time, Adelaida had already become aware that the appraiser had valued the property at
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P70,000.00. If that was so, there was no plausible reason for still leaving the consideration on the deed of sale blank if the deed was drafted by Adelaida on October 20, 1986, especially considering that they could have conveniently communicated with each other in the meanwhile on this significant aspect of their transaction. It was also improbable for Adelaida to still hand the unfilled deed of sale to Linda as her copy if, after all, the deed of sale would be eventually notarized on October 22, 1986. According to Article 1318 of the Civil Code, the requisites for any contract to be valid are, namely: (a) the consent of the contracting parties; (b) the object; and (c) the consideration. There is a perfection of a contract when there is a meeting of the minds of the parties on each of these requisites. Xxx In a sale, the contract is perfected at the moment when the seller obligates herself to deliver and to transfer ownership of a thing or right to the buyer for a price certain, as to which the latter agrees. The absence of the consideration from Linda's copy of the deed of sale was credible proof of the lack of an essential requisite for the sale. In other words, the meeting of the minds of the parties so vital in the perfection of the contract of sale did not transpire. And, even assuming that Linda's leaving the consideration blank implied the authority of Adelaida to fill in that essential detail in the deed of sale upon Linda's default on the loan, the conclusion of the CA that the deed of sale was a pactum commisorium still holds, for, as earlier mentioned, all the elements of pactum commisorium were present. WHEREFORE, the Court AFFIRMS the decision of the CA.
FABIO CAHAYAG and CONRADO RIVERA, Petitioners, 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, Respondents. G.R. No. 168078 G.R. No. 168357 January 13, 2016 NATURE OF THE ACTION: Extra Judicial Foreclosure
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TOPIC: Nemo dat quad non ha bet PONENTE: SERENO, J.: FACTS: Petitioner Dulos Realty was the registered owner of certain residential lots covered by several Transfer Certificate of Titles. Dulos Realty obtained a loan from respondent CCC in the amount of P300,000. To secure the loan, Dulos 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. Dulos Realty entered into a Contract to Sell with petitioner Cahayag over the lot covered by TCT No. S-39775. Dulos Realty entered into another Contract to Sell, this time with petitioner Rivera over the lot covered by TCT No. S28335. Dulos Realty defaulted in the payment of the mortgage loan, prompting respondent CCC to initiate extrajudicial foreclosure proceedings. In the auction sale, CCC was held the the highest bidder. a Certificate of Sale covering the properties, together with all the buildings and improvements existing thereon, was issued in favor of CCC. Thereafter, Dulos Realty entered into a Contract to Sell with petitioner Escalona over the house and lot covered by TCT No. S-29776.Subsequently, corresponding titles to the properties. TCT Nos. S-39775, S-28335, 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. Respondent CCC, through a Deed of Absolute Sale, sold to respondent Qua the same subject properties, Accordingly, TCT Nos. 74531, 74532, 74533 and 74534 were cancelled; and TCT Nos. 77012, 77013, 77014 and 770015 were issued to respondent Qua. Subsequently, respondent Qua filed ejectment suits individually against petitioners Dulos Realty, Cahayag,Esca1ona, and Rivera . The MTC rendered Decisions in favor of respondent Qua. It ordered Dulos Realty, Escalona, Cahayag, and Rivera to vacate the properties. Petitioners filed a Complaint against respondents for the "Annulment of Sherifffs] Sale and Other Documents with Preliminary Injunction and/or Temporary Restraining Order" The Complaint alleged that petitioners Cahayag, Rivera, Escalona and Baldoza were owners of the properties in question by virtue of Contracts of Sale individually executed in their favor, and that the Real Estate Mortgage between Dulos Realty and defendantappellant CCC did not include the houses, but merely referred to the lands themselves. Thus, the inclusion of the housing units in the Deed of Sale executed by respondent CCC in favor of respondent Qua was allegedly illegal. The RTC rendered a Decision, which ruled that the houses were not included in the Real Estate Mortgage; and that the foreclosure of the mortgage over the subject lots, as well as the housing units, was not valid. Petitioners claim that the List of Properties attached to the Deed of Real Estate Mortgage refers merely to the lands themselves and does not include the housing units found thereon. As backup argument for the theory that the houses are outside the coverage
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of the mortgage agreement, petitioners argue that the improvements were not owned by Dulos Realty, the mortgagor, but by its buyers under the Contracts to Sell and Contracts of Sale; hence, those improvements are excluded from the coverage of the real estate mortgage. Also, petitioners challenge the validity of the foreclosure sale on the ground that the mortgage executed by the mortgagor (petitioner Dulos Realty) and the mortgagee (respondent CCC) was null and void. 38 Petitioners claim that Dulos Realty was no longer the owner of the properties it had mortgaged at the time of the execution of the mortgage contract, as they were sold under existing Contracts to Sell and Deed of Absolute Sale Petitioners also, claim that respondent CCC cannot claim to be a mortgagee in good faith, since it is a financial institution. As such, respondent CCC knew that it was dealing with a subdivision developer, which was in the business of selling subdivision lots. CA held that the extrajudicial foreclosure was valid, since the Real Estate Mortgage clearly included the buildings and improvements on the lands, subject of the mortgage. ISSUES: 1. Whether the real mortgage covers the lands only, as enumerated in the Deed of Real Estate Mortgage or the housing units as well; 2.Whether Dulos Realty was the owner of the properties it had mortgaged at the time of its execution in view of the various Contracts to Sell and Deed of Absolute Sale respectively executed in favor of petitioners Cahayag, Rivera, Escalona and Cahayag? HELD: No. It is true that the List of Properties attached to the Deed of Real Estate Mortgage refers merely to the lands themselves and does not include the housing units found thereon. A plain reading of the Real Estate Mortgage, however, reveals that it covers the housing units as well. We quote the pertinent provision of the agreement: [T]he MORTGAGOR has transferred and conveyed and, by these presents, do hereby transfer and convey by way of FIRST MORTGAGE unto the MORTGAGEE, its successors and assigns the real properties described in the list appearing at the back of this document and/or in a supplemental document attached hereto as Annex "A" and made and integral part hereof, together with all the buildings and/or other improvements now existing or which may hereafter be place[d] or constructed thereon, all of which the MORTGAGOR hereby warrants that he is the absolute owner and exclusive possessor thereof, free from all liens and encumbrances of whatever kind and nature. xxx.47 (Emphasis Ours) Thus, the housing units would fall under the catch-all phrase "together with all the buildings and/or other improvements now existing or which may hereafter be placed or constructed thereon."
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The contra proferentem rule finds no application to this case. The doctrine provides that in the interpretation of documents, ambiguities are to be construed against the drafter.48 By its very nature, the precept assumes the existence of an ambiguity in the contract, which is why contra proferentem is also called the ambiguity doctrine. In this case, the Deed of Real Estate Mortgage clearly establishes that the improvements found on the real properties listed therein are included as subject-matter of the contract. It covers not only the real properties, but the buildings and improvements thereon as well. 2.No. Undeniably, there is an established rule under the law on sales that one cannot give what one does not have (Nemo dat quad non ha bet).73 The CA, however, confuses the application of this rule with respect to time. It makes the nemo dat quad non habet rule a requirement for the perfection of a contract of sale, such that a violation thereof goes into the validity of the sale. But the Latin precept has been jurisprudentially held to apply to a contract of sale at its consummation stage, and not at the perfection stage. Cavite Development Bank v. Spouses Syrus Lim puts nemo dat quad non habet in its proper place. Initially, the Court rules out ownership as a requirement for the perfection of a contract of sale. For all that is required is a meeting of the minds upon the object of the contract and the price. The case then proceeds to give examples of the rule. It cites Article 1434 of the Civil Code, which provides that in case the seller does not own the subject matter of the contract at the time of the sale, but later acquires title to the thing sold, ownership shall pass to the buyer. The Court also refers to the rule as the rationale behind Article 1462, which deals with sale of "future goods." Cavite Development Bank thereafter turns to Article 1459, which requires ownership by the seller of the thing sold at the time of delivery or consummation stage of the sale. The Court explains that if the rule were otherwise, the seller would not be able to comply with the latter's obligation to transfer ownership to the buyer under a perfected contract of sale. The Court ends the discourse with the conclusion that "[i]t is at the consummation stage where the principle of nemo dat quad non habet applies.76 Case law also provides that the fact that the seller is not the owner of the subject matter of the sale at the time of perfection does not make the sale void. Hence, the lesson: for title to pass to the buyer, the seller must be the owner of the thing sold at the consummation stage or at the time of delivery of the item sold. The seller need not be the owner at the perfection stage of the contract, whether it is of a contract to sell or a contract of sale. Ownership is not a requirement for a valid contract of sale; it is a requirement for a valid transfer of ownership'. Consequently, it was not correct for the CA to consider the contract of sale void. The CA erroneously considered lack of ownership on the part of the seller as having an effect on the validity of the sale. The sale was very much valid when the Deed of Absolute Sale between the parties was executed on 10 December 1983, even though title to the property had earlier been consolidated in favor of respondent CCC as early as 10 November 1983. The fact that Dulos Realty was no longer the owner of the property in question at the time of the sale did not affect the validity of the contract.
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On the contrary, lack of title goes into the performance of a contract of sale. It is therefore crucial to determine in this case if the seller was the owner at the time of delivery of the object of the sale. For this purpose, it should be noted that execution of a public instrument evidencing a sale translates to delivery. It transfers ownership of the item sold to the buyer. In this case, the delivery coincided with the perfection of the contract -The Deed of Absolute Sale covering the real property in favor of petitioner Baldoza was executed on 10 December 1983. As already mentioned, Dulos Realty was no longer the owner of the property on that date. Accordingly, it could not have validly transferred ownership of the real property it had sold to petitioner. Thus, the correct conclusion that should be made is that while there was a valid sale, there was no valid transfer of title to Baldoza, since Dulos Realty was no longer the owner at the time of the execution of the Deed of Absolute Sale. WHEREFORE, premises considered, the Petitions are DENIED.
TIMOTEO BACALSO and DIOSDADA BACALSO vs. GREGORIA B. ACA-AC ET AL., G.R. No.172919, January 13, 2016 NATURE OF THE ACTION: Declaration of nullity of documents, certificates of title. TOPIC: Sale (consideration) PONENTE: REYES, J.: FACTS:
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The Bacus siblings were the registered owners of a parcel of land covered by Transfer Certificate of Title (TCT) No. 59260. The Bacus siblings inherited the said property from their mother (Matea Bacalso). 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. 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, reconveyance of real property and damages against the Bacus siblings and four other persons before the RTC of Cebu. They claimed that they are co-owners of the three-fourths portion of Lot No. 1809-Gas Bacus Mother (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. 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 aflirmed by the CA in a Decision dated March 23, 1992 and became final and executory on April 15, 1992. Timoteo and Diosdada Bacalso (petitioners) filed another 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.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. 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. the CA affirmed the ruling of the RTC. ISSUES: Whether the Deedof Absolute Saledated 15 OCTOBER 1987 is null and void ab initio for failure or want of consideration? Held: The sale is void. Well-settled is the rule that where there is no consideration, the sale is null and void ab initio (Sps. Lequin v. Sps. Vizconde). In the Civil Code, a contract is a meeting of minds, with respect to the other, to give something or to render some service. Article 1318 provides: Art. 1318. There is no contract unless the following requisites concur: (l) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3) Cause of the obligation which is established.
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In the case at bar, the petitioners argue that the Deed of Absolute Sale has all the requisites of a valid contract. The petitioners contend that there is no lack of consideration that would prevent the existence of a valid contract. They assert that the testimonies of Timoteo and witness Roberto Ybas sufficiently established that the purchase price of P5,000.00 for Lot No. 1809-G-2-C was paid to Julian at Sto. Nifio Church in Cebu City before the execution of the Deed of Absolute Sale. They also claim that even assuming that they failed to pay the purchase price, such failure does not render the sale void for being fictitious or simulated, rather, there is only non-payment of the consideration within the period agreed upon for payment. The Court does not agree. 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. The trial court's discussion on the said issue, as affirmed by the CA, is hereby quoted: 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: Sometime in October 1987, he and his two sisters agreed to sell to the [petitioners] Lot No. 1809-G-2-C because they needed money for the issuance of the titles to the four lots into which Lot 1809-G-2 was subdivided. [Timoteo] lured him and his sisters into selling the said land by his promise and representation that money was coming from his sister, Lucena Bacalso, from Jolo, Sulu. Timoteo Bacalso asked for two weeks within which to produce the said money. However, no such money came. To the shock and surprise of him and his sisters, a complaint was filed in Court against them in Civil Case No. CEB-6693 by [Timoteo], together with nine others, when Lucena Bacalso arrived from Jolo, Sulu, wherein they claimed as theirs Lot 1809-G. Instead of being paid, he and his sisters were sued in Court. From then on, [Timoteo] never cared anymore to pay for Lot 1809-G-2-C. He and his sisters just went through the titling of Lots 1809-G-A, 1809-G-2-B, Lot 1809-G-2-C and 1809-G-2-D on their own. On his part, [Timoteo] himself acted in such a manner as to confirm that he did not anymore give significance or importance to the Deed of Sale of Lot 1809-G-2-C which, in turn, creates an impression or conclusion that he did not pay Jor the consideration or price thereof. Upon being cross-examined in Court on his testimony, he made the following significant admissions and statements: 1. That he did not let [Julian] sign a receipt for the sum of P8,000.00 purportedly given by him to the latter as payment for the land in question;
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2. That the alleged payment of the said sum of P8,000.00 was made not in the presence of the notary public who notarized the document but in a place near Sto. Nino Church in Cebu City; 3. That it was only [Julian] who appeared before the notary public, but he had no special power of attorney from his two sisters; 4. That the Deed of Sale of Lot 1809-G-2-C was already in his possession before Civil Case No. CEB-6693 was filed in court; 5. That he did not however show the said Deed of Sale to his lawyer who filed for the plaintiffs the complaint in Civil Case No. CEB 6693, as in fact he suppressed the said document from others; 6. That he did not bother to cause the segregation of Lot 1809-G-2-C from the rest of the lots even after he had already bought it already; 7. That it was only after he lost in Civil Case No. CEB-6693 that he decided to file the present case; 8. That he did not apply for building permits for the three houses that he purportedly caused to be built on the land in question; 9. That he did not also declare for taxation purposes the said alleged houses; 10. That he did not declare either for taxation purposes the land in question in his name or he had not paid taxes therefore; and 11. That he did not bother to register with the Registry of Deeds for the Province of Cebu the Deed of Sale of the lot.1a\^/phi1 To the mind of the Court, [Timoteo] desisted from paying to [the Bacus siblings] the price for Lot 1809-G-2-C when he, together with nine others, filed in Court the complaint in Civil Case No. CEB-6693. He found it convenient to just acquire the said land as supposed co-owners. 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. It is clear from the factual findings of the RTC that the Deed of Absolute Sale entirely lacked consideration and, consequently, void and without effect. No portion of the
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P8,000.00 consideration indicated in the Deed of Absolute Sale was ever paid by the petitioners.1âwphi1 It must be stressed that the present case is not merely a case of failure to pay the purchase price, as [the petitioners] claim, which can only amount to a breach of obligation with rescission as the proper remedy. What we have here is a purported contract that lacks a cause - one of the three essential requisites of a valid contract. Failure to pay the consideration is different from lack of consideration. The former results in a right to demand the fulfillment or cancellation of the obligation under an existing valid contract while the latter prevents the existence of a valid contract. Consequently, we rule that the October 15, 1987 Deed of Sale is null and void ab initio for lack of consideration. 20 (Citation omitted) WHEREFORE, petition is DENIED.
HELEN B. LUKBAN vs. OPTIMUM DEVELOPMENT BANK January 20, 2016 G.R. No. 205785 NATURE OF ACTION: Cancellation of Transfer Certificate Title TOPIC: Auction sale of tax delinquent real properties PONENTE: CARPIO,J FACTS:
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On 18 August 2005, the City Treasurer's Office of Marikinaconducted an auction sale of tax delinquent real properties, which included the real property of Melba T. Atienza. Petitioner Helen B. Lukban was the highest and winning bidder of the property during the public auction. On 25 August 2005, the City Treasurer issued Petitioner Lukban a Certificate of Sale of Delinquent Real Property to Purchaser, acknowledging receipt of her payment. Petitioner Lukban then paid the realty taxes, capital gains tax, documentary stamp tax, and all other internal revenue taxes due on the property.
On 10 June 2008, Lukban filed a petition for the cancellation of TCT No. 234408 and the issuance by the Register of Deeds of Marikina City a new TCT in her favor. The case was raffled to the Regional Trial Court of Marikina City. The trial court found that there was an entry on TCT No. 234408 annotating a prior Notice of Levy in favor of Capitol Bank, denominated as Entry No. 285574/T-No. 234408 - Mortgage. It was annotated more than 12 years ahead of the Notice of Levy for tax delinquency. The trial court noted that there was a possibility that the owner's duplicate certificate of title was not with Atienza but with Capitol Bank. The trial court further noted that while Lukban provided it with Atienza's address, she did not furnish the trial court with Capitol Bank's address. The trial court ordered Lukban to provide it with Capitol Bank's correct address so that it could be notified of the case as a party in interest. Lukban sought the help of the Marikina Register of Deeds but it could not provide her with Capitol Bank's address. The trial court then issued an Order setting the continuance of the proceedings on 27 November 2008 and the initial presentation of evidence on 3 December 2008. ISSUE: Whether or not the Court of Appeals committed a reversible error in setting aside the trial court’s Decision on the ground that the registered owner did not receive a copy of the notice of auction sale. HELD: No. Only the registered owner of the property is deemed the taxpayer who is entitled to a notice of delinquency and other proceedings relative to the tax sale. In this case, Atienza received the Warrant of Levy and the Notice of Sale. Whether Atienza received the Notice of Public Auction is a factual issue that was not raised by Optimum Bank because it is an issue that only Atienza, being the registered owner, can raise. We do not find merit in the claim of Optimum Bank that the issuance of a new TCT in favor of Lukban will impair its rights as a mortgagee. The trial court made a clear ruling on this. It stated: As for the opposition interposed in the instant petition by the oppositor, Optimum Development Bank, the Court deemed that in the issuance of a new title under petitioner's name, the oppositor's rights as a mortgagee should be annotated in the new title. This is in line with the pronouncement in Ligon v. CA that, "It (the mortgage) is inseparable from the property mortgaged as it is a right in rem - a lien on the property whoever its owner may be. It subsists notwithstanding a change in ownership; in short, the personality of the owner is disregarded. Thus, all subsequent purchasers must respect the mortgage whether
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the transfer to them be with or without the consent of the mortgage, for such mortgage until discharged follows the property." In the dispositive portion of its Decision, the trial court mandated that "[t]he mortgage annotated on the subject title shall be incorporated in or carried over to the new transfer certificate of title and its duplicates and shall also contain a memorandum of the annulment of the outstanding duplicate." In short, the rights of Optimum Bank as a mortgagee are amply protected, both by the Decision and by Section 180 of R.A. No. 7160, despite the cancellation of the old TCT and the issuance of a new TCT in favor of Lukban. Even in the petition before this Court, Lukban stressed that she never alleged and prayed for the cancellation of the encumbrances on TCT No. 234408. We do not subscribe to Optimum Bank's view that it is entitled to the Notice of Sale so that it may exercise its right to redeem the property. Section 260 of R.A. No. 7160 states: Section 260. Advertisement and Sale. - x x x. Within thirty (30) days after the sale, the local treasurer or his deputy shall make a report of the sale to the sanggunian concerned, and which shall form part of his records. The local treasurer shall likewise prepare and deliver to the purchaser a certificate of sale which shall contain the name of the purchaser, a description of the property sold, the amount of the delinquent tax, the interest due thereon, the expenses of sale and a brief description of the proceedings: Provided, however, That proceeds of the sale in excess of the delinquent tax, the interest due thereon, and the expenses of sale shall be remitted to the owner of the real property or person having legal interest therein. Clearly, only the registered owner is entitled to the Notice of Sale xxx
OSCAR S. VILLARTA vs. GAUDIOSO TALAVERA, JR., G.R. No. 208021, February 03, 2016 NATURE OF ACTION: Reformation of Contract TOPIC: Equitable Mortgage PONENTE: CARPIO, J.: FACTS: Oscar Villarta (Villarta) filed the complaint a quo for reformation of contracts Gaudioso Talavera, Jr. (Talavera) he owned four parcels of land; sometime in 1993, he
59
ventured into treasure hunting activites; in order to infuse his much needed capital, he obtained several loans from Talavera who was a distant relative; as of 1996, his loan already reached P800,000.00, inclusive of 3% interest per month; he religiously paid the interest, but when the 1997 financial crisis struck, Talavera raised the interest to a rate between 7% and 10%; in 1995, Talavera employed insidious words and machinations in convincing him to execute a deed of absolute sale over TCT No. T-130095; however, the real agreement was that the lot would only serve as security for the several loans he obtained; in 1997, he was again convinced to execute two more deeds of conveyance over the his two lots, respectively; in 2001, he was informed that his loan had already reached P2,000,000.00 and since the 3 parcels of land were no longer sufficient to cover the loan, he was further convinced to mortgage to Maybank additional real properties, on top of the 3 parcels of land, to secure a P50 million loan; when Talavera realized that his loan was going to be approved, the former demanded that he execute a deed of absolute sale over the lot, yet, the real agreement was that the lot would only serve as collateral suit. Talavera, Jr. averred: even before 1996, Villarta had been obtaining loans from him; during their early transactions secured by the lot covered by TCT T-130095, and, the amount of P526.552.00, by appellant's two lots covered by TCT T-12142 and TCT T-53252; when the two checks were presented for payment, they were dishonored due to account since the latter could no longer raise the sum to pay off his loans, and, instead offered his properties, offered to transfer these titles to his nameand were delivered to him via Villarta’s s two deeds of absolute sale; the transfer of the properties to him was by virtue of dacion en pago. The RTC rendered ruled in favor of Talavera which found that that the subject deeds of absolute sale were executed by the [petitioner] when his loan obligation was already overdue. In other words, the subject deeds of absolute sale, being public documents, speak for themselves, res ipsa loquitur, that [petitioner] sold the two (2) covered properties for and in consideration of his overdue loan account with [respondent], and this fact is unrefuted. The CA dismissed Villarta’s appeal and affirmed the RTC. The CA rejected petitioner's argument that the real transaction is an equitable mortgage. ISSUE: Whether or not the contract in this case is one of equitable mortgage. HELD: No. Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases: 1. When the price of a sale with a right to repurchase is unusually inadequate; 2.
When
the
vendor
remains
in
possession
as
lessee
or
otherwise;
3. When upon or after the expiration of the right to repurchase another instrument extending the period of redemption or granting a new period is executed;
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4. When the purchaser retains for himself a part of the purchase price; 5.
When the
vendor
binds
himself
to
pay
the
taxes
on
the
thing sold;
6. In any other case where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. We agree with the lower courts' assessment of the facts. The conduct of the parties prior to, during, and after the execution of the deeds of sale adequately shows that petitioner sold to respondent the lots in question to satisfy his debts. Respondent was able to sufficiently explain why the presumption of an equitable mortgage does not apply in the present case. The inadequacy of the purchase price in the two deeds of sale dated 18 May 2001 was supported by an Affidavit of True Consideration of the Absolute Sale of the Property. Respondent did not tolerate petitioner's possession of the lots. Respondent caused the registration and subsequent transfer of TCT No. T-214950 to TCT No. T-333921 under his name, and paid taxes thereon. There were no extensions of time for the payment of petitioner's loans; rather, petitioner offered different modes of payment for his loans. It was only after three instances of bounced checks that petitioner offered TCT Nos. T-130095 and T-214950 as payment for his loans and executed deeds of sale in respondent's favor. The transaction between petitioner and respondent is thus not an equitable mortgage, but is instead a dacion en pago.Dacion en pago is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of an existing obligation. It is a special mode of payment where the debtor offers another thing to the creditor who accepts it as equivalent to the payment of an outstanding debt. For dacion en pago to exist, the following elements must concur: (a) existence of a money obligation; (b) the alienation to the creditor of a property by the debtor with the consent of the former; and (c) satisfaction of the money obligation of the debtor. WHEREFORE, we DENY the petition.
JOEY R. PEÑA, Petitioner, v. JESUS DELOS SANTOS AND THE HEIRS OF ROSITA DELOS SANTOS FLORES., Respondents. G.R. No. 202223, March 02, 2016 NATURE OF ACTION: Special Civil Action TOPIC: Validity of Substitution PONENTE: REYES, J.: FACTS: Jesus Delos Santos and Rosita De Jesus are awardees of the two-thirds portion or 9,915 square meters of four adjoining lots located in Boracay Island, Malay, Aldan. The
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decision became final and executory and the case was then remanded to the RTC of Kalibo, Aklan for the execution proceedings during which a Motion for Substitution with a Motion for a Writ of Execution and Demolition was filed by Penñ a. Penñ a averred that he is the transferee of Jesus and Rosita's adjudged allotments over the subject lots. He claimed that he bought the same from Atty. Romeo Robiso (Atty. Robiso) who in turn, acquired the properties from Jesus and Rosita through assignment and sale as evidenced by 1) Deed of Transfer or Conveyance dated May 4, 2005 to Atty. Robiso 2). Deed of Absolute Sale dated May 4, 2005 over the 2,000 sq m of Lots No. 394-PT and 393-A in favor of Atty. Robiso; 3) c. Confirmation of Sale and Transfer dated December 5, 2006 affirming the two foregoing instruments executed by Jesus and Rosita in favor of Atty. Robiso. The latter later on sold Lots No. 393-A and 394-D to Penñ a and said portions were subsequently registered in Penñ a's name. Atty. Robiso was the counsel of Jesus and Rosita in Civil Case No. 3683. Under their agreement, Atty. Robiso will render his legal services in connection with Civil Case No. 3683 and to any proceedings that may arise in connection therewith and Atty. Robiso undertook to advance his own funds for all expenses and costs he may incur in relation to the case. In consideration thereof, Jesus and Rosita obliged themselves to give or pay to him as contingent professional fees, 2,000 sq m of any and all lands that the courts will award to them in the case. The plaintiffs opposed Penñ a's motion claiming that the conveyance made by Jesus and Rosita in favor of Atty. Robiso was null and void for being a prohibited transaction because the latter was their counsel in the case. The RTC upheld that the conveyance made by Jesus and Rosita in favor of Atty. Robiso is valid since it was not made during the pendency of litigation but after judgment has been rendered. The CA reversed the RTC and ruled that the conveyance made by Jesus and Rosita in favor of Atty. Robiso was null and void because it is a prohibited transaction under Article 1491(5) of the Civil Code. When the two Deeds of Sale in favor of Atty. Robiso were executed on May 4, 2005 and December 5, 2005 and the Confirmation of Sale on December 15, 2006, the case was still pending with the Supreme Court, before which Jesus and Rosita were still represented by Atty. Robiso. ISSUE: Whether or not a lawyer may purchase a property of his client by virtue of a contingency agreement which is a subject matter of a litigation. HELD: No. Article 1491(5) of the Civil Code expressly prohibits lawyers from acquiring property or rights that may be the object of any litigation in which they may take part by virtue of their profession. A complementary prohibition is also provided in Rule 10 of the Canons of Professional Ethics which states: - 10. Acquiring interest in litigation. The lawyer should not purchase any interest in the subject matter of the litigation which he is conducting.A property is in litigation if there is a contest or litigation over it in court or when it is subject of a judicial action. Records show that the judicial action over the subject lots was still in the appellate proceedings stage when they were conveyed to Jesus and Rosita's counsel, Atty. Robiso. The
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Deed of Transfer or Conveyance and the Deed of Absolute Sale both dated May 4, 2005 as well as the Confirmation of Sale and Transfer dated December 5, 2006 were all executed long before the termination of the appellate proceedings. Clearly then, since the property conveyed to Atty. Robiso by Jesus and Rosita was still the object of litigation, the deeds of conveyance executed by the latter are deemed inexistent. Under Article 1409 of the Code, contracts which are expressly prohibited or declared void by law are considered inexistent and void from the beginning. This being so, Atty. Robiso could not have transferred a valid title in favor of Penñ a over the lots awarded to Jesus and Rosita in Civil Case No. 3683. Consequently, Penñ a has no legal standing to be substituted in the stead of or joined with Jesus and Rosita as the first set of intervenors and to move for issuance of a writ of execution in Civil Case No. 3683. The basis of Penñ a's motion for substitution is infirm because the lots were transferred to his predecessor-in-interest, Atty. Robiso, through a prohibited sale transaction This is notwithstanding the fact that the sale to Atty. Robiso was made pursuant to a contingency fee contract. It is true that contingent fee agreements are recognized in this jurisdiction as a valid exception to the prohibitions under Article 1491(5) of the Civil Code. The Court cannot extend a similar recognition to the present case, however, since the payment to Atty. Robiso of his contingency fees was made during the pendency of litigation. "A contingent fee contract is an agreement in writing where the fee, often a fixed percentage of what may be recovered in the action, is made to depend upon the success of the litigation. The payment of the contingent fee is not made during the pendency of the litigation involving the client's property but only after the judgment has been rendered in the case handled by the lawyer."Penñ a cannot rely on Article 1437 by claiming that Jesus and Rosita are already estopped from questioning the validity of their deeds of conveyance with Atty. Robiso. Estoppel is a principle in equity and pursuant to Article 1432 it is adopted insofar as it is not in conflict with the provisions of the Civil Code and other laws. Otherwise speaking, estoppel cannot supplant and contravene the provision of law clearly applicable to a case. Conversely, it cannot give validity to an act that is prohibited by law or one that is against public policy.The rationale advanced for the prohibition in Article 1491(5) is that public policy disallows the transactions in view of the fiduciary relationship involved, i.e., the relation of trust and confidence and the peculiar control exercised by these persons. It is founded on public policy because, by virtue of his office, an attorney may easily take advantage of the credulity and ignorance of his client and unduly enrich himself at the expense of his client. The principle of estoppel runs counter to this policy and to apply it in this case will be tantamount to sanctioning a prohibited and void transaction. WHEREFORE, foregoing considered, the Motion for Reconsideration is DENIED. 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, Petitioners, v. ARTEMIO PIS-AN, Respondent. June 01, 2016 G.R. No. 204056 NATURE OF ACTION: Petition for nullity of sale TOPIC: Estoppel
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FACTS: Under Original Certificate of Title (OCT) No, 2393-A, Emeterio Jumento was the owner of the half portion, and his children Hospicio Jumento and Severina Jumento 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 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 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, 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 Sale ISSUE: Whether Artemio is already estopped from claiming Lot 3154-C as early as 1996, petitioners already occupied and possessed the said sub-lot by making use of the gravel, soil and stones found therein. HELD: Essentially, the Court is tasked to resolve who between petitioners and Artemio has a right over Lot 3154-C. For this determination, one pivotal question must be answered, i.e., did the sale between the spouses Sillero and Gil include Lot 3154-C? The Court finds in the negative. It is necessary to determine the true intention of the parties to the instruments relevant to this case. Petitioners, in order to further their case, rely on the failure of the Absolute Sale to state that the 207-square meter portion conveyed by Artemio and his coheirs to the spouses Sillero was Lot 3154-A. Artemio, on the other hand, puts emphasis on the fact that the Deed of Sale between Gil and the spouses Sillero expressly stated that the lot subject of the sale was Lot 3154-A only. Plainly, the parties' respective arguments hinge on two relevant documents which they adopted as common exhibits - (1) the Absolute Sale subject of which, among others, is the conveyance made by Artemio and his co-heirs to the spouses Sillero; and (2) the Deed of Sale between the spouses Sillero and Gil. It is worthy to note that there is no dispute regarding the contents of these documents, that is, neither of the
64
parties contests that the Absolute Sale did not state that the 207-square meter portion sold to the spouses Sillero was Lot 3154-A nor that the Deed of Sale between Gil and the spouses Sillero expressly mentioned that the subject of the sale between them was Lot 3154-A. What is really in issue therefore is whether the admitted contents of the said documents adequately and correctly express the true intention of the parties to the same. It has been held that "[w]hen the parties admit the contents of written documents but put in issue whether these documents adequately and correctly express the true intention of the parties, the deciding body is authorized to look beyond these instruments and into the contemporaneous and subsequent actions of the parties in order to determine such intent." In view of this and since the Parol Evidence Rule is inapplicable in this case, an examination of the parties' respective parol evidence is in order. Indeed, examination of evidence is necessarily factual and not within the province of a petition for review on certiorari 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.
RCBC SAVINGS BANK vs. NOEL M. ODRADA G.R. No. 219037, October 19, 2016 NATURE OF ACTION: SUM OF MONEY TOPIC: Warranty against hidden defects PONENTE: CARPIO, J.: FACTS:
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Noel M. Odrada (Odrada) sold a secondhand Mitsubishi Montero (Montero) to Teodoro L. Lim (Lim) P10M financed by petitioner RCBC through a car loan obtained by Lim.4 As a requisite for the approval of the loan, Odrada executed a Deed of Absolute Sale in favor of Lim and the latter took possession of the Montero. RCBC issued two manager's checks payable to Odrada. Prior to the checks' presentation, Lim notified Odrada in a letter that there was an issue regarding the roadworthiness of the Montero. Despite being informed of the Monteros defects, Ondrada deposited the manager's checks 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 suit against Lim and RCBC Lim alleged that the cancellation of the loan was at his instance, upon discovery of the misrepresentations by Odrada about the Montero's roadworthiness.On the other hand, RCBC contended that the manager's checks were dishonored because Lim had cancelled the loan. RCBC claimed that the cancellation of the loan was prior to the presentation of the manager's checks. Moreover, RCBC alleged that despite notice of the defective condition of the Montero, which constituted a failure of consideration, Odrada still proceeded with presenting the manager's checks. The trial court held that Odrada was the proper party to ask for rescission reasoned that the right of rescission is implied in reciprocal obligations where one party fails to perform what is incumbent upon him when the other is willing and ready to comply. The trial court ruled that it was not proper for Lim to exercise the right of rescission since Odrada had already complied with the contract of sale by delivering the Montero while Lim remained delinquent in payment. Since Lim was not ready, willing, and able to comply with the contract of sale, he was not the proper party entitled to rescind the contract. The trial court ruled that the defective condition of the Montero was not a supervening event that would justify the dishonor of the manager's checks. trial court ruled that RCBC was liable to Odrada for the value of the manager's checks. The Court of Appeals ruled that the two manager's checks, which were complete and regular, reached the hands of Lim who deposited the same in his bank account with Ibank. RCBC knew that the amount reflected on the manager's checks represented Lim's payment for the remaining balance of the Montero's purchase price. The appellate court held that when RCBC issued the manager's checks in favor of Odrada, RCBC admitted the existence of the payee and his then capacity to endorse, and undertook that on due presentment the checks which were negotiable instruments would be accepted or paid, or both according to its tenor. The appellate court held that the effective delivery of the checks to Odrada made RCBC liable for the checks. ISSUES: RCBC presented the following, issues in this petition: 1) The court a quo gravely erred in finding that as between Odrada as seller and Lim as buyer of the vehicle, only the former has the right to rescind the contract of sale finding failure to perform an obligation under the contract of sale on the part of the latter only despite the contested roadworthiness of the vehicle, subject matter of the sale. 2) The court a quo gravely erred when it found that Odrada is a holder in due course of the manager's checks in question despite being informed of the cancellation of the auto loan by the borrower, Lim. HELD:
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1. We grant the petition. 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. 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. 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. 34However, 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. In this case, Odrada and Lim entered into a contract of sale of the Montero. Following the initial downpayment and execution of the deed of sale, the Montero was delivered by Odrada to Lim and the latter took possession of the Montero. Notably, under the law, Odrada's warranties against hidden defects continued even after the Montero's delivery. Consequently, a misrepresentation as to the Montero's roadworthiness constitutes a breach of warranty against hidden defects. In the present case, when Lim acquired possession, he discovered that the Montero was not roadworthy. The engine was misaligned, the automatic transmission was malfunctioning, and the brake rotor disks needed refacing. 40 However, during the proceedings in the trial court, Lim's testimony was stricken off the record because he failed to appear during cross-examination. In effect, Lim was not able to present clear preponderant evidence of the Montero's defective condition. 2) RCBC May Refuse to Pay Manager's Checks We address the legal question of whether or not the drawee bank of a manager's check has the option of refusing payment by interposing a personal defense of the purchaser of the manager's check who delivered the check to a third party.
Jurisprudence defines a manager's check as a check drawn by the bank's manager upon the bank itself and accepted in advance by the bank by the act of its issuance. It is really the bank's own check and may be treated as a promissory note with the bank as its maker.44 Consequently, upon its purchase, the check becomes the primary obligation of the bank and constitutes its written promise to pay the holder upon demand. It is similar to a cashier's check both as to effect and use in that the bank represents that the check is drawn against sufficient funds.47chanrobleslaw
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As a general rule, the drawee bank is not liable until it accepts. Prior to a bill's acceptance, no contractual relation exists between the holder and the drawee. Acceptance, therefore, creates a privity of contract between the holder and the drawee so much so that the latter, once it accepts, becomes the party primarily liable on the instrument. Accordingly, acceptance is the act which triggers the operation of the liabilities of the drawee (acceptor) under Section 62of the Negotiable Instruments Law. Thus, once he accepts, the drawee admits the following: (a) existence of the drawer; (b) genuineness of the drawer's signature; (c) capacity and authority of the drawer to draw the instrument; and (d) existence of the payee and his then capacity to endorse. As can be gleaned in a long line of cases decided by this Court, a manager's check is accepted by the bank upon its issuance. As compared to an ordinary bill of exchange where acceptance occurs after the bill is presented to the drawee, the distinct feature of a manager's check is that it is accepted in advance. Notably, the mere issuance of a manager's check creates a privity of contract between the holder and the drawee bank, the latter primarily binding itself to pay according to the tenor of its acceptance. The drawee bank, as a result, has the unconditional obligation to pay a manager's check to a holder in due course irrespective of any available personal defenses. However, while this Court has consistently held that a manager's check is automatically accepted, a holder other than a holder in due course is still subject to defenses. In International Corporate Bank v. Spouses Gueco,52 which involves a delivered manager's check, the Court still considered whether the check had become stale: The foregoing rulings clearly establish that the drawee bank of a manager's check may interpose personal defenses of the purchaser of the manager's check if the holder is not a holder in due course. In short, the purchaser of a manager's check may validly countermand payment to a holder who is not a holder in due course. Accordingly, the drawee bank may refuse to pay the manager's check by interposing a personal defense of the purchaser. Hence, the resolution of the present case requires a determination of the status of Odrada as holder of the manager's checks. In this case, the Court of Appeals gravely erred when it considered Odrada as a holder in due course. Section 52 of the Negotiable Instruments Law defines a holder in due course as one who has taken the instrument under the following conditions: (a) That it is complete and regular upon its face; (b) That he became the holder of it before it was overdue, and without notice that it has been previously dishonored, if such was the fact;
(c) That he took it in good faith and for value; (d) That at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it. (Emphasis supplied) To be a holder in due course, the law requires that a party must have acquired the instrument in good faith and for value. In the present case, Odrada attempted to deposit the manager's checks on 16 April 2002, a day after Lim had informed him that there was a serious problem with the Montero.
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Instead of addressing the issue, Odrada decided to deposit the manager's checks. Odrada's actions do not amount to good faith. Clearly, Odrada's action in depositing the manager's checks despite knowledge of the Montero's defects amounted to bad faith. RCBC acted in good faith in following the instructions of Lim. The records show that Lim notified RCBC of the defective condition of the Montero before Odrada presented the manager's checks. Lim informed RCBC of the hidden defects of the Montero. Hence, RCBC acted in good faith in stopping the payment of the manager's checks. WHEREFORE, we GRANT the petition. We REVERSE and SET ASIDE the 26 March 2014 Decision and the 18 June 2015 Resolution of the Court of Appeals in CA-G.R. CV No. 94890 only insofar as RCBC Savings Bank is concerned.
AGENCY BANK OF THE PHILIPPINE ISLANDS AND FGU INSURANCE CORPORATION (PRESENTLY KNOWN AS BPI/MS INSURANCE CORPORATION), Petitioners, v. YOLANDA LAINGO, Respondent. G.R. No. 205206, March 16, 2016 NATURE OF ACTION: Specific Performance
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TOPIC: Agency PONENTE: CARPIO, J.: FACTS: The son of respondent Yolanda Laingo (Laingo), is covered by "Platinum 2-in-1 Savings and Insurance" account with BPI. The Platinum 2-in-1 Savings and Insurance account is a savings account where depositors are automatically covered by an insurance policy against disability or death issued by FGU Insurance Corporation (FGU), with Laingo as his named beneficiary.On 25 September 2000, Rheozel died due to a vehicular accident On 27 September 2000, Laingo instructed the family's personal secretaryto go to BPI, Claveria, Davao City branch and inquire about the savings account of Rheozel because Laingo wanted to use the money in the savings account for Rheozel's burial and funeral expenses.Laingo was allowed to withdraw P995,000 from the account of Rheozel. More than two years later, Laingo found the Personal Accident Insurance Coverage Certificate issued by FGU Insurance.Laingo sent two letters to BPI and FGU Insurance requesting them to process her claim as beneficiary of Rheozel's insurance policy. FGU Insurance sent a reply-letter to Laingo denying her claim. FGU Insurance stated that Laingo should have filed the claim within three calendar months from the death of Rheozel as required under Paragraph 15 of the Personal Accident Certificate of Insurance Laingo filed a Complaint for Specific Performance with Damages against BPI and FGU Insurance. The trial court dismissed the complaint because the prescriptive period of 90 days shall commence from the time of death of the insured and not from the knowledge of the beneficiary. Since the insurance claim was filed more than 90 days from the death of the insured, the case must be dismissed. The CA reversed the ruling of the trial court which ruled that Laingo could not be expected to do an obligation which she did not know existed; Laingo was not a party to the insurance contract entered into between Rheozel and petitioners. Thus, she could not be bound by the 90-day stipulation. ISSUE: Whether or not Laingo, as named beneficiary who had no knowledge of the existence of the insurance contract, is bound by the three calendar month deadline for filing a written notice of claim upon the death of the insured. HELD: No. As the named beneficiary entitled to the benefits of the insurance claim she had no knowledge that Rheozel was covered by an insurance policy against disability or death issued by FGU Insurance that was attached to Rheozel's savings account with BPI.
Articles
1884
and
1887
of
the
Civil
Code
state:
Art. 1884. The agent is bound by his acceptance to carry out the agency and is liable for the damages which, through his non-performance, the principal may suffer. He must also finish the business already begun on the death of the principal, should delay entail any danger.
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Art. 1887. In the execution of the agency, the agent shall act in accordance with the instructions of the principal. In default, thereof, he shall do all that a good father of a family would do, as required by the nature of the business. The provision is clear that an agent is bound to carry out the agency. The relationship existing between principal and agent is a fiduciary one, demanding conditions of trust and confidence. It is the duty of the agent to act in good faith for the advancement of the interests of the principal. In this case, BPI tied up with its affiliate, FGU Insurance, as its partner. Any customer interested to open a deposit account under this 2-in-1 product, after submitting all the required documents to BPI and obtaining BPI's approval, will automatically be given insurance coverage. Thus, BPI acted as agent of FGU Insurance with respect to the insurance feature of its own marketed product. Thus, BPI had the obligation to carry out the agency by informing the beneficiary, who appeared before BPI to withdraw funds of the insured who was BPI's depositor, not only of the existence of the insurance contract but also the accompanying terms and conditions of the insurance policy in order for the beneficiary to be able to properly and timely claim the benefit. Upon Rheozel's death, which was properly communicated to BPI by his mother Laingo, BPI, in turn, should have fulfilled its duty, as agent of FGU Insurance, of advising Laingo that there was an added benefit of insurance coverage in Rheozel's savings account. An insurance company has the duty to communicate with the beneficiary upon receipt of notice of the death of the insured. This notification is how a good father of a family should have acted within the scope of its business dealings with its clients. BPI is expected not only to provide utmost customer satisfaction in terms of its own products and services but also to give assurance that its business concerns with its partner entities are implemented accordingly. The records show that BPI had ample opportunity to inform Laingo, whether verbally or in writing, regarding the existence of the insurance policy attached to the deposit account. First, Rheozel's death was headlined in a daily major newspaper a day after his death. Second, not only was Laingo, through her representative, able to inquire about Rheozel's deposit account with BPI two days after his death but she was also allowed by BPI's Claveria, Davao City branch to withdraw from the funds in order to help defray Rheozel's funeral and burial expenses. Lastly, an employee of BPI visited Rheozel's wake and submitted documents for Laingo to sign in order to process the withdrawal request. These circumstances show that despite being given many opportunities to communicate with Laingo regarding the existence of the insurance contract, BPI neglected to carry out its duty. Since BPI, as agent of FGU Insurance, fell short in notifying Laingo of the existence of the insurance policy, Laingo had no means to ascertain that she was entitled to the insurance claim. It would be unfair for Laingo to shoulder the burden of loss when BPI was remiss in its duty to properly notify her that she was a beneficiary.Thus, as correctly decided by the appellate court, BPI and FGU Insurance shall bear the loss and must compensate Laingo for the actual damages suffered by her family plus attorney's fees. Likewise, FGU Insurance has the obligation to pay the insurance proceeds of Rheozel's personal accident insurance coverage to Laingo, as Rheozel's named beneficiary. WHEREFORE, we DENY the petition.
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THE HONGKONG & SHANGHAI BANKING CORPORATION, LIMITED, Petitioner, v. NATIONAL STEEL CORPORATION AND CITYTRUST BANKING CORPORATION (NOW BANK OF THE PHILIPPINE ISLANDS), Respondents. G.R. No. 183486, February 24, 2016 NATURE OF ACTION: Action for specific performance TOPIC: AGENCY
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FACTS: Respondent National Steel Corporation entered into an Export Sales Contract with Klockner East Asia Limited on October 12, 1993. NSC sold 1,200 metric tons of prime cold rolled coils to Klockner under FOB ST Iligan terms. In accordance with the requirements in the Contract, Klockner applied for an irrevocable letter of credit with HSBC in favor of NSC as the beneficiary in the amount of US$ 468,000. On October 22, 1993, HSBC issued an irrevocable and onsight letter of credit no. HKH 239409 in favor of NSC. The Letter of Credit was amended twice to reflect changes in the terms of delivery. NSC coursed the collection of its payment from Klockner through CityTrust Banking Corporation (CityTrust). NSC had earlier obtained a loan from CityTrust secured by the proceeds of the Letter of Credit issued by HSBC. On November 29, 1993, CityTrust sent a collection order to HSBC respecting the collection of payment from Klockner. The Collection Order instructed as follows: (1) deliver documents against payment; (2) cable advice of non-payment with reason; (3) cable advice payment; and (4) remit proceeds via TELEX. The Collection Order also contained the following statement: "Subject to Uniform Rules for the Collection of Commercial Paper Publication No. 322." Further, the Collection Order stated that proceeds should be remitted to Standard Chartered Bank of Australia, Ltd., Offshore Branch Manila (SCB-M) which was, in turn, in charge of remitting the amount to CityTrust On December 2, 1993, HSBC sent a cablegram to CityTrust acknowledging receipt of the Collection Order. It also stated that the documents will be presented to "the drawee against payment subject to UCP 322 [Uniform Rules for Collection (URC) 322] as instructed. "SCB-M then sent a cablegram to HSBC requesting the latter to urgently remit the proceeds to its account. It further asked that HSBC inform it if unable to pay and the reasons of such On December 7, of the same year, HSBC responded to SCB-M and sent a cablegram where it repeated that "this bill is being handled subject to URC 322 as instructed by the collecting bank." It informed SCB-M that it has referred the matter to Klockner for payment and that it will revert upon the receipt of the amount. The Letter of Credit expired on December 8, 1993. ISSUE: Who among the parties bears the liability to pay the amount stated in the Letter of Credit. HELD: xxx A letter of credit is a commercial instrument developed to address the unique needs of certain commercial transactions. It is recognized in our jurisdiction and is sanctioned under Article 567of the Code of Commerce and in numerous jurisprudence defining a letter of credit, the principles relating to it, and the obligations of parties arising from it.
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In simpler terms, the various transactions that give rise to a letter of credit proceed as follows: Once the seller ships the goods, he or she obtains the documents required under the letter of credit. He or she shall then present these documents to the issuing bank which must then pay the amount identified under the letter of credit after it ascertains that the documents are complete. The issuing bank then holds on to these documents which the buyer needs in order to claim the goods shipped. The buyer reimburses the issuing bank for its payment at which point the issuing bank releases the documents to the buyer. The buyer is then able to present these documents in order to claim the goods. At this point, all the transactions are completed. The seller received payment for his or her performance of his obligation to deliver the goods. The issuing bank is reimbursed for the payment it made to the seller. The buyer received the goods purchased. Having been remiss in its obligations under the applicable law, rules and jurisprudence, HSBC only has itself to blame for its consequent liability to NSC. CityTrust's Liability When NSC obtained the services of CityTrust in collecting under the Letter of Credit, it constituted CityTrust as its agent. Article 1868 of the Civil Code states that a contract of agency exists when a person binds himself or herself "to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter." In this case, CityTrust bound itself to collect under the Letter of Credit in behalf of NSC. One of the obligations of an agent is to carry out the agency in accordance with the instructions of the principal. In ascertaining NSC's instructions to CityTrust, its letter dated January 18, 1994 is determinative. In this letter, NSC clearly stated that it "negotiated with CityTrust the export documents pertaining to LC No. HKH 239409 of HSBC and it was CityTrust which wrongfully treated the negotiation as 'on collection basis."' HSBC persistently communicated with CityTrust and consistently repeated that it will proceed with collection under URC 322. At no point did CityTrust correct HSBC or seek clarification from NSC. In insisting upon its course of action, CityTrust failed to act in accordance with the instructions given by NSC, its principal. Nevertheless while this Court recognizes that CityTrust committed a breach of its obligation to NSC, this carries no implications on the clear liability of HSBC. As this Court already mentioned, HSBC had a separate obligation that it failed to perform by reason of acts independent of CityTrust's breach of its obligation under its contract of agency. If CityTrust has incurred any liability, it is to its principal NSC. However, NSC has not raised any claim against CityTrust at any point in these proceedings. Thus, this Court cannot make any finding of liability against CityTrust in favor of NSC. WHEREFORE, the Assailed Decision is AFFIRMED.
PARTNERSHIP MICHAEL C. GUY, vs. ATTY. GLENN C. GACOTT G.R. No. 206147, January 13, 2016 NATURE OF ACTION: Damages
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TOPIC: LIABILITY OF A PARTNER IN A PARTNERSHIP PONENTE: MENDOZA, J.: FACTS: It appears from the records that on March 3, 1997, Atty. Glenn Gacott (Gacott) from Palawan purchased two (2) brand new transreceivers from Quantech Systems Corporation (QSC) in Manila through its employee Rey Medestomas (Medestomas) On May 10, 1997, due to major defects, Gacott personally returned the transreceivers to QSC and requested that they be replaced. Medestomas received the returned transreceivers and promised to send him the replacement units. Despite several demands, both oral and written, Gacott was never given a replacement or a refund.. Thus, Gacott filed a complaint for damages. The decision of RTC became final. During the execution stage, Gacott learned that QSC was not a corporation, but was in fact a general partnership and Guy was its General Manager. Sheriff Felizarte attached Guy’s vehicle by virtue of the Notice of Attachment/Levy upon Personalty Thereafter, Guy filed his Motion to Lift Attachment Upon Personalty, arguing that he was not a judgment debtor and, therefore, his vehicle could not be attached. RTC denied the Motion to Lift Attachment Upon Personalty and so holds that the property of Michael Guy may be validly attached in satisfaction of the liabilities adjudged by this Court against Quantech Co., the latter being an ostensible Corporation and the movant being considered by this Court as a general partner therein. The CA rendered the assailed decision dismissing Guy’s appeal for the same reasons given by the trial courtbeing listed as a general partner of QSC during that time, cannot feign ignorance of the existence of the court summons. Guy argues that he is not solidarily liable with the partnership because the solidary liability of the partners under Articles 1822, 1823 and 1824 of the Civil Code only applies when it stemmed from the act of a partner. In this case, the alleged lapses were not attributable to any of the partners. Guy further invokes Article 1816 of the Civil Code which states that the liability of the partners to the partnership is merely joint and subsidiary in nature. Gacott countered, among others, that because Guy was a general and managing partner of QSC, he could not feign ignorance of the transactions undertaken by QSC. Gacott insisted that notice to one partner must be considered as notice to the whole partnership, which included the pendency of the civil suit against it.
ISSUE Whether Guy is solidarily liable with the partnership for damages arising from the breach of the contract of sale? HELD:
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No. A partner must be separately and distinctly impleaded before he can be bound by a judgment. Although a partnership is based on delectus personae or mutual agency, whereby any partner can generally represent the partnership in its business affairs, it is non sequitur that a suit against the partnership is necessarily a suit impleading each and every partner. It must be remembered that a partnership is a juridical entity that has a distinct and separate personality from the persons composing it.In relation to the rules of civil procedure, it is elementary that a judgment of a court is conclusive and binding only upon the parties and their successors-in-interest after the commencement of the action in court. A decision rendered on a complaint in a civil action or proceeding does not bind or prejudice a person not impleaded therein, for no person shall be adversely affected by the outcome of a civil action or proceeding in which he is not a party.The principle that a person cannot be prejudiced by a ruling rendered in an action or proceeding in which he has not been made a party conforms to the constitutional guarantee of due process of law. Here, Guy was never made a party to the case. He did not have any participation in the entire proceeding until his vehicle was levied upon and he suddenly became QSC’s “codefendant debtor” during the judgment execution stage. It is a basic principle of law that money judgments are enforceable only against the property incontrovertibly belonging to the judgment debtor. Indeed, the power of the court in executing judgments extends only to properties unquestionably belonging to the judgment debtor alone. An execution can be issued only against a party and not against one who did not have his day in court. The duty of the sheriff is to levy the property of the judgment debtor not that of a third person. For, as the saying goes, one man's goods shall not be sold for another man's debts.In the spirit of fair play, it is a better rule that a partner must first be impleaded before he could be prejudiced by the judgment against the partnership. Xxx. Further, Article 1821 of the Civil Code does not state that there is no need to implead a partner in order to be bound by the partnership liability. It provides that: Notice to any partner of any matter relating to partnership affairs, and the knowledge of the partner acting in the particular matter, acquired while a partner or then present to his mind, and the knowledge of any other partner who reasonably could and should have communicated it to the acting partner, operate as notice to or knowledge of the partnership, except in the case of fraud on the partnership, committed by or with the consent of that partner. A careful reading of the provision shows that notice to any partner, under certain circumstances, operates as notice to or knowledge to the partnership only. Evidently, it does not provide for the reverse situation, or that notice to the partnership is notice to the partners. Unless there is an unequivocal law which states that a partner is automatically charged in a complaint against the partnership, the constitutional right to due process takes precedence and a partner must first be impleaded before he can be considered as a judgment debtor. To rule otherwise would be a dangerous precedent, harping in favor of the deprivation of property without ample notice and hearing, which the Court certainly cannot countenance.
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Partners’ liability is subsidiary and generally joint; immediate levy upon the property of a partner cannot be made Granting that Guy was properly impleaded in the complaint, the execution of judgment would be improper. Article 1816 of the Civil Code governs the liability of the partners to third persons, which states that: Article 1816. All partners, including industrial ones, shall be liable pro rata with all their property and after all the partnership assets have been exhausted, for the contracts which may be entered into in the name and for the account of the partnership, under its signature and by a person authorized to act for the partnership. However, any partner may enter into a separate obligation to perform a partnership contract. This provision clearly states that, first, the partners’ obligation with respect to the partnership liabilities is subsidiary in nature. It provides that the partners shall only be liable with their property after all the partnership assets have been exhausted. To say that one’s liability is subsidiary means that it merely becomes secondary and only arises if the one primarily liable fails to sufficiently satisfy the obligation. Resort to the properties of a partner may be made only after efforts in exhausting partnership assets have failed or that such partnership assets are insufficient to cover the entire obligation. The subsidiary nature of the partners’ liability with the partnership is one of the valid defenses against a premature execution of judgment directed to a partner. In this case, had he been properly impleaded, Guy’s liability would only arise after the properties of QSC would have been exhausted. The records, however, miserably failed to show that the partnership’s properties were exhausted. The report 37 of the sheriff showed that the latter went to the main office of the DOTC-LTO in Quezon City and verified whether Medestomas, QSC and Guy had personal properties registered therein. Gacott then instructed the sheriff to proceed with the attachment of one of the motor vehicles of Guy.38 The sheriff then served the Notice of Attachment/Levy upon Personalty to the record custodian of the DOTC-LTO of Mandaluyong City. A similar notice was served to Guy through his housemaid at his residence. Clearly, no genuine efforts were made to locate the properties of QSC that could have been attached to satisfy the judgment − contrary to the clear mandate of Article 1816. Being subsidiarily liable, Guy could only be held personally liable if properly impleaded and after all partnership assets had been exhausted. Second, Article 1816 provides that the partners’ obligation to third persons with respect to the partnership liability is pro rata or joint. Liability is joint when a debtor is liable only for the payment of only a proportionate part of the debt. In contrast, a solidary liability makes a debtor liable for the payment of the entire debt. In the same vein, Article 1207 does not presume solidary liability unless: 1) the obligation expressly so states; or 2) the law or nature requires solidarity. With regard to partnerships, ordinarily, the liability of the partners is not solidary. The joint liability of the partners is a defense that can be raised by a partner impleaded in a complaint against the partnership. WHEREFORE, the petition is GRANTED.
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MELECIO DOMINGO, Petitioner, vs. SPOUSES GENARO MOLINA and ELENA B. MOLINA, substituted by ESTER MOLINA, Respondents G.R. No. 200274 April 20, 2016 NATURE OF ACTION: Action for nullity of sale
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TOPIC: Sale of conjugal partnership FACTS: Spouses Domingo bought a property in Tarlac, consisting of a one-half undivided portion over an 18, 164 square meter parcel of land. Anastacio borrowed money from the respondent spouses spouses Molina 10 years after Flora’s death, Anastacio sold his interest over the land to the spouses Molina to answer for his debts. In 1986, Anastacio died. In May 19, 1995, the sale of Anastacio’s interest was registered under Transfer Certificate of Title (TCT) No. 272967 and transferred the entire one-half undivided portion of the land to the spouses Molina. Melecio, one of the children of Anastacio and Flora, learned of the transfer and filed a Complaint for Annulment of Title and Recovery of Ownership (Complaint) against the spouses Molina on May 17, 1999. Melecio claims that Anastacio gave the subject property to the spouses Molina to serve as collateral for the money that Anastacio borrowed. Finally, Melecio asserts that he occupied the subject property from the time of Anastacio’s death up to the time he filed the Complaint. Melecio presented the testimonies of the Records Officer of the Register of Deeds of Tarlac, and of Melecio’s nephew, George Domingo. The Records Officer testified that he could not locate the instrument that documents the transfer of the subject property ownership from Anastacio to the spouses Molina. George, on the other hand, testified that he has been living on the subject property owned by Anastacio since 1986. George testified, however, that aside from himself, there were also four other occupants on the subject property. The spouses Molina asserted that Anastacio surrendered the title to the subject property to answer for his debts and told the spouses Molina that they already own half of the land. The spouses Molina have been in possession of the subject property before the title was registered under their names and have religiously paid the property’s real estate taxes. The spouses Molina also asserted that Melecio knew of the disputed sale since he accompanied Anastacio several times to borrow money. The last loan was even used to pay for Melecio’s wedding. Finally, the spouses Molina asserted that Melecio built his nipa hut on the subject property only in 1999, without their knowledge and consent. The spouses Molina presented Jaime Garlitos as their sole witness and who is one of the occupants of the subject lot. Jaime testified that Elena Molina permitted him to build a house on the subject property in 1993. Jaime, together with the other tenants, planted fruit bearing trees on the subject property and gave portions of their harvest to Elena Molina without any complaint from Melecio. Jaime further testified that Melecio never lived on the subject property and that only George Domingo, as the caretaker of the spouses Molina, has a hut on the property. Meanwhile, the spouses Molina died during the pendency of the case and were substituted by their adopted son, Cornelio Molina. ISSUE: Whether the sale of land belonging to the conjugal partnership without the wife’s consent is invalid. HELD:
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Anastacio and Flora’sconjugal partnership was dissolved upon Flora’s death. There is no dispute that Anastacio and Flora Domingo married before the Family Code’s effectivity on August 3, 1988 and their property relation is a conjugal partnership. governed by the rules found in Chapter 4 (Conjugal Partnership of Gains) of Title IV (Property Relations Between Husband and Wife) of the Family Code. This is clear from Article 105 of the Family Code which states: x x x The provisions of this Chapter shall also apply to conjugal partnerships of gains already established between spouses before the effectivity of this Code, without prejudice to vested rights already acquired in accordance with the Civil Code or other laws, as provided in Article 256. The conjugal partnership of Anastacio and Flora was dissolved when Flora died in 1968, pursuant to Article 175 (1) of the Civil Code (now Article 126 (1) of the Family Code). Article 130 of the Family Code requires the liquidation of the conjugal partnership upon death of a spouse and prohibits any disposition or encumbrance of the conjugal property prior to the conjugal partnership liquidation, to quote: Article 130. Upon the termination of the marriage by death, the conjugal partnership property shall be liquidated in the same proceeding for the settlement of the estate of the deceased. If no judicial settlement proceeding is instituted, the surviving spouse shall liquidate the conjugal partnership property either judicially or extrajudicially within one year from the death of the deceased spouse. If upon the lapse of the six month period no liquidation is made, any disposition or encumbrance involving the conjugal partnership property of the terminated marriage shall be void. x x x (emphases supplied) While Article 130 of the Family Code provides that any disposition involving the conjugal property without prior liquidation of the partnership shall be void, this rule does not apply since the provisions of the Family Code shall be "without prejudice to vested rights already acquired in accordance with the Civil Code or other laws."xxx.
CREDIT TRANSACTIONS ORIX METRO LEASING AND FINANCE CORPORATION, vs. CARDLINE INC., ET AL G.R. No. 201417, January 13, 2016
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NATURE OF ACTION: Replevin and Damages Topic: Benefit of Excussion PONENTE: BRION, J.: FACTS: Cardline leased four machines (machines) from Orix as evidenced by three similarlyworded lease agreements. Cardline’s principal stockholders and officers - Mary C. Calubad, Sony N. Calubad, and Ng Beng Sheng (individual respondents) – signed the suretyship agreements in their personal capacities to guarantee Cardline’s obligations under each lease agreement. Cardline defaulted in paying the rent. Orix formally demanded payment from Cardline but the latter refused to pay. Orix filed a complaint for replevin, sum of money, and damages with an application for a writ of seizure against Cardline and the individual respondents (collectively, the respondents) before the RTC. The RTC issued a writ of seizure allowing Orix to recover the machines from Cardline. The CA granted the petition, annulled the RTC’s order dated December 1, 2010, and prohibited the sheriff from executing the judgment. Orix argues that: (1) the market value of the returned machines and the guaranty deposit do not offset the outstanding obligations; (2) the individual respondents are solidarily liable to Orix and are not entitled to the benefit of excussion; and (3) the respondents and their counsel engaged in willful and deliberate forum shopping. Respondents argue that: (1) the RTC’s judgment should be interpreted as follows: if Orix recovers the properties, their market values should be deducted from the respondents’ outstanding obligations; (2) the individual respondents merely acted as guarantors, not as sureties; and (3) the respondents committed no forum shopping because no cases were pending before the courts when they filed the petition for prohibition. ISSUE: Whether or not the individual respondents are solidarily liable to Orix and are not entitled to the benefit of excussion. HELD: No. The terms of a contract govern the parties’ rights and obligations. When a party undertakes to be "jointly and severally" liable, it means that the obligation is solidary. Furthermore, even assuming that a party is liable only as a guarantor, he can be held immediately liable without the benefit of excussion if the guarantor agreed that his liability is direct and immediate. In effect, the guarantor waived the benefit of excussion pursuant to Article 2059(1) of the Civil Code.
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In the present case, the records show that the individual respondents bound themselves solidarily with Cardline. Section 31.1 of the lease agreements states that the persons who sign separate instruments to secure Cardline’s obligations to Orix shall be jointly and severally liable with Cardline.Even assuming arguendo, that the individual respondents signed the continuing surety agreements merely as guarantors, they still cannot invoke the benefit of excussion. The surety agreements provide that the individual respondents’ liability is "solidary, direct, and immediate and not contingent upon" Orix’s remedies against Cardline. The continuing suretyship agreements also provide that the individual respondents "individually and collectively waive(s) in advance the benefit of excussion xxx under Articles 2058 and 2065 of the Civil Code." Without any doubt, the individual respondents can no longer avail of the benefit of excussion. The individual respondents are solidarily liable for Cardline's obligations and are not entitled to the benefit of excussion. WHEREFORE, we hereby GRANT the petition. The January 6, 2012 decision and April 16, 2012 resolution of the Court of Appeals in CA-GR SP No. 118226 are hereby REVERSED and SET ASIDE. Costs against the respondents.
PHILIPPINE NATIONAL BANK vs. HEIRS OF BENEDICTO AND AZUCENA ALONDAY G.R. No. 171865, October 12, 2016 NATURE OF THE ACTION:
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TOPIC: Dragnet Clause or blanket mortgage clause PONENTE: BERSAMIN, J.: FACTS: Spouses Benedicto and Azucena Alonday (Spouses Alonday) obtained an agricultural loan of P28,000.00 from PNB Digos Branch secured the obligation by constituting a real estate mortgage on their parcel of land in Davao Del Sur covered by (OCT) No. P-3599. On June 11, 1980, the Spouses Alonday obtained a commercial loan for P16,700.00 from the PNB, Davao City Branch, and constituted a real estate mortgage over their residential lot situated in Ulas, Davao City under TCT No. T-66139. It is noted that the mortgage contracts contained the following identical provision, to wit: xxx. In case the Mortgagor executes subsequent promissory note or notes either as renewal of the former note, as an extension thereof, or as a new loan, or is given any other kind of accommodation, xxx, this mortgage shall also stand as security for the payment of the said promissory note or notes and/or accommodations without the necessity of executing a new contract and this mortgage shall have the same force and effect as if the said promissory note or notes and/or accommodations were existing on the date thereof, notwithstanding full payments of any or all obligations of the Mortgagors. This mortgage shall also stand as security for said obligations and any and all other obligations of the Mortgagor to the Mortgagee of whatever kind and nature, whether such obligations have been contracted before, during or after the constitution of this mortgage. Xxx As the consequence of the failure to pay, PNB 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 PNB 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 Alondays were unable to redeem the property, the petitioner consolidated its ownership. According to the petitioner, the deed of mortgage relating to the property covered by TCT No. T-66139 included an "all-embracing clause" whereby the mortgage secured not only the commercial loan contracted with its Davao City Branch but also the earlier agricultural loan contracted with its Digos Branch.
Spouses Alonday instituted a complaint against PNB to recover damages and attorney's fees, averring that the foreclosure and sale of the property covered by TCT No. T66139 was illegal. RTC rendered judgment in favor of the Spouses. The RTC observed that if the petitioner had intended to have the second mortgage secure the pre-existing agricultural loan, it should have made an express reservation to that effect; that based on the all-
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embracing clause, the mortgage was a contract of adhesion, and the ambiguities therein should be construed strictly against the petitioner; that the last sentence of the allembracing clause provided that the mortgage would be null and void upon the payment of the obligations secured by the mortgage; and that the petitioner was guilty of bad faith in refusing to nullify the mortgage despite full payment of the commercial loan prior to its maturity. CA affirmed the RTC,8 observing that the mortgage, being a contract of adhesion, should be construed strictly against the petitioner as the party who had drafted the same. ISSUE: Whether the all-embracing or dragnet clause contained in the first mortgage contract executed between the parties for the security of the first loan could authorize the foreclosure of the property under the mortgage to secure a second loan despite the full payment of the second loan. HELD: NO. 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. The mere fact that the mortgage constituted on the property covered by TCT No. T66139 made no mention of the pre-existing loan could only strongly indicate that each of the loans of the Spouses Alonday had been treated separately by the parties themselves, and this sufficiently explained why the loans had been secured by different mortgages. Another indication that the second mortgage did not extend to the agricultural loan was the fact that the second mortgage was entered into in connection only with the commercial loan. Our ruling inPrudential Bank v. Alviar is then relevant, to wit: xxx Thus, when the mortgagor takes another loan for which another security was given it could not be inferred that such loan was made in reliance solely on the original security with the "dragnet clause," but rather, on the new security given. This is the "reliance on the security test." xxx Accordingly, finding a different security was taken for the second loan no intent that the parties relied on the security of the first loan could be inferred, so it was held. The rationale involved, the court said, was that the "dragnet clause" in the first security instrument constituted a continuing offer by the borrower to secure further loans under the security of the first security instrument, and that when the lender accepted a different security he did not accept the offer.
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To reiterate, in order for the all-embracing or dragnet clauses to secure future and other loans, the loans thereby secured must be sufficiently described in the mortgage contract. Considering that the agricultural loan had been pre-existing when the mortgage was constituted on the property covered by TCT No. T-66139, it would have been easy for the petitioner to have expressly incorporated the reference to such agricultural loan in the mortgage contract covering the commercial loan. But the petitioner did not. Being the party that had prepared the contract of mortgage, its failure to do so should be construed that it did not at all contemplate the earlier loan when it entered into the subsequent mortgage. WHEREFORE, the Court AFFIRMS the decision in all respects.
