Civil Law Review 2 Digests (2016)

Arellano University School of Law Taft Avenue corner Menlo Street, Pasay City

CIVIL LAW REVIEW 2 Digests of cases decided by the Supreme Court in 2016 and 2017 covered by Civil Law Review 2

Submitted by: Anne Meagen DC. Maningas

Student number: 2012-0641 Section: Wednesday 1PM-5PM Class number: 31

Submitted to: Atty. Crisostomo A. Uribe

14 May 2017

CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 TABLE OF CONTENTS I. OBLIGATIONS

A. Sources of Civil Obligations 1. Quasi-delicts Torres-Madrid Brokerage, Inc. v. Feb Mitsui Marine Insurance Co., Inc. and Benjamin P. Manalastas, doing business under the name of BMT Trucking Services   ............................................................................................................................. 5

B. Kinds of civil obligations 1. As to performance of prestation Spouses Alexander and Julie Lam v. Kodak Philippines, Ltd.  ........................... 7

C. Compliance with civil obligations Philippine Science High School - Cagayan Valley Campus v. PIRAA Construction Enterprises   .............................................................................................

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D. Breach of contractual obligations 1. Manner of breach a. Delay Tarcisio S. Calilung v. Paramount Insurance Corporation, RP Technical Services, Inc., Renato L. Punzalan and Jose Manalo, Jr.  ................................... 10

E. Remedies for Breach of obligations Dr. Restituto C. Buenviaje v. Spouses Jovito R. Salonga and Lydia B. Salonga, Jebson Holdings Corporation and Ferdinand Juat Banez  ................ 11

1. Extra-judicial remedies Nissan Car Lease Phils., Inc. v. Lica Management, Inc. and Proton Pilipinas, Inc.  ................................................................................................................................... 13

F. Modes of extinguishment of obligations 1. Payment or performance Spouses Roberto and Adelaida Pen v. Spouses Santos and Linda Julian  ....... 15 II. CONTRACTS

A. Fundamental characteristics of contracts 1. Consensuality of contracts Teresita I. Buenaventura v. Metropolitan Bank and Trust Company  ............ 16 Vicente D. Cabanting and Lalaine V. Cabanting v. BPI Family Savings Bank, Inc.  ................................................................................................................................... 17

2. Autonomy of contracts 1

CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Anecito Campos v. Bank of the Philippine Islands  .............................................. 19 Century Properties, Inc. v. Edwin J. Babiano and Emma B. Concepcion  ..... 20

B. Classification of contracts 1. according to solemnity or form a. special form IBM Philippines, Inc. v. Prime System Plus, Inc.  ................................................. 22

C. Kinds of contracts as to validity 1. Void contracts The Roman Catholic Bishop of Tuguegarao v. Florentina Prudencio, et al.  . 23 Desiderio Ranara, Jr. v. Zacarias de los Angeles, Jr.  .......................................... 25

2. Unenforceable contracts Mactan Cebu International Airport Authority v. Heirs of Gavina Ijordan  .. 27

D. Essential elements of contract Kabisig Real Wealth Dev., Inc. and Fernando C. Tio v. Young Builders Corporation   ...................................................................................................................

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Timoteo Bacalso and Diosdada Bacalso v. Gregoria B. Aca-ac, Eutiquia B. Aguila, Julian Bacus, and Evelyn Sychangco  ........................................................ 29

E. Breach of contractual obligations Philippine Science High School - Cagayan Valley Campus v. PIRAA Construction Enterprises   ...........................................................................................

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III. SALES

A. In general 1. Contract of sale and contract to sell Thelma Rodriguez, joined by her husband v. Spouses Jaime Sioson and Armi Sioson, et al.  ................................................................................................................... 32

B. Elements of a contract of sale 1. consent of the contracting parties Joey R. Peña, v. Jesus Delos Santos and the Heirs of Rosita Delos Santos Flores   ...............................................................................................................................

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Melecio Domingo v. Spouses Genaro Molina and Elena B. Molina  ................. 36

C. Remedies for breach of contract 1. Sale of movables on installments in stallments Equitable Savings Bank v. Rosalinda C. Palces  .................................................... 37

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 IV. LEASE

A. Termination of the lease 1. Loss of the thing Spouses Jaime and Matilde Poon v. Prime Savings Bank represented by the Philippine Deposit Insurance Corporation as Statutory Liquidator  ............... 39 V. AGENCY

A. In general: nature Magellan Aerospace Corporation v. Philippine Air Force .................. ............... 41

B. Essential elements of contract of agency 1. Form of contract of agency Mactan-Cebu International Airport Authority v. Richard E. Unchuan ......... 42

C. Obligations of the agent Bank of the Philippine Islands And FGU Insurance Corporation (Presently Known As BPI/MS Insurance Corporation) v. Yolanda Laingo  ...................... 44 Dra. Mercedes Oliver v. Philippine Saving Bank and Lilia Castro  ................. 46 VI. PARTNERSHIP

A. Obligations of partners with regard to third persons Michael C. Guy v. Atty. Glenn C. Gacott  ............................................................... 48 VII. TRUSTS

A. Kinds of trusts 1. Implied trusts Jose Norberto Ang v. The Estate of Sy So  .............................................................. 50 VIII. CREDIT TRANSACTIONS

A. Pledge, mortgage, antichresis 1. Provisions common to pledge and mortgage a. Pactum commisorium Spouses Roberto and Adelaida Pen v. Spouses Santos and Linda Julian  ....... 52

2. accomodation mortgagor Rosalina Carodan v. China Banking Corporation  ............................................... 54 IX. TORTS AND DAMAGES

A. Torts

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 1. Persons liable a. Vicarious liability Greenstar Express, Inc. and Fruto L. Sayson, Jr. v. Universal Robina Corporation and Nissin Universal Robina Corporation ................................. .... 56

B. Damages 1. Kinds of damages Moral damages; temperate damages Sulpicio Lines, Inc. v. Napoleon Sesante  ................................................................. 58 Coca-Cola Bottlers Philippines, Inc. v. Spouses Jose R. Bernardo and Lilibeth R. Bernardo, doing business under the name and style Jolly Beverage Enterprises   ................................................................................................60 “

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Torres-Madrid Brokerage, Inc. v. Feb Mitsui Marine Insurance Co., Inc. and Benjamin P. Manalastas, doing business under the name of BMT Trucking Services G.R. No. 194121, July 11, 2016 Second Division, J. Brion

(Obligations; sources of civil obligations; quasi-delict) Facts: Sony had engaged the services of TMBI to facilitate, process, withdraw, and deliver a shipment of various electronic goods from Thailand. The agreement was to bring the good from the port to Sony’s warehouse in Binan, Laguna. TMBI did not own any delivery trucks so it subcontracted the services of BMT. Sony was notified and had no objections. Four BMT trucks left the port containing the shipments but only three arrived at the warehouse. The other truck was found abandoned, with both the shipment and the driver missing. TMBI notified Sony of the loss. Sony filed an insurance claim with Mitsui and after evaluation, Mitsui paid Sony P7M corresponding to the value of the lost goods. Mitsui thereafter sent TMBI a demand letter for payment of the lost goods. TMBI refused to pay. As a result, Mitsui filed a case against TMBI. TMBI impleaded Benjamin Magtalas as third party defendant, alleging that the negligence of the BMT driver is the proximate cause of the loss and should be held liable. RTC found TMBI and Benjamin Manalastas jointly and slidarily liable to pay Mitsui the amount it paid to Sony plus damages. The RTC held that TMBI and BMT are common carriers and acted negligently. CA held that there is failure to observe extra-ordinary diligence in overseeing the cargo and adopting security measures. Moreover, it held that TMBI shall be held liable for  breach of its contractual obligations to Sony when it failed to deliver the shipment. Issue: W/N TMBI and BMT are solidarily liable to Mitsui for the loss of the cargo as joint tortfeasors under quasi-delict. Held:  No. TMBI and BMT are not solidarily liable to Mitsui for the loss as joint tortfeasors. The ruling was based on Article 2194 of the Civil Code: Art. 2194. The responsibility of two or more persons who are liable for quasidelict is solidary.  Notably, TMBI's liability to Mitsui does not stem from a quasi-delict (culpa aquiliana) but from its breach of contract (culpa contractual). The tie that binds TMBI with Mitsui is contractual, albeit one that passed on to Mitsui as a result of TMBI's contract of carriage with Sony to which Mitsui had been subrogated as an insurer who had paid Sony's insurance claim. The legal reality that results from this contractual tie precludes the application of quasi-delict b ased Article 2194. We have repeatedly distinguished between an action for breach of contract (culpa contractual) and an action for quasi-delict (culpa aquiliana). In culpa contractual, the plaintiff only needs to establish the existence of the contract and the obligor's failure to perform his obligation. It is not necessary for the plaintiff to prove or even allege that the obligor's non- compliance was due to fault or negligence because Article 1735 already presumes that the common carrier is negligent. The common carrier can only free itself from liability by proving that it observed extraordinary diligence. It cannot discharge this liability by shifting the blame on its agents or servants.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 On the other hand, the plaintiff in culpa aquiliana must clearly establish the defendant's fault or negligence because this is the very basis of the action. Moreover, if the injury to the plaintiff resulted from the act or omission of the defendant's employee or servant, the defendant may absolve himself by proving that he observed the diligence of a good father of a family to prevent the damage. In the present case, Mitsui's action is solely premised on TMBl's breach of contract. Mitsui did not even sue BMT, much less prove any negligence on its part. If BMT has entered the picture at all, it 'is because TMBI sued it for reimbursement for the liability that TMBI mi ght incur from its contract of carriage with Sony/Mitsui. Accordingly, there is no basis to directly hold BMT liable to Mitsui for quasi-delict.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Spouses Alexander and Julie Lam v. Kodak Philippines, Ltd. G.R. No. 167615, January 11, 2016 Second Division, J. Leonen

(Obligations; Kinds of civil obligations as to performance of prestation; divisible, indivisible;  Article 1225) Facts: Spouses Lam and Kodak entered into an agreement for the sale of three units of the Kodak Minilab System 22XL (Minilab) in the amount of P1. 796M per unit, with the ff. 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 Package 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. 5. Prevailing price of Kodak Minilab System 22XL as of January 8, 1992 is at ONE MILLION SEVEN HUNDRED NINETY SIX THOUSAND PESOS. 6. Price is subject to change without prior notice. *Secured with PDCs; 1st monthly amortization due 4 5 days after installation. On January 15, 1992, Kodak delivered and installed one unit of Minilab in Tagum and spouses Lam issued 12 PDCs of P35,000.00 each as payment. However, spouses Lam requested Kodak not to negotiate the first two checks due to insufficiency of funds. Both checks were negotiated  by Kodak and were honored by the bank but the subsequent checks were subsequently dishonored after spouses lam ordered the bank to stop payment. Kodak cancelled the sale and demanded spouses Lam to return the unit. Spouses Lam ignored the demand and rescinded the contract through a letter stating that Kodak failed to deliver the other two remaining Minilab units. Kodak filed a complaint for replevin and/o r recovery of sum of money. RTC found that Kodak defaulted in performance of its obligation under its Letter Agreement with spouses Lam when it failed to deliver all three units as agreed, which caused spouses Lam to stop paying for the rest of the installments. Thus, Kodak is ordered to pay for the amount of the undelivered units and damages. On appeal, the CA modified RTC’s Decision ruling that the Letter Agreement executed by the parties showed that their obligations were susceptible of  partial performance. On appeal, CA found that the intention of the parties is to be bound separately for each Minilab Equipment to be delivered as shown by the separate purchase price for each of the item, by the acceptance of spouses Lam of separate deliveries for the first Minilab Equipment, and for those of the remaining two and the separate payment arrangements for each of the equipment. Under this premise, spouses Lam shall be liable for the entire amount of the purchase price of the Minilab Equipment delivered considering that Kodak had already completely fulfilled its obligation to deliver the same.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017

Issue: W/N the obligation of Kodak to deliver the three Minilab units to Spouses Lam as written in the Letter Agreement is divisible and severable. Held:  No. The Letter Agreement contained an indivisible obligation. The Letter Agreement contemplated a “ package deal”  involving three (3) units of the Kodak Minilab System 22XL. Based on the Letter Agreement, 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. 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 p rovides that “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 b y the parties.”

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Philippine Science High School - Cagayan Valley Campus v. PIRAA Construction Enterprises G.R. No. 204423, September 14, 2016 Second Division, J. Del Castillo

(Obligations; substantial compliance of contractual obligations; Article 1234) Facts: PIRRA is a business that is engaged in general contracting and a licensed contractor registered with Philippine Domestic Construction Board and owned by Artemio Perez. PSHS is a government academic institution under DOST and is located in Nueva Vizcaya, headed by Dir. Romo. PIRRA filed with CIAC a complaint for damages against PSHS relative to the construction contracts for PSHS. On Project A (Academic Building I – Phases IV and V, and Girls’ Dormitory Building I –   Phase IV), PIRAA requested for payment of partial billing (PB) no. 5 and substantial acceptance and completion since the project is 94% complete. PSHS replied that it cannot grant PIRAA’s request for substantial completion and issuance of PB no. 5 pending correction of the noted defects (conducted by an inspectorate team created by PSHS) and remaining work activities. PIRAA and PSHS entered into an inspection agreement to be conducted by the DOST. While waiting for the date of inspection, PSHS informed PIRAA that it would take over Project A. It also stated that it would implement the repair of the identified defects through a third party, the expenses of which would be deducted from PIRRA’s final billing. PIRRA claimed that PSHS’s takeover of Project A is violative of its rights as the winning contractor. It argued that COA’s inspection on Project A was conducted without the presence of PIRRA; and the findings of the COA are subject to protest for being one-sided. CIAC ruled in favor of PIRAA holding PSHS liable for delay in paying PB No. 5 and in taking over Project A without legal basis. On appeal, CA partially affirmed with modifications. CA ruled that Project A was substantially completed, thus PSHS is liable for payment of PB no. 5. Issue: W/N there was a substantial compliance by PIRAA on Project A of its contract with PSHS. Held: Yes. There was substantial compliance by PIRAA and PSHS’ takeover is of no moment. When PIRRA requested substantial acceptance and completion of Project A, PSHS did not object to such a request. It acted upon it and even created an Inspectorate Team for punch listing, and for the purpose of determining PIRRA’s PB No. 5. Notably, PSHS repeatedly referred to PB No. 5 as the final billing for Project A. In fact, PSHS initially expressed its willingness to pay only to  put it on hold because of the COA Report. Nonetheless, as correctly explained by the CIAC, such Report cannot affect PSHS’ obligation to pay PIRRA because the “existence of the defective or undelivered items was not an excuse to avoid payment of the progress billing, as the  payment was due on the performed items that were completed or were otherwise performed, save for the defects.” In addition, as provided for under Article 1234 of the Civil Code, if the obligation had been substantially performed in good faith, the obligor, in this case, PIRRA, may recover as if it had strictly and completely fulfilled its obligation, less the damages suffered by the obligee or in this instance, PSHS. More importantly, consistent with the foregoing rule that the Court accords respect and finality on the factual findings of the CIAC, as affirmed by the CA, the Court sustains the finding that PSHS treated Project A as substantially completed; thus, it is liable to pay PIRRA the residual value of PB No. 5. 9

CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Tarcisio S. Calilung v. Paramount Insurance Corporation, RP Technical Services, Inc., Renato L. Punzalan and Jose Manalo, Jr. G.R. No. 195641, July 11, 2016 First Division, J. Bersamin

(Obligations; breach of obligations; delay; interest; Articles 1956, 2212) Facts: In March 16, 2005, the SC promulgated its resolution in the case Paramount Insurance Corporation v. Tarcisio Calilung an RP Technical Services, Inc. and ordered respondents jointly and severally liable to pay petitioner the principal obligation of P718,750.00, with interest at 14% per annum from October 7, 1987 until full payment, plus attorney's fees equivalent to 5% of the amount due, and the costs of suit. The resolution became final and executory on July 19, 2005 and was recorded on the same date. The case was remanded to RTC for execution. Calilung filed his petition arguing that he should be entitled to a compound interest of 12% per annum as legal interest because the obligation of the respondent is a loan or forbearance of money. Calilung also insisted that he is entitled to such interest under Article 2212 of the Civil Code. Issue: W/N Calilung is entitled to the additional 12% interest per annum Held:  No. The judgment directing the respondents to pay to the petitioner the principal amount of P718,750.00 plus 14% interest is already final and executory. It is immutable and can no longer  be modified or otherwise disturbed. The kinds of interest that may be imposed in a judgment are the monetary interest and the compensatory interest. In this regard, the Court has expounded in Siga-an v. Villanueva: Interest is a compensation fixed by the parties for the use or forbearance of money. This is referred to as monetary interest. Interest may also be imposed by law or by courts as penalty or indemnity for damages. This is called compensatory interest. The right to interest arises only by virtue of a contract or by virtue of damages for delay or failure to pay the principal loan on which interest is demanded. Article 1956 of the Civil Code, which refers to monetary interest, specifically mandates that no interest shall be due unless it has been expressly stipulated in writing. As can be gleaned from the foregoing provision, payment of monetary interest is allowed only if: (1) there was an express stipulation for the payment of interest; and (2) the agreement for the payment of interest was reduced in writing. The concurrence of the two conditions is required for the payment of monetary interest. Thus, we have held that collection of interest without any stipulation therefor in writing is prohibited by law. There are instances in which an interest may be imposed even in the absence of express stipulation, verbal or written, regarding payment of interest. Article 2209 of the Civil Code states that if the obligation consists in the payment of a sum of money, and the debtor incurs delay, a legal interest of 12% per annum may be imposed as indemnity for damages if no stipulation on the payment of interest was agreed upon. Likewise, Article 2212 of the Civil Code provides that interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent on this point. All the same, the interest under these two instances may be imposed only as a penalty or damages for breach of contractual obligations. It cannot be charged as a compensation for the use or forbearance of money. In other words, the two instances apply only to compensatory interest and not to monetary interest.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Dr. Restituto C. Buenviaje v. Spouses Jovito R. Salonga and Lydia B. Salonga, Jebson Holdings Corporation and Ferdinand Juat Banez G.R. No. 216023, October 5, 2016 First Division, J. Perlas- Bernabe

(Obligations; remedies for breach of obligations; specific performance; rescission; Article 1191) Facts: In 1997, Jebson, an entity engaged in the real estate business, through iits Executive VP Banez, enter into a Joint Venture Agreement (JVA) with spouses Salonga. Spouses Salonga owned three  parcels of land in Tagaytay. Under the JVA, Jebson will construct ten high-end single detached residential units, to be known as Brentwoods. They likewise assumed to subdivide the property into individual titles upon which Jebson shall assume the liability to pay their mortgage loan with Metrobank. Jebson undertook to construct the units at its own expense, secure the building and development permits, and the license to sell from the HLURB, as well as the other permits required. 7 out of 10 units will belong to Jebson while the remaining 3 will correspond to spouses Salonga’s share. Jebson was also allowed to sell its allocated units under such terms as it may deem fit, subject to the condition that the price agreed upon was with the conformity of spouses Salonga. Jebson then entered into a Contract to Sell with Buenviaje over Unit 5 without the conformity of spouses Salonga. Despite the full payment, Jebson was not able to complete construction of Unit 5 and when Buenviaje formally demanded immediate completion and delivery, Jebson cited the 1997 financial crisis as the reason for the delay. Buenviaje filed a case for specific performance against Jebson and spouses Salonga before the HLURB, praying for completion of the unit,  partition and subdivision of the property, delivery of title, payment of damages and attorney’s fees. In the alternative, he prayed for rescission and return of all payments made with interest. In their defense, Jebson and Bañez claimed that they were ready to comply with all their contractual obligations but were not able to secure the necessary government permits because Spouses Salonga stubbornly refused to cause the consolidation of the parcels of land. For their part, spouses Salonga averred that they were not liable to the complainants since there was no privity of contract between them, adding that the contracts to sell were unenforceable against them as they were entered into by Jebson without their conformity, in violation of the JVA. HLURB rescinded the contract to sell and found spouses Salonga solidarily liable with Jebson for the return of payments and damages. On appeal with HLURB-BOC, the Decision was reversed, finding that the contract to sell was valid and that rescission is not proper. It held that there was no substantial breach but only a casual one, which did not justify a rescission of contract to sell, especially in view of the fact that the residential units covered by the said contracts were already at their finishing stages. It, however, granted the remedy of specific  performance in Buenviaje’s favor. OP and CA affirmed the HLURB-BOC ruling. Issue: W/N the remedy of specific performance is proper under the circumstances. Held: Yes. Specific performance and “rescission” (more accurately referred to as resolution) are alternativeremedies available to a party who is aggrieved by a counter-party's breach of a reciprocal obligation. This is provided for in Article 1191 of the Civil Code, which partly reads: Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek 11

CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 rescission, even after he has chosen fulfillment, if the latter should become impossible. xxxx Specific performance is defined as “[t]he remedy of requiring exact performance of a contract in the specific form in which it was made, or according to the precise terms agreed upon.” It  pertains to “[t]he actual accomplishment of a contract by a party bound to fulfill it.” On the other hand, resolution is defined as the “unmaking of a contract for a legally sufficient reason x x x.” “[Resolution] does not merely terminate the contract and release the parties from further obligations to each other, but abrogates the contract from its inception and restores the  parties to their original positions as if no contract has been made. Consequently, mutual restitution, which entails the return of the benefits that each party may have received as a result of the contract, is thus required.” Notably, resolution under Article 1191 of the Civil Code “will not be permitted for a slight or casual breach, but only for such substantial and fundamental violations as would defeat the very object of the parties in making the agreement. Ultimately, the question of whether a breach of contract is substantial depends upon the attending circumstances.” In this case, the HLURB-BOC, the OP, and the CA all pointed out that Buenviaje primarily  prayed for the remedy of specific performance - i.e., the completion of Unit 5, the subdivision of Sps. Salonga's property into individual lots per unit, and the tum-over of Unit 5 as well as the subdivided lot portion allocated to such unit to him and only prayed for the remedy of rescission as an alternative remedy. Thus, it remains apparent that as between the two remedies made available to him, Buenviaje, had, in fact, chosen the remedy of specific performance and therefore, ought to be bound by the choice he had made. To add, “[t]he fundamental rule is that reliefs granted a litigant are limited to those specifically prayed for in the complaint; other reliefs  prayed for may be granted only when related to the specific prayer(s) in the pleadings and supported by the evidence on record.” Hence, based on this postulate, the lower tribunals could hardly be faulted for granting the proper relief in accordance with what Buenviaje himself had claimed. Relatedly, it is observed that Buenviaje's alternative prayer for resolution is textually consistent with that portion of Article 1191 of the Civil Code which states that an injured party “may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.”  Nevertheless, the impossibility of fulfillment was not sufficiently demonstrated in the  proceedings conducted in this case. As the HLURB BOC pointed out, “[t]here is no finding that specific performance has become impossible or that there are insuperable legal obstacles to the completion of the constructed units so as to justify [resolution].” In fact, as the CA contrarily remarked, Buenviaje's “main prayer [for specific performance] x x x appears to be the more  plausible course of action”57 “[s]ince the units covered by the disputed Contracts To Sell are almost finished, and [have] most likely [been] complete[d].” With these in mind, the CA therefore correctly upheld the directive for Jebson to comply with its obligations under the subject CTS with Buenviaje as prayed for by the latter. Failing to show any cogent reason to hold otherwise, Buenviaje can no longer recant his primary choice of relief. His  prayer for resolution in the instant petition must perforce fail.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Nissan Car Lease Phils., Inc. v. Lica Management, Inc. and Proton Pilipinas, Inc. G.R. No. 176986, January 13, 2016 Third Division, J. Jardeleza

(Obligations; remedies for breach of obligations; extra-judicial rescission; Article 1192) Facts: Lica Management Inc. (Lica) owns a property in Makati City. On June 24, 1994, Lica entered into a lease contract with Nissan Car Lease Phils., Inc. (Nissan) for ten years with a monthly rental of P308,000.00 and annual escalation rate of 10%. Subsequently, Nissan defaulted in  payment and its total rental arrearages amounted to P1,741,520.85. Thus, in May 1996, Nissan and Lica verbally agreed to convert the arrearages into a debt to be covered by a promissory note and twelve PDCs as monthly payments starting June 1996 until May 1997. Nissan defaulted from June to October 1996. Thus, Lica informed Nissan that it was terminating their lease contract and demanded Nissan to pay unpaid rentals and vacate the premises within five days from notice. In the meantime, Proton Pilipinas (Proton) sent Nissan a request to use the premises for ten days.  Nissan agreed and allowed Proton to make the necessary renovations even prior to the execution of a sublease contract. Nissan and Lica failed to agree on a subleasing contract, which forced Proton to enter into a lease contract with Lica since it already terminated its contract with Nissan. Lica demanded Nissan to vacate the property. A few days after, Lica filed a complaint for sum of money with damages against Nissan to recover the unpaid rentals with interest, penalties, and damages. Nissan asserted that its failure to pay rent does not automatically result in the termination of the Contract of Lease nor does it give Lica the right to terminate the same. Nissan also informed Lica that since it was unlawfully ousted from the leased premises and was not deriving any benefit therefrom, it decided to stop payment of the checks issued to pay the rent. RTC found that Nissan purposely violated the terms of its contract with Lica when it failed to  pay the required rentals and contracted to sublease the premises without the latter's consent. Under Article 1191 of the Civil Code, Lica was therefore entitled to rescind the contract between the parties and seek payment of the unpaid rentals and damages. Nissan argued that there was no valid extra-judicial rescission of the lease contract of Nissan with Lica. CA affirmed the ruling of the RTC. Issue: W/N Lica validly rescinded extra-judicially its contract of lease with Nissan. Held: Yes. The extra judicial rescission is valid. It is clear from the records that NCLPI committed substantial breaches of its Contract of Lease with LMI. Under Paragraph 2, NCLPI bound itself to pay a monthly rental of P308,000.00 not later than the first day of every month to which the rent corresponds. NCLPI, however, defaulted on its contractual obligation to timely and properly  pay its rent. Aside from non-payment of rentals, it appears that NCLPI also breached its obligations under Paragraphs 4 and 5 of the Contract of Lease which prohibit it from subleasing the premises or introducing improvements or alterations thereon without LMI's prior written consent. While it is true that NCLP1 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 13

CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 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. Delos Angeles wherein this Court held: The 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) 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. 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.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Spouses Roberto and Adelaida Pen v. Spouses Santos and Linda Julian G.R. No. 160408, January 11, 2016 First Division, J. Bersamin

(Obligation; Modes of extinguishment; Payment; dacion en pa go) Facts: In 1986, spouses Julian obtained several loans from Adelaida Pen. Evidenced by two promissory notes and secured by a REM over a property registered under the name of Santos. When the loans become due and demandable, spouses Julian failed to pay despite several demands, forcing Adelaida to institute foreclosure proceedings. Before she could file the foreclosure proceedings, Linda offered the mortgaged property as payment in kind. The parties agreed to have the  property valued at P70,000.00. Thereafter, spouses Julian executed the Deed of Sale and after spouses Pen’s payment of taxes, title was transferred to their name. In 1989 and in 1990, Linda offered to repurchase the property but failed to give payment in the agreed dates. Linda offered to pay P100,000.00 in cash as sign of good faith but spouses Pen refused to accept but instead, it was deducted to the indebtedness of spouses Julian so that as of October 1997, their unpaid  balance amounted to P319,065.00. However, instead of paying the balance, spouses Julian instituted an adverse claim and lis pendens and both were annotated at the back of the title. Spouses Julian’s version of the story is different. According to them, the deed of absolute sale had no consideration, undated, unfilled, and unnotarized. They also claimed that in December 1992 they offered to pay P150,000.00 but Adelaida refused and demanded P250,000.00. Linda desisted and instead checked the property with the Register of Deeds. She discovered that the land was already registered in the name of spouses Pen, which prompted Linda Julian to file an adverse claim against spouses Pen. Spouses Pen argued that the transaction was a valid dacion en  pago. RTC ruled in favor of spouses Julian. Ca affirmed. Issue: W/N the transaction between spouses Pen and spouses Julian was a valid dacion en pago. Held.  No. the transaction is not dacion en pago but a sale. 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.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Teresita I. Buenaventura v. Metropolitan Bank and Trust Company G.R. No. 167082, August 3, 2016 First Division, J. Bersamin

(Contracts; fundamental characteristics of contracts; consensuality of contracts; contract of adhesion) Facts: In 1997, Teresita Buenaventura executed two promissory notes of P1.5M each payable to MBTC with interest. As of 1998, the PNs remain unpaid. MBTC filed action against Teresita for recovery of said amounts. In her answer, Teresita claimed that she is a mere guarantor of her nephew Imperial, who drew postdated checks against MBTC as partial payment of purchase  price of Imperial’s properties. Teresita claimed that when she rediscounted the checks, she was required to execute the PN’s. She also claimed that as a guarantor, she cannot be held liable unless MBTC shall have exhausted all the properties of Imperial. RTC ruled in favor of MBTC and ordered Teresita to pay P3.5M plus interest and penalties. CA affirmed with modifications as to the interest and penalty. Issue: W/N Teresita shall be held liable for the promissory notes she executed because of the rediscounting transaction with MBTC. Held: Yes. Teresita is liable for the amount in the promissory notes. The petitioner claims that the  promissory notes she executed were contracts of adhesion because her only participation in their execution was affixing her signature, and that the terms of the promissory notes should consequently be strictly construed against the respondent as the party responsible for their  preparation. In contrast, the respondent counters that the terms and conditions of the promissory notes were clear and unambiguous; hence, there was no room or need for interpretation thereof. What the petitioner advocates is for the Court to now read into the promissory notes terms and conditions that would contradict their clear and unambiguous terms in the guise of such  promissory notes being contracts of adhesion. This cannot be permitted, for, even assuming that the promissory notes were contracts of adhesion, such circumstance alone did not necessarily entitle her to bar their literal enforcement against her if their terms were unequivocal. It is  preposterous on her part to disparage the promissory notes for being contracts of adhesion, for she thereby seems to forget that the validity and enforceability of contracts of adhesion were the same as those of other valid contracts. As a rule, indeed, the contract of adhesion is no different from any other contract. Its interpretation still aligns with the literal meaning of its terms and conditions absent any ambiguity, or with the intention of the parties. The terms and conditions of the promissory notes involved herein, being clear and beyond doubt, should then be enforced accordingly.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Vicente D. Cabanting and Lalaine V. Cabanting v. BPI Family Savings Bank, Inc. G.R. No. 201927, February 17, 2016 Third Division, J. Peralta

(Contracts; fundamental characteristics of contracts; consensuality of contracts; contract of adhesion) Facts: In 2003, the Cabantings bought on installmet basis from Diamond Motors Corporation a 2002 Mitsubishi Adventure SS MT worth P836,032.00, and for value received, the Cabantings signed, executed, and delivered to Diamond motors a promissory note (PN) with chattel mortgage on the said vehicle. On the day of the execution of the document, Diamond Motors, with notice to the Cabantings, executed a deed of assignment, thereby assigning to BPI Family all its rights, title and interest to the PN with chattel mortgage. Nine months thereafter, BPI Family filed a complaint for replevin against the Cabantings praying that Cabantings be ordered to pay the unpaid portion of the vehicle’s price with interest and damages. BPI Family alleged that  petitioners failed to pay three consecutive installments and despite written demand sent to  petitioners through registered mail, petitioners failed to comply with said demand to pay or to surrender possession of the vehicle to BPI Family. The Cabantings alleged that they sold the vehicle to one Abalos with the agreement that Abalos will pay the monthly installments, and having defaulted, BPI should have sued Abalos instead of the Cabantings. The Cabantings also claimed that BPI Family made no prior demand to make the obligation due and payable. RTC ruled in favor of BPI Family. CA affirmed. Issue: W/N a prior demand is necessary to make the obligation of the Cabantings due and payable. Held:  No. no prior demand was necessary to make petitioners' obligation due and payable. The Promissory Note with Chattel Mortgage clearly stipulated that: “[i]n case of my/our [petitioners'] failure to pay when due and payable, any sum which I/We x x x or any of us may now or in the future owe to the holder of this note x x x then the entire sum outstanding under this note shall immediately  become due and payable without the necessity of notice or demand which I/We hereby waive.” Petitioners argue that such stipulation should be deemed invalid as the document they executed was a contract of adhesion. It is important to stress the Court's ruling in Dia v. St. Ferdinand Memorial Park, Inc., to wit: A contract of adhesion, wherein one party imposes a ready-made form of contract on the other, is not strictly against the law. A contract of adhesion is as binding as ordinary contracts, the reason being that the party who adheres to the contract is free to reject it entirely. Contrary to petitioner's contention, not every contract of adhesion is an invalid agreement. In RCBC v. CA, the Court held that contracts of adhesion are not invalid per se; they are not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. Verily, petitioners are bound by the aforementioned stipulation in the Promissory Note with Chattel Mortgage waiving the necessity of notice and demand to make the obligation due and  payable. In Agner v. BPI Family Savings Bank, Inc, the Court ruled: 17

CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017

A provision on waiver of notice or demand has been recognized as legal and valid in BPI v. CA, wherein We held: The Civil Code in Article 1169 provides that one incurs in delay or is in default from the time the obligor demands the fulfillment of the obligation from the obligee. However, the law expressly provides that demand is not necessary under ce1iain circumstances, and one of these circumstances is when the parties expressly waive demand. Hence, since the co-signors expressly waived demand in the promissory notes, demand was unnecessary for them to be in default. Clearly, as stated above, Article 1169 (1) of the Civil Code allows a party to waive the need for notice and demand. Petitioners' argument that their liability cannot be deemed due and payable for lack of proof of demand must be struck down.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Anecito Campos v. Bank of the Philippine Islands G.R. No. 207597, May 30, 2016 Second Division, J. Brion

(Contracts; fundamental characteristics; autonomy of contracts; Article 1306) Facts: In 1980, Campos mortgaged 14 lots in favor of FEBTC, now merged with BPI to secure a P1M loan, and among these lots was the then vacant lot subject of this case. Campos constructed a two-story building on the said lot allegedly with knowledge and consent by the bank. Campos failed to pay his loan, which ballooned to P11M. Subsequently, BPI moved for extrajudicial foreclosure of the mortgaged lots and a writ of possession was later on issued to BPI in 2006. Campos filed a Motion for the Suspension of the Implementation of the Writ of Possession and/or to Allow Mortgagor to Present Evidence of Good Faith dated February 12, 2007. Campos claimed that he constructed the building in good faith and with bank’s consent and therefore he has the right to retain possession of the subject lot until the bank reimburses him, citing Articles 456, 448, and 450 of the Civil Code. BPI opposed the motion arguing that the purchaser in a foreclosure sale has no obligation to reimburse the mortgagor for the value of the improvements. More importantly, the Bank cited the Mortgage Contract which has a stipulation that says the mortgage includes “all the buildings and improvements now existing or which may hereafter be erected or constructed thereon x x x”. RTC denied the motion filed by Campos. CA affirmed. Issue: W/N Campos has the right of retention of the subject lot together with the improvements he made thereon until BPI reimburses him of his expenses. Held:  No. BPI is the lawful owner of the subject lot and thus Campos has no right of retention nor does BPI have the obligation to reimburse Campos. The mortgage contracts themselves specifically include “all the buildings and improvements now existing or which may hereafter be erected or constructed [on the properties]” as part of the mortgage. This renders the value of the improvements and Campos' alleged good faith immaterial; he voluntarily included the building when he entered into the mortgage. Article 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient provided they are not contrary to law, morals, good customs, public order, or pub lic policy. This Civil Code provision asserts the Autonomy of Contracts. Contractual obligations have the force of law between the parties and should be complied with in good faith. The Courts will not rescue a litigant from his bad bargains, protect him from unwise investments, relieve him from disadvantageous contracts, or annul the effects of his foolish acts unless there has been a violation of law.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Century Properties, Inc. v. Edwin J. Babiano and Emma B. Concepcion G.R. No. 220978, July 5, 2016 First Division, J. Perlas-Bernabe

(Contracts; fundamental characteristics; autonomy of contracts) Facts: In 2002, Babiano was hired by CPI as Director of Sales and was eventually appointed as VP for Sales. His employment contract contained a “Confidentiality of Documents and Non-Compete Clause”, which, among others, barred him from disclosing confidential information and from working in any business enterprise that is in direct competition with CPI while employed and for a period of one year from date of resignation or termination from CPI. Moreover, should Babiano breach any of the terms thereof, his forms of compensation, including commissions and incentives will be forfeited. After receiving reports that Babiano provided a competitor with information regarding CPI’s marketing strategies, spread false information regarding CPI and its projects, recruited CPI's  personnel to join the competitor, and for being AWOL for 5 days CPI sent Babiano a Notice to Explain directing him to explain why he should not be charged with disloyalty, conflict of interest, and breach of trust and confidence for his actuations. As reply, Babiano tendered his resignation and revealed that he had been accepted as VP of First Global, a competitor of CPI. Babiano thereafter was served a Notice of T ermination. Sometime thereafter, Babiano filed a complaint for non-payment of commissions and damages against CPI before the NLRC claiming that despite repeated demands, the release of his commission remained unheeded. CPI claimed that it validly withheld Babiano’s commission as they were deemed forfeited for violation of the Confidentiality and Non-Compete Clause. Labor Arbiter ruled in CPI’s favor holding that Babiano’s acts are blatant violations of the Confidentiality and Non-Compete Clause, which resulted in the forfeiture of his commissions. The NLRC, however, ruled that the forfeiture of all earned commissions of Babiano under the Confidentiality of Documents and Non-Compete Clause is confiscatory and unreasonable and hence, contrary to law and public policy. CA affirmed NLRC ruling. Issue: W/N the Confidentiality and Non-Compete Clause is valid and binding as to hold Babiano liable for his acts and therefore validates the forfeiture of his commissions. Held: Yes. The Confidentiality and Non-Compete Clause is valid and binding between Babiano and CPI justifying CPI’s forfeiture of Babaiano’s commissions. Article 1370 of the Civil Code  provides that “if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.” In Norton Resources and Development Corporation v. All Asia Bank Corporation, the Court had the opportunity to thoroughly discuss the said rule as follows: The rule is that where the language of a contract is plain and unambiguous, its meaning should be determined without reference to extrinsic facts or aids. The intention of the parties must be gathered from that language, and from that language alone. Stated differently, where the language of a written contract is clear and unambiguous, the contract must be taken to mean that which, on its face, it purports to mean, unless some good reason can be assigned to show that the words should be understood in a different sense. x x x

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Thus, in the interpretation of contracts, the Court must first determine whether a provision or stipulation therein is ambiguous. Absent any ambiguity, the provision on its face will be read as it is written and treated as the binding law of the parties to the contract. In the case at bar, CPI primarily invoked the “Confidentiality of Documents and Non-Compete Non-Compete Clause” found in Babiano's employment contract to justify the forfeiture of his commissions, viz.: Confidentiality of Documents and Non-Compete Clause xxx And in order to ensure strict compliance herewith, you shall not work for whatsoever capacity, either as an employee, agent or consultant with any person whose business is in direct competition with the company while you are employed and for a period of one year from date of resignation or termination from the company. xxx Finally, if undersigned breaches any terms of this contract, forms of compensation including commissions and incentives will be forfeited. Verily, the foregoing clause is not only clear and unambiguous in stating that Babiano is barred to “work for whatsoever capacity x x x with any person whose business is in direct competition with [CPI] while [he is] employed and for a period of one year from date of [his] resignation or termination from the company,” it  it  also expressly provided in no uncertain terms that should Babiano “[breach] any term of [the employment contract], forms of compensation including commissions and incentives will be forfeited.” More significantly, as CPI's Vice President for Sales, Babiano Babiano held a highly sensitive and confidential managerial position as he “was tasked, among others, to guarantee the achievement of agreed sales targets for a project and to ensure that his team has a qualified and competent manpower resources by conducting recruitment activities, training sessions, sales rallies, motivational activities, and evaluation programs.” Hence, to allow Babiano to freely move to direct competitors during and soon after his employment with CPI would make the latter's trade secrets vulnerable to exposure, especially in a highly competitive marketing environment. As such, it is only reasonable that CPI and Babiano agree on such stipulation in the latter's employment contract in order to afford a fair and reasonable protection to CPI. Indubitably, obligations arising from contracts, including employment contracts, have the force of law between the contracting parties and should be complied with in good faith. Corollary thereto, parties are bound by the stipulations, clauses, terms, and conditions they have agreed to, provided that these stipulations, clauses, terms, and conditions are not contrary to law, morals, public order or public policy, as in this case.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 IBM Philippines, Inc. v. Prime System Plus, Inc. G.R. No. 203192, August 15, 2016 Second Division, J. Del Castillo

(Contracts; form of contracts; special form as to validity; interst; Article 1956) Facts: IBM entered into an agreement with PSP where IBM will deliver 45 ATMs and computer hardware for P24M. IBM then instituted a complaint for collection of sum of money against PSP for P45M representing representing PSP’s unpaid obligation obligation with 3% monthly interest. RTC rendered rendered in favor of IBM ordering the payment of P45M plus 6% nterest per annum. RTC found the 3% interest which were evidenced by invoices late payments or payments after thirty days of delivery. CA reversed citing Article 1956 of the Civil Code. CA found that there is no showing that the parties had actually agreed on the imposition of the 3% monthly interest for invoices which remained unpaid 30 days from its delivery. CA imposed a penalty of 6% per annum. Issue: W/N the imposition of 3% monthly interest by IBM is a valid stipulation under Article 1956 of the Civil Code Held:  No. It has been a long-standing rule that for interest to become due and demandable, two requisites must be present: (1) that there must be an express stipulation for the payment of interest and (2) the agreement to pay interest is reduced in writing. Here, petitioner insists that there was an express agreement for a 3% monthly interest, which petitioner placed in writing in its letter dated December 29, 1997. Petitioner has gone through great lengths to attribute respondent's alleged silence, coupled with, respondent's request for the reduction of monthly interest to the latter's express agreement to a 3% monthly interest. Using the contents of the letter, this Court finds that the evidence points to respondent's lack of consent to a 3% monthly interest. Petitioner adamantly claims that respondent's act of requesting for a lower interest rate shows the latter's agreement to a 3% monthly interest. Such an askewed reasoning escapes us  —   especially here where respondent's authorized representative never assented to petitioner's letter. To accept petitioner's misplaced argument that the parties mutually agreed to a 3% monthly interest when respondent subsequently ordered ATMs despite receiving  petitioner's letter imposing a 3% monthly interest will render the second condition –  condition  –   that the agreement be reduced in writing - futile. Although respondent did agree to the imposition of interest per se, the fact that there was never a clear rate of interest still leaves room to guess as to how much interest respondent will pay. This is precisely the reason why Article 1956 was included in the Civil Code - so that both parties clearly agree to and are fully aware of the price to be paid in a contract. In the absence of agreement as to the exact rate of interest, the CA properly applied the legal rate of 6% annual interest following our ruling in Eastern Shipping Lines, Inc. v. Court of Appeals and the Bangko Sentral ng Pilipinas MB Circular No. 799, series of 2013.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 The Roman Catholic Bishop of Tuguegarao v. Florentina Prudencio, et al. G.R. No. 187942, September 7, 2016 Third Division, J. Jardeleza

(Contracts; Kinds of contracts; void contracts; Article 1409) Facts: Felipe married twice during his lifetime. With his first wife, Elena, he had five children. With his second wife, Teodora, he had two children. During the marriage of Felipe and Elena, they acquired a 13ha parcel of land in Cagayan. When Elena died, Felipe and her children became coowners of the property. Felipe then died intestate during his second marriage. Upon his death, his two children from second marriage executed a Deed of Extra-Judicial Partition of the Estate to Felipe with waiver of rights in favor of Teodora. The Cagayan lot was recognized in the deed that it was acquired during the first marriage but there were no heirs to inherit the property except the living heirs, Teodora, and her two children, Prudencio and Leonora. The deed also  provided that the children are waiving their rights in favor of their mother, Teodora. Accordingly, the Cagayan lot was transferred to Teodora’s name. Teodora then sold the Cagayan lot to spouses Cepeda (also respondents), who in turn sold the lot to the Roman Catholic Bishop Bishop of Tuguegarao (RCBT). (RCBT). The children and grandchildren of Felipe  by his first marriage (respondents) filed a Complaint for Partition with Reconveyance alleging that they are the children of Felipe and upon the death of their mother Elena, first wife of Felipe, they became co-owners of the Cagayan lot. The respondents also alleged that they were fraudulently deprived of their rightful shares in the estate of Felipe and Elena when the Extra Judicial Partition declared Teodora as the sole owner of the Cagayan lot. Petitioner countered that Spouses Cepeda were in possession of the Cagayan lot at the time they offered it for sale. It denied knowledge of o f the existence of any an y defect over Spouses Cepeda's title. It averred that it was an innocent purchaser for value. On the other hand, spouses Cepeda maintained that their title over the Cagayan lot was clean and that they had no knowledge that other persons had interest on it because Teodora's title over the property was clean. The y asserted that like petitioner, they were purchasers for value and in good faith. Issue: W/N the Extra-Judicial Partition of the Estate of Felipe is valid and binding on the heirs of Elena, thus validly causing the transfer of ownership of the Cagayan lot to Teodora. Held:  No. The extra-judicial partition is not valid and binding. It also does not transfer ownership of the land to Teodora. Articles 979, 980 and 981 of the Civil Code of the Philippines (Civil Code) state that all the children of the deceased shall inherit from him and by implication should  participate in the settlement of his/her estate, to wit: Art. 979. Legitimate children and their descendants succeed the parents and other ascendants, without distinction as to sex or age, and even if they should come from different marriages. An adopted child succeeds to the property of the adopting parents in the manner as a legitimate child. Art. 980. The children of the deceased shall always inherit from him in their own right, dividing the inheritance in equal shares.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Art. 981. Should children of the deceased and descendants of other children who are dead, survive, the former shall inherit in their own right, and the latter by right of representation. Thus, the children of Felipe in his two (2) marriages should be included in the execution of the Extra-Judicial Partition. In this case, it is undisputed that respondents-appellees were children of Felipe by his first marriage. Teodora, Prudencio, Jr. and Leonora did not deny respondentsappellees' relation with Felipe. Despite this, however, Teodora, Prudencio, Jr. and Leonora declared in the Extra- Judicial Partition that they are the only living heirs of Felipe by operation of law. They claimed that Felipe had no child with his first wife Elena, in effect depriving respondents-appellees of their rightful shares in the estate of their parents. They arrogated upon themselves not only the share of Felipe in the Cagayan lot but also the shares belonging to respondents-appellees. Petitioner, however, submits that the Extra-Judicial Partition is not void because it does not fall within any of the inexistent and void contracts under Article 1409 of the Civil Code. Petitioner is not correct. In Constantino v. Heirs of Pedro Constantino, Jr., we declared two (2) deeds of extrajudicial settlements as void and inexistent for having a purpose or object which is contrary to law. The intention of the signatories in both deeds is to exclude their co-heirs of their rightful share in the estate of the deceased. Similarly, in the present case, Teodora, Prudencio, Jr. and Leonora acted in bad faith when they declared that they are the only living heirs of Felipe, despite knowing that Felipe had children in his first marriage. It is well-settled that a deed of extrajudicial partition executed without including some of the heirs, who had no knowledge of and consent to the same, is fraudulent and vicious. Thus, the Extra-Judicial Partition is void under Article 1409 ( l) or those whose cause, object or  purpose is contrary to law, morals, good customs, public order or public policy. As a consequence, it has no force and effect from the beginning, as if it had never been entered into and it cannot be validated either by time or ratification.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Desiderio Ranara, Jr. v. Zacarias de los Angeles, Jr. G.R. No. 200765, August 08, 2016 Third Division, J. Reyes

(Contracts; kinds of contracts; void contracts; in pari delicto doctrine; Articles 1411, 1412 ) Facts: In 1989, Parada loaned form Zacarias, Sr. P60,000.00 to finance her migration to Canada  payable within a period of ten years. Zacarias, Sr. informed Parada that the mone y came from his son, Zacarias, Jr. As security, Parada mortgaged a parcel of agricultural land. It was agreed upon  by the parties that Zacarias, Jr. would take possession of and farm the land as payment for the loan interest. Parada executed Deed of Sale with Right to Repurchase. In 2001, Zacarias, Sr. fell sick and Zacarias, Jr. pleaded to Noel, Parada’s son, to repurchase the property to finance his father’s hospital and medical bills. Parada paid P40,000.00 but Zacarias, Jr. found the amount unacceptable so he returned the money to Parada. Later, Zacarias, Jr. sold the land to Ranara, Jr. for P300,000.00 evidenced by a deed of sale. Zacarias, Jr. sent Parada a letter giving her 15 days to repurchase. Parada insisted that the sale was not valid and tendered P60,000.00 as payment for the loan but Zacarias, Jr. refused to accept. Parada also alleged that Zacarias, Jr. fraudulently register the property and thus Ranara has no rights to the property. RTC ruled in favor of Parada. It found that Parada and the respondent entered into an Equitable mortgage pursuant to Article 1602(6)16 of the Civil Code. It denied the petitioner and the respondent's claim for reimbursement from Parada. Moreover, when the petitioner purchased the land from the respondent, he knew of the property's status. He knew that he was dealing with a registered land and the fact that title to the land reflected Parada as the owner. The petitioner knew of the risks involved but continued with the sale. The RTC stated that “[h]e who comes to Court must have clean hands. Each of the parties must bear his own loss.” It denied the  petitioner's claim of reimbursement for the improvements he had allegedly introduced in the land  because he acquired the property in bad faith. CA affirmed. Issue: W/N Ranara is an innocent purchaser for value and thus entitled to reimbursement form respondent Held:  No. Ranara is not an innocent purchaser for value. The petitioner cannot claim reimbursement for any expense incurred in the improvements on the lot. Both respondent and petitioner are both in bad faith. A purchaser of land that is in the actual possession of the seller must make some inquiry in the rights of the possessor of the land. The rule of caveat emptor requires the purchaser to be Ware of the supposed title of the vendor and one who buys without checking the vendor's title takes all the risks and losses consequent to such failure. As a doctrine in civil law, the rule on pari delicto is principally governed by Articles 1411 and 1412 of the Civil Code, which state that: Article 1411. When the nullity proceeds from the illegality of the cause or object of the contract, and the act constitutes a criminal offense, both parties being in  pari delicto, they shall have no action against each other, and both shall be  prosecuted. xxxx

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Article 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense, the following rules shall be observed: 1. When the fault is on the part of both contracting parties, neither may recover what he has given by virtue of the contract, or demand the performance of the other's undertaking xxxx Article 1412 of the Civil Code that breathes life to the doctrine speaks of the rights and obligations of the parties to the contract with an illegal cause or object which does not constitute a criminal offense. It applies to contracts which are void for illegality of subject matter and not to contracts rendered void for being simulated, or those in which the parties do not really intend to  be bound thereby. Specifically, in pari delicto situations involve the parties in one contract who are both at fault, such that neither can recover nor have any action against each other. Here, there is neither an illegal cause nor unlawful cause which would necessitate the application of Articles 1411 and 1412 of the Civil Code. The petitioner is mistaken in the application of the doctrine of in pari delicto.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Mactan Cebu International Airport Authority v. Heirs of Gavina Ijordan G.R. No. 173140, January 11, 2016 First Division, J. Bersamin

(Contracts; kinds of contracts as to validity; unenforceable contracts; Article 1317) Facts: In 1957, Julian Cuizon (Julian), one of the heirs of Gavina Ijordan, executed a Deed of Extrajudicial Settlement and Sale of a parcel of land in Lapu-Lapu City in favor of Civil Aeronautics Administration (CAA). The lot was transferred to MCIAA by virtue of RA 6958. In 1980, the respondents caused the judicial reconstitution of the OCT covering the subject land and an original certificate of title was issued to the other heirs of Gavina Ijordan. Thereafter, the heirs asserted before the MCIAA that they were the lawful owners of the lot and that they had not sold their shares in the lot nor authorized Julian to sell their shares to CAA. The failure of the respondents to surrender the owner’s copy of   the OCT prompted MCIAA to sue them for the cancellation of their title alleging that the certificate of title held by the heirs of Gavina Ijordan confers no rights as the lot was already sold to the Government in 1957. Citing Article 1317 of the Civil Code, the heirs of Gavina Ijordan argued that the sale was unenforceable against them  because it was only Julian who had executed the same without obtaining their consent or authority as co-heirs. RTC ruled in favor of the heirs of Gavina Ijordan stating that only the share of Julian was sold to MCIAA in 1957. Issue: W/N the sale of Julian of the lot to MCIAA is unenforceable against the co-owners who do not give their express authority to the sale. Held: Yes. The conveyance by Julian of the entire property pursuant to the Deed did not bind the respondents for lack of their consent and authority in his favor. As such, the Deed had no legal effect as to their shares in the property. Article 1317 of the Civil Code  provides that no person could contract in the name of another without being authorized by the latter, or unless he had by law a right to represent him; the contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers, is unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the other contracting party. But the conveyance by Julian through the Deed had full force and effect with respect to his share of 1/22 of the entire property consisting of 546 square meters by virtue of its being a voluntary disposition of property on his part. As ruled in Torres, Jr. v. Lapinid, x x x even if a co-owner sells the whole property as his, the sale will affect only his own share but not those of the other co-owners who did not consent to the sale. This is  because the sale or other disposition of a co-owner affects only his undivided share and the transferee gets only what would correspond to his grantor in the partition of the thing owned in common.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Kabisig Real Wealth Dev., Inc. and Fernando C. Tio v. Young Builders Corporation G.R. No. 212375, January 25, 2017 Second Division, J. Peralta

(Contracts; essential elements; classification as to form; Articles 1318, 1356) Facts: In April 2001, Kabisig Real Wealth Dev., Inc. (Kabisig), through Ferdinand Tio (Tio), contracted the services of Young Builders Corporation (Young Builders) to supply labor, tools, equipment, and materials for the renovation of its building in Cebu City. Young Builders then finished the work in September 2001 and billed Kabisig for P4.123M. However, despite numerous demands, Kabisig failed to pay. It contended that no written contract was ever entered into between the parties and it was never informed of the estimated cost of the renovation. Thus, Young Builders filed an action for Collection of Sum of Money against Kabisig. RTC ruled in favor of Young Builders and ordered Kabisig to pay Young Builders for the services rendered with interest and damages. Issue: W/N there was a perfected contract between Kabisig and Young Builders Held: Yes. Under the Civil Code, a contract is a meeting of minds, with respect to the other, to give something or to render some service. Accordingly under Article 1318, for a contract to be valid, it must have the following essential elements: (1) consent of the contracting parties; (2) object certain, which is the subject matter of the contract; and (3) cause of the obligation which is established. Consent must exist, otherwise, the contract is non- existent. Consent is manifested  by the meeting of the offer and the acceptance of the thing and the cause, which are to constitute the contract. By law, a contract of sale, is perfected at the moment there is a meeting of the minds upon the thing that is the object of the contract and upon the price. Indeed, it is a consensual contract which is perfected by mere consent. Further, Kabisig's claim as to the absence of a written contract between it and Young Builders simply does not hold water. It is settled that once perfected, a contract is generally binding in whatever form, whether written or oral, it may have been entered into, provided the aforementioned essential requisites for its validity are present. Article 1356 of the Civil Code  provides that, “contracts shall be obligatory in whatever form they may have been entered into,  provided all the essential requisites for their validity are present. xxx” There is nothing in the law that requires a written contract for the agreement in question to be valid and enforceable.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Timoteo Bacalso and Diosdada Bacalso v. Gregoria B. Aca-ac, Eutiquia B. Aguila, Julian Bacus, and Evelyn Sychangco G.R. No. 172919, January 13, 2016 Third Division, J. Reyes

(Contracts; essential elements of contracts; Article 1318) Facts: The Bacus siblings were the registered owners of a parcel of land in Talisay, Cebu, which they inherited from their mother, Matea. In 1987, the Bacus sinlings executed a Deed of Absolute Sale conveying a portion of the lot in favor of their cousin, Timoteo, for P8,000.00. In 1988, Timoteo, together with his siblings and some of his cousins filed a complaint for declaration of nullitu of documents, certificates of title, reconveyance of real property and other damages against Bacus and four other persons claiming that they are co-owners of 3/4 of the lot because Matea paid for the property for and in behalf of her brother, Alejandro (father of petitioner timoteo) and sisters Perpetua and Liberata. RTC found that Matea was the sole owner of the subject property. CA affirmed. Petitioners then filed another complaint for declaration of nullity of contract and claimed ownership over the lot through the DOAS. They also alleged that after partitioning the lot without their knowledge, the Bacus siblings sold a portion of the lot to Sychangco and a TCT was issued in her name. Bacus siblings claimed that there was no sale between them and the  petitioners because petitioners failed to pay the purchase price. On her part, Sychangco claimed that she is a buyer in good faith and for valaue. RTC declared the DOAS void for lack of consideration. RTC held that even granting that the sale between the Bacus siblings and the  petitioners was valid, the petitioners still cannot ask for the rescission of the sale of the disputed  portion to Sychangco as the latter was a buyer in good faith, thus has a better right to the  property. CA affirmed. Issue: W/N the deed of absolute sale executed between Bacus siblings and petitioners is null and void for failure or want of consideration. Held: Yes. The DOAS is null and void for want of consideration. Under 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: 1. Consent of the contracting parties; 2. Object certain which is the subject matter of the contract; 3. Cause of the obligation which is established. 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 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. 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

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 initio for failure to or want of consideration since the petitioner failed to pay the consideration stipulated in the Deed of Absolute Sale. 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. Well-settled is the rule that where there is no consideration, the sale is null and void ab initio. In Spouses Lequin v. Spouses Vizconde, the Court ruled that: There can be no doubt that the contract of sale or Kasulatan lacked the essential element of consideration. It is a well-entrenched rule that where the deed of sale states that the purchase price has been paid but in fact has never been paid, the deed of sale is null and void ab initio for lack of consideration.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Philippine Science High School - Cagayan Valley Campus v. PIRAA Construction Enterprises G.R. No. 204423, September 14, 2016 Second Division, J. Del Castillo

(Contracts; breach of contractual obligation; quantum meruit principle) Facts: PIRRA (general contractor) filed with CIAC a complaint for damages against PSHS Nueva Vizcaya (government academic institution) relative to the construction contracts for PSHS  particularly on Project C (Academic Building II – Phase I, Boys’ Dormitory Building –   Phase I, and School Canteen –  Phase I). Here, PIRAA requested the suspension of the construction of the canteen because PSHS decided to relocate the canteen site. PSHS granted the request. PIRAA also requested a time suspension in lieu of the relocation but PSHS said that it was not the solution as there are no structural changes in the design. PSHS directed PIRAA to file variation order with time extension. The agreement was PIRAA would submit another drawing plan to the PSHS consultant, which would evaluate PIRAA’s claim for extension. The PSHS consultant in turn, will visit the site and will submit to PIRAA a detailed drawing of the site for the variation order, but consultant failed to do so. During this period, PSHS informed PIRAA that it was terminating the Project C contract because of the latter’s delay, default, and abandonment. PIRRA contended that the termination of the contract is unjustified. It stressed that PSHS failed to give it the intended revisions of the building plan for Project C as well as the necessary documents to secure a building permit for the project. As a result, Project C was stopped and PIRRA incurred a slippage. For its part, PSHS countered that it validly terminated the contract for Project C. CIAC ruled in favor of PIRAA holding PSHS liable for delay in submitting revised drawings and for giving extra work to PIRAA. On appeal, CA partially affirmed with modifications. CA ruled that project C was validly terminated, however, PSHS was ordered to  pay for the value of the work done so far. Issue: W/N PSHS validly terminated its contract with PIRAA for Project C. Held: Yes. The contract is validly terminated. Pursuant to the General Conditions of Contract, PSHS may terminate the contract if PIRRA incurs delay, abandons the project, causes stoppage of work without the authority of PSHS, among other grounds. Indeed, by reason of PIRRA’s delay, suspension of work without any approval from PSHS, and abandonment of the project, PSHS has sufficient basis to terminate the contract for Project C. The Court, nonetheless, agrees with the CA that PIRRA is entitled to the value of the work done on Project C pursuant to the principle of quantum meruit and to avoid unjust enrichment on the  part of PIRRA. “Quantum meruit means that, in an action for work and labor, payment shall be made in such amount as the plaintiff reasonably deserves x x x as it is unjust for a person to retain any benefit without paying for it.” Here, records show that PIRRA had a 25.25 % accomplishment on Project C. To deny payment thereof would result in unjust enrichment of PSHS at the expense of PIRRA. Hence, PSHS must pay PIRRA the value of the work done on Project C.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Thelma Rodriguez, joined by her husband v. Spouses Jaime Sioson and Armi Sioson, et al. G.R. No. 199180, July 27, 2016 Third Division, J. Reyes

(Sales; contract of sale; contract to sell; double sales) Facts: In 1997, the Municipality of Orani, Bataan purchased from Neri an area of about 1.7ha to be used as extension of public market. The lot was subdivided into five lots and Neri still holds absolute title of two out of the five lots, and subsequently the lots were registered in Neri’s name  but the owner’s duplicate copies remain in the possession of the municipality pending Neri’s  payment for the share in the expenses of subdividing the lot. Neri claimed that the then municipal Mayor Zuniga suggested to sell the lot to Thelma and later on it would be expropriated. Thelma, however, failed to pay his obligations to the lot and was only able to pay half of the purchase price. In 2001, Thelma caused the annotation of an adverse claim on the lot being sold to him but she saw an announcement that a new Orani Common Terminal would be built on the said lot. Thus, Thelma file a complaint for injunction. In 2002, Neri executed an affidavit claiming that the owner’s copy of the two lots were lost, which was annotated in the original copies. Neri then caused the cancellation of Thelma’s adverse claim and caused the reconstitution of new owner’s copy of TCTs over the two lots. Thereafter, new copies were issued and Neri sold the first lot to spouses Sioson, et al. A SPA was executed by a certain Violeta in favor of Neri for the purpose. Upon learning the second sale, Thelma filed a complaint for the Declaration of Nullity of te Second Sale against spouses Sioson, et al. The respondents countered that they are innocent  purchasers for value having bought the lot at the time when Thelma's adverse claim was already cancelled. While they admit Thelma's possession of the subject property, they, however, qualify that possession is being contested in a separate a ction for forcible entry. RTC ruled in favor of Thelma holding that the second deed of sale entered into by Neri with the respondents and the subsequent TCT issued are null and void. CA reversed holding 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. Issue: W/N the contract between Neri and Thelma is a contract to sell and not a contract of sale. Held: Yes. The resolution of this case basically rests on the determination of whether the transaction  between Neri and Thelma is a contract of sale or a contract to sell. 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. The real character of the contract is not the title given, but the intention of the parties. In this case, there exist two deeds of absolute sale. Though identically worded, the first contract was undated, not notarized, signed only by Neri, and was presented in Civil Case No. 7394 for Injunction, while the second deed was dated April 10, 1997, notarized on September 5, 1997, signed by both Neri and Thelma, and was presented in Civil Case No. 7664 for Declaration of  Nullity of Deed of Sale and Title.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 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 that it was a mere contract to sell. 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.” Moreover, the alleged delivery of the property, even if true, is irrelevant considering that in a contract to sell, ownership is retained by the registered owner in spite of the partial payment of the purchase price and delivery of possession of the property. Thus, in Roque v. Aguado, the Court ruled that since the petitioners have not paid the final installment of the purchase price, the condition which would have triggered the parties' obligation to enter into and thereby perfect a contract of sale cannot be deemed to have been fulfilled; consequently, they “cannot validly claim ownership over the subject portion even if they had made an initial payment and even took  possession of the same.” Accordingly, the CA did not commit any reversible error in concluding that “the contract  between Thelma and Neri was a mere contract to sell, the transfer of ownership over Lot 398-A  being conditioned on Thelma's full payment of the purchase price. Having failed to pay the  purchase price in full, Thelma cannot claim ownership over Lot 398-A and Neri is not legally  proscribed from alienating the same lot to other buyers.”

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Joey R. Peña, v. Jesus Delos Santos and the Heirs of Rosita Delos Santos Flores G.R. No. 202223, March 02, 2016 Third Division, J. Reyes

(Sales; Capacity of the contracting parties; Article 1491) Facts: Jesus and Rosita were the judgment awardees of the 2/3 portion of four adjoining lots in Boracay Island in Civil Case No. 3683. The losing parties in the case appealed the judgment to the CA but such was dismissed. Thus, it was brought to the SC via petition for review on certiorari. SC remanded the case to Kalibo RTC for execution proceedings, during which a Motion for Substitution with a Motion for Writ of Execution and Demolition was filed by Peña averring 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. Robiso who, in turn, acquired the properties from Jesus and Rosita through assignment and sale. Peña claimed 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. RTC ruled that Jesus and Rosita lost their standing in the case upon the conveyance of their adjudged 2,000sqm portion in favor of Atty. Robiso whose ownership rights were afterwards acquired by Peña. 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. 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 and Confirmation of Sale in favor of Atty. Robiso were executed, the case was still pending with the Supreme Court, before which Jesus and Rosita were still represented by Atty. Robiso. Issue: W/N the sale of Jesus and Rosita of the parcel of land to Atty. Robiso is a prohibited sale under Article 1491(5) of the Civil Code thus making the transfer to Peña void. Held: Yes. The basis of Peña's motion for substitution is infirm because the lots were transferred to his  predecessor-in-interest, Atty. Robiso, through a prohibited sale transaction. 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 the y may take part by virtue of their profession, thus: Art. 1491. The following persons cannot acquire by purchase, even at a public or  judicial auction, either in person or through the mediation of another: xxxx (5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the  property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this  prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession. 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. 34

CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Robiso. 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 Peña over the lots awarded to Jesus and Rosita in Civil Case No. 3683. Consequently, Peña 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 rationale advanced for the prohibition in Article 1491(5) is that public policy transactions in view of the fiduciary relationship involved, i.e., the relation confidence and the peculiar control exercised by these persons. It is founded on  because, by virtue of his office, an attorney may easily take advantage of the ignorance of his client and unduly enrich himself at the expense of his client.

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disallows the of trust and public policy credulity and

CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Melecio Domingo v. Spouses Genaro Molina and Elena B. Molina G.R. No. 200274, April 20, 2016 Second Division, J. Brion

(Sales; capacity of the contracting parties; sale of conjuga l property) Facts: In 1951, spouses Anastacio and Flora Domingo bought a property in Tarlac consisting of onehalf undivided portion of an 18,164sqm parcel of land. During his lifetime, Anastacio borrowed money from spouses Molina. In 1978 or ten years after Flora’s death, Anastacio sold his undivided interest over the land to spouses Molina to cover his debt. The sale was registered and the land was transferred to spouses Molina. Melecio, one of the children of Anastacio and Flora Domingo, learned of the transfer and on 1999, Melecio filed a complaint for Annulment of Title and Recovery of Ownership against spouses Molina claiming that Anastacio could not have validly sold the interest over the subject property without Flora’s consent, as Flora was already dead at the time of the sale. The spouses Molina asserted that Anastacio surrendered the title to the subject property to answer for his debts and they have been in possession of the subject  property before the title was registered under their names and have religiously paid the  property’s r eal estate taxes. RTC dismissed the case and held that Anastacio could dispose of conjugal property without Flora’s consent since the sale was necessary to answer for conjugal liabilities. CA affirmed and held that Flora’s death is immaterial because Anastacio only sold his rights, excluding Flora’s interest, over the lot to the spouses Molina. The CA explained that there is no prohibition against the sale by the widower of real property formerly belonging to the conjugal partnership of gains. Issue: W/N the sale of the conjugal property of Anastacio and Flora to the spouses Molina without the consent of Flora is valid. Held: Yes. The sale is valid. Anastacio and Flora’s conjugal 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. Conjugal  partnership of gains established before and after the effectivity of the Family Code are 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 Code22 (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.” 36

CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Equitable Savings Bank v. Rosalinda C. Palces G.R. No. 214752, March 9, 21016 First Division, J. Perlas-Bernabe

(Sales; sale of personal property in installments; Article 1484) Facts: In 2005, Palces purchased a Hyundai Starex GRX Jumbo through a loan granted by Equitable Savings Bank (Equitable). As security for the loan, Palces executed a promissory note (PN) with chattel mortgage in favor of Equitable. The PN states that the payment shall be in 36 monthly installments; that upon default in paying any installment renders the balance due and demandable; and any default in payment gives Equitable the option to foreclose the mortgage or file an ordinary civil action for collection or any other proceedings as may be allowed by law. When Palces defaulted for two consecutive months, Equitable sent a demand letter compelling Palces to pay the remaining balance of the loan, which Palces failed to do so. Thereafter, Equitable filed a Complaint for Recovery of Possession with Replevin with Alternative Prayer for Sum of Money and Damages against Palces. Palces claimed that even though she defaulted  payment, she called Equitable and spoke to their bank officer, who gave consent thereto, thus Palces updated her payment by paying the monthly installments she missed. RTC ruled in favor of Equitable holding Palces liable to pay the entire balance because she defaulted in payment. However, since the writ of replevin over the subject vehicle had already been implemented, the RTC merely confirmed petitioner's right to possess the same and ruled that it is no longer entitled to its alternative prayer. CA affirmed with modification ordering Equitable to return the late  payments made by Palces. In this regard, the CA opined that by choosing to recover the subject vehicle via a writ of replevin, petitioner already waived its right to recover any unpaid installments, pursuant to Article 1484 of the Civil Code. Issue: W/N Equitable Savings Bank has the obligation to return to Palces the amount she paid representing Palces’ late installment payments. Held:  No. The bank has no obligation to return the amount representing the late installment payments. Article 1484 of the Civil Code, which governs the sale of personal properties in installments, states in full: Article 1484. In a contract of sale of personal property the price of which is  payable in installments, the vendor may exercise any of the following remedies: 1. Exact fulfilment of the obligation, should the vendee fail to pay; 2. Cancel the sale, should the vendee's failure to pay cover two or more installments; 3. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should the vendee's failure to pay cover two or more installments. In this case, he shall have no further action against the  purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall be void. In this case, there was no vendor-vendee relationship between respondent and petitioner. A  judicious perusal of the records would reveal that respondent never bought the subject vehicle from petitioner but from a third party, and merely sought financing from petitioner for its full  purchase price. In order to document the loan transaction between petitioner and respondent, a Promissory Note with Chattel Mortgage dated August 18, 2005 was executed wherein, inter alia, respondent acknowledged her indebtedness to petitioner in the amount of Pl,196,100.00 and 37

CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017  placed the subject vehicle as a security for the loan. Indubitably, a loan contract with the accessory chattel mortgage contract - and not a contract of sale of personal property in installments - was entered into by the parties with respondent standing as the debtor-mortgagor and petitioner as the creditor-mortgagee. Therefore, the conclusion of the CA that Article 1484 finds application in this case is misplaced, and thus, must be set aside. Further, there is nothing in the Promissory Note with Chattel Mortgage that bars petitioner from receiving any late partial payments from respondent. If at all, petitioner's acceptance of respondent's late partial payments in the aggregate amount of P103,000.00 will only operate to reduce her outstanding obligation to petitioner from P664,500.00 to P561,500.00. Such a reduction in respondent's outstanding obligation should be accounted for when petitioner conducts the impending foreclosure sale of the subject vehicle. Once such foreclosure sale has  been made, the proceeds thereof should be applied to the reduced amount of respondent's outstanding obligation, and the excess of said proceeds, if any, should be returned to her.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Spouses Jaime and Matilde Poon v. Prime Savings Bank represented by the Philippine Deposit Insurance Corporation as Statutory Liquidator G.R. No. 183794, June 13, 2016 First Division, C.J. Sereno

(Lease; termination of the lease; loss of the thing) Facts: Spouses Poon owned a commercial building in Naga City, which they used for their bakery  business. In 2006, Matulde and PSBank executed a ten-year lease contract over the building to  be used as PSBank’s branch office. The lease contract include a provision which states that: “24. Should the leased premises be closed, deserted, or vacated by the lesee, 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 x x x. 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.” Three years later BSP placed PSBank under receivership of PDIC because PSBank’s liabilities exceed its assets and it violated a cease and desist order amounting to fraud or dissipation of the assets of the institution. Thereafter, PSBank vacated the premises and surrendered the same to spouses Poon. Subsequnently, PDIC issued a demand letter to spouses Poon asking for the return of the unused advanced rentals arguing that paragraph 24 no longer holds because the closure of the bank constituted force majeure. Spouses Poon refused to pay claiming that they are entitled to the rentals. RTC ruled in favor of PDIC. CA affirmed. Issue: W/N the closure of PSBank is a fortuitous event that rendered the lease agreement functus officio and thus releasing PSBank from its contractual o bligations with spouses Poon. Held:  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. As an alternative justification for its premature termination of the Contract, respondent lessee invokes the doctrine of unforeseen event under Article 1267 of the Civil Code, which provides: Art. 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part. Tagaytay Realty Co., Inc. v. Gacutan lays down the requisites for the application of Article 1267, as follows: 1. The event or change in circumstance could not have been foreseen at the time of the execution of the contract. 2. It makes the performance of the contract extremely difficult but not impossible. 3. It must not be due to the act of any of the parties. 4. The contract is for a future prestation.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 The difficulty of performance should be such that the party seeking to be released from a contractual obligation would be placed at a disadvantage by the unforeseen event. Mere inconvenience, unexpected impediments, increased expenses, or even pecuniary inability to fulfil an engagement, will not relieve the obligor from an undertaking that it has knowingly and freely contracted. The law speaks of “service.” This term should be understood as referring to the performance of an obligation or a prestation. A prestation is the object of the contract; i.e., it is the conduct (to give, to do or not to do) required of the parties. In a reciprocal contract such as the lease in this case, one obligation of respondent as the lessee was to pay the agreed rents for the whole contract period. It would be hard-pressed to complete the lease term since it was already out of  business only three and a half years into the 10-year contract period. Without a doubt, the second and the fourth requisites mentioned above are present in this case. The first and the third requisites, however, are lacking. It must be noted that the lease agreement was for 10 years. As shown by the unrebutted testimony of Jaime Poon during trial, the parties had actually considered the possibility of a deterioration or loss of respondent's business within tha t period. Clearly, the closure of respondent's business was not an unforeseen event. As the lease was longterm, 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.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Magellan Aerospace Corporation v. Philippine Air Force G.R. No. 216566, February 24, 2016 Second Division, J. Mendoza

(Agency; in general) Facts: Philippine Air Force (PAF) contracted Chervin Enterprises, Inc. (Chervin) for the overhaul of two aircraft engines. Due to Chervin’s lack of technical capability to do the repair and overhaul, Chervin commissioned Magellan Aerospace Corporation (MAC). MAC, in turn, outsourced the overhaul service from another subcontractor, National Flight Services, Inc. (NSFI). Eventually, the engines were repaired and overhauled and PAF paid Chervin for the services, withholding P2M as retention fund. MAC demanded from Chervin payment for the balance of the contract price but MAC was not  paid despite several demands. MAC demanded from PAF the release of retention fund but to no avail. Thus, MAC filed a complaint for sum of money against Chervin and PAF. PAF claimed that its contract with Chervin was one for repair and overhaul and not for agency and thus it cannot be held liable as principal. RTC ruled in favor of PAF and CA affirmed. Issue: W/N the contract entered into by PAF and Chervin is a contract of agency. Held:  No. There was no contract of agency between PAF and Chervin. The averment that Chervin acted as PAF’s mere agents in subsequently contracting MAC to perform the overhauling services is not an ultimate fact. Nothing can be found in the complaint that can serve as a  premise of PAF’s status as the principal in the contract between Chervin and MAC. No factual circumstances were alleged that could plausibly convince the Court that PAF was a party to the subsequent outsourcing of the overhauling services. Not even in the annexes can the Court find any plausible basis for the assertion of MAC on PAF’s status as a principal. What MAC entirely did was to state a mere conclusion of law, if not, an inference based on matters not stated in the  pleading. To clarify, a mere allegation that PAF, as a principal of Chervin, can be held liable for nonpayment of the amounts due, does not comply with the ultimate fact rule. Not being an ultimate fact, the assumption of truth does not apply to the aforementioned allegation made by MAC concerning PAF. Consequently, PAF cannot be held liable as a principal in the agreement  between Chervin and MAC.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017

Mactan-Cebu International Airport Authority v. Richard E. Unchuan G.R. No. 182537, June 01, 2016 Second Division, J. Mendoza

(Agency; formalities of contract of agency; special power of attorney; Articles 1874, 1878) Facts: In 2004 Unchuan filed a complaint for damages and Partial Declaration of nullity of the Deed of Absolute Sale with Plea for Partition, Damages and Attorney’s Fees against the MCIAA alleging that he was the legal and rightful owner of two parcels of land in Lapu-Lapu City, which title to said land was registered under the name of the heirs of Eugenio Godinez. Unchuan found that Atanacio Godinez, attorney-in-fact of all the registered owners and their heirs, already sold the land to Civil Aeronautics Administration (CAA), the predecessor of MCIAA. He claimed that the sale covered by the Deed of Absolute Sale, dated April 3, 1958, was null and void because the registered owners and their heirs did not authorize Atanacio to sell their undivided shares in the subject lots in favor of CAA; that no actual consideration was paid to the said registered owners or their heirs, despite promises that they would be paid; that the deed of absolute sale did not bear the signature of the CAA representative; that there was no proof that the Secretary of the Department of Public Works and Highways approved the sale; and that his predecessors-ininterest merely tolerated the possession by CAA and, later, by MCIAA. In its Answer, MCIAA averred that on April 3, 1958, Atanacio, acting as the representative of the heirs of Eugenio Godinez, who were the registered owners, sold Lot No. 4810-A and Lot No. 4810-B to the Republic of the Philippines, represented by CAA. Thereafter, CAA took  possession of the said property upon payment of the purchase price. To corroborate the said transaction, on September 17, 1969, Atanacio, along with other former registered co-owners, signed a deed of partition attesting to the fact of sale of the two lots in favor of the government and admitted its absolute right over the same. Since then, the said lots had been in the possession of the Republic in the concept of an owner. RTC ruled in favor of Unchuan holding that Atanacio was not legally authorized to act as the attorney-in-fact of his brothers and sisters and to transact on their behalf because he was not clothed with a special power of attorney granting him authority to sell the disputed lots. “This lack of authority of Atanacio Godinez, therefore, has an effect of making the contract of sale  between the parties' predecessors-in-interest as void except perhaps for the share of Atanacio Godinez which he could very well alienate.” Moreover, the documentation of the sale was never transmitted to CAA's Manila Office; hence, the heirs did not receive any payment for the sale transaction. CA affirmed. Issue: W/N the sale is void because Atanacio has no authority to sell the subject lands. Held: Yes. The sale transaction executed between Atanacio, acting as an agent of his fellow registered owners, and the CAA was indeed void insofar as the other registered owners were concerned. They were represented without a written authority from them clearly in violation of the requirement under Articles 1874 and 1878 of the Civil Code, which provide: Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. Art. 1878. Special powers of attorney are n ecessary in the following cases: 42

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xxx (5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration; xxx The significance of requiring the authority of an agent to be put into writing was amplified in Dizon v. Court of Appeals: When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. Thus the authority of an agent to execute a contract for the sale of real estate must be conferred in writing and must give him specific authority, either to conduct the general business of the principal or to execute a binding contract containing terms and conditions which are in the contract he did execute. A special  power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration. The express mandate required by law to enable an appointee of an agency (couched) in general terms to sell must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned. For the principal to confer the right upon an agent to sell real estate, a  power of attorney must so express the powers of the agent in clear and unmistakable language. When there is any reasonable doubt that the language so used conveys such power, no such construction shall be given the document. Without a special power of attorney specifying his authority to dispose of an immovable, Atanacio could not be legally considered as the representative of the other registered co-owners of the properties in question. Atanacio's act of conveying Lot No. 4810-A and Lot No. 4810-B cannot be a valid source of obligation to bind all the other registered co-owners and their heirs  because he was not clothed with any authority to enter into a contract with CAA. The other heirs could not have given their consent as required under Article 147550 of the New Civil Code  because there was no meeting of the minds among the other registered co -owners who gave no written authority to Atanacio to transact on their behalf. Therefore, no contract was perfected insofar as the portions or shares of the other registered co-owners or their heirs were concerned.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Bank of the Philippine Islands And FGU Insurance Corporation (Presently Known As BPI/MS Insurance Corporation) v. Yolanda Laingo G.R. No. 205206, March 16, 2016 Second Division, J. Carpio

(Agency; obligations of the agent; Articles 1884, 1887) Facts: In July 1999, Rheozel, the son of respondent Laingo, opened an insurance account with BPI Caveria, Davao City, with Laingo as his named beneficiary. The insurance account is a savings account where depositors are automatically covered by an insurance policy against disability or death issued by petitioner FGU Insurance Corporation (FGU). In September 2000, Rhoezel died due to a vehicular accident. This was headlined in the Daily Mirror newspaper the following day. On the next day, Laingo instructed Alice, the family’s personal secretary, to go to BPI and inquire about the savings account of Rhoezel as it would be used for burial and funeral expenses. Alice was allowed to withdraw P995,000.00. About two years thereafter, Rheozel’s sister accidentally found the insurance certificate in Rheozel’s room and gave it to her mother Laingo. Laingo requested BPI to process the claim but FGU, in a letter, denied the claim stating that Laingo should have filed the claim 3 months after the death of the insured, as stated in the agreement. Laingo filed a complaint for specific performance with damages against BPI and FGU. RTC ruled in favor of the respondents stating that 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. CA reversed RTC and ruled that Laingo could not be expected to do an obligation which she did not know existed. The appellate court added that 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. CA ordered BPI and FGU to pay Laigo the insurance proceeds with interest and damages. Issue: W/N BPI and FGU are liable to pay Laingo the insurance proceeds as beneficiary even if the claim was filed out of time. Held: Yes. As the main proponent of the 2-in-1 deposit account, 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. Under the law, an agent is one who binds himself to render some service or to do something in representation of another. Agency may even be implied from the words and conduct of the  parties and the circumstances of the particular case. For an agency to arise, it is not necessary that the principal personally encounter the th ird person with whom the agent interacts. The law in fact contemplates impersonal dealings where the principal need not personally know or meet the third person with whom the agent transacts: precisely, the purpose of agency is to extend the  personality of the principal through the facility of the agent. In this case, since the Platinum 2-in1 Savings and Insurance account was BPI's commercial product, offering the insurance coverage free for every deposit account opened, Rheozel directly communicated with BPI, the agent of FGU Insurance.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 BPI, as agent of FGU Insurance, had the primary responsibility to ensure that the 2-in-1 account  be reasonably carried out with full disclosure to the parties concerned, particularly the  beneficiaries. Thus, it was incumbent upon BPI to give proper notice of the existence of the insurance coverage and the stipulation in the insurance contract for filing a claim to Laingo, as Rheozel's beneficiary, upon the latter's death. 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. 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 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. This notification is how a good father of a family should have acted within the scope of its business dealings with its clients. 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.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Dra. Mercedes Oliver v. Philippine Saving Bank and Lilia Castro G.R. No. 214567, April 04, 2016 Second Division, J. Mendoza

(Agency; obligations of the agent; Article 1881) Facts: Oliver was a depositor of PSBank and Castro was the Asst. VP and Acting Branch Manager of PSBank San Pedro, Laguna. In 1997, Oliver made an initial deposit of P12M in her account and 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 and with such Oliver will earn 4% per loan transaction. Due to the frequency of their transactions, Oliver entrusted her passbook to Castro. After sometime, Castro convinced Oliver to avail of an additional P10M credit line. The credit line was secured by a REM on Oliver’s house and lot in Ayala, Alabang. Oliver instructed Castro to pay P2M monthly to PSBank starting September 3, 1998 so that her credit line will be fully paid after 5 months. In the same month, Castro stopped rendering an accounting for Oliver. Oliver demanded the return of her passbook and she noticed several erasures and superimpositions therein. She became very suspicious so she requested a copy of her transaction history register from PSBank. Upon receiving her copy, Oliver was surprised to discover that P.4.5M was entered into her account on December 1998 and a total of P7M was withdrawn on the same day. She also discovered several other loan transactions she never applied for in connection with the P10M credit line. She also discovered several inconsistencies between her passbook record and the transaction history register. Afterwards, she received collection letters from PSBank but she refused to pay. Subsequently, she received a notice of sale involving her property in Ayala, Alabang. As a result, Oliver filed a complaint against PSBank and Castro. RTC ruled in favor of PSBank and Castro but reversed itself upon a motion for reconsideration filed by Oliver. According to the RTC, Oliver's assertion that the withdrawal was made without her consent prevailed in the absence of any proof to the contrary. CA reversed. The appellate court found no compelling evidence to prove that fraud attended the processing and release of the P4.5 million loan as well as the withdrawal of P7 million from Oliver's account. CA also found that PSBank exercised extraordinary diligence in handling Oliver's account, thus, the awards of damages were deleted. Issue: W/N Castro is the agent of Oliver and therefore Castro and PSBank should be liable for the transactions regarding the bank account of Oliver Held: Yes. There was an implied agency between Oliver and Castro; the loans were properly acquired. A contract of agency may be inferred from all the dealings between Oliver and Castro. Agency can be express or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency knowing that another, person is acting on his behalf without authority. In this case, clearly, an agency was formed because Castro bound herself to render some service in representation or on behalf of Oliver, in the furtherance of their business pursuit. For months, the agency between Oliver and Castro benefited both parties. Oliver, through Castro's representations, was able to obtain loans, relend them to borrowers, and earn interests; while Castro acquired commissions from the transactions. Oliver even gave Castro her passbook to facilitate the transactions. Accordingly, the laws on agency apply to their relationship. Article 1881 of the New Civil Code  provides that the agent must act within the scope of his authority. He may do such acts as may be conducive to the accomplishment of the purpose of the agency. Thus, as long as the agent acts 46

CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 within the scope of the authority given by his principal, the actions of the former shall bind the latter. Although it was proven that Oliver authorized the loans, there was nothing in the records which proved that she also allowed the withdrawal of P7 million from her bank account. Oliver vehemently denied that she gave any authority whatsoever to either Castro or PSBank to withdraw the said amount. Castro's lack of authority to withdraw the P7 million on behalf of Oliver became more apparent when she altered the passbook to hide such transaction. The Court is convinced that Castro went beyond the scope of her authority in withdrawing the P7 million from Oliver's bank account. Her flimsy excuse that the said amount was transferred to the account of a certain Lim deserves scant consideration. Hence, Castro must be held liable for  prejudicing Oliver. On the other hand, 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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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Michael C. Guy v. Atty. Glenn C. Gacott G.R. No. 206147, January 13, 2016 Second Division, J. Mendoza

(Partnership; liability of partners; solidary liability; Articles 1816, 1821-1824) Facts: Gacott purchased two brand new transreceivers form Quantech Systems Corporation (QSC) in Manila through its employee, Medestomas, but due to major defects, Gacott personally returned the transreceivers to QSC and requested for replacement. Medestomas received the returned transreceivers and promised to send replacements within two weeks but time passed and Gacott did not receive any replacements so he demanded for it but QSC said that there were no available units and it could also not refund the purchase price. Gacott filed a complaint for damages. RTC ruled in favor of Gacott. During execution of judgment, Gacott learned that QSC was not a corporation but a general partnership, with Guy as the appointed general manager. To execute  judgment, the sheriff attached one of the motor vehicles of Guy and notice was served to Guy thorough his housemaid at his residence. Guy filed motion to lift attachment arguing that he was not a judgment debtor. RTC denied the motion stating that as general partner, he may be held  jointly and severally liable with QSC and Medestomas. CA affirmed and opined that the law did not require a partner to be actually involved in a suit in order for him to be made liable. He remained “solidarily liable whether   he participated or not, whether he ratified it or not, or whether he had knowledge of the act or omission.” Issue: Whether or not Guy is solidarily liable with the partnership for damages arising from the breach of the contract of sale with Gacott. Held:  No. Guy is not solidarily liable with the partnership. 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. 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. 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. Moreover, even 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. 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.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 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. In other words, only in exceptional circumstances shall the partners’ liability be solidary in nature. Articles 1822, 1823 and 1824 of the Civil Code provide for these exceptional conditions, to wit: Article 1822. Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership or with the authority of his co partners, loss or injury is caused to any person, not being a partner in the  partnership, or any penalty is incurred, the partnership is liable therefor to the same extent as the partner so acting or omitting to act. Article 1823. The partnership is bound to make good the loss: 1. Where one partner acting within the scope of his apparent authority receives money or property of a third person and misapplies it; and 2. Where the partnership in the course of its business receives money or  property of a third person and the money or property so received is misapplied by any partner while it is in the custody of the partnership. Article 1824. All partners are liable solidarily with the partnership for everything chargeable to the partnership under Articles 1822 and 1823. In the case at bench, it was not shown that Guy or the other partners did a wrongful act or misapplied the money or property he or the partnership received from Gacott. A third person who transacted with said partnership can hold the partners solidarily liable for the whole obligation if the case of the third person falls under Articles 1822 or 1823. Gacott’s claim through the latter's employee, Medestomas. It was for a breach of warranty in a contractual obligation entered into in the name and for the account of QSC, not due to the acts of any of the  partners. For said reason, it is the general rule under Article 1816 that governs the joint liability of such breach, and not the exceptions under Articles 1822 to 1824. Thus, it was improper to hold Guy solidarily liable for the obligation of the partnership.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Jose Norberto Ang v. The Estate of Sy So G.R. No. 182252, August 3, 2016 First Division, C.J. Sereno

(Trusts; kinds of trusts; implied trust; Article 1448) Facts: In 1930, Sy So was married to Jose Ang. The couple was childless. In 1941 they adopted Jose  Norberto with no formal adoption papers. They also adopted three other wards with no formal adoption papers. In 1943, Jose Ang died. Later, Sy So acquired a property in Caloocan and named it after Norberto. She acquired another property and named it again after Jose Norberto. A six-door apartment was built on the property, which later on became an eight-door apartment. For 30 years, the family lived there. In 1989, however, having registered the property to his name, Jose Norberto filed an ejectment suit against Sy So for non-payment of rentals despite demand. In 1993, Sy So filed with RTC a case for “Transfer of Trusteeship from the Defendant Jose  Norberto Ang to the New Trustee, Tony Ang, with Damages”  citing Jose Norberto's gross ingratitude, disrespectfulness, dishonesty and breach of trust, respondent Sy So argued that she had bought the two parcels of land and constructed the apartment doors thereon at her own expense. Thus, she alleged that there was an implied trust over the properties in question. In his Answer, Jose Norberto countered that respondent Sy So was a plain housewife; that the two subject parcels of land were acquired through the money given to him by his foster father, Jose Ang; and that the apartments were built using funds derived from the sale of the latter's other properties. Jose Norberto further alleged that when he came of age, he took possession of the properties and allowed respondent Sy So to stay thereon without paying rent. However, he shouldered the real estate taxes on the land. Jose Norberto filed a second ejectment case in 1996. RTC dismissed Sy So’s complaint holding that there was no implied trust because, under Art. 1448 of the New Civil Code, “there is an implied trust when property is sold, and the legal estate is granted to one party but the price is paid by another for the purpose of having the beneficial interest of the property.”  In this case, the trial court reasoned that respondent Sy So did not intend to have the beneficial interest of the properties, but to make her wards the beneficiaries thereof. Moreover, RTC ruled that when Sy So gave the subject properties to Jose Norberto who was her child, though not legally adopted - no implied trust was created pursuant to law. CA upheld the applicability of Article 1448 of the Civil Code and the existence of an implied trust. Issue: W/N there was an implied trust thus making the substitution valid. Held:  No, there was no implied trust. Sy So's Chinese citizenship is undisputedly shown by the records, and even supported by documentary evidence presented by the representative of respondent Sy So herself. Under the Constitution then in force, aliens may not acquire residential lands. These  provisions have been substantially carried over to the present Constitution, and jurisprudence confirms that aliens are disqualified from acquiring lands of the public domain. We have consistently ruled thus in line with constitutional intent to preserve and conserve the national  patrimony. Our Constitution clearly reserves for Filipino citizens or corporations at least sixty  percent of the capital of which is owned by Filipinos the right to acquire lands of the public domain. The prohibition against aliens owning lands in the Philippines is subject only to limited constitutional exceptions, and not even an implied trust can be permitted on equity considerations.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Much as We sympathize with the plight of a mother who adopted an infant son, only to have her ungrateful ward eject her from her property during her twilight years, We cannot grant her  prayer. Applying the above rules to the present case, We find that she acquired the subject  parcels of land in violation of the constitutional prohibition against aliens owning real property in the Philippines. Axiomatically, the properties in question cannot *be legally reconveyed to one who had no right to own them in the first place. This being the case, We no longer find it necessary to pass upon the question of respondent Sy So's substitution in these proceedings.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Spouses Roberto and Adelaida Pen v. Spouses Santos and Linda Julian G.R. No. 160408, January 11, 2016 First Division, J. Bersamin

(Credit transactions; pledge; mortgage; pactum commissorium; Article 2088) Facts: In 1986, spouses Julian obtained several loans from Adelaida Pen. Evidenced by two promissory notes and secured by a REM over a property registered under the name of Santos. When the loans become due and demandable, spouses Julian failed to pay despite several demands, forcing Adelaida to institute foreclosure proceedings. Before she could file the foreclosure proceedings, Linda offered the mortgaged property as payment in kind. The parties agreed to have the  property valued at P70,000.00. Thereafter, spouses Julian executed the Deed of Sale and after spouses Pen’s payment of taxes, title was transferred to their name. In 1989 and in 1990, Linda offered to repurchase the property but failed to give payment in the agreed dates. Linda offered to pay P100,000.00 in cash as sign of good faith but spouses Pen refused to accept but instead, it was deducted to the indebtedness of spouses Julian so that as of October 1997, their unpaid  balance amounted to P319,065.00. However, instead of paying the balance, spouses Julian instituted an adverse claim and lis pendens and both were annotated at the back of the title. Spouses Julian’s version of the story is different. According to them, the deed of absolute sale had no consideration, undated, unfilled, and unnotarized. They also claimed that in December 1992 they offered to pay P150,000.00 but Adelaida refused and demanded P250,000.00. Linda desisted and instead checked the property with the Register of Deeds. She discovered that the land was already registered in the name of spouses Pen, which prompted Linda Julian to file an adverse claim against spouses Pen. RTC ruled in favor of spouses Julian concluding that the deed of sale is not valid for lack of consideration, but the PNs and the REM is valid, holding the spouses Julian still liable to pay their outstanding obligations with interest. CA affirmed with modifications ruling that the deed of sale is void, not for lack of consideration, but because it was executed at the same time as the REM, which makes the sale a prohibited pactum commissorium, in light of the fact that the deed of sale was blank as to consideration and date. Issue: W/N the deed of sale entered into by spouses Pen and spouse Julian is a pactum commissorium. Held: Yes. 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 former’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.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 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 nonpayment of the debt by Linda, and reasonably pronounced that such circumstances rendered the transaction  pactum commissorium.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Rosalina Carodan v. China Banking Corporation G.R. No. 210542, February 24, 2016 First Division, C.J. Sereno

(Credit Transactions; mortgage; accommodation mortgage; suretyship; guarantyship; Article 2047) Facts: Barbara, Rosalina, Rebecca (petitioner) and Madeline obtained a loan from Chinabank covered  by a promissory note to which they promised to pay jointly and severally the amount of P2.8M. As security for payment, Barbara, Rebecca and Rosalina executed a REM over a property registered in the name of Rosalina. Moreover, Barbara and Rebecca, as principals, also executed a surety agreement in favor of Chinabank as creditor, with Rosalina and Madeline as sureties. Barbara and Rebecca failed to pay their obligations, which prompted the bank to institute extra judicial foreclosure proceedings on the mortgaged property, and after the property was sold, the  proceedings from the sale was not enough to cover the debt. Thus, chinaba nk filed a complaint in Court to collect the deficiency. Barbara and Rebecca claimed that Rosalina and Madeline never complied with their obligation to pay their share in the loan and filed a crossclaim against Rosalina and Madeline. Chinabank filed its reply and clarified that it was suing Barbara and Rebecca as debtors under the promissory note and as principals in the surety agreement, as well as Rosalina and Madeline as sureties in the same agreement. RTC ruled in favor of Chinabank holding petitioner Rosalina, Rebecca, Barbara to be jointly and severally liable to Chinabank for the deficiency between the outstanding loan and the proceeds of the foreclosure sale. The trial court held that the creditor had the right to proceed against any one of the solidary debtors, or some or all of them simultaneously; and that a creditor's right to  proceed against the surety exists independently of the creditor's right to proceed against the  principal. CA affirmed. Issue: W/N Rosalina is liable jointly and severally with Barbara and Rebecca for the payment of Chinabank’s claims. Held: Yes. Rosalina is liable jointly and severally with Barbara and Rebecca as an accommodation mortgagor and as surety. In Belo v. PNB, we had the occasion to declare: An accommodation mortgage is not necessarily void simply because the accommodation mortgagor did not benefit from the same. The validity of an accommodation mo1igage 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.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 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. Further discussion on the same legal concept proceeded thusly: A contract of surety is an accessory promise by which a person binds himself for another already bound, and agrees with the creditor to satisfy the obligation if the debtor does not. A contract of guaranty, on the other hand, is a collateral undertaking to pay the debt of another in case the latter does not pay the debt. Simply put, a surety is distinguished from a guaranty in that a guarantor is the insurer of the solvency of the debtor and thus binds himself to pay if the principal is unable to pay while a surety is the insurer of the debt, and he obligates himself to pay if the principal does not pay. When Rosalina affixed her signature to the Real Estate Mortgage as mortgagor and to the Surety Agreement as surety which covered the loan transaction represented by the Promissory Note, she thereby bound herself to be liable to China Bank in case the principal debtors, Barbara and Rebecca, failed to pay. She consequently became liable to respondent bank for the payment of the debt of Barbara and Rebecca when the latter two actually did not pay.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Greenstar Express, Inc. and Fruto L. Sayson, Jr. v. Universal Robina Corporation and Nissin Universal Robina Corporation G.R. No. 205090, October 17, 2016 Second Division, J. Del Castillo

(Torts; liability of the employer for the damages caused by their employees; doctrine of last clear chance; Article 2180) Facts: Greenstar is a domestic corporation engaged in the business of public transportation and Sayson is one of its drivers. URC and NURC are domestic corporations engaged in the food business,  NURC being a subsidiary of URC. On February 25, 2003 which is a national holiday, a Greenstar bus driven by Sayson collided head-on with a URC van driven by Bicomong. The incident happened along Maharlika Highway, Alaminos, Laguna. Bicomong died on the spot while both the vehicles sustained considerable damage. Greenstar filed a complaint against  NURC to recover damages alleging that there was negligence on the part of Bicomong. NURC claimed that there was no negligence on their part and on the part of Bicomong as driver. RTC dismissed the complaint for damages. After evaluation of the facts, it ruled that Greenstar has no cause of action and cannot recover from URC, even assuming that the direct and  proximate cause of the accident was the negligence of the defendant's employee Renato Bicomong. Pursuant to Article 2184 of the New Civil Code, the owner of a motor vehicle is solidarily liable with his driver if at the time of the mishap, the owner was in the vehicle and by the use of due diligence could have presented (sic) the misfortune; if the owner is not in the motor vehicle, the provision of Article 2180 is applicable. The defendants being juridical  persons, the first paragraph of Article 2184 is obviously not applicable. Under Article 2180, “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.” In other words, for the employer to be liable for the damages caused by his employee, the latter must have caused the damage in the course of doing his assigned tasks or in the-performance of his duties. Here, Bicomong was not in the performance of his duty when the accident happened. It was a holiday and URC has no business transaction whatsoever in the area and the van was merely  borrowed by Bicomong for personal use. The accident having occurred outside Bicomong's assigned tasks, defendant employers cannot be held liable to the plaintiffs, even assuming that it is the fault of defendants' employee that was the direct and proximate cause of their damages. CA affirmed the decision of the RTC and held that the present case involves an action for damages based on quasi-delict is governed by Articles 2176 and 2180 of the New Civil Code. Issue: W/N NURC and URC are liable to Greenstar for the damages they sustained during the incident Held:  No. NURC and URC are not liable to pay damages against Greenstar. The resolution of this case must consider two (2) rules. First, Article 2180's specification that '[e]mployers shall be liable for the damages caused by their employees ... acting within the scope of their assigned tasks [.]' Second, the operation of the registered-owner rule, that registered owners are liable for death or injuries caused by the operation of their Vehicles. These rules appear to be in conflict when it comes to cases in which the employer is also the registered owner of a vehicle. Article 2180 requires proof of two things: first, an employment relationship between the driver and the owner; and second, that the driver acted within the scope of his or her assigned tasks. On the other hand, applying the registered-owner rule only requires the plaintiff to prove that the defendant-employer is the registered owner of the vehicle. The 56

CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 appropriate approach is that in cases where both the registered-owner rule and Article 2180 apply, the plaintiff must first establish that the employer is the registered owner of the vehicle in question. Once the plaintiff successfully proves ownership, there arises a disputable presumption that the requirements of Article 2180 have been proven. As a consequence, the burden of proof shifts to the defendant to show that no liability under Article 2180 has arisen. Thus, when by evidence the ownership of the van and Bicomong's employment were proved, the  presumption of negligence on respondents' part attached, as the registered owner of the van and as Bicomong's employer. The burden of proof then shifted to respondents to show that no liability under Article 2180 arose. This may be do ne by proof of any of the following: 1. That they had no employment relationship with Bicomong; or 2. That Bicomong acted outside the scope of his assigned tasks; or 3. That they exercised the diligence of a good father of a family in the selection and supervision of Bicomong. Respondents succeeded in overcoming the presumption of negligence, having shown that when the collision took place, Bicomong was not in the performance of his work; that he was in  possession of a service vehicle that did not belong to his employer NURC, but to URC, and which vehicle was not officially assigned to him, but to another employee; that his use of the URC van was unauthorized - even if he had used the same vehicle in furtherance of a personal undertaking in the past, this does not amount to implied permission; that the accident occurred on a holiday and while Bicomong was on his way home to his family in Quezon province; and that Bicomong had no official business whatsoever in his hometown in Quezon, or in Laguna where the collision occurred, his area of operations being limited to the Cavite area. On the other hand, the evidence suggests that the collision could have been avoided if Sayson exercised care and prudence, given the circumstances and information that he had immediately  prior to the accident. The collision was certainly foreseen and avoidable but Sayson took no measures to avoid it. To add insult to injury, Sayson hastily fled the scene of the collision instead of rendering assistance to the victims. The doctrine of last clear chance provides that where both  parties are negligent but the negligent act of one is appreciably later in point of time than that of the other, or where it is impossible to determine whose fault or negligence brought about the occurrence of the incident, the one who had the last clear opportunity to avoid the impending harm but failed to do so, is chargeable with the consequences arising therefrom. Stated differently, the rule is that the antecedent negligence of a person does not preclude recovery of damages caused by the supervening negligence of the latter, who had the last fair chance to  prevent the impending harm by the exercise of due diligence.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Sulpicio Lines, Inc. v. Napoleon Sesante G.R.No. 172682, July 27, 2016 First Division, C.J. Sereno

(Damages; moral; temperate) Facts: In 1998, MV Princess of the Orient, a passenger vessel owned and operated by Sulpicio Lines, sank near Fortune Island in Batangas. 150 out of 388 recorded passengers were lost. Napoleon Sesante, member of the PNP and a lawyer, was one of the survivors. He sued Sulpicio Lines for  breach of contract and damages. The sinking of the ship was allegedly due to the fact the the vessel still sailed despite the stormy weather. Because of this, the vessel was hit by strong winds and big waves, putting the passengers in danger. He claimed that due to the experience he had undergone, he had suffered tremendous hunger, thirst, pain, fear, shock, serious anxiety and mental anguish. He had sustained injuries, and had lost money, jewelry, important documents,  police uniforms and the .45 caliber pistol issued to him by the PNP; and that because it had committed bad faith in allowing the vessel to sail despite the storm signal, the petitioner should  pay him actual and moral damages of P500,000.00 and Pl,000,000.00, respectively. For its part, Sulpicio Lines claimed that the vessel is seaworthy, it being cleared to sail from the port by the  proper authorities. It also claimed that there was no negligence on the part of its employees and that the sinking was due to a fortuitous event. RTC ruled in favor of Sesante, holding Sulpicio Lines liable under Article 1739 and 1759 of the Civil Code. However, it reduced the award for moral damages. CA affirmed but further reduced the award of moral damages but Sulpicio Lines was still dissatisfied with the Decision. Sulpicio Lines claimed that none of the instances under Article 2201 were present in this case as to make it liable for the award of damages. Issue: W/N Suspicio Lines should be held liable to pay moral damages and temperate damages for injuries sustained by Napoleon Held: Yes. The award of moral damages and temperate damages is proper. We agree with the  petitioner that moral damages may be recovered in an action upon breach of contract of carriage only when: (a) death of a passenger results, or ( b) it is proved that the carrier was guilty of fraud and bad faith, even if death does not result. However, moral damages may be awarded if the contractual breach is found to be wanton and deliberately injurious, or if the one responsible acted fraudulently or with malice or bad faith. The negligent acts of the officers and crew of M/V Princess of the Orient could not be ignored in view of the extraordinary duty of the common carrier to ensure the safety of the passengers. The totality of the negligence by the officers and crew of M/V Princess of the Orient, coupled with the seeming indifference of the petitioner to render assistance to Sesante, warranted the award of moral damages. While there is no hard-and-fast rule in determining what is a fair and reasonable amount of moral damages, the discretion to make the determination is lodged in the trial court with the limitation that the amount should not be palpably and scandalously excessive. The trial court then bears in mind that moral damages are not intended to impose a penalty on the wrongdoer, or to enrich the  plaintiff at the expense of the defendant. While the anguish, anxiety, pain and stress experienced  by Sesante during and after the sinking cannot be quantified, the moral damages to be awarded should at least approximate the reparation of all the consequences of the petitioner's negligence. The award of temperate damages was also proper. The petitioner claims that temperate damages were erroneously awarded because Sesante had not proved pecuniary loss. Temperate damages 58

CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 may be recovered when some pecuniary loss has been suffered but the amount cannot, from the nature of the case, be proven with certainty. Article 2224 of the Civil Code expressly authorizes the courts to award temperate damages despite the lack of certain proof of actual damages. Indubitably, Sesante suffered some pecuniary loss from the sinking of the vessel, but the value of the loss could not be established with certainty. The CA, which can try facts and appreciate evidence, pegged the value of the lost belongings as itemized in the police report at P120,000.00. The valuation approximated the costs of the lost belongings. In that context, the valuation of P120,000.00 is correct, but to be regarded as temperate damages. In fine, the petitioner, as a common carrier, was required to observe extraordinary diligence in ensuring the safety of its passengers and their personal belongings. It being found herein short of the required diligence rendered it liable for the resulting injuries and damages sustained by Sesante as one of its passengers.

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CIVIL LAW REVIEW 2 CASE DIGESTS 2016-2017 Coca-Cola Bottlers Philippines, Inc. v. Spouses Jose R. Bernardo and Lilibeth R. Bernardo, doing business under the name and style Jolly Beverage Enterprises G.R. No. 190667, November 7, 2016 First Division, C.J. Sereno “

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(Damages; temperate; moral; exemplary) Facts: Coca-Cola is a domestic corporation engaged in the large-scale manufacture, sale, and distribution of beverages around the country. Jolly Beverage Enterprises is engaged in the wholesale delivery of soft drinks in Quezon City. In 1987 Coca-Cola designated JBE as distributor and they entered into an exclusive dealership contract for three years. For the past 13 years, the parties had good and harmonious relationship. However, in 1999, JBE discovered that Coca-Cola started reaching out to the former ’s customers through a list provided by JBE as required by Coca-Cola, giving them promos and selling their product at a lower price. Because of these schemes, JBE lost both their major customers and some of its small store customers. This prompted JBE to file complaint for damages, alleging that the acts of Coca-Cola constituted dishonesty, bad faith, gross negligence, fraud, and unfair competition in commercial enterprise. Coca-cola denied the allegations. RTC held Coca-Cola liable for abuse of rights in violation of Articles 19, 20, and 21 of the Civil Code and for unfair competition under Article 28. In its Decision, RTC ordered Coca-Cola to  pay JBE temperate damages amounting to P500,000.00, to be offset with their outstanding obligation to Coca-Cola, plus moral and exemplary damges, as well as attorney’s fees. CocaCola argued that RTC had no jurisdiction to award temperate damages because it was not prayed for in the complaint. It also claimed that there was no violation of Articles 19, 20, 21, and 28, and thus the award of moral and exemplary damages were not proper. CA affirmed the RTC Decision. Issue: W/N The award of temperate damages not prayed for in the Complaint, as well as moral and exemplary damages, and attorney’s fees are proper. Held: Yes. The CA did not err in affirming the finding that petitioner was liable for temperate, moral and exemplary damages, as well as attorney's fees, tor abuse of rights and unfair competition. Petitioner is liable for damages for abuse of rights and unfair competition under the Civil Code. Both the RTC and the CA found that petitioner had employed oppressive and highhanded schemes to unjustly limit the market coverage and diminish the investment returns of respondents. Articles 19, 20, and 21 of the Civil Code provide the legal bedrock for the award of damages to a  party who suffers damage whenever another person commits an act in violation of some legal  provision; or an act which, though not constituting a transgression of positive law, nevertheless violates certain rudimentary rights of the party aggrieved. The provisions read: Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith. Art. 20. Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same.

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