1

Stronghold Insurance vs Republic Asahi

Quiachon, Rudith

STRONGHOLD INSURANCE COMPANY, INC., vs. REPUBLIC-ASAHI GLASS CORPORATION Facts: On may 24, !", Republic#asahi entered into a contract $ith %ose &. Santos 'r (proprietor o) %&S costruction* )or the construction o) road$ays and a drainage system in its compound in +asig city. Republic#asahi $as to pay ,.-.(inclusive o) /A0* to be completed $ithin 241 days beginning may !, !". 0o insure the completion, %&S e2ecuted a per)ormance bond 'ointly and severally $ith Stronghold Insurance 3o. Inc. $orth +hp4",,111. On may 2-,!", Republic asahi paid 4",,111 as do$npayment On august, %&S sent 2 post billings $orth more than 244,111 $hich republic asahi paid ho$ever it constituted only 4.-5 o) the construction. 6e)ore nov. !", enginners o) republic asahi sent reminders to %&S 3onstruction )or the alarmingly slo$ pace o) the $or7 ho$ever it $ent unheeded. On nov !", republic asahi rescinded the contract pursuant to art. 1- o) its contract. Such rescission does not constitute a $aiver to claim damages to %&S and its sureties pursuant to art 1, o) the contract. &ue to %&S )ailure to comply, Republic asahi had to hire another contractor to )inish the $or7 $hich incurred an additional e2pense o) more than -.2m On 'an and mar 8"1, republic asahi sent a letter to stronghold to claim, under the bond, an amount not less 4",,111. such letters $ent unheeded. 0hus republic asahi )iled a complaint against %&S, as7ing payment o) more than -.2m )or the additional e2penses incurred )or the ne$ contractor. And a )ile against %&S and stronghold )or an amount o) 4,1,111 as damages, under the bond. And also )or e2emplary and attorney s )ees. According the deputy sheri)), summons $ere duly delivered to stronghold, ho$ever, 'ose d. santos died the previous year. Since then %&S o))ice location $as already un7no$n. Stronghold s ans$er to the complaint $as that it s liability as surety $as e2tinguished by the death o) 'ose d. santos. And i) this $as not the case, it $as still released )rom the liability on the )). grounds9 #there $as no li:uidation to ascertain the liability o) %&S and stronghold, pursuant to procedural due process, $ith the active participation o) 'ose d. santos since he is already dead.

#that it s claim )or money $as conditioned on its claim )or damages in case on )ailure on the part o) %&S to )ul)il the obligation. Since 'ose d. santos already died, it can no longer prove to claim damages. #that it $as deprived o) its right to protect its interest as surety $hen it $as not in)ormed o) the death o) 'ose d. santos and the unilateral rescission by republic asahi. #that it $as denied due process $hen republic asahi did not in)orm them during the determining and )i2ing o) the amount )or the completion o) the pro'ect. #that article 1, o) the contract $as against o) public policy and denied stronghold o) due process. #that republic asahi deviated )rom the terms o) the contract $ithout the consent o) stronghold. Stronghold prayed )or damages and attorney s )ees. 0he lo$er court dismissed the complaint. 3A held that it $as not released )rom its liability since it $as not the )ault o) republic asahi that the obligation $as impossible to per)orm but it $as %&S s )ault. So it s liability still subsists. $hether or not the liability o) stronghold as surety $as automatically e2tinguished by the death o) the principal debtor ('ose d. santos*;

Issue:

Hel : <o. the obligation still subsists. As a general rule, the eat! "# e$t!e% t!e c%e $t"% "% t!e e&t"% "es '"t e(t$')u$s! t!e "&l$)at$"'. O&l$)at$"'s a%e t%a's*$ss$&le t" t!e !e$%s, e(ce+t ,!e' t!e t%a's*$ss$"' $s +%e-e'te &. t!e la,, t!e st$+ulat$"'s "# t!e +a%t$es, "% t!e 'atu%e "# t!e "&l$)at$"'." O'l. "&l$)at$"'s t!at a%e +e%s"'al "% a%e $ e't$#$e ,$t! t!e +e%s"'s t!e*sel-es a%e e(t$')u$s!e &. eat!.

Section , o) Rule !=12 o) the Rules o) 3ourt e2pressly allo$s the prosecution o) money claims arising )rom a contract against the estate o) a deceased debtor. >vidently, those claims are not actually e2tinguished.1- ?hat is e2tinguished is only the obligee s action or suit )iled be)ore the court. In the present case, ,!ate-e% *"'eta%. l$a&$l$t$es "% "&l$)at$"'s Sa't"s !a u' e% !$s c"'t%acts ,$t! %es+"' e't ,e%e '"t $'t%a's*$ss$&le &. t!e$% 'atu%e, &. st$+ulat$"', "% &. +%"-$s$"' "# la,. He'ce, !$s eat! $ '"t %esult $' t!e e(t$')u$s!*e't "# t!"se "&l$)at$"'s "% l$a&$l$t$es, ,!$c! *e%el. +asse "' t" !$s estate. Deat! $s '"t a e#e'se t!at !e "% !$s estate ca' set u+ t" ,$+e "ut t!e "&l$)at$"'s u' e% t!e +e%#"%*a'ce &"' . C"'se/ue'tl., +et$t$"'e% as su%et. ca''"t use !$s eat! t" esca+e $ts *"'eta%. "&l$)at$"' u' e% $ts +e%#"%*a'ce &"' . As a su%et., +et$t$"'e% $s s"l$ a%$l. l$a&le ,$t! Sa't"s in accordance $ith the 3ivil 3ode, $hich provides as )ollo$s9 @Art. 2144. 6y guaranty a person, called the guarantor, binds himsel) to the creditor to )ul)ill the obligation o) the principal debtor in case the latter should )ail to do so. @I) a person binds himsel) solidarily $ith the principal debtor, the provisions o) Section 4,14 3hapter -, 0itle I o) this 6oo7 shall be observed. In such case the contract is called a suretyship.@ @Art. 121=. 0he creditor may proceed against any one o) the solidary debtors or some or all o) them simultaneously. 0he demand made against one o) them shall not be an obstacle to those $hich may subse:uently be directed against the others, so long as the debt has not been )ully collected.@ Ander the la$ and 'urisprudence, respondent may sue, separately or together, the principal debtor and the petitioner herein, in vie$ o) the s"l$ a%. 'atu%e "# t!e$% l$a&$l$t. . 0he death o) the principal debtor $ill not $or7 to convert, decrease or nulli)y the substantive right o) the solidary creditor. >vidently, despite the death o) the principal debtor, respondent may still sue petitioner alone, in accordance $ith the solidary nature o) the latter s liability under the per)ormance bond. 2 +<6 vs 0an Sumando, BritCie Dynne

PNB -s. TAN FACTS

+rivate respondent Doreto 0an is the o$ner o) a parcel o) land abutting the national high$ay in .andalagan, 6acolod 3ity. Eovernment instituted an e2propriation proceeding against 0an and other property o$ners. 0an )iled a motion )or order o) issuance o) the release o) the e2propriation price o) +-2,4!1. 0he court directed the petitioner +hilippine <ational 6an7 (+<6* to deliver the said amount to respondent 0an. +<6, through its Assistant 6ranch .anager %uan 0agamolilo, issued a manager s chec7 to one Sonia EonCaga $ithout the 7no$ledge, consent or authority o) 0an. Sonia EonCaga then deposited the amount in her account $ith Bar >ast 6an7 and 0rust 3ompany then later on $ithdre$ it. 0an demanded )or the payment o) the e2propriation price but the petitioner re)used to do so since it already delivered it to Sonia EonCaga by virtue o) the strength o) a s+ec$al +",e% "# att"%'e. allegedly executed in her favour by Tan. 0an e2ecuted an a))idavit stating that9 Fe never e2ecuted a special po$er o) attorney in )avour o) Sonia EonCaga. Fe never authoriCed Sonia EonCaga to receive the e2propriation price )rom petitioner. Fe signed a motion )or the court to issue the release o) the e2propriation price. 0his $as given to <ilo EonCaga, Sonia s husband, )or him to )ile in court. A)ter the issuance o) the order, >ngr. &ecena o) Figh$ay >ngineer s O))ice authoriCed the release to .r. EonCaga and not to 0an. 0an )iled a motion praying that the petitioner be directed to pay the amount. +<6 re)used to pay, contending that payment $as already delivered to Sonia EonCaga $ho presented a special po$er o) attorney. 0he court directed +<6 to present the S+A in court but )ailed to do so. In a separate civil action, 0an )iled a complaint against petitioner and %uan 0agamolila to recover the said amount. +etitioner )iled a third party complaint against the spouses <ilo and Sonia EonCaga, praying that they be ordered to pay the respondent. 0he summons $as not delivered to the spouses despite the opportunity to do it. Fence, the complaint $as dismissed. In his ans$er, %uan 0agamolila stated that Sonia EonCaga presented the special po$er o) attorney. Dater on, she borro$ed it but promised to return it. She said that he needed the S+A to encash the chec7. 0he R03 ruled that petitioner +<6 and %uan 0agamolila are 'ointly and severally liable to the respondent )or the e2propriation price. 3A a))irmed the decision o) the R03.

ISSUE: ?O< there $as payment made to respondent 0an HELD: <o, there $as no payment made since the chec7 $as not delivered to 0an. ?hen the court directed +<6 to pay 0an, it already had an obligation to deliver the said amount to him. Article 12-- o) the 3ivil 3ode stated that a debt shall not be understood to have been paid unless the thing or service $hich the obligation consists has been completely delivered or rendered. T!e &u% e' "# +%""# t" +%"-e t!at t!e%e ,as +a.*e't *a e l$es ,$t! t!e e&t"%. Fo$ever, in this case, t!e SPA a' t!e c!ec0 ,e%e '"t +%ese'te $' c"u%t. 0he testimonies o) the petitioner s $itnesses $ere also con)licting. %uan 0agamolila stated that the chec7 $as issued to the order o) Sonia EonCaga as attorney#in#)act o) 0an. Fo$ever, >lvira 0ibon, cashier o) +<6 6acolod 6ranch, stated that the chec7 $as issued to the order o) Doreto 0an. 3ontrary to the petitioner s contention that only the e2istence o) the S+A should be proved, necessary evidence $ith regards to the 'atu%e a' e(te't "# t!e alle)e +",e% a' aut!"%$t. "# S"'$a G"'1a)a s!"ul als" &e +%"-e . N" suc! e-$ e'ce ,as +%ese'te . 0he best evidence rule applies in this case. 0he best evidence is the "%$)$'al ,%$t$'). Fo$ever, petitioner )ailed to produce it in court. 0his could supposedly determine $hether or not Sonia EonCaga had the authority to receive the amount. ?ithout such evidence, the petitioner s arguments must )ail. 3A ABBIR.>&.

3ulaba vs 3A

+usta, 6% 6onn

FRANCISCO CULABA a' DEMETRIA CULABA, "$') &us$'ess u' e% t!e 'a*e a' st.le 2Cula&a St"%e2, petitioners, vs. COURT OF APPEALS a' SAN MIGUEL CORPORATION, respondents. T!e U' $s+ute Facts

0he spouses Brancisco and &emetria 3ulaba $ere the o$ners and proprietors o) the 3ulaba Store and $ere engaged in the sale and distribution o) San .iguel 3orporation s (S.3* beer products. S.3 sold beer products on credit to the 3ulaba spouses in the amount o) +2!,=,1.11, as evidenced by 0emporary 3redit Invoice <o. 42"4-. 4 0herea)ter, the 3ulaba spouses made a partial payment o) +-,441.11, leaving an unpaid balance o) +24,"11.11. As they )ailed to pay despite repeated demands, S.3 )iled an action )or collection o) a sum o) money against. 0he de)endant#spouses denied any liability, claiming that they had already paid the plainti)) in )ull on )our separate occasions. 0o substantiate this claim, the de)endants presented )our (4* 0emporary 3harge Sales (03S* Di:uidation Receipts. &e)endant Brancisco 3ulaba testi)ied that he made the )oregoing payments to an S.3 supervisor $ho came in an S.3 van. Fe $as then sho$ed a list o) customers accountabilities $hich included his account. 0he de)endant, in good )aith, then paid to the said supervisor, and he $as, in turn, issued genuine S.3 li:uidation receipts. Bor its part, S.3 submitted a publisher s a))idavit " to prove that the entire boo7let o) 03SD Receipts bearing <os. 24-11#24-,1 $ere reported lost by it, and that it caused the publication o) the notice o) loss in the %uly ", 1"!- issue o) the &aily >2press, stating the said loss and that any transaction entered into $ith the use o) the said lost receipt $ill not be honored.

T!e T%$al C"u%t3s Rul$') A)ter trial on the merits, the trial court rendered 'udgment in )avor o) S.3, and held the 3ulaba spouses liable on the balance o) its obligation. According to the trial court, it $as unusual that de)endant Brancisco 3ulaba )orgot the name o) the collector to $hom he made the payments and that he did not re:uire the said collector to print his name on the receipts. T!e c"u%t als" '"te t!at alt!"u)! t!e. ,e%e +a%t "# a s$')le &""0let, t!e TCS L$/u$ at$"' Rece$+ts su&*$tte &. t!e e#e' a'ts $ '"t a++ea% t" !a-e &ee' $ssue $' t!e$% 'atu%al se/ue'ce. Fu%t!e%*"%e, t!e. ,e%e +a%t "# t!e l"st &""0let %ece$+ts, ,!$c! t!e +u&l$c ,as ul. ,a%'e "# t!%"u)! t!e N"t$ce "# L"ss t!e +la$'t$## cause t" &e +u&l$s!e $' a a$l. 'e,s+a+e%. T!$s c"'#$%*e t!e +la$'t$##3s cla$* t!at t!e %ece$+ts +%ese'te &. t!e e#e' a'ts ,e%e s+u%$"us "'es.

(mao ni ans$er sa :uestion n imam sa a7oa na mali a7oa tubag. * 0he appellants asserted that $hile the trial court s observations $ere true, it $as the usual business practice in previous transactions bet$een them and S.3. 0he S.3 previously honored receipts not bearing the salesman s name. According to appellant Brancisco 3ulaba, he even lost some o) the receipts, but did not encounter any problems. According to appellant Brancisco, he could not be )aulted )or paying the S.3 collector $ho came in a van and $as in uni)orm, and that any regular customer $ould, $ithout any apprehension, transact $ith such an S.3 employee. Burthermore, the respective receipts issued to him at the time he paid on the )our occasions mentioned had not yet then been declared lost. 0hus, the subse:uent publication in a daily ne$spaper declaring the boo7lets lost did not a))ect the validity and legality o) the payments made. Accordingly, by its actuations, the S.3 $as estopped )rom :uestioning the legality o) the payments and had no cause o) action against the appellants. 0he 3ourt o) Appeals a))irmed the decision o) the trial court. Fence, the instant petition.

3ontentions o) +arties (Reiteration* According to the petitioners, receiving receipts )rom the private respondent s agents instead o) its salesmen $as a usual occurrence, as they had been operating the store since 1"4". 0hus, on )our occasions in April 1"!-, $hen an agent o) the respondent came to the store $earing an S.3 uni)orm and driving an S.3 van, petitioner Brancisco 3ulaba, $ithout :uestion, paid his accounts. Fe received the receipts $ithout )ear, as they $ere similar to $hat he used to receive be)ore. Burthermore, the petitioners assert that, common e2perience $ill attest that unless the attention o) the customers is called )or, they $ould not ta7e note o) the serial number o) the receipts. 0he petitioners contend that the private respondent advertised its $arning to the public only a)ter the damage $as done, or on %uly ", 1""-. Its belated notice sho$ed its glaring lac7 o) interest or concern )or its customers $el)are, and, in sum, its negligence. +etitioner Brancisco 3ulaba avers that the agent to $hom the accounts $ere paid had all the physical and material attributes or indications o) a representative o) the private respondent, leaving no doubt that he $as duly authoriCed by the latter. +etitioner Brancisco 3ulaba s testimony that @he does not necessarily chec7 the contents o) the receipts issued to him e2cept )or the amount indicated i) GtheH same accurately re)lects his actual payment@ is a common attitude o) customers. Fe could, thus, not be )aulted )or paying the private respondent s agent on )our occasions. +etitioner Brancisco 3ulaba asserts that he made the payment in good )aith, to an agent $ho issued S.3 receipts $hich appeared to be genuine. 0hus, according to the petitioners, they had duly paid their obligation in accordance $ith Articles 1241 and 1242 o) the <e$ 3ivil 3ode. 0he private respondent, )or its part, avers that the burden o) proving payment is $ith the debtor, in consonance $ith the e2press provision o) Article 12-- o) the <e$ 3ivil 3ode. 0he petitioners miserably )ailed to prove the sel)#serving allegation that they already paid their liability to the private respondent. Burthermore, under normal circumstances, an obligor $ould not 'ust pay a substantial amount to someone $hom he sa$ )or the )irst time, $ithout even as7ing )or the latter s name.

T!e Rul$') "# t!e C"u%t 0he petition is dismissed. +ayment is a mode o) e2tinguishing an obligation. 21 Article 1241 o) the 3ivil 3ode provides that payment shall be made to the person in $hose )avor the obligation has been constituted, or his successor#in#interest, or any person authoriCed to receive it.21 In this case, the payments $ere purportedly made to a @supervisor@ o) the private respondent, $ho $as clad in an S.3 uni)orm and drove an S.3 van. Fe appeared to be authoriCed to accept payments as he sho$ed a list o) customers accountabilities and even issued S.3 li:uidation receipts $hich loo7ed genuine. An)ortunately )or petitioner Brancisco 3ulaba, he did not ascertain the identity and authority o) the said supervisor, nor did he as7 to be sho$n any identi)ication to prove that the latter $as, indeed, an S.3 supervisor. 0he petitioners relied solely on the man s representation that he $as collecting payments )or S.3. 0hus, the payments the petitioners claimed they made $ere not the payments that discharged their obligation to the private respondent. 0he basis o) agency is representation. 22 A person dealing $ith an agent is put upon in:uiry and must discover upon his peril the authority o) the agent. 2- In the instant case, the petitioners loss could have been avoided i) they had simply e2ercised due diligence in ascertaining the identity o) the person to $hom they allegedly made the payments. 0he )act that they $ere parting $ith valuable consideration should have made them more circumspect in handling their business transactions. +ersons dealing $ith an assumed agent are bound at their peril to ascertain not only the )act o)

agency but also the nature and e2tent o) authority, and in case either is controverted, the burden o) proo) is upon them to establish it. 240he petitioners in this case )ailed to discharge this burden, considering that the private respondent vehemently denied that the payments $ere accepted by it and $ere made to its authoriCed representative.

<egligence is the omission to do something $hich a reasonable man, guided by those considerations $hich ordinarily regulate the conduct o) human a))airs, $ould do, or the doing o) something, $hich a prudent and reasonable man $ould not do.2, In the case at bar, the most prudent thing the petitioners should have done $as to ascertain the identity and authority o) the person $ho collected their payments. Bailing this, the petitioners cannot claim that they acted in good )aith $hen they made such payments. 0heir claim there)or is negated by their negligence, and they are bound by its conse:uences. 6eing negligent in this regard, the petitioners cannot see7 relie) on the basis o) a supposed agency. Allied 6an7ing vs Dim Sio ?an .alinao, Iennerly Albert

All$e Ba'0$') C"%+"%at$"' -s. L$* S$" 4a' Facts: Issue: On <ovember 1"!-, respondent Dim Sio ?an deposited +1.1. to petitioner Allied 6an7ing 3orporation s money mar7et placement )or a ter o) -1#days to mature on &ecember 1,, 1"!-. On &ecember ,, 1"!-, 3ristina So an o))icer o) petitioner Allied 6an7ing 3orp. received a call )rom one $ho introduced himsel) as respondent JDim Sio ?anK instructing the )ormer to pre# terminate her money mar7et placement and issue a manager s chec7 )or the proceeds to be pic7ed up by one J&eborah SantosK (the caller describe the appearance o) .rs. Santos so that So can easily identi)y her* Dater Santos arrived and the petitioner Allied 6an7ing 3orp issued the manager s chec7 amounting to 1.1. in the name o) Dim Sio ?an. (the chec7 $as a cross#chec7 JBor payees account onlyK* to Santos. 0he said manager s chec7 $as the deposited to Bilipinas 3ement 3orporation s metroban7 account $ith Dim Sio ?an s signature )orged in the endorsement. >arlier on September 1"!-, B33 deposited 2. in +roducer 6an7 s money mar7et placement maturing on Oct 1"!- but $hich $as rolled over until &ecember ,, 1"!-, in $hich &eborah Santos $as the money mar7et trader o) +roducer 6an7 assigned to the account o) B33. B33 demanded the proceed o) its money mar7et placement on &ecember ,, 1"!- (same time $hen .s. So o) Allied 6an7 received the phone call )rom allegedly Dim Sio ?an instructing her to pre#terminate the latter s money mar7et placement $ith them (Allied 6an7* through the manager s chec7 issued by Allied 6an7ing 3orp. and $as then deposited to B33 s .etroban7 account as +roducer 6an7 s payment o) its obligation to B33. 0o clear the chec7 and in compliance $ith the rules and regulations o) +hilippine 3learing Fouse 3orp. (+3F3*, .etroban7 stamped as guarantee on the manager s chec7 $hich readsK All previous endorsement andLor lac7 o) endorsement guaranteedK. 0he chec7 $as sent to Allied 6an7 through +3F3 and upon presentment Allied 6an7 )unded the chec7 $ithout even chec7ing the authenticity o) Dim Sio ?ans signature in the purported indorsement. On &ecember ", 1"!4, Dim Sio ?an deposited $ith Allied 6an7ing 3orporation its second money mar7et placement to mature on %anuary ", 1"!4. On &ecember 14, 1"!- upon the maturity o) the )irst money mar7et placement, Dim Sio ?an $ent to Allied 6an7 to $ithdra$ the proceeds but $as later on in)ormed that the placement $as pre# terminated upon her instruction, $hich $as denied by Dim Sio ?an. She only desisted )rom )urther complaining $hen the ban7 manager s promise her that the proceeds o) her )irst money mar7et placement $ill be recovered. Apon maturity o) the respondent s second money mar7et placement on %anuary ", 1"!4, 3ristina So called Dim Sio ?an )or )urther instruction. Dim instructed So to roll#over the placement )or -1 more days. Dim Sio ?an upon realiCing that the promise o) the petitioner Allied 6an7 o) the recovery o) the proceeds o) the )irst money mar7et placement did not materialiCe, she sent a demand letter address to the petitioner, but Allied 6an7ing 3orp. re)used to pay Dim Sio ?an )or according to the petitioner, the respondent authoriCed the pre#termination o) the )irst money mar7et placement. So on Beb. 1"!4, respondent )iled $ith R03 a complaint )or the recovery o) the proceeds o) the )irst money mar7et placement. R03 ruled in )avor o) Dim Sio ?an (respondent* 3A a))irmed the decision o) R03 $ith .O&IBI3A0IO<. Fence this petition.

4ON, CA e%%e $' %ul$') t!at t!e%e ,as '" aut!"%$1at$"' &. t!e %es+"' e't t" +%e-te%*$'ate t!e #$%st *"'e. *a%0et +lace*e't5 4ON All$e Ba'0$') C"%+"%at$"' $s st$ll l$a&le t" +a. %es+"' e't #"% t!e +%"cee s "# t!e *"'e. *a%0et +lace*e't.

Hel : <o, 3A $as correct in holding that the respondent did not authoriCe to pre#terminate the money mar7et placement nor the release o) the proceeds o) the placement to &eborah Santos.

S3 held that Allied 6an7ing 3orporation is still liable to respondent Dim Sio ?ant. Bor the relationship bet$een the ban7 and a client is one o) a debtor#creditor. 0he civil code enumerated the instances $hen the obligation are e2tinguished under Article 12-19 0hrough payment or per)ormance 6y the loss o) the thing due. 6y condonation or remission o) the debt. 6y merger or con)usion o) the rights o) the debtor and creditor. 6y compensation and 6y novation. Other $ays o) e2tinguishing an obligation are9 1. Rescission, 2. Annulment. -. Bul)illment o) the resolutory condition and 4. +rescription. Brom the )actual )indings o) the trial court and appellate court, Dim Sio ?an did not authoriCe the release o) her money mar7et placement to Santos and the 6an7 had been negligent in doing so. So there is no :uestion that the obligation o) the petitioner had not been e2tinguished. Article 12419 +ayment shall be made only to the person in $hose )avor the obligation $as constituted, or to his successor in interest or any person authoriCed to receive such payment. As commented by Arturo 0olentino9 +ayment by a debtor to a $rong party does not e2tinguish the obligation as to the creditor, i) no )raud or negligence imputable against the latter. >ven i) the debtor acted in utmost good )aith and by mista7e as to the person o) the creditor or through error induced by the )raud o) a third person, the payment to one $ho is not in )act his creditor or authoriCed to receive such payment is void e2cept as provided in article 1241, such payment does not pre'udice the creditor and accrual o) interest is not suspended by it. Since there $as no e))ective payment o) respondent s money mar7et placement, the ban7 is still obliged to pay her at =5 per annum interest )rom .arch 1=, 1"!4 until the payment thereo).

P.S. sa /uest$"' '$ *aa* 0a)a&$ ')a ,ala 0" 0atu&a), a') a's,e% 0a., All$e te%*$'ate t!e *"'e. *a%0et +lace*e't.

Ba'0$') C"%+ s!"ul !a-e as0 #"% t!e %es+"' e't3s c"'se't ,!e' C%$st$'a S" ,as $'st%ucte t" +%e-

>stanislao vs >ast ?est 6an7ing

RodrigueC, &yan

Case &et,ee' Pet$t$"'e%s-S+"uses Ra#ael 6 7e'a$ a Esta'$sla" -. Res+"' e't East 4est Ba'0$') C"%+"%at$"' FACTS: 1. %uly 24, 1""49 +etitioners obtained -, "2,, 111 Doan )rom respondents evidenced by a +romissory <ote and Secured by 2 &eeds o) 3hattel .ortgage (1 st deed o) 2 dump truc7s M a bulldoCer to secure the loan amount o) 2, -4,, 111 N 2nd deed o) bulldoCer M a $heel loader to secure the loan amount o) 1, ,,1, 111.*. 2. +etitioners de)aulted in the amortiCations. 0he entire obligation became due and demandable. -. April 11, 21119 Respondent )iled in R03 Antipolo a Suit )or Replevin $L &amages praying that the e:uipment in the 1 st deed o) chattel mortgage be SeiCed and &elivered to it. O In the alternative, prayed that petitioners be ordered to pay the outstanding principal amount o) -, !4=, 124.- $ith 1".,5 interestLyear rec7oned )rom 'udicial demand until )ully paid O Subse:uently moved )or Suspension o) the +roceedings on account o) an >arnest Attempt to arrive at an Amicable Settlement o) the case. 4. 0he trial court suspended the proceedings. &uring the negotiations, a &eed o) Assignment dated August 1=, 2111 $as dra)ted by the respondent $hich provides that9 O+etitioners indebted in the aggregate sum o) 4, -1,, 4,".,2 as o) August 1=, 2111 and in )ull payment thereo), they 3onvey motor vehicles in the 1 st deed O0hat the ban7 as Assignee Accepts the Assignment in Bull +ayment o) the debt. O+etitioners a))i2ed their signature on the &eed o) Assignment but )or some un7no$n reason, the ban7 s duly authoriCed representative )ailed to sign the deed. ,. October =, 2111 M .arch !, 21119 +etitioners completed the delivery o) the heavy e:uipment mentioned in deed o) assignment. O Respondent accepted $ithout +rotest or Ob'ection. =. %une 21, 21119 Respondent )iled a .ani)estation and .otion to admit an Amended 3omplaint )or the seiCure and delivery o) t$o more heavy e:uipment covered under the 2 nd deed o) chattel mortgage claiming that the representative inadvertently )ailed to include the 2nd deed among the documents )or$arded to its counsel $hen the original complaint $as being dra)ted. 4. 6an7 s amended complaint )or Replevin alleged that petitioners outstanding indebtedness as o) %une 14, 2111 stood at 4, 24,, "1".=1, more or less e:ual to the aggregate value o) the additional units o) heavy e:uipment sought to be recovered.

O+rayed that the in the event that the e:uipment could not be replevied, petitioners be ordered to pay the outstanding sum o) -, !4=, 124. 4- $ith 1".,5 interest per annum rec7oned )rom %anuary 24, 1"!! !. +etitioners sought to dismiss the amended complaint alleging that their previous payments on loan amortiCations, the e2ecution o) the deed o) assignment on August 1=, 2111, M respondent s acceptance o) the three units o) heavy e:uipment, had the e))ect o) )ull payment o) their total outstanding obligation $hich is a bar on respondent )rom recovering any more amounts. O 6y $ay o) counterclaim, they sought the a$ard o) damages ". .arch 14, 211=9 0rial court &ismissed the amended complaint )or lac7 o) merit holding that the deed o) assignment M petitioners delivery o) the heavy e:uipment e))ectively e2tinguished petitioners total loan obligation. ORespondent $as estopped )rom )urther collecting )rom the petitioners $hen it accepted $ithout any protest, delivery o) the - units o) heavy e:uipment as )ull M complete satis)action o) the petitioners total loan obligation. O It )ailed to timely recti)y its alleged mista7e in the original complaint and deed o) assignment, ta7ing almost a year to act. O Respondent appealed to the 3A. 3A reversed the trial court s decision. Issue: ?L< the &eed o) Assignment $as a per)ected agreement $hich e2tinguished petitioners total outstanding obligation to the respondent. Rul$'): a. &eed o) Assignment $as a per)ected agreement $hich e2tinguished petitioners total outstanding obligation to the respondent. O It e2plicitly provided that petitioners (assignors* Jin )ull paymentK o) its obligation o) 4, -1,, 4,". ,2, shall deliver the - units o) heavy e:uipment to the assignee (respondent*, $hich Jaccepts the assignment in )ull payment o) the above#mentioned debtK O0his could only mean that should petitioners complete the delivery o) the - units, respondent s credit $ould have been satis)ied in )ull, and petitioner s aggregate indebtedness $ould then be considered to have been paid in )ull as $ell. b. 0he nature o) the assignment $as a dation in payment, $hereby property is alienated to the 3R in satis)action o) a debt in money. O Assuming arguendo that it $as a compromise agreement, there $as no need )or respondent s signature because $ith the delivery o) the heavy e:uipment $hich the latter accepted, the agreements $as 3onsummated. ORespondent s approval may be in)erred )rom its un:uali)ied acceptance o) the heavy e:uipment. O 3onsent to contracts is mani)ested by the meeting o) the o))er and the acceptance o) the thing. O O))er must be certain and the acceptance absolute. c. ?ith its years o) ban7ing e2perience, resources M manpo$er, respondent is presumed to be )amiliar $ith the implications o) entering into the deed o) assignment $hose terms are categorical and le)t nothing $ith interpretation. O Alleged non#inclusion is tantamount to ine2cusable mani)est negligence $hich should not invalidate the 'uridical tie O +rotestations are sel)#serving. It $as not until %une 21, 2111 that respondent raised the issue o) its alleged mista7e by )iling an amended complaint )or replevin involving di))erent chattels, although )ounded on the same principal obligation. d. ?hen respondent accepted the delivery o) all three units o) heavy e:uipment under the deed o) assignment, there could be no doubt that it intended to be bound under the agreement. O Since the agreement $as consummated by the delivery on .arch !, 2111, petitioners are deemed to have been released )rom all the obligations to respondent. O<o more credit to collect N <o principal obligation to spea7 o) N <o more 2nd deed o) chattel mortgage that may subsist O A chattel mortgage cannot e2ist as an independent contract since it is a mere accessory contract, its validity $ould depend on the validity o) the loan secured by it. NN Amended complaint )or replevin should be dismissed, because the chattel mortgage agreement upon $hich it is based had been rendered ine))ectual. 0he R03 decision reinstatedNN = Ong vs Roban Dending Opalla, <issa

ONG -s. ROBAN LENDING CORPORATION ER <O. 142,"2 %uly ", 211! FACTS: (4L14L"" in the P total -L21L11* amount o) +etitioner +4.. spouses 0hese loans obtained $ere several secured by loans a )rom real estate respondents mortgage.

(2L12L11* 0he parties e2ecuted an Amendment to Amended Real >state .ortgage consolidating their loans inclusive o) charges thereon $hich totaled to +,.".. 0he parties e2ecuted a &acion in +ayment Agreement $herein petitioners assigned the properties to respondent in settlement o) their total obligation. 0hey also e2ecuted a .emorandum o) agreement $ith the stipulations as )ollo$9

a. b. c.
(April o) and

that they agreed upon the consolidation o) loans that Sps. Ong shall sign another +romissory note $ith an amount o) +,.". $ith a promise to pay $ithin a year )rom the time o) the consolidation other$ise, the de)endant shall proceed $ith the &acion >n +ago Agreement 2112* mortgage the +etitioners contract &acion )iled as in a complaint abandoned, accounting +ayment e2ecuted are be)ore and void R03 damages )or 0arlac alleging constituting )or that pactum the the declaration .OA commissorium.

+etitioners alleged that the loans e2tended to them $ere )ounded on several +L< $hich provided )or -.,5 monthly interest rates, ,5 penalty per month on the total amount due and demandable and 2,5 attorneyQs )ees. +etitioners decried these additional charges as illegal and unconscionable@ as they hardly allo$ any borro$er any chance o) survival in case o) de)ault. 0he respondent maintained the legality o) its transactions $ith petitioner stating the &acion is la$)ul and valid as it is recogniCed under the 3ivil 3ode and that the accumulated interest and other charges computed )or more than 2 years $ould stand reasonable and valid ta7ing into consideration that the principal loan is +4.. R039 no pactum commissorium. 3omplaint dismissed. 3A9 upheld R03 ISSUE: ?O< the .OA and the &acion >n +ago e2ecuted are valid; RULING: <o. 0hey are null and void as they constitute pactum commissorium. >lements o) +actum 3ommissorum o) the mortgaged property $ithout the need o) any )oreclosure proceedings are9 $hich enables the mortgagee to ac:uire o$nership

1. there should be a property mortgaged by $ay o) security )or the payment o) the principal obligation 2 there should be a stipulation )or automatic appropriation by the creditor o) the thing mortgaged in case o) non#payment o) the principal obligation $ithin the stipulated period. +actum 3ommissorium is prohibited under Art. 21!! o) 33. JA creditor may not appropriate a thing given by $ay o) pledge or mortgage, nor dispose the same. Stipulations contrary to this shall be null and void.K 0he .OA and the &+A contain no provision )or )oreclosure proceedings or redemption $hich means that Roban Dending automatically ac:uires o$nership o) the mortgaged property upon Sps Ong )ailure to pay. A true &acio >n +ago is the assignment or alienation o) property intended to e2tinguish debt and not by $ay o) security. So, the &+A does not e2tinguish the petitioner s obligation. Since .OA and &+A constitute pactum commissorium $hich is prohibited under the la$, it is <ADD and /OI&.

S3 held that the monthly interest rate o) -.,5 or 425 per annum unconscionable. Respecting the charges on the loans, courts may reduce interest rates, penalty charges and attorneyQs )ees i) they are ini:uitous or unconscionable. 0he penalty )ee at the monthly rate o) ,5 or =15 per annum o) the total amount due and demandable P principal O interest, $ith the interest not paid $hen due added to and becoming part o) the principal and li7e$ise bearing interest at the same rate, compounded monthly P unconscionable and reduces it to 125 per annum. 3ase remanded to the lo$er courts )or accounting purposes. 4 Ocampo vs Dandban7 Raphoc7un, Brances

GLORIA OCAMPO AND TERESITA TAN -s LANBAN8 OF THE PHILIPPINES 9:ul. ;, <==>? FACTS: In 1""1, Eloria Ocampo and her daughter, 0eresita 0an, obtained )rom the Dand 6an7 o) the +hilippines a +11,111,111.11G-H loan (herein re)erred to as :uedan loan*, $hich $as released to them on the separate dates9 Amount +-.""=. +=. &ate released %an. -1, 1""1 Apr. ,, 1""1 &ate o) maturity %uly -1, 1""1 October 2, 1""1 +< s 2 +< - +<

Ocampo and 0an availed o) the Quedan Binancing +rogram )or Erain Stoc7s o) the Quedan and Rural 3redit Euarantee 3orporation (Quedancor*, $hereby the latter guaranteed to pay the Dand 6an7 their loan,but upto !15 o) the outstanding loan, plus interests upon maturity, in case o) non#payment. +ursuant thereto, they delivered to the Dand 6an7 several grains $arehouse receipts (:uedans*, and e2ecuted a &eed o) AssignmentL3ontract o) +ledge covering 41,="1 cavans o) palay. 3orollarily, the :uedans delivered by Ocampo and 0an, as security, turned out to be insu))icient. Ocampo and 0an constituted a R>. over 2 parcels o) unregistered land o$ned by Ocampo to secure the remaining 215. Such encumbrance $as annotated in the land titile $hen Ocampo )iled )or registration o) the said property. On August 1,, 1""1, Ocampo signed debit advices amounting to +111,111.11 as partial payment o) the :uedan loan. A)ter the maturity o) the remaining three (-* promissory notes on October 2, 1""1, Ocampo )ailed to pay the balance )or her :uedan loan. 0hus, the Dand 6an7 )iled $ith Quedancor a claim )or guarantee payment. It also )iled $ith the R03 a criminal case )or esta)a against Ocampo )or disposing the stoc7s o) palay covered by the grains $arehouse receipts. Also )or the e2tra'udicial )oreclosure o) the R>. as regards to the 215 portion o) the :uedan loan. 0herea)ter, the Ex Officio +rovincial Sheri)) issued a <otice o) >2tra'udicial Sale, setting the sale at public auction, a copy o) $hich $as )urnished to, and received by, Ocampo. Ocampo and 0an )iled $ith the R03 a 3omplaint )or Declaration of Nullity and Damages with Application for a Writ of reliminary !n"unction against the Dand 6an7 o) the +hilippines and the Ex Officio +rovincial Sheri)) o) +angasinan, praying that a)ter due notice and hearing on the merits, the R039 (1* ecla%e t!e ee "# %eal estate *"%t)a)e 'ull a' -"$ S (2* ecla%e t!e e(t%a@u $c$al #"%ecl"su%e +%"cee $')s a' '"t$ce "# e(t%a@u $c$al sale, 'ull a' -"$ S (-* *a0e t!e ,%$t "# +%el$*$'a%. $'@u'ct$"' +e%*a'e't S and (4* "% e% t!e e#e' a'ts t" +a., @"$'tl. a' se-e%all., *"%al a*a)es $' a' a*"u't t" &e #$(e &. t!e RTC, +lus att"%'e.As #ees, e(+e'ses "# l$t$)at$"', a*"') "t!e%s. In their 3omplaint, Ocampo and 0an claimed that the real estate mortgage is a )orgery, because Dand 6an7 did not in)orm them that the properties $ould be used to secure the payment o) a +2. loan, $hich they never applied )or, much less received its proceeds. And the properties $as $as allegedly mortagaged $as not her o$n. Dand 6an7 presented its $itnesses $hich testi)ied that Ocampo and 0an obtained a 11. loan )rom Dandban7, !15 $as secured by :uedan receipts and $as re:uired to submit an additional collateral )or the remaining 215 unsecured portion. As )or OcampoQs claim o) )ull payment o) the :uedan loan, Dand 6an7 insisted other$ise. It argued that the :uedan loan $as still not )ully satis)ied because it $as not made a party to the &eed o) Absolute Assignment bet$een Ocampo and Quedancor. R03 rendered a decision in )avor o) Ocampo and 0an. Dand 6an7 moved )or reconsideration, but the R03 denied the same. 3A reversed the decision o) the R03 and ordered )or the dismissal o) the complaint. Ocampo and 0an did not )ile a motion )or reconsideration o) the 3A decision. Instead, they elevated the matter be)ore the 3ourt via the present petition, $hich involves the )ollo$ing issues9

ISSUES: (1* $hether or not the deed o) real estate mortgage $as void due to )orgeryS and (2* assuming that it $as valid, $hether or not the loan $as already e2tinguished. RULING: 9B?

0he real issue here is not so much on )orgery, but on the )act that the Dand 6an7 allegedly used the genuine signature o) Ocampo in order to ma7e it appear that she had e2ecuted a real estate mortgage to secure a +2. loan. Ocampo maintained that $hen she signed the blan7 )orm, she $as led to believe by the Dand 6an7 that such $ould be used to process her +,. loan application. She $as, there)ore, surprised $hen she received a notice )rom the sheri)) regarding the )oreclosure o) a mortgage over her properties. An)ortunately, Ocampo )ailed to convince the court that she $as deceived, through misrepresentations andLor insidious actions, into signing a blan7 )orm )or use as security to her previous loan. 0here)ore, &eed o) R>. $as valid. 9<? S3 held that the loan $as not yet e2tinguished. 0he loan $as bet$een her and the Dand 6an7S yet, she did not include the latter as party to the &eed o) Absolute Assignment, )or the )ollo$ing reasons9 that it $as Quedancor $hich collected )rom her and that, once, $hen she $ent to the Dand 6an7 to pay her loan, the person she approached merely smiled at her. Fer 'usti)ications $ere )limsy and incredulous. All the above circumstances, not$ithstanding, Ocampo hastily e2ecuted the &eed o) Absolute Assignment and conveyed some o) her properties to Quedancor $ithout prior notice to the Dand 6an7. S3 )urther de)ined dacion en pago is the delivery and transmission o) o$nership o) a thing by the debtor to the creditor as an accepted e:uivalent o) the per)ormance o) the obligation. 0hus, it is a special mode o) payment $here the debtor o))ers another thing to the creditor, $ho accepts it as e:uivalent o) payment o) an outstanding debt, $hich underta7ing, in one sense, amounts to a sale. As such, the essential elements are consent, ob'ect certain, and cause or consideration. In its modern concept, $hat actually ta7es place in dacion en pago is an ob'ective novation o) the obligation $here the thing o))ered as an accepted e:uivalent o) the per)ormance o) an obligation is considered as the ob'ect o) the contract o) sale, $hile the debt is considered as the purchase price. In any case, common consent is an essential prere:uisite, be it sale or novation, to have the e))ect o) totally e2tinguishing the debt or obligation. T!e %e/u$s$te c"'se't $s '"t +%ese't $' t!$s case. 0he &eed o) Assignment re)erred to $as entered into bet$een Quedan GEuaranteeH Bund 6oard and the plainti))s#appellees. 0he appellant creditor ban7, ho$ever, had no participation, or much less, consented to the e2ecution o) the said deed o) assignment. Fence, the deed o) assignment cannot have the valid e))ect o) e2tinguishing the real estate mortgage or much less the :uedan loan inso)ar as the creditor ban7 is concerned.

Roc7ville vs 3ulla

0oma$is, .oe

ROC8CILLE EDCEL INTERNATIONAL EDIM CORPORATION -s SPOUSES OLIGARIO CULLA a' BERNARDITA MIRANDA FACTS: 0he spouses Oligario and 6ernardita (#ps. $ulla* are the registered o$ners o) a parcel o) land that $as mortgaged to +S 6an7 to secure a loan o) +1.4.. Sometime in 1""-, the O))ice o) the 3ler7 o) 3ourt and the >2#O))icio Sheri)) issued a Sheri)) s <otice o) Sale )or the e2tra'udicial )oreclosure o) the property. 0o prevent the )oreclosure, Oligario approached Roc7ville P represented by its president and chairman, &iana Roung P )or )inancial assistance. Roc7ville accommodated Oligario s re:uest and e2tended him a loan o) +1.4.. 0his amount $as increased by +=110 )or the cash advances Oligario re:uested, )or a total loan amount o) +2.. According to Roc7ville, $hen Oligario )ailed to pay the +2. loan a)ter repeated demands and promises to pay, the Sps. 3ulla agreed to pay their indebtedness by selling to Roc7ville another property the spouses o$ned in 6atangas 3ity. 0he property has an area o) appro2imately 4,144 s:uare meters and survey revealed that the property is $orth more than the Sps. 3ulla s +2. loan, the parties agreed to )i2 the purchase price at +-.,.. Roc7ville contented that it accepted the o))er )or a dacion en pago and a &eed o) Absolute Sale over the property $as e2ecuted. ?hile the property $as a con'ugal property o) the Sps. 3ulla, only Oligario signed the &eed o) Absolute Sale. Roc7ville asserted that, by agreement $ith the Sps. 3ulla, Roc7ville $ould pay the additional +1.,. a)ter 6ernardita a))i2es her signature to the &eed o) Absolute Sale. Roc7ville claimed that it had al$ays been ready and $illing to comply $ith its obligation to deliver the +1.,.. Fo$ever, $hen 6ernardita continued to re)use to sign the &eed o) Absolute Sale, Roc7ville caused the annotation o) an adverse claim on 030 in order to protect its interest in the property. Burthermore, Roc7ville tried to trans)er the title o) the property in its name but the Registry o) &eeds re)used to carry out the trans)er, given the absence o) 6ernardita s signature in the &eed o) Absolute Sale. Roc7ville )iled a complaint )or Speci)ic +er)ormance and &amages be)ore %T$ against the Sps. 3ulla, praying that the lo$er court order 6ernardita to sign the &eed o) Absolute Sale or, in the alternative, to authoriCe the sale even $ithout 6ernardita s signature. Sps. 3ulla alleged that the purported &eed o) Absolute Sale )ailed to re)lect their true intentions, as the deed $as meant only to guarantee the debt to &iana Roung, not to Roc7ville. 3ontrary to Roc7ville s contention, the agreement $as that the +1.,. had to be paid be)ore 6ernardita $ould sign the &eed o) Absolute Sale. ?hen neither Roc7ville nor &iana Roung paid the +1.,., the Sps. 3ulla volunteered to repay the +2. and opted to rescind the sale. R03 decided the case in the respondents )avor, dismissing Roc7ville s complaint a)ter )inding that the transaction bet$een the parties $as in reality an e:uitable mortgage, not an absolute sale. 3A a))irmed R03 s decision.

10

Roc7ville submits that the 3A erred in )inding that the contract o) sale $ith the Sps. 3ulla $as an e:uitable mortgage, insisting that the transaction $as a dacion en pago. $A concluded that the purported contract of sale between %oc&ville and the #ps. $ulla was in reality an e'uitable mortgage based on the following factual circumstances( )a* the glaring inade'uacy in the consideration for the sale and the actual mar&et value of the property+ )b* the fact that the #ps. $ulla remained in possession of the property even after the execution of the Deed of Absolute #ale+ )c* the fact that %oc&ville never paid the #ps. $ulla the agreed ,.-. balance in the purchase price+ and )d* %oc&ville/s continuous grant of extensions to the #ps. $ulla to pay their loan despite the execution of the deed of sale.

ISSUE: ?O< the petitioner $as correct in insisting that the transaction $as that o) &A3IO< >< +AEO and not an e:uitable mortgage. RULING: Not dacion en pago Dacion en pago is a special mode o) payment $hich involves the delivery and transmission o) o$nership o) a thing by the debtor to the creditor as an accepted e:uivalent o) the per)ormance o) an e2isting obligation. Bor dacion en pago to e2ist, the )ollo$ing elements must concur9 (a* e($ste'ce "# a *"'e. "&l$)at$"' S (b* t!e al$e'at$"' t" t!e c%e $t"% "# a +%"+e%t. &. t!e e&t"% ,$t! t!e c"'se't "# t!e #"%*e%S and (c* sat$s#act$"' "# t!e *"'e. "&l$)at$"' "# t!e e&t"%. Roc7ville mainly contends that the Sps. 3ulla sold their property to pay their due and demandable +2. debtS the transaction is there)ore a dacion en pago. It also repeatedly emphasiCed that 6ernardita admitted in her testimony that she $ould have signed the &eed o) Absolute Sale i) Roc7ville had paid the +1.,.. Roc7ville s arguments $ould have been telling and convincing $ere it not )or the undisputed )act that even a)ter the e2ecution o) the &eed o) Absolute Sale, Roc7ville still granted Oligario time (a)ter the lapse o) = months* to repay his +2. indebtedness, on the same day that the deed $as e2ecuted. I) the parties had truly intended a dacion en pago transaction to e2tinguish the Sps. 3ulla s loan and Oligario had sold the property in payment )or this debt, it made no sense )or him to continue to as7 )or e2tensions o) the time to pay the loan. .ore importantly, Roc7ville $ould not have granted the re:uested e2tensions to Oligario i) payment through a dacion en pago had ta7en place, the granted e2tensions simply belied its contention that they had intended a dacion en pago. On several occasions, $e have decreed that in determining the nature o) a contract, courts are not bound by the title or name given by the parties. 0he decisive )actor in evaluating an agreement is the intention o) the parties, as sho$n, not necessarily by the terminology used in the contract but, by their conduct, $ords, actions and deeds prior to0 during and immediately after e2ecuting the agreement. 0hus, S3 agree $ith the )actual )indings o) the R03 and the 3A that no agreement o) sale $as per)ected bet$een Roc7ville and the Sps. 3ulla. On the contrary, $hat they denominated as a &eed o) Absolute Sale $as in )act an e:uitable mortgage.

"

0ypingco vs Dim

RaTises, &olly

:OSEPH TYPINGCO -s SYCHINGHOS a' FAR EAST BAN8 AND TRUST CO. FACTS: Sometime bet$een &ecember 1""= and Bebruary 1""4, respondents#spouses Dina ?ong Dim (Dina* and %ohnson Sychingho (%ohnson* borro$ed )rom petitioner %oseph 0ypingco (0ypingco* the sum o) ASU=11,111 $hich $as later restructured, payable on or be)ore &ecember -1, 1""4, under a promissory note e2ecuted by the spouses and co#signed by their children#co# respondents %erry Sychingho (%erry* and %ac7son Sychingho (%ac7son* as sureties. Bollo$ing their de)ault in payment, Dina, %erry, and %ac7son conveyed on %anuary 2", 1""! to 0ypingco via dacion en pago their house and lot in Ereenhills, San %uan (sub'ect property*, a)ter )irst paying respondent Bar >ast 6an7 and 0rust 3ompany (B>603* the balance o) a promissory note to clear the title o) a Real >state .ortgage annotated thereon in )avor o) B>603. 0ypingco s repeated demands )or the delivery o) the o$ner s duplicate copy o) the title, having remained unheeded, he )iled a complaint )or speci)ic per)ormance and recovery o) the title against respondents Sychinghos and B>603 be)ore the QueCon 3ity Regional 0rial 3ourt (R03*. Respondents Sychinghos averred in the main that it $as B>603 that $as unla$)ully $ithholding delivery o) the o$ner s duplicate copy o) the title despite )ull payment o) the mortgage loan $ith it. B>603, $hich $as absorbed a)ter a merger by 6an7 o) the +hilippine Islands (6+I*, contended that spouses Dina and %ohnson had unsettled obligations as sureties )or %SR International +hilippines, Inc. and %M% 6rothers 3orporation under 3omprehensive Surety Agreements $hich they had e2ecuted authoriCing B>603 to retain and proceed against their properties in its possession that the Real >state .ortgage annotated on the title $as a continuing security )or their present and )uture obligations that 0ypingco $as not a buyer in good )aith, he having )ailed to conduct )urther in:uiry on the status o) the sub'ect property

11

+etitioner argues that the copy o) the Real >state .ortgage submitted by 6+I (>2hibit J11K* is inadmissible, the $itness $ho identi)ied it having no personal 7no$ledge o) its e2istence and due e2ecution. Fe contends that there $as no evidence that respondents Sychinghos had other unpaid obligations $ith B>603 )or $hich the title should continue to stand as security.

ISSUE: ?hether respondent Sychinghos had the right to sell or convey title to the sub'ect property at the time o) the dacion en pago HELD:

0he 3ourt )inds in the a))irmative. 0here having been no previous )oreclosure o) the Real >state .ortgage on the sub'ect property, respondent Sychinghos o$nership thereo) remained intact. A mortgage does not a))ect the o$nership o) the property as it is nothing more than a lien thereon serving as security )or a debt. 0he mortgagee does not ac:uire title to the mortgaged real estate unless he purchases it at a public auction. Since petitioner agreed to the )ull e2tinguishment o) respondents spouses then outstanding obligation in vie$ o) the unconditional conveyance to him o) the sub'ect property, here is a per)ected and en)orceable dacion en pago. Fe should thus en'oy )ull entitlement to the sub'ect property. 6an7 o) the +hilippine Islands, to $hich Bar >ast 6an7 and 0rust 3ompany $as merged, is ordered to surrender the o$ner s duplicate copy to the Register o) &eeds o) San %uan, .etro .anila in order to process the issuance o) a ne$ title over the sub'ect property in the name o) petitioner, %oseph 0ypingco.

11

0an Shuy vs .aula$in

Eido, >Carianne

Ta' S!u. -s spouses Gu$lle%*" Maula,$' a' Pa%$') Ca%$'" Maula,$' FACTS: +etitioner and Respondent are both engage in the business o) buying and selling copra and corn. /icente, petitioner s son $ho helps in their business, e2plained that $henever they are to buy copra or corn )rom crop sellers they $ould prepare and issue them a pessada. A pessada is a document that contains details o) the transaction, he )urther e2plained that $henever the said pessadas contains the annotation pd on the total amount o) the purchase price that $ould mean that the said crop deliveries had already been paid by the petitioner. %uly 11,1""4. Ferein petitioner e2tended a loan to the respondent )or the amount o) +421,111. In return herein respondent obligated himsel) to pay the said loan and to sell copras to the petitioner. +etitioner allege that despite repeated demands, herein respondent only remitted a total amount o) 2!,,11 $hich leaves an outstanding balance o) -"1,,11. +etitioner )iled a complaint in the regional trial court. Respondent countered that he had already paid the sub'ect amount in )ull. According to him, he continuously delivered and sold copras to petitioner an d that he had a subse:uent oral arrangement $ith petitioner that the net proceeds )or the said copra deliveries $ould be applied as installment payment )or his loan. 0o bolster his de)ense. Respondent presented copies o) the pessada issued by >lena, daughter o) the respondent and o) /icente. Fe pointed out that the said do not contain the notation pd $hich means that he did not receive the net proceeds o) the copra deliveries but instead they $ere applied as installment payment )or the loan. R03 ruled that the net proceeds )or the copra deliveries should be applied as installment payment. 3A a))irmed the decision o) the R03.

12

ISSUE: ?O< the delivery o) the copras amounted to installment payments )or the loan obtained by the respondent )rom the petitioner.

RULING: R>S. Article 12,4 provied )or a soecial )orm o) payment called dation in payment, in $here property is alienated to the creditor to satis)y a debt in money. 0he subse:uent arrangement bet$een the petitioner and the respondent is in the nature o) Dation in ayment. 0here $as partial payment $henever Euillermo delivers copras and chose not to collect the net proceeds but instead apply them as installment payments o) the loan. ?here)ore, the petition is denied and the resolution o) the 3A is a))irmed.

11

>:uitable +3I vs <g Sheung <gor

Repors, %amil

E/u$ta&le PCI Ba'0, A$*ee Yu a' Be@a' L$"'el A+as, Pet$t$"'e%s Cs. N) S!eu') N)"%, "$') &us$'ess u' e% t!e 'a*e a' st.le E8EN MAR8ETINGF 8EN APPLIANCE DICISION , INC. a' Be'@a*$' E. G", Res+"' e'ts Facts: Oct. 4, 2111 respondents )iled an action )or annulment andLor re)ormation o) documents and contracts against petitioner >:uitable +3I 6an7 and its employees, Aimee and 6e'an in the R03. Respondents claimed that the said ban7 induced them to avail o) its peso and dollar credit )acilities by o))ering lo$ interest rates that is $hy they accepted >:uitable +3I 6an7 s proposal and signed the ban7 s pre#printed promissory notes on various dates beginning 1""=. According to the respondents, they $ere una$are that the documents contained identical escalation clauses granting >:uitable +3I 6A<I authority to increase interest rates $ithout their consent. >:uitable asserted that the respondents consented to the terms and conditions laid do$n by the said ban7. In )act, they $ere availing the said credit )acilities )or almost , years. R03 decided that the promissory note $as valid. 6ut the escalation clause violated the principle o) .utuality o) 3ontracts. It also rendered that there $as a steep depreciation o) the peso during the intervening period, there)ore, it declared the e2istence o) >2traordinary &e)lation. &ue to the 'udgment, R03 ordered the use o) the 1""= dollar e2change rate in computing respondents dollar denominated loans. 3A a))irmed the decision o) the 0rial 3ourt. Issue: ?O< there $as an e2traordinary de)lation in this case. Hel : S3 said no. Art. 12,1 provides that, I< >V0RAOR&I<ARR I<BDA0IO< OR &>BDA0IO<OB 0F> 3ARR><3R S0I+ADA0>& SFOAD& I<0>R/><>, 0F> /ADA> OB 0F> 3ARR><3R A0 0F> 0I.> OB 0F> >S0A6DISF.><0 OB 0F> O6DIEA0IO< SFADD 6> 0F> 6ASIS OB +AR.><0, A<D>SS 0F>R> IS A< AER>>.><0 0O 0F> 3O<0RARR. 0here are re:uisites )or e2traordinary in)lation or de)lation be proven9 0hat there $as an O))icial declaration o) e2traordinary in)lation or de)lation )orm the 6ang7o Sentral ng +ilipinas. 0hat the obligation $as contractual in nature. 0hat the parties e2pressly agreed to consider the e))ects o) the e2traordinary in)lation or de)lation.

13

In the case at bar, despite there $as devaluation o) the peso, 6S+ never declared e2traordinary de)lation. Also, the parties did not agree to recogniCe the e))ect o) e2traordinary in)lation or de)lation i) such case is present. 0he court ans$ered that the respondents should pay their dollar#denominated loans at the e2change rate )i2ed by the 6S+ on the date o) maturity.

12

Almeda vs 6athala .ar7eting

/alle, %oan

ALMEDA CS BATHALA M8TG INDUSTRIES FACTS: Sometime in .ay 1""4, respondent 6athala .ar7eting Industries, Inc., as lessee, represented by its president Ramon F. Earcia, rene$ed its 3ontract o) Dease 4 $ith +onciano D. Almeda (+onciano*, as lessor, husband o) petitioner >u)emia and )ather o) petitioner Romel Almeda. Ander the said contract, +onciano agreed to lease a portion o) the Almeda 3ompound, located at 221! +asong 0amo Street, .a7ati 3ity. 3O<&I0IO<S9 SIV0F P 0a2es, )ees, burdens to imposed by the government shall be charged to the lessee. S>/><0F # In case an e2traordinary in)lation or devaluation o) +hilippine 3urrency should supervene, the value o) +hilippine peso at the time o) the establishment o) the obligation shall be the basis o) paymentS= &uring the e))ectivity o) the contract, +onciano died. 0herea)ter, respondent dealt $ith petitioners. In a letter 4 dated &ecember 2", 1""4, petitioners advised respondent that the )ormer shall assess and collect /alue Added 0a2 (/A0* on its monthly rentals. In response, respondent contended that /A0 may not be imposed as the rentals )i2ed in the contract o) lease $ere supposed to include the /A0 therein, considering that their contract $as e2ecuted on .ay 1, 1""4 $hen the /A0 la$ had long been in e))ect. ! On %anuary 2=, 1""!, respondent received another letter )rom petitioners in)orming the )ormer that its monthly rental should be increased by 4-5 pursuant to condition <o. 4 o) the contract and Article 12,1 o) the 3ivil 3ode. Respondent opposed petitionersQ demand and insisted that there $as no e2traordinary in)lation to $arrant the application o) Article 12,1 in light o) the pronouncement o) this 3ourt in various cases." Respondent re)used to pay the /A0 and ad'usted rentals as demanded by petitioners but continued to pay the stipulated amount set )orth in their contract. On Bebruary 1!, 1""!, respondent instituted an action )or declaratory relie) )or purposes o) determining the correct interpretation o) condition <os. = and 4 o) the lease contract to prevent damage and pre'udice. On .arch 11, 1""!, petitioners in turn )iled an action )or e'ectment, rescission and damages against respondent )or )ailure o) the latter to vacate the premises a)ter the demand made by the )ormer.11 6e)ore respondent could )ile an ans$er, petitioners )iled a <otice o) &ismissal.12 ISSUE : ?O< there should be rental ad'ustment by reason o) e2traordinary in)lation or devaluation; HELD: <O, there $as no e2traordinary in)lation or de)lation. +etitioners contend that Article 12,1 o) the 3ivil 3ode does not apply to this case because the contract stipulation spea7s o) e2traordinary in)lation or devaluation $hile the 3ode spea7s o) e2traordinary in)lation or de)lation. ?hile, indeed, condition <o. 4 o) the contract spea7s o) @e2traordinary in)lation or devaluation@ as compared to Article 12,1Qs @e2traordinary in)lation or de)lation,@ $e )ind that $hen the parties used the term @devaluation,@ they really did not intend to depart )rom Article 12,1 o) the 3ivil 3ode. 0hat this is the intention o) the parties is evident )rom petitionersQ letter 22 dated %anuary 2=, 1""!, $here, in demanding rental ad'ustment ostensibly based on condition <o. 4, petitioners made e2plicit re)erence to Article 12,1 o) the 3ivil 3ode, even :uoting the la$ verbatim. Article 12,1 o) the 3ivil 3ode states9 In case an e2traordinary in)lation or de)lation o) the currency stipulated should supervene, the value o) the currency at the time o) the establishment o) the obligation shall be the basis o) payment, unless there is an agreement to the contrary. 0he )actual circumstances obtaining in the present case do not ma7e out a case o) e2traordinary in)lation or devaluation as $ould 'usti)y the application o) Article 12,1 o) the 3ivil 3ode. 0he erosion o) the value o) the, starting in the mid#si2ties, is characteristic o) most currencies. Burthermore, absent an o))icial pronouncement or declaration by competent authorities o) the e2istence o) e2traordinary in)lation during a given period, the e))ects o) e2traordinary in)lation are not to be applied. B; P%e*$e%e De-el"+*e't Ba'0 -s Ce't%al Su%et. Ba'/ue%$)", A%e"

14

14

+abugais vs Sahi'$ani

Sumando, BritCie Dynne

PABUGAIS -s SAHI:4ANI FACTS: +ursuant to an Agreement and Anderta7ing, petitioner +abugais sold to respondent Sahi'$ani a lot o) 12-" s:m. Docated in %aracanda St., <orth Borbes +ar7, .a7ati, .etro .anila )or 1, 4!4 ,11. Respondent paid the optionL reservation )ee o) =11 111 and the remaining balance o) 14 !!4 ,11 $as to be paid $ithin =1 days )rom the e2ecution o) the contract. 0his $ould be simultaneous $ith the delivery o) the o$ner s duplicate 0rans)er 3erti)icate 0itle in respondent s name the &eed o) Absolute Sale, 3erti)icate o) <on#0a2 &elin:uency, and 3learance o) +ayment o) Association &ues. Bailure to pay the balance $ould )or)eit the option )ee $hile )ailure to deliver the documents $ould result to the return o) the option )ee plus 1!5 interest per annum. +etitioner )ailed to deliver the documents. Fe contented that he returned the =11 111 by$ay o) B>603 chec7 $hich $as subse:uently dishonoured. +etitioner claimed that he t$ice tendered to respondent, through his counsel, the amount o) =42 "11 (option )ee plus 1!5 interest )or the period* in the )orm o) manager s chec7 but said that the counsel re)used to accept it. Attempt to tender payment9 1st. 0hrough petitioner s messenger. 2nd. Sent through &FD ?orld$ide Services the manager s chec7 attached to the letter. Respondents counsel admitted that his o))ice received the letter but claimed that there $as no valid tender o) payment since there $as no chec7 attached. 3omputation o) the amount also $as insu))icient. Fe claimed that both parties verbally agreed to pay -5 monthly interest and 2,5 attorney s )ees as penalty )or de)ault in addition to the 1!5 interest per annum until )ully paid. R039 1. 3onsignation $as invalid )or )ailure to prove that petitioner tendered payment to respondent. 2. I) there $as tender o) payment, re)usal $as valid because manager s chec7 $as not legal tender. -. +etitioner $as ordered to pay the option )ee plus 1!5 interest. +etitioner appealed to the 3A. Fe also in)ormed that his consel Atty. %uan died so she $ill be substituted $ith Atty. &e EuCman. Fe then e2ecuted a &eed o) Assignment assigning the consigned money in )avour o) Atty. &e EuCman as partial payment o) attorney s )ees. Atty. &e EuCman )iled a motion )or the release o) the consigned money to him. 3A9 1. &enied petitioner s motion to $ithdra$ the consigned amount. 2. Reversed and Set Aside the decision o) R03 since there $as valid consignation o) =42 "11 by petitioner. Fis obligation to return the option )ee $as e2tinguished. +etitioner )iled an instant motion )or revie$. Fe contended that he can $ithdra$ the amount deposited $ith the trial court as a matter o) right because at the time he moved )or the $ithdra$al, 3A has yet to rule on the consignation s validity and the respondent has no yet accepted the same.

ISSUE B. ?O< there $as valid consignation. Res. (Read the re:uisites o) consignation.* Respondent s reason )or re)usal o) tender o) payment9 1.0he chec7 $as not attached to the letter. 2.0he amount tendered $as insu))icient to cover the obligation. It $as obvious to the court that the reason o) the non#acceptance $as the insu))iency. Fo$ever, $hat appeared in the de)ault clause o) the Agreement and Anderta7ing $as only the 1!5 interest per annum on the option )ee. .anager s chec7 is not legal tender but the creditor has the option o) re)using or accepting it. +ayment in chec7 is valid i) there is no prompt ob'ection $hen the payment is made. 0ender o) payment in the )orm o) manager s chec7 is valid. 0here is a valid tender o) payment in an amount su))icient to e2tinguish the obligation. 0here)ore, 3onsignation $as valid. ISSUE <. ?O< the petitioner could $ithdra$ the amount consigned as a matter o) right. <o. Art.12=1. 6e)ore the creditor has accepted the consignation, or be)ore the 'udicial con)irmation that the consignation has been properly made, the debtor may $ithdra$ the thing or sum deposited, allo$ing the obligation to remain in )orce. 0he amount consigned could no longer be $ithdra$n because the respondent s prayer in his ans$er that 8the amount consigned be a$arded to him is e:uivalent to an acceptance o) the consignation, $hich has the e))ect o) e2tinguishing the petitioner s obligation. +etitioner )ailed to mani)est his intention to comply $ith the Agreement and Anderta7ing. ?ithdra$al o) the said amount $ould enrich the petitioner and un'ustly pre'udice the respondent. ?ithdra$al o) the amount in )avour o) Atty. &e EuCman is in violation o) Art. 14"1 o) the 3ivil 3ode and Rule 11 o) 3+R.

15

3A ABBIR.>&.

1,

Dlobrera vs BernandeC

.ungcal, .ar'ouree

LLOBRERA CS FERNANDE7 FACTS: Sub'ect o) the controversy is a 1!4"#s:uare meter parcel o) land covered by 030 W "142. Respondent, %ose)ina BernandeC served a $ritten demand letter to the petitioners to vacate the sub'ect property $ithin 1, days )rom notice. <ot$ithstanding the receipt, petitioners re)used to vacate the property, necessitating respondent to )ile a complaint be)ore the barangay captain. 6ecause o) the )ailure o) the parties to reach a settlement, respondent )iled a veri)ied complaint )or e'ectment and damages against the petitioners be)ore the .033 o) &agupan 3ity. 6y $ay o) de)ense, petitioners alleged that they had been occupying the property in :uestion beginning the year 1"4, on$ards, $hen their predecessors#in#interest, $ith the permission o) Eualberto de /enecia, one o) the other co#o$ners o) said land, developed and occupied the same on condition that they $ill pay their monthly rental o) +21.11 each. Brom then on, they have continuously paid their monthly rentals to Eualberto de /enecia or Rosita de /enecia or their representatives, such payments being duly ac7no$ledged by receipts. 6eginning sometime %une 1""=, ho$ever, the representative o) Eualberto de /enecia re)used to accept their rentals, prompting them to consign the same to 6anco San %uan, $hich ban7 deposit they continued to maintain and update $ith their monthly rental payments. .033 ruled in )avor o) the respondent, ordering the petitioners to vacate the sub'ect property. &ecision o) .033 $as a))irmed by R03 and 3A. Fence, this petition )or revie$ on certiorari be)ore the S3.

ISSUE: ?O< the consignation made by the petitioners in contemplation o) Article 12,= o) the <e$ 3ivil 3ode is legally tenable. HELD: <o. 0he consignation made by the petitioners is not legally tenable. 0he alleged consignation o) the +21.11 monthly rental to a ban7 account in respondent s name cannot save the day )or the petitioners simply because o) the absence o) any contractual basis )or their claim to right)ul possession o) the sub'ect property. C"'s$)'at$"' &ase "' A%t$cle B<GH "# t!e C$-$l C" e $' $s+e'sa&l. %e/u$%es a c%e $t"%- e&t"% %elat$"'s!$+ &et,ee' t!e +a%t$es, $' t!e a&se'ce "# ,!$c!, t!e le)al e##ects t!e%e"# ca''"t &e a-a$le "#. I' t!e +%ese't case, t!e +"ssess$"' "# t!e +%"+e%t. &. t!e +et$t$"'e%s &e$') &. *e%e t"le%a'ce as t!e. #a$le t" esta&l$s! t!%"u)! c"*+ete't e-$ e'ce t!e e($ste'ce "# a'. c"'t%actual %elat$"'s &et,ee' t!e* a' t!e %es+"' e't, t!e latte% !as '" "&l$)at$"' t" %ece$-e a'. +a.*e't #%"* t!e*. S$'ce %es+"' e't $s '"t a c%e $t"% t" +et$t$"'e%s as #a% as t!e alle)e P<=.== *"'t!l. %e'tal +a.*e't $s c"'ce%'e , %es+"' e't ca''"t &e c"*+elle t" %ece$-e suc! +a.*e't e-e' t!%"u)! c"'s$)'at$"' u' e% A%t$cle B<GH. 0he ban7 deposit made by the petitioners intended as consignation has no legal e))ect inso)ar as the respondent is concerned.

BH

BPI -s CA

Ma %$a)a, :"se+!

14

6.>. San &iego vs AlCul

.orales, &ave

B.E. SAN DIEGO - ROSARIO T. AL7UL 9:u'e I, <==J? FACTS:

16

ISSUE:

1"4,, AlCul purchased )rom 6.>. San &iego Inc. 4 subdivision lots $ith an area o) 1,24, s:uare meters in Aurora Subdivision, .alabon through installment under a 3ontract to Sell. AlCul too7 immediate possession o) the property and constructed a house and perimeter )ence. 1"44, AlCul signed a 3onditional &eed o) Assignment and 0rans)er o) Rights, assigning to ?ilson Ru, AlCul s rights under the 3ontract to Sell <o. !=4. San &iego $as noti)ied o) such deed and issued a ne$ one )or Ru. 0he 3ontract to Sell in AlCul s name $as cancelled. AlCul in)ormed San &iego that Ru )ailed and re)used to pay the amounts due on the 3onditional &eed and that she $ould instead pay the installments due to Ru s de)ault. AlCul )iled )or rescission o) the 3onditional &eed o) assignment against Ru and had the notices o) lis pendens annotated on the titles o) the lot. San &iego noti)ied AlCul that the 3ontract to Sell $as rescinded and cancelled and subse:uently sold the lots to spouses 3arlos and Sandra /entura. 0he spouses /entura $ere surprised to )ind the annotation o) lis pendens so they )iled an action )or Quieting o) 0itle $ith +rayer )or 3ancellation o) Annotation and &amages. 0he R03 ruled in )avor o) the /entura spouses but the 3A reversed the decision. :u'e BJ, B>>H, S3 said that no time limit $as set by the 3A )or AlCul to pay San &iego. 0o recti)y such oversight, AlCul $as given a non#e2tendible period o) -1 days to pay +1!4,-!1.11 )rom the entry o) 'udgment on %uly 12, 1""=. AlCul tried to serve payment on August 2" M -1 and September 2!, 1""= through a Solidban7 .anager s 3hec7. San &iego, ho$ever, re)used to accept payment on all dates. San &iego replied that they %e#use t" acce+t payment because9 1. 0he 3ontract to Sell $as long legally rescinded due to )ailure to pay monthly amortiCations. 2. AlCul sold her rights to ?ilson Ru $ho )ailed to pay monthly amortiCations too. -. San &iego $as never a part o) the case AlCul is alluding to and can t be bound by the same. 4. 0he lots are to be reconveyed through a compromised agreement $ith the /entura spouses. AlCul )iled a .ani)estation in)orming the S3 that San &iego re)used to accept payment on all - occasions. 0he S3 re)erred the case to the court o) origin. AlCul s attorney $rote a letter to San &iego, citing the latter s re)usal to accept payment on many occasions. In e))ect, AlCul $ould consign the balance be)ore the proper 'udicial authority. AlCul )iled an action )or consignation and speci)ic per)ormance be)ore the HLURB. 0he FDAR6 dismissed and held that it $as evident that there $as no valid consignation o) the balance o) the purchase price )rom the -1#day non#e2tendible period beginning :u'e BJ, B>>H. AlCul )iled to the O##$ce "# t!e P%es$ e't, $hich ruled FDAR6 $as correct to deny consignation. AlCul )iled to the CA, $hich agreed to the FDAR6 decision. 0he 3A, on the basis o) 'ustice, allo$ed AlCul to e))ect consignation $ithin , days )rom receipt o) decision on Fe&%ua%. BI, <==G. AlCul )iled a 3ompliance and .otion )or >2tension o) 0ime to 3omply )or 11 days. It $as granted. ?O< AlCul is still entitled to consignation despite the lapse o) the period provided by the S3;

RULING: NO. S3 ERA<0>& petition and R>I<S0A0>& order o) the O+ and FDAR6. San &iego is declared the true and legal o$ner o) lots but must reimburse AlCul )or improvements made on property. AlCul )ailed to comply $ith the S3 Resolution on :u'e BJ, B>>H giving a non#e2tendible period o) -1 days )rom entry o) 'udgment to ma7e )ull payment. 0he resolution became )inal and e2ecutory on %uly 2, 1""=. AlCul received a copy o) the entry through counsel on Au)ust <B, B>>H. Fe had until Se+te*&e% <=, B>>H to pay )ully. A)ter - unsuccess)ul tenders o) payment, AlCul made no consignation o) the amount in court. San &iego has t," *a$' c"'te't$"'s9 1. AlCul $ '"t e+"s$t a'. a*"u't $ith the FDAR6, violating the rules )or consignment $hich re:uire actual deposit o) the amount already due $ith the proper 'udicial authority. 2. AlCul only o))ered to consign be)ore the FDAR6 on Ma%c! B<, B>>I, one and a hal) years later. 0he ela. "# B.G .ea%s should be regarded as a ,a$-e% to claim residual remedies. I'c!"ate R$)!ts "# Al1ul Al1ul c"'te' s 1. 0he &ecember 2=, 1"", Resolution granting her +%"+%$eta%. %$)!ts over lots has long become )inal and e2ecutory. 2. Lac!es a' est"++els do not apply in the case since circumstances sho$ that she has relentless pursued the protection o) her rights over the lots )or over 2, years. 0he S3 held that AlCul has inchoate proprietary rights over the lots. S3 upheld 3A ruling in declaring the titles in the name o) the /entura spouses 'ull a' -"$ . 0he titles are to be reinstated in the name o) San &iego, u't$l suc! t$*e t!at ",'e%s!$+ $s t%a's#e%%e t" Al1ul. AlCul s e2pectant rights over the lots, ho$ever, are c"' $t$"'e on the payment o) the balance. AlCul is deemed to have )or)eited her rights over the lots )or )ailure to e))ect )ull payment and pay monthly amortiCations and absence o) consignation $ithin the -1#day period or reasonable time. Te' e% "# Pa.*e't a' C"'s$)'at$"':

17

.ere tender o) payment is not enough to e2tinguish an obligation. /alid consignation in court is also needed to e))ect the e2tinguishment. C"'s$)'at$"' is the act o) depositing the thing due $ith the court $henever the creditor re)uses to accept. It generally re:uires prior tender o) payment. Te' e% is the antecedent o) consignation, $hich is the principal. 0ender is e2tra'udicial $hile consignation is 'udicial and both, $hen validly made, produces the e))ect o) payment and e2tinguishes obligation. 0here is no dispute that a valid tender o) payment $as made by AlCul. Fo$ever, $ithout valid consignation, mere tender is insu))icient to e2tinguish the obligation and consummate ac:uisition. Apon re)usal by San &iego to receive payment, the proper remedy )or AlCul $as consignation. ?hen the S3 resolved to re)er the case to the court o) origin, AlCul )ailed to consign the amount $ith the court o) origin. 0he S3 issued its Resolution on :a'ua%. <I, B>>J and AlCul pursued the action )or consignation only on Ma%c! B<, B>>I, $hich is $ay beyond a reasonable time therea)ter. S3 has accorded AlCul all the opportunity to pursue consignation $ith court o) origin but respondent still )ailed. 0his is already ine2cusable 'e)lect on AlCul s part. A%t B<GI provides that c"'s$)'at$"' shall be made by depositing the things due at the disposal o) 'udicial authority, be)ore $hom the tender o) payment shall be proved, in a proper case, and the announcement o) the consignation in other cases. A%t B<GH provides that i) the creditor to $hom tender o) payment has been made %e#uses $ithout 'ust cause to accept it, the debtor shall be %elease )rom responsibility by the consignation o) the thing or sum due. 0here are G %e/u$s$tes )or a valid consignation9 1. A debt $as due 2. 3onsignation is made because creditor re)uses to accept tender o) payment -. +revious notice o) consignation to interested persons 4. Actual consignation o) the amount due in court ,. Subse:uent notice o) consignation to interested persons 0he Kt! a' Gt! %e/u$s$tes $ere missing )or a valid consignation.

Ot!e% Issues: 1. San &iego $as '"t a +a%t. to the .alabon 3ity case bet$een spouses /entura and Ru, thus there $as no court directive to accept payment )rom AlCul. San &iego did not ac:uire 'urisdiction. 2. 0he G- a. a $t$"'al +e%$" cannot prevail over 'udicial rules o) procedure or statutory la$. >:uity cannot be used as a guise )or AlCul to bene)it )rom her o$n 'e)l$)e'ce. <on#consignation being a mere procedural lapse o) AlCul s counsel is contrary to settled 'urisprudence. Rights over the property are no$ lost and )or)eited. -. 0he HLURB a' OP is 'usti)ied in re)using consignation or it $ould be accused o) e2tending the period beyond $hat is provided by the S3. A valid consignation is e))ected $hen there is actual consignation o) the amount due $ithin the prescribed period. 4. 0he +%"ce u%al $ssue, $herein AlCul s petition lac7ed the essential pleadings )iled $ith the FDAR6 and O+, should not ta7e credence over the promotion o) substantial 'ustice.

1!

Solid Fomes vs Daserna

.iToCa, &ha$ell

S"l$ H"*es I'c -s Lase%'a Facts: On 1 April 1"44, respondents >velina Daserna and Eloria 3a'ipe, represented by their attorney#in#)act, +roceso B. 3ruC, as buyers, entered into a 3ontract to Sell - $ith petitioner Solid Fomes, Inc. (SFI*, a corporation engaged in the development and sale o) subdivision lots, as seller. 0he sub'ect o) the said 3ontract to Sell $as a parcel o) land located at Dot -, 6loc7 I, +hase II, Doyola Erand /illas, QueCon 3ity, $ith a total area o) =11 s:uare meters, more or less. 0he total contract price agreed upon by the parties )or the said parcel o) land $as +142,2=1.11, to be paid in the )ollo$ing manner9 (1* the +--,1=1.11 do$n payment should be paid upon the signing o) the contractS and (2* the remaining balance o) +1==,421.!!4 $as payable )or a period o) three years at a monthly installment o) +4,=22.!- beginning 1 April 1"44. 0he respondents made the do$n payment and several monthly installments. ?hen the respondents had allegedly paid "15 o) the purchase price, they demanded the e2ecution and delivery o) the &eed o) Sale and the 0rans)er 3erti)icate o) 0itle (030* o) the sub'ect property upon the )inal payment o) the balance. 6ut the petitioner did not comply $ith the demands o) the respondents. 0he respondents $hereupon )iled against the petitioner a 3omplaint )or &elivery o) 0itle and >2ecution o) &eed o) Sale $ith &amages, dated 2! %une 1""1, be)ore the Fousing and Dand Ase Regulatory 6oard (FDAR6*. In their 3omplaint, respondents alleged that as their outstanding balance $as only +,,"2!.1!, they $ere already demanding the e2ecution and delivery o) the &eed o) Sale and the 030 o) the sub'ect property upon )inal payment o) the said amount.

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0he petitioner )iled a .otion to Admit Ans$er, together $ith its Ans$er dated 14 September 1""1, asserting that the respondents have no cause o) action against it because the respondents )ailed to sho$ that they had complied $ith their obligations under the 3ontract to Sell, since the respondents had not yet paid in )ull the total purchase price o) the sub'ect property. In vie$ o) the said non#payment, the petitioner considered the 3ontract to Sell abandoned by the respondents and rescinded in accordance $ith the provisions o) the same contract. FDAR6 Arbiter rendered a &ecision denying respondents prayer )or the issuance o) the &eed o) Sale and the delivery o) the 030. Beeling aggrieved, the petitioner appealed the a)oresaid &ecision to the FDAR6 6oard o) 3ommissioners $hich ruled 1. Respondent is directed to pay the balance o) +11,,!,.41 $ithin the thirty (-1* days 2. +etitioner is directed to e2ecute the necessary deed o) sale and deliver the 030 over the sub'ect property immediately upon )ull payment. -. +etitioner is directed to cease and desist )rom charging andLor collecting )ees other than those authoriCed by +.&. ",4 and other related la$s.

Issue: Rul$'):

+etitioner remained unsatis)ied $ith the &ecision o) the FDAR6 6oard o) 3ommissioners, thus, it appealed the same be)ore the O))ice o) the +resident $hich a))irmed in toto the same. Again )eeling it )iled an appeal to the 3ourt o) Appeals $hich also a))irmed the ruling o) the O))ice o) the +resident. Respondents have tendered payment in the amount o)+11,,!4.41, representing the balance o) the purchase price o) the sub'ect property, as determined in the 11 August 1""4 &ecision o) the FDAR6 6oard o) 3ommissioners, and a))irmed by both the O))ice o) the +resident and the 3ourt o) Appeals. Fo$ever, the petitioner, $ithout any 'usti)iable reason, re)used to accept the same.

?hether or not Solid Fomes have the right to rescind the contract based on the stipulations o) the contract to sell ?hether or not the contract is still subsisting

In Ramos v. Sarao, the S3 held that tender o) payment is the mani)estation by debtors o) their desire to comply $ith or to pay their obligation. I) the creditor re)uses the tender o) payment $ithout 'ust cause, the debtors are discharged )rom the obligation by the consignation o) the sum due. 3onsignation is made by depositing the proper amount $ith the 'udicial authority, be)ore $hom the tender o) payment and the announcement o) the consignation shall be proved. All interested parties are to be noti)ied o) the consignation. 3ompliance $ith these re:uisites is mandatory. In the case at bar, a)ter the petitioner re)used to accept the tender o) payment made by the respondents, the latter )ailed to ma7e any consignation o) the sum due. 3onse:uently, there $as no valid tender o) payment and the respondents are not yet discharged )rom the obligation to pay the outstanding balance o) the purchase price o) the sub'ect property. Since petitioner did not rescind the 3ontract to Sell it e2ecuted $ith the respondents by a notarial act, the said 3ontract still stands. 6oth parties must comply $ith their obligations under the said 3ontract. As ruled by the FDAR6 6oard o) 3ommissioners, and a))irmed by the O))ice o) the +resident and the 3ourt o) Appeals, the respondents must )irst pay the balance o) the purchase price o) the sub'ect property, a)ter $hich, the petitioner must e2ecute and deliver the necessary &eed o) Sale and 030 o) said property. 1" +hil. <ational 3onstruction vs 3A Dubaton, .aryanne

B>. P!$l$++$'e Nat$"'al C"'st%uct$"' C"%+"%at$"' -. CA Facts: On 1! <ovember 1"!,, petitioner +<33 and private respondents entered into a contract o) lease on an undivided portion o) -1, 111 s:. m. o) a parcel o) land o$ned by private respondents. Said contract contained the )ollo$ing stipulations9 (a* the lease shall be )or a period o) , years commencing on the date o) the issuance o) the industrial clearance by the .inistry o) Fuman Settlements, rene$able )or a li7e or other period at the option o) the lessee under the same terms and conditionsS (b* the lessee shall pay rent at the monthly rate o) +21, 111. 11 to be increased yearly by ,5S (c* the rent shall be paid yearly in advance by the lesseeS (d* the property shall be used as the site, grounds and premises o) a roc7 crushing plant and )ield o))iceS (e* the lease may be terminated by mutual agreement o) the parties. On 4 %anuary 1"!=, petitioner obtained )rom the .inistry o) Fuman Settlements a 0emporary Ase +ermit $hich $as to be valid )or 2 years unless sooner revo7ed by the .inistry. Subse:uently, private respondents re:uested payment o) the )irst annual rental in the amount o) +241, 111. 11. 0hey also assured +<33 that they had already stopped considering the proposals o) other aggregate plants to lease the property because o) the e2isting contract $ith petitioner. +<33 ho$ever argued that the payment o) rental should commence on the date o) the issuance o) an industrial clearance by the .inistry o) Fuman Settlements and not )rom the date o) signing o) the contract. It then e2pressed its intention to terminate the contract as it had decided to cancel or discontinue $ith the roc7 crushing pro'ect Jdue to )inancial, as $ell as technical, di))iculties.K

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+rivate respondents re)used to accede to petitioner s re:uest )or the pretermination o) the lease and reiterated their demand )or the payment o) the )irst annual rental. +etitioner contended that it $as only obligated to pay +21, 111.11 representing the rental payments )or one month period o) lease. 0his prompted private respondents to institute an action )or speci)ic per)ormance $ith damages against petitioner be)ore the R03 o) +asig.

0he R03 rendered a decision ordering petitioner to pay the amount o) +4"2, 111.11 $hich represented the rentals )or t$o years. 0his $as a))irmed by the 3A. +etitioner asserts that it should be released )rom the obligatory )orce o) the contract o) lease because the purpose o) the contract did not materialiCe due to un)oreseen events and causes beyond its control such as the abrupt change in political climate a)ter the >&SA revolution and )inancial di))iculties.

Issue: ?O< petitioner may be released )rom its obligation )ollo$ing the principle o) rebus sic stantibus. Hel : Ander the concept o) rebus sic stantibus0 the parties stipulate in the light o) certain prevailing conditions, and once these conditions cease to e2ist, the contract also ceases to e2ist. 0his theory is said to be the basis o) Article 12=4 o) the 33 $hich provides9 Art. ,123. When the service has become so difficult as to be manifestly beyond the contemplation of the parties0 the obligor may also be released therefrom0 in whole or in part. 0his article, $hich enunciates the doctrine o) un)oreseen events, is not, ho$ever, an absolute application o) the principle o) rebus sic stantibus, $hich $ould endanger the security o) contractual relations. 0he parties to the contract must be presumed to have assumed the ris7s o) un)avorable developments. It is there)ore only in absolutely e2ceptional changes o) circumstances that e:uity demands assistance )or the debtor. In the case at bar, petitioner contends that the abrupt change in the political climate o) the country a)ter the >&SA Revolution and its poor )inancial condition Jrendered the per)ormance o) the lease contract impractical and inimical to the corporate survivalK o) the petitioner. It is ho$ever a matter o) record that petitioner +<33 entered into a contract $ith private respondents on 1! <ovember 1"!,. +rior thereto, it is o) 'udicial notice that a)ter the assassination o) Senator A:uino on 21 August 1"!-, the country has e2perienced political upheavals, turmoil, almost daily mass demonstrations, unprecedented in)lation, peace and order deterioration, the A:uino trial and many other things that brought about the hatred o) people even against crony corporations. On - <ovember 1"!,, +res. .arcos, being intervie$ed live on AS television announced that there $ould be a snap election scheduled on 4 Bebruary 1"!=. <ot$ithstanding such, petitioner +<33 entered into the contract o) lease $ith private respondents $ith open eyes o) the deteriorating conditions o) the country. Anent petitioner s alleged poor )inancial condition, the same $ill neither release petitioner )rom the binding e))ect o) the contract o) lease. .ere pecuniary inability to )ul)ill an engagement does not discharge a contractual obligation, nor does it constitute a de)ense to an action )or speci)ic per)ormance.

Fence, the assailed decision o) the 3A is a))irmed in toto.

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So vs Bood Best Dand

6uniel, >mmy

SO CS FOOD FEST LAND, INC. FACTS: Bood Best Dand Inc. entered into a September 14, 1""" 3ontract o) Dease $ith &aniel 0. So over a commercial space in San Antonio /illage, .a7ati 3ity )or a period o) three years (1"""#2112* on $hich Bood Best intended to operate a Ientuc7y Bried 3hic7en carry out branch. 6e)ore )orging the lease contract, the parties entered into a preliminary agreement dated %uly 1, 1""", the pertinent portion o) $hich stated9

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0he lease shall not become binding upon us unless and until the government agencies concerned shall authoriCe, permit or license us to open and maintain our business ?e shall also noti)y you i) any o) the re:uired permits, licenses and authorities shall not be be ( sic* given or granted $ithin )i)teen days (1,* )rom your con)orm (sic*hereto. In such case, the agreement may be canceled and all rights and obligations hereunder shall cease.G2H (underscoring supplied* ?hile Bood Best $as able to secure the necessary licenses and permits )or the year 1""", it )ailed to commence business operations. Bor the year 2111, Bood Best s application )or rene$al o) barangay business clearance $as Jheld in abeyance until )urther study o) GitsH 7itchen )acilities. Bood Best $as unable to operate due to lac7 o) necessary licenses. Bearing )urther business losses, Bood Best communicated its intent to terminate the lease contract to So $ho did not accede and instead o))ered to help Bood Best secure authoriCation )rom the barangay. In August 2111, Bood Best in)ormed So o) its intent to terminate the lease, and it in )act stopped paying rent. So later sent a <ovember 22, 2111 demand letter to Bood Best )or the payment o) rental arrearages and reiterated his o))er to help it secure clearance )rom the barangay. 6y letter o) .arch 2=, 2111,G,H So again demanded payment o) rentals )rom Bood Best )rom September 2111 to .arch 2111 amounting to +12-,211.11. Bood Best denied any liability, ho$ever, and started to remove its )i2tures and e:uipment )rom the premises. On April 2, 2111, So sent Bood Best a Binal <otice o) 0ermination $ith demand to pay and to vacate. G=H On April 2=, 2111, So )iled a complaint )or e'ectment and damages against Bood Best be)ore the .etropolitan 0rial 3ourt (.e03* o) .a7ati 3ity $hich ruled in )avor o) So. Bood Best appealed $ith the R03 $hich reversed the .e03 s decision. R03 )ound that Bood Best already vacated the leased premises be)ore So )iled the complaint )or e'ectmentS and $hereas possession is the only issue )or resolution in an e'ectment case, So s cause o) action only pertained to collection o) the rental arrears. R03 held that Bood Best s )ailure to secure the authority to commence business operations resulted in the termination o) its contractual obligations to So, including the obligation to pay rent. On petition )or revie$, the 3ourt o) Appeals, by &ecision o) April 1!, 211! declared that Bood Best s obligation to pay rent $as not e2tinguished upon its )ailure to secure permits to operate. So maintained that the .e03 had 'urisdiction over his complaint )or e'ectment. Fe contended Bood Best did not vacate the leased premises be)ore his )iling (on April 2=, 2111* o) the complaint. Bood Best contended that the principle o) rebus sic stantibus as enunciated in Article 12=4 o) the 3ivil 3ode to render the lease contract )unctus o))icio $ould release it )rom responsibility to pay rentals.

ISSUE: ?O< Bood Best is liable to So RULING: 3ourt is not persuaded by Bood Best s contention that Article 12=4 is applicable in the case at bar so as to release the latter )rom liability o) paying rentals to So. Article 12=4. ?hen the service has become so di))icult as to be mani)estly beyond the contemplation o) the parties, the obligor may also be released there)rom, in $hole or in part. 0his article, $hich enunciates the "ct%$'e "# u'#"%esee' e-e'ts, is not, ho$ever, an absolute application o) the principle o) rebus sic stantibus, $hich $ould endanger the security o) contractual relations. 0he parties to the contract must be presumed to have assumed the ris7s o) un)avorable developments. It is, there)ore, only in absolutely e2ceptional changes o) circumstances that e:uity demands assistance )or the debtor. Bood Best claims that its )ailure to secure the necessary business permits and licenses rendered the impossibility and non#materialiCation o) its purpose in entering into the contract o) lease, in support o) $hich it cites the earlier#:uoted portion o) the preliminary agreement dated %uly 1, 1""" o) the parties. 0he cause or essential purpose in a contract o) lease is the use or en'oyment o) a thing . A party s motive or particular purpose in entering into a contract does not a))ect the validity or e2istence o) the contractS an e2ception is $hen the realiCation o) such motive or particular purpose has been made a condition upon $hich the contract is made to depend. 0he e2ception does not apply here. It is clear that the condition set )orth in the preliminary agreement pertains to the initial application o) Bood Best )or the permits, licenses and authority to operate. It should not be construed to apply to Bood Best s subse:uent applications. Bood Best $as able to secure the permits, licenses and authority to operate $hen the lease contract $as e2ecuted. Its )ailure to rene$ these permits, licenses and authority )or the succeeding year, does not, ho$ever, su))ice to declare the lease )unctus o))icio, nor can it be construed as an un)oreseen event to $arrant the application o) Article 12=4. 3ontracts, once per)ected, are binding bet$een the contracting parties. Obligations arising there)rom have the )orce o) la$ and should be complied $ith in good )aith. Bood Best cannot renege )rom the obligations it has )reely assumed $hen it signed the lease contract.

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21

6+I vs 3A

+olinar, %anua

BAN8 OF THE PHILIPPINE ISLANDS -.CA FACTS

In 1"!,, private respondent Reyes opened 'oint Savings Account at petitioner 6+I $ith his $i)e.)Account A* Dater in 1"!=, private respondent also held a 'oint account at the same 6+I branch. Fe regularly deposited in this account the A.S. 0reasury ?arrants payable to the order o) his grandmother s monthly pension. )Account 4* &ecember 2!, 1"!", respondent s grandmother died $ithout the 7no$ledge o) the A.S. 0reasury &epartment. A.S. 0reasury ?arrant sent the amount o) A.S. U-44.11- or +11, ,,=.11 as pension. On %anuary 4, 1""1, private respondent deposited the said A.S. treasury chec7 in 6an7 Account B. 0$o months a)ter, $ithdra$ the same )rom 6an7 Account B and deposited the amount to 6an7 Account A. Subse:uently, closed 6an7 Account B. 1""1, A.S 0reasury &epartment discovered that BernandeC died three (-* days prior to its issuance. 0he A.S. &epartment o) 0reasury re:uested petitioner ban7 )or a re)und. Bor the )irst time petitioner ban7 came to 7no$ o) the death o) BernandeC. 6+I called private respondent and he -e%&all. aut!"%$1e them to debit )rom his Account A the amount stated in the dishonored A.S. 0reasury ?arrant. On the same day, petitioner ban7 debited the amount o) +11, ,,=.11 )rom private respondent s 6an7 Account A. Surprisingly, private respondent demanded )rom petitioner ban7 restitution o) the debited amount. Fe claimed that because o) the debit, he )ailed to $ithdra$ his money $hen he needed them. Fe then )iled a suit )or damages against petitioners.

ISSUE ?hether or not 3A erred in holding that 6+I has no legal right to apply legal compensation HELD YES, 3A erred in rulingS BPI !as t!e %$)!t t" a++l. le)al c"*+e'sat$"'. C"*+e'sat$"' shall ta7e place $hen t$o persons, in their o$n right, are creditors and debtors o) each other. A%t$cle B<>= o) the 3ivil 3ode provides that J$hen all the re:uisites mentioned in Article 124" are present, compensation ta7es e))ect by operation o) la$, and e2tinguishes both debts to the concurrent amount, even though the creditors and debtors are not a$are o) the compensation.K Degal compensation operates even against the $ill o) the interested parties and even $ithout the consent o) them since this compensation ta7es place ipso "ure0 its e))ects arise on the very day on $hich all its re:uisites concur. ?hen used as a de)ense, it retroacts to the date $hen its re:uisites are )ul)illed. T!e ele*e'ts "# le)al c"*+e'sat$"' a%e all +%ese't $' t!e case at &a% . T!e "&l$)"%s &"u' +%$'c$+all. a%e at t!e sa*e t$*e c%e $t"%s "# eac! "t!e% . +etitioner ban7 stands as a debtor o) the private respondent, a depositor. At the same time, said ban7 is the creditor o) the private respondent $ith respect to the dishonored A.S. 0reasury ?arrant $hich the latter illegally trans)erred to his 'oint account. 0he debts involved c"'s$st "# a su* "# *"'e.. 0hey are ue, l$/u$ ate , a' e*a' a&le. 0hey are '"t cla$*e &. a t!$% +e%s"'. 3ourt ruled that the presence o) private respondent s $i)e does not negate the ele*e't "# *utual$t. o) parties, i.e., that they must be creditors and debtors o) each other in their o$n right. 0he $i)e o) private respondent is not a party in the case at bar. S!e 'e-e% asse%te a'. %$)!t t" t!e e&$te U.S. T%easu%. 4a%%a't. Indeed, the right o) the petitioner ban7 to ma7e the debit is clear and cannot be doubted. 0o )rustrate the application o) legal compensation on the ground that the parties are not all mutually obligated $ould result in un'ust enrichment on the part o) the private respondent and his $i)e $ho hersel) out o) honesty has not ob'ected to the debit. 0he rule as to mutuality is strictly applied at la$. 6ut not in e:uity, $here to allo$ the same $ould de)eat a clear right or permit irremediable in'ustice.

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+<6 vs 3A

&uran, Iman

P!$l$++$'e Nat$"'al Ba'0 -s C"u%t "# A++eals a' Ra*"' La+e1 Facts: +<6 appliedLappropriated the amounts o) U2,=24.11 and +-4,-41.!- )rom remittances o) .r. DapeC principals abroad.

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 ISSUE:

Birst remittance $as made by <ational 3ommercial 6an7 (<36* o) %eddah, Saudi Arabia )or the bene)it o) .r. Ramon DapeC to be credited in his account at 3itiban7, Ereenhills 6ranchS the second $as )rom Dibya, and $as intended to be deposited at .r. DapeC account $ith +<6, $ith an account number !-1#2411. Ramon DapeC made a demand upon +<6 )or the remittance o) the e:uivalent o) U2,=24.11 by means o) a letter dated &ecember 4, 1"!=. 0his $as ans$ered by +<6 on &ecember 22, 1"!= inviting .r. Ramon DapeC to come )or a con)erence. 0here $as indeed t$o instances in the past, one in <ovember 1"!1, and the other in %anuary 1"!1 $hen .r. DapeC account (!-1#2411* $as doubly credited $ith the e:uivalents o) U,,=4".2and U,,!!,.-! respectively, $hich amounted to an aggregate amount o) +!4,-41.44. +<6 made a demand upon .r. DapeC )or the re)und o) the doubly or duplicated credits erroneously made on the latter s account by means o) a letter dated October 1"!= (, years and 11 months )rom 1"!1 and , years "months )rom 1"!1.* 0he deduction o) +-4,-41.!- $as made by +<6 not $ithout the 7no$ledge and consent o) .r. DapeC $ho $as issued a receipt $ith a receipt no. !,4,4= dated Bebruary 1!, 1"!4 by +<6. R03 ordered the +etitioner (+<6* to pay the private respondent (.r. DapeC* the sum o) U2,=24.11 or its e:uivalent in +hilippine currency $ith interest. R03 s decision $as a))irmed by 3A. ?L< Degal compensation has ta7en place.

RULING: <O Article 124" o) the 3ivil 3ode +rovides that9 5!n order that compensation may prosper0 it is necessary( ,* That each of the obligor be bound principally and he be at the same time principal creditor of the other. 1*That both debts consist in a sum of money0 and if the things due are consumable0 they be of the same &ind and of the same 'uality. 6* That both debts be due. 7* That they be li'uidated and demandable. -* That over neither of them there by any retention or controversy0 commenced by third persons and communicated in due time to the debtor. In the case o) U2,=24.11, only re:uisites <o. 2, -, 4 and , are present. And the obligors $ere not bound principally and they $ere both not a creditor#debtor o) the other at the same time. AnalyCing the relationship bet$een the parties, it appears that9 1*With respect to .r. 8ape9 being a depositor of N40 they are creditor and debtor respectively. 2* As to the relationship created by the telexed fund transfers from abroad( A contract between a foreign ban& and local ban& as&ing the latter to pay an amount to a beneficiary is a stipulation por autrui. )#tipulation por autrui is a stipulation in favor of a third person* Thus between the defendant ban& )as local correspondent of N$4* and .r. 8ape9 as beneficiary0 there is created an implied trust )pursuant to Art. ,7-6 of the $ivil $ode0 'uoted as follows( 5When the property is conveyed to a person in reliance upon his declared intention to hold for it0 or transfer it to another or the grantor0 there is an implied trust in favor of the person whose benefit is contemplated: 3*4y the principle of solution indebiti0 .r. 8ape9 who unduly received something by mista&e became obligated to between them a relationship of an obligor and obligee0 or of creditor and debtor under a 'uasi;contract. N4 to return what he unduly received. Thus0 there was created

In vie$ o) the )oregoing, the 3ourt held that the parties are not both principally bound $ith respect to U2,=24.11 )rom %eddah neither they at the same time principal creditor o) the other. 0here)ore, the parties obligations are not sub'ect to compensation under Art. 124", )or the reason that +<6 is not a principal debtor nor is .r. DapeC a principal creditor inso)ar as the amount U2,=24.11 is concerned.

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0hey are creditor and debtor only $ith respect to the double payments, but are trustee#and bene)iciary as to the )und trans)er o) U2,=24.11. 0hus it may be concluded that .r. DapeC o$e +<6 the e:uivalent o) U,,=4".2- and U,,!!,.-! erroneously doubly credited to his account, +<6 s actuation in intercepting the amount o) U2,=24.11 is not only improper but $ill also erode the trust and con)idence o) the international ban7ing community in the ban7ing system o) the country. Since .r. DapeC unduly received the doubly credited amounts $ithout the right to demand it, the obligation to return the amount unduly received must arise, under the principle o) solutio indebiti in Art. 214, o) the 3ivil 3ode. ?F>R>BOR>, the instant petition is here$ith &><I>& )or being plainly unmeritorious, the assailed decision is ABBIR.>& in toto. 3osts against petitioner.

>E/ Realty vs 3A

Dimpot, >milou %anine

EGC Realt. -s CA Facts: +etitioner, >E/ Realty &evelopment 3orporation is the o$nerLdeveloper o) a seven#storey condominium building 7no$n as 3ristina 3ondominium. 3ristina 3ondominium 3orporation holds title to all the common areas in the said condominium and is in#charge o) managing, maintaining and administering the condominium s common areas and providing the building s security. Respondent Anisphere International Inc. is the o$nerLoccupant o) Anit -11 o) the said condominium. On <ovember 2!, 1"!1, respondent s unit $as allegedly robbed o) various items valued at +=,1=,.11. Another robbery happened again on %uly 2,, 1"!2 $here +=,1-1.11 $orth o) items $ere lost. 6oth incidents $ere reported to petitioner. Anisphere demanded compensation and reimbursement )rom petitioner 333 )or the losses incurred as a result o) the robbery. Fo$ever, petitioner denied the said claim stating that they $ere not liable since the goods lost belonged to Amtrade, a third party. &ue to petitioner s denial, respondent $ithheld payment o) its monthly dues starting <ovember 1"!2. On September 1-, 1"!-, petitioner demanded payment o) past dues )rom respondent. 6ut no response $as received )rom them. On &ecember ,, 1"!4, petitioner e2ecuted a &eed o) Absolute Sale over Anit -11 in )avor o) respondent. 0herea)ter, 3ondominium 3erti)icate o) 0itle <o 4111 $as issued to respondent and $ith it is an annotation o) a lien in )avor o) petitioner )or the unpaid condominium dues in the amount o) +1-,142.=4. On %anuary 2!,1"!4, petitioners )iled a petition $ith the Securities and >2change 3ommission )or the collection o) the unpaid monthly dues against respondent. S>3 decided in )avor o) petitioner, ordering respondent to pay the unpaid dues and petitioner to pay respondent on the items lost during the robbery. 6oth )iled a motion )or reconsideration. +etitioner s motion $as granted ma7ing them not liable )or the value o) the items lost during the robbery. Respondent appealed the said decision to the 3A. 0he 3A granted respondent s motion and ordered that the unpaid monthly dues be o))set by the losses su))ered by Anisphere. +etitioner )iled a motion )or reconsideration but $as denied. +etitioners 3ontention9 0he ruling o) 3A to o))set the alleged losses )rom the unpaid monthly dues is un)ounded because respondent is not the o$ner o) the goods lost but a third party, Amtrade. .oreover, the cause o) action )or the reimbursement should be against the security agency they hired and not to the corporation. Issue: ?hether or not compensation has ta7en place in the instant case. Hel : <o. 3ompensation did not ta7e place in the case. In Article 124! o) the 3ivil 3ode, compensation is said to ta7e place $hen t$o persons, in their o$n right, are creditors and debtors o) each other. 3ompensation is Ja mode o) e2tinguishing to the concurrent amount, the obligations o) those persons $ho in their o$n right are reciprocally debtors and creditors o) each otherK and Jthe o))setting o) t$o obligations $hich are reciprocally e2tinguished i) they are o) e:ual value, or e2tinguished to the concurrent amount i) o) di))erent values.K Article 124" o) the same 3ode provides9 Article 124". In order that compensation may be proper, it is necessary9 (1* 0hat each one o) the obligors be bound principally, and that he be at the same time a principal creditor o) the otherS (2* 0hat both debts consist in a sum o) money, or i) the things due are consumable, they be o) the same 7ind, and also o) the same :uality i) the latter has been statedS

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(-* 0hat the t$o debts be dueS (4* 0hat they be li:uidated and demandableS (,* 0hat over neither o) them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor. Absent any sho$ing that all o) these re:uisites e2ist, compensation may not ta7e place. ?hile respondent Anisphere does not deny its liability )or its unpaid dues to petitioners, the latter do not admit any responsibility )or the loss su))ered by the )ormer occasioned by the burglary. At best, $hat respondent Anisphere has against petitioners is 'ust a claim, not a debt. Such being the case, it is not en)orceable in court. It is only the debts that are en)orceable in court, there being no apparent de)enses inherent in them. Respondent Anisphere s claim )or its loss has not been passed upon by any legal authority so as to elevate it to the level o) a debt. A debt is a claim $hich has been )ormally passed upon by the highest authority to $hich it can in la$ be submitted and has been declared to be a debt. A claim, on the other hand, is a debt in embryo. It is mere evidence o) a debt and must pass thru the process prescribed by la$ be)ore it develops into $hat is properly called a debt. 0ested by the )oregoing yardstic7, it has not been su))iciently established that compensation or set#o)) is proper here as there is lac7 o) evidence to sho$ that petitioners >.E./. Realty and 333 and respondent Anisphere are mutually debtors and creditors to each other. 0he petition is granted. 24 0rinidad vs Acapulco +usta, 6% 6onn

HERMENEGILDO M. TRINIDAD, +etitioner, vs. ESTRELLA ACAPULCO, Respondent FACTS: O' Ma. H, B>>B, respondent >strella Acapulco )iled a 3omplaint see7ing the nulli)ication o) a sale she made in )avor o) petitioner Fermenegildo .. 0rinidad. S!e alle)e : Sometime in Bebruary 1""1, a certain +rimitivo 3aTete re:uested her to sell a .ercedes 6enC )or +,!1,111.11. 3aTete also said that i) respondent hersel) $ill buy the car, 3aTete $as $illing to sell it )or +,11,111.11. Pet$t$"'e% &"%%",e t!e ca% )rom respondent )or t$o days but instead o) returning the car as promised, petitioner told respondent to buy the car )rom 3aTete )or +,11,111.11 and that petitioner $ould pay respondent a)ter he returns )rom &avao. F"ll",$') +et$t$"'e%3s $'st%uct$"'s, respondent re:uested 3aTete to e2ecute a deed o) sale covering the car in respondent s )avor )or +,11,111.11 )or $hich respondent issued three chec7s in )avor o) 3aTete. Res+"' e't t!e%ea#te% e(ecute a deed o) sale in )avor o) petitioner even though petitioner did not pay her any consideration )or the sale. ?hen petitioner returned )rom &avao, he re)used to pay respondent the amount o) +,11,111.11 saying that said amount $ould 'ust be deducted )rom $hatever outstanding obligation respondent had $ith him, $hich is +,==,111.11. Due t" +et$t$"'e%3s #a$lu%e to pay respondent, the chec7s that respondent issued in )avor o) 3aTete bounced, thus criminal charges $ere )iled against her. Respondent then prayed that the deed o) sale bet$een her and petitioner be declared null and voidS that the car be returned to herS and that petitioner be ordered to pay damages. I' !$s A's,e% petitioner contended that9 it is not true that he borro$ed the car and that any demand $as made to return itS he also did not give any instructions to respondent to buy the car )rom 3aTete because as early as September 2!, 1""1, 3aTete has already sold the car to respondent )or +,11,111.11S at the time respondent e2ecuted the deed o) sale in his )avor on Ma%c! K, B>>B, respondent $as already in possession o) the deed o) sale )rom 3aTeteS the amount o) +,11,111.11 $as )ully paid by $ay o) dation in payment to partially e2tinguish respondent s obligation $ith petitionerS the contract entered into $as a true sale o) a motor vehicle and the mode o) payment $as that o) dation in payment agreed upon at the time o) the sale. RTC %e' e%e $ts Dec$s$"' )inding that no dacion en pago is present in this case as common consent $as not proven.

25

 +etitioner )iled a .otion )or Reconsideration and also a Supplemental .otion $here )or the )irst time, he averred that assuming that respondent did not agree to have the purchase price charged against the +,==,111.11 she o$ed petitioner, nonetheless, $ith or $ithout her consent andLor 7no$ledge, the obligations parties o$ed to each other $ere e2tinguished by operation o) la$ or through legal compensation in the amount o) +,11,111.11. T!e RTC e'$e the .otion )or Reconsideration and Supplemental .otion stating that the claim o) dacion en pago is ine2istent and the de)ense o) legal compensation $as not alleged or pleaded in petitioner s Ans$er. CA a##$%*e t!e Dec$s$"', )inding that the issue o) legal compensation $as )iled too late as it $as brought up only in the supplemental motion )or reconsideration. He'ce t!$s +et$t$"'. ISSUE: ?O< legal compensation has ta7en place in this case HELD: YES, t!e%e ,as le)al c"*+e'sat$"' $' t!$s case.

Pet$t$"'e% a%)ues t!at: the purchase price o) the car had been automatically o))set by respondent s o$n monetary obligation o) +,==,111.11, even i) he and respondent had not agreed to o))setting
)ollo$ing Article 12"1 o) the 3ivil 3ode ?hat petitioner is contending is that legal compensation should be appreciated, though not e2pressly stated in his Ans$er to the 3omplaint be)ore the trial court. Fe )urther argues that, in any case, legal compensation ta7es place by operation o) la$ even $ithout the consent o) the interested parties. T!e C"u%t %es"l-es t" )%a't t!e +et$t$"'. C"*+e'sat$"' ta0es e##ect by operation o) la$ even $ithout the consent or 7no$ledge o) the parties concerned $hen all the re:uisites in Article 124" o) the 3ivil 3ode are present, in consonance $ith Article 12"1 o) the 3ivil 3ode $hich provides that9 A%t$cle B<>=. ?hen all the re:uisites mentioned in article 124" are present, compensation ta7es e))ect by operation o) la$, and e2tinguishes both debts to the concurrent amount, even though the creditors and debtors are not a$are o) the compensation. S$'ce $t ta0es +lace ipso jure, $hen used as a de)ense, it retroacts to the date $hen all its re:uisites are )ul)illed. A%t$cle B<J> +%"-$ es that in order that compensation may be proper, it is necessary9 (1* that each one o) the obligors be bound principally, and that he be at the same time a principal creditor o) the otherS (2* that both debts consist in a sum o) money, or i) the things due are consumable, they be o) the same 7ind, and also o) the same :uality i) the latter has been statedS (-* that the t$o debts be dueS (4* that they be li:uidated and demandableS (,* that over neither o) them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor. He%e, +et$t$"'e%3s sta'ce is that legal compensation has ta7en place and operates even against the $ill o) the parties because9 o 9a? %es+"' e't a' +et$t$"'e% $ere personally both creditor and debtor o) each otherS

26

o 9&? t!e *"'eta%. "&l$)at$"' o) respondent $as +,==,111.11 and that o) the petitioner $as +,11,111.11 sho$ing that both indebtedness $ere monetary obligations t!e a*"u't "# ,!$c! $ere also both 7no$n and li:uidatedS o 9c? &"t! *"'eta%. "&l$)at$"'s had become due and demandableXpetitioner s obligation as sho$n in the deed o) sale and respondent s indebtedness as sho$n in the dishonored chec7sS and o 9 ? 'e$t!e% "# t!e e&ts or obligations are sub'ect o) a controversy commenced by a third person.

T!e cla$* "# %es+"'

e't that there could be no legal compensation in this case as one o) the obligations consists o) delivery o) a car and not a sum o) money *ust #a$l. Res+"' e't s"l t!e ca% t" +et$t$"'e% "' Ma%c! K, B>>B #"% PG==,===.== ,!$le s!e #$le !e% c"*+la$'t #"% 'ull$#$cat$"' "# t!e sale "'l. "' Ma. H, B>>B. As le)al c"*+e'sat$"' ta0es +lace ipso jure, a' %et%"acts t" t!e ate ,!e' $ts %e/u$s$tes a%e #ul#$lle , le)al c"*+e'sat$"' !as al%ea . ta0e' +lace at t!e t$*e "# t!e sale. At such time, petitioner o$ed respondent the sum o) +,11,111.11 $hich is the price o) the vehicle.

C"'se/ue'tl., &. "+e%at$"' "# la,, the +,11,111.11 $hich petitioner o$ed respondent is o))#set against the +,==,111.11 o$ed by respondent to petitioner, lea-$') a &ala'ce o) +==,111.11,
$hich respondent should pay $ith 125 interest per annum )rom date o) 'udicial or e2tra'udicial deed. S$'ce t!e%e ,as no e2tra'udicial deed in this case, the interest shall be resolved )rom the date petitioner )iled its Supplemental .otion )or Reconsideration invo7ing )or the )irst time legal compensation, that is, .ay 21, 1""2. Fence, the petition is ERA<0>&. 6% 6onn +usta W!14 <G P!$l. C"**e%c$al Ba'0 I't3l Ba'0 -s Bal*ace a Fa@a% ", G%e)"%

2=

Dicaros vs Eatmaitan

Repors, %amil

A&ela% " L$ca%"s, Pet$t$"'e% Cs. A't"'$" P. Gat*a$ta', Res+"' e't Facts: Anglo#Asean 6an and 0rust Dimited, is a private ban7 registered and organiCed to do business under the la$ o) the Republic o) /anuatu but not in the +hil. 0he said ban7 engages in receiving )und placement by $ay o) deposits )rom institutions and investors all over the $orld. Abelardo Dicaros, a Bilipino 6usinessman invested on the said ban7 on mid 1"!1 s. ?hat Dicaros envisioned resulted the other $ay around. Dicaros had di))iculty in retrieving bac7 the amount that he had invested to the said ban7. Fe see7s )or the service o) a )inancial and management consultant. .r. Antonio Eatmaitan, a reputable ban7er and )inancial consultant, voluntarily assumed the indebtedness o) the said ban7 to .r. Dicaros provided that there are terms and conditions. 0o e))ectuate the agreement, they notariCed a .OA stipulating that .r. Eatmaitan $ill issue a non#negotiable promissory note $ith security o) cash dividends amounting ASU1,1,111 $Lo interest payable in +hilippine 3urrency ($L an e2change rate o) 2191* .r. Eatmaitan issued a non#negotiable promissory note in )avor o) .r. Dicaros amounting +-,1,1,111 $Lo interest $ith the security o) 415 )rom the cash dividends o) the +rudential Di)e +lans and +rudential Di)e Realty Inc. shares o) the )ormer payable on or be)ore %uly 1""-. .r. Eatmaitan, presented the said .OA to the Asean 6an7 and claimed the amount indicated. 0he o))icers o) the ban7 loo7ed at this matter, but did not respond to the claim o) the respondent. .r. Eatmaitan, seeing the reaction and behavior o) the ban7, did not comply in his responsibility indicated in the .OA.

27

Dicaros, through his counsel, sent demands )or payment. 6ut $ere not responded by the respondent. Biled an action in the R03 and )avored. 3A reversed the decision o) the 0rial 3ourt.

ISSUE: ?O< the .OA $as a valid 3onventional Subrogation. Hel : S3 said <O. Art. 1-11 o) the 33 provides that, 3onventional Subrogation o) a third person re:uires the consent o) the original parties and the third person. In the case at bench, the very important re:uirement )or the conventional subrogation $hich is the consent o) the Anglo#asean ban7 $as not present in this case. In )act, the ban7 did not respond to the claim o) the respondent. <ot even a))irming to the .OA. .OA never came into e))ect due to the )ailure o) the parties to get the consent o) A<EDO#AS>A< 6A<I to the Agreement, and as such, respondent cannot be liable )or the amount stipulated.

24

Earcia vs Dlamas

&iaC, >d$ard Ross

Ga%c$a -s Lla*as Facts: On &ecember 2-, 1""=, G+etitionerH Romeo Earcia and >duardo de %esus borro$ed +411,111 )rom GrespondentH &ionisio Dlamas. 0hey e2ecuted a promissory note $herein they bound themselves "ointly and severally to pay the loan on or be)ore %anuary 2-, 1""4 $ith a ,5 interest per month. ?hen the loan became overdue and despite repeated demands, petitioner and de %esus have )ailed and re)used to pay. 6y reason o) their un'usti)ied re)usal, respondent )iled a complaint )or sum o) money and damages against petitioner and de %esus. +etitioner Earcia, $hile resisting the complaint, averred that he assumed no liability under the promissory note because he signed it merely as an accommodation party )or de %esus. Fe claims that he is relieved )rom any liability arising )rom the note inasmuch as the loan had been paid by de <esus by means of a chec& which he issued . Burther, he contends that in any event, the issuance o) the chec7 and respondent s acceptance thereo) novated and superseded the note. Respondent tendered a reply to petitioner asserting that the loan remained unpaid )or the reason that the chec7 issued by de %esus bounced and that petitioner s ans$er $as not even accompanied by a certi)icate o) non#)orum shopping. On the other hand, de %esus contended in his Ans$er $ith 3ounterclaim that out o) the supposed +411,111 loan, he received only +-=1,111, the +41,111 having been advance interest thereon. Burther, he asserts that he paid the sum o) 121,111 by $ay o) interest. Fe stated that he had di))iculty in paying the loan and as7ed respondent )or an e2tension o) time. Fe avers that respondent acted in bad )aith in instituting the case )or respondent having agreed to accept the bene)its he(de %esus* $ould receive )or his retirement, nonetheless respondent )iled the instant case $hile his retirement $as being processed. 0he R03 rendered in )avor o) respondent ordering petitioner and de %esus to pay 'ointly and severally.

On appeal, the appellate court ruled that no novation(e2press or implied* had ta7en place $hen respondent accepted the chec7 )rom de %esus.

CA Rul$'): Respondent s acceptance o) the chec7 did not serve to ma7e &e %esus the sole debtor because, first, the obligation incurred by de %esus and petitioner $as 'oint and severalS and, second, the chec7 ## $hich had been intended to e2tinguish the obligation ## bounced upon its presentment.

28

Issue: ?o< <ovation too7 place

Hel : NO <ovation is a mode o) e2tinguishing an obligation by changing its ob"ects or principal obligations0 by substituting a new debtor in place of the old one0 or by subrogating a third person to the rights of the creditor. In general, there are t$o modes o) substituting the person o) the debtor9 (1* e2promision and (2* delegacion. In e(+%"*$s$"', the initiative )or the change does not come )rom the debtorS it consists o) a third person s assumption o) the obligation. 0hus, it re:uires the consent o) the third person and the creditor. In ele)ac$"', the debtor o))ers, the creditor accepts, and the third person consents to the substitution and assumption o) the obligation. 0here)ore, the consent o) all three persons is necessary. <ovation may also be e2press or implied. It is e(+%ess $hen the ne$ obligation declares in une'uivocal terms the old obligation is e2tinguished. It is $*+l$e incompatible $ith the old one on every point. $hen the ne$ obligation is

Applying the )oregoing to the instant case, $e hold that no novation too7 place. +etitioner see7s to e2tricate himsel) )rom his obligation as 'oint and solidary debtor by insisting that novation too7 place, either through the substitution o) de %esus as sole debtor or the replacement o) the promissory note by the chec7. In the present case, the chec7 could not have e2tinguished the obligation, because it bounced upon presentment. 0he parties )urther did '"t u'e/u$-"call. ecla%e that the old obligation had been e2tinguished by the issuance and the acceptance o) the chec7, or that the chec7 $ould ta7e the place o) the note. 0here is also '" $'c"*+at$&$l$t. bet$een the promissory note and the chec7. 0he chec7 had been issued precisely to ans$er )or the obligation. On one hand, the promissory note evidences the loan obligationS and on the other hand, the chec7 ans$ers )or it. As regards the payment of interest, it does not as $ell constitute novation. Such payment $as already provided )or in the promissory note and, li7e the chec7, it $as totally in accord $ith the terms thereo). As to petitioner s argument that the obligation $as novated by the substation o) debtors, the court )inds such argument as unmeritorious. In order to change the person o) the debtor, the old one must be e2pressly released )rom the obligation, and the third person or ne$ debtor must assume the )ormer s place in the relation. It is a $ell#settled rule that novation is never presumed. 3onse:uently, a purported change in the person o) the debtor must be clear and e2press. In the present case, petitioner has not sho$n that he $as e2pressly released )rom the obligation, and that a third person $as substituted in his place, or that the 'oint and solidary obligation $as cancelled and substituted by the solitary underta7ing o) de %esus. .ore importantly, e :esus ,as '"t a t!$% +e%s"' t" t!e "&l$)at$"'. Brom the beginning, he $as a 'oint and solidary obligor o) the +411,111 loan, thus, he can be released only )rom its e2tinguishment. Binally, it must be noted that in a solidary obligation, the creditor is entitled to demand the satis)action o) the $hole obligation )rom any or all o) the debtors.

2!

3ali)ornia 6us Dines vs State Investment

Sema, Rayan

CALIFORNIA BUS LINE -s. STATE INCESTMENT E.R. <o. 144",1 N Dece*&e% BB, <==; LMu$su*&$') L +etition )or Revie$ on certiorari o) a decision o) the 3A FACTS

29

In 1"4", &elta .otors 3orporation (&elta* applied )or )inancial assistance )rom respondent State Investment Fouse, Inc. (SIFI*, a domestic corporation engaged in the business o) :uasi# ban7ing. SIFI agreed to e2tend a credit line to &elta )or +2,. in - separate credit agreements. &elta eventually became indebted to SIFI. In April 1"4" to .ay 1"!1, petitioner 3ali)ornia 6us Dines, Inc. (36DI*, purchased on installment basis -, units o) ..A.<. &iesel 6uses and 2 units o) ..A.<. &iesel 3onversion >ngines )rom &elta. 0o secure the payment o) the -, buses, 36DI and its president e2ecuted 1= promissory notes in )avor o) &elta. 36DI GaH promised to pay &elta or order, +2.-14. payable in =1 monthly installments $ith interest at 145 per annum (p.a*, GbH promised to pay the holder o) the said notes 2,5 o) the amount due on the same as attorney s )ees and e2penses o) collection, GcH e2ecuted chattel mortgages over the -, buses in &elta s )avor. ?hen 36DI de)aulted on all payments due, it entered into a restructuring agreement $ith &elta in Oct. 1"!1, to cover its overdue obligations under the promissory notes. 0he restructuring agreement provided )or a ne$ schedule o) payments o) 36DI s past due installments, e2tending the period to pay, and stipulating daily remittance instead o) the previously agreed monthly remittance o) payments. In case o) de)ault, &elta $ould have the authority to ta7e over the management and operations o) 36DI until 36DI remitted andLor updated 36DI s past due account. 36DI and &elta also increased the interest rate to 1=5. In &ec. 1"!1, &elta e2ecuted a 3ontinuing &eed o) Assignment o) Receivables in )avor o) SIFI as security )or the payment o) its obligations to SIFI per the credit agreements. In vie$ o) &elta s )ailure to pay, the loan agreements $ere restructured under a .emorandum o) Agreement dated .arch 1"!2. &elta obligated itsel) to pay a )i2ed monthly amortiCation o) +1.4. to SIFI and to discount $ith SIFI +!. $orth o) receivables $ith the understanding that SIFI shall apply the proceeds against &elta s overdue accounts. 36DI continued having trouble meeting its obligations to &elta. 0his prompted &elta to threaten 36DI $ith the en)orcement o) the management ta7eover clause. 36DI )iled a complaint )or in'unction at 3BI RiCal, +asay 3ity, (no$ R03 +asay 3ity*. In due time, &elta )iled amended ans$er $ith applications )or issuance o) a $rit o) preliminary mandatory in'unction to en)orce the management ta7eover clause and a $rit o) preliminary attachment over the buses it sold to 36DI. R03 granted &elta s prayer on account o) the )raudulent disposition by 36DI o) its assets. In Sept.1"!-, pursuant to the .emorandum o) Agreement, &elta e2ecuted a &eed o) Sale assigning to SIFI , o) the 1= promissory notes )rom 36DI At the time o) assignment, these , promissory notes had a total value +1=.1. inclusive o) interest at 145 p.a. SIFI subse:uently sent a demand letter to 36DI re:uiring 36DI to remit the payments due on the , promissory notes directly to it. 36DI replied in)orming SIFI that &elta had ta7en over its management and operations. 0herea)ter, &elta and 36DI entered into a compromise agreement in %uly 1"!4. 36DI agreed that &elta $ould e2ercise its right to e2tra'udicially )oreclose on the chattel mortgages over the -, bus units. R03 +asay approved this compromise agreement. Bollo$ing this, 36DI vehemently re)used to pay SIFI the value o) the , promissory notes, contending that the compromise agreement $as in )ull settlement o) all its obligations to &elta including its obligations under the promissory notes. On &ec 2=, 1"!4, SIFI )iled a complaint against 36DI in R03 .anila, to collect on the , promissory notes $ith interest at 145 p.a. SIFI also prayed )or the issuance o) a $rit o) preliminary attachment against the properties o) 36DI. On &ec 2!, 1"!4, &elta )iled a petition )or e2tra'udicial )oreclosure o) chattel mortgages pursuant to its compromise agreement $ith 36DI. &elta then )iled in the R03 +asay a motion )or e2ecution o) the 'udgment based on the compromise agreement $hich $as granted. In vie$ o) &elta s petition and motion )or e2ecution per the 'udgment o) compromise, the R03 .anila granted SIFI s application )or preliminary attachment on %an. 4, 1"!,. 3onse:uently, SIFI $as able to attach and physically ta7e possession o) -2 buses belonging to 36DI. Fo$ever, acting on 36DI s motion to :uash the $rit o) preliminary attachment, the same court resolved in %an. 1"!=, to discharge the $rit o) preliminary attachment. SIFI assailed the discharge o) the $rit be)ore the IA3 (no$ 3ourt o) Appeals* 3A granted SIFI s petition in and ruled that the $rit o) preliminary attachment issued by R03 .anila should stay. .ean$hile, pursuant to the %an. -, 1"!, Order o) R03 o) +asay, the sheri)) o) +asay 3ity conducted a public auction and issued a certi)icate o) sheri)) s sale to &elta on April 2, 1"!4, attesting to the )act that &elta bought 14 o) the -, buses )or +-."2.. On April 4, 1"!4, the sheri)) o) .anila, by virtue o) the $rit o) e2ecution dated .arch 24, 1"!4, sold the same 14 buses at public auction in partial satis)action o) the 'udgment SIFI obtained against &elta. SIFI moved to sell the 1= buses o) 36DI $hich had previously been attached by the sheri)) pursuant to the %an 4, 1"!,, Order o) R03 o) .anila. SIFI s motion $as granted on &ec. 1=, 1"!4. In <ov. 1"!!, ho$ever, SIFI )iled an urgent e2#parte motion to amend this order claiming that its ne$ counsel made a mista7e in the list o) buses in the .otion to Sell it had earlier )iled. SIFI e2plained that 14 o) the buses listed had already been sold to &elta on April 2, 1"!4, by virtue o) the %an. -, 1"!, Order o) the R03 o) +asay, and that 2 o) the buses listed had been released to a third party. 36DI opposed SIFI s motion to allo$ the sale o) the 1= buses. On .ay -, 1"!", R03 .anila denied SIFI s urgent motion to allo$ the sale o) the 1= buses listed in its motion to amend. R03 ruled that the best interest o) the parties might be better served by denying )urther sales o) the buses and to go direct to the trial o) the case on the merits. R03 and 3A Ruling. %udgment discharged 36DI )rom liability on the , promissory notes. R03 also )avorably ruled on 36DI s compulsory counterclaim. It directed SIFI to return the 1= buses or to pay 36DI +4. representing the value o) the seiCed buses, $ith interest at 125 p.a. R03 held that the restructuring agreement bet$een &elta and 36DI novated the , promissory notesS hence, at the time &elta assigned the , promissory notes to SIFI, the notes $ere already merged in the restructuring agreement and cannot be en)orced against 36DI. SIFI appealed to the 3ourt o) Appeals. 3A reversed R03 ruling. Fence this appeal.

ISSUES ?O< the Restructuring Agreement bet$een 36DI and &elta novated the , promissory notes &elta assigned to respondent SIFI

30

?O< the 3ompromise Agreement bet$een &elta and 36DI superseded andLor discharged the sub'ect , promissory notes HELD1.<O Rat$" An agreement subse:uently e2ecuted bet$een a seller and a buyer that provides )or a di))erent schedule and manner o) payment, to restructure the mode o) payments by the buyer so that it could settle its outstanding obligation in spite o) its delin:uency in payment is not novation.

Reas"'$') NaO <ovation &e)ined and its Re:uisites. <ovation is the e2tinguishment o) an obligation by the substitution or change o) the obligation by a subse:uent one $hich terminates the )irst, either by changing the ob'ect or principal conditions, or by substituting the person o) the debtor, or subrogating a third person in the rights o) the creditor. <ovation, in its broad concept, may either be e2tinctive or modi)icatory. It is e2tinctive $hen an old obligation is terminated by the creation o) a ne$ obligation that ta7es the place o) the )ormerS it is merely modi)icatory $hen the old obligation subsists to the e2tent it remains compatible $ith the amendatory agreement. Bor novation to ta7e place, 4 essential re:uisites have to be met, namely, (1* a previous valid obligationS (2* an agreement o) all parties concerned to a ne$ contractS (-* the e2tinguishment o) the old obligationS and (4* the birth o) a valid ne$ obligation. N&O >2press and Implied <ovation. 0here are 2 $ays $hich could indicate the presence o) novation and thus produce the e))ect o) e2tinguishing an obligation by another $hich substitutes the same. 0he )irst is $hen novation has been e2plicitly or e2pressly stated and declared in une:uivocal terms. 0he second is implied novation. $hen the old and the ne$ obligations are incompatible on every point. 0he test o) incompatibility is $hether the 2 obligations can stand together, each one having its independent e2istence. I) they cannot, they are incompatible and the latter obligation novates the )irst. 3orollarily, changes that breed incompatibility must be essential in nature and not merely incidental. 0he incompatibility must ta7e place in any o) the essential elements o) the obligation, such as its ob'ect, cause or principal conditions thereo)S other$ise, the change $ould be merely modi)icatory in nature and insu))icient to e2tinguish the original obligation. NcO In this case, the attendant )acts do not ma7e out a case o) novation. 0he restructuring agreement bet$een &elta and 36DI e2ecuted sho$s that the parties did not e2pressly stipulate that the restructuring agreement novated the promissory notes. Absent an une:uivocal declaration o) e2tinguishment o) the pre#e2isting obligation, only a sho$ing o) complete incompatibility bet$een the old and the ne$ obligation $ould sustain a )inding o) novation by implication. Fo$ever, our revie$ o) its terms yields no incompatibility bet$een the promissory notes and the restructuring agreement. Burthermore, obligation is not novated by an instrument that e2pressly recogniCes the old, changes only the terms o) payment, and adds other obligations not incompatible $ith the old ones, or $here the ne$ contract merely supplements the old one 2. <O Rat$" A compromise agreement determines the rights and obligations o) only the parties to it. Reas"'$'): NaO Faving previously assigned the , promissory notes to SIFI, &elta had no more right to compromise the same. &elta s limited authority to collect )or SIFI stipulated in the Sept. 1-, 1"!,, &eed o) Sale cannot be construed to include the po$er to compromise 36DI s obligations in the said promissory notes. An authority to compromise, by e2press provision o) Article 1!4! o) the 3ivil 3ode, re:uires a special po$er o) attorney, $hich is not present in this case. Burthermore, the compromise agreement itsel) provided that it covered the rights and obligations only o) &elta and 36DI and that it did not re)er to, nor cover the rights o), SIFI as the ne$ creditor o) 36DI in the sub'ect promissory notes. N&O 0he assignment o) the , notes operated to create a separate and independent obligation on the part o) 36DI to SIFI, distinct and separate )rom 36DI s obligations to &elta. And since there $as a previous revocation o) &elta s authority to collect )or SIFI, &elta $as no longer SIFI s collecting agent. 36DI, in turn, 7ne$ o) the assignment and &elta s lac7 o) authority to compromise the sub'ect notes, yet it readily agreed to the )oreclosure D$s+"s$t$"' 3A ruling a))irmed. 36DI is ordered to pay SIFI the value o) the , promissory notes less the proceeds )rom the sale o) the attached 1= buses.

2"

A:uintey vs 0ibong Dece*&e% <=, <==H

3asalan, Armie

G.R. N". BHHJ=K T"+$c: <ovation

AGRIFINA AMUINTEY, petitioner, vs. SPOUSES FELICIDAD AND RICO TIBONG, respondents. Natu%e "# t!e Case: +etition )or revie$ under Rule 4, o) the Revised Rules on 3ivil +rocedure o) the &ecision o) the 3ourt o) Appeals, $hich a))irmed $ith modi)ication the &ecision o) the Regional 0rial 3ourt (R03*, 6ranch =1, 6aguio 3ity, and the Resolution o) the appellate court denying reconsideration thereo). Facts: Spouses Belicidad and Rico 0ibong (Respondents* secured several loans )rom Agri)ina A:uintey (+etitioner* at monthly interest rates o) =5 to 45 but despite demands they )ailed to pay their outstanding loan, amounting to 44-,111php, e2clusive o) interests. Respondent spouses admitted that they secured loans )rom petitioner. 0hey used the money to re#lend to other borro$ers at higher interest rates. Fo$ever, they alleged that they had e2ecuted deeds o) assignment in )avor o) petitioner and that their debtors have e2ecuted promissory notes in petitioner s )avor. According to them, this resulted in a novation o) the original obligation to petitioner.

31

As suggested by petitioner s la$yer, respondent spouses indorsed the accounts o) her debtors to petitioner so that the latter $ould be the one to collect )rom her debtors and she $ould no longer have any obligation to petitioner. Fence, the deeds o) assignment $ere e2ecuted covering the sums o) money due )rom her debtors. 0hey insisted that by virtue o) these documents, petitioner became the ne$ collector o) their debtors and the obligation to pay the balance o) their loans had been e2tinguished. Agri)ina $as able to collect the total amount o) -11,111php )rom Belicidad s debtors. She tried to collect Belicidad s balance and $hen the latter reneged on her promise, Agri)ina )iled a complaint in the o))ice o) the barangay )or the collection o) 44-,111php. 0here $as no settlement. +etitioner )iled a complaint )or sum o) money and damages against respondents. RTC: Belicidad s obligation had not been novated by the deeds o) assignment and the promissory notes e2ecuted by e2ecuted by her borro$ers. 0he documents did not contain any e2press agreement to novate and e2tinguish BelicidadQs obligation. 0he deeds and notes $ere separate contracts $hich could stand alone )rom the original indebtedness o) Belicidad. 3onsidering, ho$ever, Agri)inaQs admission that she $as able to collect )rom BelicidadQs debtors the total amount o) -11,111php this should be deducted )rom the latterQs accountability.Fence, the balance, e2clusive o) interests, amounted to 442,111.11php. CA: A))irmed R03 s decision $ith modi)ication ordering de)endant to pay the balance o) total indebtedness in the amount o) ,1,-41php plus =5 per month.

Issue: WON the obligation of the respondents to pay petitioner has been extinguished by the deeds of assignment of credit. Rul$'): Yes. 0he Supreme 3ourt agreed $ith the )inding o) the 3A that petitioner had no right to collect )rom respondents the total amount o) -11,111php, $hich includes more than 14!,"!1php $hich respondent Belicidad collected )rom ! debtors. +etitioner cannot again collect the same amount )rom respondentsS other$ise, she $ould be enriching hersel) at their e2pense. <either can petitioner collect )rom respondents more than 11-,,11php $hich she had already collected )rom - debtors. 0here is no longer a need )or the 3ourt to still resolve the issue o) $hether respondents obligation to pay the balance o) their loan account to petitioner $as partially e2tinguished by the promissory notes e2ecuted by = debtors because, as admitted by petitioner, she $as able to collect the amounts under the notes )rom said debtors and applied them to respondents accounts. Ander Article 12-1(b* o) the <e$ 3ivil 3ode, novation is enumerated as one o) the $ays by $hich obligations are e2tinguished. Obligations may be modi)ied by changing their ob'ect or principal creditor or by substituting the person o) the debtor. 0he burden to prove the de)ense that an obligation has been e2tinguished by novation )alls on the debtor. <ovation may either be e2tinctive or modi)icatory, much being dependent on the nature o) the change and the intention o) the parties. >2tinctive novation is never presumedS there must be an e2press intention to novateS in cases $here it is implied, the acts o) the parties must clearly demonstrate their intent to dissolve the old obligation as the moving consideration )or the emergence o) the ne$ one. Implied novation necessitates that the incompatibility bet$een the old and ne$ obligation be total on every point such that the old obligation is completely superseded by the ne$ one. 0he test o) incompatibility is $hether they can stand together, each one having an independent e2istenceS i) they cannot and are irreconciliable, the subse:uent obligation $ould also e2tinguish the )irst. An e2tinctive novation $ould thus have the t$in e))ects o), first, e2tinguishing an e2isting obligation and, second, creating a ne$ one in its stead. 0his 7ind o) novation presupposes a con)luence o) )our essential re:uisites9 (1* a previous valid obligationS (2* an agreement o) all parties concerned to a ne$ contractS (-* the e2tinguishment o) the old obligationS and (4* the birth o) a valid ne$ obligation. <ovation is merely modi)icatory $here the change brought about by any subse:uent agreement is merely incidental to the main obligation ( e.g.0 a change in interest rates or an e2tension o) time to pay*S in this instance, the ne$ agreement $ill not have the e))ect o) e2tinguishing the )irst but $ould merely supplement it or supplant some but not all o) its provisions. <ovation $hich consists in substituting a ne$ debtor ( delegado* in the place o) the original one ( delegante* may be made even $ithout the 7no$ledge or against the $ill o) the latter but not $ithout the consent o) the creditor. Substitution o) the person o) the debtor may be e))ected by delegacion, meaning, the debtor o))ers, and the creditor (delegatario*, accepts a third person $ho consents to the substitution and assumes the obligation. 0hus, the consent o) those three persons is necessary. In this 7ind o) novation, it is not enough to e2tend the 'uridical relation to a third personS it is necessary that the old debtor be released )rom the obligation, and the third person or ne$ debtor ta7e his place in the relation. ?ithout such release, there is no novationS the third person $ho has assumed the obligation o) the debtor merely becomes a co#debtor or a surety. I) there is no agreement as to solidarity, the )irst and the ne$ debtor are considered obligated 'ointly. As correctly )ound by the 3A, respondent spouses obligation to pay the balance o) their account $ith petitioner $as e2tinguished, pro tanto, by the deeds o) assignment o) credit e2ecuted by Belicidad in )avor o) petitioner.

-1

RicarCe vs 3A

Baustino, 3hariC

32

RICAR7E -s. CA, PP, CALTED, PCIBAN8 G,1, S3RA -12S Bebruary ", 2114H Facts: +etitioner $as employed as a collector#messenger by 3ity Service 3orporation, a domestic corporation engaged in messengerial services. Fe $as assigned to the main o))ice o) 3alte2 +hilippines, Inc. (3alte2* in .a7ati. Fis primary tas7 $as to collect chec7s payable to 3alte2 and deliver them to the cashier. Fe also delivered invoices to 3alte2 s customers. 3alte2 )iled a criminal complaint against petitioner )or esta)a through )alsi)ication o) commercial documents. 0he manager o) its 6an7ing and Insurance &epartment, Romano, alleged that $hile his department $as conducting a daily electronic report )rom +3I6an7, one o) its depositary ban7s, it $as discovered that un7no$n to the department, a company chec7 in the amount o) +,,4"1,,41.2, payable to &ante R. EutierreC, had been cleared through +3I6. An investigation also revealed that t$o other chec7s $ere also missing and that his signature and that o) another signatory, Eo:uinco, $ere )orgeries. A chec7, in the amount o) +1,4"1,4,4.2, li7e$ise payable to &ante R. EutierreC, $as also cleared through the same ban7. 0his chec7 $as li7e$ise not issued by 3alte2, and the signatures appearing thereon had also been )orged. Apon veri)ication, it $as uncovered that the chec7s $ere deposited at the 6&O in the name o) a regular customer o) 3alte2, EutierreC. EutierreC, ho$ever, diso$ned the savings account as $ell as his signatures on the dorsal portions thereo). Fe also denied having $ithdra$n any amount )rom said savings account. Burther investigation revealed that said savings account had actually been opened by petitionerS the )orged chec7s $ere deposited and endorsed by him under EutierreC s name. A ban7 teller )rom the 6&O positively identi)ied petitioner as the person $ho opened the savings account using EutierreC s name. +etitioner )urther averred that unless the In)ormations $ere amended to change the private complainant to +3I6, his right as accused $ould be pre'udiced. Fe pointed out, ho$ever, that the In)ormations can no longer be amended because he had already been arraigned under the original In)ormations. Fe insisted that the amendments o) the In)ormations to substitute +3I6 as the o))ended party )or 3alte2 $ould place him in double 'eopardy. +3I6, through SR.O, opposed the motion. It contended that the +3I6 had re#credited the amount to 3alte2 to the e2tent o) the indemnityS hence, the +3I6 had been subrogated to the rights and interests o) 3alte2 as private complainant. 3onse:uently, the +3I6 is entitled to receive any civil indemnity $hich the trial court $ould ad'udge against the accused. .oreover, the re#credited amount $as brought out on cross#e2amination by Ramon Romano $ho testi)ied )or the +rosecution. +3I6 pointed out that petitioner had mar7ed in evidence the letter o) the A33RA Da$ O))ice to +3I6an7 and the credit memo sent by +3I6 to 3alte2. Issue: ?O< there is a valid subrogation bet$een 3alte2 and +3I6A<I. Hel : 0he argument o) the petitioner that there is no $ay $here +3I6A<I subrogated to the rights o) 3alte2, considering that he has no 7no$ledge o) the subrogation much less gave his consent to it and )urther posits that i) subrogation $as proper, then the charges against him should be dismissed because the t$o in)ormations being de)ective and void due to )alse allegations, is misplaced. 0he 3ourt agrees $ith respondent +3I6 s comment that petitioner )ailed to ma7e a distinction bet$een legal and conventional subrogation. Subrogation is the trans)er o) all the rights o) the creditor to a third person, $ho substitutes him in all his rights. It may either be legal or conventional. Degal subrogation is that $hich ta7es place $ithout agreement but by operation o) la$ because o) certain acts. Instances o) legal subrogation are those provided in Article 1-12 o) the 3ivil 3ode. 3onventional subrogation, on the other hand, is that $hich ta7es place by agreement o) the parties. 0hus, petitioner s ac:uiescence is not necessary )or subrogation to ta7e place because the instant case is one o) legal subrogation that occurs by operation o) la$, and $ithout need o) the debtor s 7no$ledge. 0hus, being subrogated to the right o) 3alte2, +3I6, through counsel, has the right to intervene in the proceedings, and under substantive la$s is entitled to restitution o) its properties or )unds, reparation, or indemni)ication.

-1

Dedonio vs 3apitol &evelopment

Euiritan, >mmy

Le "'$" -s. Ca+$t"l De-el"+*e'tP G.R. N". BK>=K= :ul. K, <==J Facts: Ferein respondent 3apitol &evelopment 3orporation instituted 3ivil 3ase <o. Q#"1#,244 by )iling a 3omplaint )or the collection o) a sum o) money against herein petitioner >dgar Dedonio.

33

In its 3omplaint, respondent alleged that petitioner obtained )rom a .s. +atrocinio S. +icache t$o loans, $ith the aggregate principal amount o) +=1,111.11, and covered by promissory notes duly signed by petitioner. In the )irst promissory note, , dated " <ovember 1"!!, petitioner promised to pay to the order o) .s. +icache the principal amount o) +-1,111.11, in monthly installments o) +-,111.11, $ith the )irst monthly installment due on " %anuary 1"!". In the second promissory note, = dated 11 <ovember 1"!!, petitioner again promised to pay to the order o) .s. +icache the principal amount o) +-1,111.11, $ith -=5 interest per annum, on 1 &ecember 1"!!. In case o) de)ault in payment, both promissory notes provided penalties. On 1 April 1"!", .s. +icache e2ecuted an Assignment o) 3redit in )avor o) respondent, $hich reads9 222do hereby sell, assign, trans)er and convey unto the said 3A+I0OD &>/>DO+.><0 3OR+ORA0IO<, a certain debt due me )rom Gherein petitionerH >&EAR A. D>&O<IO in the principal sum o) (+=1,111.11* $ith )ull po$er to sue )or, collect and discharge, or sell and assign the same. 0he )oregoing document $as signed by t$o $itnesses and duly ac7no$ledged by .s. +icache be)ore a <otary +ublic also on 1 April 1"!". Since petitioner did not pay any o) the loans covered by the promissory notes $hen they became due, respondent ## through its /ice +resident sent petitioner several demand letters. &espite receiving the said demand letters, petitioner still )ailed and re)used to settle his indebtedness, thus, prompting respondent to )ile the 3omplaint $ith the R03 In his Ans$er )iled $ith the R03, petitioner sought the dismissal o) the 3omplaint averring that9 (a* respondent had no cause o) action against him. (b* Fe denied obtaining any loan )rom .s. +icache and :uestioned the genuineness and due e2ecution o) the promissory notes, )or they $ere the result o) intimidation and )raudS hence, void. (c* 0he assignment by .s. +icache o) the promissory notes to respondent $as a mere ploy and simulation to e))ect the un'ust en)orcement o) the invalid promissory notes and to insulate .s. +icache )rom any direct counterclaims (d* he never consented or agreed to the said assignment.

+etitioner stated that he entered into a 3ontract o) Dease o) real property .R.3, o) $hich .s. +icache is an incorporator and member o) the 6oard o) &irectors. 0hat he incurred damages amounting to =1,111 AS dollars due to the unpaid electric bills o) the leased property $hich caused $or7 stoppage and loss o) business opportunities. .Faving )ailed to obtain compensation )rom .R.3, petitioner decided to vacate and pull out his machines )rom the leased property but he can only do so, unhampered and uninterrupted by .R.3 security personnel, i) he signed, as he did, blan7 promissory note )orms. +etitioner alleged that $hen he signed the promissory note )orms, the allotted spaces )or the principal amount o) the loans, interest rates, and names o) the promiseeLs $ere in blan7S and that .s. +icache too7 advantage o) petitionerQs signatures on the blan7 promissory note )orms by )illing up the blan7s. R03 ruled in )avour o) respondent stating that it appears incredulous that a businessman li7e GpetitionerH $ould simply sign blan7 sheets o) paper or blan7 promissory notes 'ust GtoH be able to vacate the leased premises and that he contradicted his earlier testominies. 0he R03 also sustained the validity and en)orceability o) the Assignment o) 3redit e2ecuted by .s. +icache in )avor o) respondent, even in the absence o) petitionerQs consent to the said assignment, it only re:uires the debtor be noti)ied and +etitioner does not deny having been noti)ied o) the assignment o) credit by +atrocinio +icache to the GrespondentH. Fe also ac7no$ledge receipt o) the demand letter $hen he assured respondent that he $ill settle his account through a telephone conversation. R03 modi)ied +etitioner s liabilities )or being ini:uitous and unconscionable Aggrieved by the decision he )iled an appeal $ith the 3A but it $as denied as $ell as the motion )or reconsideration on the ground that it $ere mere reiterations o) the issues and matters already considered. +etitioner )iled in S3 a +etition )or Revie$ in 3ertiorari. Fis main arguments 3A erred in ruling that there $as an assignment and not subrogation or novation. +etitioner asserts the position that consent o) the debtor to the assignment o) credit is a basicLessential element in order )or the assignee to have a cause o) action against the debtor. ?ithout the debtorQs consent, the recourse o) the assignee in case o) non#payment o) the assigned credit, is to recover )rom the assignor in support o) his contention he stated Art. 1-11 and 1-11 AR0. 1-11. Subrogation o) a third person in the rights o) the creditor is either legal or conventional. 0he )ormer is not presumed, e2cept in cases e2pressly mentioned in this 3odeS the latter must be clearly established in order that it may ta7e e))ect. AR0. 1-11. 3onventional subrogation o) a third person re:uires the consent o) the original parties and the third person.

Issue: ?O< there is subrogationLnovation $hich re:uires the consent o) the debtor Hel : <o, the S3 declared that the transaction bet. .s. +icache and 3apitol $as an ass. o) credit not cconventional subrogation

34

An assignment o) credit has been de)ined as an agreement by virtue o) $hich the o$ner o) a credit (7no$n as the assignor*, by a legal cause # such as sale, dation in payment or e2change or donation # and $ithout need o) the debtorQs consent, trans)ers that credit and its accessory rights to another (7no$n as the assignee*, $ho ac:uires the po$er to en)orce it, to the same e2tent as the assignor could have en)orced it against the debtor. On the other hand, subrogation, by de)inition, is the trans)er o) all the rights o) the creditor to a third person, $ho substitutes him in all his rights. It may either be legal or conventional. Degal subrogation is that $hich ta7es place $ithout agreement but by operation o) la$ because o) certain acts. 3onventional subrogation is that $hich ta7es place by agreement o) parties. Under our Code, however, conventional subrogation is not identical to assignment of credit. In the )ormer, the debtorQs consent is necessaryS in the latter, it is not re:uired, noti)ication o) the assignment o) credit to the debtor is su))icient. Subrogation e2tinguishes an obligation and gives rise to a ne$ oneS assignment re)ers to the same right $hich passes )rom one person to another. 0he nullity o) an old obligation may be cured by subrogation, such that the ne$ obligation $ill be per)ectly validS but the nullity o) an obligation is not remedied by the assignment o) the creditorQs right to another. Article 1-11 o) the 3ivil 3ode provides that conventional subrogation must be clearly established in order that it may ta7e e))ect. Since it is petitioner $ho claims that there is conventional subrogation in this case, the burden o) proo) rests upon him to establish the same by a preponderance o) evidence. 0here is nothing in the said Assignment o) 3redit $hich imparts to this 3ourt, $hether literally or deductively, that a conventional subrogation $as intended by the parties thereto. 0he terms o) the Assignment o) 3redit only convey the straight)or$ard intention o) .s. +icache to @sell, assign, trans)er, and convey@ to respondent the debt due her )rom petitioner, as evidenced by the t$o promissory notes o) the latter, dated " <ovember 1"!! and 11 <ovember 1"!!, )or the consideration o) +=1,111.11. 6y virtue o) the same document, .s. +icache gave respondent )ull po$er @to sue )or, collect and discharge, or sell and assign@ the very same debt. 0he Assignment o) 3redit $as signed solely by .s. +icache, $itnessed by t$o other persons. <o re)erence $as made to securing the conforme o) petitioner to the transaction, nor any space provided )or his signature on the said document. Since the Assignment o) 3redit, dated 1 April 1"!", is 'ust as its title suggests, then petitionerQs consent as debtor is not necessary in order that the assignment may )ully produce legal e))ects. Since his consent is immaterial, the only other matter $hich this 3ourt must determine is $hether petitioner had 7no$ledge o) the Assignment o) 3redit, dated 1 April 1"!", bet$een .s. +icache and respondent. 6oth the 3ourt o) Appeals and the R03 ruled in the a))irmative, and so must this 3ourt. Binally, assuming arguendo that this 3ourt considers petitioner a third person to the Assignment o) 3redit, dated 1 April 1"!", the )act that the said document $as duly notariCed ma7es it legally en)orceable even as to him. According to Article 1=2, o) the 3ivil 3ode P AR0. 1=2,. An assignment o) credit, right or action shall produce no e))ect as against third persons, unless it appears in a public instrument, or the instrument is recorded in the Registry o) +roperty in case the assignment involves real property.

<otariCation converted the Assignment o) 3redit, dated 1 April 1"!", a private document, into a public document, -- thus, complying $ith the mandate o) the a)ore#:uoted provision and ma7ing it en)orceable even as against third persons. 4HEREFORE, premises considered, the instant +etition )or Revie$ is hereby DENIED, and the decision o) the R03 and 3A is A))irmed.

-2

/alenCuela vs Ialayan &evelopment

SalaCar, &emrev

SPOUSES :OSE T. CALEN7UELA a' GLORIA CALEN7UELA, Pet$t$"'e%s, -s. 8ALAYAAN DECELOPMENT 6 INDUSTRIAL CORPORATION, Res+"' e't. G.R. N". BH;<KK :u'e <<, <==>

Facts: Ialayaan &evelopment M Industrial 3orporation discovered that Spouses %ose and Eloria /alenCuela had occupied and built a house on a parcel o) land it o$ned, and demanded that they vacate said property. Apon negotiation, ho$ever, petitioners and Ialayaan entered a $ontract to #ell $herein the petitioners $ould purchase 2-= s:uare meters o) the sub'ect property )or +1,41=,111 in t$elve e:ual monthly installments. 0he contract )urther stated that upon )ailure to pay any o) said installments, petitioners $ould be liable )or li:uidated penalty at -5 a month compounded monthly until )ully paid. Ialayaan $ould also e2ecute the deed o) absolute sale only upon )ull payment. +etitioners $ere only able to pay monthly installments amounting to a total o) +21!, 111.11. 0hey then re:uested Ialayaan to issue a deed o) sale )or 11! s:uare meters o) the lot $here their house stood, arguing that since they had paid hal) the purchase price, or a total o) +41!,111.11 representing 11! s:uare meters o) the property. Ialayaan, on the other hand, sent t$o demand letters as7ing petitioners to pay their outstanding obligation including agreed penalties.

35

Eloria /alenCuela s sister, %uliet Eiron, assumed the remaining balance )or the 11! s:uare meters o) the sub'ect property at +11,111.11 per month to Ialayaan, $hich the latter accepted )or and in behal) o) Eloria. 0herea)ter, Ialayaan demanded that petitioners pay their outstanding obligation, but $ere unheeded. Ialyaan then )iled a 3omplaint )ot the Rescission o) 3ontract and &amages against petitioners. 0he R03 o) 3aloocan rendered a &ecision in )avor o) Ialayaan, rescinding the contract bet$een the parties and ordering petitioners to vacate the premises. +etitioners sought recourse )rom the 3A. 0hey aver that the 3A )ailed to see that the original contract bet$een petitioners and Ialayaan $as altered, changed, modi)ied and restricted as a conse:uence o) the change in the person o) the principal debtor (Sps. /alenCuela to %uliet*. ?hen Ialayaan agreed to a monthly amortiCation o) +11,111.11 per month the original contract $as changed, and that the same recogniCed %uliet s capacity to pay and her designation as the ne$ debtor. <evertheless, the 3A a))irmed the R03 ruling. Issue: I) the original contract $as novated and the principal obligation to pay )or the remaining hal) o) the sub'ect property $as trans)erred )rom petitioners to %uliet. Hel : <o. Novation is never presumed. <ovation is the e2tinguishment o) an obligation by the substitution or change o) the obligation by a subse:uent one $hich e2tinguishes or modi)ies the )irst, either by changing the ob'ect or principal conditions, or by substituting another in place o) the debtor, or by subrogating a third person in the rights o) the creditor. +arties to a contract must e2pressly agree that they are abrogating their old contract in )avor o) a ne$ one. In absence o) an e2press agreement, novation ta7es place only $hen the old and ne$ obligations are incompatible on every point. 0hese are the indispensable re:uisites o) novation9 1* 0here must be a previous valid obligationS 2* 0here must be an agreement o) the parties concerned to a ne$ contractS -* 0here must be the e2tinguishment o) the old contractS and 4* 0here must be the validity o) the ne$ contract. In the instant case, none o) the a)orementioned re:uisites are present, as Ialayaan never agreed to the creation o) a ne$ contract bet$een them or %uliet. Ialayaan s acceptance o) the late payments made by %uliet is, at best, an act o) tolerance on part o) Ialayaan that could not have modi)ied the contract. 0he non#)ul)illment by petitioners o) their obligation to pay, $hich is a suspensive condition )or the obligation o) Ialayaan to sell and deliver the title to the property, rendered the 3ontract to Sell ine))ective and $ithout )orce and e))ect. 0he parties stand as i) the conditional obligation had never e2istedS Ialayaan cannot be compelled to trans)er o$nership o) the property to petitioners. ;; Cec$lle-$lle Realt. -s Acu'a Ba'/ue%$)", A%e"

-4

0omimbang vs 0omimbang

&egamo, Biona

MARIA SOLEDAD TOMIMBANG CS. ATTY. :OSE TOMIMBANG FACTS: +etitioner and respondent are siblings. 0heir parents donated to petitioner an !#door apartment $ith the condition that, during their parentQs li)etime, they shall retain control over the property and petitioner shall serve as the administrator thereo). In 1"",, petitioner applied )or a +AEI6IE loan to )inance the renovation o) Anit F##intended as her residence. Fo$ever, she )ailed to do so. Fence, respondent o))ered his credit line $ith the )ollo$ing conditions9 1. +#should 7eep a record o) all the advances 2. +# should start paying the loan##upon completion o) the renovation -. a loan and mortgage agreement based on the advances should be made a)ter the completion 4. the loan agreement shall contain com)ortable terms and conditions that + could have attained )rom +AEI6IE Fo$ever, in 1""4, an altercation happened bet$een the 2 o) them. So had a meeting at EeneroQs house (brother*. 0hrough such, theyQve entered into a <>? AER>>.><0S $here + is to start paying

36

monthly payments on her loan. So, + turned over all the records o) cash advances to R. + had made monthly payments )rom %une to October 1""4. 0otal o) "-,111.11php. On October 2114, a :uarrel bet$een R and .aricion (sister* occured. A barangay hearing happened, $here R reminded + to pay. + allegedly ans$ered, QIADI.A0A< .O <A A<E +>RA .O ?ADA 0ARO<E +I<IR.AFA<. FI<&I AIO <A0A0AIO0 SARO.Q A)ter that, + could no longer be )ound and le)t Anit F. Renovations $ere discontinued. And she stopped ma7ing payments. 1""!, R )iled a complaint in R03. R03 ruled in )avor o) respondent. 3A a))irmed in toto. .R denied. ISSUES: 1. ?O< obligation o) + is already due and demandable 2. ?O< R is entitled to attyQs )ees -. ?O< interest should be imposed upon +, i) yes, in $hat rate .AI< ISSA>9 number 1. HELD: Res, obligation is already due and demandable. >vidence sho$s that a)ter the renovation o) the 4L! apartments, both parties agreed that + shall start ma7ing monthly installments even i) renovation o) the last unit $as still pending. Eenaro 0omimbang (brother* also testi)ied that a meeting $as held and both made a <>? AER>>.><0S $here + started ma7ing payments )rom %une to October o) 1""4 amounting to "-,111.11php. Fence, by the SA6S>QA><0 AER>>.><0, both had dispensed $ith the condition that petitioner shall only begin paying a)ter the completion o) all renovations. 0hus, there $as a modi)icatoryL partial novation. Read Art 12"1 esp no.1 9* (7apoy type eh* +Qs partial per)ormance is proo) enough that the original agreement FA& 6>>< <O/A0>& by the deletion o) the condition that payments shall be made only a)ter completion o) the renovations. 0here)ore, by +Qs o$n admission and partial per)ormance, under the <O/A0>& AER>>.><0##+Qs obligation is already due and demandable.

-,

Republic Blour .ills vs Borbes Bactors

Agamata, .elanie

REPUBLIC FLOUR MILLS CORPORATION, +etitioner, # versus # FORBES FACTORS, INC. Respondent

37

ISSUE: ?O< there is a subrogation o) rights bet$een Respondent Borbes Bactors and Richco 3ompany over the obligation o) petitioner, Blour .ills 3orp. to Richco 3orp. FACTS HELD

In a contract dated 2= April 1"!-, respondent $as appointed as the e2clusive +hilippine indent representative o) Richco Rotterdam 6./. (Richco*, a )oreign corporation, in the sale o) the latter s commodities. Ander one o) the terms o) the contract, respondent $as to assume the liabilities o) all the +hilippine buyers, should they )ail to honor the commitments on the discharging operations o) each vessel, including the payment o) demurrage and other penalties. Sometime in 1"!4, petitioner purchased 3anadian barley and soybean meal )rom Richco. 0he contract )urther provided that petitioner guarantees to settle any demurrage due $ithin one (1* month )rom respondent s presentation o) the statement. Apon delivery o) the barley and soybean meal, petitioner )ailed to discharge the cargoes )rom the )our (4* vessels at the computed allo$able period to do so. 0hus, it incurred a demurrage amounting to a total o) ASU1"-,"-4.41. On numerous occasions, on behal) o) Richco, respondent demanded )rom petitioner the payment o) the demurrage, to no avail. 3onse:uently, on 21 October 1""1, Richco sent a communication to respondent, in)orming it that the demurrage due )rom petitioner had been debited )rom the respondent s account. Respondent )iled $ith the Regional 0rial 3ourt (R03*, <ational 3apital %udicial Region, .a7ati 3ity, a 3omplaint )or demurrage and damages against petitioner. petitioner contends alleging that respondent $as not a real party#in#interest to bring the collection suit. +etitioner insisted that the payment o) demurrage should be made to the o$ner o) the vessels that transported the goods, and not to respondent $ho $as merely the indent representative o) Richco, the charterer o) the vessel. 0he )acts are undisputed. 0he delay incurred by petitioner in discharging the cargoes )rom the vessels $as due to its o$n )ault. Respondent une:uivocally established that Richco charged to it the demurrage due )rom petitioner. 0hus, at the moment that Richco debited the account o) respondent, the latter is deemed to have subrogated to the rights o) the )ormer, $ho in turn, paid demurrage to the ship o$ner. It is there)ore immaterial that respondent is not the ship o$ner, since it has been able to prove that it has stepped into the shoes o) the creditor. 3onse:uently, it $as subrogated to the rights o) RI3F3O arising )rom the )ailure o) RB. to pay its demurrage and BOR6>S paid )or it. 0he subrogation $as pursuant to Articles 1-12 and 21=4, <e$ 3ivil 3ode, $hich read9 JArt. 1-12. It is presumed that there is legal subrogation9 ?hen a creditor pays another creditor $ho is pre)erred, even $ithout the debtor s 7no$ledgeS ?hen, even $ithout the 7no$ledge o) the debtor, a person interested in the )ul)illment o) the obligation pays, $ithout pre'udice to the e))ects o) con)usion as to the latter s share.K JArt. 21=4. 0he guarantor $ho pays is subrogated by virtue thereo) to all the rights $hich the creditor had against the debtor.

0he case at bar is an e2ample o) legal subrogation, the petitioner and respondent having no e2press agreement on the right o) subrogation. 0hus, it is o) no moment that the 3ontracts o) Sale did not e2pressly state that demurrage shall be paid to respondent. 6y operation o) la$, respondent has become the real party#in#interest to pursue the payment o) demurrage. M.P.AGAMATA

-=

Stolt#<ielsn vs 3hung Eai Ship .anagement

Earcia, Eiovanni

STOLT-NIELSN a' CHUNG GAI SHIP MANAGEMENT -s. SULPECIO MEDIMUILLO

Facts: In .arch 1",,, Sulpecio .ade:uillo, respondent, )iled a complaint be)ore the Ad'udication O))ice o) the +hilippine Overseas >mployment Admin. (+O>A* against the petitioners )or illegal dismissal under a )irst contract M )or )ailure to deploy under a second contract.

In a summary, .ade:uillo alleged that9

38

In 1""1, he $as hired by Stolt#<ielsen .arine Services Inc. on behal) o) its principal 3hung#Eai Ship .anagement o) +anama as - rd Assistant >ngineer on board the vessel JStolt AspirationK )or a period o) " months. A)ter nearly - months and $hile the vessel $as at 6atangas, he $as ordered to disembar7 the vessel and repatriated bac7 to .anila )or no reason or e2planation. Apon his return to .anila, he $ent to the petitioner s o))ice $here he $as trans)erred employment $ith another vessel named ./ JStolt +rideK under the same terms M 3onditions Subse:uently, the Second contract $as noted and approved by the +O>A but a)ter the commencement o) the 2nd 3ontract, petitioners )ailed to deploy him $ith the said vessel. .ade:uillo made a )ollo$#up $ith the petitioner but the same re)used to comply $ith the 2 nd >mployment 3ontract. Fe then demanded )or his employment documents, but $as not allo$ed to claim unless he $ill sign a document. Fe also alleged that he $as constrained to sign the document involuntarily because he cannot $or7 $Lo these employment documents. 3onse:uently, the case $as trans)erred to the Dabor arbiter o) the &OD>. It $as decided there that the respondents employer are guilty o) constructively dismissing the complainant by not honoring the employment contract. Dabor Arbiter also )ound the )irst contract to have been novated by the e2ecution o) the 2 nd 3ontract. In other $ords, respondents cannot be held liable )or the )irst contract but are clearly and de)initely liable )or the breach o) the second contract. 0he petitioners appealed be)ore the <ational Dabor Relations 3ommission that the respondent cannot be considered as dismissed )rom employment because he $as not even deployed. 0he <DR3 a))irmed the decision o) the Dabor Arbiter $ith modi)ications by deleting the a$ard o) overtime pay. +etitioners then )iled a petition )or 3ertiorari be)ore the 3A. It a))irmed the decision.

Issue: ?O< there $as novation o) the )irst contract by the second contract )or the petitioners to be held liable )or the breach o) the second contract; <ovation is the e2tinguishment o) an obligation by the substitution or change o) the obligation by a subse:uent one $hich e2tinguishes or modi)ies the )irst, either by changing the ob'ect or principal conditions, or by substituting another in place o) the debtor, or by subrogating a third person in the rights o) the creditor.

And in order )or novation to ta7e place, the )ollo$ing re:uisites must concur9 A previous valid obligation An agreement o) the parties concerned to a ne$ contract. >2tinguishment o) the old contract .ust be the validity o) the ne$ contract In the case at bar, the S3 ruled that novation too7 place. 0he parties impliedly e2tinguished the )irst contract by agreeing to enter into the second contract to placate or appease .ede:uillo $ho $as une2pectedly dismissed and repatriated to .anila. 0he 2nd 3ontract e2tinguished the )irst contract by changing its ob'ect or principal. 0hese contracts $ere )or overseas employment aboard di)). vessels. 0he )irst $as )or ./ AS+IRA0IO< and the 2 nd $as )or ./ Stolt +ride. 6oth parties accepted the terms and condition o) the 2nd contract, 3ontrary to the petitioner s assertion that the )irst contract is not a valid contract, )or it has already been e2tinguished, is $ithout merit. It $as still a previous valid contract since it had not yet been terminated at the time o) .ede:uillo s repatriation to .anila. 0he legality o) his dismissal $as not yet resolved $ith )inality. It means he $as still employed under the )irst contract $hen he negotiated $ith petitioners on the second contract. ?ith such, S3 ruled that novation became an unavoidable conclusion. 3laim )or damages under the 1st 3ontract is already time#barred. .adue:uillo, ho$ever, is entitled to ade:uate compensation only )or such pecuniary loss su))ered by him and he has duly proved provided )or by .igrant ?or7ers Act (RA !142* as a conse:uence o) non#deployment.

39

-4

Starbright Sales vs +hilippine Realty

Aranas, Ievienne MSGR. DOMINGO A. CIRILOS, TROPICANA PROPERTIES AND DECELOPMENT

STARBRIGHT SALES ENTERPRISES, INC., +etitioner, vs. PHILIPPINE REALTY CORPORATION, CORPORATION and STANDARD REALTY CORPORATION, Respondents. Facts:

April 14, 1"!! # Ramon Dicup $rote .sgr. 3irilos, o))ering to buy three contiguous parcels o) land in +araTa:ue that 0he Foly See and +hilippine Realty 3orporation (+R3* o$ned )or +1,241.11 per s:uare meter. Dicup accepted the responsibility )or removing the illegal settlers on the land and enclosed a chec7 )or +111I to @close the transaction.@ and to pay the balance o) the purchase price upon presentation o) the title )or trans)er and once the property has been cleared o) its occupants. 3irilos, representing 0he Foly See and +R3, signed his name on the con)orme portion o) the letter and accepted the chec7. 6ut the chec7 could not be encashed due to Dicup s stop#order payment. Dicup re:uested on April 2=, 1"!! that the titles to the land be instead trans)erred to Starbright Sales >nterprisesS enclosed a ne$ chec7 )or the same amount. 3irilos $rote SS> to remove the occupants on the property or i) not he $ill return the +111I. SS> replied $ith an @updated proposal.@# that it $ould be $illing to comply $ith the condition provided the purchase price is lo$ered to +1,1,1.11 per s:uare meter. 3irilos $rote bac7, re'ecting the @updated proposal.@ 0hat other buyers $ere $illing to ac:uire the property on an @as is, $here is@ basis at +1,411.11 per s:uare meterS gave SS> seven days $ithin $hich to buy the property at +1,411.11 per s:uare meter. Fe also enclosed a chec7 )or +111I in his letter as re)und. SS> $rote 3irilos that they already had a per)ected contract o) sale in the April 14, 1"!! letter $hich he signed. SS> claimed that it got no reply )rom 3irilos and that the ne2t thing they 7ne$, the land had been sold to 0ropicana +roperties on .arch -1, 1"!". SS> demanded rescission o) that sale. .ean$hile 0ropicana +roperties sold the three parcels o) land to Standard Realty. Its demand )or rescission unheeded, SS> )iled a complaint )or annulment o) sale and reconveyance $ith damages be)ore the R03 o) .a7ati, against 0he Foly See, +R3, 3irilos, and 0ropicana +ropertiesS SS> amended its complaint impleading Standard Realty as additional de)endant. 0he Foly See sought dismissal o) the case claiming that as a )oreign government, it cannot be sued $ithout its consent. 0he R03 held other$ise but the 3ourt reversed the ruling o) the R03 and ordered that 0he Foly See be dismissed. SS> alleged that Dicup s original letter o) April 14, 1"!! to 3irilos constituted a per)ected contract. Dicup even gave an earnest money o) +111I to @close the transaction.@ Fis o))er to rid the land o) its occupants $as a @mere gesture o) accommodation i) only to e2pedite the trans)er o) its title.@ Burther, SS> claimed that, in representing 0he Foly See and +R3, 3irilos acted in bad )aith $hen he set the price o) the property at +1,411.11 per s:uare meter $hen in truth, the property $as sold to 0ropicana +roperties )or only +4=1.=! per s:uare meter. 3irilos maintained, on the other hand, that based on their e2change o) letters, no contract o) sale $as per)ected bet$een SS> and the parties he represented. And, only a)ter the negotiations bet$een them )ell through did he sell the land to 0ropicana +roperties. R03 treated the April 14, 1"!! letter bet$een Dicum and .sgr. 3irilos as a per)ected contract o) sale bet$een the parties. 3irilos attempted to change the terms o) contract and return SS> s initial deposit but the parties reached no agreement regarding such change. Since such agreement $as $anting, the original terms provided in the April 14, 1"!! letter continued to bind the parties. 3ourt o) Appeals reversed the R03 decision, that no per)ected contract can be gleaned )rom the April 14, 1"!! letter. Indeed, the subse:uent e2change o) letters bet$een SS> and .sgr. 3irilos sho$ that the parties $ere grappling $ith the terms o) the sale. 3irilos made no unconditional acceptance that $ould give rise to a per)ected contract. As to the +111I given to 3irilos, the 3A considered it an option money that secured )or SS> only the privilege to buy the property even i) Dicup called it a @deposit.@ 3A denied SS> s motion )or reconsideration.

Issue: ?hether or not there $as a per)ected contract o) sale e2isted bet$een SS> and the land o$ners, represented by .sgr. 3irilos.

Rul$'):

40

<one. T!%ee ele*e'ts a%e 'ee e t" c%eate a +e%#ecte c"'t%act: B? t!e c"'se't "# t!e c"'t%act$') +a%t$esP <? a' "&@ect ce%ta$' ,!$c! $s t!e su&@ect *atte% "# t!e c"'t%actP a' ;? t!e cause "# t!e "&l$)at$"' ,!$c! $s esta&l$s!e .

Ander the la$ on sales, a contract o) sale is per)ected $hen the seller, obligates himsel), )or a price certain, to deliver and to trans)er o$nership o) a thing or right to the buyer, over $hich the latter agrees. Brom that moment, the parties may demand reciprocal per)ormance. 0he C"u%t &el$e-es t!at t!e A+%$l BJ, B>II lette% &et,ee' L$cu+ a' Ms)%. C$%$l"s, c"'st$tute a +e%#ecte c"'t%act . ?hen .sgr. 3irilos a))i2ed his signature on that letter, he e2pressed his con)ormity to the terms o) Dicup s o))er appearing on it. 0here $as meeting o) the minds as to the ob'ect and consideration o) the contract. But ,!e' L$cu+ "% e%e a st"+-+a.*e't "' !$s e+"s$t a' +%"+"se t!at t!e +%"+e%t. &e $'stea t%a's#e%%e t" SSE, a su&@ect$-e '"-at$"' t""0 +lace. A su&@ect$-e '"-at$"' %esults t!%"u)! su&st$tut$"' "# t!e +e%s"' "# t!e e&t"% "% t!%"u)! su&%")at$"' "# a t!$% +e%s"' t" t!e %$)!ts "# t!e c%e $t"%. T" acc"*+l$s! a su&@ect$-e '"-at$"' t!%"u)! c!a')e $' t!e +e%s"' "# t!e e&t"%, t!e "l e&t"% 'ee s t" &e e(+%essl. %elease #%"* t!e "&l$)at$"' a' t!e t!$% +e%s"' "% 'e, e&t"% 'ee s t" assu*e !$s +lace $' t!e %elat$"'. <ovation serves t," #u'ct$"'s P one is to e(t$')u$s! a' e($st$') "&l$)at$"', the other to su&st$tute a 'e, "'e $' $ts +lace P re:uiring concurrence o) #"u% %e/u$s$tes: B? a +%e-$"us -al$ "&l$)at$"'P <? a' a)%ee*e't "# all +a%t$es c"'ce%'e t" a 'e, c"'t%actP ;? t!e e(t$')u$s!*e't "# t!e "l "&l$)at$"'P a' K? t!e &$%t! "# a -al$ 'e, "&l$)at$"'.

<otably, Dicup and .sgr. 3irilos a))i2ed their signatures on the original agreement embodied in Dicup s letter o) April 2=, 1"!!. N" s$*$la% lette% a)%ee*e't ca' &e #"u' &et,ee' SSE a' Ms)%. C$%$l"s. 0he +%"+"se su&st$tut$"' "# L$cu+ &. SSE "+e'e t!e 'e)"t$at$"' sta)e #"% a 'e, c"'t%act "# sale as &et,ee' SSE a' t!e ",'e%s . 0he succee $') e(c!a')e "# lette%s &et,ee' M%. Ste+!e' Cu, SSE3s %e+%ese'tat$-e, a' Ms)%. C$%$l"s attests t" a' u'#$'$s!e 'e)"t$at$"'. .sgr. 3irilos re)erred to his discussion $ith SS> regarding the purchase as a @pending transaction.@ 3u, on the other hand, regarded SS> s )irst letter to .sgr. 3irilos as an @updated proposal.@ 0his proposal too7 up t$o issues9 ,!$c! +a%t. ,"ul u' e%ta0e t" e-$ct t!e "ccu+a'ts on the property and !", *uc! t!e c"'s$ e%at$"' *ust &e #"% t!e +%"+e%t.. 0hese are clea% $' $cat$"'s t!at t!e%e ,as '" *eet$') "# t!e *$' s &et,ee' t!e +a%t$es.1avvphi1 As it turned out, t!e +a%t$es %eac!e '" c"'se'sus %e)a% $') t!ese $ssues, t!us +%" uc$') '" +e%#ecte sale &et,ee' t!e*. +arenthetically, .sgr. 3irilos did not act in bad )aith $hen he sold the property to 0ropicana even i) it $as )or a lesser consideration. .ore than a month had passed since the last communication bet$een the parties on Bebruary 4, 1"!". It is not improbable )or prospective buyers to o))er to buy the property during that time. 0he +111I that $as given to .sgr. 3irilos as @deposit@ cannot be considered as earnest money. ?here the parties merely e2changed o))ers and counter#o))ers, no contract is per)ected since they did not yet give their consent to such o))ers. >arnest money applies to a per)ected sale. SSE ca''"t %e-e%t t" t!e "%$)$'al te%*s state $' L$cu+3s lette% t" Ms)%. C$%$l"s ate A+%$l BJ, B>II s$'ce $t ,as '"t +%$-. t" suc! c"'t%act. 0he parties to it $ere Dicup and .sgr. 3irilos. U' e% t!e +%$'c$+le "# %elat$-$t. "# c"'t%acts, c"'t%acts ca' "'l. &$' t!e +a%t$es ,!" e'te%e $'t" $t . It cannot )avor or pre'udice a third person. +etitioner SSE ca''"t, there)ore, $*+"se t!e te%*s L$cu+ state $' !$s A+%$l BJ, B>II lette% u+"' t!e ",'e%s. ?F>R>BOR>, the C"u%t DISMISSES t!e +et$t$"' a' AFFIRMS t!e C"u%t "# A++eals Dec$s$"'.

-!

Anited +ulp +aper vs Acropolis 3entral Euaranty

.oreno

U'$te Pul+ a' Pa+e% C". I'c. -s. Ac%"+"l$s Su%et. Gua%a't. C"%+"%at$"' Facts

41

On .ay 14, 2112, Anited +ulp and +aper 3o., Inc. ( = $* )iled a civil case )or collection o) the amount o) +42,!44,-,-.14 against Anibo2 +ac7aging 3orporation ( =nibox* and /icente Ortega (Ortega* be)ore the Regional 0rial 3ourt o) .a7ati, 6ranch 14! ( %T$*.A++3 also prayed )or a ?rit o) +reliminary Attachment against the properties o) Anibo2 and Ortega )or the reason that the latter $ere on the verge o) insolvency and $ere trans)erring assets in )raud o) creditors. On August 2", 2112, the R03 issued the ?rit o) Attachment a)ter A++3 posted a bond in the same amount o) its claim. 6y virtue o) the said $rit, several properties and assets o) Anibo2 and Ortega $ere attached. On October 11, 2112, Anibo2 and Ortega )iled their .otion )or the &ischarge o) Attachment, praying that they be allo$ed to )ile a counter#bond in the amount o)+42,!44,-,-.14 and that the $rit o) preliminary attachment be discharged a)ter the )iling o) such bond. Although this $as opposed by A++3, the R03, in its Order dated October 2,, 2112, granted the said motion )or the discharge o) the $rit o) attachment sub'ect to the condition that Anibo2 and Ortega )ile a counter#bond. 0hus, on <ovember 21, 2112, respondent Acropolis 3entral Euaranty 3orporation (Acropolis* issued the &e)endant s 6ond )or &issolution o) Attachment in the amount o) +42,!44,-,-.14 in )avor o) Anibo2. <ot satis)ied $ith the counter#bond issued by Acropolis, A++3 )iled its .ani)estation and .otion to &ischarge the 3ounter#6ond dated <ovember 24, 2112, claiming that Acropolis $as among those insurance companies $hose licenses $ere set to be cancelled due to their )ailure to put up the minimum amount o) capitaliCation re:uired by la$. Bor that reason, A++3 prayed )or the discharge o) the counter#bond and the reinstatement o) the attachment. In its &ecember 11, 2112 Order, the R03 denied A++3 s .otion to &ischarge 3ounter#6ond and, instead, approved and admitted the counter#bond posted by Acropolis. Accordingly, it ordered the sheri)) to cause the li)ting o) the attachment on the properties o) Anibo2 and Ortega. On September 2", 211-, Anibo2, Ortega and A++3 e2ecuted a compromise agreement, $herein Anibo2 and Ortega ac7no$ledged their obligation to A++3 in the amount o) +-,,1!",,44.11 as o) August -1, 211-, inclusive o) the principal and the accrued interest, and bound themselves to pay the said amount in accordance $ith a schedule o) payments agreed upon by the parties. 3onse:uently, the R03 promulgated its %udgment dated October 2, 211- approving the compromise agreement. Bor )ailure o) Anibo2 and Ortega to pay the re:uired amounts )or the months o) .ay and %une 2114 despite demand by A++3, the latter )iled its .otion )or >2ecution to satis)y the remaining unpaid balance. In the %uly -1, 2114 Order, the R03 acted )avorably on the said motion and, on August 4, 2114, it issued the re:uested ?rit o) >2ecution. 0he sheri)) then proceeded to en)orce the ?rit o) >2ecution. It $as discovered, ho$ever, that Anibo2 had already ceased its business operation and all o) its assets had been )oreclosed by its creditor ban7. .oreover, the responses o) the selected ban7s $hich $ere served $ith notices o) garnishment indicated that Anibo2 and Ortega no longer had )unds available )or garnishment. 0he sheri)) also proceeded to the residence o) Ortega to serve the $rit but he $as denied entry to the premises. &espite his e))orts, the sheri)) reported in his <ovember 4, 211! +artial Return that there $as no satis)action o) the remaining unpaid balance by Anibo2 and Ortega. On the basis o) the said return, A++3 )iled its .otion to Order Surety to +ay Amount o) 3ounter#6ond directed at Acropolis. On <ovember -1, 2114, the R03 issued its Order granting the motion and ordering Acropolis to comply $ith the terms o) its counter#bond and pay A++3 the unpaid balance o) the 'udgment in the amount o) +24,14!,,=!.4! $ith interest o) 125 per annum )rom de)ault. 0herea)ter, on &ecember 1-, 2114, Acropolis )iled its .ani)estation and /ery Argent .otion )or Reconsideration, arguing that it could not be made to pay the amount o) the counter#bond because it did not receive a demand )or payment )rom A++3. Burthermore, it reasoned that its obligation had been discharged by virtue o) the novation o) its obligation pursuant to the compromise agreement e2ecuted by A++3, Anibo2 and Ortega. 0he motion, $hich $as set )or hearing on &ecember 14, 2114, $as received by the R03 and A++3 only on &ecember 21, 2114. In the Order dated Bebruary 22, 211,, the R03 denied the motion )or reconsideration )or lac7 o) merit and )or having been )iled three days a)ter the date set )or the hearing on the said motion. Aggrieved, Acropolis )iled a petition )or certiorari be)ore the 3A $ith a prayer )or the issuance o) a 0emporary Restraining Order and ?rit o) +reliminary In'unction. On <ovember 14, 211,, the 3A rendered its &ecision granting the petition, reversing the Bebruary 22, 211, Order o) the R03, and absolving and relieving Acropolis o) its liability to honor and pay the amount o) its counter# attachment bond. In arriving at said disposition, the 3A stated that, )irstly, Acropolis $as able to comply $ith the three#day notice rule because the motion it )iled $as sent by registered mail on &ecember 1-, 2114, )our days prior to the hearing set )or &ecember 14, 2114S secondly, A++3 )ailed to comply $ith the )ollo$ing re:uirements )or recovery o) a 'udgment creditor )rom the surety on the counter#bond in accordance $ith Section 14, Rule ,4 o) the Rules o) 3ourt, to $it9 (1* demand made by creditor on the surety, (2* notice to surety and (-* summary hearing as to his liability )or the 'udgment under the counter#bondS and, thirdly, the )ailure o) A++3 to include Acropolis in the compromise agreement $as )atal to its case. A++3 then )iled a motion )or reconsideration but it $as denied by the 3A in its Resolution dated .arch 1, 211=. Fence, this petition.

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!ssue ?hether the e2ecution o) the compromise agreement bet$een A++3 and Anibo2 and Ortega $as tantamount to a novation $hich had the e))ect o) releasing Acropolis )rom its obligation under the counter#attachment bond. "uling

A++3 argues that the underta7ing o) Acropolis is to secure any 'udgment rendered by the R03 in its )avor. It points out that because o) the posting o) the counter#bond by Acropolis and the dissolution o) the $rit o) preliminary attachment against Anibo2 and Ortega, A++3 lost its security against the latter t$o $ho had gone ban7rupt. It cites the cases o) >uerrero v. $ourt of Appealsand .artine9 v. $avives to support its position that the e2ecution o) a compromise agreement bet$een the parties and the subse:uent rendition o) a 'udgment based on the said compromise agreement does not release the surety )rom its obligation nor does it novate the obligation. Acropolis, on the other hand, contends that it $as not a party to the compromise agreement. <either $as it a$are o) the e2ecution o) such an agreement $hich contains an ac7no$ledgment o) liability on the part o) Anibo2 and Ortega that $as pre'udicial to it as the surety. Accordingly, it cannot be bound by the 'udgment issued based on the said agreement. Acropolis also :uestions the applicability o) >uerrero and dra$s attention to the )act that in said case, the compromise agreement speci)ically stipulated that the surety shall continue to be liable, unli7e in the case at bench $here the compromise agreement made no mention o) its obligation to A++3. 0he terms o) the 6ond )or &issolution o) Attachment issued by Anibo2 and Acropolis in )avor o) A++3 are clear and leave no room )or ambiguity9 NOW0 T?E%E@O%E0 we =N!4OA A$BA>!N> $O% . as rincipal and ?!8! !NE %C$E A##=%AN$E $O% .0 a corporation duly organi9ed and existing under and by virtue of the laws of the hilippines0 as #urety0 in consideration of the dissolution of said attachment0 hereby "ointly and severally bind ourselves in the sum of @O%TC TWO .!88!ON E!>?T ?=ND%ED @O%TC @O=% T?O=#AND T?%EE ?=ND%ED @!@TC T?%EE AND ,7D,EE ON8C ) 710F7706-6.,7* hilippine $urrency0 in favor of the plaintiff to secure the payment of any "udgment that the plaintiff may recover against the defendants in this action. 6ased on the )oregoing, Acropolis voluntarily bound itsel) $ith Anibo2 to be solidarily liable to ans$er )or A<R 'udgment $hich A++3 may recover )rom Anibo2 in its civil case )or collection. Its counter#bond $as issued in consideration o) the dissolution o) the $rit o) attachment on the properties o) Anibo2 and Ortega. 0he counter#bond then replaced the properties to ensure recovery by A++3 )rom Anibo2 and Ortega. It $ould be the height o) in'ustice to allo$ Acropolis to evade its obligation to A++3, especially a)ter the latter has already secured a )avorable 'udgment.

-"

.illa vs +eople

Dimos

MILLA -s PEOPLE FACTS: Respondent 3arlo DopeC $as the Binancial O))icer o) private respondent .ar7et +ursuits Inc. (.+I*. In 211-, .illa represented himsel) as a real estate developer )rom Ines Anderson &ev t 3orp., $hich $as engaged in selling business properties in .a7ati, and o))ered to sell .+I a property therein located. Bor this purpose, he sho$ed DopeC a photocopy o) 030 registered in the name o) spouses Barley and %ocelyn Fandog as $ell as S+A purportedly e2ecuted by the spouses in )avor o) .illa. DopeC veri)ied $ith the Registry o) &eeds o) .a7ati and con)irmed that the property $as indded registered under the names o) spouses Fandog. Since DopeC $as convinced by .illa s authority, .+I purchased the property )or +2., issuing a Security 6an7 0rust 3o. (S603* in the amount o) +1.=.. A)ter receiving the chec7, .illa gave DopeC a notariCed &eed o) Absolute Sale e2ecuted by the spouses Fandog in )avor o) .+I and an original o$ner s duplicate copy o) the 030. .illa then gave Regino Acosta, DopeC s partner, a copy o) the ne$ certi)icate o) title to the property registered in the name o) .+I. 0herea)ter, it tendered in )avor o) .illa S60& chec7 in the amount o) +411,111 as payment )or the balance. .illa turned over 030 to Acosta, but did not )urnish the latter $ith the receipts )or the trans)er ta2es and other costs incurred during the trans)er o) the property. 0his )ailure to turn over receipts prompted DopeC to chec7 $ith the Registry o) &eeds $here he discovered that9 1. the certi)icate o) title given to them by .illa could not be )ound thereinS 2. there $as no trans)er o) property )rom spouses Fandog to .+I andS -. 030 $as registered in the name o) certain .atilde 0olentino. 3onse:uently, DopeC demanded the return o) the amount o) 2. )rom .illa, $ho then issued 2 >:uitable +3I chec7s in the amount o) 1. each. Fo$ever these chec7s $ere dishonored due to insu))iciency o) )unds. ?hen .illa ignored the demand letter sent by DopeC, he )iled a complaint, 2 in)ormtions o) >sta)a thru Balsi)ication o) +ublic &ocuments.

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R03 )ound .illa guilty beyond reasonable doubt o) 2 counts o) >sta)a thru Balsi)ication o) +ublic &ocuments. On appeal, 3A a))irmed )indings o) R03.

ISSUE: ?hether or <ot the principle o) novation can e2culpate .illa )rom criminal liablity . HELD: 0he principles o) novation cannot apply to the present case as to e2tinguish his criminal liability. .illa cites eople v. NeryG2-H to support his contention that his issuance o) the >:uitable +3I chec7s prior to the )iling o) the criminal complaint averted his incipient criminal liability. Fo$ever, it must be clari)ied that mere payment o) an obligation be)ore the institution o) a criminal complaint does not, on its o$n, constitute novation that may prevent criminal liability. 0his 3ourtQs ruling in Nery in )act $arned that novation is not one o) the means recogniCed by the +enal 3ode $hereby criminal liability can be e2tinguishedS hence, the role o) novation may only be to either prevent the rise o) criminal liability or to cast doubt on the true nature o) the original petition, $hether or not it $as such that its breach $ould not give rise to penal responsibility, as $hen money loaned is made to appear as a deposit, or other similar disguise is resorted to (c). Abeto vs. +eople, "1 +hil. ,!1S /illareal, 24 +hil. 4!1*. E-e' $' C$-$l La, t!e acce+ta'ce "# +a%t$al +a.*e'ts, ,$t!"ut #u%t!e% c!a')e $' t!e "%$)$'al %elat$"' &et,ee' t!e c"*+la$'a't a' t!e accuse , ca' '"t +%" uce '"-at$"'. F"% t!e latte% t" e($st, t!e%e *ust &e +%""# "# $'te't t" e(t$')u$s! t!e "%$)$'al %elat$"'s!$+, a' suc! $'te't ca' '"t &e $'#e%%e #%"* t!e *e%e acce+ta'ce "# +a.*e'ts "' acc"u't "# ,!at $s t"tall. ue. .uch less can it be said that the acceptance o) partial satis)action can e))ect the nulli)ication o) a criminal liability that is )ully matured, and already in the process o) en)orcement. T!e c%$*$'al l$a&$l$t. #"% esta#a al%ea . c"**$tte $s t!e' '"t a##ecte &. t!e su&se/ue't '"-at$"' "# c"'t%act, #"% $t $s a +u&l$c "##e'se ,!$c! *ust &e +%"secute a' +u'$s!e &. t!e State $' $ts ",' c"'at$"'. In the case at bar, the acceptance by .+I o) the >:uitable +3I chec7s tendered by .illa could not have novated the original transaction, as the chec7s $ere only intended to secure the return o) the +2 million the )ormer had already given him. >ven then, these chec7s bounced and $ere thus unable to satis)y his liability. .oreover, the estafa involved here $as not )or simple misappropriation or conversion, but $as committed through .illaQs )alsi)ication o) public documents, the liability )or $hich cannot be e2tinguished by mere novation.

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