Marsman vs.

Philippine Geoanalytics
G.R. No. 183374
June 29, 2010

Facts:
Marsman Drysdale Land, Inc. (Marsman) and Gotesco Properties, Inc. (Gotesco) entered
into a Joint Venture Agreement (JVA) which stipulated that they undertake a
condominium building project wherein they would invest on the project on a Fifty-Fifty
(50%-50%) basis.
Marsman would contribute property in a buildable condition in the amount of Php
420,000,000.00 and Gotesco would contribute Php 50,000,000.00 as initial down
payment and the balance of Php 370,000,000.00 would be paid out as needed during
construction.
It was stipulated that all cash contributions and obligations would be borne by Gotesco.
For purposes of the venture Marsman and Gotesco hired Philippine Geonanalytics, Inc.
(PGI) to conduct a seismic study on the property prior to the construction of the
building.
Due to debris left on the property PGI failed to drill all the boreholes necessary for the
study but was still able to complete said study. Despite various demands Marsman and
Gotesco failed to pay PGI the amount of Php 284,553.50 and Php 250,800.00 as the cost
of soil exploration and seismic study.
Marsman contends that since according to the JVA, Gotesco is responsible for all cash
contributions needed for the project, thus Gotesco should solely pay for the amount
payable to PGI.
Gotesco contends that Marsman should solely pay for the amount payable to PGI for it
was their fault that PGI was unable to complete the boreholes as they failed to remove
debris on the property.
The RTC ruled that Marsman and Gotesco are jointly liable for the amount payable and
that Gotesco should reimburse Marsman the amount of Php 535,353.50.
The CA then modified the decision of the RTC removing the part of Gotesco paying
Marsman a lump sum amount and instead holding that Gotesco should pay Marsman
50% of the amount due to PGI.
Marsman now contends that the court erred in holding both them and Gotesco jointly
liable for the amount payable to PGI as the JVA between them and Gotesco stipulated
that Gotesco is responsible for all cash liabilities incurred by the project.

Issue:
Whether or not Marsman and Gotesco are jointly liable for the amount payable to PGI.

Held:
Article 1207 of the Civil code provides inter alia two or more debtors in one and the same
obligation does not imply that each one of the former has a right to demand, or that each one
of the latter is bound to render, entire compliance with the prestations and Article 1208 of
the same code provides inter alia the credit or debt shall be presumed to be divided into as
many equal shares as there are creditors or debtors, thus if no stipulation is made to make
the parties solidarily liable and no stipulation to the division of gains and losses, the law
presumes that the parties are joint. The JVA does not affect third parties as it only affects the
parties involved which are Gotesco and Marsman, as Gotesco and Marsman entered into the
contract of service with PGI jointly then they are jointly liable for any claim that PGI is entitled
to against them. Furthermore Article 1797 of the Civil Code which provides that inter alia If
only the share of each partner in the profits has been agreed upon, the share of each in
the losses shall be in the same proportion, thus as Marsman and Gotesco agreed to the 50-
50 percent share in the project the same applies to its liabilities.
























Purita Alipio vs. the Court of Appeals and Romeo G. Jaring
G.R. No. 134100
September 29, 2000

Facts:
Spouses Placido and Purita Alipio and Spouses Bienvenido and Remedios Manuel were
sublessees of a 14.5 hectare fishpond leased by Romeo Jaring.
They stipulated that the rent amounting to Php 485,600.00 would be paid in two
installments of Php 300,000.00 and Php 185,600.00, with the second installment falling
due in June 30, 1989. Each of the four sublessees signed the contract.
The sublessees however failed to pay the full amount of the second installment and
were only able to pay the partial amount of Php 50,600.00. Romeo Jaring filed a case of
collection of sum of money on October 13, 1989 against the Alipio and Manuel Spouses.
Purita Alipio contends that since her husband died 10 months prior to the filing of the
suit, Romeo can no longer file the case against her as stated in Rule 3, section 20 of the
1997 Rules of Civil Procedure which provides that an action for recovery of money is
dismissed prior to its final judgment upon the debt of the defendant.
The RTC ruled in favor of Romeo and held that since Purita herself is a party in the
contract she can be held liable for the collection of money.

Issue:
Whether or not the death of Placido releases Purita from the collection of sum of money.

Held:
The contract of sublease was signed by spouses Alipio and Manuel which bind them to pay the
amount of rent to Romeo is governed by Article 161 (1) of the Civil Code which provides that;
All debts and obligations contracted by the husband for the benefit of the conjugal
partnership, and those contracted by the wife, also for the same purpose, in the cases where
she may legally bind the partnership. Thus, the death of Placido automatically extinguished the
Conjugal Partnership of the spouses Alipio. Romeo Jaring cannot hold Purita liable in her
personal capacity but can hold the estate of Placido liable for the collection of the amount.
Furthermore, the judgment of the trial court failed to specify whether the obligation to pay
Romeo the balance of the rent was to be paid jointly or solidarily by the spouses Alipio and
Manuel, Article 1207 of the Civil Code provides that an obligation is only solidary when there is
express stipulation to the same or when the law or the nature of the obligation requires
solidarity. Thus, the estate of Placido Alipio and Spouses Manuel are Jointly liable for the
amount payable to Romeo Jaring.

PH Credit Corporation vs. Court of Appeals and Carlos M. Ferrales
G.R. No. 109648
November 22, 2001

Facts:
PH Credit Corporation filed a suit for collection of sum of money against Pacific Lloyd
Corp., Carlos Farrales, Thomas H. Van Sebille and Federico C. Lim.
A judgment was rendered by the trial court holding all aforementioned liable to pay PH
Credit Corporation the amount of Php 118,814.49 at 18% interest per annumstarting
December 20, 1982 until fully paid; Surcharge of 16% per annum from December 20,
1982; Penalty Charge of 2% per month from December 20, 1982, computed on interest
and principal compounded; Attorneys fees in an amount equivalent to 25% of the total
sum due; and Costs of suit.
A writ of execution was issued and the personal properties of Carlos M. Farrales were
levied and sold at public auction where PH Credit Corp. was the highest bidder.
The judgment failed to specify in the fallo part whether the liability of the
aforementioned debtors were joint or solidary.
PH Credit Corp. contends that the body of the decision holds that the debtors are jointly
and severally liable which should render them solidarily liable.

Issue:
Whether or not the aforementioned parties are solidarily liable.

Held:
Article 1207 and 1208 of the Civil Code provides that in the absence of clear stipulation or of
the law or the nature of the obligation does not require solidary liability then the parties are
presumed to be jointly liable. The statement holding the aforementioned parties as solidarily
liable were only part od the statement of facts of the judgment rendered by the judge, thus in
the absence of any express statement in the fallo portion of the judgment holding the parties
solidarily liable, they are jointly liable. Furthermore, the sale of Carlos M. Farrales property is
deemed void for it was made to answer for the whole obligation against PH Credit Corp., when
parties are jointly liable an execution sale of their property should only be up to the extent of
their liability.



Construction Development Corporation of the Philippines vs. Rebecca
G. Estrella, et. al.
G.R. No. 147791
September 8, 2006

Facts:
Rebecca G. Estrella and her granddaughter, Rachel E. Fletcher boarded a BLTB bus
bound for pasay.
A tractor-truck of Construction Development Corporation of the Philippines (CDCP) hit
the back of the BLBT bus that Rebecca and Rachel were boarding causing them various
injuries.
Respondents then filed a complaint for damages against BLBT, CDCP, Espiridion
Payunan, Jr. and Wilfredo Datinguinoo, the latter two as drivers of the CDCP tractor-
truck and BLTB bus respectively, for their negligence in disobeying traffic laws, driving
recklessly, that CDCP and BLBT did not exercise the diligence of a good father in hiring
their employees and that Both Rachel and Rebecca are entitled to moral damages due
to physical discomfort, serious anxiety, fright and mental anguish, besmirched
reputation and wounded feelings, moral shock, and lifelong social humiliation and actual
damages.
The lower court held that all the parties impleaded by Rachel and Rebecca shall be
jointly and solidarily liable for the award of damages.
CDCP now contends that BLBT and their driver should be solely liable for damages
against Rebecca and Rachel.

Issue:
Whether or not CDCP should be held solidarily liable for the payment of damages.

Held:
As held in Fabre, Jr. v. Court of Appeals, the owner of the vehicle which collided with the
common carrier is held solidarily liable to the injured passenger of the same. The action filed is
one arising from quasi-delict, in cases of quasi-delict the Article 2180 provides that the
obligation imposed by Article 2176 is demandable for the acts or omissions of those persons for
whom one is responsible. Consequently, an action based on quasi-delict may be instituted
against the employer for an employee's act or omission. The liability for the negligent conduct
of the subordinate is direct and primary, but is subject to the defense of due diligence in the
selection and supervision of the employee.

In the instant case, the trial court found that
petitioner failed to prove that it exercised the diligence of a good father of a family in the
selection and supervision of Payunan, Jr.
Thus, the liability of CDCP and BLBT is solidary.


























Republic Glass Corporation and Gervel Inc., vs. Lawrence C. Qua
G.R. No. 144413
July 30, 2004

Facts:
Ladtek Inc. (Ladtek) acquired a loan from Metropolitan Bank and Trust Company
(Metrobank) and Private Development Corporation of the Philippines (PDCP) wherein
Republic Glass Corporation (RPC), Gervel, Inc., (Gervel), Lawrence C. Qua (Qua) were
stockholders of Ladtek and entered the contracts as sureties to Ladteks loan.
RPC, Gervel and Qua stipulated that as sureties they would reimburse each other for any
payment made by one party, regardless of amount, for their respective shares or pro
rata.
Qua pledged 1,892,360 common shares of General Milling Corporation in favor of RGC
and Gervel as security for the payment of any sum which RGC and Gervel may be held
liable under the agreements.
Ladtek defaulted on its loan obligations to Metrobank and PDCP which led to
Metrobank filing a collection case against RPC, Gervel and Qua.
During the pendency of the collection case RPC and Gervel paid Metrobank the amount
of Php 7,000,000.00.
Metrobank issued a quitclaim in favor of RPC and Gervel releasing them from any
liability from the payment of the loan.
Gervel and RPC now demand that Qua reimburse them for their payment of Php
7,000,000.00 to Metrobank as fulfillment of their stipulation to indemnify each other in
case of any payment made by one party.
RPC and Gervel gave Qua notices of foreclosure of Quas pledged shares.
Qua moved for the suspension of the Foreclosure sale, however RPC and Gervel were
able to foreclose said shares.
Qua states that, on the foreclosure sale, RPC and Gervels payment of Php 7,000,000.00
to Metrobank was for the whole obligation, thus RPC and Gervel have no right to
foreclose his share.
However, on the separate case for collection, Qua states that the payment was not for
the entire obligation.
The RTC ruled in favor of Qua but this decision was reversed by the CA, and added that
there was implied novation of the original payment plan by virtue of the indemnification
agreement.
The CA further stated that payment of the entire obligation is a sine qua non condition
before any reimbursement is made.
Issue:
1. Whether or not there was an implied novation.
2. Whether or not full payment Is needed before indemnification by the other parties to the
party who paid is needed.

Held:
1. A novation extinguishes an obligation but in its place creates a new obligation. Novation
extinguishes an obligation by (1) changing its object or principal conditions; (2) substituting the
person of the debtor; and (3) subrogating a third person in the rights of the creditor. Article
1292 of the Civil Code clearly provides that in order that an obligation may be extinguished by
another which substitutes the same, it should be declared in unequivocal terms, or that the old
and new obligations be on every point incompatible with each other. Novation may either be
extinctive or modificatory. Novation is extinctive when an old obligation is terminated by the
creation of a new obligation that takes the place of the former. Novation is merely modificatory
when the old obligation subsists to the extent it remains compatible with the amendatory
agreement. There was no novation as the agreement between the sureties was only to the
payment of reimbursement. Their agreement was that of an indemnity of liability where the
agreement becomes operative as soon as the liability of the person indemnified arises
irrespective of whether or not he has suffered actual loss. Thus, there was no change in the
prestation.

2. As stated the agreement was that of an indemnification agreement of liability, Therefore,
whether the solidary debtor has paid the creditor, the other solidary debtors should indemnify
the former once his liability becomes absolute. However, in this case, the liability of RGC, Gervel
and Qua became absolute simultaneously when Ladtek defaulted in its loan payment. As a
result, RGC, Gervel and Qua all became directly liable at the same time to Metrobank and
PDCP. Thus, RGC and Gervel cannot automatically claim for indemnity from Qua because Qua
himself is liable directly to Metrobank and PDCP. However, in solidary obligations the parties
who have paid may only recover or reimburse from the other parties overpayment of their
respective shares on the obligation. The total obligation of RGC, Gervel and Qua was in the
amount of Php 14,200,854.37, the Php 7,000,000.00 they paid was not in excess of their share
in the obligation, in fact it is less than what their shares require them to pay. Thus,
reimbursement from Qua cannot be obtained by RPC and Gervel.



Industrial Management International Development Corp. (INIMACO)
vs National Laabor Relations Commission
331 Scra 640

Facts:
Private respondents filed a complaint with the Department of Labor and Employment
against Filipinas Carbon Mining Corporation, Gerardo Sicat, Antonio Gonzales, Chin Chin
Gin, Lo Kuan Chin, and petitioner Industrial Management Development Corporation
(INIMACO), for payment of separation pay and unpaid wages.
The decision of the Labor Arbiter held that respondents Filipinas Carbon and Mining
Corp., Gerardo Sicat, Antonio Gonzales/INIMACO, Chiu Chin Gin and Lo Kuan Chin to pay
complainants Enrique Sulit, Esmeraldo Pegarido, Roberto Nemenzo and Dario Go to be
deposited with the Commissionwithin 10 days from receipt of the Decision. All other
claims were dismissed.
Since no appeal was filed within the reglementary period, the Decision of the Labor
Arbiter became final and executor. The Labor Arbiter then issued a writ of execution but
was returned unsatisfied. The Labor Arbiter then issued an Alias Writ of Execution
commanding the complainants to proceed to the premises of respondents to collect and
turn over the ordered amount. Should a failure to collect the said amount in cash be
encountered, they were authorized to cause the satisfaction of the same on the
movable or immovable property(s) of respondent not exempt from execution.
Petitioner then filed a Motion to Quash Alias Writ of Execution and set aside the
Decision alleging that the alias writ of execution altered and changed the decision by
changing the liability of therein respondents from joint to solidary. The motion was
denied by the lAbor Arbiter.
The petitioner then filed and appeal and the NLRC dismissed the appeal holding that the
Writ of Execution be given due course in all respects.
A Motion to Compel Sheriff to Accept Payment representing one sixth pro rate share of
petitioner as full and final satisfaction of judgment. The private respondents opposed
the motion and the Labor Arbiter denied the motion ruling that the amount offered by
INIMACO is to be accepted by the Sheriff as partial satisfaction of the judgment and to
proceed with the enforcement of the Alias Writ of Execution.
An appeal was again filed to the NLRC which was consequently denied ruling that
INIMACO would reopen the issue which was already resolved against it thus, not
keeping with the established rules of practice and procedure to allow the attempt of
INIMACO to delay final disposition of the case.

Issue:
Whether or not petitioners liability is solidary or not.

Held:

The court held, NO. INIMACOs liability is not solidary but merely joint and that the respondent
NLRC acted with grave abuse of discretion in upholding the Alias Writ of Execution.

A solidary or joint and several obligation is one in which each debtor is liable for the entire
obligation, and each creditor is entitled to demand the whole obligation. In a joint obligation
each obligor answers only for a part of the whole liability and to each obligee belongs only a
part of the correlative rights.

Well-entrenched is the rule that solidary obligation cannot lightly be inferred. There is a
solidary liability only when the obligation expressly so states, when the law so provides or when
the nature of the obligation so requires.

























Metro Manila Transit Coprporation vs Court of Appeals
G.R. No. 104408

Facts:
On August 28, 1979, Nenita Custodio boarded as a paying passenger a public utility
jeepney driven by defendant Agudo Calebag and owned by Victorino Lamayo. While in
transit, a collision between the said jeepney and a Metro Manila Transit Corp. (MMTC)
bus occurred. The collision impact caused Custodio to hit the front windshield of the
passenger jeepney and was thrown out therefrom, falling onto the pavement
unconscious with serious physical injuries.
A complaint for damages was filed by private respondent, a minor, against all of therein
named defendants following their refusal to pay the expenses incurred by Custodio as
result of the collision.
The trial court rendered judgment dismissing the complaint against Metro Manila
Transit Corporation and ordering Calebag, Lamayo and Godofredo C. Leonardo to pay
the NenitaCustodio jointly and severally.
Custodios motion to reconsider the portion the of the trial courts decision absolving
MMTC from liability was denied for lack of merit. An appeal was filed with the Court of
Appeals, who modified the trial courts decision by holding MMTC solidarily liable with
the other defendants.
The Court of Appeals denied subsequent motions for reconsideration of both Custodio
and MMTC.

Issue:
Whether or not MMTC is vicariously liable for damages based on quasi-delict due to Calebags
negligence

Held:
It is procedurally required for each party in a case to prove his own affirmative assertion by the
degree of evidence required by law.In civil cases, the degree of evidence required of a party in
order to support his claim is preponderance of evidence, or that evidence adduced by one party
which is more conclusive and credible than that of the other party. It is, therefore, incumbent
on the plaintiff who is claiming a right to prove his case. Corollarily, defendant must likewise
prove own allegation to buttress its claim that it is not liable.

The case at bar is clearly within the coverage of Article 2176 and 2177, in relation to Article
2180, of the Civil Code provisions on quasi-delicts as all the elements thereof are present, to
wit: (1) damages suffered by the plaintiff, (2) fault or negligence of the defendant or some
other person for whose act he must respond, and (3) the connection of cause and effect
between fault or negligence of the defendant and the damages incurred by plaintiff.It is to be
noted that petitioner was originally sued as employer of driver Leonardo under Article 2180,
the pertinent parts of which provides that:
The obligation imposed by article 2176 is demandable not only for one's own acts or omissions,
but also for those of persons for whom one is responsible. Employers shall be liable for
damages caused by their employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any business or industry. The
responsibility treated of in this article shall cease when the persons herein mentioned prove
that they observed all the diligence of a good father of a family to prevent damage.
The basis of the employer's vicarious liability has been explained under this ratiocination: The
responsibility imposed by this article arises by virtue of a presumptionjuristantumof negligence
on the part of the persons made responsible under the article, derived from their failure to
exercise due care and vigilance over the acts of subordinates to prevent them from causing
damage. Negligence is imputed to them by law, unless they prove the contrary. Thus, the last
paragraph of the article says that such responsibility ceases if is proved that the persons who
might be held responsible under it exercised the diligence of a good father of a family
(diligentissimipatrisfamilias) to prevent damage. It is clear, therefore, that it is not
representation, nor interest, nor even the necessity of having somebody else answer for the
damages caused by the persons devoid of personality, but it is the non-performance of certain
duties of precaution and prudence imposed upon the persons who become responsible by civil
bond uniting the actor to them, which forms the foundation of such responsibility. Finally, we
believe that respondent court acted in the exercise of sound discretion when it affirmed the
trial court's award, without requiring the payment of interest thereon as an item of damages
just because of delay in the determination thereof, especially since private respondent did not
specifically pray therefoer in her complaint. Article 2211 of the Civil Code provides that in quasi-
delicts, interest as a part of the damages may be awarded in the discretion of the court, and not
as a matter of right. We do not perceive that there have been international dilatory maneuvers
or any special circumstances which would justify that additional award and, consequently, we
find no reason to disturb said ruling.















Baldomero Inciong, Jr. vs Court of Appeals and Philippine Bank of
Communications
G.R. No. 96405

Facts:
Petitioners liabitlity resulted from a promissory note which he signed with Rene C.
Naybe and Gregorio D. Pantanosas holding themselves jointly and severally liable to
private respondent.
The promissory note went due and was left unpaid. Private respondent sent telegrams
and letters through registered mail letter of demands for payment to Rene C. Naybe.
Since the demands were left unanswered, private respondent filed a complaint for
collection against the three obligors.
The complaint was dismissed for failure to prosecute. And as prayed for by Gregorio
Pantanosas, the lower court dismissed the case against him. In serving the summons,
the sheriff learned that defendant Rene C. Naybe had gone to Saudi Arabia, thus, only
the summons to petitioner was served.

Issue:
Whether or not petitioner should be held liable for the obligation to respondent.

Held:
Petitioner signed the promissory note as a solidary co-maker and not as a guarantor. A solidary
or joint and several obligation is one in which each debtor is liable for the entire obligation, and
each creditor is entitled to demand the whole obligation. On the other hand, Article 2047 of the
Civil Code states:
"By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation
of the principal debtor in case the latter should fail to do so.

Because the promissory note involved in this case expressly states that the three signatories
therein are jointly and severally liable, any one, some or all of them may be proceeded against
for the entire obligation.











Philippine Blooming Mill, Inc. vs Court of Appeals
G.R. No. 142381

FACTS:
Traders Royal Bank filed suit to compel Alfredo Ching to pay the following amounts:
P959,611.96 under Letter of Credit No. 479 AD covered by Trust Receipt No. 106
P1,191,137.13 under Letter of Credit No. 563 AD covered by Trust Receipt No. 113
P3,500,000 under the trust loan covered by a notarized Promissory Note.
Alferedo Ching was the Sevio Vice President of Philippine Blooming Mill (PBM) and in his
personal capacity signed a Deed of Suretyship binding himself as primary obligor and
not as guarantor of the loan obtained from TRB.

The TRB granted letters of credit on application of Ching in his capacity as Senior VP of
PBM. Ching later accomplished and delivered to TRB trust receipts. Under the trust
receipts, PBM had the right to sell the merchandise for cash with the obligation to turn
over the entire proceeds of the sale to TRB as payment of their indebtness.

PBM defaulted in the payment of the Trust receipts and of their trust loan. PBM and
Ching filed a petition for suspension of payments with the SEC that sought to suspend
payment of PBMs obligations and prayed that the SEC allow PBM to continue its normal
business operations free from the interference of its creditors. The SEC placed PBMs
assets, liabilities, and obligations under the rehabilitation receivership of Kalaw, Escaler
and Associates.

Ten months after the SEC placed PBM under rehabilitation receivership. TRB filed with
the trial court a complaint for collection against PBM and Ching. TRB asked the trial
court to order defendants to pay solidarily their indebtedness. The complaint was then
withdrawn by the TRB on the ground that SEC had already placed PBM under
receivership. The trial court thus dismissed the complaint.

PBM and Ching also moved for the dismissal of the complaint on the ground that the
trial court had no jurisdiction over the subject matter of the case since they assumed
the jurisdiction of the SEC over all of PBMs assets and liabilities. TRB opposed this
motion arguing that Ching is being sued in his personal capacity.

The trial court denied the motion to dismiss with respect to Ching and affirmed its
dismissal of the case with respect to PBM. TRB was holding Ching liable under the Deed
of Suretyship. As his obligation was solidary, the trial court ruled that TRB could proceed
against Ching.

Upon trial courts denial of his Motion for Reconsideration, Ching applied for a Petition
for Certiorari and Prohibition before the Court of Appeals. The appellate court granted
Chings petition and ordered the dismissal of the case since SEC assumed jurisdiction
over Ching and PBM. The TRB assailed the decision of the CA and on the higher courts
ruling upheld that TRB can sue Ching as an individual.

The trial court found Ching liable to TRB for P19,333,558.16 under the Deed of
Suretyship. On appeal, the CA affirmed the decision of the lower court with
modifications with respect to Chings liability.

Issue:
Whether or not Alfredo Ching is liable to TRB.

Held:
This Court has already resolved the issue of Chings separate liability as a surety despite the
rehabilitation proceedings before the SEC. We held in Traders Royal Bank that: Although Ching
was impleaded in SEC Case No. 2250, as a co-petitioner of PBM, the SEC could not assume
jurisdiction over his person and properties. The Securities and Exchange Commission was
empowered, as rehabilitation receiver, to take custody and control of the assets and properties
of PBM only, for the SEC has jurisdiction over corporations only [and] not over private
individuals, except stockholders in an intra-corporate dispute (Sec. 5, P.D. 902-A and Sec. 2 of
P.D. 1758). Being a nominal party in SEC Case No. 2250, Chings properties were not included in
the rehabilitation receivership that the SEC constituted to take custody of PBMs assets.
Therefore, the petitioner bank was not barred from filing a suit against Ching, as a surety for
PBM. An anomalous situation would arise if individual sureties for debtor corporations may
escape liability by simply co-filing with the corporation a petition for suspension of payments in
the SEC whose jurisdiction is limited only to corporations and their corporate assets. Ching can
be sued separately to enforce his liability as surety for PBM, as expressly provided by Article
1216 of the New Civil Code.

Ching is liable for credit obligations contracted by PBM against TRB before and after the
execution of the 21 July 1977 Deed of Suretyship. This is evident from the tenor of the deed
itself, referring to amounts PBM may now be indebted or may hereafter become indebted to
TRB. The law expressly allows a suretyship for future debts. Article 2053 of the Civil Code
provides: A guaranty may also be given as security for future debts, the amount of which is not
yet known; there can be no claim against the guarantor until the debt is liquidated. A
conditional obligation may also be secured. Ching is liable for credit obligations contracted by
PBM against TRB before and after the execution of the 21 July 1977 Deed of Suretyship. This is
evident from the tenor of the deed itself, referring to amounts PBM may now be indebted or
may hereafter become indebted to TRB. The law expressly allows a suretyship for future
debts. Article 2053 of the Civil Code provides: A guaranty may also be given as security for
future debts, the amount of which is not yet known; there can be no claim against the
guarantor until the debt is liquidated. A conditional obligation may also be secured.



Queensland Tokyo Commodities, Inc. vs Thomas George
G.R. 172727

Facts:
Queensland Tokyo Commodities , Inc. (QTCI), a licensed broker engaged in the trading of
commodity futures entered into a Customers Agreement with Thomas George. Charlie
Collado signed the agreement in behalf of QTCI. Forming part of the agreement was the
Special Power of Attorney executed by respondent appointing Guillermo Mendoza, Jr.
as his attorney-in-fact with full authority to trade and manage his account.
QTCI was issued a Cease-and-Desist Order by the SEC. Alarmed by this, respondent
demanded QTCI to return his investment but it was not heeded. He also learned that
Mendoza and Oniler Lontoc were not licensed commodity futures salesmen.
Respondent files a complainr for Recovery of Investment with Damages with the SEC
against petitioners and the unlicensed salesmen. Only the petitioners answered the
complaint, as Mendoza and Lontoc had since vanished into thin air.
The SEC ruled in favour of the respondent ordering the petitioners to pay the former his
investment and moral damages. The petitioners filed an appeal with the Commission en
banc, but the appeal was dismissed due to non verification of the Notice of Appeal and
the Memorandum on Appeal.
Petitioners filed a petition for review with the CA under Rule 43. The CA declared the
dismissal of the petitioners appeal by the Commission en banc improper and affirmed
the decision of the SEC.

Issue:
Whether or not individual petitioners are solidarily liable for the damages and awards due to
the respondent

Held:
Petitioners allowed unlicensed individuals to engage in, solicit or accept orders in futures
contracts, and thus, transgressed the Revised Rules and Regulations on Commodity Futures
Trading. Batas Pambansa Bilang (B.P. Blg.) 178 or the Revised Securities Act explicitly provided
in Sec. 53:... (b) Every contract executed in violation of any provision of this Act, or any rule or
regulation thereunder, and every contract, including any contract for listing a security on an
exchange heretofore or hereafter made, the performance of which involves the violation of, or
the continuance of any relationship or practice in violation of, any provision of this Act, or any
rule and regulation thereunder, shall be void.

It is settled that a void contract is equivalent to nothing; it produces no civil effect. It does not
create, modify, or extinguish a juridical relation. Parties to a void agreement cannot expect the
aid of the law; the courts leave them as they are, because they are deemed in pari delicto or in
equal fault. This rule, however, is not absolute. Article 1412 of the Civil Code provides an
exception, and permits the return of that which may have been given under a void contract.
Thus: Art. 1412. If the act in which the unlawful or forbidden cause consists does not
constitute a criminal offense, the following rules shall be observed:
(1) When the fault is on the part of both contracting parties, neither may recover what he
has given by virtue of the contract, or demand the performance of the other's undertaking;
(2) When only one of the contracting parties is at fault, he cannot recover what he has
given by reason of the contract, or ask for the fulfillment of what has been promised him. The
other, who is not at fault, may demand the return of what he has given without any obligation
to comply with his promise.


































Shrimp-Specialist vs. Fuji-Triumph Agri-Industrial Corporation
G.R. No. 168756

Facts:
Shrimp Specialist, through their president Eugene Lim, entered into an agreement with
Fuji-Triumph (Fuji) of distributorship, Fuji would supply Shrimp Specialist with prawn
feeds on a credit basis.
During the course of the agreement Shrimp Specialist issued a Stop Payment order for
the nine post-dated checks issued to Fuji for payment of the delivery of the feeds
alleging that the feeds were contaminated with aflatoxin.
Shrimp Specialist and Fuji then entered into a written agreement where Shrimp
Specialist, acting through Eugene Lim, would replace the nine post-dated checks in the
event that Fuji would replace the feeds that were contaminated with uncontaminated
ones.
Upon presentment of the replacement checks, all were dishonoured due to another
Stop payment order from Shrimp Specialist stating that Fuji failed to replace the feeds.
Fuji filed a case of recovery of sum of money against Shrimp specialist where the RTC
ruled in favour of Fuji finding that Shrimp Specialist did not present evidence that the
feeds delivered were in fact contaminated and that the written agreement did not
expressly state that Fuji admitted to delivering contaminated feeds and holding Shrimp
Specialist and Eugene Lim solidarily liable for the amount due.
The CA modified the decision by removing Eugene Lim from the obligation and only
holding Shrimp Specialist solely liable for the amount due.

Issues:
1) Whether or not the written agreement between Shrimp Specialist and Fuji was am
admission in Fujis part that the delivered feeds were contaminated.
2) Whether or not Eugene Lim and Shrimp Specialist should be held solidarily liable for the
obligation.

Held:
1) It is a rule that a statement is not competent as an admission where it does not,
under a reasonable construction, appear to admit or acknowledge the fact which is
sought to be proved by it. An admission or declaration to be competent must have
been expressed in definite, certain and unequivocal language; to inform in advance in
case the same checks cannot be deposited for failure to replace the defective feeds is
not expressed in definite, certain and unequivocal language that Fuji admitted to
delivering defective feeds. Furthermore, Shrimp Specialist did not in fact include Fuji in
the testing of the feeds for contamination and that receipts shown by Fuji that the feeds
were received in good condition by Shrimp Specialist contradicts their claim.

2) The general rule is that obligations incurred by the corporation, acting
through its directors, officers, and employees, are its sole liabilities.
However, solidary liability may be incurred, but only under the following
exceptional circumstances:When directors and trustees or, in
appropriate cases, the officers of a corporation: (a) vote for or assent to
patently unlawful acts of the corporation; (b) act in bad faith or with
gross negligence in directing the corporate affairs; (c) are guilty of conflict
of interest to the prejudice of the corporation, its stockholders or
members, and other persons;When a director or officer has consented to
the issuance of watered stocks or who, having knowledge thereof, did
not forthwith file with the corporate secretary his written objection
thereto; When a director, trustee or officer has contractually agreed or
stipulated to hold himself personally and solidarily liable with the
corporation; orWhen a director, trustee or officer is made, by specific
provision of law, personally liable for his corporate action.

None of these circumstances are found in these case and no evidence is
present showing that Eugene Lim and Shrimp Specialist are in fact one in
the same, the doctrine of piercing the veil is unnecessary.
Asset Builders Corporation vs. Stronghold Insurance Company, Inc.
G.R. No. 187116

Facts:
Asset Builders Corporation (ABC) entered into an agreement with Lucky Star Drilling &
Construction Company (Lucky Star) as part of the completion of its project to construct
the ACG Commercial Complex.
Lucky Star was to supply labor, materials, tools, and equipment including technical
supervision to drill one exploratory production well on the project site. The total
contract price was Php 1,150,000.00.
Lucky Star engaged respondent Stronghold to guarantee faithful compliance with
agreement with ABC which issued two bonds in favor of petitioner. The surety bond
dated May 9, 2006, covers the amount of Php 575,000.00 or the required down
payment for the drilling work. The performance bond issued on the same date covers
the sum of Php 345,000.00.
On May 20,2006, ABC paid Lucky Star Php575,000.00 as advance payment, representing
50% of the contract price. Lucky Star, thereafter, commenced the drilling work but only
managed to accomplish only 10% of the work by July 18, 2006, just a few days before
the agreed completion of 60 calendar days. Petitioner sent a demand letter to Lucky
Star on July 18, 2006 for the immediate completion of the drilling work with a threat to
cancel the agreement and forfeit the bonds should it still fail to complete said project
within the agreed period.
On August 3, 2006, ABC sent a Notice of Rescission of Contract with Demand for
Damages to Lucky Star. And on August 16, 2006, ABC sent a Notice of Claim for payment
to Stronghold to make good its obligation under its bonds. Despite these notices, ABC
did not receive any reply either from Lucky Star or Stronghold, prompting it to file its
Complaint for Rescission with Damages against both before the RTC on November 21,
2006.
On February 27, 2009, the RTC rendered the assailed decision ordering Lucky Star to pay
ABC but absolving Stronghold from liability.

Issue:
Whether or not Stronghold Insurance, Inc., as surety, can be held liable under its bonds.

Held:
Respondent, along with its principal, Lucky Star bound itself to the petitioner when it executed
in its favor surety and performance bonds. The contents of the said contracts clearly establish
that the parties entered into a surety agreement as defined under Article 2047 of the New Civil
Code.

In Article 2047, the surety undertakes to be bound solidarily with the principal obligor which
makes a surety agreement an ancillary contract as it presupposes the existence of the principal
contract. Although the contract of surety is secondary only to a valid principal obligation, the
surety becomes liable for the debt or duty of another although it possesses no direct or
personal interest over the obligations nor does it benefit therefrom. The surety assumes
liability as a regular party to the undertaking.

Accordingly, after liability has attach to the principal, the oblige or, in this case, the petitioner,
can exercise the right to proceed against Lucky Star or respondent or both. Article 1216 of the
New Civil Code states: The creditor may proceed against any one of the solidary debtors or
some or all of them simultaneously.

In fine, respondent should be answerable to petitioner on account of Lucky Stars non-
performance of its obligation as guaranteed by the performance bond.
Finally, Article 121722 of the New Civil Code acknowledges the right of reimbursement from co-
debtor (the principal co-debtor, in case of suretyship) in favor of the one who paid (the surety).
Thus, respondent is entitled to reimbursement from Lucky Star for the amount it may be
required to pay petitioner arising from its bonds.



























Eparwa Security and Janitorial Services, Inc. vs Liceo de Cagayan
University
G.R. No. 150402

Facts:
Eparwa dn LDCU, through their representatives entered into a Contract for security
services. Eparwa allocated the contracted amount of P5,000.00 per security guard per
month.
Security guards whom Eparwa assigned to LDCU files a complaint before the NLRC
against both Eparwa and LDCU for underpayment of salary, legal holiday pay, 13
th

month pay, rest day, service incentive leave, night shift differential, overtime pay and
payment for attorneys fees.
LDCU made a cross-claim and prayed that Eparwa should reimburse LDCU for any
payment to the security guards.
In its decision, the Labor Arbiter found that the security guards are entitled to wage
differentials and premium for holiday and rest day work. It held that Eparwa and LDCU
are solidarily liable pursuant to Article 109 of the Labor Code. LDCU and Eparwa, both
subsequently filed appeals before the NLRC.
The NLRC found that the security guards are entitled to wage differentials and premium
for holiday and rest day work. Although the NLRC held Eparwa and LDCU solidarily liable
for the wage differential and premium, it did not require Eparwa to reimburse LDCU fot
its payments to the security guards. Eparwa and LDCU again filed separate motions for
partial reconsideration.
The NLRC declared that although Eparwa and LDCU are solidarily liable for the monetary
award, LDCU alone is ultimately liable. LDCU then files a petition for certiorari before
the appellate court.
The appellate court granted LDCUs petition and reinstated the Labor Arbiters decision.
The appellate court also allowed LDCU to claim reimbursement from Eparwa. Eparwa
then filed a motion for reconsideration which was denied for lack of merit.

Issue:
Whether or not LDCU alone is ultimately liable for the wage differentials and premiums of the
security guards.

Held:
The wage differentials and premiums of the security guards id Eparwas and LDCUs solidary
liability and LDCUs ultimate liability. Articles 106, 107 and 109 of the Labor Code read: Art. 106.
Contractor or subcontractor. Whenever an employer enters into a contract with another
person for the performance of the formers work, the employees of the contractor and of the
latters subcontractor, if any, shall be paid in accordance with the provisions of this Code. In the
event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor
or subcontractor to such employees to the extent of the work performed under the contract, in
the same manner and extent that he is liable to employees directly employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out
of labor to protect the rights of workers established under this Code. In so prohibiting or
restricting, he may make appropriate distinctions between labor-only contracting and job
contracting as well as differentiations within these types of contracting and determine who
among the parties involved shall be considered the employer for purposes of this Code, to
prevent any violation or circumvention of any provision of this Code.

There is labor-only contracting where the person supplying workers to an employer does not
have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by such persons are performing
activities which are directly related to the principal business of the employer. In such cases, the
person or intermediary shall be considered merely as an agent of the employer who shall be
responsible to the workers in the same manner and extent as if the latter were directly
employed by him. Article 107. Indirect employer. The provisions of the immediately
preceding Article shall likewise apply to any person, partnership, association or corporation
which, not being an employer, contracts with an independent contractor for the performance
of any work, task, job or project. Article 109. Solidary liability. The provisions of existing
laws to the contrary notwithstanding, every employer or indirect employer shall be held
responsible with his contractor or subcontractor for any violation of any provision of this Code.
For purposes of determining the extent of their civil liability under this Chapter, they shall be
considered as direct employers. For the security guards, the actual source of the payment of
their wage differentials and premium for holiday and rest day work does not matter as long as
they are paid. This is the import of Eparwa and LDCUs solidary liability. Creditors, such as the
security guards, may collect from anyone of the solidary debtors. Solidary liability does not
mean that, as between themselves, two solidary debtors are liable for only half of the payment.
LDCUs ultimate liability comes into play because of the expiration of the Contract for Security
Services. There is no privity of contract between the security guards and LDCU, but LDCUs
liability to the security guards remains because of Articles 106, 107 and 109 of the Labor Code.
Eparwa is already precluded from asking LDCU for an adjustment in the contract price because
of the expiration of the contract, but Eparwas liability to the security guards remains because
of their employer-employee relationship. In lieu of an adjustment in the contract price, Eparwa
may claim reimbursement from LDCU for any payment it may make to the security guards.
However, LDCU cannot claim any reimbursement from Eparwa for any payment it may make to
the security guards.







P.T. Cerna Corporation vs Court of Appeals
G.R. No. 91622

Facts:
The subjects of this case are three personal properties, all of which are jaw crushers.
The first one is a rock crusher, purchased from Bormaheco, Inc. The other two are US
Mfg. jaw crushers, both purchased from the International Tractor Sales.
Both parties, petitioner and private respondent Scheider, claim ownership over the
three jaw crushers. Petitioner anchored its claim of ownership of the first rock crusher
on the Customers Copy of an invoice no. 43984 issued in the name of the corporation
by Bormaheco, Inc., and another invoice for the other two crushers by the International
Tractor and Equipment Sales. All of these purchases were purportedly paid through the
corporation checks duly signed by its President and Vice-President.
Private respondent Scheider claimed that the three rock crushers were actually
purchased by hm and in reality are owned by him. He presented the Sales Department
Copy of the same Invoice No. 43984 which was in his name properly countersigned by
Mr. Cevantes, the President of Bormaheco. He also presented a notarized deed of sale
of said rock crushers executed by Bormaheco in his favor and a further certification by
Mr. Cervantes stating that the purchaser and owner of the said equipment was Mr.
Peter Scheider. For the other two rock crushers, he managed to present a notarized
deed of sale executes by Mr. Virgil Lundberg in his favor. In connection with this, he
presented a delivery receipt and a certification by Mr. Lundberg attesting that he Is the
purchaser and owner of the two rock crushers.
Private respondent however, admitted that the purchase price of the crushers were [aid
for by petitioner, but only to off-set outstanding obligations of the same to him for
various spare parts sold to petitioner, prior to the dispute.

Issue:
Who, between the claimants, is the rightful owner of the three jaw crushers.

Held:
We rule in favor of private respondent Scheider.

Petitioner relies heavily on the invoices as evidence of purchase and delivery. It has been held
time and again that the issuance of a sales invoice does not prove transfer of ownership of the
thing sold to the buyer. An invoice is nothing more than a detailed statement of the nature,
quantity and cost of the thing sold and has been considered not a bill of sale.
The Deeds of Sale, being notarial documents, are evidence of the facts in clear, unequivocal
manner therein expressed. As such, they have in their favor, the presumption of regularity.
Petitioner failed miserably to overcome the binding force and effect of the deeds of sale.

In civil cases, the burden of proof rests upon the party who, as determined by the pleadings or
the nature of the case, asserts the affirmative of an issue. In this case, the burden lies on the
petitioner, who is duty bound to prove the allegations in its complaint. As this Court has held,
he who alleges a fact has the burden of proving it and a mere allegation is not evidence. A
careful evaluation of the evidence presented by petitioner reveals its insufficiency to detract
from the evidentiary force of the public instrument which appears on its face, as having been
drawn up with all the formalities prescribed by the law. This leads Us to the inescapable
conclusion that private respondent Scheider is the owner of the litigated properties.






























Natividad P. Nazareno vs Court of Appeals
G.R. No. 138842

Facts:
Maximino Nazareno, Sr. and Aurea Poblete, as husband and wife, acquired properties in
Quezon City and Cavite Province, during their marriage. They had five children, namely,
Natividad, Romeo, Jose, Pacifico, and Maximino Jr.
After the death of Maximino Sr., Romeo filed an intestate case in the Court of First
Instance in Cavite. Upon the reorganization of the courts, the case was transferred to
the RTC of Naic, Cavite. Romeo was appointed administrator of his fathers estate.
In the course of the proceedings, Romeo discovered that his parents executed several
deeds of sale conveying a number of real properties in favor of his sister, Natividad.
Among the lots covered by the Deed of Sale is Lot 3-B. This lot has been occupied by
Romeo, his wife Eliza, and Maximino Jr. Unknown to Romeo, Natividad sold the lot to
Maximino Jr. for which the latter was issued TCT No. 293701 by the Register of Deeds of
Quezon City.
When Romeo found out about the ale to Maximino Jr., he and his wife locked Maximino
Jr. out of the house. The latter then brought an action for recovery of possession and
damages with prayer for writs of preliminary injunction and mandatory injunction with
the RTC. The trial court ruled in favor of Maximino Jr. The Court of Appeals affirmed the
decision of the trial court.
Romeo in turn filed, on behalf of the estate of Maximino Sr., for annulment of sale with
damages against Natividad and Maximino Jr. Romeo sought the declaration of nullity of
the sale to Natividad and Maximino Jr. on the ground that both sales were void for lack
of consideration.
Natividad and Maximino Jr., filed a third-party complaint against the spouses Romeo
and Eliza alleging that Lot 3 was included in the Deed of Absolute Sale to Natividad and
that Romeo secured for himself a new title in his name for the said lot. They therefore
sought the annulment and cancellation of the transfer to Romeo and the cancellation of
his title, the eviction of Romeo and Eliza and all persons claiming rights from Lot 3, and
the payment of damages.
The lower court rendered judgment declaring the nullity of the Deed of Sale except Lots
3, 3-B, 13 and 14 which had passed on to third persons, Natividad shall hold the rest in
trust for Jose Nazareno to whom the same had been adjucated. The defendants
counter-claim and the third-party complaint are dismissed.
Natividad and Maximino Jr. filed a motion for reconsideration. As a result, the court
modified its decision.On appeal to the Court of Appeals, the trial courts decision was
modified in the sense that titles to Lot 3 and Lot 3-B, as well as Lots 10 and 11 were
cancelled and ordered restored to the estate of Maximino Nazareno, Sr. Petitioners filed
a motion for reconsideration but the motion was denied.

Issue:
Whether or not the lots in question as the prestation are divisible or indivisible.

Held:
An obligation is indivisible when it cannot be validly performed in parts, whatever may be the
nature of the thing which is the object thereof. The indivisibility refers to the prestation and not
to the object thereof. In the present case, the Deed of Sale of January 29, 1970 supposedly
conveyed the six lots to Natividad. The obligation is clearly indivisible because the performance
of the contract cannot be done in parts, otherwise the value of what is transferred is
diminished. Petitioners are therefore mistaken in basing the indivisibility of a contract on the
number of obligors. In any case, if petitioners only point is that the estate of Maximino, Sr.
alone cannot contest the validity of the Deed of Sale because the estate of Aurea has not yet
been settled, the argument would nonetheless be without merit. The validity of the contract
can be questioned by anyone affected by it. A void contract is inexistent from the beginning.
Hence, even if the estate of Maximino, Sr. alone contests the validity of the sale, the outcome
of the suit will bind the estate of Aurea as if no sale took place at all.





























Aurelio P. Alonzo vs Jaime and Perlita San Juan
G.R. No. 137549

Facts:
A complaint for recovery of possession was filed by Aurelio P. Alonzo and Teresita A.
Sison against Jaime and Perlita San Juan alleging that they are a the owners of a parcel
of land located at Lot 3, Block 11, M. Agoncillo St., Novaliches, Quezon City.
The plaintiffs discovered that the portion of the said parcel of land was occupied by the
defendants for more than a year, without their prior knowledge or consent. Defendants
were sent a demand letter in August of 1996 requiring them to vacate the property but
they refused to comply, hence, filing the Complaint. During pendency of the case, the
parties agreed to enter into a Compromise Agreement which was approved by the trial
court.
In the Compromise Agreement, it was expressly stipulated that should any two of the
installments of the purchase price be unpaid by the defendants, the said agreement
shall be considered null and void.
Alleging that the respondents failed to abide by the provisions of the Compromise
agreement by their failure to pat the amounts due thereon, plaintiffs sent a letter
demanding that the defendants vacate the premises and subsequently files an Amended
Motion for Execution.
In the Amended Motion for Execution, the plaintiffs expressly admitted that the
defendants failed to pay the installments for July 31, 1997 and August 31, 1997 on their
due dates; hence the Compromise Agreement submitted by the parties became null and
void.
The Amended Motion for Execution and subsequent Motion for Reconsideration filed by
the plaintiffs were denied since the Court has no basis to direct the issuance of a writ of
execution because the Compromise Agreement submitted by the parties have been
rendered null and void.

Issue:
Whether or not the trial courts interpretation of the Compromise agreement entered into by
the parties was correct.

Held:
A review and examination of payments made by the respondents to the plaintiffs showed that
the checks were issued by a Cirila Cruz, whose relation to the respondents was never given
clarification. These checks were accompanied by vouchers with particulars stating that each
check issued is additional partial payment to the plaintiffs by the defendants.

The law requires that the party who alleges a fact has the burden of proving it. In this case, the
burden of proof is on the respondents because they allege an affirmative defense, namely
payment. As a rule, one who pleads payment has the burden of proving it. The debtor has the
burden of showing that the obligation has been cleared by payment.
Apropos is the rule so well-settled that a receipt of payment is the best evidence of the fact of
payment. A receipt is a written and signed acknowledgement that money or goods have been
delivered, while a voucher is a documentary record of a business transaction. The references
presented to alleged check payments in the vouchers do not vest them with the character of
receipts.

Even assuming that the payments were made, it has not been shown to the fu;; satisfaction of
the Court whether the payments were made specifically to satisfy respondents obligation nor
were the circumstances under which payments were made explained, taking into consideration
the conditions of the Compromise Agreement.

An obligation may be cleared by payment. However, two requisites must concur: identity of
prestation and its integrity. The first means the very thing due must be released and the second
that the prestation be fulfilled completely. In this case the creditor must receive and
acknowledge full payment from the debtor. No acknowledgement or proof was shown to the
satisfaction of the court.

Compromise agreements are contracts, wherein the parties undertake reciprocal obligations to
resolve their differences, thus avoiding litigation, or put and end to one already commenced.
Article 1374 of the Civil Code requires that the various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that sense which may result from all of
them taken jointly.

In this case, it was an error on the part of the trial court to have interpreted the compromise
agreement in the manner it has done so. If we were to follow the argument of the trial court to
its logical conclusion, then it would mean that the parties would have to go back to the
beginning and re-litigate what they had already put to rest when they entered the compromise
agreement.

The reciprocal concessions are the very heart and life of every compromise agreement. By its
nature, it brings the parties to agree to something which neither of them may actually want,
but for the peace it will bring them without a protracted litigation. With this, the principle of
autonomy of contracts must be respected. The contract between respondent and petitioner
have the force of law between them. Respondents are thus bound to fulfill what has been
expressly stipulated therein. In the compromise agreement, it was stated clearly that in case of
failure to pay on the part of the respondents, they shall vacate and surrender possession of the
occupied land and petitioners shall be entitled to immediately obtain from the trial court a writ
of execution for the ejectment of the respondents. Once approved, the compromise agreement
can not and must not be disturbed except for vices of consent or forgery.

The orders of the trial court dated August 11, 1998 and February 17, 1999 are declared null and
void and setaside and a new one entered directing the trial court to issue the writ of execution
prayed for by the Petitioner in accordance with the compromise agreement.
Jesus T. David vs. Court of Appeals
G.R. No. 115821

Facts:
The Regional Trial Court of Manila, Branch 27 issued a writ of attachment over real
properties covered bt TCT Nos. 80718 and 10289 of private respondents. Then Presiding
Judge Ricardo Diaz, ordered private respondent Afable to pay the petitioner P66,500.00
plus interest plus P5,000.00 as attorneys fee and the cost of the suit starting from July
24, 1974 until fully paid. Such decision was amended by Judge Diaz so that the legal rate
of interest should be computed.
Respondent Afable appealed to the Court of Appeals and then the Supreme Court. The
decision of the lower court was affirmed in both instances. Judgement entries were
made and the record was remanded to Branch 27, presided at that time by respondent
Judge Edgardo P. Cruz for final execution of the Decision.
Respondent Judge issued an Alias Writ of Execution by virtue of which respondent
Sheriff Melchor P. Pea conducted a public auction. Sheriff Pea informed the petitioner
of the total amount of judgement but petitioner claimed that the judgement amount
should be higher based on compounded interest.
Although auctioned properties were sold to petitioner, Sheriff Pea did not issue the
Certificate of Sale because there was an excess in the bid price which the petitioner
failed to pay despite notice.
Petitioner filed a motion prating that respondent Judge Cruz issue an order directing
respondent Sheriff Pea to prepare and execute a Certificate of Sale in favor of the
petitioner, placing therein the amount of the judgement be the amount he bid during
the auction which he won, reasoning that compound interest should apply in this case.
This motion was denied by respondent Judge.
Upon elevation to appellate court, the Court of Appeals dismissed the petition
stipulating that there was no interest stipulated by the parties. No interest was
mentioned in the Compromise Agreement signed by private respondent and duly
accepted by petitioner.

Issue:
Whether or not appellate court erred in affirming respondent Judges order for payment of
simple interest only rather than compound interest.

Held:
The court held, NO. Article 2212 of the Civil Code contemplates the presence of stipulated or
conventional interest which has accrued when demand was judicially made. In cases where no
interest had been stipulated by the parties, no accrued conventional interest could further earn
interest upon judicial demand.

In the said case, we further held that when the judgment sought to be executed ordered the
payment of simple legal interest only and said nothing about payment of compound interest,
but the respondent judge orders payment of compound interest, then, he goes beyond the
confines of a judgment which had become final.

The Court of Appeals made the factual finding that . . . no interest was stipulated by the
parties. In the promissory note denominated as Compromise Agreement signed by the private
respondent which was duly accepted by petitioner no interest was mentioned. In his
complaint, petitioner merely prayed that defendant be ordered to pay plaintiff the sum of
P66,500.00 with interest thereon at the legal rate from the date of the filing of the complaint
until fully paid.


































Republic of the Philippines vs. Thi Thu Thuy T. De Guzman
G.R. No. 175021

Facts:
Thi Thu Thuy T. De Guzman is the proprietor of Montaguz General Merchandise (MGM),
she contracted with the Philippine National Police Engineering Services (PNPES) to
deliver to the Philippine National Police (PNP) various construction equipment
amounting to P2,288,562.60 for the construction of a four-storey condominium in Camp
Crame, Quezon City.
De Guzman claims that she has not been paid by the PNP for the materials which she
has delivered.
The PNP admits that in fact the materials have been delivered, but claims that he same
has been paid through a check issued by the Landbank of the Philippines (LBP) as
evidenced by a receipt issued by De Guzman.
De Guzman claims that the receipt presented by the PNP is for Montaguz Builders (MB),
another company of hers, and not of MGM.
The receipt was signed by one Edgardo Cruz, proprietor of Highland Enterprise, another
contractor of the PNP, and that said check was in fact released to Cruz.
Cruz states that he received the check because the PNP and him had an agreement to
construct the said condominium and that the PNP and the other contractors had an
agreement that the PNP would give a 2% commission of the purchase price of materials
used for the condominium for use of their business names to remove the implication of
monopoly of contracts with Highland Enterprise.

Issue:
Whether or not the obligation to pay De Guzman by the PNP has been extinguished.

Held:
The receipt that was issued was that of MB and not MGM, thus the obligation to pay De
Guzman by virtue of MGM has not been extinguished. Also the fact that the statement
of Cruz involving the use of other business names for a 2% commission is a disturbing
fact of the spurious dealings of our own government. Cruz is not an authorized agent of
MGM nor De Guzman, and that MGM did in fact deliver the materials the PNP is
obligated to compensate her for the same. Payment made by the debtor to the person
of the creditor or to one authorized by him or by the law to receive it extinguishes the
obligation. When payment is made to the wrong party, however, the obligation is not
extinguished as to the creditor who is without fault or negligence even if the debtor
acted in utmost good faith and by mistake as to the person of the creditor or through
error induced by fraud of a third person.

In general, a payment in order to be effective to discharge an obligation, must be made
to the proper person. Thus, payment must be made to the obligee himself or to an
agent having authority, express or implied, to receive the particular payment. Payment
made to one having apparent authority to receive the money will, as a rule, be treated
as though actual authority had been given for its receipt. Likewise, if payment is made
to one who by law is authorized to act for the creditor, it will work a discharge. The
receipt of money due on a judgment by an officer authorized by law to accept it will,
therefore, satisfy the debt.

PNP failed to show any evidence to support payment to MGM. Furthermore, since the
obligation did not rise from a loan or forbearance of money the legal interest of 6% per
annum is attached to the amount due.






























Jose Marques and Maxilite Technologies, Inc. vs Far East Bank and
Trust Company
G.R. No. 171379

Facts:
Maxilite Technologies, Inc. (Maxilite) is a domestic corporation engaged in the
importation and trading of equipment for energy-efficient systems. Jose N. Marques is
the president and controlling stockholder of Maxilite.
Far East Bank and Trust Co. (FEBTC) is a local bank which handles the financing and
related requirements of Marques and MAxilite. Marques and MAxilite maintained
accounts with FEBTC. FEBTC maintained Maxilites capital and operational requirements
through loans secured with properties of Marques.
Far East Bank Insurance Brokers, Inc. (FEBIBI) is a local insurance brokerage corporation
while Makati Insurance Company is a local insurance company, both are subsidiaries of
FEBTC.
Maxilite and Marques entered into a trust receipt transaction with FEBTC for the
shipment of various high-technology equipment from the United States with the
merchandise serving as collateral.
FEBIBI, upon the advice of FEBTC, facilitated the procurement and processing from
Makati Insurance Company of four separate and independent fire insurance policies
over the trust receipt merchandise. Maxilite paid the premium for theses policies
through debit arrangement. FEBTC would debit Maxilites account for premium the
payments, as reflected by statement of accounts sent to Maxilite.
On March 9, 1995, a fire gutted the Aboitiz Sea Transport Building where Maxilites
office and warehouse were located. AS a result, Maxilite suffered losses which they
claimed against the fire insurance policy with Makati Insurance Company. The latter
denied the claim due to non-payment of premium. FEBTC and FEBIBI disclaimed any
responsibility for the denial.
Maxilite and Marques sued FEBTC, FEBIBI, and Makati Insurance Company praying for
payment of damages. The defendants countered that Maxilite and Marques have no
cause of action against them and essentially denied the allegations.
The trial court ruled in favour of Maxilite and Marques ordering the defendants to pay
jointly and severally to the plaintiff the full coverage of the fire insurance policy,
damages, attorneys fees and litigation expenses. Subsequently, the counter claims
were dismissed.
The Court of Appeals affirmed the trial courts decision with modifications.

Issue:
Whether or not the premium for the insurance policy has in fact been paid.

Held:

Essentially, Maxilite and Marques invoke estoppel in claiming against FEBTC, FEBIBI, and Makati
Insurance Company the face value of the insurance policy. In their complaint, Maxilite and
Marques alleged they were led to believe and they in fact believed tha the settlement of
Maxilites trust receipt account included the payment of the insurance premium. Article 1431 of
the Civil Code defines estoppel as follows: Art. 1431. Through estoppel an admission or
representation is rendered conclusive upon the person making it, and cannot be denied or
disproved as against the person relying thereon. Meanwhile, Section 2(a), Rule 131 of the Rules
of Court provides: SEC. 2. Conclusive presumptions. The following are instances of conclusive
presumptions: (a) Whenever a party has, by his own declaration, act, or omission, intentionally
and deliberately led another to believe a particular thing is true, and to act upon such belief, he
cannot, in any litigation arising out of such declaration, act or omission, be permitted to falsify
it.

In estoppel, a party creating an appearance of fact, which is false, is bound by that appearance
as against another person who acted in good faith on it. Estoppel is based on public policy, fair
dealing, good faith and justice. Its purpose is to forbid one to speak against his own act,
representations, or commitments to the injury of one who reasonably relied thereon. It springs
from equity, and is designed to aid the law in the administration of justice where without its aid
injustice might result. The Court agrees with the Court of Appeals in reducing the interest rate
from 12% to 6% as the obligation to pay does not arise from a loan or forbearance of money.
With respect to Maxilites and Marques invocation of legal compensation, we find the same
devoid of merit. Aside from their bare allegations, there is no clear and convincing evidence
that legal compensation exists in this case. In other words, Maxilite and Marques failed to
establish the essential elements of legal compensation. Therefore, Maxilites and Marques
claim of legal compensation must fail.

















PRISMA Construction and Development Corporation vs Arthur F.
Menchavez
G.R. No. 160545

Facts:
Rogelio S. Pantaleon, the President and Chairman of the Board of PRISMA, obtained a
loan from the respondent in the amount of P1M with a monthly interest of P40,000.00
payable in six months. To secure the payment of the loan, Pantaleon issued a
promissory note.

As of January 4, 1997, the petitioners had already paid a total of P1,108,772.00.
However, the respondent found that the petitioner still had an outstanding balance of
P1,364,151.00, to which it applied a 4% monthly interest. Thus, the respondent filed a
complaint for the sum of money with the RTC to enforce unpaid balance, monthly
interest, attorneys fees and costs of suit.

The RTC rendered a decision ordering the petitioners to jointly and severally pay the
respondent the amount of P3,526,117.00 plus 4% monthly interest from February 11,
1999 until fully paid.

The petitioners elevated the case to the CA insisting that there was no express
stipulation on the 4% monthly interest. The CA affirmed the RTCs decision with
modifications imposing a 12% per annum interest, computed from the filing of the
complaint until finality of judgment, and thereafter 12% from finality until fully paid. The
petitioners filed a motion for reconsideration but was denied by the appellate court.

Issue:
Whether or not the 4% monthly interest on the loan applies to the payment period only or until
full payment of the loan.

Held:
The court finds the petition meritorious.
Obligations arising from contracts have the force of law between the contracting parties and
should be complied with in good faith. When the terms of a contract are clear and leave no
doubt as to the intention of the contracting parties, the literal meaning of its stipulations
governs. In such cases, courts have no authority to alter the contract by construction or to make
a new contract for the parties; a court's duty is confined to the interpretation of the contract
the parties made for themselves without regard to its wisdom or folly, as the court cannot
supply material stipulations or read into the contract words the contract does not contain. It is
only when the contract is vague and ambiguous that courts are permitted to resort to the
interpretation of its terms to determine the parties intent.

Article 1956 of the Civil Code specifically mandates that no interest shall be due unless it has
been expressly stipulated in writing. Under this provision, the payment of interest in loans or
forbearance of money is allowed only if:
(1) there was an express stipulation for the payment of interest; and
(2) the agreement for the payment of interest was reduced in writing.

The concurrence of the two conditions is required for the payment of interest at a stipulated
rate. Applying this provision, we find that the interest of P40,000.00 per month corresponds
only to the six (6)-month period of the loan, or from January 8, 1994 to June 8, 1994, as agreed
upon by the parties in the promissory note. Thereafter, the interest on the loan should be at the
legal interest rate of 12% per annum, , consistent with our ruling in Eastern Shipping Lines, Inc.
v. Court of Appeals. The court reversed and set aside the decision of the Court of Appeals and
remanded the case to the RTC for proper computation of the amount due.






























Theresa Macalalag vs People of the Philippines
G.R. No. 164358

Facts:
Petitioner Theresa Macalalag obtained loans from Grace Estrella in two separate
occasions with an interest rate of 10% per month. Macalalag persistently paid the
interests. Finding the interests so burdensome, she requested Estrella for a reduction of
the same which the latter agreed.
Macalalag then executed Acknowledgment/Affirmation Receipts promising to pay
Estrella the face value of the loans within two months from the date of execution plus
6% interest per month. She further obliged herself to pay for the two loans as liquidated
damages and attorneys fees as stipulated by the parties the moment she breaches the
terms and conditions thereof.
As security for payment, Macalalag issued two checks in favour of Estrella. However,
when Estrella presented said checks to drawee bank, the same were dishonoured for
the reason that the account was already closed.
Estrella then sent notice of dishonour and demand to Macalalag, but the latter failed to
do so. Estrella then filed 2 criminal complaints against Macalalag for violation of BP 22.
Macalalag pleaded not guilty and attested that she already made payments over and
above the value of the checks.
The trial court found Macalalag guilty. The Court of Appeals also found her guilty with
modification ruling that she is liable for only 1 count of BP 22.

Issue:
Whether or not petitioner had already paid her obligations to Estrella.

Held:
It was established that Macalalag already made a total payment of P355,837.00. This amount
could be very well applied to the value of the first check which is P156,000.00. Thus, Macalalag
cannot be held liable for the violation of BP 22 in so far as the first check is concerned. The
second check however, Macalalag can still be liable for violation of BP 22 since the check
representing payment was dishonoured by the drawee bank for the reason that the account
was already closed. Hence, her obligation to Estrella is not fully paid.










Antonio Tan vs. Court of Appeals
G.R. No. 116285

Facts:
Antonio Tan secured two loans from the Cultural Center of the Philippines (CCP) in the
amount of P 4,000,000.00 and P 2,000,000.00.
After partial payments Tan defaulted resulting to the restructuring of the payment of
the balance to be paid at five equal instalments.
Tan failed to pay any instalment and thereafter restructured the loan again that is: (a)
twenty percent (20%) of the principal amount of the loan upon the respondent giving its
conformity to his proposal; and (b) the balance on the principal obligation payable in
thirty-six (36) equal monthly instalments until fully paid, and that the principal would
bear interest at 14% per annum plus 3% service charge and a penalty of 2% monthly
penalty in case of breach.
Tan still failed to pay and asked for a moratorium on his obligation due to the
considerable change in his business.
CCP filed a case of collection of sum of money against Tan where the trial court and CA
ruled in favor of CCP and ordered Tan to pay what is due to CCP and that the amount
stated in the judgment shall accrue 12% annual interest from finality until satisfaction.

Issues:
1. Whether or not the penalty of 2% interest should also accrue interest of 12% per annum.
2. Whether or not the penalty of 2% per month is frivolous or usurious.

Held:
1. There is an express stipulation in the promissory note (Exhibit A) permitting the
compounding of interest. The fifth paragraph of the said promissory note provides
that: Any interest which may be due if not paid shall be added to the total amount when
due and shall become part thereof, the whole amount to bear interest at the maximum rate
allowed by law. Therefore, any penalty interest not paid, when due, shall earn the legal
interest of twelve percent (12%) per annum, in the absence of express stipulation on the
specific rate of interest, as in the case at bar. Article 2212 of the New Civil Code provides
that Interest due shall earn legal interest from the time it is judicially demanded, although
the obligation may be silent upon this point. In the instant case, interest likewise began to
run on the penalty interest upon the filing of the complaint in court by respondent CCP on
August 29, 1984. Hence, the courts a quo did not err in ruling that the petitioner is bound
to pay the interest on the total amount of the principal, the monetary interest and the
penalty interest.

2. Since Tan has showed good faith in trying to fulfil his obligation evidenced by multiple
attempts to restructure the loan and partial payments, the court held that a reduction on
the penalty was due and found that the 2% monthly interest as a penalty usurious and
reduced it to a straight 12% per annum interest rate.







































Eastern Shipping Lines, Inc. vs Court of Appeals
G.R. No. 97412

Facts:
Two fiber drums of riboflavin were shipped from Yokohama, Japan for delivery along the
vessel SS Eastern Comet owned by Eastern Shipping Lines. This shipment was insured
by Mercantile Insurance Company, Inc.
Upon arrival of shipment in Manila, it was discharged unto the custody of Metro Port
Service, Inc., who excepted one drum, said to be in bad order of unknown damage.
Allied Brokerage Corporation received the shipment from Metro Port Service, Inc., one
drum opened and without seal. They then made deliveries of the shipment to
consignees warehouse, who excepted to one drum which contained spillages, while the
rest of the contents was adulterated/fake.
Due to the losses/damage sustained by said drum, consignee suffered losses due to the
fault and negligence of the shipping company. Claims were then presented and were
refused to be paid.
The Court of Appeals, after a careful scrutiny of evidence in record, found that the
conclusion drawn was correct. As there is sufficient evidence that the shipmen has
sustained damage while in the successive possession of appellants, and therefore are
liable as subrogee for the amount paid to the consignee.

Issue:
Whether or not the Court of Appeals showed error and grave abuse of discretion to petitioner.

Held:
The common carrier's duty to observe the requisite diligence in the shipment of goods lasts
from the time the articles are surrendered to or unconditionally placed in the possession of,
and received by, the carrier for transportation until delivered to, or until the lapse of a
reasonable time for their acceptance by, the person entitled to receive them (Arts. 1736-1738,
Civil Code). When the goods shipped either are lost or arrive in damaged condition, a
presumption arises against the carrier of its failure to observe that diligence, and there need
not be an express finding of negligence to hold it liable (Art. 1735, Civil Code). There are, of
course, exceptional cases when such presumption of fault is not observed but these cases,
enumerated in Article 1734

of the Civil Code, are exclusive, not one of which can be applied to
this case.

The decision herein sought to be executed is one rendered in an Action for Damages for injury
to persons and loss of property and does not involve any loan, much less forbearances of any
money, goods or credits. As correctly argued by the private respondents, the law applicable to
the said case is Article 2209 of the New Civil Code.



Rodelo G. Polotan, Sr. vs Court of Appeals
G.R. No. 119379

Facts:
Petitioner Rodelo S. Polotan, Sr. Applied for membership and credit accommodations
with Diners Club in October 1985. The application form contained terms and conditions
governing the use and availment of the Diners Club card, among which is for the
cardholder to pay all charges made through the use of said card and any remaining
unpaid balance to earn 3% interest per annum plus prime rate of Security Bank and
Trust Company. Notably, in the application form, Ofricano Canlas obligated himself to
pay jointly and severally with petitioner the latters obligation to private respondent.
The petitioner incurred credit charges plus appropriate interest and service charges in
the amount of P33,819.84 as of May 8, 1987, which has become due and demandable.
Demands for payment proved futile, hence, private respondent filed a Complaint for
Collection of Sum of Money against petitioner before the lower court.
The lower court rendered judgment ordering Rodelo Polotan, Sr. And Ofricano Canlas to
pay jointly and severally the private respondent. Upon appeal, the Court of Appeals
affirmed the ruling of the lower court.

Issue:
Whether or not petitioner had an obligation to pay private respondent.

Held:
Petitioners claim that since the contract he signed with Diners Club was a contract of adhesion,
the obscure provision on interest should be resolved in his favour. A contract of adhesion is one
in which one of the contracting parties imposes a ready-made form of contract which the other
party may accept or reject, but cannot modify. One party prepares the stipulation in the
contract, while the other party merely affixes his signature or his adhesion thereto, giving no
room for negotiation and depriving the latter of the opportunity to bargain on equal footing.
These types of contracts have been declared as binding as ordinary contracts, the reason being
that the party who adheres to the contract is free to reject it entirely.








New Sampaguita Builders Construction, Inc. (NSBCI) vs Philippine
National Bank
G.R. No. 148753

Facts:
On February 11, 1989, Board Resolution No. 05 was approved by NSBCI (petitioner)
authorizing the company to apply for or secure a commercial loan with the PNB in an
aggregate amount of P8.0M, using or mortgaging the real estate properties registered in
the name of its President and Chairman of the Board Eduardo R. Dee as collateral, and
authorizing petitioner spouses to secure the loan and to sign any and all documents
which may be required by PNB, and that petitioners shall act as sureties or co-obligors
who shall be jointly and severally liable with NSBCI for the payment of any and all
obligations.
The loan was approved and was secured by a firts mortgage on the following: a) 3
parcels of residential land located at Mangaldan, Pangasinan; b) 6 parcels of residential
land situated at San Fabian, Pangasinan, and c) a residential lot and improvements
thereon located at Mangaldan, Pangasinan.
The loan was further secured by the joint and several signatures of petitioner spouses
who signed as accommodation-mortgagors since all the collaterals were owned by them
and registered in their names.
Petitioner also executed several promissory notes with different payment dates. The
first promissory note had a 19.5% interest rate, the 2
nd
and 3
rd
had a 21.5% interest rate.
Included in the promissory note is a uniform clause that permitted PNB to increase the
rate within the limits allowed by law at any time depending on whatever policy it may
adopt in the future, even without giving petitioners prior notice. Subsequently, there
was also a clause stating that if the same is not paid in 2 years after release, it shall be
converted to a medium term loan and the interest rate for such loan will apply.
NSBCI defaulted on its payments and failed to comply with obligations and promissory
notes, thus, they requested for a 90 day extension. Even with the extension, they again
defaulted and asked that the loan be restructured. The loan was paid in part and the
balance was promised to be paid later on. Due to failure of NSBCI to pay PNB again, the
latter extrajudicially foreclosed the mortgaged properties and was sold for P10M.
Respondent bank then files a complaint with the court with the prayer that NSBCI pay
the deficiency of P2M since the respondent bank claimed that the petitioners owed
them P12M
The lower court ruled that NSBCI was entitled to the debt relief package of the PNB and
ruled that respondent bank had no cause of action. Upon appeal, the CA reversed the
decision of the lower court stating that NSBCI was not entitled to loan relief thus
ordering the petitioner to pay the respondent bank the sum of money that they still
owe.

Issue:
Whether or not the loan was bloated by respondent bank.

Held:
Respondents Circular is not an outright grant of assistance or extension of payment, but a
mere offer subject to specific terms and conditions. Petitioner NSBCI failed to establish
satisfactorily that it had been seriously and directly affected by the economic slowdown in the
peripheral areas of the then US military bases. Its allegations, devoid of any verification, cannot
lead to a supportable conclusion. In fact, for short-term loans, there is still a need to conduct a
thorough review of the borrowers repayment possibilities. After the foreclosure and sale of
the mortgaged property, the Real Estate Mortgage is extinguished. Although the mortgagors,
being third persons, are not liable for any deficiency in the absence of a contrary stipulation,
the action for recovery of such amount -- being clearly sureties to the principal obligation --
may still be directed against them. However, respondent may impose only the stipulated
interest rates of 19.5 percent and 21.5 percent on the respective availments -- subject to the 12
percent legal rate revision upon automatic conversion into medium-term loans -- plus 1 percent
attorneys fees, without additional charges on penalty, insurance or any increases thereof.
Accordingly, the excessive interest rates in the Statements of Account sent to petitioners are
reduced to 19.5 percent and 21.5 percent, as stipulated in the Promissory Notes; upon loan
conversion, these rates are further reduced to the legal rate of 12 percent.

T h e un i l a t e r a l de t e r mi n a t i on a nd i mp o s i t i on of i n c r e a s e d r a t e s i s
violative of the principle of mutuality of contracts ordained in Article 1308 of the Ci vi l
Code. One-si ded i mposi ti ons do not have the force of l aw between the parti es,
because such i mposi ti ons are not based on the parties essential equality


















Dario Nacar vs Gallery Frames and/or Felipe Bordey, Jr.
G.R. No. 189871

Facts:
Dario Nacar filed a complaint for constructive dismissal before the Arbitration Branch of
the NLRC against respondent Gallery Frames and/or Felipe Bordey, Jr. The Labor Arbiter
rendered a decision in favor of petitioner and found that he was dismissed from
employment without a valid or just cause entitling him to be awarded back wages and
separation pay.
Respondents appealed to NLRC but was dismissed for lack of merit. The NLRC sustained
the decision of the Labor Arbiter. Respondents then filed a motion for reconsideration,
but was denied.
Respondents frilled a Petition for Review on Certiorari before the Court of Appeals. The
CA issued a Resolution dismissing the petition. A Motion for Reconsideration was then
filed but likewise denied.
The respondents sought relief from the Supreme Court but the latter found no
reversible error on the part of the CA, thus denying the petition. An Entry of Judgment
was later issued certifying that the resolution became final and executor. The case was
referred back to the Labor Arbiter.
Petitioner filed a Motion for Correct Computation praying that his back wages be
computed from the date of his dismissal up to the finality of the Resolution of the
Supreme Court. The Computation and Examination Unit of the NLRC arrived at an
updated amount in the sum of P471,320.31.
A Writ of Execution was issued by the Labor Arbiter ordering the Sheriff to collect from
the respondents the recomputed amount. Respondents filed a Motion to Quash Writ of
Execution claiming that after the decision becomes final and executor, the same cannot
be altered. The Labor Arbiter denied the motion and issued an Alias Writ of Execution.
Respondents again appealed to the NLRC who granted the appeal in favor of the
respondents and ordered the recomputation of the judgment award. Upon
recomputation, the judgment award of petitioner was reassessed to be in the total sum
of P147,560.19. The Labor Arbiter then issued an Alias Writ of Execution to satisfy the
judgment award that was due to the petitioner, which the petitioner eventually
received.
Petitioner the filed a Manifestation and Motion praying for the re-computation of
monetary award to include appropriate interests. The Labor Arbiter issued an order
granting the motion, nut only up to the amount of P11,459.73 reasoning that the
decision that should be enforced was that of October 15, 1998 considering that it as the
one that became final and executory.
Petitioner appealed before the NLRC which the latter denied. He then filed a Motion for
reconsideration but was likewise denied. Petitioner then sought recourse before the CA,
who also denied the petition. The CA reasoned that since petitioner no longer appealed
the October 15, 1998 decision, a correction thereof is no longer allowed.

Issue:
Whether or not the payment of back wages should be paid with interest.

Held:
The petition is meritorious.

The decision of the Court of Appeals and the Resolution dated October 9, 2009 are reversed
and set aside. Respondents are ordered to pay petitioner: (1) backwages computed from the
time petltwner was illegally dismissed on January 24, 1997 up to May 27, 2002, when the
Resolution of this Court in G.R. No. 151332 became final and executory; (2) separation pay
computed from August 1990 up to May 27, 2002 at the rate of one month pay per year of
service; and (3) interest of twelve percent ( 12%) per annum of the total monetary awards,
computed from May 27, 2002 to June 30, 2013 and six percent (6%) per annum from July 1,
2013 until their full satisfaction.

The Labor Arbiter is hereby ORDERED to make another recomputation of the total monetary
benefits awarded and due to petitioner in accordance with this Decision.




















Land Bank of the Philippines vs Alfredo Ong
G.R. No. 190755

Facts:
Spouses Johnson and Evangeline Sy secured a loan from Land Bank Legazpi City. The
loan was secured by three residential lots, five cargo trucks, and a warehouse. Under
the agreement, part of the loan would be a short-term loan and the remaining part
would be payable in seven years. The Notice of Loan Approval contained an acceleration
clause wherein any default in payment of amortizations or other charges would
accelerate the maturity of the loan.
When the spouses Sy could no longer pay for their loan, they sold three of their
mortgaged parcels of land to Angelina Gloria Ong, under a Deed of Sale with
Assumption of Mortgage. Alfredo Ong, Evangelines Father, who is also the respondent,
then went to Land Bank to inform them about the sale and assumption of mortgage.
Branch Head Atty. Edna Hingco told him and his counsel that there was nothing wrong
with the agreement but provided them with requirements for the assumption of
mortgage. When the requirements and payments were met, Atty. Hingco informed
petitioner that the certificate of land title would be transferred in his name but never
materialized.
Respondent later found out that his application for assumption of mortgage was not
approved by Land Bank. Petitioner foreclosed the mortgage of the Spouses Sy. Alfredo
Ong learned about the foreclosure when he saw the subject mortgage propertied
included in an Auction Sale. Through his other counsel, Atty. Madrilejos, talked to Land
Bank and was told that the amount he paid as principal foe the assumption of mortgage
would be returned to him.
Alfredo initiated an action for recovery of sum of money with damages against Land
Bank as the payment was not returned by Land Bank. He maintained that the
foreclosure of the mortgaged parcels of land without informing him of the denial of his
assumption of mortgage was done in bad faith.
The RTC held that the contract approving the assumption or mortgage was not
perfected as a result of the credit investigation conducted on Alfredo. It ruled that
under the principle of equity and justice, the bank should return the amount Alfredo
had paid with interest. It further held that he was entitled to attorneys fees and
litigation expenses.
On appeal, The CA affirmed the decision of the RTC. It found that Alfredo and Land
Banks active preparations for Alfredos assumption of mortgage essentially novated the
agreement.
The subsequent motion of reconsideration by Land Bank was denied by the CA for lack
of merit.

Issue:
Whether or not the CA erred in holding that Art, 1236 of the Civil Code does not apply.

Held:
The appealed decision is affirmed with modification.
Land Bank contends that Art. 1236 of the Civil Code backs their claim that Alfredo should have
sought recourse against the Spouses Sy instead of Land Bank. Art. 1236 provides: The creditor
is not bound to accept payment or performance by a third person who has no interest in the
fulfillment of the obligation, unless there is a stipulation to the contrary. Whoever pays for
another may demand from the debtor what he has paid, except that if he paid without the
knowledge or against the will of the debtor, he can recover only insofar as the payment has
been beneficial to the debtor.

We agree with Land Bank on this point as to the first part of paragraph 1 of Art. 1236. Land
Bank was not bound to accept Alfredos payment, since as far as the former was concerned, he
did not have an interest in the payment of the loan of the Spouses Sy. However, in the context
of the second part of said paragraph, Alfredo was not making payment to fulfill the obligation
of the Spouses Sy. Alfredo made a conditional payment so that the properties subject of the
Deed of Sale with Assumption of Mortgage would be titled in his name. It is clear from the
records that Land Bank required Alfredo to make payment before his assumption of mortgage
would be approved. He was informed that the certificate of title would be transferred
accordingly. He, thus, made payment not as a debtor but as a prospective mortgagor. Land
Bank also faults the CA for finding that novation applies to the instant case. It reasons that a
substitution of debtors was made without its consent; thus, it was not bound to recognize the
substitution under the rules on novation.

Novation, in its broad concept, may either be extinctive or modificatory. It is extinctive when an
old obligation is terminated by the creation of a new obligation that takes the place of the
former; it is merely modificatory when the old obligation subsists to the extent it remains
compatible with the amendatory agreement. An extinctive novation results either by changing
the object or principal conditions (objective or real), or by substituting the person of the debtor
or subrogating a third person in the rights of the creditor (subjective or personal). Under this
mode, novation would have dual functions one to extinguish an existing obligation, the other to
substitute a new one in its place requiring a conflux of four essential requisites:
(1) a previous valid obligation;
(2) an agreement of all parties concerned to a new contract;
(3) the extinguishment of the old obligation; and
(4) the birth of a valid new obligation.

In order that an obligation may be extinguished by another which substitutes the same, it is
imperative that it be so declared in unequivocal terms, or that the old and the new obligations
be on every point incompatible with each other. The test of incompatibility is whether or not
the two obligations can stand together, each one having its independent existence.
Furthermore, Art. 1293 of the Civil Code states: Novation which consists in substituting a new
debtor in the place of the original one, may be made even without the knowledge or against
the will of the latter, but not without the consent of the creditor.

Spouses Florentino T. Mallari and Aurea V. Mallari vs Prudential Bank
(now Bank of the Philippine Islands)
G.R. No. 197861

Facts:
Florentino T. Mallari obtained from respondent Prudential Bank a loan as evidenced by
promissory note which states that the loan is subject to an interest rate of 21% per
annum, attorneys fees equivalent to 15% of the total amount due and, in case of
default, a penalty and collection charges of 12% per annum of the total amount due.
Petitioner Florentino executed a Deed of Assignment where he authorized the
respondent bank to pay his loan with his time deposit with the latter in the amount of
P300,000.00.
Petitioner spouses obtained again from respondent bank another loan of P1.7 million
stipulating that the loan will bear 23% interest per annum, attorneys fees equivalent to
15% p.a. of the total amount due, and penalty and collection charges of 12% p.a.
Petitioners executed a Deed of Real Estate Mortgage in favour of respondent bank
covering petitioners property under TCT No. T-215175 to answer for the said loan.
Petitioners failed to settle their loan obligation with respondent bank, thus prompting
the latter, through their lawyer, to send a demand letter to the petitioners for them to
pay their obligation. Respondent bank then filed with the RTC a petition for extrajudicial
foreclosure of petitioners mortgaged property for the satisfaction of the petitioners
obligation secured by such mortgage. Provincial Sheriff set auction sale on April 23,
1992.
Petitioners filed a complaint for annulment of mortgage, deeds, injunction, preliminary
injunction, temporary restraining order and damages. Petitioners asked the court to
restrain respondent bank from proceeding with the foreclosure sale.
The RTC denied the Application for a Writ of Preliminary Injunction. However, later
reversed itself and issued the restraining order. Respondent bank then filed its Motion
to Lift Restraining Order and proceeded with the extrajudicial foreclosure of the
mortgaged property. A Certificate of Sale was issued to respondent bank being the
highest bidder.
Subsequently, respondent bank files a Motion to Dismiss Complaint for failure to
prosecute action for unreasonable length of time to which petitioners filed their
Opposition. RTC denied this motion. Trial ensued and the RTC issued its Order granting
respondents demurrer to evidence stating in its disposition that there is no evidence
of bad faith.
Petitioners appealed the RTC decision to the CA which issued its assailed Decision
denying the instant appeal and affirming the Order issued by the RTC. A Motion for
Reconsideration was then filed by the petitioners which was denied by the appellate
court.

Issue:
Whether or not the Court of Appeals erred in the affirming the Order of the RTC.

Held:
The court held that the petition is denied and affirms the decision and resolution of the Court
of Appeals.

Parties are free to enter into agreements and stipulate as to the terms and conditions of their
contract, but such freedom is not absolute. Article 1306 of the Civil Code provide, The
contracting parties may establish such stipulations, clauses, terms and conditions, as they may
deem convenient, provided they are not contrary to law, morals, good customs, public order, or
public policy. Hence, if stipulations in the contract are valid, the parties are bound to comply
with them, since contract is the law between the parties.
































RGM Industries vs United Pacific Capital Corporation
G.R. No. 194781

Facts:
The respondent, who is involved in the business of lending and financing, granted a
P30M short-term credit facility in favour of the petitioner. The loan amount was sourced
from individual funders on the basis of a direct-match facility for which a series of
promissory notes were issued by the petitioner for the payment of the loan.
Petitioner failed to satisfy the said promissory notes. Consequently, petitioner issued in
favour of respondent a consolidated promissory note in the principal amount for a term
of 14 days. The stipulated interest was 32& per annum. In case of default, penalty
charge was imposed in an amount equivalent to 8% per month.
The petitioner again failed to satisfy the consolidated promissory note. The respondent
then sent demand letters to the petitioner but the latter failed to pay and instead asked
for loan restructuring. The respondent declined and then filed a compliant for collection
of the sum of money.
The petitioner claimed that the agreed interest rate was fixed at 15.5% per annum and
not varying interest rates as imposed by the respondent which reached as high as 40%
per annum. The respondent argued that the increased interest rates were mutually
agreed upon and are not considered usurious
The trial court ruled in favour of the respondent. On appeal, the CA affirmed the RTCs
judgment but modified the interest rates and penalty charges imposed.

Issue:
Whether or not the imposed interest rates and penalty charges are exhorbitant.

Held:
Stipulated interest rates are illegal if they are unconscionable and courts are allowed to temper
interest rates when necessary. In exercising this vested power to determine what is iniquitous
and unconscionable, the Court must consider the circumstances of each case. What may be
iniquitous and unconscionable in one case, may be just in another.

However, pursuant to Bank of the Philippine Islands, Inc. v. Yu, we deem it proper to further
reduce the penalty charge decreed by the CA from 2% per month to 1% per month or 12% per
annum in view of the following factors: (1) respondent has already received P7,504,522.27 in
penalty charges, and (2) the loan extended to respondent was a short-term credit facility. On
the basis of the same precedent, the attorney's fees must likewise be equitably reduced
considering that: (1) the petitioner has already made partial payments; (2) the attorney's fees
are not an integral part of the cost of borrowing but a mere incident of collection; and (3) the
attorney's fees were intended as penal clause to answer for liquidated damages, hence, the
rate of 10% of the unpaid obligation is too onerous. Under the premises, attorneys fees
equivalent to one percent (1%) of the outstanding balance is reasonable.

Philippine National Bank vs Spouses Wilfredo and Estela Encina
G.R. No. 174055

Facts:
On September 13, 1995, respondent spouses Encina obtained a P500,000.00 loan with
petitioner PNB, secured by a promissory note, a real estate mortgage, and a credit
agreement, on parcels of land located at Occidental Mindoro
The Encinas obtained an additional P200,000.00 loan with PNB embodied in a credit
agreement and promissory note, secured by the same parcels of land. The loan
obligations of the Encinas were fully paid on February 4, 1997.
Another loan was obtained by spouses Encina secured by a promissory note and a time
loan commercial credit agreement, likewise secured by the same parcels of land. PNB
subsequently granted an all purpose credit facility to respondent spouses. The spouses
availed of part of the credit facility, as evidenced by a promissory note secured by the
same parcels of land as well. The remaining amount of money left in the credit facility,
was then availed of by the spouses secured by a promissory note dated May 22, 1998.
The respondent spouses failed to pay their obligation upon its maturity. Demands from
the petitioner were left unheeded, prompting them to file for a petition for the sale of
mortgaged properties. The extra-judicial sale of the mortgaged properties was
published, a foreclosure sale was thereafter conducted with PNB as the highest bidder.
A certificate of sale was then issued in favor of PNB.
On November 15, 2001, a contract of lease was executed between the Espouses Encina
and PNB over the subject properties, pursuant to a request made by the Encinas that
they be allowed to lease the subject properties at P7,500.00 a month.
The Encina spouses sued PNB in an action for the nullification and foreclosure sale and
damages with prayer for extension and/or grace period alleging that their loan
obligations should have been restructured because they were agricultural loans, and
that no penalties should be imposed. Further, they claimed that the extra-judicial
foreclosure and sale of the mortgaged properties was null and void.
PNB filed a motion to dismiss and was granted by the lower court. On appeal, The Court
of Appeals reversed the trial courts dismissal on the finding that there was no definite
agreement as to the interest rate to imposed on the loan.

Issue:
Whether or not the interest rate imposed on the loan is proper.

Held:
Assuming the facts alleged in the complaint to be true, i.e., that the Encina spouses incurred an
agricultural loan which, under the Agricultural Modernization Act of 1997, has a long gestation
period and is not subject to imposition of penalties, the trial court may render a valid judgment.

It should be definitively ruled in this regard that the Usury Law had been rendered legally
ineffective by Resolution No. 224 dated 3 December 1982 of the Monetary Board of the Central
Bank, and later by Central Bank Circular No. 905 which took effect on 1 January 1983 and
removed the ceiling on interest rates for secured and unsecured loans regardless of maturity.
The effect of these circulars is to allow the parties to agree on any interest that may be charged
on a loan. The virtual repeal of the Usury Law is within the range of judicial notice which courts
are bound to take into account. After all, the fundamental tenet is that the law is deemed part
of the contract. Thus, the trial court was correct in ruling that the second cause of action was
without basis.

In sum, in view of the factual issues raised by PNB in its motion to dismiss, the just and fair
resolution of the present controversy demands further proceedings in the RTC with regard to
the first cause of action mentioned in the complaint. We shall refrain from taking them up in
this Decision.

The petition is partly granted. The decision of the Court of Appeals are reversed and set aside.
The case id ordered remanded to the court of origin to resolve the same.





















Restituta M. Imperial vs Alexa Jaucian
G.R. No. 149004

Facts:
Controversy Arose from a case of collection of money, filed by Alex Jaucian against
Restituta Imperial. The complaint alleges that petitioner obtained from respondent
6separate loans for which the former executed in favor of the latter 6 separate
promissory notes and issued several checks as guarantee for payment.
When said loans became overdue and unpaid, petitioners checks were dishonored,
respondent made repeated oral and written demands for payment.
RTC and CA held that the respondents clear and detailed computation of petitioners
outstanding obligation was convincing and satisfactory.

Issues:
1. Whether or not the petitioner has fully paid her obligations even before filing of the case.
2. Whether or not the charging of 28% interest per annum without any writing is legal.
3. Whether or not charging of excessive penalties is a guise of hidden interest.

Held:
1. Involves a question of fact. Such question exists when a doubt or difference arises as to the
truth or the falsehood of alleged facts; and when there is need for a calibration of the evidence,
considering mainly the credibility of witnesses and the existence and the relevancy of specific
surrounding circumstances, their relation to each other and to the whole, and the probabilities
of the situation. It is a well-entrenched rule that pure questions of fact may not be the subject
of an appeal by certiorari under Rule 45 of the Rules of Court, as this remedy is generally
confined to questions of law.

2. The records show that there was a written agreement between the parties for the payment
of interest on the subject loans at the rate of 16 percent per month. As decreed by the lower
courts, this rate must be equitably reduced for being iniquitous, unconscionable and exorbitant.
While the Usury Law ceiling on interest rates was lifted by C.B. Circular No. 905, nothing in the
said circular grants lenders carte blanche authority to raise interest rates to levels which will
either enslave their borrowers or lead to a hemorrhaging of their assets.

3. Article 1229 of the Civil Code states thus: The judge shall equitably reduce the penalty when
the principal obligation has been partly or irregularly complied with by the debtor. Even if
there has been no performance, the penalty may also be reduced by the courts if it is iniquitous
or unconscionable. Nevertheless, it appears that petitioners failure to comply fully with her
obligation was not motivated by ill will or malice. The 29 partial payments she made were a
manifestation of her good faith. Again, Article 1229 of the Civil Code specifically empowers the
judge to reduce the civil penalty equitably, when the principal obligation has been partly or
irregularly complied with. Upon this premise, we hold that the RTCs reduction of attorneys
fees -- from 25 percent to 10 percent of the total amount due and payable -- is reasonable.
Teddy G. Pabugais vs Dave P. Sahijwani
G.R. No. 156846

Facts:
Pursuant to an Agreement and Undertaking, petitioner Teddy G. Pabugais, agreed to
sell to respondent Dave P. Sahijwani a lot located at North Forbes Park, Makati, Metro
Manila.
The sum of money amounting to P600,000.00 was paid by respondent to petitioner as
option/reservation fee and the balance will be paid within 60 days from execution of
contract, simultaneous with the delivery of the owners Transfer Certificate of Title, the
Deed of Absolute Sale, Certificate of Non-Tax Delinquency and Clearance on Payment of
Association dues. In addition, the parties agreed that failure on the part of the
respondent to pay the balance of the purchase price, the option/reservation fee will be
forfeited; while non-delivery of the necessary documents obliges him to return to the
respondent the said reservation fee with interest at 18% per annum.
Petitioner failed to deliver the required documents, thus returned the respondents
option/reservation fee by way of Far East Bank and Trust Company Check, which was
dishonoured.
What transpired after is disputed by both parties. The trial court rendered a decision
declaring the consignation was invalid for failure to prove that petitioner tendered
payment to respondent and that the latter refused to receive the same. The trial court
ordered petitioner to pay respondent the reservation fee with 18% interest per annum
plus moral damages and attorneys fees.
Petitioner appealed the decision of the lower court with the Court of Appeals. On a
Motion for Reconsideration, the court reconsidered their first decision and reversed and
set aside the trial courts decision. Entering a new one declaring that as valid as the
consignation by the plaintiff-appelant in favour of defendant-appellee the amount of
reservation plus interest and declaring as extinguished appellants observation in favour
of the appellee.

Issues:
1. Whether or not there was a valid consignation.
2. Whether or not petitioner can withdraw the amount consigned.

Held:
1. Consignation is the act of depositing the thing due with the court or judicial authorities
whenever the creditor cannot accept or refuses to accept payment and it generally requires a
prior tender of payment. In order that consignation may be effective, the debtor must show
that: (1) there was a debt due; (2) the consignation of the obligation had been made because
the creditor to whom tender of payment was made refused to accept it, or because he was
absent or incapacitated, or because several persons claimed to be entitled to receive the
amount due or because the title to the obligation has been lost; (3) previous notice of the
consignation had been given to the person interested in the performance of the obligation; (4)
the amount due was placed at the disposal of the court; and (5) after the consignation had
been made the person interested was notified thereof. Failure in any of these requirements is
enough ground to render a consignation ineffective. There being a valid tender of payment in
an amount sufficient to extinguish the obligation, the consignation is valid.

2. With regards to petitioners right to withdraw the amount consigned, reliance on Article
1260 of the Civil Code is misplaced. The said Article provides Art. 1260. Once the
consignation has been duly made, the debtor may ask the judge to order the cancellation of the
obligation. Before the creditor has accepted the consignation, or before a judicial confirmation
that the consignation has been properly made, the debtor may withdraw the thing or the sum
deposited, allowing the obligation to remain in force. The amount consigned with the trial court
can no longer be withdrawn by petitioner because respondents prayer in his answer that the
amount consigned be awarded to him is equivalent to an acceptance of the consignation, which
has the effect of extinguishing petitioners obligation.






















Antonio Lo vs Court of Appeals
G.R. No. 138677

Facts:
Two parcels of land with an office building constructed thereon was acquired by
petitioner in an auction sale from the Land Bank of the Philippines.
Private respondent was the occupant of the disputed parcels of land under a subsisting
contract of lease with Land Bank which was valid until December 31, 1995.
Upon expiration of the lease of contract, petitioner demanded that private respondent
vacate the leased premises and surrender its possession to him. Private respondent
refused on the ground that it was contesting petitioners acquisition of the parcels of
land in question.
Petitioner then files an action for ejectment before the Metropolitan Trial Court. He
asked for the imposition of the contractually stipulated penalty of P5,000.00 per day of
delay in surrendering the possession of the property to him. The trial court decided the
case in favour of the petitioner.
On appeal, the RTC of Malabon affirmed the decision of the MTC. Private respondents
subsequent motion for reconsideration of the RTC decision was denied.
Private respondent elevated the case to the Court of Appeals via a petition for review.
The CA affirmed the decision of the trial court, with modification.

Issue:
Whether or not the Court of Appeals had authority to reduce the penalty awarded by the trial
court.

Held:
The court held that, petition has no merit.

Generally, courts are not at liberty to ignore the freedom of the parties to agree on such terms
and conditions as they see fit as long as they are not contrary to law, morals, good customs,
public order or public policy. Nevertheless, courts may equitably reduce a stipulated penalty in
the contract if it is iniquitous or unconscionable, or if the principal obligation has been partly or
irregularly complied with.

This power of the courts is explicitly sanctioned by Article 1229 of the Civil Code which
provides:
Article 1229. The judge shall equitably reduce the penalty when the principal obligation has
been partly or irregularly complied with by the debtor. Even if there has been no performance,
the penalty may also be reduced by the courts if it is iniquitous or unconscionable.



Tolomeo Ligutan vs Court of Appeals
G.R. No. 138677

Facts:
Petitioners obtained a loan from respondent Security Bank and Trust Company.
Petitioners executed a promissory note binding themselves, jointly and severally, to pay
the sum borrowed with an interest of 15.189% per annum and to pay a penalty of 5%
every month in case of default. In addition, petitioners agreed to pay 10% of the total
amount due by way of attorneys fees if the matter were endorsed to a lawyer for
collection.
Despite several demands from the bank, petitioners failed to settle the debt. A final
demand letter was sent to petitioners informing them that they had five days to make
full payment. Still, petitioners defaulted on their obligation, thus prompting the bank to
file a complaint with the RTC for the recovery of the due amount.
Instead of introducing evidence, the petitioners had the hearing of the case reset on
two consecutive occasions. In view of their absence on the third hearing date, the bank
moved, and the trial court resolved, to consider the case submitted for decision.
Two years later, petitioners filed a motion for reconsideration of the order of the trial
court declaring them as having waived their right to present evidence and prayed that
they be allowed to prove their case. The court denied the motion and issued a judgment
in favour of the bank.
Petitioners posed an appeal with the CA, questioning the rejection of the trial court of
their motions to present evidence. The appellate court affirmed the judgment of the
trial court except on the matter of the 2% service charge which was deleted pursuant to
Central Bank Circular No. 783. The decision of the trial court was modified.
Petitioners filed a motion for reconsideration presenting new evidence and contended
that the execution of a real estate mortgage had the effect of novating the contract
between them and the bank. The appellate court denied the motion and rationalized
that newly discovered evidence cannot be admitted or entertained under Section 2,
Rule 52 of the Rules of Civil Procedure.

Issue:
Whether or not the Court of Appeals erred in not holding that there was a novation of the
cause of action of private respondents complaint due to subsequent execution of real estate
mortgage

Held:
Extinctive novation requires, first, a previous valid obligation; second, the agreement of all the
parties to the new contract; third, the extinguishment of the obligation; and fourth, the validity
of the new one. In order that an obligation may be extinguished by another which substitutes
the same, it is imperative that it be so declared in unequivocal terms, or that the old and the
new obligation be on every point incompatible with each other. An obligation to pay a sum of
money is not extinctively novated by a new instrument which merely changes the terms of
payment or adding compatible covenants or where the old contract is merely supplemented by
the new one. When not expressed, incompatibility is required so as to ensure that the parties
have indeed intended such novation despite their failure to express it in categorical terms. The
incompatibility, to be sure, should take place in any of the essential elements of the obligation,
i.e.,
(1) the juridical relation or tie, such as from a mere commodatum to lease of things, or from
negotiorum gestio to agency, or from a mortgage to antichresis, or from a sale to one of loan,
(2) the object or principal conditions, such as a change of the nature of the prestation; or
(3) the subjects, such as the substitution of a debtor or the subrogation of the creditor.
Extinctive novation does not necessarily imply that the new agreement should be complete by
itself; certain terms and conditions may be carried, expressly or by implication, over to the new
obligation.
























Spouses Silvestre vs Rodrigo V. Ramos
G.R. No. 144712

Facts:
Spouses Silvestre and Celia Pascual executed in the favor of Ramos a Deed of Absolute
Sale with Right to repurchase over two parcels of land and the improvements thereon.
The Pascuals did not exercise the right to repurchase the property within the stipulated
one year period, so, Ramos prayed that the title or ownership of the parcels of land and
improvements thereon be consolidated in his favor.
As a counterclaim, the Pascuals prayed that Ramos be ordered to execute a Deed of
Cancellation, Release or Discharge of the Deed of Absolute Sale with Right to repurchase
or a Deed of Real Estate Mortgage, deliver the owners duplicate of the TCT, return the
amount they had overpaid, and pay each of them moral and exemplary damages.
The trial court found that the transaction between the parties was a loan, the payment
of which was secured by a mortgage of the properties involved. It also found that the
Pascuals had made payments with interset at 7% per annum, and has over-payed the
loan by P141,500.00. The trial court rendered judgment in favor of the Pascuals and
against Ramos.
Ramos moved for reconsideration alleging that the trial court erred in using the interst
of 7% per annum because what was in the stipulated Sinumpaang Salaysay was 7% per
month. Finding merit to this motion, the trial court issued an order modifying its
decision by deleting the award of overpayment of the loan and interest and ordered the
Pascuals to pay Ramos P511,000.00 representing the principal loan plus interest.
The Pascuals contented that the interest of 7% per month is exorbitant and
burdensome. While Ramos contends that there was nothing illegal with the interest rate
agreed upon by both parties since the ceilings of interests under the Usury Law had
been removed.

Issue:
Whether or not the 7% per month interest charge is illegal.

Held:
It is a basic principle in civil law that parties are bound by the stipulations in the contracts
voluntarily entered into by them. Parties are free to stipulate terms and conditions which they
deem convenient provided they are not contrary to law, morals, good customs, public order, or
public policy. The interest rate of 7% per month was voluntarily agreed upon by RAMOS and the
PASCUALs. There is nothing from the records and, in fact, there is no allegation showing that
petitioners were victims of fraud when they entered into the agreement with RAMOS. Neither
is there a showing that in their contractual relations with RAMOS, the PASCUALs were at a
disadvantage on account of their moral dependence, ignorance, mental weakness, tender age
or other handicap, which would entitle them to the vigilant protection of the courts as
mandated by Article 24 of the Civil Code.

First Metro Investment Corporation vs Este del Sol Mountain Reserve
G.R. No. 141811

Facts:
Petitioner FMIC granted respondent a loan to finance the construction and
development of the Este del Sol Mountain Reserve.

Under the terms of the Loan Agreement, the proceeds of the loan were to be releases
on staggered basis. Interest on the loan was pegged at 16% per annum based on
diminishing balance. The loan was payable in 36 equal and consecutive monthly
amortizations. In case of default, an acceleration clause was provided and the amount
due was made subject to a 20% one-time penalty on the amount due and such amount
shall bear interest at the highest rate permitted by law.

As a guarantee for payment, respondent executed a REM, individual continuing
suretyship and underwriting agreement where FMIC shall underwrite at the public
offering of common shares of respondents capital stock.

When respondent failed to pay its obligation, FMIC caused foreclosure of the REM and
was the highest bidder at the public auction. Petitioner then filed to collect for alleged
deficiency balance from respondents since they failed to collect from the sureties, plus
interest.

The trial court ruled in favour of petitioner. Respondents then appealed before the CA
which found that the fees provided for in the Undertaking and Consultancy Agreements
were present to camouflage the usurious interest charged. The CA then ordered FMIC to
reimburse what is due to respondent.

Issue:
Whether or not the interests are lawful.

Held:
The court held, NO. A loan is usurious when it is intended that additional compensation due the
loan be camouflaged by an unrelated contract for payment by the borrower for the lenders
services. Article 1957 states that contracts and stipulations, under any cloak or device, intended
to circumvent the law against usury shall be void.






DOMEL Trading Corporation vs Court of Appeals
G.R. 84813

Facts:
Private respondent ordered from petitioner 22,000 bundles of buri midribs to be
delivered within 30 working days from the date of the opening of a letter of credit.
Private respondent again ordered 300,000 pieces of rattan poles to be delivered within
60 days from the date of opening of a letter of credit. The specifications and provisions
of both transactions, which served as their agreement, were printed in two separate
purchase orders.
In accordance to their agreement, private respondent opened two letters of credit with
Philippine National Bank in favor of DOMEL to cover its order of rattan poles and buri
midribs.
In violation of their agreement, DOMEL failed to deliver the buri midribs and rattan
poles within he stipulated period. Both parties agreed to restructure the purchase
orders of private respondent in a Memorandum of Agreement. However, no deliveries
were again made. Consequently, private respondent demanded payment of damages
from petitioner which were ignored by the latter.
NNRMC (private respondent) filed a complaint before the Regional Trial Court which
rendered a judgment in their favor and against DOMEL. On appeal, the Court of Appeals
modified the decision of the lower court.

Issue:
Whether or not the modification of the lower courts decision by the Court of Appeals is just.

Held:
While we do not agree with the Court of Appeals that the failure of NNRMC to conduct the
inspection mitigated DOMELs liability for liquidated damages, nevertheless, we agree in the
reduction of the amount of liquidated damages to only P150,000.00. The amount of P2,000.00
as penalty for every day of delay is excessive and unconscionable.

Article 1229 of the Civil Code states, thus: The judge shall equitably reduce the penalty when
the principal obligation has been partly or irregularly complied with by the debtor. Even if there
has been no performance, the penalty may also be reduced by the courts if it is iniquitous or
unconscionable.

Article 2227 of the Civil Code likewise states, thus: Liquidated damages, whether intended as
an indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable.
In determining whether a penalty clause is iniquitous and unconscionable, a court may very
well take into account the actual damages sustained by a creditor who was compelled to sue
the defaulting debtor, which actual damages would include the interest and penalties the
creditor may have had to pay on its own from its funding source

Leticia Y. Medel, et. al. vs Court of Appeals
G.R. No. 131622

Facts:
Servando Franco and Leticia Medel obtained a loan from Veronica R. Gonzales who was
engaged in money lending business under the name Gonzales Credit Enterprises. A
promissory note was executed to evidence the loan, which will mature on January 7,
1986.
Servando and Leticia obtained another loan from Veronica and executed another
promissory note to evidence the loan which will mature on January 19, 1986.
Upon maturity, the borrowers failed to pay their indebtedness. However, Servando and
Leticia still obtained another loan from Veronica, which was secured by a real estate
mortgage over a property belonging to Leticia Makalintal Yaptinchay, who issued a SPA
in favor of Leticia Medel, authorizing her to execute the mortgage.
Servando and Medel failed to pay the third loan on maturity. Then, Servando and Leticia
with the latters husband, Dr. Rafael Medel, consolidated all their previous unpaid loans
and sought from Veronica another loan evidenced by a promissory note. Upon maturity,
the borrowers again failed to pay the indebtedness plus interests and penalties.
Veronica Gonzales, joined by her husband Danilo G. Gonzales, then filed a complaint
with the RTC for collection of the full amount of the loan including interests and
charges.

Issue:
Whether or not the interest rate stipulated is valid.

Held:
The court found that the petition was meritorious. The court reversed and set aside the
decision of the Court of Appeals, reviving and affirming the decision of the lower court. We
agree with petitioners that the stipulated rate of interest at 5.5% per month on the
P500,000.00 loan is excessive, iniquitous, unconscionable and exorbitant. However, we can not
consider the rate "usurious" because this Court has consistently held that Circulr No. 905 of the
Central Bank, adopted on December 22, 1982, has expressly removed the interest ceilings
prescribed by the Usury Law and that the Usury Law is now "legally inexistent".

Nevertheless, we find the interest at 5.5% per month, or 66% per annum, stipulated upon by
the parties in the promissory note iniquitous or unconscionable, and, hence, contrary to morals
("contra bonos mores"), if not against the law. The stipulation is void. The courts shall reduce
equitably liquidated damages, whether intended as an indemnity or a penalty if they are
iniquitous or unconscionable. Consequently, the Court of Appeals erred in upholding the
stipulation of the parties. Rather, we agree with the trial court that, under the circumstances,
interest at 12% per annum, and an additional 1% a month penalty charge as liquidated
damages may be more reasonable.

Pacita F. Reformina vs The Honorable Valeriano P. Tomol
G.R. No. L-59096

Facts:

On June 7, 1972, the Court of First Instance of Cebu, rendered a judgment as follows:
Ordering defendants and third party plaintiffs Shell and Michael, Incorporated to pay
jointly and severally the following persons:
(g) Plaintiffs Pacita F. Reformina and Francisco Reformina the sum of
P131,084.00 which is the value of the boat F B Pacita Ill together with its
accessories, fishing gear and equipment minus P80,000.00 which is the value of
the insurance recovered and the amount of P10,000.00 a month as the
estimated monthly loss suffered by them as a result of the fire of May 6, 1969 up
to the time they are actually paid or already the total sum of P370,000.00 as of
June 4, 1972 with legal interest from the filing of the complaint until paid and to
pay attorney's fees of P5,000.00 with costs against defendants and third party
plaintiffs.
On appeal, the trial courts judgment was modified as follows:
Shell Refining Co. (Phils.), Inc. and Michael, Incorporated are hereby ordered to
pay ... The two (2) defendants- appellants are also directed to pay P100,000.00
with legal interests from the filing of the complaint until paid as compensatory
and moral damages and P41,000.00 compensation for the value of the lost boat
with legal interest from the filing of the complaint until fully paid to Pacita F.
Reformina and the heirs of Francisco Reformina.
The decision, having become final, was remanded to the lower court for execution.
Petitioners claim that the legal interest to be executed should be at the rate of 12% per
annum invoking in support Central Bank of the Philippines Circular No. 416. Private
respondents on the other hand, insist that legal interest be at the rate of 6% per annum
pursuant to Article 2209 of the New Civil Code in relation to Articles 2210 and 2211
thereof. The petition is devoid of merit and dismissed.

Issue:
Whether or not the legal interest should be at 6%.

Held:
In the case at bar, the decision herein sought to be executed is one rendered in an Action for
Damages for injury to persons and loss of property and does not involve any loan, much less
forbearances of any money, goods or credits. As correctly argued by the private respondents,
the law applicable to the said case is Article 2209 of the New Civil Code which reads Art.
2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in
delay, the indemnity for damages, there being no stipulation to the contrary, shall be the
payment of interest agreed upon, and in the absence of stipulation, the legal interest which is
six percent per annum.
Sonny Lo vs KJS Eco-Formwork System Phil., Inc.
G.R. No. 149420

Facts:
Petitioner ordered scaffolding equipments from respondent, paying respondent a down
payment with the balance payable in ten monthly instalments.
Respondent delivered scaffoldings to petitioner. Petitioner was able to pay first two
monthly installments. However, he encountered financial difficulties and was unable to
settle his obligation despite oral and written demands.
Petitioner and respondent executed a Deed of Assignment whereby petitioner assigned
to respondent his receivables from Jomero Realty Corporation. Respondent tried to
collect from Jomero Realty Corporation but the latter refused to honor the Deed of
Assignment claiming that the petitioner was also indebted to it.
Respondent sent a letter to petitioner demanding payment, but petitioner refused to
pay claiming that his obligation had been extinguished when the Deed of Assignment
was executed.
Respondent filed an action for recovery of the sum of money against petitioner before
the RTC of Makati. The trial court dismissed the complaint on the ground that the
assignment of credit extinguished the obligation.
Respondent appealed to the Court of Appeals. The CA rendered a decision finding merit
in the appeal, reversed the appealed Decision and enters judgment ordering Sonny Lo to
pay KJS Eco-Formwork System Phils., Inc.

Issues:
Whether or not the CA erred in holding that the Deed of Assignment was null and void.

Held:
An assignment of credit is an agreement by virtue of which the owner of a credit, known as the
assignor, by a legal cause, such as sale, dacion en pago, exchange or donation, and without the
consent of the debtor, transfers his credit and accessory rights to another, known as the
assignee, who acquires the power to enforce it to the same extent as the assignor could
enforce it against the debtor. In dacion en pago, as a special mode of payment, the debtor
offers another thing to the creditor who accepts it as equivalent of payment of an outstanding
debt. In order that there be a valid dation in payment, the following are the requisites: (1)
There must be the performance of the prestation in lieu of payment (animo solvendi) which
may consist in the delivery of a corporeal thing or a real right or a credit against the third
person; (2) There must be some difference between the prestation due and that which is given
in substitution (aliud pro alio); (3) There must be an agreement between the creditor and
debtor that the obligation is immediately extinguished by reason of the performance of a
prestation different from that due. Furthermore, we find that petitioner breached his
obligation under the Deed of Assignment. by warranting the existence of the credit, petitioner
should be deemed to have ensured the performance thereof in case the same is later found to
be inexistent. He should be held liable to pay to respondent the amount of his indebtedness
Philippine National Bank vs Court of Appeals and Loreto Tan
G.R. No. 108630

Facts:
Loreto Tan owns a parcel of land abutting the national highway in Bacolod City.
Expropriation proceedings were instituted by the government against Tan and other
property owners. Tan filed a motion requesting issuance of an order for the release to
him of the expropriation price of P32,480.00.
Petitioner, through its Assistant Branch Manager Juan Tagamolila, issued a check for the
said amount and delivered the same to one Sonia Gonzaga without Tans knowledge,
consent or authority. She then deposited it in her account with Far East Bank and Trust
Co. (FEBTC) and later on withdrew the same.
Tan subsequently demanded payment from petitioner, but the same refused on the
grounds that they had already paid and delivered the said amount to Sonia Gonzaga on
the strength of a Special Power of Attorney allegedly executer in her favor by Tan.
Tan executed an affidavit before the petitioners lawyer stating that he had never
executed and SPA in favor of Sonia Gonzaga. Petitioner then filed an opposition that
Sonia Gonzaga presented a copy of the May 28, 1978 order and a SPA. The matter was
heard, and upon direction of the court to petitioner to produce the said SPA, the
petitioner failed to do so.
The trial court rendered judgment ordering petitioner and Tagamolila to pay the private
respondent jointly and severally the said amount with legal interest, damages and
attorneys fees. Both petitioner and Tagamolila appealed the case to the Court of
Appeals who dismissed the appeal of Tagamolila for failure to pay the docket fee and
affirmed the decision of the trial court against petitioner, with modifications.

Issue:
Whether or not the existence of the SPA need to be proved to release PNB from payment of the
amount due to Loreto Tan.

Held:
When the court ordered petitioner to pay private respondent the amount of P3 2,480.00, it had
the obligation to deliver the same to him. Under Art. 1233 of the Civil Code, a debt shall not be
understood to have been paid unless the thing or service in which the obligation consists has
been completely delivered or rendered, as the case may be.

The burden of proof of such payment lies with the debtor. In the instant case, neither the SPA
nor the check issued by petitioner was ever presented in court Section 2, Rule 130 of the Rules
of Court states that: SEC. 2. Original writing must be produced; exceptions. - There can be no
evidence of a writing the contents of which is the subject of inquiry, other than the original
writing itself, except in the following cases: (a) When the original has been lost, destroyed, or
cannot be produced in court; (b) When the original is in the possession of the party against
whom the evidence is offered, and the latter fails to produce it after reasonable notice; (c)
When the original is a record or other document in the custody of a public officer; (d) When the
original has been recorded in an existing record a certified copy of which is made evidence by
law; (e) When the original consists of numerous accounts or other documents which cannot be
examined in court without great loss of time and the fact sought to be established from them is
only the general result of the whole.

Considering that the contents of the SPA are also in issue here, the best evidence rule applies.
Hence, only the original document (which has not been presented at all) is the best evidence of
the fact as to whether or not private respondent indeed authorized Sonia Gonzaga to receive
the check from petitioner. In the absence of such document, petitioners arguments regarding
due payment must fail.




























Cathay Pacific Airways, Ltd. Vs Spouses Daniel Vazquez and Maria
Luisa Madrigal Vazquez
G.R. No. 150843

Facts:
Cathay, a common carrier of passengers and goods by air, as part of its marketing
strategy accords its frequent flyers membership in its Marco Polo Club. The members
enjoy several privileges, such as priority for upgrading of booking without any extra cost
when an opportunity arises.
Respondent spouses are frequent flyers of Cathay and are Gold Card members of its
Marco Polo Club. Along with their maid and two friends, they went to Hongkong for
pleasure and Business.
On their return flight to Manila on 28 September 1996, Dr. Vazquez presented his
boarding pass to the ground stewardess and upon inserting it into an electronic
machine, saw a message that there was a seat change from Business Class to First
Class for the Vazquezes.
Ms. Chiu, the ground attendant, approached Dr. Vazquez and informed him of the
upgrade but the latter refused, reasoning that it would not look nice for their guests and
moreover, they were going to discuss business matters during the flight. Taken aback by
his refusal, Ms. Chiu consulted with her supervisor and was advised to handle the
situation and convince the Vazquezes to accept the upgrading. Eventually, Dr. Vazquez
gave in and he and Mrs. Vazquez then proceeded to the First Class Cabin.

Issue:
Whether or not Cathay breached its contract of carriage with the Vazquezes by upgrading seat
accommodation.

Held:
A contract is a meeting of minds between two persons whereby one agrees to give something
or render some service to another for a consideration. There is no contract unless the following
requisites concur: (1) consent of the contracting parties; (2) an object certain which is the
subject of the contract; and (3) the cause of the obligation which is established.

Breach of contract is defined as the failure without legal reason to comply with the terms of a
contract. In this case, we have ruled that the breach of contract of carriage, which consisted in
the involuntary upgrading of the Vazquezes seat accommodation, was not attended by fraud
or bad faith. The Court of Appeals award of moral damages has, therefore, no leg to stand on.
The deletion of the award for exemplary damages by the Court of Appeals is correct. The most
that can be adjudged in favor of the Vazquezes for Cathays breach of contract is an award for
nominal damages under Article 2221 of the Civil Code, which reads as follows: Nominal
damages are adjudicated in order that a right of the plaintiff, which has been violated or
invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.
Citibank, N.A. and Investors Finance Corporation vs Modesta R.
Sabeniano
G.R. No. 156132

Facts:
Citibank is a banking corporation duly authorized to do commercial banking activities
and perfoem trust functions in the Philippines. Investors Finance Corporation, which did
business under the name and style of FNCB Finance, was an affiliate company of
petitioner Citibank, specifically handling money market placements for its clients.
Sabeniano was a client of both Citibank and FNCB Finance.
Respondent filed a complaint against petitioners claiming that she has substantial
deposits with them, the proceeds of which were supposedly transferred automatically
and directly to her account with Citibank and that allegedly petitioner refused to so
despite demands.
Petitioner alleged that respondent has several loans from Citibank and by default, it
exercised its right to set-off respondents outstanding loans with her deposits and
money. Trial court declared the said act of petitioner illegal, and null and void and
ordered the petitioner to return the amount plus interest. On the other hand, trial court
ordered respondent to pay Citibank her debt.
The Court of Appeals affirmed the trial courts decision entirely in favor of the
respondent.

Issue:
Whether or not compensation was warranted with regard to loan and deposit account.

Held:
Article 1278 states that Compensation shall take place when two persons, intheir own right,
are creditors and debtors of each other. And in order for that compensation to be proper, it is
necessary: (1) that each one of the obligors be bound principally, and that he be at the same
time a principal creditor of the other, (2) That both debts consists in a sum of money, or if the
things due are consumable, they be of the same kind, and also of the same quality if the latter
has been stated, (3) That the two debts are due, (4) That they be liquidated and demandable,
and (5) That neither of them there be any retention or controversy, commenced by third
persons and communicated in due time to the debtor.

Thus, the petition is partly granted with modification. Citibank is ordered to return to the
respondent the principal amount and was ordered to refund the remittance from respondents
Citibank-Geneva account since such remittance was declared illegal, and null and void, using
the Philippine currency or its equivalent based on the exchange rate at the time of payment.
Citibank was also ordered to pay respondent moral damages, exemplary damages and
attorneys fees. Respondent was ordered to pay petitioner the balance of her outstanding loans
and interest.

Telengtan Brothers & Sons, INC. vs. United States Lines
G.R. No. 132284

Facts:
United States Lines (US Lines) filed a case against Telengtan seeking payment for
demurrage charges plus interest and damages for their failure to collect their goods
from the container vans of US Lines within the 10-day free period.
Telengtan contends that it did not enter into an agreement with US Lines for payment of
demurrage and that US Lines did not make any demand for the payment thereof, and
that it presented Bills of Lading B/L for the delivery of their goods wherein it was then
found out that US Lines has removed such products from the container vans and has
placed them in a warehouse without Telengtans approval.
The Trial court and the CA ruled in US Lines favor ordering Telengtan to pay the former
the demurrage charges.
Telengtan now contends that their agreement with US Lines requires the latter to
deliver the shipped goods to the formers facilities and that the latter is liable for
damages for placing said goods in a warehouse.
Telengtan also contends that the payment of demurrage shall be recomputed for
inflation based on Article 1250 of the civil code.

Issues:
1. Whether or not it is US Lines who is at fault for storing the goods at a warehouse.
2. Whether or not a recomputation of the demurrage charges and its interest shall be made in
light of inflation as Article 1250 of the civil code provides.

Held:
1. Based on the records it shows that in previous business dealings Telengtan has in fact been
paying demurrage charges to US Lines and thus is now estopped from claiming that it has no
obligation to pay the latter.
In the matter of the goods being transferred to a warehouse, said transfer was authorized by
the Bureau of Customs based on the B/L states in its Section 17 that Also if the consignee does
not take possession or delivery of the goods as soon as the goods are at the disposal of the
consignee for removal, the goods shall be at their own risk and expense, delivery shall be
considered complete and the carrier may, subject to carrier's liens, send the goods to store,
warehouse, put them on lighters or other craft, put them in possession of authorities, dump,
permit to lie where landed or otherwise dispose of them, always at the risk and expense of the
goods, and the shipper and consignee shall pay and indemnify the carrier for any loss, damage,
fine, charge or expense whatsoever suffered or incurred in so dealing with or disposing of the
goods, or by reason of the consignee's failure or delay in taking possession and delivery as
provided herein. The shipper is the consignor and the person to whom the delivery to be made
is the consignee. Thus, US Lines was justified in transferring said goods to the warehouse.

2. Article 1250 of the Civil Code states: In case an extraordinary inflation or deflation of the
currency stipulated should supervene, the value of the currency at the time of the
establishment of the obligation shall be the basis of payment, unless there is an agreement to
the contrary.Extraordinary inflation or deflation, as the case may be, exists when there is an
unusual increase or decrease in the purchasing power of the Philippine peso which is beyond
the common fluctuation in the value of said currency, and such increase or decrease could not
have been reasonably foreseen or was manifestly beyond the contemplation of the parties at
the time of the establishment of the obligation. And while the Court may take judicial notice of
the decline in the purchasing power of the Philippine currency in that span of time, such
downward trend of the peso cannot be considered as the extraordinary phenomenon
contemplated by Article 1250 of the Civil Code. Furthermore, absent an official pronouncement
or declaration by competent authorities of the existence of extraordinary inflation during a
given period, as here, the effects of extraordinary inflation, if that be the case, are not to be
applied.





















C.F. Sharp & Co., Inc. vs Northwest Airlines, Inc.
G.R. No. 133498

Facts:
Petitioner was authorized sale and dispensing of tickets of Northwest Airlines -
Japan, but subsequently failed to remit the proceeds of such sales. Failure of
remittance prompted NWA to file suit against petitioner in Tokyo and judgment
was rendered that petitioner should pay and found judgement in the favor of
respondent. Thereafter, the RTC issued a writ of execution for foreign courts
decision.
The petitioner,filed for certiorari, attesting that it has already made partial
payments to respondent. The CA lowered the payable amount and held that the
amount may be paid in local currency at rate prevailing at time of payment.

Issue:
What conversion rate will be the basis of the amount payable in local currency.

Held:
Under RA 529, satisfaction of obligations in foreign currency are void. Payments of
monetary obligations, subject to certain exceptions, shall be payed in the currency which is
the legal tender of the Philippines. But since the law doesn't provide for the rate of exchange
for the payment of foreign currency obligations incurred after its enactment,
jurisprudence held that the exchange rate should be the prevailing rate at time of
payment. Amendment of this law allows payments for obligations to be made in currency
other than Philippine currency but again failed to state what exchange rate should be used.
This being the case, the use of the exchange rate at time of payment shall be used.









Albert R. Padilla vs Spouses Floresco Paredes and Adelina Paredes G.R.
No. 124874

Facts:
Petitioner Albert R. Padilla and private respondents Floresco and Adelina Paredes
entered into a contract to sell a parcel of land. Under the contract, petitioner undertook
to secure title of the property in private respondents names. Upon signing of the
contract, the petitioner was to pay P50,000.00 downpayment, and the balance was due
within ten days from the issuance of a court order declaring issuance of a decree of
registration for the property.
The court ordered the issuance of land registration for the subject property. Private
respondents then demanded the payment of the balance of the purchase price as per
agreement but petitioner failed to pay the full purchase price even after the expiration
of the period set.
Petitioner was still unable to pay the full purchase price of the property despite demand
from counsel of private respondents. Private respondents then offered the petitioner
one-half of the property for all the payments the petitioner has made, instead of
rescinding the contract. If the proposal is not agreed upon, they would take steps to
enforce the automatic rescission of the contract.
Petitioner did not accept the proposal but instead offered to pay the balance in full for
the entire property, plus interest and attorneys fees which the respondents refused.
The lower court ruled in favor of the petitioner, saying that the breach of contract by
the petitioner was only casual and slight and did not warrant the rescission of the
contract. Acceptance of the installments made by petitioner to private respondents,
modified the contract. Acceptance of delayed payments stopped private respondents
from exercising their right of rescission.
Upon appeal, the Court of Appeals ruled that private respondents are entitled to
rescission under Article 1191 of the Civil Code, but with the obligation to return to
petitioner the payments the latter had made.

Issue:
Whether or not the private respondents are entitled to rescind their contract to sell.

Held:
Private respondents may validly cancel the contract to sell their land to petitioner. However,
the reason for this is not that private respondents have the power to rescind such contract, but
because their obligation thereunder did not arise. Article 1191 of the Civil Code, on rescission, is
inapplicable in the present case. This is apparent from the text of the article itself: "Art. 1191.
The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should
not comply with what is incumbent upon him. The injured party may choose between the
fulfillment and the rescission of the obligation, with the payment of damages in either case. He
may also seek rescission, even after he has chosen fulfillment, if the latter should become
impossible. The court shall decree the rescission claimed, unless there be just cause authorizing
the fixing of a period. This is understood to be without prejudice to the rights of third persons
who have acquired the thing, in accordance with articles 1385 and 1388 and the Mortgage
Law." Article 1191 speaks of obligations already existing, which may be rescinded in case one of
the obligors fails to comply with what is incumbent upon him. However, in the present case,
there is still no obligation to convey title of the land on the part of private respondents. There
can be no rescission of an obligation that is non-existent, considering that the suspensive
condition therefore has not yet happened.

The Court of Appeals is correct in ordering the return to petitioner of the amounts received
from him by private respondents, on the principle that no one may unjustly enrich himself at
the expense of another.































Norberto Tibajia, Jr. and Armen Tibajia vs Court of Appeals
G.R. No. 100290

Facts:
Eden Tan filed a suit for collection of a sum of money against the petitioners. The RTC
rendered its decision in favour of Eden Tan ordering the Tibajia spouses to pay her an
amount in excess of P300,000.00.
On appeal, the Court of Appeals modified the decision by reducing the award of moral
and exemplary damages. Since the decision is already final, Eden Tan filed the
corresponding motion for execution and thereafter.
The Tibajia spouses, on Deccember 14, 1990, delivered to Deputy Sheriff Eduardo
Bolima in total money the judgment in the form of a cashiers check and cash. Private
respondent refused to accept the payment and insisted that the garnished funds
deposited with the cashier of the RTC of Pasig be withdrawn to satisfy judgment
obligation.
Spouses filed a motion to lift the writ of execution on the ground that judgment debt
had already been paid. The motion was denies by the trial court on the ground that
payment in cashiers check is not legal tender and that payment was made by a third
party. On appeal, the CA dismissed the petition holding that payment by cashiers check
is not legal tender as required by Republic Act No. 529. Motion for Consideration was
subsequently denied.

Issue:
Whether or not cashiers check is legal tender.

Held:
Article 1249 of the Civil Code which provides:
Art. 1249. The payment of debts in money shall be made in the currency stipulated, and if it is not
possible to deliver such currency, then in the currency which is legal tender in the Philippines. The
delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall
produce the effect of payment only when they have been cashed, or when through the fault of the
creditor they have been impaired. In the meantime, the action derived from the original obligation shall
be held in abeyance.; Section 1 of Republic Act No. 529, as amended, which provides: Sec. 1. Every
provision contained in, or made with respect to, any obligation which purports to give the obligee the
right to require payment in gold or in any particular kind of coin or currency other than Philippine
currency or in an amount of money of the Philippines measured thereby, shall be as it is hereby declared
against public policy null and void, and of no effect, and no such provision shall be contained in, or made
with respect to, any obligation thereafter incurred. Section 63 of Republic Act No. 265, as amended
(Central Bank Act) which provides: Sec. 63. Legal character Checks representing deposit money do
not have legal tender power and their acceptance in the payment of debts, both public and private, is at
the option of the creditor: Provided, however, that a check which has been cleared and credited to the
account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the
amount credited to his account.


Development Bank of the Philippines vs Court of Appeals
G.R. No. 138703

Facts:
The Development Bank of the Philippines granted to respondents Philippine United
Foundry and Machineries Corporation and Philippine Iron Manufacturing Company, Inc.
an industrial loan in cash and DBP Progress Bonds which was evidenced by a promissory
note and secured by a mortgage executed by respondents over their present and future
properties.
DBP granted to respondents another loan in the form of a five-year revolving guarantee
which was reflected in the amended mortgage contract. According to respondents, the
loan guarantee was extended to them when they encountered difficulty in negotiating
the DBP Progress Bonds.
The outstanding accounts of the respondents were restructured in view of their failure
to pay. The outstanding principal balance of the loans and advances were consolidated
into a single account which was evidenced by a new promissory note and payable within
seven years, wit partial payments on the principal to be made beginning on the third
year plus an interest per annum payable every month.
All accrued interest and charges due were denominated as Notes Taken for Interests
and evidenced by a separate promissory note.
Respondents were still unable to comply with the terms and conditions of the new
promissory notes and requested DBP to refinance the matured obligation. The request
was granted, pursuant to which three foreign currency denominated loans sourced from
DBPs own foreign borrowings were extended to respondents on various dates. These
loans were secured by mortgages and were evidenced by promissory notes.
Respondents claim that DBP was collecting from them an unconscionable if not unlawful
or usurious obligation since they have remitted to DBP money to repay their original
debt. They also asserted that since loans were procured for the Self-Reliant Defense
Posture Program of the Armed Forces of the Philippines, the latters breach of its
commitment to purchase military armaments and equipment from respondents amount
to a failure of consideration that would justify the annulment of the mortgage on their
properties.
Regional Trial Court issued a temporary restraining order. Subsequently, a Writ of
Preliminary Injunction was issued and the court rendered decision in favor of the
respondents. Upon appeal by the DBP and PMO, the appellate court affirmed the
decision of the RTC.


Issue:
Whether or not the prestation to collect by petitioner is usurious.

Issue:
In usurious loans, the entire obligation does not become void due to an agreement for usurious
interest; the unpaid principal debt still stands and remains valid but the stipulation as to
interest is void. The debt is then considered without stipulation as to the interest. The absence
of an express stipulation as to interest rate, imposes that the legal rate of 12% per annum shall
be applied.

Determination whether the DBP applied an interest rate higher than what is prescribed cannot
be done. With the assumption that it exceeded the 12% in addition to the other penalties
imposed, should be removed for being usurious.

The petition is partly granted. The case is remanded to the trial court for determination of the
amount of respondents obligation based on the promissory notes, according to the interest
rate agreed upon on the interest rate of 12% per annum, whichever is lower.















Vitarich Corporation vs. Chona Losin
G.R. No. 181560

Facts:
ChonaLosin operates a fastfood and catering business and Vitarich Corporation is her supplier of
poultry meat.
ChonaLosin was serviced by Rodrigo Directo(Directo) and Allan Rosa (Rosa), both salesmen and
authorized collectors of Vitarich, and Arnold Baybay(Baybay), a supervisor of said corporation.
When the three aforementioned employees of Vitarich left the company they failed to also turn
over pertinent invoices covering Losins account.
Vitarich then sent Losin demand letters covering her alleged unpaid account amounting to
P921,083.10.
Because of said demands, she checked her records and discovered that she had an overpayment
to Vitarich in the amount of P500,000.00. She relayed this fact to Vitarich and further informed
the latter that checks were issued and the same were collected by Directo.
Losin had three checks which were dishonoured amounting to P288,463.30 either for the reason
of Drawn Against Insufficient Funds (DAIF) or a Stop Payment Order (SPO).
Vitarich then filed a collection of money suit against Losin where the Trial court ruled in favour
of Vitarich basing their decision on the fact of the three checks that were dishonoured.
The CA however, reversed the decision and based their decision on Article 1921 of the civil code
which provides that Art. 1921. If the agency has been entrusted for the purpose of contracting
with specified persons, its revocation shall not prejudice the latter if they were not given notice
thereof, also stating that indeed Directo, Rosa, and Baybay were agents of Vitarich in
accordance with the provisions of the civil code.
Vitarich now brings the issue to the SC stating that the CA has erred in appreciating the facts of
the case by contradicting the findings and rulings of the trial court.

Issue:
Whether or not the CA erred in appreciating that facts of the case by reversing the decision of
the trial court.

Held:
The general rule is that the SC shall not disturb the factual findings of the lower courts as they
are more inclined to test the credibility of the witnesses and evidence presented, however
there are exceptions that is: (1) when the findings are grounded entirely on speculations,
surmises, or conjectures; (2) when the inference made is manifestly mistaken, absurd, or
impossible; (3) when there is a grave abuse of discretion; (4) when the judgment is based on
misappreciation of facts; (5) when the findings of fact are conflicting; (6) when in making its
findings, the same are contrary to the admissions of both appellant and appellee; (7) when the
findings are contrary to those of the trial court; (8) when the findings are conclusions without
citation of specific evidence on which they are based; (9) when the facts set forth in the petition
as well as in the petitioners main and reply briefs are not disputed by the respondent; and (10)
when the findings of fact are premised on the supposed absence of evidence and contradicted
by the evidence on record. The 7
th
exception is pertinent to this case.

The CA erred in holding that Losin is not liable to pay the amount due to Vitarich. As a general
rule, one who pleads payment has the burden of proving it. In Jimenez v. NLRC, the Court ruled
that the burden rests on the debtor to prove payment, rather than on the creditor to prove
non-payment. The debtor has the burden of showing with legal certainty that the obligation has
been discharged by payment.
True, the law requires in civil cases that the party who alleges a fact has the burden of proving
it. Section 1, Rule 131 of the Rules of Court provides that the burden of proof is the duty of a
party to prove the truth of his claim or defense, or any fact in issue by the amount of evidence
required by law. In this case, however, the burden of proof is on Losin because she alleges an
affirmative defense, namely, payment. Losin failed to discharge that burden.
After examination of the evidence presented, this Court is of the opinion that Losin failed to
present a single official receipt to prove payment. This is contrary to the well-settled rule that a
receipt, which is a written and signed acknowledgment that money and goods have been
delivered, is the best evidence of the fact of payment although not exclusive. All she presented
were copies of the list of checks allegedly issued to Vitarich through its agent Directo, a
Statement of Payments Made to Vitarich, and apparently copies of the pertinent history of her
checking account with Rizal Commercial BankingCorporation (RCBC). At best, these may only
serve as documentary records of her business dealings with Vitarich to keep track of the
payments made but these are not enough to prove payment.

Furthermore, Inasmuch as the case at bar involves an obligation not arising from a loan or
forbearance of money, but consists in the payment of a sum of money, the legal rate of interest
is 6% per annum of the amount demanded.













Metropolitan Bank and Trust Company vs Renato D. Cabilzo
G.R. No. 154469

Facts:
Metropolitan Bank and Trust Company (Metrobank) is a banking institution duly
organized and existing as such under Philippine laws. Renato D. Cabilzo is one of
Metrobanks clients who maintained a current account with Metrobank Pasong Tamo
Branch.
Cabilzo issued a post dated check dated November 24, 1994 payable to CASH in the
amount of P1,000.00 and was paid by Mr. Cabilzo to a certain Mr. Marquez as his sales
commission.The check was presented to Westmont Bank for payment. In turn, the
check was endorsed to Metrobank for appropriate clearing. After proper examination of
entries, including availability of funds and authenticity of signatures, Metrobank cleared
the check for encashment in accordance with the Philippine Clearing House Corporation
(PCHC) Rules.
On November 16, 1994, Cabilzos representative was at the Pasong Tamo Branch of
Metrobank when he was asked by a bank personnel if Cabilzo had issued a check for
P91,000.00 to which the representative replied in the negative. That same day, Cabilzo
called Metrobank to reiterate that he did not issue a check in that amount and
requested that the check in question be returned to him fore verification. Upon receipt
of the check, he discovered that the check number was issues on November 12, 1994 in
the amount of P1,000.00 and was altered to P91,000.00 and the date changed to
November 14, 1994.
Cabilzo demanded that Metrobank re0credit the amount of P91,000.00 t his account.
Metrobank refused reasoning tha the matter will be referred first to its Legal Division.
Failure or refusal of Metrobank to comply with its obligation after demand compelled
Cabilzo to file a civil action before the RTC, who rendered a decision in favor of Cabilzo.
Metrobank filed an appeal with the Court of Appeals but the latter affirmed with
modifications the ruling of the lower court. Further motions for reconsideration was
also denied by the appellate court.

Issue:
Whether or not Metrobank should be held liable for its negligence.

Held:
An alteration is said to be material if it changes the effect of the instrument. It means that an
unauthorized change in an instrument that purports to modify in any respect the obligation of a
party or an unauthorized addition of words or numbers or other change to an incomplete
instrument relating to the obligation of a party. In other words, a material alteration is one
which changes the items which are required to be stated under Section 1 of the Negotiable
Instruments Law. Section 1 of the Negotiable Instruments Law provides: Section 1. Form of
negotiable instruments. - An instrument to be negotiable must conform to the following
requirements: (a) It must be in writing and signed by the maker or drawer; (b) Must contain an
unconditional promise or order to pay a sum certain in money; (c) Must be payable on demand
or at a fixed determinable future time; (d) Must be payable to order or to bearer; and (e)
Where the instrument is addressed to a drawee, he must be named or otherwise indicated
therein with reasonable certainty.

Now, having laid the premise that the present petition is a case of material alteration, it is now
necessary for us to determine the effect of a materially altered instrument, as well as the rights
and obligations of the parties thereunder. The following provision of the Negotiable Instrument
Law will shed us some light in threshing out this issue: Section 124. Alteration of instrument;
effect of. Where a negotiable instrument is materially altered without the assent of all parties
liable thereon, it is avoided, except as against a party who has himself made, authorized, and
assented to the alteration and subsequent indorsers. But when the instrument has been
materially altered and is in the hands of a holder in due course not a party to the alteration, he
may enforce the payment thereof according to its original tenor.

In the present case, it is obvious that Metrobank was remiss in that duty and violated that
relationship. As observed by the Court of Appeals, there are material alterations on the check
that are visible to the naked eye. The decision of the Court of Appeals are affirmed with
modification.
















Almeda vs Bathala Marketing
G.R. No. 150806

Facts:
In May 1997, respondent Bathala Marketing Industries, Inc. (lessee), represented by its
president Ramon H. Garcia, entered into a contract of lease with Ponciano L. Almeda
(Ponciano), as lessor, husband of petitioner Eufemia and father of petitioner Romel
Almeda. Provisions of the contract of lease include:
6th Rental rate stipulated is based on the present rate of assessment of the
property, and that in case the assessment should hereafter be increased or any
new tax, charge, or burden be imposed by authorities on the lot and building
where the premises are located, LESSEE shall pay, when the rental becomes due,
the additional rental or charge corresponding to the portion leased; provided,
however, that in the event that the present assessment or tax on the property
be reduced, LESSEE shall be entitled to reduction in the stipulated rental on
proportion to the portion leased by him.
7th - In case of supervening extraordinary inflation or devaluation of Philippine
Currency, the value of Philippine peso at the time of the establishment of the
obligation shall be the basis of payment

Petitioners later demanded payment of VAT and 73% adjusted rentals pursuant to the
foregoing provisions. Respondent refused and filed an action for declaratory relief.
Petitioners filed an action for ejectment.

Issue:
Whether the amount of rentals due the petitioners should be adjusted by reason of
extraordinary inflation or devaluation.

Held:
Petitioners insist that respondent was already in breach of the contract when the petition was
filed, thus, respondent is barred from filing an action for declaratory relief. However, after
petitioners demanded payment of adjusted rentals and in the months that followed,
respondent complied with the terms and conditions set forth in their contract of lease by
paying the rentals stipulated therein. Respondent religiously fulfilled its obligations to
petitioners even during the pendency of the present suit. There is no showing that respondent
committed an act constituting a breach of the subject contract of lease. Thus, respondent is not
barred from instituting before the trial court the petition for declaratory relief.

Petitioners further claim that the instant petition is not proper because a separate action for
rescission, ejectment and damages had been commenced before another court; thus, the
construction of the subject contractual provisions should be ventilated in the same forum.

As a rule, the petition for declaratory relief should be dismissed in view of the pendency of a
separate action for unlawful detainer. In this case, however, the trial court had not yet resolved
the rescission/ejectment case during the pendency of the declaratory relief petition. In fact, the
trial court, where the rescission case was on appeal, initiated the suspension of the proceedings
pending the resolution of the action for declaratory relief.

As to the liability of respondent for the payment of VAT, petitioners are stopped from shifting to
respondent the burden of paying the VAT.

The petitioners reliance on the sixth condition of the contract is unavailing. This provision
clearly states that respondent can only be held liable for new taxes imposed after the
effectivity of the contract of lease, that is, after May 1997, and only if they pertain to the lot and
the building where the leased premises are located. Considering that RA 7716 took effect in
1994, the VAT cannot be considered as a new tax in May 1997, as to fall within the coverage
of the sixth stipulation.

Neither can petitioners legitimately demand rental adjustment because of extraordinary
inflation or devaluation. The factual circumstances obtaining in the present case do not make
out a case of extraordinary inflation or devaluation as would justify the application of Article 1250 of
the Civil Code.














Simplicio A. Palanca vs Ulyssis Guides
G.R. No. 146365

Facts:
Simplicio Palance executed a Contract to Sell a parcel of land on installment with Josefa
A. Jopson. Jopson then assigned and transferred all her rights and interests over the
property in question in favor of the respondent Ulyssis Guides.
Believing that she had fully paid her obligation, respondent verified the status of the lot
with the Register of Deeds, only to find out that the title was not in the name of the
petitioner as it was covered by the Transfer Certificate of Title in the name of a certain
Carissa T. de Leon.
A complaint was filed with the trial court and the parties were allowed to make their
cases and show evidence. But at the last scheduled hearing for the case, no one
appeared for the petitioner without any explanation of their non-appearance. The trial
court, upon motion of respondent, considered petitioner to have waived his right to
present evidence and have rested the case and declared the case submitted for
decision.
Petitioner sought reconsideration twice, but was denied both times. The trial court
rendered decision in favor of the plaintiff and against the defendant Simplicio A.
Palanca.
Petitioner claimed that the trial court erred in denying his right to present evidence in
support of his cause. In its decision, the CA held that petitioner was afforded due
process, having been given the opportunity to present and submit evidence in support
of his defense. A Subsequent Motion for Reconsideration was also denied by the CA.

Issue:
Whether or not petitioner was deprived of his right to present evidence.

Held:
Well-settled is the rule that the negligence of counsel binds the client. The Court agrees with
the trial court that notice to Atty. Cario is in fact notice to both petitioner and Atty. Novero in
the light of the recorded fact that Atty. Cario had actively participated in the presentation of
petitioners evidence during the previous proceedings. No clearer proof of notice can be had
than the signature of Atty. Cario assenting to the resetting of the case. Indeed, neither he nor
Atty. Novero can feign ignorance of the said arrangement. The most basic tenet of due process
is the right to be heard. A court denies a party due process if it renders its orders without giving
such party an opportunity to present its evidence. Thus, in the application of this principle,
what is sought to be safeguarded against is not the lack of previous notice, but the denial of the
opportunity to be heard. The question is not whether petitioner succeeded in defending his
interest, but whether he had the opportunity to present his side. Petitioner was provided
opportunities to present his case but these he utterly squandered. The questioned decision and
resolution of the Court of Appeals are affirmed with modification. Petitioner is ordered to
return the overpayment in the amount of P1,527.10 to respondent.
PHILIPPINE COMMERCIAL INTERNATIONAL BANK (formerly INSULAR
BANK OF ASIA AND AMERICA) vs. COURT OF APPEALS
G.R. No. 121413

Facts:
Ford Philippines (Ford) maintained with Citibank a checking account
Ford then issued a check amounting to P 4,746,114.41 for its tax payments for the last
quarter of 1979.
The check was presented to Philippine Commercial International Bank (PCIB) as an
authorized collector of the Bureau of Internal Revenue.
The check was crossed check and named to The BIR.
The amount of the check however was not deposited in favour of the account of BIR
which forced Ford to write a new check of the same amount for payment of the same.
Ford then filed an action for recovery of the sum against Citibank and (PCIB).
It was later discovered that the check and amount was lost due to a syndicate formed by
employees of Ford and PCIB, two more checks, in 1978 and 1979, of Ford were lost this
way amounting to P12,163,298.10.
Citibank contends that Ford was negligent in selecting and supervising their employees
thus had contributory negligence for the loss of the amount.
PCIB contends that Fords right to file the action has prescribed for filing the action only
in 1983.
The trial court found both solidarily liable, while the CA modified the decision stating
that only PCIB is liable.

Issues:
1. Whether or not Citibank and PCIB are solidarily liable for reimbursing Ford.
2. Whether or not Fords right to recover has prescribed.

Held:
1. For the first check it was found that PCIB allowed the Ford to employee to recall such check
and replace it in turn with two of its Managers Checks which allowed the syndicate to encash
the amount even though the check was crossed checked to the name of BIR. When a check is
crossed check it is the duty of the bank to ensure that such check and its proceeds would only
be deposited to the account in which it was intended for, by allowing its substitution to two
Managers Chekcks, PCIB was solely negligent for the loss of the proceeds of the check. Thus,
PCIB is solely liable for the amount of the first check. The subsequent checks, however were
intercepted during the clearing process by the syndicate and replaced with worthless checks.
Citibank has contributed negligence as it failed to ensure that such checks were in fact cleared
and that it broke its trust with Ford for allowing the money of the same to be lost through the
syndicate. PCIB is negligent as it did not ensure that the crossed checks were deposited straight
to the account foe which it was intended, and that it was two of their employees that led to the
checks interception. Thus, Citibank and PCIB are both liable on equal shares for the amount of
the proceeds of the lost two checks.

2. In Philippine law the prescription period for written contracts is ten years. The prescription
period in these cases is counted once the check that has gone through clearing is returned to
the drawer, usually a month later in the bank statements. Since the first check was returned to
Ford on December 29, 1977 and the action was filed on 1983, barely six years have passed.
Thus, the action has not prescribed.

























Jose V. Lagon vs Hooven Comalco Industries, Inc.
G.R. No. 135657

Facts:
Jose V. Lagon, a businessman and owner of a commercial building, and HOOVEN, a
domestic corporation who manufactures and installs aluminium materials entered into
2 contracts, both named Proposal.
HOOVEN agreed to sell and install various aluminium materials in petitioners
commercial building. An advance payment was given by Lagon upon the execution of
the contracts.
Lagon alleged that HOOVEN was in breach of their contract for failure to deliver and
install some of the materials specified in the proposals, thus he was forced to buy the
undelivered materials from other sources. In addition, all material that were delivered
and installed by HOOVEN in his commercial building was paid in full.

Issue:
Whether or not all said materials specified in the contracts had been delivered and installed by
HOOVEN.

Held:
The decision of the Court of Appeals is Modified.

The quantity of materials specified in the contracts and the amounts stated in the delivery
receipts does not tally with those in the invoices covering them, when according to HOOVEN,
the invoices were based on the delivery receipts. The total value of the materials reflected in
the invoices as compared to the delivery receipts has a difference of P4,458.00.
All the delivery receipts did not appear to be signed by petitioner or his duly authorized
representative. A closer examination of the receipts clearly shows that the deliveries were
made to a certain Jose Rubin, the petitioners driver, Armando Lagon, and a bookkeeper. The
identities of these persons were never established and there is now no way of determining
whether they were authorized by the petitioner.

Thus, the petitioner Jose Lagon is ordered to pay HOOVEN Comalco Industries, Inc. the value of
the unpaid materials admittedly delivered to him. On the other hand, HOOVEN is ordered to
pay petitioner moral and actual damages, attorneys fees, and litigation costs.






Audion Electric Co., Inc. vs National Labor Relations Commission
G.R. No. 106648

Facts:
Petitioner seeks the annulment of the resolution of the National Labor Relations
Commission in NLRC NCR-CA dated July 31, 1992, denying petitioners motion for
reconsideration.
Nicolas Madolid, respondent, claims that he was dismissed without justifiable cause and
due process and that his dismissal was done in bad faith which renders the dismissal
illegal. He claims to be entitled to reinstatement with full backwages, and moral and
exemplary damages. The NLRC ruled in favor of Nicolas Madolid.
Petitioner filed an appeal and motion for reconsideration to the National Labor
Relations Commission which were both denied.
Petitioner filed a civil action raising that the respondent commission acted with grave
abuse of discretion in rendering its decision.

Issue:
Whether or not petitioner was denied due process when all money claims of private
respondent were granted

Held:
Private respondents employment status was established by the Certificate of Employment
dated April 10, 1989 issued by petitioner which certified that private respondent is a bonafide
employee of the petitioner from June 30, 1976 up to the time the certification was issued. This
proves that private respondent was regularly and continuously employed by petitioner in
various job assignments from 1976 to 1989, a total of 13 years. The alleged gap in service cited
by the petitioner does not defeat respondents regular status as he was rehired for many more
projects without interruption and performed functions which are vital, necessary and
indispensable to the usual business of the petitioner.

Policy Instruction No. 20 of the Department of Labor is explicit that employers of project
employees are exempted from the clearance requirement but nt from the submission of
termination report. Failure of the employer to file termination reports after every project
completion with the nearest public employment office is an indication that private respondent
was not and is not a project employee. Department Order No. 19 expressly provides that the
repot of termination is one of the indications of project employment.

The rule in our jurisdiction is that findings of facts of the NLRC affirming those of the Labor
Arbiter are entitled to great weight and will not be disturbed if they are supported by
substantial evidence. We find no grave abuse of discretion committed by NLRC in finding that
private respondent was not a project employee.