TABLE OF CONTENTS

Obligations

The Hongkong & Shanghai Banking Corp. vs National Steel (Performance). Pp. 1

Corodan vs China Banking Corporation (Solidary Liability) Pp. 2

Sps. Jonsay and Momarco vs Solidbank (Extinguishment) .. Pp. 3

Contracts

Georg vs Holy Trinity College, Inc (Essential Elements) Pp. 4

Rojales vs Dime (Relativity of Contracts) Pp. 5

PNOC vs Keppel Philippine Holdings, Inc (Option Contract) Pp. 6-7

Century Properties, Inc. vs Babiano (Breach of Contract)Pp. 7-8

Sulpicio Lines, Inc vs. Sesante (Breach of Contract) Pp. 8-10

Victoria, et al. vs Pidlaoan (Simulated Contract) Pp. 10-11

Cathay Pacific Airways Ltd. vs Sps. Fuentebella (Breach of Contract) Pp. 11-12

Heirs of Natividad vs Juana Mauricia-Natividad, et, al (Void Contract)..Pp. 12-13

Tan vs Hosana (Void or Inexistent Contract)Pp. 13-14

Ranara vs Delos Angeles (Void or Inexistend Contracts)..Pp. 14-15

Mercedes Abella , et al. vs Heirs of Francisca San JuanPp. 15

Sales
Thelma Rodriguez vs. Sps. Jaime & Armi Sioson (Contract to Sell).Pp. 16

Oscar Villarta vs Gaudioso Talavera (Equitable Mortgage) Pp. 17

Gregorio vs Culig (Redemption)Pp. 18

Melecio Domingo vs Sps. Genaro & Elena Molina. Pp. 20-21

Equitable Savings Bank vs Rosalinda Paces.Pp. 21

Lease

Heirs of Gamaliel Albano vs Sps. Roberto & Mena Ravanes (Lease Contract) Pp. 22

Agency

Dra. Mercedes Oliver vs PS Bank & Lilia Castro (Contract of Agency).... Pp. 23

MCIAA vs Unchuan (Special Power of Attorney) Pp. 24-26

Partnership

Michael C. Guy vs Atty. Glenn Gacott (General Partnership).. Pp. 26-28

Credit

Tarcisio Calilung vs Paramount Insurance (Simple Loan) Pp. 28-29

Sps. Tan vs China Banking Corp (Application of Payments).. Pp. 29-30

Torts and Damages

Techno Development vs Viking Metal Industries, Inc (Exemplary)... Pp. 31

Sps. Timado vs Rural Bank of San Jose (Exemplary Damages). Pp. 32

Anna Marie Gumabon vs PNB (Moral and Exemplary Damages).. Pp. 33

Torres-Madrid Brokerage vs FEB Mitsui Marine Insurance (Quasi-Delict) Pp. 34

MERALCO vs Spouses Sulpicio & Patricia Ramos (Moral and Actual Damages)
Pp. 35-36

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THE HONGKONG & SHANGHAI BANKING CORPORATION, LIMITED vs.
NATIONAL STEEL CORPORATION & CITY TRUST BANKING CORPORATION
G.R. NO. 183486, February 24, 2016
JARDELEZA, J.

FACTS:
The National Steel Corporation (NSC) and Klockner East Asia Limited
(Klockner) entered into an Export Sales Contract to which NSC sold 1,200 metric
tons of prime cold rolled coilsto Klockner. In securing its payment to NSC, Klockner
applied with HSBC and irrevocable Letter of Credit amounting to 468,000 US dollars
naming NSC as the beneficiary to the Letter of Credit.

HSBC then issued an irrevocable Letter of Credit in favor of NSc governed by

UCP 400 and further stipulated that HSBC has the obligation to NSC upon the
presentment of the documents listed in the Letter of Credit.

There was an amendment on the Letter of Credit and it was done twice. The
first amendment was for the transferring of the terms of the contract from FOB ST
lligan to FOB ST Manila and further increased the amount to $488,000, while the
second amendment was for the delivery date of the prime cold rolled coils.

The prime cold rolled coils were loaded to MV Sea Dragon under China Ocean
Shipping Company with Bill of Lading No. HKG 266001 and the same arrived in
Hong Kong. Thereafter, NSC through City Trust facilitated the collection of its
payment from Klockner by the Letter of Credit issued by HSBC. Thereafter, City Trust
sent HSBC a collection Order as HSBC acknowledged the receipt.

Klockner refused payment neither to give any reason of such refusal. NSC
sent HSBC a demand letter.

ISSUE:
Who among the parties bear the liability to pay the amount stated in the
Letter of Credit?

HELD:
The Court ruled based on the principle of Independence on the law on Letters
of Credit. In this case, HSBC has the obligation as it binds itself both to Klockner and
NSC as it freely and knowingly must perform an act, where its obligation arises from
the two source, First, it has a contractual obligation to Klockner when it agreed to
pay NSC upon the due presentment to it of the LC by City Trust, Second, HSBC has
the obligation to NSC to honor the LC. The obligation of HSBC to pay NSC under the
LC will stand independent even if Klockner refuse to pay.

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ROSALINA CARODAN vs. CHINA BANKING CORPORATION
G.R. No. 210542, February 24, 2016
SERENO, CJ.

FACTS:
A complaint for a sum of money was filed against Corodan, et.al by China
Banking Corporation in relation to the promissory note which they promised to pay
jointly and severally the amount of 2.8 Million pesos. For the security of the loan, a
real estate mortgage was executed and a Surety Agreement in favor of China Bank
was executed. The warranties were made by the principal debtor.
After the petitioners failed to pay their loan from China Bank despite the
demands made this case arise.

ISSUE:
Whether Rosalina is liable jointly and severally with Barbara and Rebbeca for
the payment of the loan obligation?

HELD:

Strictly speaking, guaranty and surety are nearly related, and many of the
principles are common to both. However, under our civil law, they may be
distinguished thus: A surety is usually bound with his principal by the same
instrument, executed at the same time, and on the same consideration. He is an
original promissor and debtor from the beginning, and is held, ordinarily, to know
every default of his principal. Usually, he will not be discharged, either by the mere
indulgence of the creditor to the principal, or by want of notice of the default of the
principal, no matter how much he may be injured thereby. On the other hand, the
contract of guaranty is the guarantor's own separate undertaking, in which the
principal does not join. It is usually entered into before or after that of the principal,
and is often supported on a separate consideration from that supporting the
contract of the principal. The original contract of his principal is not his contract,
and he is not bound to take notice of its non-performance. He is often discharged by
the mere indulgence of the creditor to the principal, and is usually not liable unless
notified of the default of the principal.

Simply put, a surety is distinguished from a guaranty in that a guarantor is

the insurer of the solvency of the debtor and thus binds himself to pay if the
principal is unable to pay while a surety is the insurer of the debt, and he obligates
himself to pay if the principal does not pay.
When Rosalina affixed her signature to the Real Estate Mortgage as mortgagor and
to the Surety Agreement as surety which covered the loan transaction represented
by the Promissory Note, she thereby bound herself to be liable to China Bank in case

4
the principal debtors, Barbara and Rebecca, failed to pay. She consequently became
liable to respondent bank for the payment of the debt of Barbara and Rebecca when
the latter two actually did not pay.

SPOUSES FLORANTE E. JONSAY and LUZVIMINDA L. JONSAY and MOMARCO

IMPORT CO., INC., vs. SOLIDBANK CORPORATION (now METROPOLITAN BANK
AND TRUST COMPANY)

G.R. No. 206459, April 6, 2016

REYES, J.

Facts:
Petitioners obtained a loan in the name of Momarco from Solid Bank. They
executed a promissory note and security to the loan they mortgaged 3 parcels of
land.

But because of the financial crisis on 1997 they were struggling to pay. As
they defaulted to pay, Solidbank proceeded to extra judicially foreclose the
mortgage.

ISSUE:

Whether the proposal of the spouses to extinguish their obligation by way of

dacion en pago novates the mortgage contract contract?

HELD:
On the question of the petitioners' failed proposal to extinguish their loan
obligations by way of dacion en pago, no bad faith can be imputed to Solidbank for
refusing the offered settlement as to render itself liable for moral and exemplary
damages after opting to extrajudicially foreclose on the mortgage. In Tecnogas
Philippines Manufacturing Corporation v. Philippine National Bank, the Court held:
Dacion en pago is a special mode of payment whereby the debtor offers another
thing to the creditor who accepts it as equivalent of payment of an outstanding
obligation. The undertaking is really one of sale, that is, the creditor is really buying
the thing or property of the debtor, payment for which is to be charged against the
debtor's debt. As such, the essential elements of a contract of sale, namely, consent,
object certain, and cause or consideration must be present. It is only when the thing
offered as an equivalent is accepted by the creditor, that novation takes place,
thereby, totally extinguishing the debt.
On the first issue, the Court of Appeals did not err in ruling that Tecnogas has
no clear legal right to an injunctive relief because its proposal to pay by way of
dacion en pago did not extinguish its obligation. Undeniably, Tecnogas' proposal to
pay by way of dacion en pago was not accepted by PNB. Thus, the unaccepted
proposal neither novates the parties' mortgage contract nor suspends its execution

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as there was no meeting of the minds between the parties on whether the loan will
be extinguished by way of dacion en pago. Necessarily, upon Tecnogas' default in its
obligations, the foreclosure of the REM becomes a matter of right on the part of PNB,
for such is the purpose of requiring security for the loans.

BENJIE B. GEORG vs. HOLY TRINITY COLLEGE, INC.

G.R. No. 190408, July 20, 2016
PEREZ, J.

FACTS:

The Holy Trinity college has a dance group and a grand choral founded by
Sister Medalle. The group travels around the world to compete. Enriquez allegedly
represented sister Medalle and booked the dance group airplane tickets from the
petitioner. The two executed a Memorandum of Agreement with Deed of
Assignment.

ISSUE:

Whether the parties have entered into a valid contract?

HELD:

Yes. The essential requisites of a contract under Article 1318 of the New Civil
Code are:
( 1) Consent of the contracting parties; (2) Object certain which is the subject matter
of the contract; (3) Cause of the obligation which is established. The validity of the
MOA is being assailed for a defect in consent. Under Article 1330 of the Civil Code,
consent may be vitiated by any of the following: (1) mistake, (2) violence, (3)
intimidation, ( 4) undue influence, and ( 5) fraud. Under the same provision, the
contract becomes voidable. There is fraud when one party is induced by the other to
enter into a contract, through and solely because of the latter's insidious words or
machinations. But not all forms of fraud can vitiate consent. Under Article 1330,
fraud refers to dolo causante or causal fraud, in which, prior to or simultaneous with
execution of a contract, one party secures the consent of the other by using
deception, without which such consent would not have been given. Sr. Medalle is
presumed to know the import of her thumbmark in the MOA. While she was indeed
confined at the UST Hospital at that time, respondent however failed to prove that Sr.
Medalle was too ill to comprehend the terms of the contract. Moreover, there is
nothing in the deposition that tends to prove that Sr. Medalle's consent was vitiated.
The trial court categorically ruled that Sr. Medalle affixed her thumbmark as
President of Holy Trinity College and therefore, respondent is a party to the MOA.
Effectively, respondent has control and supervision of the Group particularly in the
selection, hiring and termination of the members. Sr. Medalle, as President of Holy

6
Trinity, is clothed with sufficient authority to enter into a loan agreement. Thus, any
agreement or contract entered into by Sr. Medalle as President of Holy Trinity
College relating to the Group bears the consent and approval of respondent. It is
through these dynamics that we cannot fault petitioner for relying on Sr. Medalle's
authority to transact with petitioner.

JUANA VDA. DE ROJALES vs. MARCELINO DIME

G.R. NO. 194548, February 10, 2016
PERALTA, J.

FACTS:

Rojales is a registered owner of a parcel of land located at Nasugbu, Batangas.

She executed a pacto de retro contract with respondent to which was purchased in
the amount of P2,502,932.10. Considering that the executed sale was a pacto de
retro, Rojales reserved the right to repurchase the property from respondent with
the agreement of a period of nine months at the same purchase price. After the
agreed a period to repurchase the petitioner did not repurchase the subject real
property despite repeated demands.

The petitioner denied the execution of the pacto de retro contract with the
respondent and argued that everything up to the signature of the notary public was
a falsity.

The RTC, on July 12, 2006 dismissed the case on the ground that the case was
not filed by a real party-in-interest.

ISSUE:

Whether Villamin is privy to the contract of pacto de retro sale between petitioner
and respondent?

HELD:

As a general rule, and as consistently ruled by this court, the parties to a

contract are always held as the indispensable party or real parties-in-interest, only
parties who executed a contract are binding to such obligation and its faithful
performance, and the only ones who has the right to bring action in case of breach
or default. As to this case, the court properly found that Villamin is not a privy to the
contract, the subject pacto de retro contract cannot extend to her as she is not a real
party-in-interest, as she in no way would prejudice her neither benefit from its
proceeds.

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 Correlating to the general rule on real party-in-interest on the law on
contracts, as to the executed pacto de retro contract, it is the vendor (petitioner) and
the vendee (respondent), their heirs, successors, and assigns have the right to bring
such action of consolidation of title and ownership pursuant to Article 1616 of the
Civil Code.

In the case Republic v. Grijaldo, this Court ruled and defined well of who is a
privy to a contract, where thesuch privy denotes the concept of succession who has
the real right to substitute for the contracting parties in their personal rights tied
and bounded in judicial relations by virtue of a contract.

In the case of Villamin, she cannot personally substitute for respondent, as

she was on the wrong belief that funding the purchase of the subject real property
conferred her any right over the same, unless otherwise, the pacto de retro contract
expressly conferred her any right over the property, in such case she is considered
by law as a privy, but absence of such would be futile on her part, as she was in no
way an heir, successor, or assign of respondent.

PHILIPPINE NATIONAL OIL COMPANY et al. vs. KEPPEL PHILIPPINES

HOLDINGS, INC.
G.R. No. 202050, July 25, 2016
BRION, J.

FACTS:

Keppel entered into a lease agreement with Luzon Stevedoring Corporation

stating that the eleven hectares of land located in Bauan, Batangas will be leased for
the period of 25 years for Php 2.1 million. That, at the option of Luzon Stevedoring,
the rental fee could be converted to equity shares in Keppel. After the lapse of the
lease contract, Keppel was given an option to purchase, with the provision that the
qualification of a foreign corporation to own properties in the Philippines as
provided for by law is achieved. Unfortunately, Keppels percentage of Filipino
ownership was less than what the law provided for. Therefore, the lease would not
be renewed for another twenty five years and there will be no option to purchase.
Nevertheless, the PNOC purchased the land from Luzon Stevedoring. When Keppel
was ready to purchase the land, however, PNOC refused hence the case was filed.

ISSUE:

Whether or not the option to purchase the land given to Keppel is valid and
supported by a valuable consideration?

HELD:

8
 An option contract is a contract where one person (the offeror/promissor)
grants to another person (the offeree/promisee) the right or privilege to buy (or to
sell) a determinate thing at a fixed price, if he or she chooses to do so within an
agreed period. As a contract, it must necessarily have the essential elements of
subject matter, consent, and consideration. Although an option contract is deemed a
preparatory contract to the principal contract of sale, it is separate and distinct
therefrom, thus, its essential elements should be distinguished from those of a sale.
An option contract, the subject matter is the right or privilege to buy (or to sell) a
determinate thing for a price certain, while in a sales contract, the subject matter is
the determinate thing itself. The consent in an option contract is the acceptance by
the offeree of the offerors promise to sell (or to buy) the determinate thing, i.e., the
offeree agrees to hold the right or privilege to buy (or to sell) within a specified
period. This acceptance is different from the acceptance of the offer itself whereby
the offeree asserts his or her right or privilege to buy (or to sell), which constitutes
as his or her consent to the sales contract. The consideration in an option contract
may be anything of value, unlike in a sale where the purchase price must be in
money or its equivalent. There is sufficient consideration for a promise if there is
any benefit to the offeree or any detriment to the offeror. For uniformity and
consistency in contract interpretation, the better rule to follow is that the
consideration for the option contract should be clearly specified as such in the
option contract or clause. Otherwise, the offeree must bear the burden of proving
that a separate consideration for the option contract exists. Given our finding that
the Agreement did not categorically refer to any consideration to support Keppels
option to buy and for Keppels failure to present evidence in this regard, we cannot
uphold the existence of an option contract in this case. The absence of a
consideration supporting the option contract, however, does not invalidate an
offer to buy (or to sell). An option unsupported by a separate consideration
stands as an unaccepted offer to buy (or to sell) which, when properly accepted,
ripens into a contract to sell. Accordingly, when an option to buy or to sell is not
supported by a consideration separate from the purchase price, the option
constitutes as an offer to buy or to sell, which may be withdrawn by the offeror at
any time prior to the communication of the offerees acceptance. When the offer is
duly accepted, a mutual promise to buy and to sell under the first paragraph of
Article 1479 of the Civil Code ensues and the parties respective obligations
become reciprocally demandable. Applied to the present case, we find that the offer
to buy the land was timely accepted by Keppel.

CENTURY PROPERTIES, INC. vs. EDWIN J. BABIANO and EMMA CONCEPCION

G.R. No. 220987, July 5, 2016
PERLAS-BERNABE, J.

9
FACTS:

Babiano was hired by Century Properties, Inc. (CPI) and later on was made
as Vice President for Sales. The employment contract states that he is prohibited
from discussing confidential matters, also from engaging conflicting trade and
business while employed by the same and within one year from the date of
resignation or termination. Failure to comply and violate the terms would nullify
and void the compensation, and other benefits he receives. In the coming events,
Babiano was later terminated on the grounds of (a) incurring AWOL; (b) violating
the "Confidentiality of Documents and Non-Compete Clause" when he joined a
competitor enterprise while still working for CPI and provided such competitor
enterprise information regarding CPI' s marketing strategies; and (c) recruiting CPI
personnel to join a competitor.

ISSUE:

Whether or not there is a breach of contract by Babiano?

HELD:

Article 1370 of the Civil Code provides that "[i]f the terms of a contract are
clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall control. Thus, in the interpretation of contracts, the
Court must first determine whether a provision or stipulation therein is ambiguous.
Absent any ambiguity, the provision on its face will be read as it is written and
treated as the binding law of the parties to the contract. In the case at bar, CPI
primarily invoked the "Confidentiality of Documents and Non-Compete Clause"
found in Babiano's employment contract to justify the forfeiture of his commissions.

A judicious review of the records reveals that in his resignation letter dated
February 25, 2009, Babiano categorically admitted to CPI Chairman Jose Antonio
that on February 12, 2009, he sought employment from First Global, and five (5)
days later, was admitted thereto as vice president. From the foregoing, it is evidently
clear that when he sought and eventually accepted the said position with First
Global, he was still employed by CPI as he has not formally resigned at that time.
Irrefragably, this is a glaring violation of the "Confidentiality of Documents and Non-
Compete Clause" in his employment contract with CPI, thus, justifying the forfeiture
of his unpaid commissions.

SULPICIO LINES, INC. vs. NAPOLEON SESANTE, now substituted by MARIBEL

ATILANO, KRISTEN MARIE, CHRISTIAN IONE, KENNETH KERRN and KARISNA
KATE, all surnamed SESANTE
G.R. No. 172682, July 27, 2016
BERSAMIN, J.

10
FACTS:

M/V Princess of the Orient, a passenger vessel owned and operated by

Sulpicio Lines, Inc., sank near Fortune Island in Batangas. 150 passengers were
reported lost. One of the survivor of the passenger, Sesante, filed for breach of
contract with damages.

ISSUE:

1) Whether or not the petitioner is liable for breach of contract with damages

2) Whether or not the petitioner is liable for the respondents lost belongings

HELD:
1. Yes. Article 1759 of the Civil Code does not establish a presumption of
negligence because it explicitly makes the common carrier liable in the event of
death or injury to passengers due to the negligence or fault of the common carrier's
employees. The liability of common carriers under Article 1759 is demanded by the
duty of extraordinary diligence required of common carriers in safely carrying their
passengers. On the other hand, Article 1756 of the Civil Code lays down the
presumption of negligence against the common carrier in the event of death or
injury of its passenger[.]The presumption of negligence applies so long as "" there is
evidence showing that: (a) a contract exists between the passenger and the common
carrier; and (b) the injury or death took place during the existence of such contract.
In such event, the burden shifts to the common carrier to prove its observance of
extraordinary diligence, and that an unforeseen event or force majeure had caused
the injury. The petitioner was directly liable to Sesante and his heirs. A common
carrier may be relieved of any liability arising from a fortuitous event pursuant to
Article 1174 of the Civil Code. But while it may free a common carrier from liability,
the provision still requires exclusion of human agency from the cause of injury or
loss.

We agree with the petitioner that moral damages may be recovered in an

action upon breach of contract of carriage only when: (a) death of a passenger
results, or ( b) it is proved that the carrier was guilty of fraud and bad faith, even if
death does not result. 33 However, moral damages may be awarded if the
contractual breach is found to be wanton and deliberately injurious, or if the one
responsible acted fraudulently or with malice or bad faith. While there is no hard-
and-fast rule in determining what is a fair and reasonable amount of moral damages,
the discretion to make the determination is lodged in the trial court with the
limitation that the amount should not be palpably and scandalously excessive.

The award of temperate damages was proper. Temperate damages may be

recovered when some pecuniary loss has been suffered but the amount cannot, from
the nature of the case, be proven with certainty.

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In contracts and quasi-contracts, the Court has the discretion to award exemplary
damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner. Indeed, exemplary damages cannot be recovered as a matter of
right, and it is left to the court to decide whether or not to award them. First of all,
exemplary damages did not have to be specifically pleaded or proved, because the
courts had the discretion to award them for as long as the evidence so warranted.
And, secondly, exemplary damages are designed by our civil law to "permit the
courts to reshape behavior that is socially deleterious in its consequence by creating
negative incentives or deterrents against such behavior. " The actuations of the
petitioner and its agents during the incident attending the unfortunate sinking of the
M/V Princess of the Orient were far below the standard of care and circumspection
that the law on common carriers demanded. Accordingly, we hereby fix the sum of Pl
,000,000.00 in order to serve fully the objective of exemplarity among those engaged
in the business of transporting passengers and cargo by sea.

2. The rule that the common carrier is always responsible for the passenger's
baggage during the voyage needs to be emphasized. Article 1754 of the Civil Code
does not exempt the common carrier from liability in case of loss, but only highlights
the degree of care required of it depending on who has the custody of the
belongings. Hence, the law requires the common carrier to observe the same
diligence as the hotel keepers in case the baggage remains with the passenger;
otherwise, extraordinary diligence must be exercised. Furthermore, the liability of
the common carrier attaches even if the loss or damage to the belongings resulted
from the acts of the common carrier's employees, the only exception being where
such loss or damages is due to force majeure

ROSARIO VICTORIA and ELMA PIDLAOAN vs. NORMITA JACOB PIDLAOAN,

HERMINIGILDA PIDLAOAN and EUFEMIA PIDLAOAN
G.R. No. 196470, April 20, 2016
BRION, J.

FACTS:

Elma and Rosario are live-in partners, through their hard work and
partnership they acquired a house and lot. However, when Rosario left to work
overseas, Elma mortgaged the subject property, with the fear of the property being
foreclosed turned asked their sister-in-law, Eufemia who eventually asked the help
of her daughter, Normita, to redeem the said property. Instead of executing a Deed of
Sale they executed a Deed of Donation in favor of Elma to avoid paying Capital Gains
Tax. When Rosario discovered the transaction the two executed, she filed a

12
complaint together with Elma for the reformation of arguing that the Deed of
Donation was simulated.

ISSUE:

Whether the contract was simulated or not?

HELD:

We find that the deed of donation was simulated and the parties real intent
was to enter into a sale.

The petitioners argue that the deed of donation was simulated and that the
parties entered into an equitable mortgage. On the other hand, the respondents
deny the claim of equitable mortgage and argue that they validly acquired the
property via sale. The RTC ruled that there was donation but only as to half of the
property. The CA agreed with the respondents that the deed of donation was not
simulated, relying on the presumption of regularity of public documents.

We first dwell on the genuineness of the deed of donation. There are two
types of simulated documents absolute and relative. A document is absolutely
simulated when the parties have no intent to bind themselves at all, while it is
relatively simulated when the parties concealed their true agreement. The true
nature of a contract is determined by the parties intention, which can be
ascertained from their contemporaneous and subsequent acts.

CATHAY PACIFIC AIRWAYS LTD. vs. SPS. ARNULFO and EVELYN FUENTEBELLA
G.R. No. 188283, July 20, 2016
SERENO, CJ.

FACTS:

Fuentebella and company was authorized by the Speaker of the House to

travel on official business to Australia to convene with the Australian Parliament.
They bought Business Class tickets from Manila to Sydney yet they then changed it
to First Class. During the flight they were not placed on the First Class section and
was not treated as what first class passengers was meant to be treated by the
employees of the carriage. Upon their arrival in the Philippines, they demanded a
formal apology and payment of damages from petitioner. After conducting an
investigation, the petitioner ruled that the respondents incurred no damage.

ISSUES:

1) Whether there was a breach of contract on the part of the petitioner?

13
2) Whether the petitioners are entitled to damages?

HELD:

1) In Air France v. Gillego, this Court ruled that in an action based on a breach of
contract of carriage, the aggrieved party does not have to prove that the common
carrier was at fault or was negligent; all that he has to prove is the existence of the
contract and the fact of its nonperformance by the carrier. In this case, both the trial
and appellate courts found that respondents were entitled to First Class
accommodations under the contract of carriage, and that petitioner failed to
perform its obligation,

2) Moral and exemplary damages are not ordinarily awarded in breach of

contract cases. This Court has held that damages may be awarded only when the
breach is wanton and deliberately injurious, or the one responsible had acted
fraudulently or with malice or bad faith. Bad faith is a question of fact that must be
proven by clear and convincing evidence. Both the trial and the appellate courts
found that petitioner had acted in bad faith. After review of the records, We find no
reason to deviate from their finding. In Singapore Airlines Limited v. Fernandez, bad
faith was imputed by the trial court when it found that the ground staff had not
accorded the attention and treatment warranted under the circumstances. The bad
faith in the present case is even more pronounced because petitioner's ground staff
physically manhandled the passengers by shoving them to the line, after another
staff had insulted them by turning her back on them.

HEIRS OF LEANDRO NATIVIDAD AND JULIANA V. NATIVIDAD vs. JUANA

MAURIClA-NATIVIDAD, and SPOUSES JEAN NATIVIDAD CRUZ AND JERRY CRUZ,
G.R. No. 198434, March 14, 2016
PERALTA, J.

FACTS:

Sergio Natividad mortgaged their two parcels of land to DPB. He and his
sibling owned the first land and mortgaged it, while the second land was registered
in his name and Mauricia. A Special Power of Attorney was issued to Sergio by his
siblings allowing him to mortgage the said property.

Afterwards, Sergio unfortunately died and left the debts unpaid. Leandro
fearing that the properties will be foreclosed paid the obligation. Which in turn, the
respondents failed to reimburse Leandro and just verbally agreed that Sergios share
in the properties were to be assigned in favor of Leandro and Juliana.

14
ISSUE:

Whether or not the verbal agreement made between the siblings and Juliana,
covering the shares of Sergio, as payment of his obligations is covered by the Statute
of Frauds despite the fact that it has been partially executed?

HELD:

There is no partial execution of any contract, whatsoever, because petitioners

failed to prove, in the first place, that there was a verbal agreement that was entered
into.

Even granting that such an agreement existed, the assignment of the shares of
Sergio in the subject properties in petitioners' favor as payment of Sergio's
obligation cannot be enforced if there is no written contract to such effect. Under the
Statute of Frauds, an agreement to convey real properties shall be unenforceable by
action in the absence of a written note or memorandum thereof and subscribed by
the party charged or by his agent. As earlier discussed, the pieces of evidence
presented by petitioners, consisting of respondents' acknowledgment of Sergio's
loan obligations with DBP as embodied in the Extrajudicial Settlement Among Heirs,
as well as the cash voucher which allegedly represents payment for taxes and
transfer of title in petitioners' name do not serve as written notes or memoranda of
the alleged verbal agreement.

TOMAS P. TAN, JR. vs. JOSE G. HOSANA

G.R. No. 190846, February 3, 2016
BRION, J.

FACTS:

Jose executed a Special Power of Attorney in favor of Milagros. Without the

knowledge of Jose, Milagros then had the power to sell the property they bought, to
Tan.

Jose afterwards filed a Complaint against his wife for the Annulment of
Sale/Cancellation of Title/Reconveyance and Damages. He claims that the SPA was
false and the signature is forged. He also claims that his wife colluded with Tan.

ISSUE:

Whether or not the void contract can be used as the basis for the amount of
consideration paid?

15
HELD:

The deed of sale as documentary evidence may be used as a means to

ascertain the truthfulness of the consideration stated and its actual payment. The
purpose of introducing the deed of sale as evidence is not to enforce the terms
written in the contract, which is an obligatory force and effect of a valid contract.
The deed of sale, rather, is used as a means to determine matters that occurred in
the execution of such contract, i.e., the determination of what each party has given
under the void contract to allow restitution and prevent unjust enrichment.

It is basic that if a void contract has already been performed, the restoration
of what has been given is in order. This principle springs from Article 22 of the New
Civil Code which states that every person who through an act of performance by
another, or any other means, acquires or comes into possession of something at the
expense of the latter without just or legal ground, shall return the same. Hence, the
restitution of what each party has given is a consequence of a void and inexistent
contract. While the terms and provisions of a void contract cannot be enforced since
it is deemed inexistent, it does not preclude the admissibility of the contract as
evidence to prove matters that occurred in the course of executing the contract, i.e.,
what each party has given in the execution of the contract.

Hence, a void document is admissible as evidence because the purpose of

introducing it as evidence is to ascertain the truth respecting a matter of fact, not to
enforce the terms of the document itself.

DESIDERIO RANARA, JR., vs. ZACARIAS DELOS ANGELES, JR.

G.R. No. 200765, August 8, 2016
REYES, J.

FACTS:

Leonor Parada entered into a loan agreement with Zacarias Sr. in the amount
of P60,000 support her migration in Canada. Leonor used as security to the loan the
agricultural land they have. If Leonor fails to pay the loan, it was agreed that Zacarias
Jr will take over the agricultural land. When Parada migrated to Canada she brought
with her the copies of the document and the title of the land. When she learned
about the illegal settlers who attempted to occupy the land she gave the original
document copy to Zacaria Sr.

Years after Zacaria Sr. became ill and asked his sone Zacaria Jr. to demand
Parada to repurchase the property. Noel Parada, the son of Leonor gave to Zacaria Sr.
the payment price of Php 40,000.00, but he refused to accept the money.

16
 Respondent then sent Parada a letter insisting to enforce the Deed of Sale
with Right to Repurchase. However, Parada insisted that there was no pacto de retro
sale and thereafter tendered an amount of Php 60,000 as payment to the loan. She
subsequently discovered that the respondent had already registered the property
and falsified her affidavit allowing the sale of the property.

ISSUE:

Whether both petitioner and respondent are at fault?

HELD:

The Court ruled affirming both the decision of the RTC and CA. As to the
petitioners contention that he is a buyer in good faith and is entitled for
reimbursement is not tenable as it was his duty to investigate the title of the
property he seeks to buy applying the principle of caveat emptor.

The Court in this case further ruled that petitioners argument that both him
and respondent are in pari delicto is misplaced. Hence, he cannot be considered as a
buyer in good faith as he is well aware that the title of the property is still in the
name of Leonor Parada.

In the case Constantino, et. al. v. Heirs of Pedro Constantino, Jr. The doctrine
of in pari delicto as enshrined in Article 1411 and Article 1412 of the Civil Code only
applies to the rights and obligations of parties in a contract which has an illegal or
unlawful cause and that which constitute a criminal offense. It specifically applies to
contracts which are generally void for the illegality of the subject matter or object.
Thus, assuming that both petitioner and respondent are at equal fault, they do not
have any right to interpose such claims as there can be no cause of action between
them.

MERCEDES N. ABELLA, MA. THERESA A. BALLESTEROS and MARIANITO N.

ABELLA vs. HEIRS OF FRANCISCA C. SAN JUAN namely: GLICERIA SAN JUAN
CAPISTRANO, BENIGNA SAN JUAN VASQUEZ, EVARISTO SAN JUAN, NIEVES SAN
JUAN LUSTRE and MATILDE SAN JUAN QUILONIO
G.R. No. 182629, February 24, 2016
JARDELEZA, J.

FACTS:

Francisca San Juan was a tenant of the petitioners in a 6,000 square meter
land in Camarines Sur. The two parties made an agreement afterwards that San Juan
will transfer the the other 6,000 square meters agricultural land the petitioners own
in Naga City.

17
 When Francisca died her children and grandchildren of Francisca asked the
wife of Dr. Abella if they could build their property on the other property which
Franisca vacated in which the wife approved. Afterwards they were demanded to
leave the premises which in turn they refused claiming ownership to the land.
Hence, the case was filed for quieting of title and proof of ownership of the land.

ISSUE:

Whether the Agreement is void for violating PD 27?

HELD:

PD 27 provides for only two exceptions to the prohibition on transfer, namely,

(1) transfer by hereditary succession and (2) transfer to the Government.

Thus, we ruled in Siacor v. Gigantana and more recently in [Caliwag-

Carmona] v. Court of Appeals, that sales or transfers of lands made in violation of PD
27 and EO 228 in favor of persons other than the Government by other legal means
or to the farmer's successor by hereditary succession are null and void. The
prohibition even extends to the surrender of the land to the former landowner.

Under PD 27 and the pronouncements of this Court, transfer of lands under

PD 27 other than to successors by hereditary succession and the Government is
void. A void or inexistent contract is one which has no force and effect from the
beginning, as if it has never been entered into, and which cannot be validated either
by time or ratification. No form of validation can make the void Agreement legal

THELMA RODRIGUEZ, joined by her husband vs. SPOUSES JAIME SIOSON &
ARMI SIOSON, et al.
G.R. No. 199180, July 27, 2016
REYES, J

FACTS:

Neri Delos Reyes owns a parcel of land with an area of 1.7 hectares in Bataan.
The municipality of Orani Bataan then after purchased the said lot that will be used
as the municipalities public market. The two parties agreed that after the payment is
made in full, Neri will surrender the mother title to the municipality.
Later on, The petitioner found out that a terminal will be built on the lot so
she filed for an injunction against the incumbent mayor. To support her claim, she
presented an undated, unnotarized deed of sale. Sometime later, Neri sold the same

18
lot to respondents. The petitioner filed a complaint for the Declaration of Nullity of
the second sale. This time, she presented a signed and notarized deed of sale.

ISSUE:

Whether or not the transaction made between Neri and petitioner Rodriguez
was a contract of sale or a contract to sell?

HELD:

Its a mere contract to sell. Despite the denomination of their agreement as

one of sale, the circumstances tend to show that Neri agreed to sell the subject
property to Thelma on the condition that title and ownership would pass or be
transferred upon the full payment of the purchase price. This is the very nature of a
contract to sell, which is a "bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the property despite delivery thereof to the
prospective buyer, binds himself to sell the property exclusively to the prospective
buyer upon fulfillment of the condition agreed upon, i.e., the full payment of the
purchase price." It was likewise established that Thelma was not able to pay the full
purchase price, and that she was only able to pay P442,293.50 of the agreed selling
price of Pl ,243,000.00. Moreover, the alleged delivery of the property, even if true, is
irrelevant considering that in a contract to sell, ownership is retained by the
registered owner in spite of the partial payment of the purchase price and delivery
of possession of the property. Thus, in Roque v. Aguado, the Court ruled that since
the petitioners have not paid the final installment of the purchase price, the
condition which would have triggered the parties' obligation to enter into and
thereby perfect a contract of sale cannot be deemed to have been fulfilled;
consequently, they "cannot validly claim ownership over the subject portion even if
they had made an initial payment and even took possession of the same."

OSCAR S. VILLARTA vs. GAUDIOSO TALAVERA, JR.

G.R. No. 208021, February 3, 2016
CARPIO, J.

FACTS:

Villarta and Talavera who are distant relatives entered into a loan contract
where in Villarta will pay Talavera 3% per month if he cannot pay the loan. Years
come and the interest rate was increased into 7% and 10% because of the financial
crisis. Talavera, using deceptive words and means to convince Villarta to execute a
deed of absolute sale over one of the parcels of land that he owns and then again
there were two more deeds of conveyance over the other 2 lots owned by him that
was sold to Talavera. The last property that Villarta owned was forcibly sold to

19
Talavera with an unreasonable amount which was covered by a Deed of Absolute
Sale.

ISSUE:

Whether or not there was an equitable mortgage between the parties?

HELD:

We agree with the lower courts assessment of the facts. The conduct of the
parties prior to, during, and after the execution of the deeds of sale adequately
shows that petitioner sold to respondent the lots in question to satisfy his debts.

Respondent was able to sufficiently explain why the presumption of an

equitable mortgage does not apply in the present case. The inadequacy of the
purchase price in the two deeds of sale dated 18 May 2001 was supported by an
Affidavit of True Consideration of the Absolute Sale of the Property. Respondent did
not tolerate petitioners possession of the lots. Respondent caused the registration
and subsequent transfer of the 2 lands under his name, and paid taxes thereon.
There were no extensions of time for the payment of petitioners loans; rather,
petitioner offered different modes of payment for his loans. It was only after three
instances of bounced checks that petitioner offered the other two lands as payment
for his loans and executed deeds of sale in respondents favor.

The transaction between petitioner and respondent is thus not an equitable

mortgage, but is instead a dacion en pago.

ANECITA GREGORIO vs. MARIA CRISOLOGO VDA. DE CULIG, THRU HER

ATTORNEY-IN-FACT ALFREDO CULIG JR.
G.R. No. 180559, January 20, 2016
JARDELEZA, J.

FACTS:

Maria was then married to Alfredo. When Alfredo was still alive he was
awarded a patent in a homestead then he died without a will Alfredo died and the
land was Anecita and her spouse which in turn was granted a title in their favor.

Maria then filed a complaint after five years of sale, alleging she was only
within her right to repurchase the land under the Public Land Act. Anecita countered
the claim alleging that Maria is in bad faith in filing the complaint and that she just
wants to sell the house for a higher price.

20
 The RTC ruled against Maria because for redemption to succeed there must
be a valid consignation of the repurchase price if Anecita did not accept the tender of
payment.

However on appeal the CA reversed the ruling of the RTC stating that tender
of payment is sufficient to have a right to repurchase the land and that consignation
is not an element for repurchase.

ISSUE:

Whether tender of payment is a requisite for the valid exercise of

redemption?

HELD:

Section 119 of the Public Land Act provides: Sec.119. Every conveyance of
land acquired under the free patent or homestead provisions, when proper, shall be
subject to repurchase by the applicant, his widow, or legal heirs, within a period of
five years from the date of the conveyance.

It is undisputed, in fact, the parties already stipulated, that the complaint for
repurchase was filed within the reglementary period of five years. The parties also
agreed that there was no consignment of the repurchase price. However, petitioner
argues that consignment is necessary to validly exercise the right of redemption. The
argument fails. In Hulganza v. Court of Appeals, we held that the bona fide tender of
the redemption price or its equivalentconsignation of said price in court is not
essential or necessary where the filing of the action itself is equivalent to a formal
offer to redeem. As explained in the said case, The formal offer to redeem,
accompanied by a bona fide tender of the redemption price, within the period of
redemption prescribed by law, is only essential to preserve the right of redemption
for future enforcement beyond such period of redemption and within the period
prescribed for the action by the statute of limitations. Where, as in the instant case,
the right to redeem is exercised thru the filing of judicial action within the period of
redemption prescribed by the law, the formal offer to redeem, accompanied by a
bona fide tender of the redemption price, might be proper, but is not essential. The
filing of the action itself, within the period of redemption, is equivalent to a formal
offer to redeem. xxx

We also do not agree with petitioners insistence that Article 1616 of the Civil
Code applies in this case. As found by the CA, the provision only speaks of the
amount to be tendered when exercising the right to repurchase, but it does not state
the procedure to be followed in exercising the right. In fact, in Peralta v. Alipio, we
rejected the argument that the provisions on conventional redemption apply as
supplementary law to the Public Land Act, and clarified that:

21
xxx. The Public Land Law does not fix the form and manner in which reconveyance
may be enforced, nor prescribe the method and manner in which demand therefor
should be made; any act which should amount to a demand for reconveyance should,
therefore, be sufficient. (Underscoring supplied.)

In Lee v. Court of Appeals, the case cited by petitioner, we held that the mere
sending of letters expressing the desire to repurchase is not sufficient to exercise the
right of redemption. In the said case, the original owners of a homestead lot sought
to compel the buyers to resell the property to them by writing demand letters within
the five-year period. The latter refused, but the former filed a case for redemption
after the lapse of the fiveyear period. We ruled that the letters did not preserve the
former owners right to redeem. The case finds no application in this case because
while respondent also sent letters to the petitioner, she also filed a complaint for
repurchase within the five-year period. As ruled in Hulganza, the filing of the
complaint is the formal offer to redeem recognized by law.

Petitioner claims that even if the redemption is timely made, respondent is

not entitled to the right of repurchase because respondent intends to resell the
property again for profit, and that her aim in redeeming the land is purely for
speculation and profit. To support her claim, petitioner states that respondent and
her heirs are professionals and her siblings are residing in Canada.

Indeed, the main purpose in the grant of a free patent or homestead is to

preserve and keep in the family of the homesteader that portion of public land which
the State has given to him so he may have a place to live with his family and become
a happy citizen and a useful member of the society. We have ruled in several
instances, that the right to repurchase of a patentee should fail if the purpose was
only speculative and for profit, or to dispose of it again for greater profit or to
recover the land only to dispose of it again to amass a hefty profit to themselves. In
all these instances, we found basis for ruling that there was intent to sell the
property for a higher profit. We find no such purpose in this case.

MELECIO DOMINGO vs. SPOUSES GENARO MOLINA and ELENA B. MOLINA,

substituted by ESTER MOLINA
G.R. No. 200274, April 20, 2016
BRION, J

FACTS:

Spouses Anastacio and Flora Domingo entered into a contract of loan with
spouses Molina. They made as security the property they owned consisting of a
undivided portion over an 18,164 sq. meter land. Which in turn they transferred the
interest to Molina

22
 Melecio, one of the children of Anastacio and Flora, learned of the transfer
and filed a Complaint for Annulment of Title and Recovery of Ownership against the
spouses Molina. He alleged that the transfer of interest was invalid because her
mother was already dead when the sale transpired. Therefore there was no consent.

ISSUE:

Whether or not the sale of a conjugal property to the spouses Molina is valid?

HELD:

Anastacio, as a co-owner, had the right to freely sell and dispose of his
undivided interest, but not the interest of his co-owners. Consequently, Anastactios
sale to the spouses Molina without the consent of the other co-owners was not
totally void, for Anastacios rights or a portion thereof were thereby effectively
transferred, making the spouses Molina a co-owner of the subject property to the
extent of Anastacios interest. This result conforms with the well-established
principle that the binding force of a contract must be recognized as far as it is legally
possible to do so (quando res non valet ut ago, valeat quantum valere potest).

The spouses Molina would be a trustee for the benefit of the co-heirs of
Anastacio in respect of any portion that might belong to the co-heirs after
liquidation and partition. The observations of Justice Paras cited in the case ofHeirs
of Protacio Go, Sr. V. Servacio are instructive:

x x x [I]f it turns out that the property alienated or mortgaged really would
pertain to the share of the surviving spouse, then said transaction is valid. If it turns
out that there really would be, after liquidation, no more conjugal assets then the
whole transaction is null and void. But if it turns out that half of the property thus
alienated or mortgaged belongs to the husband as his share in the conjugal
partnership, and half should go to the estate of the wife, then that corresponding to
the husband is valid, and that corresponding to the other is not. Since all these can
be determined only at the time the liquidation is over, it follows logically that a
disposal made by the surviving spouse is not void ab initio. Thus, it has been held
that the sale of conjugal properties cannot be made by the surviving spouse without
the legal requirements. The sale is void as to the share of the deceased spouse
(except of course as to that portion of the husbands share inherited by her as the
surviving spouse). The buyers of the property that could not be validly sold become
trustees of said portion for the benefit of the husbands other heirs, the cestui que
trust ent. Said heirs shall not be barred by prescription or by laches.

EQUITABLE SAVINGS BANK, vs ROSALINDA C. PALCES

G.R. No. 214752, March 9, 2016

23
BRION, J
FACTS:

In the year of 2005, Palces purchased a van through a loan awarded by

Equitable Savings Bank. The loan was secured by a promissory note and a Chattel
Mortgage.

Afterwards, Palces failed to pay two monthly installments, which effected the
acceleration clause of the loan agreement. Palces asserted that she did not fail to
pay the installments.

ISSUE:

Whether there is a vendor-vendee relationship between the petitioner and

the respondent?

HELD:

In this case, there was no vendor-vendee relationship between respondent

and petitioner. A judicious perusal of the records would reveal that respondent
never bought the subject vehicle from petitioner but from a 3rd party, and merely
sought financing from petitioner for its full purchase price. In order to document the
loan transaction between petitioner and respondent, a Promissory Note with Chattel
Mortgage was executed wherein, inter alia, respondent acknowledged her
indebtedness to petitioner in the amount of P1,196,100.00 and placed the subject
vehicle as a security for the loan. Indubitably, a loan contract with the accessory
chattel mortgage contract and not a contract of sale of personal property in
installments was entered into by the parties with respondent standing as debtor-
mortgagor and petitioner as the creditor-mortgagee. Therefore, the conclusion of
the CA that Article 1484 finds application in this case is misplaced, and thus, must be
set aside

HEIRS OF GAMALIEL ALBANO vs. SPS. ROBERTO and MENA RAVANES

G.R. No. 183645, July 20, 2016
JARDELEZA, J.

Spoused Ravanes are the registered owner of a parcel of land in which the
petitioners has built a two-storey house and leased the land with the agreement that
they will vacate the property once the respondent demand to. Respondents then
requested for them to vacate the premises because their daughter will build a house

24
on it. The petitioners does not want to leave the premises arguing that they had a
valid contract with Roberto.

ISSUE:

Whether the lease contract entered into by petitioner Roberto was valid and would
stay the execution of the judgment?

HELD:

No it was not. To our mind, instead of a supervening event, the execution of

the lease contract partakes of the nature of a compromise. A compromise is a
contract whereby the parties, by making reciprocal concessions, avoid litigation or
put an end to one already commenced. Unfortunately for petitioners, the
compromise that they effected is wanting of one of the essential requisites of a valid
and binding compromise--consent of all the parties in the case. It is undisputed that
only Roberto entered into a lease contract with petitioners. Mena did not sign it, but
on the contrary, denounces its execution as being done in evident bad faith and
without authority from her as the sole owner of the property. Considering that Mena
did not participate in the execution of the lease contract, the compromise is not
binding on her. In addition, the compromise is also not valid even between
petitioners and Roberto because the records show that the land in question is
indeed a paraphernal prope1iy of Mena. Without an authorization showing that
Roberto is acting on behalf of Mena, he has no right and power to enter into a lease
contract involving Mena's exclusive property. Besides, even assuming that the
property is conjugally owned by respondent-spouses, this does not bestow upon
Roberto the power to enter into a lease contract without the consent of his wife. We
have explained in Roxas v. Court of Appeals, that consent of the wife is required for
lease of a conjugal realty for a period of more than one year, such lease being
considered a conveyance and encumbrance under the provisions of the Civil Code.

DRA. MERCEDES OLIVER vs. PHILIPPINE SAVINGS BANK & LILIA CASTRO
G.R. No. 214567, April 4, 2016
Mendoza, J.

FACTS:

Castro convinced Oliver to loan out her 12 Million Peso deposit in PSbank as
bridge financing for the approved loans of bank borrowers. The loan would then
charge 4% a month from the loan proceeds as bridge interest and in turn, Castro
would earn a commission of 10% from such interest.

25
 Because of the great returns of the transaction Oliver was persuaded by
Castro to obtain a credit line worth 10 Million pesos that was secured by a real
estate mortgage. The petitioner found out that Castro did not pay the balances of the
loan as instructed by him and that there were fraudulent transactions. The
petitioner saw the final demand letter sent to her.

ISSUE:

Whether or not a contract of agency exists between Oliver and Castro?

HELD:

In this case, Oliver and Castro had a business agreement wherein Oliver
would obtain loans from the bank, through the help of Castro as its branch manager;
and after acquiring the loan proceeds, Castro would lend the acquired amount to
prospective borrowers who were waiting for the actual release of their loan
proceeds. Oliver would gain 4% to 5% interest per month from the loan proceeds of
her borrowers, while Castro would earn a commission of 10% from the interests.
Clearly, an agency was formed because Castro bound herself to render some service
in representation or on behalf of Oliver, in the furtherance of their business pursuit.

A contract of agency may be inferred from all the dealings between Oliver
and Castro. Agency can be express or implied from the acts of the principal, from his
silence or lack of action, or his failure to repudiate the agency knowing that another
person is acting on his behalf without authority. The question of whether an agency
has been created is ordinarily a question which may be established in the same way
as any other fact, either by direct or circumstantial evidence. The question is
ultimately one of intention.

Accordingly, the laws on agency apply to their relationship. Article 1881 of the New
Civil Code provides that the agent must act within the scope of his authority. He may
do such acts as may be conducive to the accomplishment of the purpose of the
agency. Thus, as long as the agent acts within the scope of the authority given by his
principal, the actions of the former shall bind the latter.

MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY vs. RICHARD E.

UNCHUAN
G.R. No. 182537, June 1, 2016
MENDOZA, J.

FACTS:

26
 Respondent claims he is the rightful owner of the two parcels of land which
he bought from the heirs of one Eugenio Godinez which it turned out that the lot was
sold by Atanacio Godinez, the attorney-in fact to the CAA, which is the predecessor
of MCIAA. He also claims that there was no valid special power of attorney executed
in favor of the heirs.
Therefore, respondent prays for the nullity of the absolute sale against
MCIAA
ISSUE:

Whether the sale between Anatacio and MCIAA is valid?

HELD:

The Court finds that the sale transaction executed between Atanacio, acting
as an agent of his fellow registered owners, and the CAA was indeed void insofar as
the other registered owners were concerned. They were represented without a
written authority from them clearly in violation of the requirement under Articles
1874 and 1878 of the Civil Code, which provide:

Art. 1874. When a sale of a piece of land or any interest therein is through an agent,
the authority of the latter shall be in writing; otherwise, the sale shall be void.

Art. 1878. Special powers of attorney are necessary in the following cases:

xxx

(5) To enter into any contract by which the ownership of an immovable is

transmitted or acquired either gratuitously or for a valuable consideration;

xxx
The significance of requiring the authority of an agent to be put into writing
was amplified in Dizon v. Court of Appeals:

When the sale of a piece of land or any interest thereon is through an agent,
the authority of the latter shall be in writing; otherwise, the sale shall be void. Thus
the authority of an agent to execute a contract for the sale of real estate must be
conferred in writing and must give him specific authority, either to conduct the
general business of the principal or to execute a binding contract containing terms
and conditions which are in the contract he did execute. A special power of attorney
is necessary to enter into any contract by which the ownership of an immovable is
transmitted or acquired either gratuitously or for a valuable consideration. The
express mandate required by law to enable an appointee of an agency (couched) in
general terms to sell must be one that expressly mentions a sale or that includes a
sale as a necessary ingredient of the act mentioned. For the principal to confer the
right upon an agent to sell real estate, a power of attorney must so express the

27
powers of the agent in clear and unmistakable language. When there is any
reasonable doubt that the language so used conveys such power, no such
construction shall be given the document.

Without a special power of attorney specifying his authority to dispose of an

immovable, Atanacio could not be legally considered as the representative of the
other registered co-owners of the properties in question. Atanacio's act of conveying
Lot No. 4810-A and Lot No. 4810-B cannot be a valid source of obligation to bind all
the other registered co-owners and their heirs because he was not clothed with any
authority to enter into a contract with CAA. The other heirs could not have given
their consent as required under Article 1475 of the New Civil Code because there
was no meeting of the minds among the other registered co-owners who gave no
written authority to Atanacio to transact on their behalf. Therefore, no contract was
perfected insofar as the portions or shares of the other registered co-owners or their
heirs were concerned.

Thus, the Court cannot give any weight either to the Deed of Partition of Lot
No. 4810, Open Cadastre (subsequently executed by all the heirs of Ambrosio and
Sotera Godinez to the effect that they had acknowledged the sale of the subject lots
in favor of CAA) or to other documents (such as Joint Affidavit of Confirmation of
Sale of Alloted Shares Already Adjudicated and Quitclaim of a Portion of Lot No.
4810, Open Cadastre) all of which gave the impression that they had ratified the sale
of the subject lots in favor of CAA, MCIAA's predecessor-in-interest.

The rule is that a void contract produces no effect either against or in favor of
anyone and cannot be ratified. Similarly, laches will not set in against a void
transaction, as in this case, where the agent did not have a special power of attorney
to dispose of the lots co-owned by the other registered owners. In fact, Article 1410
of the Civil Code specifically provides that an action to declare the inexistence of a
void contract does not prescribe.

The transaction entered into by Atanacio and CAA, however, was not entirely
void because the lack of consent by the other co-owners in the sale was with respect
to their shares only. Article 493 of the New Civil Code expressly provides:

Art. 493. Each co-owner shall have the full ownership of his part and the
fruits and benefits pertaining thereto, and he may therefore alienate, assign or
mortgage it, and even substitute another person in its enjoyment, except when
personal rights are involved. But the effect of the alienation or the mortgage, with
respect to the co-owners, shall be limited to the portion which may be allotted to
him in the division upon the termination of the co-ownership.
The quoted provision recognizes the absolute right of a co-owner to freely
dispose of his pro indivisoshare as well as the fruits and other benefits arising from
that share, independently of the other co-owners. The sale of the subject lots affects
only the seller's share pro indiviso, and the transferee gets only what corresponds to

28
his grantor's share in the partition of the property owned in common. Since a co-
owner is entitled to sell his undivided share, a sale of the entire property by one co-
owner without the consent of the other co-owners is not null and void; only the
rights of the co-owner/seller are transferred, thereby making the buyer a co-owner
of the property.

In the case at bench, although the sale transaction insofar as the other heirs
of the registered owners was void, the sale insofar as the extent of Atanacio's
interest is concerned, remains valid. Atanacio was one of the registered co-owners of
the subject lots, but he was not clothed with authority to transact for the other co-
owners. By signing the deed of sale with the CAA, Atanacio effectively sold his
undivided share in the lots in question. Thus, CAA became a co-owner of the
undivided subject lots. Accordingly, Atanacio's heirs could no longer alienate
anything in favor of Unchuan because he already conveyed his pro indiviso share to
CAA.

MICHAEL C. GUY vs. ATTY. GLENN C. GACOTT

G.R. No. 206147, January 13, 2016
MENDOZA, J.

FACTS:

Respondent bought two brand new transrecievers from Quantech Systems

Corporation in Manila. The materials after testing it out were in fact defective that is
why the respondent returned them and asked for replacements.

Afterwards, Quantech failed to replace the items and the price paid by the
respondent. Hence, the complaint for Damagaes. While the case was pending, it
turned out that Quantech was not a corporation but a General Partnership and the
petitioner was the General Manager.

ISSUE:

Whether or not the General Manager is solidarily liable with the partnership?

HELD:

Partners liability is subsidiary and generally joint; immediate levy upon the
property of a partner cannot be made.

Granting that Guy was properly impleaded in the complaint, the execution of
judgment would be improper. Article 1816 of the Civil Code governs the liability of
the partners to third persons, which states that:

29
Article 1816. All partners, including industrial ones, shall be liable pro rata with all
their property and after all the partnership assets have been exhausted, for the
contracts which may be entered into in the name and for the account of the
partnership, under its signature and by a person authorized to act for the
partnership. However, any partner may enter into a separate obligation to perform a
partnership contract.
In this case, had he been properly impleaded, Guys liability would only arise
after the properties of QSC would have been exhausted. The records, however,
miserably failed to show that the partnerships properties were exhausted. The
report of the sheriff showed that the latter went to the main office of the DOTC-LTO
in Quezon City and verified whether Medestomas, QSC and Guy had personal
properties registered therein. Gacott then instructed the sheriff to proceed with the
attachment of one of the motor vehicles of Guy. The sheriff then served the Notice of
Attachment/Levy upon Personalty to the record custodian of the DOTC-LTO of
Mandaluyong City. A similar notice was served to Guy through his housemaid at his
residence.
Clearly, no genuine efforts were made to locate the properties of QSC that
could have been attached to satisfy the judgment contrary to the clear mandate of
Article 1816. Being subsidiarily liable, Guy could only be held personally liable if
properly impleaded and after all partnership assets had been exhausted.
Second, Article 1816 provides that the partners obligation to third persons with
respect to the partnership liability is pro rata or joint.1a wphi1 Liability is joint when
a debtor is liable only for the payment of only a proportionate part of the debt. In
contrast, a solidary liability makes a debtor liable for the payment of the entire debt.
In the same vein, Article 1207 does not presume solidary liability unless: 1) the
obligation expressly so states; or 2) the law or nature requires solidarity. With
regard to partnerships, ordinarily, the liability of the partners is not solidary. The
joint liability of the partners is a defense that can be raised by a partner impleaded
in a complaint against the partnership.
In other words, only in exceptional circumstances shall the partners liability be
solidary in nature. Articles 1822, 1823 and 1824 of the Civil Code provide for these
exceptional conditions, to wit:
Article 1822. Where, by any wrongful act or omission of any partner acting in the
ordinary course of the business of the partnership or with the authority of his co-
partners, loss or injury is caused to any person, not being a partner in the
partnership, or any penalty is incurred, the partnership is liable therefor to the same
extent as the partner so acting or omitting to act.
Article 1823. The partnership is bound to make good the loss:
(1) Where one partner acting within the scope of his apparent authority receives
money or property of a third person and misapplies it; and
(2) Where the partnership in the course of its business receives money or property
of a third person and the money or property so received is misapplied by any
partner while it is in the custody of the partnership.
Article 1824. All partners are liable solidarily with the partnership for
everything chargeable to the partnership under Articles 1822 and 1823.

30
In essence, these provisions articulate that it is the act of a partner which caused
loss or injury to a third person that makes all other partners solidarily liable with
the partnership because of the words "any wrongful act or omission of any partner
acting in the ordinary course of the business," "one partner acting within the scope
of his apparent authority" and "misapplied by any partner while it is in the custody
of the partnership." The obligation is solidary because the law protects the third
person, who in good faith relied upon the authority of a partner, whether such
authority is real or apparent.

In the case at bench, it was not shown that Guy or the other partners did a
wrongful act or misapplied the money or property he or the partnership received
from Gacott. A third person who transacted with said partnership can hold the
partners solidarily liable for the whole obligation if the case of the third person falls
under Articles 1822 or 1823. Gacotts claim stemmed from the alleged defective
transreceivers he bought from QSC, through the latter's employee, Medestomas. It
was for a breach of warranty in a contractual obligation entered into in the name
and for the account of QSC, not due to the acts of any of the partners. For said reason,
it is the general rule under Article 1816 that governs the joint liability of such
breach, and not the exceptions under Articles 1822 to 1824. Thus, it was improper
to hold Guy solidarily liable for the obligation of the partnership.

TARCISIO S. CALILUNG vs. PARAMOUNT INSURANCE et. al.

G.R. No. 195641, July 11, 2016
BERSAMIN, J

FACTS:
Petitioner was an interested buyer of the shares of stock of RP Technical
Services, Inc. (RPTSI). He communicated this intention to Punzalan, the president of
the corporation. However, the directors and stockholders was not in agreement of
the proposal presented by the petitioner because it will result to a total control of
the corporation by the petitioner. He was only allowed to buy a limited amount of
shares and its remaining balance would be used to finance a project that was being
undertaken by RPTSI. Petitioner was issued a promissory note guaranteed by a
surety bond by the respondent corporation.

Unfortunately, the promissory note became due and RPTSI failed to pay the
amount of the promissory note. Hence, the petitioner filed a complaint for sum of
money against RPTSI and Paramount. The RTC ruled in favor of the petitioner and
ordered respondent to pay the obligation. The Supreme Court affirmed the decision
of he lower court The petitioner afterwards filed a motion for execution at the RTC
and claimed to The petitioner then filed a motion for execution at the RTC, and
claimed entitlement to also collect the compound interest.

ISSUE:

31
 Whether or not the obligation earned a compound interest.

HELD:

The only interest to be collected from the respondents is the 14% per annum
on the principal obligation of 718,750.00 reckoned from October 7, 1987 until full
payment. There was no basis for the petitioner to claim compounded interest
pursuant to Article 2212 of the Civil Code considering that the judgment did not
include such obligation. As such, neither the RTC nor any other court, including this
Court, could apply Article 2212 of the Civil Code because doing so would infringe the
immutability of the judgment. Verily, the execution must conform to, and not vary
from, the decree in the final and immutable judgment. It is cogent to observe that
under the express terms of the judgment, the respondents' obligation to pay the
interest per annum was joint and several. This meant that the respondents were in
passive solidarity in relation to the petitioner as their creditor, enabling him to
compel either or both of them to pay the entire obligation to him. Stated differently,
each of the respondents was a debtor of the whole as to the petitioner, but each
respondent, as to the other, was only a debtor of a part.

SPS. JUAN CHUY TAN and MARY TAN substituted by their surviving heirs, JOEL
TAN and ERIC TAN, vs.CHINA BANKING CORPORATIION
G.R. No. 200299, April 18, 2016
PEREZ, J.

FACTS:

Petitioner secured several loans by covered by promissory notes from

respondent on 1997. It contained that if the petitioner defaults in payment there
will be an additional 1% interest per day of the total amount of obligation upto the
time the obligation is fully paid. A real estate mortgage was evidenced as security to
the payment of loan. Afterwards, the petitioner failed to pay the obligation, which
resulted to the foreclosure of the real estate mortgaged executed.

Respondent bank then moved the properties sold by way of auction after due
notice and publication. China Bank was the highest bidder in the auction and
therefore acquired the property. However, the property was not enough to satisfy
the loan obligation of the petitioner. The respondent bank demanded for the
remaining balance to the petitioner but there was no compliance or
acknowledgement.

The trial court ordered the petitioner to pay for the remaining balance. But
the petitioner argued that the property that was acquired through auction by the
bank was already enough to satisfy the loan obligation. Hence the petition.

32
ISSUE:

Whether or not the foreclosed properties are enough to settle the obligation?

HELD:

The Court anchored its decision in favor of respondent following the

provisions on payment of debts under the Civil Code, particularly Articles 1252 and
1253. In this case, petitioner has the option to apply the amount of sale of its
foreclosed real properties. However, petitioner is silent on the application of the sale
of its real properties which gave respondent the right to elect or choose where the
proceeds of the sale should be applied. Subsequently, respondent chose to apply the
proceeds to cover the incurred penalties and interest incurred by petitioner on its
loan obligation. Consequently, petitioner having the wrong assumption, thought that
the total amount of the sale of its real properties by respondent fully covered its
indebtedness. Applying Article 1252 of the Civil Code, if the debtor who has different
kinds of debts to one creditor failed to give preference on the application of its
payment, the right to choose to which the same may be applied passes on to the
creditor. While Article 1253 pertains to debts having incurred interests, petitioner is
on the wrong assumption that the sale of its real properties covered both interest
and the principal of its debt.

Respondent, having the right to choose the application of the sale of the real
properties it foreclosed first to choose the payment of the interest and surcharges of
the principal debt. Hence, applying Article 1253, the principal debt is not deemed
settled without first covering the interest incurred. As to this case, only the interest
of the debt were covered by the total amount of sale of petitioners real properties.
Hence, the obligation of petitioner to respondent has not been fully extinguished as
it still has the performance to pay the remaining balance.

TECHNO DEVELOPMENT & CHEMICAL CORPORATION vs. VIKING METAL

INDUSTRIES, INCORPORATED
G.R. No. 203179, July 4, 2016
PERALTA, J.

FACTS:

Respondent bid a proposal to supply various fabricated items to PNOC-EDC

for its first 40 MW Mindanao-Geothermal project. After the project was awarded to
the respondent, they met with the petitioner, who manufactures an anti-rust primer

33
called Ultrazinc Primer. The petitioner supplied the primer and the necessary
personnel to supervise the application on the fabricated items. The fabricated items
in turn were supplied to PNOC-EDC. However, the fabricated items begun developing
rust. Respondent then demanded for the pull-out of the items in the expense of the
petitioner. Then, PNOC-EDC prompted the respondent to finish the project as
scheduled and if delay will be incurred they will be liable.
Because of the delay the contract price was decreased by PNOC-EDC.
Therefore, respondent claims for sum of money and damages against PNOC-EDC for
the remaining balance of the contract price, and against the petitioner for the alleged
repairs done on the damaged fabricated items.

ISSUE:

Whether or not petitioner is entitled to exemplary damages and attorneys fees?

HELD:

No, it is not. Article 2234 of the Civil Code of the Philippines requires a party
to first prove that he is entitled to moral, temperate or compensatory damages
before he can be awarded exemplary damages. Moreover, Article 2220 of the same
Code provides that in breaches of contract, moral damages may be awarded when
the party at fault acted fraudulently or in bad faith. Thus, to justify an award for
exemplary damages, the wrongful act must be accompanied by bad faith, and an
award of damages would be allowed only if the guilty party acted in a wanton,
fraudulent, reckless or malevolent manner. In the instant case, there is no showing
that VMI failed to pay for its purchased paint products fraudulently or in bad faith.
The Court, therefore, does not find Techno to be entitled to exemplary damages.
As to Techno's claim for the award of attorney's fees in the amount of
P200,000.00, as well as an honorarium of P5,000.00 per appearance, the Court finds
said amounts to be inconsistent with the stipulation on the Delivery Receipts and
Invoices submitted by Techno which provides that "the buyer agrees to pay x x x in
case of an action is filed in Court, an additional Twenty-Five (25%) Per Cent of the
total amount of the obligation due and demandable, in the nature of attorney's fees."
Thus, instead of the P200,000.00 attorney's fees, as well as the P5,000.00
honorarium per appearance, the award of attorney's fees must be computed on the
basis of said stipulation, which provides for a twenty-five percent (25%) charge on
the total amount due to petitioner Techno.

SPS. MAMERTO and ADELIA TIMADO vs. RURAL BANK OF SAN JOSE et. al.
G.R. No. 201436, July 11, 2016
BRION, J.

FACTS:

34
 Petitioners executed a real estate mortgage over a parcel of land and a chattel
mortgae over a rice mill machinery and a diesel engine as security to a loan from
Rural Bank of San Jose.

After the petitioners failed to pay the obligation, the bank informed them that
it will foreclose the mortgages. Then the petitioners filed for the reformation of
instruments and prayed for a TRO and damages. No writ was issued by the court
therefore the bank continued with the extra judicial foreclosure of the properties
and they were the highest bidder at the public auction. The title was consolidated in
favor of the bank due to the failure of the petitioners to redeem the property within
one year.

ISSUE:

Whether or not the petitioners are entitled for damages?

HELD:

Exemplary or corrective damages are imposed by way of example or

correction for the public good, in addition to moral, temperate, liquidated, or
compensatory damages. The award of exemplary damages is allowed by law as a
warning to the public and as a deterrent against the repetition of socially deleterious
actions. The requirements for an award of exemplary damages to be proper are as
follows: First, they may be imposed by way of example or correction only in
addition, among others, to compensatory damages, and cannot be recovered as a
matter of right, their determination depending upon the amount of compensatory
damages that may be awarded to the claimant. Second, the claimant must first
establish his right to moral, temperate, liquidated, or compensatory damages. And
third, the wrongful act must be accompanied by bad faith; and the award would be
allowed only if the guilty party acted in a wanted, fraudulent, reckless, oppressive, or
malevolent manner. In the light of the appellate courts finding that the respondents
are not entitled to moral damages, the award of exemplary damages, too, must be
deleted for lack of legal basis.

ANNA MARIE L. GUMABON vs. PHILIPPINE NATIONAL BANK

G.R. No. 202514, July 25, 2016
BRIION, J.

FACTS:

Anna Marie Gumabon has eight savings accounts with her mother and
siblings with respondent PNB. The petitioner called Salvoro, the employee of PNB
who handle their accounts, and requested for its consolidation. When Gumabon

35
went to the bank to withdraw the money, she was denied access because her records
were missing and Salvoro was nowhere to be found. Afterwards, PNB resolved the
issue and consolidated the accounts and issued a passbook. Petitioner then filed for
damages.

ISSUE:

Whether the petitioner is entitled to damages?

HELD:

Yes, she is. Section 2 of Republic Act No. 8791, declares the States recognition of the
fiduciary nature of banking that requires high standards of integrity and
performance. PNB was negligent for its failure to update and properly handle Anna
Maries accounts. The bank is not absolved from liability by the fact that it was the
banks employee who committed the wrong and caused damage to the depositor.
Article 2180 of the New Civil Code provides that the owners and managers of an
establishment are responsible for damages caused by their employees while
performing their functions. The Court agrees with the RTC that the PNB failed to
substantiate its allegation that Anna Marie was guilty of contributory
negligence. In the present case, Anna Marie cannot be held responsible for
entrusting her account with Salvoro. As shown in the records, Salvoro was the banks
time deposit specialist. In these lights, we hold that Anna Marie is entitled to moral
damages of P100,000.00. In cases of breach of contract, moral damages are
recoverable only if the defendant acted fraudulently or in bad faith, or is guilty of
gross negligence amounting to bad faith, or in clear disregard of his contractual
obligations. Anna Marie was able to establish the mental anguish and serious
anxiety that she suffered because of the PNBs refusal to honor its obligations. Anna
Marie is likewise entitled to exemplary damages of P50,000.00. Article 2229 of the
New Civil Code imposes exemplary damages by way of example or correction for the
public good. To repeat, banks must treat the accounts of its depositors with
meticulous care and always have in mind the fiduciary nature of its relationship with
them. Exemplary damages are awarded herein and as Anna Marie was compelled to
litigate to protect her interests, the award of attorneys fees and expenses of
litigation of P150,000.00 is proper.

TORRES-MADRID BROKERAGE, INC. vs. FEB MITSUI MARINE INSURANCE CO.,

INC.
G.R. 194121, July 11, 2016
BRION, J.

FACTS:

36
 Sony Philippines, Inc. (Sony) has engaged the services of petitioner to ship
various electronic goods from Thailand and Malaysia to its warehouse in Laguna.
TMBI subcontracted the services of BMT trucking services to transport the goods
from the port of Manila to Laguna warehouse. Sony knew of the contract between
BMT and TMBI. The trucks of BMT arrived and picked up the goods however they
cannot leave the port due to truck ban and the following day was a Sunday.
Therefore, there was a delay for two days. Come delivery day only three trucks
arrived at the warehouse while the fourth truck was found abandoned on a road
with the driver and the shipment missing. TMBI then demanded payment from MBT
for the lost shipment but BMT refused. BMT alleged that the goods were hijacked.
On the other hand, Sony filed a claim on its insurer of goods, which was Mitsui,
which in turn demanded payment from TMBI.

ISSUE:

Whether or not TMBI or BMT may be held liable for quasi- delict?

HELD:

In the present case, the shipper, Sony, engaged the services of TMBI, a
common carrier, to facilitate the release of its shipment and deliver the goods to its
warehouse. In turn, TMBI subcontracted a portion of its obligation the delivery of
the cargo to another common carrier, BMT. Despite the subcontract, TMBI
remained responsible for the cargo. Under Article 1736, a common carriers
extraordinary responsibility over the shippers goods lasts from the time these
goods are unconditionally placed in the possession of, and received by, the carrier
for transportation, until they are delivered, actually or constructively, by the carrier
to the consignee. That the cargo disappeared during transit while under the custody
of BMT TMBIs subcontractor did not diminish nor terminate TMBIs
responsibility over the cargo. Article 1735 of the Civil Code presumes that it was at
fault. We disagree with the lower courts ruling that TMBI and BMT are solidarily
liable to Mitsui for the loss as joint tortfeasors. Notably, TMBIs liability to Mitsui
does not stem from a quasi-delict (culpa aquiliana) but from its breach of contract
(culpa contractual).

We likewise disagree with the finding that BMT is directly liable to

Sony/Mitsui for the loss of the cargo. While it is undisputed that the cargo was lost
under the actual custody of BMT (whose employee is the primary suspect in the
hijacking or robbery of the shipment), no direct contractual relationship existed
between Sony/Mitsui and BMT. If at all, Sony/Mitsuis cause of action against BMT
could only arise from quasi-delict, as a third party suffering damage from the action
of another due to the latters fault or negligence, pursuant to Article 2176 of the Civil
Code. In culpa contractual, the plaintiff only needs to establish the existence of the

37
contract and the obligors failure to perform his obligation. On the other hand, the
plaintiff in culpa aquiliana must clearly establish the defendants fault or negligence
because this is the very basis of the action. In the present case, Mitsuis action is
solely premised on TMBIs breach of contract. Mitsui did not even sue BMT, much
less prove any negligence on its part. If BMT has entered the picture at all, it is
because TMBI sued it for reimbursement for the liability that TMBI might incur from
its contract of carriage with Sony/Mitsui. Accordingly, there is no basis to directly
hold BMT liable to Mitsui for quasi-delict.

MANILA ELECTRIC COMPANY vs. SPOUSES SULPICIO & PATRICIA RAMOS

G.R. No. 195145, February 10, 2016
BRION, J.

FACTS:

Respondents availed of the services of the respondent. Thereby resulting to a

contract of service wherein the electric company will supply electricity to the
residence of respondent. Meralco installed an electric meter outside the front wall of
the spouses Sales. When the service inspector of Meralco conducted an inspection
on the respondents electric meter, they found out that there was an illegal
connection made by the spouses Sales. Meralco disconnected the electricity supply
of the respondent without their knowledge as they were not at home during the
inspection.
When the respondents found out that they have no electricity and that there
connection was disconnected, they filed a complaint for Breach of Contract with
Preliminary Mandatory Injunction.

ISSUE:
Whether or not the respondents are entitled to damages?

HELD:

Central in this case, as to the ruling laid out by the Court, is the entitlement of
respondents to damages resulting from MERALCOs unlawful disconnection of their
electricity supply. Respondents entitlement first to actual damages is tenable due to
the reason that as to MERALCOs refusal to re-connect respondents electricity
supply, respondents endured for long eight (8) months without electricity and their
daily expenses on food and other households increased.

However, the Court finds it reasonable to discuss the tenor of actual damages and its
justification for award where it discussed actual damages in the case of Viron
Transportation Co., Inc. v. Delos Santos, the Court elaborated the requisites of actual
damages that first, there must be a pleading of proof of the damages suffered, it
further ruled that for actual damages to be able to recover it must be proved
substantially and with reasonable certainty. As courts cannot simply rely on mere

38
conjecture and assumption, as there must be a presence of proof or evidence to be
carefully determined.

As in this case, respondents were able to establish that there was in fact actual
damages when Patricia Ramos testified about the eight (8) months that they do not
have electricity, and they were forced to transfer residence as evidenced by the
Contract of Lease and the receipts of monthly rentals amounting to Php 210,000.00.
In this contention of respondent, the Court correctly ruled on the award of actual
damages resulting from the unlawful disconnection of respondents electricity
supply.

As to the award of moral damages, the Court likewise laid out that the award of
moral damages must also be proved. As to this case, as respondents have to endure
their daily living without electricity, it caused respondents not just physical
discomfort, but as well as moral discomfort. Respondents further contended that
they were subject of gossips on their neighborhood that they were disconnected of
electrical supply because of their illegal connection which resulted to their decision
leaving their residence.

The Court, in this case properly awarded to respondents actual and moral damages,
as the unlawful disconnection of their electricity by MERALCO caused discomfort
and suffering physically and psychologically.

As to the exemplary damages, the Court stressed that the same is designed as a
corrective measure for the benefit of the general public. Due to the unlawful
disconnection of respondents electricity, the same must be corrected to prevent
such culpable act of repetition on other similar circumstances. In this case, the Court
properly awarded exemplary damages against MERALCO which serves as a warning
to the public on the deterrence of culpable acts.

39