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Stronghold Insurance v Republic Asahi

Republic Asahi Glass contracts with JDS for the construction of roadways and
drainage systems in RAG's compound. JDS does so and files the required
compliance bond with Stronghold Insurance acting as surety. The contract is
5.3M the bond is 795k. JDS falls woefully behind schedule, prompting RAG to
rescind the contract and demand the compliance bond. The owner of JDS
dies and JDS disappears. SHI refuses to pay the bond claiming that the death
of JDS owner extinguishes the obligation.
Issue: Whether or not the death of JDS owner extinguishes the obligation
As a general rule, the death of either the creditor or the debtor does not extinguish the
obligation. Obligations are transmissible to the heirs, except when the transmission is
prevented by the law, the stipulations of the parties, or the nature of the obligation.
Only obligations that are personal or are identified with the persons themselves
are extinguished by death. Furthermore, The liability of petitioner is
contractual in nature, because it executed a performance bond, As a surety,
petitioner is solidarily liable with Santos in accordance with the Civil Code.
G.R. No. 146365 February 28, 2005
In August 1983, petitioner Palanca executed a contract to sell a parcel of
land on installment with Jopson for P11,250. Jopson paid petitioner P1,650 as
downpayment, leaving a balance of P9600. In December 1983, Jopson
assigned ad transferred all her rights and interests over the property to
respondent Guides. Believing that she had fully paid the purchase prize,
respondent found out when she verified with the Register of Deeds that the
property in question was still in the name of de Leon. Petitioner stated that
she refused to execute the document of sale in favor of the respondent since
the latter failed with the said obligation- that he was not paid the complete
amount in the contract. RTC ruled in favor of the plaintiff and against
Palanca, ordering him to execute a Deed of Absolute Sale and the issuance of
TCT, reimburse plaintiff the amount paid n excess and for damages.
Whether the petitioners claim of unpaid charges from the respondent proper

Petitioner was deemed to have waived his right to present evidence and thus
was unable to adduce evidence of such inflation or fluctuation. Even if there
were such, petitioner did not make a demand on respondent for the
satisfaction of the claim.
When petitioner accepted respondents installment payments despite the
alleged charges, and without any showing that he protested the irregularity
of such payment, nor demanded the payment of the alleged charges,
respondents liability, if any for said charges is deemed fully satisfied.
GR No. 137549 February 11, 2005
A complaint for recovery of possession was filed by Aurelio P. Alonzo and
Teresita A. Sison against Jaime and Perlita San Juan docketed as Civil Case
No. Q-96-29415 before the Regional Trial Court (RTC) of Quezon City, Branch
77. In their Complaint, plaintiffs alleged that they are the registered owners
of a parcel of land. At around June of 1996, plaintiffs discovered that a
portion on the left side of the said parcel of land with an area of one hundred
twenty-five (125) square meters, more or less, was occupied by the
defendants for more than a year, without their prior knowledge or consent. A
demand letter was sent to the defendants in August of 1996 requiring them
to vacate the property but they refused to comply; hence, the filing of the
Complaint. During the pendency of the case, the parties agreed to enter into
a Compromise Agreement which the trial court approved in a Judgment.
Alleging that they failed to abide by the provisions of the Compromise
Agreement by their failure to pay the amounts due thereon, plaintiffs sent a
letter demanding that the defendants vacate the premises. Plaintiffs
subsequently filed an Amended Motion for Execution. Acting on the motion,
the trial court issued its Order dated 11 August 1998 denying the motion.
Is the RTC decision correct?
In herein case, the respondents failed to discharge their burden of proving
payment. Even assuming that payments were made, it has not been shown
to the full satisfaction of this Court whether the payments were made
specifically to satisfy respondents obligation under the Compromise
Agreement, nor were the circumstances under which the payments were
made explained, taking into consideration the conditions of the Compromise
Agreement. Respondents contract with the petitioners have the force of law
between them. Respondents are thus bound to fulfill what has been
expressly stipulated therein. Items 11 and 12 of the Compromise Agreement
provided, in clear terms, that in case of failure to pay on the part of the
respondents, they shall vacate and surrender possession of the land that

they are occupying and the petitioners shall be entitled to obtain

immediately from the trial court the corresponding writ of execution for the
ejectment of the respondents. This provision must be upheld, because the
Agreement supplanted the Complaint itself. When the parties entered into a
Compromise Agreement, the original action for recovery of possession was
set aside and the action was changed to a monetary obligation. Once
approved judicially, the Compromise Agreement can not and must not be
disturbed except for vices of consent or forgery.
The Allandale Sportline, Inc (ASI) obtained a loan amounting to P204, 000.00 from The
Good Development Corporation (GDI) after having executed a promissory note and
provided an additional security in the form of a deed of mortgage in favor of GDC.
The terms and conditions of the promissory note signed by Melbarose S. Sasot
and Allandale R. Sasot, the President and Vice-President of the company respectively
and the deed of mortgage are as follows:
1. The loan is to be paid daily in equal installments amounting to P 2,000.00 at an
interest of 26 % per annum;
2. In case of default in payment the whole obligation shall be due and demandable
and shall be subject to liquidate penalty/collection charge at a rate of 2 % of the
principal amount;
3. The failure of the Mortgagors to comply with the terms of the promissory note
and the mortgage contract, the mortgagee shall automatically have the absolute
right without a need of demand to foreclose the mortgage and proceed
against all or any of the mortgaged rights, interests and properties for the full
satisfaction of the mortgagors entire obligation to the mortgagee;
4. The mortgagee shall also be liable for the payment of attorneys fees equivalent
to 25%of the unpaid debt and all expenses and incidental cost.
On June 24, 1991, ASI failed to comply with their obligation and GDC demanded that
the unpaid account of 179,000. On October 31, 1991 ASI sent the respondent a posted
check amounting to 171,000.00 which GDC eventually rejected since the check
amount is insufficient for the loan balance of the principal loan. On October 15,
1997, petitioners tendered cash payment of 171,000.00 and on October 29, 1991
amounting to 174,986.96 and still the respondent still refused to accept the payment
due to insufficiency of the amount. When no payment was made, GDC filed a complaint
for sum of Money with damages against ASI.
Whether or not ASI tender of payment and GDC refusal thereof discharged petitioners
from their obligation

NO. The tender of payment do not result in the payment and extinguishment of
the loan obligation. Tender of payment must be followed by a valid consignation in
order to produce the effect of payment and extinguish the obligation. It is but a
preparatory act to consignation. It is the manifestation by the debtor of a desire to
comply with or pay an obligation. If refused without just cause, the tender of payment
will discharge the debtor of the obligation to pay but only after a valid consignation of
the sum due shall have been made with the proper court. ASI did not allege or prove
that their tender of payment was rejected by respondents; they attempted or pursed
132284,February 28,2006
Petitioner is a domestic corporation while US Lines is a foreign corporation
engaged in overseas shipping. It was made applicable that consignees who
fail to take delivery of their containerized cargo within the 10-day free period
are liable to pay demurrage charges. On June 22, 1981, US Lines filed a suit
against petitioner seeking payment of demurrage charges plus interest and
damages. Petitioner incurred P94,000 which the latter refused to pay despite
repeated demands. Petitioner disclaims liability alleging that it has never
entered into a contract nor signed an agreement to be bound by it. RTC ruled
that petitioner is liable to respondent and all be computed as of the date of
payment in accordance with Article 1250 of the Civil Code. CA affirmed the
Whether the re-computation of the judgment award in accordance with
Article 1250 of the Civil Code proper
The Supreme Court found as erroneous the trial courts decision as affirmed
y the Court of Appeals. The Court holds that there has been an extraordinary
inflation within the meaning of Article 1250 of the Civil Code. There is no
reason for ordering the payment of an obligation in an amount different from
what has been agreed upon because of the purported supervention of an
extraordinary inflation.
The assailed decision is affirmed with modification that the order for recomputation as of the date of payment in accordance with the provisions of
Article 1250 of New Civil Code is deleted.
G.R.No. 150806, January 28, 2008

In May 1997, Bathala Marketng, renewed its Contract of Lease with Ponciano
Almeda. Under the contract, Ponciano agreed to lease a portion of Almeda
Compound for a monthly rental of P1, 107, 348.69 for four years. On January
26, 1998, petitioner informed respondent that its monthly rental be
increased by 73% pursuant to the condition No. 7 of the contract and Article
1250. Respondent refused the demand and insisted that there was no
extraordinary inflation to warrant such application. Respondent refused to
pay the VAT and adjusted rentals as demanded by the petitioners but
continually paid the stipulated amount. RTC ruled in favor of the respondent
and declared that plaintiff is not liable for the payment of VAT and the
adjustment rental, there being no extraordinary inflation or devaluation. CA
affirmed the decision deleting the amounts representing 10% VAT and rental
Whether the amount of rentals due the petitioners should be adjusted by
reason of extraordinary inflation or devaluation
Petitioners are stopped from shifting to respondent the burden of paying the
VAT. 6th Condition states that respondent can only be held liable for new
taxes imposed after the effectivity of the contract of lease, after 1977, VAT
cannot be considered a new tax. Neither can petitioners legitimately
demand rental adjustment because of extraordinary inflation or devaluation.
Absent an official pronouncement or declaration by competent authorities of
its existence, its effects are not to be applied.
Petition is denied. CA decision is affirmed.
October 23, 2009
Respondents-spouses Lina Wong Lim (Lina) and Johnson Sychingho (Johnson)
borrowed from petitioner Joseph Typingco (Typingco) the sum of US$600,000 which
was later restructured, payable on or before December 31, 1997, under a promissory
note executed by the spouses and co-signed by their children-co-respondents as
sureties. Following their default in payment, Lina, Jerry, and Jackson
conveyed on January 29, 1998 to Typingco via dacion en pago their house
and lot in Greenhills, San Juan, covered by TCT No. 6259-R, after first paying
respondent Far East Bank and Trust Company (FEBTC) the balance of a

promissory note to clear the title of a Real Estate Mortgage annotated

thereon in favor of FEBTC. However, FEBTC refused to hand over the title,
contending that the respondent-Sychinghos had unsettled obligations
as sureties.
Whether or not respondent Sychinghos had the right to sell or convey title
to the subject property at the time of the dacion en pago
Sychinghos had the right to convey title. As there was no previous
foreclosure of the mortgage on the subject property, Sychinghos ownership
thereof remained intact. Indeed, a mortgage does not affect the ownership of
the property as it is nothing more than a lien thereon serving as security for
a debt. The mortgagee does not acquire title thereto. Whatever obligation
the Sychinghos may still owe BPI (then FEBTC), this is not a concern of
petitioner as he is not a party to the loan documents covering it. Since
petitioner agreed to the full extinguishment of respondent-spouses then
outstanding obligation in view of the unconditional conveyance to him of the subject
property, there is a perfected and enforceable dacion en pago. He
should thus enjoy full entitlement to the subject property. However,
surrender of the certificate of title will not impair any existing mortgage on
the subject property. It is an elementary principle in civil law that a real
estate mortgage subsists notwithstanding changes in ownership, and all
subsequent purchasers of the property must respect the mortgage.
G.R. No. 141434, September 23, 2003
411 SCRA 523
Antonio Lo acquired two parcels of land with an office constructed thereon in
an auction sale on November 9,1995 from the Land Bank of the Philippines.
At variance, private respondent National Onion Growers Cooperative
Marketing Association, Inc. was the occupant of the parcels of land under a
subsisting contract of lease with Land Bank. The lease was valid until
December 31,1995.
Upon the expiration of the lease contract, Lo demanded that private
respondent vacate the leased premises and surrender its possession to him.
The agricultural cooperative refused on the ground of a contest against
petitioners acquisition of the parcels of land in an action for annulment of
sale, redemption and damages.
On February 23,1996, petitioner filed an action for ejectment and
subsequently asked for imposition of the contractually stipulated penalty of
P5, 000 per day of delay in surrendering the possession of the property.

Thereafter, the trial court decided the case in favor of petitioner. Private
respondent was ordered to vacate the leased premises. On appeal to the
Regional Trial Court, the MTC decision was affirmed in toto. The agricultural
cooperative then elevated the case to the court of Appeals that affirmed the
lower courts decision but modified that the penalty to be imposed must be
reduced to P1, 000.
Unsatisfied with the decision of the CA, Lo filed the instant petition for
The issue raised by the petitioner is whether or not the Court of Appeals has
the authority to reduce the penalty awarded by the trial court, the same
having been stipulated by the parties in their Contract of Lease.
YES, the Court of Appeals has the authority to do so. While 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, courts may equitably reduce a
stipulated penalty 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 that 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 courts if
it is iniquitous or unconscionable.
G.R. No. 150731 | 2007-09-14(Failure of plaintiff to deny genuineness and
due execution of a document constitutes judicial admission)
Casent Realty Development Corp. executed two promissory notes in favor of
Rare Realty. These promissory notes were used by Rare Realty as a security
for a loan that Rare Realty obtained from Philbanking wherein a Deed of
Assignment was executed. When Rare Realty failed to pay its debt, the bank
went after the security of the loan. The bank demanded payment based on
the promissory notes issued by Casent Realty Corp to Rare Realty by virtue
of the deed of assignment. On a separate loan with Philbanking, Casent
Realty satisfied its obligation by executing a Dacion en pago. Philbanking
filed for a complaint for the collection of payment against Casent based on
the promissory notes. Casent Realty, in its answer, raised that a Dacion en
pago was already executed which extinguished its obligation. Philbanking

failed to file a reply. Casent Realty points out that the defense of Dacion and
Confirmation Statement, which were submitted in the Answer, should have
been specifically denied under oath by respondent in accordance with Rule 8,
Section 8 of the Rules of Court. Its failure constituted an admission on the
part of the bank. Philbanking claimed that even though it failed to file a
Reply, all the new matters alleged in the Answer are deemed controverted
anyway, pursuant to Rule 6, Section 10: Section 10. Reply.--A reply is a
pleading, the office or function of which is to deny, or allege facts in denial or
avoidance of new matters alleged by way of defense in the answer and
thereby join or make issue as to such new matters. If a party does not file
such reply, all the new matters alleged in the answer are deemed
GR No. 126890; April 2, 2009
In 1987, the Republic of the Philippines lost around 1.5 Billion Pesos after it
had waived its right to collect on an outstanding indebtedness from
petitioner, by virtue of a so-called friendly foreclosure agreement that
ultimately was friendly only to petitioner.
Petitioner United Planters Sugar Milling Co. (UPSUMCO) was engaged in the
business of milling sugar. In 1974, as UPSUMCO commenced operations, it
obtained a set of loans from respondent Philippine National Bank (PNB). The
loans were secured over two parcels of land where the milling plant stood
and chattel mortgages over the machineries and equipment.
On 27 February 1987, through a Deed of Transfer, PNB assigned to the
Government its rights, titles and interests over UPSUMCO, among several
other assets.[6] The Deed of Transfer acknowledged that said assignment
was being undertaken in compliance with Presidential Proclamation No.
50. The Government subsequently transferred these rights, titles and
interests over UPSUMCO to the respondent Asset and Privatization Trust
Whether or not there was compensation in the present case.
The right of PNB to set-off payments from UPSUMCO arose out of
conventional compensation rather than legal compensation, even though all
of the requisites for legal compensation were present as between those two
parties. The determinative factor is the mutual agreement between PNB and
UPSUMCO to set-off payments. Even without an express agreement
stipulating compensation, PNB and UPSUMCO would have been entitled to
set-off of payments, as the legal requisites for compensation under Article
1279 were present.

As soon as PNB assigned its credit to APT, the mutual creditor-debtor relation
between PNB and UPSUMCO ceased to exist. However, PNB and UPSUMCO
had agreed to a conventional compensation, a relationship which does not
require the presence of all the requisites under Article 1279. And PNB too
had assigned all its rights as creditor to APT, including its rights under
conventional compensation. The absence of the mutual creditor-debtor
relation between the new creditor APT and UPSUMCO cannot negate the
conventional compensation. Accordingly, APT, as the assignee of credit of
PNB, had the right to set-off the outstanding obligations of UPSUMCO on the
basis of conventional compensation before the condonation took effect on 3
September 1987.