SOURCES OF OBLIGATION

THE METROPOLITAN BANK AND TRUST COMPANY vs

ANA GRACE ROSALES AND YO YUK TO

G.R. No. 183204, January 13, 2014

FACTS:
Petitioner Metrobank is a domestic banking corporation duly organized and
existing under the laws of the Philippines. Respondent Rosales is the owner of a travel
agency while Yo Yuk To is her mother.
In 2000, respondents opened a Joint Peso Account10 with petitioner’s Pritil-
Tondo Branch.
In May 2002, respondent Rosales accompanied her client Liu Chiu Fang, a
Taiwanese National applying for a retiree’s visa from the Philippine Leisure and
Retirement Authority (PLRA), to petitioner’s branch in Escolta to open a savings account.
Since Liu Chiu Fang could speak only in Mandarin, respondent Rosales acted as an
interpreter for her.
On March 3, 2003, respondents opened with petitioner’s Pritil-Tondo Branch a
Joint Dollar Account with an initial deposit of US$14,000.00.
On July 31, 2003, petitioner issued a “Hold Out” order against respondents’
accounts.
On September 3, 2003, petitioner, through its Special Audit Department Head
Antonio Ivan Aguirre, filed before the Office of the Prosecutor of Manila a criminal casefor
Estafa through False Pretences, Misrepresentation, Deceit, and Use of Falsified
Documents.
Respondent Rosales, however, denied taking part in the fraudulent and
unauthorized withdrawal from the dollar account of Liu Chiu Fang.
On December 15, 2003, the Office of the City Prosecutor of Manila issued a
Resolution dismissing the criminal case for lack of probable cause. On September 10,
2004, respondents filed before the RTC of Manila a complaint for Breach of Obligation
and Contract with Damages.

ISSUE:
Whether Metrobank breached its contract with respondents.

HELD:
YES. The Court held that Metrobank’s reliance on the “Hold Out” clause in the
Application and Agreement for Deposit Account is misplaced.
Bank deposits, which are in the nature of a simple loan or mutuum, must
be paid upon demand by the depositor.
The “Hold Out” clause applies only if there is a valid and existing obligation
arising from any of the sources of obligation enumerated in Article 1157 of the Civil Code,
to wit: law, contracts, quasi-contracts, delict, and quasi-delict. In this case, petitioner failed
to show that respondents have an obligation to it under any law, contract, quasi-contract,
delict, or quasi-delict. And although a criminal case was filed by petitioner against
respondent Rosales, this is not enough reason for petitioner to issue a “Hold Out” order
as the case is still pending and no final judgment of conviction has been rendered against
respondent Rosales.
In fact, it is significant to note that at the time petitioner issued the “Hold Out”
order, the criminal complaint had not yet been filed. Thus, considering that respondent
Rosales is not liable under any of the five sources of obligation, there was no legal basis
for petitioner to issue the “Hold Out” order. Accordingly, we agree with the findings of the
RTC and the CA that the “Hold Out” clause does not apply in the instant case.
In view of the foregoing, the Court found that petitioner is guilty of breach of
contract when it unjustifiably refused to release respondents’ deposit despite demand.
Having breached its contract with respondents, petitioner is liable for damages.

FALLO:
WHEREFORE, the Petition is hereby DENIED. The assailed April 2, 2008
Decision and the May 30, 2008 Resolution of the Court of Appeals in CA-G.R. CV No.
89086 are hereby AFFIRMED.

QUASI- CONTRACT

[ G.R. No. 192105, December 09, 2013 ]

ANTONIO LOCSIN II, PETITIONER, VS. MEKENI FOOD

CORPORATION, RESPONDENT.

DECISION

DEL CASTILLO, J.:

In the absence of specific terms and conditions governing a car plan
agreement between the employer and employee, the former may not retain
the installment payments made by the latter on the car plan and treat them
as rents for the use of the service vehicle, in the event that the employee
ceases his employment and is unable to complete the installment payments
on the vehicle. The underlying reason is that the service vehicle was
precisely used in the former's business; any personal benefit obtained by
the employee from its use is merely incidental.

This Petition for Review on Certiorari[1] assails the January 27, 2010
Decision[2] of the Court of Appeals (CA) in CA-G.R. SP No. 109550, as well
as its April 23, 2010 Resolution[3] denying petitioner's Motion for Partial
Reconsideration.[4]
Factual Antecedents

In February 2004, respondent Mekeni Food Corporation (Mekeni) a

Philippine company engaged in food manufacturing and meat processing
offered petitioner Antonio Locsin II the position of Regional Sales Manager
to oversee Mekeni's National Capital Region Supermarket/Food Service
and South Luzon operations. In addition to a compensation and benefit
package, Mekeni offered petitioner a car plan, under which one-half of the
cost of the vehicle is to be paid by the company and the other half to be
deducted from petitioner's salary. Mekeni's offer was contained in an Offer
Sheet[5] which was presented to petitioner.

Petitioner began his stint as Mekeni Regional Sales Manager on March 17,
2004. To be able to effectively cover his appointed sales territory, Mekeni
furnished petitioner with a used Honda Civic car valued at P280,000.00,
which used to be the service vehicle of petitioner's immediate supervisor.
Petitioner paid for his 50% share through salary deductions of P5,000.00
each month.

Subsequently, Locsin resigned effective February 25, 2006. By then, a total

of P112,500.00 had been deducted from his monthly salary and applied as
part of the employee's share in the car plan. Mekeni supposedly put in an
equivalent amount as its share under the car plan. In his resignation letter,
petitioner made an offer to purchase his service vehicle by paying the
outstanding balance thereon. The parties negotiated, but could not agree on
the terms of the proposed purchase. Petitioner thus returned the vehicle to
Mekeni on May 2, 2006.

Petitioner made personal and written follow-ups regarding his unpaid

salaries, commissions, benefits, and offer to purchase his service vehicle.
Mekeni replied that the company car plan benefit applied only to employees
who have been with the company for five years; for this reason, the balance
that petitioner should pay on his service vehicle stood at P116,380.00 if he
opts to purchase the same.

On May 3, 2007, petitioner filed against Mekeni and/or its President,

Prudencio S. Garcia, a Complaint[6] for the recovery of monetary claims
consisting of unpaid salaries, commissions, sick/vacation leave benefits,
and recovery of monthly salary deductions which were earmarked for his
cost-sharing in the car plan. The case was docketed in the National Labor
Relations Commission (NLRC), National Capital Region (NCR), Quezon
City as NLRC NCR CASE NO. 00-05-04139-07.

On October 30, 2007, Labor Arbiter Cresencio G. Ramos rendered a

Decision,[7] decreeing as follows:

WHEREFORE, in the light of the foregoing premises, judgment is hereby

rendered directing respondents to turn-over to complainant x x x the
subject vehicle upon the said complainant's payment to them of the sum of
P100,435.84.

SO ORDERED.[8]
Ruling of the National Labor Relations Commission

On appeal,[9] the Labor Arbiter's Decision was reversed in a February 27,

2009 Decision[10] of the NLRC, thus:

WHEREFORE, premises considered, the appeal is hereby Granted. The

assailed Decision dated October 30, 2007 is hereby REVERSED and SET
ASIDE and a new one entered ordering respondent-appellee Mekeni Food
Corporation to pay complainant-appellee the following:

1. Unpaid Salary in the amount of P12,511.45;

2. Unpaid sick leave/vacation leave pay in the amount of P14,789.15;

3. Unpaid commission in the amount of P9,780.00; and

4. Reimbursement of complainant's payment under the car plan agreement

in the amount of P112,500.00; and

5. The equivalent share of the company as part of the complainant's benefit

under the car plan 50/50 sharing amounting to P112,500.00.

Respondent-Appellee Mekeni Food Corporation is hereby authorized to

deduct the sum of P4,736.50 representing complainant-appellant's cash
advance from his total monetary award.

All other claims are dismissed for lack of merit.

SO ORDERED.[11]
The NLRC held that petitioner's amortization payments on his service
vehicle amounting to P112,500.00 should be reimbursed; if not, unjust
enrichment would result, as the vehicle remained in the possession and
ownership of Mekeni. In addition, the employer's share in the monthly car
plan payments should likewise be awarded to petitioner because it forms
part of the latter's benefits under the car plan. It held further that Mekeni's
claim that the company car plan benefit applied only to employees who
have been with the company for five years has not been substantiated by its
evidence, in which case the car plan agreement should be construed in
petitioner's favor.

Mekeni moved to reconsider, but in an April 30, 2009 Resolution,[12] the

NLRC sustained its original findings.

Ruling of the Court of Appeals

Mekeni filed a Petition for Certiorari[13] with the CA assailing the NLRC's
February 27, 2009 Decision, saying that the NLRC committed grave abuse
of discretion in holding it liable to petitioner as it had no jurisdiction to
resolve petitioner's claims, which are civil in nature.

On January 27, 2010, the CA issued the assailed Decision, decreeing as

follows:

WHEREFORE, the petition for certiorari is GRANTED. The Decision of the

National Labor Relations Commission dated 27 February 2009, in NLRC
NCR Case No. 00-05-04139-07, and its Resolution dated 30 April 2009
denying reconsideration thereof, are MODIFIED in that the reimbursement
of Locsin's payment under the car plan in the amount of P112,500.00, and
the payment to him of Mekeni's 50% share in the amount of P112,500.00
are DELETED. The rest of the decision is AFFIRMED.

SO ORDERED.[14]
In arriving at the above conclusion, the CA held that the NLRC possessed
jurisdiction over petitioner's claims, including the amounts he paid under
the car plan, since his Complaint against Mekeni is one for the payment of
salaries and employee benefits. With regard to the car plan arrangement,
the CA applied the ruling in Elisco Tool Manufacturing Corporation v.
Court of Appeals,[15] where it was held that

First. Petitioner does not deny that private respondent Rolando Lantan
acquired the vehicle in question under a car plan for executives of the
Elizalde group of companies. Under a typical car plan, the company
advances the purchase price of a car to be paid back by the employee
through monthly deductions from his salary. The company retains
ownership of the motor vehicle until it shall have been fully paid for.
However, retention of registration of the car in the company's name is only
a form of a lien on the vehicle in the event that the employee would abscond
before he has fully paid for it. There are also stipulations in car plan
agreements to the effect that should the employment of the employee
concerned be terminated before all installments are fully paid, the vehicle
will be taken by the employer and all installments paid shall be considered
rentals per agreement.[16]
In the absence of evidence as to the stipulations of the car plan
arrangement between Mekeni and petitioner, the CA treated petitioner's
monthly contributions in the total amount of P112,500.00 as rentals for the
use of his service vehicle for the duration of his employment with Mekeni.
The appellate court applied Articles 1484-1486 of the Civil Code,[17] and
added that the installments paid by petitioner should not be returned to
him inasmuch as the amounts are not unconscionable. It made the
following pronouncement:

Having used the car in question for the duration of his employment, it is
but fair that all of Locsin's payments be considered as rentals therefor
which may be forfeited by Mekeni. Therefore, Mekeni has no obligation to
return these payments to Locsin. Conversely, Mekeni has no right to
demand the payment of the balance of the purchase price from Locsin since
the latter has already surrendered possession of the vehicle.[18]
Moreover, the CA held that petitioner cannot recover Mekeni's
corresponding share in the purchase price of the service vehicle, as this
would constitute unjust enrichment on the part of petitioner at Mekeni's
expense.

The CA affirmed the NLRC judgment in all other respects. Petitioner filed
his Motion for Partial Reconsideration,[19] but the CA denied the same in its
April 23, 2010 Resolution.
Thus, petitioner filed the instant Petition; Mekeni, on the other hand, took
no further action.

Issue

Petitioner raises the following solitary issue:

WITH ALL DUE RESPECT, THE HONORABLE COURT OF

APPEALS ERRED IN NOT CONSIDERING THE CAR PLAN
PRIVILEGE AS PART OF THE COMPENSATION PACKAGE
OFFERED TO PETITIONER AT THE INCEPTION OF HIS
EMPLOYMENT AND INSTEAD LIKENED IT TO A CAR LOAN ON
INSTALLMENT, IN SPITE OF THE ABSENCE OF EVIDENCE ON
RECORD.[20]
Petitioner's Arguments

In his Petition and Reply,[21] petitioner mainly argues that the CA erred in
treating his monthly contributions to the car plan, totaling P112,500.00, as
rentals for the use of his service vehicle during his employment; the car
plan which he availed of was a benefit and it formed part of the package of
economic benefits granted to him when he was hired as Regional Sales
Manager. Petitioner submits that this is shown by the Offer Sheet which
was shown to him and which became the basis for his decision to accept the
offer and work for Mekeni.

Petitioner adds that the absence of documentary or other evidence showing

the terms and conditions of the Mekeni company car plan cannot justify a
reliance on Mekeni's self-serving claims that the full terms thereof applied
only to employees who have been with the company for at least five years;
in the absence of evidence, doubts should be resolved in his favor pursuant
to the policy of the law that affords protection to labor, as well as the
principle that all doubts should be construed to its benefit.

Finally, petitioner submits that the ruling in the Elisco Tool case cannot
apply to his case because the car plan subject of the said case involved a car
loan, which his car plan benefit was not; it was part of his compensation
package, and the vehicle was an important component of his work which
required constant and uninterrupted mobility. Petitioner claims that the
car plan was in fact more beneficial to Mekeni than to him; besides, he did
not choose to avail of it, as it was simply imposed upon him. He concludes
that it is only just that his payments should be refunded and returned to
him.

Petitioner thus prays for the reversal of the assailed CA Decision and
Resolution, and that the Court reinstate the NLRC's February 27, 2009
Decision.

Respondent's Arguments

In its Comment,[22] Mekeni argues that the Petition does not raise questions
of law, but merely of fact, which thus requires the Court to review anew
issues already passed upon by the CA an unauthorized exercise given that
the Supreme Court is not a trier of facts, nor is it its function to analyze or
weigh the evidence of the parties all over again.[23] It adds that the issue
regarding the car plan and the conclusions of the CA drawn from the
evidence on record are questions of fact.

Mekeni asserts further that the service vehicle was merely a loan which had
to be paid through the monthly salary deductions. If it is not allowed to
recover on the loan, this would constitute unjust enrichment on the part of
petitioner.

Our Ruling

The Petition is partially granted.

To begin with, the Court notes that Mekeni did not file a similar petition
questioning the CA Decision; thus, it is deemed to have accepted what was
decreed. The only issue that must be resolved in this Petition, then, is
whether petitioner is entitled to a refund of all the amounts applied to the
cost of the service vehicle under the car plan.

When the conclusions of the CA are grounded entirely on speculation,

surmises and conjectures, or when the inferences made by it are manifestly
mistaken or absurd, its findings are subject to review by this Court.[24]

From the evidence on record, it is seen that the Mekeni car plan offered to
petitioner was subject to no other term or condition than that Mekeni shall
cover one-half of its value, and petitioner shall in turn pay the other half
through deductions from his monthly salary. Mekeni has not shown, by
documentary evidence or otherwise, that there are other terms and
conditions governing its car plan agreement with petitioner. There is no
evidence to suggest that if petitioner failed to completely cover one-half of
the cost of the vehicle, then all the deductions from his salary going to the
cost of the vehicle will be treated as rentals for his use thereof while
working with Mekeni, and shall not be refunded. Indeed, there is no such
stipulation or arrangement between them. Thus, the CA's reliance on Elisco
Tool is without basis, and its conclusions arrived at in the questioned
decision are manifestly mistaken. To repeat what was said in Elisco Tool

First. Petitioner does not deny that private respondent Rolando Lantan
acquired the vehicle in question under a car plan for executives of the
Elizalde group of companies. Under a typical car plan, the company
advances the purchase price of a car to be paid back by the employee
through monthly deductions from his salary. The company retains
ownership of the motor vehicle until it shall have been fully paid for.
However, retention of registration of the car in the company's name is only
a form of a lien on the vehicle in the event that the employee would abscond
before he has fully paid for it. There are also stipulations in car plan
agreements to the effect that should the employment of the
employee concerned be terminated before all installments are
fully paid, the vehicle will be taken by the employer and all
installments paid shall be considered rentals per
agreement.[25] (Emphasis supplied)
It was made clear in the above pronouncement that installments made on
the car plan may be treated as rentals only when there is an express
stipulation in the car plan agreement to such effect. It was therefore patent
error for the appellate court to assume that, even in the absence of express
stipulation, petitioner's payments on the car plan may be considered as
rentals which need not be returned.

Indeed, the Court cannot allow that payments made on the car plan should
be forfeited by Mekeni and treated simply as rentals for petitioner's use of
the company service vehicle. Nor may they be retained by it as purported
loan payments, as it would have this Court believe. In the first place, there
is precisely no stipulation to such effect in their agreement. Secondly, it
may not be said that the car plan arrangement between the parties was a
benefit that the petitioner enjoyed; on the contrary, it was an absolute
necessity in Mekeni's business operations, which benefited it to the fullest
extent: without the service vehicle, petitioner would have been unable to
rapidly cover the vast sales territory assigned to him, and sales or
marketing of Mekeni's products could not have been booked or made fast
enough to move Mekeni's inventory. Poor sales, inability to market
Mekeni's products, a high rate of product spoilage resulting from stagnant
inventory, and poor monitoring of the sales territory are the necessary
consequences of lack of mobility. Without a service vehicle, petitioner
would have been placed at the mercy of inefficient and unreliable public
transportation; his official schedule would have been dependent on the
arrival and departure times of buses or jeeps, not to mention the
availability of seats in them. Clearly, without a service vehicle, Mekeni's
business could only prosper at a snail's pace, if not completely paralyzed.
Its cost of doing business would be higher as well. The Court expressed just
such a view in the past. Thus

In the case at bar, the disallowance of the subject car

plan benefits would hamper the officials in the performance of
their functions to promote and develop trade which requires
mobility in the performance of official business. Indeed, the car
plan benefits are supportive of the implementation of the
objectives and mission of the agency relative to the nature of its
operation and responsive to the exigencies of the
service.[26] (Emphasis supplied)
Any benefit or privilege enjoyed by petitioner from using the service vehicle
was merely incidental and insignificant, because for the most part the
vehicle was under Mekeni's control and supervision. Free and complete
disposal is given to the petitioner only after the vehicle's cost is covered or
paid in full. Until then, the vehicle remains at the beck and call of Mekeni.
Given the vast territory petitioner had to cover to be able to perform his
work effectively and generate business for his employer, the service vehicle
was an absolute necessity, or else Mekeni's business would suffer adversely.
Thus, it is clear that while petitioner was paying for half of the vehicle's
value, Mekeni was reaping the full benefits from the use thereof.

In light of the foregoing, it is unfair to deny petitioner a refund of all his

contributions to the car plan. Under Article 22 of the Civil Code, "[e]very
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 to him." Article
2142[27] of the same Code likewise clarifies that there are certain lawful,
voluntary and unilateral acts which give rise to the juridical relation of
quasi-contract, to the end that no one shall be unjustly enriched or
benefited at the expense of another. In the absence of specific terms and
conditions governing the car plan arrangement between the petitioner and
Mekeni, a quasi-contractual relation was created between them.
Consequently, Mekeni may not enrich itself by charging petitioner for the
use of its vehicle which is otherwise absolutely necessary to the full and
effective promotion of its business. It may not, under the claim that
petitioner's payments constitute rents for the use of the company vehicle,
refuse to refund what petitioner had paid, for the reasons that the car plan
did not carry such a condition; the subject vehicle is an old car that is
substantially, if not fully, depreciated; the car plan arrangement benefited
Mekeni for the most part; and any personal benefit obtained by petitioner
from using the vehicle was merely incidental.

Conversely, petitioner cannot recover the monetary value of Mekeni's

counterpart contribution to the cost of the vehicle; that is not property or
money that belongs to him, nor was it intended to be given to him in lieu of
the car plan. In other words, Mekeni's share of the vehicle's cost was not
part of petitioner's compensation package. To start with, the vehicle is an
asset that belonged to Mekeni. Just as Mekeni is unjustly enriched by
failing to refund petitioner's payments, so should petitioner not be awarded
the value of Mekeni's counterpart contribution to the car plan, as this would
unjustly enrich him at Mekeni's expense.

There is unjust enrichment "when a person unjustly retains a benefit to the

loss of another, or when a person retains money or property of another
against the fundamental principles of justice, equity and good conscience."
The principle of unjust enrichment requires two conditions: (1) that a
person is benefited without a valid basis or justification, and (2) that such
benefit is derived at the expense of another.

The main objective of the principle against unjust enrichment is to prevent

one from enriching himself at the expense of another without just cause or
consideration. x x x[28]
WHEREFORE, the Petition is GRANTED IN PART. The assailed
January 27, 2010 Decision and April 23, 2010 Resolution of the Court of
Appeals in CA-G.R. SP No. 109550 are MODIFIED, in that respondent
Mekeni Food Corporation is hereby ordered to REFUND petitioner
Antonio Locsin II's payments under the car plan agreement in the total
amount of P112,500.00.

Thus, except for the counterpart or equivalent share of Mekeni Food

Corporation in the car plan agreement amounting to P112,500.00, which
is DELETED, the February 27, 2009 Decision of the National Labor
Relations Commission is affirmed in all respects.

SO ORDERED.

GR No. 178031, Aug 28, 2013 ]

VIRGINIA M. VENZON v. RURA[ L BANK OF BUENAVISTA

DEL CASTILLO, J.:

Before us is a Petition for Review on Certiorari[1] questioning the December
14, 2006 Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP No.
01341-MIN which dismissed the Petition in said case, as well as its May 7,
2007 Resolution[3] denying reconsideration thereof.

Factual Antecedents

On January 28, 2005, petitioner Virginia M. Venzon filed a Petition[4] to

nullify foreclosure proceedings and Tax Declaration Nos. 96-GR-06-003-
7002-R and 96-GR-06-003-7003-R issued in the name of respondent
Rural Bank of Buenavista (Agusan del Norte), Inc. The case[5] was docketed
as Civil Case No. 5535 and raffled to Branch 5 of the Regional Trial Court
(RTC) of Butuan City. Petitioner alleged that in 1983 she and her late
spouse, George F. Venzon, Sr., obtained a P5,000.00 loan from respondent
against a mortgage on their house and lot in Libertad, Butuan City, covered
by Tax Declaration Nos. 28289 and 42710 issued in their names, which
were later on replaced with Tax Declaration Nos. 96 GR-06-003-2884-R
and 96 GR-06-003-2885-R; that she was able to pay P2,300.00, thus
leaving an outstanding balance of only P2,370.00; that sometime in March
1987, she offered to pay the said balance in full, but the latter refused to
accept payment, and instead shoved petitioner away from the bank
premises; that in March 1987, respondent foreclosed on the mortgage, and
the property was sold at auction for P6,472.76 to respondent, being the
highest bidder; that the foreclosure proceedings are null and void for lack of
notice and publication of the sale, lack of sheriff's final deed of sale and
notice of redemption period; and that she paid respondent P6,000.00 on
October 9, 1995, as evidenced by respondent's Official Receipt No.
410848[6] issued on October 9, 1995.

In its Answer with Counterclaims,[7] respondent claimed that petitioner did

not make any payment on the loan; that petitioner never went to the bank
in March 1987 to settle her obligations in full; that petitioner was not
shoved and driven away from its premises; that the foreclosure proceedings
were regularly done and all requirements were complied with; that a
certificate of sale was issued by the sheriff and duly recorded in the Registry
of Deeds; that petitioner's claim that she paid P6,000.00 on October 9,
1995 is utterly false; that petitioner's cause of action has long prescribed as
the case was filed only in 2005 or 18 years after the foreclosure sale; and
that petitioner is guilty of laches. Respondent interposed its counterclaim
for damages and attorney's fees as well.

In her Reply,[8] petitioner insisted that the foreclosure proceedings were

irregular and that prescription and laches do not apply as the foreclosure
proceedings are null and void to begin with.

Ruling of the Regional Trial Court

On July 13, 2006, the trial court issued a Resolution[9] dismissing Civil Case
No. 5535. It held that

The plaintiff, however, may have erroneously relied the [sic] mandatorily
[sic] requirement of the aforestated provision of law upon failure to
consider that the other party is a Rural Bank. Under the R.A. No. 720 as
amended, (Rural Bank Act) property worth exceeding P100,000.00 [sic] is
exempt from the requirement of publication. This may have been the
reason why the foreclosure prosper [sic] without the observance of the
required publication. Moreover, neither in the said applicable laws provide
[sic] for the impairment of the extrajudicial foreclosure and the subsequent
sale to the public. The Court ruled in Bonnevie, et al. vs. CA, et al. that Act
[N]o. 3135 as amended does not require personal notice to the mortgagor.
In the same view, lack of final demand or notice of redemption are [sic] not
considered indispensable requirements and failure to observe the same
does not render the extrajudicial foreclosure sale a nullity.[10]
In other words, the trial court meant that under the Rural Banks Act, the
foreclosure of mortgages covering loans granted by rural banks and
executions of judgments thereon involving real properties levied upon by a
sheriff shall be exempt from publication where the total amount of the loan,
including interests due and unpaid, does not exceed P10,000.00.[11] Since
petitioner's outstanding obligation amounted to just over P6,000.00
publication was not necessary.

Petitioner moved for reconsideration,[12] but in the September 6, 2006

Resolution,[13] the trial court denied the same.

Ruling of the Court of Appeals

Petitioner went up to the CA via an original Petition for Certiorari.[14] On

December 14, 2006, the CA issued the first assailed
Resolution[15] dismissing the Petition. It held that petitioner's remedy
should have been an appeal under Rule 41 of the Rules of Court since the
July 13, 2006 Resolution is a final order of dismissal. Petitioner received
the Resolution denying her Motion for Reconsideration on September 18,
2006;[16] but she filed the Petition for Certiorari on October 25, 2006 when
she should have interposed an appeal on or before October 3, 2006. Having
done so, her Petition may not even be treated as an appeal for the same was
belatedly filed.

The CA added that the Petition does not provide a sufficient factual
background of the case as it merely alleges a chronology of the legal
remedies she took before the trial court which does not comply with the
requirement under Section 3 of Rule 46.[17]

Petitioner moved for reconsideration[18] by submitting a rewritten Petition.

However, in a Resolution dated May 7, 2007, the CA denied the same,
hence the present Petition.

Issues

Petitioner submits the following assignment of errors:

 I

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS

REVERSIBLY ERRED IN DISMISSING THE PETITION FOR
CERTIORARI THEREBY PREVENTING THE COURT FROM FINDING
OUT THAT ACTUALLY NO EXTRAJUDICIAL FORECLOSURE WAS
CONDUCTED BY THE OFFICE OF THE PROVINCIAL SHERIFF ON
PETITIONER'S PROPERTY AT THE INSTANCE OF THE PRIVATE
RESPONDENT.

II

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS

REVERSIBLY ERRED IN NOT DISREGARDING TECHNICALITIES IN
ORDER TO ADMINISTER SUBSTANTIAL JUSTICE TO THE
PETITIONER.[19]
Petitioner's Arguments

Petitioner claims that no extrajudicial foreclosure proceedings ever took

place, citing a February 2, 2005 Certification issued by the Office of the
Clerk of Court of Butuan City stating that the record pertaining to the
foreclosure proceedings covering her property "could not be found [in
spite] of diligent efforts to find the same."[20] And because no foreclosure
proceedings took place, there could not have been notice and publication of
the sale, and no sheriff's certificate of sale. For this reason, she claims that
the CA erred in dismissing her case.

Petitioner adds that, technicalities aside, a Petition for Certiorari is

available to her in order to prevent the denial of her substantial rights. She
also argues that her payment to respondent of the amount of P6,000.00 in
1995 should be considered as a valid redemption of her property.

Respondent's Arguments

For its part, respondent merely validates the pronouncements of the CA by

citing and echoing the same, and holding petitioner to a strict observance of
the rules for perfecting an appeal within the reglementary period, as it
claims they are necessary for the orderly administration of justice,[21] as well
as that which requires that only questions of law may be raised in a Petition
for Review on Certiorari.

Our Ruling

The Court denies the Petition.

The Court finds no error in the CA's treatment of the Petition

for Certiorari. The trial court's July 13, 2006 Resolution dismissing the
case was indeed to be treated as a final order, disposing of the issue of
publication and notice of the foreclosure sale which is the very core of
petitioner's cause of action in Civil Case No. 5535 and declaring the same to
be unnecessary pursuant to the Rural Banks Act, as petitioner's outstanding
obligation did not exceed P10,000.00, and thus leaving petitioner without
basis to maintain her case. This constitutes a dismissal with the character of
finality. As such, petitioner should have availed of the remedy under Rule
41, and not Rule 65.

The Court is not prepared to be lenient in petitioner's case, either. Civil

Case No. 5535 was instituted only in 2005, while the questioned foreclosure
proceedings took place way back in 1987. Petitioner's long inaction and
commission of a procedural faux pas certainly cannot earn the sympathy of
the Court.

Nor can the Court grant the Petition on the mere allegation that no
foreclosure proceedings ever took place. The February 2, 2005 Certification
issued by the Office of the Clerk of Court of Butuan City to the effect that
the record of the foreclosure proceedings could not be found is not
sufficient ground to invalidate the proceedings taken. Petitioner herself
attached the Sheriff's Certificate of Sale[22] as Annex "A" of her Petition in
Civil Case No. 5535; this should belie the claim that no record exists
covering the foreclosure proceedings. Besides, if petitioner insists that no
foreclosure proceedings took place, then she should not have filed an action
to annul the same since there was no foreclosure to begin with. She should
have filed a different action.

However, petitioner is entitled to a return of the P6,000.00 she paid to

respondent in 1995. While this may not be validly considered as a
redemption of her property as the payment was made long after the
redemption period expired, respondent had no right to receive the amount.
In its Answer with Counterclaims in Civil Case No. 5535, respondent simply
alleged therein that

10. Defendant DENIES the allegations under paragraph 10 of the

petition for being utterly false, highly self-serving and patently
speculative, the truth being ---

 Assumption cannot be had that there was an alleged foreclosure of

the then property of the petitioner for the truth of the matter is that a
foreclosure proceeding was duly conducted, which fact remains
undisputable for so many years now.

 Without necessarily admitting that payment of P6,000.00

was made, the same however could hardly and could never be
considered as redemption price for the following reasons ---

The redemption period had long lapsed when the payment of

P6,000.00 was allegedly made. Thus, there is no point talking about
redemption price when the redemption period had long been gone at
the time the alleged payment was made.

Even x x x granting, without conceding, that the amount of P6,000.00

was a redemption price, said amount, however, could not constitute as a
legal redemption price since the same was not enough to cover the
entire redemption price as mandated by the rules and
laws.[23] (Emphases supplied)
Interestingly, respondent did not deny being the issuer of Official Receipt
No. 410848. Instead, it averred that petitioner's payment to it of P6,000.00
was false and self-serving, but in the same breath argued that, without
necessarily admitting that payment of P6,000.00 was made, the same
cannot be considered as redemption price.

By making such an ambiguous allegation in its Answer with Counterclaims,

respondent is deemed to have admitted receiving the amount of P6,000.00
from petitioner as evidenced by Official Receipt No. 410848, which amount
under the circumstances it had no right to receive. "If an allegation is not
specifically denied or the denial is a negative pregnant, the allegation is
deemed admitted."[24] "Where a fact is alleged with some qualifying or
modifying language, and the denial is conjunctive, a 'negative pregnant'
exists, and only the qualification or modification is denied, while the fact
itself is admitted."[25] "A denial in the form of a negative pregnant is an
ambiguous pleading, since it cannot be ascertained whether it is the fact or
only the qualification that is intended to be denied."[26] "[P]rofession of
ignorance about a fact which is patently and necessarily within the pleader's
knowledge, or means of knowing as ineffectual, [is] no denial at all."[27] In
fine, respondent failed to refute petitioner's claim of having paid the
amount of P6,000.00.

Since respondent was not entitled to receive the said amount, as it is

deemed fully paid from the foreclosure of petitioner's property since its bid
price at the auction sale covered all that petitioner owed it by way of
principal, interest, attorney's fees and charges,[28] it must return the same
to petitioner. "If something is received when there is no right to demand it,
and it was unduly delivered through mistake, the obligation to return it
arises."[29] Moreover, pursuant to Circular No. 799, series of 2013 of
the Bangko Sentral ng Pilipinas which took effect July 1, 2013, the amount
of P6,000.00 shall earn interest at the rate of 6% per annum computed
from the filing of the Petition in Civil Case No. 5535 up to its full
satisfaction.

WHEREFORE, premises considered, the Petition is DENIED. The

December 14, 2006 and May 7, 2007 Resolutions of the Court of Appeals in
CA-G.R. SP No. 01341-MIN are AFFIRMED.

However, respondent Rural Bank of Buenavista (Agusan del Norte), Inc.

is ORDERED to return to petitioner Virginia M. Venzon or her assigns the
amount of P6,000.00, with interest at the rate of 6% per annum computed
from the filing of the Petition in Civil Case No. 5535 up to its full
satisfaction.

SO ORDERED.

DOMINGO GONZALO, Petitioner,

vs.

JOHN TARNATE, JR., Respondent.

 G.R. No. 160600 January 15, 2014

PONENTE: Bersamin, J.

TOPIC: Void or inexistent contract

FACTS:

After the DPWH had awarded on July 22, 1997 the contract for the improvement
of the Sadsadan-Maba-ay Section of the Mountain Province-Benguet Road to his
company, Gonzalo Construction, petitioner Gonzalo subcontracted to respondent
Tarnate on October 15, 1997, the supply of materials and labor for the project under the
latter’s business known as JNT Aggregates. Their agreement stipulated, among others,
that Tarnate would pay to Gonzalo eight percent and four percent of the contract price,
respectively, upon Tarnate’s first and second billing in the project.

In furtherance of their agreement, Gonzalo executed on April 6, 1999 a deed of

assignment whereby he, as the contractor, was assigning to Tarnate an amount equivalent
to 10% of the total collection from the DPWH for the project. This 10% retention fee was
the rent for Tarnate’s equipment that had been utilized in the project. In the deed of
assignment, Gonzalo further authorized Tarnate to use the official receipt
of Gonzalo Construction in the processing of the documents relative to the collection of
the 10% retention fee and in encashing the check to be issued by the DPWH for that
purpose. The deed of assignment was submitted to the DPWH on April 15, 1999. During
the processing of the documents for the retention fee, however, Tarnate learned
that Gonzalo had unilaterally rescinded the deed of assignment by means of an affidavit
of cancellation of deed of assignment dated April 19, 1999 filed in the DPWH on April 22,
1999; and that the disbursement voucher for the 10% retention fee had then been issued
in the name of Gonzalo, and the retention fee released to him.

Tarnate demanded the payment of the retention fee from Gonzalo, but to no
avail.

ISSUE:

Whether or not the subcontract and deed of assignment are void contracts.

HELD:

YES. The Court held that the subcontract agreement and deed of assignment
between Gonzalo and Tarnate are void for being contrary to law. However, even though
both parties are in pare delicto the Court allowed Tarnate to recover his retention fee, as
an exception, due to unjust enrichment.
Contract is void

Every contractor is prohibited from subcontracting with or assigning to another

person any contract or project that he has with the DPWH unless the DPWH Secretary
has approved the subcontracting or assignment. Gonzalo, who was the sole contractor of
the project in question, subcontracted the implementation of the project to Tarnate in
violation of the statutory prohibition. Their subcontract was illegal, therefore, because it
did not bear the approval of the DPWH Secretary. Necessarily, the deed of assignment
was also illegal, because it sprung from the subcontract.

Obviously, without the Sub-Contract Agreement there will be no Deed of

Assignment to speak of. The illegality of the Sub-Contract Agreement necessarily affects
the Deed of Assignment because the rule is that an illegal agreement cannot give birth to
a valid contract. To rule otherwise is to sanction the act of entering into transaction the
object of which is expressly prohibited by law and thereafter execute an apparently valid
contract to subterfuge the illegality. The legal proscription in such an instance will be
easily rendered nugatory and meaningless to the prejudice of the general public.

Under Article 1409 (1) of the Civil Code, a contract whose cause, object or
purpose is contrary to law is a void or inexistent contract. As such, a void contract cannot
produce a valid one. To the same effect is Article 1422 of the Civil Code, which declares
that “a contract, which is the direct result of a previous illegal contract, is also void and
inexistent.”

Rigid application of in pare delicto in void contracts; exception

According to Article 1412 (1) of the Civil Code, the guilty parties to an illegal
contract cannot recover from one another and are not entitled to an affirmative relief
because they are in pari delicto or in equal fault. The doctrine of in pari delicto is a
universal doctrine that holds that no action arises, in equity or at law, from an illegal
contract; no suit can be maintained for its specific performance, or to recover the property
agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation;
and where the parties are in pari delicto, no affirmative relief of any kind will be given to
one against the other.

Nonetheless, the application of the doctrine of in pari delicto is not always rigid.
An accepted exception arises when its application contravenes well-established public
policy.

There is no question that Tarnate provided the equipment, labor and materials
for the project in compliance with his obligations under the subcontract and the deed of
assignment; and that it was Gonzalo as the contractor who received the payment for his
contract with the DPWH as well as the 10% retention fee that should have been paid to
Tarnate pursuant to the deed of assignment. Considering that Gonzalo refused despite
demands to deliver to Tarnate the stipulated 10% retention fee that would
have compensated the latter for the use of his equipment in the project, Gonzalo would
be unjustly enriched at the expense of Tarnate if the latter was to be barred from
recovering because of the rigid application of the doctrine of in pari delicto. The
prevention of unjust enrichment called for the exception to apply in Tarnate’s favor.

Metropolitan Bank vs. Absolute Management Corp. | G.R. No. 170498 | January 9,
2013

Facts: Metrobank deposited the AMC checks to Ayala Lumber and Hardware’s
account; because of Chua’s control over AMC’s operations, Metrobank assumed that
the checks payable to AMC could be deposited to Ayala Lumber and Hardware’s
account.

Ayala Lumber and Hardware had no right to demand and receive the checks that were
deposited to its account; despite Chua’s control over AMC and Ayala Lumber and
Hardware, the two entities are distinct, and checks exclusively and expressly payable to
one cannot be deposited in the account of the other.

In its fourth-party complaint, Metrobank claims that Chua’s estate should reimburse it if
it becomes liable on the checks that it deposited to Ayala Lumber and Hardware’s
account.

Issue: Whether or not Ayala Lumber must return the amount of said checks to
Metrobank.

Held: Metrobank acted in a manner akin to a mistake when it deposited the AMC
checks to Ayala Lumber and Hardware’s account because it assumed that the checks
payable to AMC could be deposited to Ayala Lumber and Hardware’s account. This
disjunct created an obligation on the part of Ayala Lumber and Hardware, through its
sole proprietor, Chua, to return the amount of these checks to Metrobank.

This fulfills the requisites of solutio indebiti. Metrobank’s fourth-party complaint falls
under the quasi-contracts enunciated in Article 2154 of the Civil Code. Article 2154
embodies the concept "solutio indebiti" which arises when something is delivered
through mistake to a person who has no right to demand it. It obligates the latter to
return what has been received through mistake. Solutio indebiti, as defined in Article
2154 of the Civil Code, has two indispensable requisites: first, that something has been
unduly delivered through mistake; and second, that something was received when there
was no right to demand it.

G.R. No. 198799, March 20, 2017

BANK OF THE PHILIPPINE ISLANDS, Petitioner, v. AMADO M. MENDOZA AND MARIA MARCOS VDA.
DE MENDOZA, Respondents.

DECISION
 PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 is the Decision2 dated February 4, 2011 and the
Resolution3 dated August 26, 2011 of the Court of Appeals (CA) in CA-G.R. CV No. 91704, which reversed
and set aside the Decision4 dated May 9, 2007 of the Regional Trial Court of Gapan City, Nueva Ecija,
Branch 87 (RTC) in Civil Case No. 1913, and consequently, dismissed the complaint filed by petitioner Bank
of the Philippine Islands (BPI) against respondents Amado M. Mendoza (Amado) and his mother, Maria
Marcos vda. de Mendoza (Maria; collectively, respondents).

The Facts

This case stemmed from a Complaint for Sum of Money with Application for Writ of Attachment5 filed by BPI
against respondents before the RTC. BPI alleged that on April 8, 1997, respondents: (a) opened a foreign
currency savings account with Account No. 0584-0007-08 (US savings account) at BPI-Gapan Branch and
deposited therein the total amount of US$16,264.00, broken down as follows: US$100.00 in cash and
US$16,164.00 in US Treasury Check with No. 3149-09693369 payable to "Ma. Marcos Vda. de Mendoza"
(subject check); and (b) placed the amount of US$2,000.00 in a time deposit account. After the lapse of the
thirty (30)-day clearing period on May 9 and 13, 1997, respondents withdrew the amount of US$16,244.00
from the US savings account, leaving only US$20.00 for bank charges.6However, on June 26, 1997, BPI
received a notice from its correspondent bank, Bankers Trust Company New York (Bankers Trust), that the
subject check was dishonored due to "amount altered",7 as evidenced by (1) an electronic mail (e-mail)
advice from Bankers Trust,8 and (2) a photocopy of the subject check with a notation "endorsement
cancelled" by Bankers Trust9 as the original copy of the subject check was allegedly confiscated by the
government of the United States of America (US government).10 This prompted BPI to inform respondents of
such dishonor and to demand reimbursement.11 BPI then claimed that: (a) on July 18, 1997, respondents
allowed BPI to apply the proceeds of their time deposit account in the amount ofUS$2,015.00 to their
outstanding obligation;12 (b) upon the exhaustion of the said time deposit account, Amado gave BPI a
promissory note dated September 8, 1997 containing his promise to pay BPI-Gapan Branch the amount of
P1,000.00 monthly;13 and (c) when respondents failed to fulfill their obligation despite repeated demands,
BPI was constrained to give a final demand letter14 to respondents on November 27, 1997.15

For their part, while respondents admitted the withdrawals and exchanged the same with BPI at the rate of
P26.159 per dollar, they did not receive the amount of P582,140.00 from the proceeds. Respondents then
maintained that Amado only affixed his signature in the letter dated July 18, 1997 in order to acknowledge
its receipt, but not to give his consent to the application of the proceeds of their time deposit account to
their purported obligations to BPI. According to Amado, he would have been willing to pay BPI, if only the
latter presented proper and authenticated proof of the dishonor of the subject check. However, since the
bank failed to do so, Amado argued that BPI had no cause of action against him and his mother, Maria.16

The RTC Ruling

In a Decision17 dated May 9, 2007, the RTC ruled in BPI's favor, and accordingly, ordered respondents to
pay: (a) P369,600.51 representing the peso equivalent of amounts withdrawn by respondent less the
amounts already recovered by BPI, plus legal interest of 12% per annum reckoned from the time the money
was withdrawn; and (b) 10% of the aforesaid monetary award representing attorney's fees. 18

The RTC found that: (a) BPI duly notified respondents of the dishonor of the subject check, thus, creating an
obligation on the part of the respondents to return the proceeds that they had already withdrawn; and (b)
Amado unmistakably acknowledged the same by executing a promissory note dated September 8, 1997
promising to pay BPI-Gapan Branch the amount of P1,000.00 monthly in connection with such obligation. In
this regard, the RTC opined that since respondents withdrew the money prior to the dishonor and that BPI
allowed such withdrawal by mistake, it is only proper that respondents return the proceeds of the same
pursuant to the principle of solutio indebiti under Article 2154 of the Civil Code. 19

Aggrieved, respondents appealed to the CA.20

The CA Ruling
In a Decision21 dated February 4, 2011, the CA reversed and set aside the RTC's ruling, and consequently,
dismissed BPI's complaint for lack of merit.22 It held that BPI failed to prove the dishonor of the subject
check, since: (a) the presentation of a mere photocopy of the subject check is in violation of the Best
Evidence Rule; and (b) the e-mail advice from Bankers Trust was not properly authenticated in accordance
with the Rules on Electronic Evidence as the person who sent the e-mail advice was neither identified nor
presented in court. As such, the CA ordered the dismissal of the complaint due to BPI's failure to prove its
claim against respondents.23

Dissatisfied, BPI moved for reconsideration,24 which was, however, denied in a Resolution25 dated August
26, 2011; hence, this petition.

The Issue Before the Court

The primordial issue for the Court's resolution is whether or not the CA correctly dismissed BPI's complaint
for sum of money against respondents.

The Court's Ruling

The petition is meritorious.

As a general rule, the Court's jurisdiction in a petition for review on certiorari under Rule 45 of the Rules of
Court is limited to the review of pure questions of law. Otherwise stated, a Rule 45 petition does not allow
the review of questions of fact because the Court is not a trier of facts.26 Case law provides that "there is a
'question of law' when the doubt or difference arises as to what the law is on a certain set of facts or
circumstances; on the other hand, there is a 'question of fact' when the issue raised on appeal pertains to
the truth or falsity of the alleged facts. The test for determining whether the supposed error was one of 'law'
or 'fact' is not the appellation given by the parties raising the same; rather, it is whether the reviewing court
can resolve the issues raised without evaluating the evidence, in which case, it is a question of law;
otherwise, it is one of fact."27 Where there is no dispute as to the facts, the question of whether or not the
conclusions drawn from these facts are correct is a question of law. However, if the question posed requires
a re-evaluation of the credibility of witnesses, or the existence or relevance of surrounding circumstances
and their relationship to each other, the issue is factual.28

Notably, however, the foregoing general rule admits of several exceptions, such as where the factual
findings of the RTC and the CA are conflicting or contradictory,29 which is evident in this case. As such, the
Court is constrained to make its own factual findings in order to resolve the issue presented before it.

To recapitulate, the RTC declared that BPI was able to sufficiently establish by preponderance of evidence
that respondents were duly notified of the dishonor of the subject check, rendering them liable to refund
what they had withdrawn from BPI. Pertinently, it hinged its ruling on the pieces of evidence presented
during the trial, namely: the e-mail printout advice from Bankers Trust informing BPI that the subject check
was dishonored, the BPI letters dated June 27, 1997 and July 18, 1997 addressed to respondents, and the
subject promissory note voluntarily executed by Amado. On the contrary, the CA held that respondents were
not liable to BPI for its failure to competently prove the fact of the subject check's dishonor and its
subsequent confiscation by the US government. In this relation, the CA deemed that the printout of the e-
mail advice is inadmissible in evidence for lack of proper authentication pursuant to the Rules on Electronic
Evidence.

After a judicious review of the records, including a re-evaluation of the evidence presented by the parties,
the Court is inclined to sustain the findings of the RTC over that of the CA, as will be explained hereunder.

It is settled that in civil cases, the party having the burden of proof must produce a preponderance of
evidence thereon, with plaintiff having to rely on the strength of his own evidence and not upon the
weakness of the defendant's.30 Preponderance of evidence is the weight, credit, and value of the aggregate
evidence on either side and is usually considered to be synonymous with the term 'greater weight of
evidence' or 'greater weight of credible evidence.’31 Succinctly put, it only requires that evidence be greater
or more convincing than the opposing evidence.32
Records evince that BPI was able to satisfactorily prove by preponderance of evidence the existence of
respondents' obligation in its favor. Verily, Amado acknowledged its existence and expressed his conformity
thereto when he voluntarily: (a) affixed his signature in the letters dated June 27, 199733 and July 18,
1997,34 where he acknowledged the dishonor of the subject check, and subsequently, allowed BPI to apply
the proceeds of their US time deposit account to partially offset their obligation to the bank; and (b)
executed a Promissory Note35 dated September 8, 1997 wherein he undertook to pay BPI in installments of
P1,000.00 per month until the remaining balance of his obligation is fully paid.

On the other hand, aside from his bare testimony, Amado did not present any corroborative evidence to
support his claim that his performance of the aforesaid voluntary acts was subject to BPI's presentment of
the proper and authenticated proof of the dishonored subject check. Amado's unsubstantiated testimony is
self-serving at the most, and hence, cannot be relied upon.36 In fact, the RTC did not lend any credence to
Amado's testimony in resolving this case. In this regard, it should be borne in mind that the "findings of the
trial court on the credibility of witnesses deserve great weight, as the trial judge is in the best position to
assess the credibility of the witnesses, and has the unique opportunity to observe the witness firsthand and
note his demeanor, conduct and attitude under gruelling examination. Absent any showing that the trial
court's calibration of credibility was flawed, the appellate court is bound by its assessment,"37 as in this case.

Overall, assessing the pieces of evidence presented by BPI as opposed to the self-serving allegations of
respondents, the weight of evidence clearly preponderates in favor of the former. Otherwise stated, BPI has
proven by the required quantum of proof, i.e., preponderance of evidence, respondents' obligation towards
it, and as such, respondents must be made to fulfill the same.

In any event, the CA erred in concluding that BPI failed to prove the dishonor of the subject check by merely
presenting: (a) a photocopy thereof with its dorsal portion stamped "ENDORSEMENT CANCELLED" by
Bankers Trust;38 and (b) a print-out of the e-mail advice from Bankers Trust stating that the subject check
was returned unpaid because the amount was altered.39

Anent the subject check, while the Best Evidence Rule under Section 3, Rule 13040 of the Rules of Court
states that generally, the original copy of the document must be presented whenever the content of the
document is under inquiry, the rule admits of certain exceptions, such as "[w]hen the original has been lost
or destroyed, or cannot be produced in court, without bad faith on the part of the offeror."41 In order to fall
under the aforesaid exception, it is crucial that the offeror proves: (a) the existence or due execution of the
original; (b) the loss and destruction of the original, or the reason for its non-production in court; and (c)
the absence of bad faith on the part of the offeror to which the unavailability of the original can be
attributed.42

In this case, BPI sufficiently complied with the foregoing requisities. First, the existence or due execution of
the subject check was admitted by both parties. Second, the reason for the non-presentation of the original
copy of the subject check was justifiable as it was confiscated by the US government for being an altered
check. The subject check, being a US Treasury Warrant, is not an ordinary check, and practically speaking,
the same could not be easily obtained. Lastly, absent any proof to the contrary and for the reasons already
stated, no bad faith can be attributed to BPI for its failure to present the original of the subject check. Thus,
applying the exception to the Best Evidence Rule, the presentation of the photocopy of the subject check as
secondary evidence was permissible.

As to the e-mail advice, while it may not have been properly authenticated in accordance with the Rules on
Electronic Evidence, the same was merely corroborative evidence, and thus, its admissibility or
inadmissibility should not diminish the probative value of the other evidence proving respondents' obligation
towards BPI, namely: (a) Amado's voluntary acts of conforming to BPI's letters dated June 27, 1997 and
July 18, 1997 and executing the promissory note to answer for such obligation; and (b) the photocopy of the
subject check, which presentation was justified as falling under the afore-discussed exception to the Best
Evidence Rule. As such, their probative value remains.

Besides, it should be pointed out that respondents did not proffer any objection to the evidence presented
by BPI, as shown by their failure to file their comment or opposition to the latter's formal offer of
evidence.43 It is well-settled that evidence not objected to is deemed admitted and may validly be
considered by the court in arriving at its judgment, as what the RTC did in this case, since it was in a better
position to assess and weigh the evidence presented during the trial.44
In sum, considering that BPI had proven its cause of action by preponderance of evidence, the Court finds
the CA to have erred in dismissing BPI's complaint against respondents. Accordingly, the RTC ruling must be
reinstated, subject to modification in the award of interest imposed on the adjudged amount.

To recount, respondents were ordered by the RTC to pay BPI the amount of P369,600.51 representing the
peso equivalent of the amounts withdrawn by respondents less the amounts already recovered by BPI, plus
legal interest of twelve percent (12%) per annum reckoned from the time the money was withdrawn,45 thus,
implying that such amount was a loan or a forbearance of money. However, records reveal that BPI's
payment of the proceeds of the subject check was due to a mistaken notion that such check was cleared,
when in fact, it was dishonored due to an alteration in the amount indicated therein. Such payment on the
part of BPI to respondents was clearly made by mistake, giving rise to the quasi-contractual obligation
of solutio indebiti under Article 215446 in relation to Article 216347 of the Civil Code. Not being a loan or
forbearance of money, an interest of six percent (6%) per annum should be imposed on the amount to be
refunded and on the damages and attorney's fees awarded, if any, computed from the time of demand until
its satisfaction.48 Consequently, respondents must return to BPI the aforesaid amount, with legal interest at
the rate of six percent (6%) per annum from the date of extrajudicial demand – or on June 27, 1997, the
date when BPI informed respondents of the dishonor of the subject check and demanded the return of its
proceeds – until fully paid.

WHEREFORE, the petition is GRANTED. The Decision dated February 4, 2011 and the Resolution dated
August 26, 2011 of the Court of Appeals in CA-G.R. CV No. 91704 is hereby REVERSED and SET ASIDE.
The Decision dated May 9, 2007 of the Regional Trial Court of Gapan City, Nueva Ecija, Branch 87 in Civil
Case No. 1913 is REINSTATED with MODIFICATION, adjusting the interest imposed on the amount
ordered to be returned, i.e., P369,600.51, to six percent (6%) per annum reckoned from the date of
extrajudicial demand on June 27, 1997, until fully paid.

SO ORDERED.
 NATURE AND EFFECTS OF OBLIGATIONS

REMEDY:

DELAY:

Spouses Nameal and Lourdes Bonrostro, Petitioners,

vs.
Spouses Juan and Constancia Luna, Respondents.
G.R. No. 172346, July 24, 2013

Facts: Constancia Luna, as buyer, entered into a contract to sell with Bliss Development Corporation
involving a house located in Quezon City. A year after, Luna sold it to Lourdes Bonrostro under the ff.
terms:
The stipulated price of P1,250,000.00 shall be paid by the VENDEE to the VENDOR in the following
manner:
(a) P200,000.00 upon signing x x x [the] Contract To Sell,
(b) P300,000.00 payable on or before April 30, 1993,
(c) P330,000.00 payable on or before July 31, 1993,
(d) P417,000.00 payable to the New Capitol Estate, for 15 years at [P6,867.12] a month,
x x x [I]n the event the VENDEE fails to pay the second installment on time, [t]he VENDEE will pay
starting May 1, 1993 a 2% interest on the P300,000.00 monthly. Likewise, in the event the VENDEE fails
to pay the amount of P630,000.00 on the stipulated time, this CONTRACT TO SELL shall likewise be
deemed cancelled and rescinded and x x x 5% of the total contract price [of] P1,250,000.00 shall be
deemed forfeited in favor of the VENDOR. Unpaid monthly amortization shall likewise be deducted
from the initial down payment in favor of the VENDOR. After execution of the contract, Bonrostro took
possession of the property. However, except for P200,000.00 downpayment, she failed to pay subsequent
amortization. Luna then filed before the RTC a Complaint for Rescission of Contract and Damages. This is
a petition for review on certiorari assailing the decision of CA affirming with modification the decision of
RTC in favor herein respondents.

Issue: Whether or not delay in the payment of installment is a substantial breach of obligation as to
warrant its rescission.

Ruling: No, in a contract to sell, payment of the price is a positive suspensive condition. Failure of which
is not a breach of contract warranting rescission under Article 1191 of the Civil Code, but rather just an
event that prevents the supposed seller from being bound to convey title to the supposed buyer. The
contract to sell entered by the parties refers to real property on installment basis, in which Art. 1191
cannot apply since they are governed by the Maceda Law. However, there being no breach, Bonrostro is
still not excused from being made liable for interest on the installments due from the date of default until
fully paid. Tender of payment, a manifestation by the debtor of a desire to comply with or pay an
obligation, asserted by Bonrostro for the accrual of interest to be suspended is not a valid defense because
for a tender of payment to take effect it must be accompanied by the means of payment and debtor must
take immediate step to make a consignation, the deposit of the proper amount with a judicial authority,
then interest is suspended from the time of such tender.

DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner,

vs.

GUARIÑA AGRICULTURAL AND REALTY DEVELOPMENT CORPORATION,

Respondent.

G.R. No. 160758 January 15, 2014

PONENTE: Bersamin, J.

TOPIC: Contracts, Delay

FACTS:

In July 1976, Guariña Corporation applied for a loan from DBP to finance the
development of its resort complex. The loan, in the amount of P3,387,000.00, was approved on
August 5, 1976. Guariña Corporation executed a promissory note that would be due on November
3, 1988. On October 5, 1976, Guariña Corporation executed a real estate mortgage over several
real properties in favor of DBP as security for the repayment of the loan. On May 17, 1977, Guariña
Corporation executed a chattelmortgage over the personal properties existing at the resort complex
and those yet to be acquired out of the proceeds of the loan, also to secure the performance of the
obligation. Prior to the release of the loan, DBP required Guariña Corporation to put up a cash
equity of P1,470,951.00 for the construction of the buildings and other improvements on the resort
complex.

The loan was released in several installments, and Guariña Corporation used the
proceeds to defray the cost of additional improvements in the resort complex. In all, the amount
released totaled P3,003,617.49, from which DBP withheld P148,102.98 as interest.

Guariña Corporation demanded the release of the balance of the loan, but DBP refused.
Instead, DBP directly paid some suppliers of Guariña Corporation over the latter’s objection. DBP
found upon inspection of the resort project, its developments and improvements that Guariña
Corporation had not completed the construction works. In a letter dated February 27, 1978, and a
telegram dated June 9, 1978, DBP thus demanded that Guariña Corporation expedite the
completion of the project, and warned that it would initiate foreclosure proceedings should Guariña
Corporation not do so.10

Unsatisfied with the non-action and objection of Guariña Corporation, DBP initiated
extrajudicial foreclosure proceedings

ISSUE:

Whether or not Guarina was in delay in performing its obligation making DBP’s action
to foreclose the mortgage proper.

HELD:

NO. The Court held that the foreclosure of a mortgage prior to the mortgagor’s default
on the principal obligation is premature, and should be undone for being void and ineffectual. The
mortgagee who has been meanwhile given possession of the mortgaged property by virtue of a
writ of possession issued to it as the purchaser at the foreclosure sale may be required to restore
the possession of the property to the mortgagor and to pay reasonable rent for the use of the
property during the intervening period.

The agreement between DBP and Guariña Corporation was a loan. Under the law, a loan
requires the delivery of money or any other consumable object by one party to another
who acquires ownership thereof, on the condition that the same amount or quality shall be paid.
Loan is a reciprocal obligation, as it arises from the same cause where one party is the creditor,
and the other the debtor. The obligation of one party in a reciprocal obligation is dependent upon
the obligation of the other, and the performance should ideally be simultaneous. This means that
in a loan, the creditor should release the full loan amount and the debtor repays it when it becomes
due and demandable.
 The loan agreement between the parties is a reciprocal obligation. Appellant in the
instant case bound itself to grant appellee the loan amount of P3,387,000.00 condition on
appellee’s payment of the amount when it falls due. The appellant did not release the total amount
of the approved loan. Appellant therefore could not have made a demand for payment of the loan
since it had yet to fulfil its own obligation. Moreover, the fact that appellee was not yet in default
rendered the foreclosure proceedings premature and improper.

By its failure to release the proceeds of the loan in their entirety, DBP had no right yet
to exact on Guariña Corporation the latter’s compliance with its own obligation under the loan.
Indeed, if a party in a reciprocal contract like a loan does not perform its obligation, the other party
cannot be obliged to perform what is expected of it while the other’s obligation remains unfulfilled.
In other words, the latter party does not incur delay.