Del Castillo Rulings

DEL CASTILLO RULINGS
CIVIL LAW
CATHAY LAND, INC. and CATHAY METAL CORPORATION vs. AYALA

LAND, INC., A VIDA LAND CORPORATION, G.R. No. 210209, August 9,
2017
Petitioners Cathay Land, Inc. and Cathay Metal Corporation (Cathay Group)
own and develop a mixed-use and multi-phase subdivision development
project known as the South Forbes Golf City. Cathay Group filed a
Complaint for easement of right of way with prayer for the issuance of a
preliminary injunction/temporary restraining order against respondents Ayala
Land, Inc., Avida Land Corporation, and Laguna Technopark, Inc., (Ayala
Group) before the Regional Trial Court (RTC), Branch 18, Tagaytay City. The
Complaint alleged that the Ayala Group unjustifiably denied passage to
Cathay Group's personnel, vehicles and heavy equipment through its
properties by putting up checkpoints and constructing gates which caused the
development of the latter's South Forbes Golf City project to be interrupted
and delayed. However, before trial could ensue, the parties executed a
Compromise Agreement the Ayala Group granted a pedestrian, vehicular
and utility easement of right of way in favor of the Cathay Group in
consideration of and subject to the latter's faithful compliance of its
undertakings in the Compromise Agreement. This includes undertakings
relating to the development of the Cathay Group's properties in the area.
Subsequently, however, the Ayala Group noted that Cathay Group's
marketing materials for the project showed plans to develop a thirty-hectare
cyber park which will house, among others, call center offices, and to
construct high-rise buildings. The Ayala Group thus made verbal and written
demands to Cathay Group to abide by the terms and conditions of the
Compromise Agreement particularly on its undertaking not to construct high-
rise buildings, but to no avail. Thus, on July 29, 2008, the Ayala Group filed
a Motion for Execution with Application for Issuance of a Temporary
Restraining Order (TRO) and Writ of Injunction before the RTC.
ISSUE: Whether a judgment based on compromise agreement shall be

executed/implemented based strictly on the terms agreed upon by the
parties.
Page 1 of 66
CIVIL LAW
RULING:
The Civil Code provides that "[a] compromise is a contract whereby the
parties, by making reciprocal concessions, avoid a litigation or put an end to
one already commenced.” It has the effect and authority of res judicata upon
the parties, but there shall be no execution except in compliance with a
judicial compromise.
It is settled that once a compromise agreement is approved by a final order of

the court, it transcends its identity as a mere contract binding only upon the
parties thereto, as it becomes a judgment that is subject to execution in
accordance with the Rules of Court. Judges, therefore, have the ministerial
and mandatory duty to implement and enforce it.
Since the issuance of a writ of execution implementing a judicial compromise

is ministerial in nature, it cannot be viewed as a judgment on the merits as
contemplated by Section 14, Article VIII of the Constitution. To be clear, it is
the decision based on a compromise agreement that is considered as a
judgment on the merits, not the order pertaining to its execution.
Nevertheless, in implementing a compromise agreement, the "courts cannot

modify, impose terms different from the terms of [the] agreement, or set aside
the compromises and reciprocal concessions made in good faith by the
parties without gravely abusing their discretion."
In this case, the RTC, through Judge Young, granted the Ayala Group's
Motion for Execution of the Compromise Agreement on account of the Cathay
Group's construction of "high-rise structures" on its properties. It will be
recalled that under the Compromise Agreement, the remedies available to
the Ayala Group should the Cathay Group fail to abide by the terms of the
agreement are, first: to notify the Cathay Group of such breach; and second,
either to withdraw or suspend the grant of easement of right-of way to the
Cathay Group if the latter does not undertake to rectify the said breach within
30 days from notice. It is this specific right that is enforceable through a writ of
execution, as expressly provided in Sections 4 and 6 of the Compromise
Page 2 of 66
CIVIL LAW
Agreement. In short, the Ayala Group has no right, under the Compromise
Agreement, to seek injunctive relief from the courts in case the Cathay Group
commits an act contrary to its undertakings in the agreement. To emphasize,
under the Compromise Agreement, the Ayala Group has no right to seek to
enjoin the Cathay Group from proceeding with the development of its South
Forbes Golf City project or from constructing high-rise buildings as it did in its
Motion for Execution. To be sure, the Ayala Group's right under the
Compromise Agreement that is enforceable through a writ of execution is
only the suspension or withdrawal of the grant of easement of right of way.
Thus, the RTC, through Judge Young, seriously erred when it issued a Writ of
Execution and Writ of Injunction prohibiting the Cathay Group from
constructing buildings with a height of 15 meters or higher and other
developments not in accord with the residential character of the properties of
the Ayala Group in the area. The RTC gravely abused its discretion when it
granted a remedy that is not available to the Ayala Group, thereby imposing
terms different from what was agreed upon by the parties in their
Compromise Agreement.
PEN DEVELOPMENT CORPORATION VS. MARTINEZ LEYBA, INC., G.R. No.

211845, August 9, 2017
Plaintiff-Appellee Martinez Leyba, Inc. (hereafter Martinez) is a corporation

organized and existing under Philippine laws and the registered owner of
three (3) contiguous parcels of land situated in Antipolo, Rizal. Defendants-
Appellants Pen Development Corporation and Las Brisas Resorts Corporation
are also domestic corporations duly organized and existing under Philippine
laws. Appellants, facreafter, merged into one corporate entity under the
name Las Brisas Resmis Corporation (hereafter Las Brisas). Las Brisas is the
registered owner of a parcel of land under TCT No. 153101 which is situated
adjacent to the lMds owned by Martinez. Las Brisas occupied the said land in
1967 and fenced the same. In 1968, Martinez noticed that the construction of
Las Brisas' fence seemed to encroach on its land. Upon verification by
surveyors, Martinez was informed that the fence of Las Brisas overlaps its
property. Thereafter, Martinez filed a Complaint for Quieting of Title,
Page 3 of 66
CIVIL LAW
Cancellation of Title and Recovery of Ownership with Damages against Las

Brisas.
ISSUE 1: Whether petitioner is a builder in bad faith.
RULING:
On the issue of being a builder in had faith, there is no question that

petitioners should be held liable to respondent for their obstinate refusal to
abide by the latter's repeated demands to cease and desist from continuing
their construction upon the encroached area. Petitioners' sole defense is that
they purchased their property in good faith and for value; but this does not
squarely address the issue of encroachment or overlapping. To repeat, while
petitioners may have been innocent purchasers for value with respect to their
land, this does not prove that they are equally innocent of the claim of
encroachment upon respondent's lands. The evidence suggests otherwise:
despite being apprised of the encroachment, petitioners turned a blind eye
and deaf ear and continued to construct on the disputed area. They did not
bother to conduct their own survey to put the issue to rest, and to avoid the
possibility of being adjudged as builders in bad faith upon land that did not
belong to them.
Under the Civil Code,
Art. 449. He who builds, plants or sows in bad faith on the land of another,
loses what is built, planted or sown without right to indemnity.
Art. 450. Tue owner of the land on which anything has been built, planted or
sown in bad faith may demand the demolition of the work, or that the
planting or sowing be removed, in order to replace things in their former
condition at the expense of the person who built, planted or sowed; or he
may compel the builder or planter to pay the price of the land, and the sower
the proper rent.
Art. 451. In the cases of the two preceding articles, the landowner is entitled
to damages from the builder planter or sower.
Page 4 of 66
CIVIL LAW
Moreover, it has been declared that
The right of the owner of the land to recover damages from a builder in bad
faith is clearly provided for in Article 451 of the Civil Code. Although said
Article 451 does not elaborate on the basis for damages, the Court perceives
that it should reasonably correspond with the value of the properties lost or
destroyed as a result of the occupation in bad faith, as well as the fruits
(natural, industrial or civil) from those properties that the owner of the land
reasonably expected to obtain. x x x28
For their part, petitioners are not entitled to reimbursement for necessary
expenses. Indeed, under Article 452 of the Civil Code,29 the builder, planter
or sower in bad faith is entitled to reimbursement for the necessary expenses
of preservation of the land. However, in this case, respondent's lands were
not preserved: petitioners' construction and use thereof in fact caused
dan1age, which must be undone or simply endured by respondent by force of
law and circumstance. Respondent did not in any way benefit from
petitioners' occupation of its lands.
ISSUE 2: Whether respondent incurred laches in enforcing its putative right.
RULING:
Finally, on the question of laches, the CA correctly held that as owners of the
subject property, respondent has the imprescriptible right to recover
possession thereof from any person illegally occupying its lands. Even if
petitioners have been occupying these lands for a significant period of time,
respondent as the registered and lawful owner has the right to demand the
return thereof at any time.
Jurisprudence consistently holds that ‘prescription and laches cannot apply to

registered land covered by the Torrens system' because 'under the Property
Registration Decree, no title to registered land in derogation to that of the
registered owner shall be acquired by prescription or adverse possession.’
Under Section 47 of the Property Registration Decree, or Presidential Decree
Page 5 of 66
CIVIL LAW
No. 1529, "(n)o title to registered land in derogation of the title of the
registered owner shall be acquired by prescription or adverse possession."
SPOUSES ROMEO PAJARES AND IDA T. PAJARES vs. REMARKABLE

LAUNDRY AND DRY CLEANING, G.R. No. 212690, February 20, 2017
Remarkable Laundry and Dry Cleaning (respondent) filed a Complaint

denominated as "Breach of Contract and Damages" against spouses Romeo
and Ida Pajares (petitioners). Respondent alleged that it entered into a
Remarkable Dealer Outlet Contract with petitioners whereby the latter, acting
as a dealer outlet, shall accept and receive items or materials for laundry
which are then picked up and processed by the former in its main plant or
laundry outlet; that petitioners violated Article IV (Standard Required Quota &
Penalties) of said contract, which required them to produce at least 200 kilos
of laundry items each week, when, on April 30, 2012, they ceased dealer
outlet operations on account of lack of personnel; that respondent made
written demands upon petitioners for the payment of penalties imposed and
provided for in the contract, but the latter failed to pay; and, that petitioners'
violation constitutes breach of contract.
ISSUE 1: Whether a complaint primarily seeking to enforce the accessory

obligation contained in the penal clause is actually an action for damages
capable of pecuniary estimation.
RULING:
Neither can we sustain respondent's contention that its Complaint is

incapable of pecuniary estimation since it primarily seeks to enforce the penal
clause contained in Article IV of the Remarkable Dealer Outlet Contract,
which reads:
Article IV: STANDARD REQUIRED QUOTA & PENALTIES
In consideration [sic] for such renewal of franchise-dealership rights, the

dealer outlet must have a minimum 200 kilos on a six-day or per week
pick-up for the entire duration of the contract to FREE the dealer outlet
Page 6 of 66
CIVIL LAW
from being charge [sic] Php200/week on falling below required

minimum kilos per week of laundry materials. Automatic charging shall
become part of the billing on the services of the dealer outlet on cases
where the minimum requirements on required kilos are not met.
The RL Main Operator has the option to cancel, terminate this

dealership outlet contract, at its option should [sic] in the event that
there are unpaid services equivalent to a two-week minimum required
number of kilos of laundry materials but not P8,000 worth of
collectibles, for services performed by the RL Main Operator or its
assigned Franchise Outlet, unpaid bills on ordered and delivered
support products, falling below required monthly minimum number of
kilos.
Ten [percent] (10%) interest charge per month will be collected on all
unpaid obligations but should not be more than 45 days or an
additional 10% on top of uncollected amount shall be imposed and
shall earn additional 10% on the next succeeding months if it still
remains unpaid. However, if the cause of default is due to issuance of a
bouncing check the amount of such check shall earn same penalty
charge with additional 5% for the first two weeks and 10% for the next
two weeks and its succeeding two weeks thereafter from the date of
dishonor until fully paid without prejudice to the filling of appropriate
cases before the courts of justice. Violation of this provision if remained
unsettled for two months shall be considered as violation [wherein]
Article XV of this agreement shall be applied.
To Our mind, petitioners' responsibility under the above penal clause involves
the payment of liquidated damages because under Article 2226[35] of the
Civil Code the amount the parties stipulated to pay in case of breach are
liquidated damages. "It is attached to an obligation in order to ensure
performance and has a double function:(1) to provide for liquidated damages,
and (2) to strengthen the coercive force of the obligation by the threat of
greater responsibility in the event of breach.”
Page 7 of 66
CIVIL LAW
Concomitantly, what respondent primarily seeks in its Complaint is to recover

aforesaid liquidated damages (which it termed as "incidental and
consequential damages") premised on the alleged breach of contract
committed by the petitioners when they unilaterally ceased business
operations. Breach of contract may also be the cause of action in a complaint
for damages filed pursuant to Article 1170 of the Civil Code. It provides:
Art. 1170. Those who in the performance of their obligations are guilty of
fraud, negligence, or delay, and those who in any manner contravene the
tenor thereof; are liable for damages. (Emphasis supplied)
In Pacmac, Inc. v. Intermediate Appellate Court, this Court held that the party
who unilaterally terminated the exclusive distributorship contract without any
legal justification can be held liable for damages by reason of the breach
committed pursuant to Article 1170.
In sum, after juxtaposing Article IV of the Remarkable Dealer Outlet Contract

vis-à-vis the prayer sought in respondent's Complaint, this Court is convinced
that said Complaint is one for damages. True, breach of contract may give
rise to a complaint for specific performance or rescission of contract. In which
case, the subject matter is incapable of pecuniary estimation and, therefore,
jurisdiction is lodged with the RTC. However, breach of contract may also be
the cause of action in a complaint for damages. Thus, it is not correct to
immediately conclude, as the CA erroneously did, that since the cause of
action is breach of contract, the case would only either be specific
performance or rescission of contract because it may happen, as in this case,
that the complaint is one for damages.
ISSUE 2: Whether in an action for damages, the court which has jurisdiction is
determined by the total amount of damages claimed.
RULING:
Page 8 of 66
CIVIL LAW
Having thus determined the nature of respondent's principal action, the next
question brought to fore is whether it is the RTC which has jurisdiction over the
subject matter of Civil Case No. CEB-39025.
Paragraph 8, Section 19 of BP 129, as amended by Republic Act No. 7691,

provides that where the amount of the demand exceeds P100,000.00,
exclusive of interest, damages of whatever kind, attorney's fees, litigation
expenses, and costs, exclusive jurisdiction is lodged with the RTC. Otherwise,
jurisdiction belongs to the Municipal Trial Court.
The above jurisdictional amount had been increased to P200,000.00 on

March 20, 1999 and further raised to P300,000.00 on February 22, 2004
pursuant to Section 5 of RA 7691.
Then in Administrative Circular No. 09-94 this Court declared that "where
the claim for damages is the main cause of action, or one of the causes of
action, the amount of such claim shall be considered in determining the
jurisdiction of the court." In other words, where the complaint primarily seeks
to recover damages, all claims for damages should be considered in
determining which court has jurisdiction over the subject matter of the case
regardless of whether they arose from a single cause of action or several
causes of action.
Since the total amount of the damages claimed by the respondent in its
Complaint filed with the RTC on September 3, 2012 amounted only to
P280,000.00, said court was correct in refusing to take cognizance of the
case.
FAJ CONSTRUCTION & DEVELOPMENT CORPORATION VS. SUSAN M.

SAULOG, G.R. No. 200759, March 25, 2015
Petitioner FAJ Construction and Development Corporation and respondent

Susan M. Saulog entered into an Agreement[6] (construction agreement) for
the construction of a residential building in San Lorenzo Village, Makati City
for a contract price of P12,500,000.00. Payment to petitioner contractor
Page 9 of 66
CIVIL LAW
shall be on a progress billing basis, after inspection of the work by

respondent. Construction of the building commenced, and respondent made
a corresponding total payment to petitioner in the amount of
P10,592,194.80. However, for the October 31 and November 6, 2000
progress billing statements sent by petitioner in the total amount of
P851,601.58, respondent refused to pay. After performing additional work,
petitioner made another request for payment, but respondent again refused
to pay, prompting petitioner to terminate the construction contract pursuant to
Article 27(b) of the Uniform General Conditions of Contract for Private
Construction (or Document 102) of the Construction Industry Authority of the
Philippines, Department of Trade and Industry. Petitioner thus filed with the
RTC of Quezon City a civil case for collection of a sum of money with
damages against respondent.
ISSUE 1: Whether the petitioner is liable in violating the construction

agreement.
RULING:
On the issue of liability, we find – relying on the identical findings of the trial
and appellate courts – that petitioner is guilty of violating the construction
agreement, for its defective and incomplete work, delay, and for unjustified
abandonment of the project. Indeed, we find no reason to disturb the
identical pronouncements of the trial court and the CA. The same holds true
with respect to the issue of damages raised by petitioner; it requires an inquiry
into the facts, which is no longer this Court’s realm. In a case previously
decided by this ponente concerning a construction contract and where similar
allegations of abandonment, delay and defective workmanship were
advanced, it was held that –
Petitioner endeavors to convince us to determine, yet again, the weight,

credence, and probative value of the evidence presented. This cannot
be done in this petition for review on certiorari under Rule 45 of the
Rules of Court where only questions of law may be raised by the parties
Page 10 of 66
CIVIL LAW
and passed upon by us. In Fong v. Velayo, we defined a question of

law as distinguished from a question of fact, viz:
A question of law arises when there is doubt as to what the law is

on a certain state of facts, while there is a question of fact when
the doubt arises as to the truth or falsity of the alleged facts. For a
question to be one of law, the same must not involve an
examination of the probative value of the evidence presented by
the litigants or any of them. The resolution of the issue must rest
solely on what the law provides on the given set of
circumstances. Once it is clear that the issue invites a review of
the evidence presented, the [question] posed is one of fact. Thus,
the test of whether a question is one of law or of fact is not the
appellation given to such question by the party raising the same;
rather, it is whether the appellate court can determine the issue
raised without reviewing or evaluating the evidence, in which
case, it is a question of law; otherwise, it is a question of fact.
It has already been held that the determination of the existence of a

breach of contract is a factual matter not usually reviewable in a
petition filed under Rule 45. We will not review, much less reverse, the
factual findings of the Court of Appeals especially where, as in this
case, such findings coincide with those of the trial court, since we are
not a trier of facts x x x.[45]
There is no ground either to doubt the testimony of Calinawan, who testified

on the defective quality of petitioner’s work and the state of construction after
the latter abandoned the project. Her testimony merely corroborates already
existing evidence – such as photographs – as well as the testimony of
respondent herself. All in all, these pieces of evidence collectively proved the
facts in issue. Besides, Calinawan need not be qualified as an expert witness
in order to testify on facts which are readily apparent to the eye, and even to
the layman: it does not require an expert to conclude that flooring is sloppily
done, or that the electrical outlet and switch are not aligned, or that the
Page 11 of 66
CIVIL LAW
flooring is stained with paint, or that incorrect colored cement was used to fill
the gap between tiles, or that a door jamb needs repair, or that grouting of
tiles is sloppily done, or that there are unwanted bubbles in the varnishing
works, or that the parquet flooring is unaligned or uneven, or that the window
sills are dirty, or that windows lacked the necessary screws and rubber, or
that the roof panels are damaged, or that the installation of asphalt shingles
on the roof was improper. Any ordinary individual building a home would
readily notice such defects.
Since respondent suffered damages as a result of petitioner’s defective and

delayed work and unjustified abandonment of the project, the principle of
damnum absque injuria cannot apply. The principle cannot apply when there
is an abuse of a person’s right.
ISSUE 2: Whether petitioner is guilty of delay.
RULING:
Coming now to the issue of delay, we find that the trial and appellate courts’
grant of P1,387,500.00 not excessive; it is, in fact, liberal. Construction
period was agreed upon at 240 days from receipt by petitioner of a notice to
proceed. Said notice was issued on June 18, 1999, thus giving petitioner
approximately eight months from said date, or – roughly computed – up to
February 18, 2000, to complete the project. Yet, petitioner was still working
on the project as late as on November 22, 2000, after which it stopped work
and abandoned the project; this fact is not denied by petitioner. Thus,
petitioner was already delayed for more than nine months – that is, beginning
March 2000 and ending November of the same year – or approximately
270 days. At P12,500.00 agreed penalty imposed for each day of delay,
petitioner should be correspondingly liable to respondent for P3,375,000.00
liquidated damages, more or less, under the construction agreement. Yet, the
courts below awarded a mere P1,387,500.00; this award is certainly not
excessive and should remain, accepted as it is without question by the
respondent.
Page 12 of 66
CIVIL LAW
Finally, the imposition of 6% interest per annum is proper. Indeed, as

correctly held by the CA, when an obligation, not constituting a loan or
forbearance of money, is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court at the rate of 6% per
annum, from the filing of the complaint until its full satisfaction.
ROBERTO D. TUAZON vs. LOURDES Q. DEL ROSARIO-SUAREZ, G.R. No.

168325, December 08, 2010
Respondent Lourdes Q. Del Rosario-Suarez (Lourdes) was the owner of a

parcel of land, containing more or less an area of 1,211 square meters located
along Tandang Sora Street, Barangay Old Balara, Quezon City and
previously covered by Transfer Certificate of Title (TCT) No. RT-56118[4] issued
by the Registry of Deeds of Quezon City. Petitioner Roberto D. Tuazon
(Roberto) and Lourdes executed a Contract of Lease[5] over the
abovementioned parcel of land for a period of three years. The lease
commenced in March 1994 and ended in February 1997. During the
effectivity of the lease, Lourdes sent a letter[6] dated January 2, 1995 to
Roberto where she offered to sell to the latter subject parcel of land. She
pegged the price at P37,541,000.00 and gave him two years from January
2, 1995 to decide on the said offer. On June 19, 1997, or more than four
months after the expiration of the Contract of Lease, Lourdes sold subject
parcel of land to her only child, Catalina Suarez-De Leon, her son-in-law
Wilfredo De Leon, and her two grandsons, Miguel Luis S. De Leon and
Rommel S. De Leon (the De Leons), for a total consideration of only
P2,750,000.00 as evidenced by a Deed of Absolute Sale[7] executed by the
parties. The new owners through their attorney-in-fact, Guillerma S. Silva,
notified Roberto to vacate the premises. Roberto refused hence, the De Leons
filed a complaint for Unlawful Detainer before the Metropolitan Trial Court
(MeTC) of Quezon City against him. MeTC rendered a Decision[9] ordering
Roberto to vacate the property for non-payment of rentals and expiration of
the contract.
ISSUE: Whether the right of first refusal exists only within the parameters of an
“option to buy”, and did not exist when the property was sold later to a third
Page 13 of 66
CIVIL LAW
person, under favorable terms and conditions which the former buyer can
meet.
RULING:
In Beaumont v. Prieto, the nature of an option contract is explained thus:
In his Law Dictionary, edition of 1897, Bouvier defines an option as a

contract, in the following language:
`A contract by virtue of which A, in consideration of the payment of a

certain sum to B, acquires the privilege of buying from, or selling to, B
certain securities or properties within a limited time at a specified price.
(Story vs. Salamon, 71 N. Y., 420.)'
From Vol. 6, page 5001, of the work "Words and Phrases," citing the
case of Ide vs. Leiser (24 Pac., 695; 10 Mont., 5; 24 Am. St. Rep., 17)
the following quotation has been taken:
An agreement in writing to give a person the `option' to purchase lands

within a given time at a named price is neither a sale nor an agreement
to sell. It is simply a contract by which the owner of property agrees
with another person that he shall have the right to buy his property at a
fixed price within a certain time. He does not sell his land; he does not
then agree to sell it; but he does sell something; that is, the right or
privilege to buy at the election or option of the other party. The second
party gets in praesenti, not lands, nor an agreement that he shall have
lands, but he does get something of value; that is, the right to call for
and receive lands if he elects. The owner parts with his right to sell his
lands, except to the second party, for a limited period. The second
party receives this right, or rather, from his point of view, he receives the
right to elect to buy.
Page 14 of 66
CIVIL LAW
But the two definitions above cited refer to the contract of option, or,
what amounts to the same thing, to the case where there was cause or
consideration for the obligation x x x. (Emphasis supplied.)
On the other hand, in Ang Yu Asuncion v. Court of Appeals, an elucidation on

the "right of first refusal" was made thus:
In the law on sales, the so-called `right of first refusal' is an innovative

juridical relation. Needless to point out, it cannot be deemed a
perfected contract of sale under Article 1458 of the Civil Code. Neither
can the right of first refusal, understood in its normal concept, per se be
brought within the purview of an option under the second paragraph of
Article 1479, aforequoted, or possibly of an offer under Article 1319 of
the same Code. An option or an offer would require, among other
things, a clear certainty on both the object and the cause or
consideration of the envisioned contract. In a right of first refusal, while
the object might be made determinate, the exercise of the right,
however, would be dependent not only on the grantor's eventual
intention to enter into a binding juridical relation with another but also
on terms, including the price, that obviously are yet to be later firmed
up. Prior thereto, it can at best be so described as merely belonging to
a class of preparatory juridical relations governed not by contracts
(since the essential elements to establish the vinculum juris would still be
indefinite and inconclusive) but by, among other laws of general
application, the pertinent scattered provisions of the Civil Code on
human conduct.
Even on the premise that such right of first refusal has been decreed
under a final judgment, like here, its breach cannot justify
correspondingly an issuance of a writ of execution under a judgment
that merely recognizes its existence, nor would it sanction an action for
specific performance without thereby negating the indispensable
element of consensuality in the perfection of contracts. It is not to say,
however, that the right of first refusal would be inconsequential for, such
Page 15 of 66
CIVIL LAW
as already intimated above, an unjustified disregard thereof, given, for

instance, the circumstances expressed in Article 19 of the Civil Code,
can warrant a recovery for damages. (Emphasis supplied.)
From the foregoing, it is thus clear that an option contract is entirely different
and distinct from a right of first refusal in that in the former, the option granted
to the offeree is for a fixed period and at a determined price. Lacking these
two essential requisites, what is involved is only a right of first refusal.
In this case, the controversy is whether the letter of Lourdes to Roberto dated
January 2, 1995 involved an option contract or a contract of a right of first
refusal. In its entirety, the said letter-offer embodies an option contract as it
grants Roberto a fixed period of only two years to buy the subject property at
a price certain of P37,541,000.00. It being an option contract, the rules
applicable are found in Articles 1324 and 1479 of the Civil Code which
provide:
Art. 1324. When the offerer has allowed the offeree a certain period to
accept, the offer may be withdrawn at any time before acceptance by
communicating such withdrawal, except when the option is founded
upon a consideration, as something paid or promised.
Art. 1479. A promise to buy and sell a determinate thing for a price
certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for

a price certain is binding upon the promissor if the promise is supported
by a consideration distinct from the price.
It is clear from the provision of Article 1324 that there is a great difference
between the effect of an option which is without a consideration from one
which is founded upon a consideration. If the option is without any
consideration, the offeror may withdraw his offer by communicating such
withdrawal to the offeree at anytime before acceptance; if it is founded upon
Page 16 of 66
CIVIL LAW
a consideration, the offeror cannot withdraw his offer before the lapse of the
period agreed upon.
The second paragraph of Article 1479 declares that "an accepted unilateral
promise to buy or to sell a determinate thing for a price certain is binding
upon the promissor if the promise is supported by a consideration distinct from
the price." Sanchez v. Rigos provided an interpretation of the said second
paragraph of Article 1479 in relation to Article 1324. Thus:
There is no question that under Article 1479 of the new Civil Code "an
option to sell," or "a promise to buy or to sell," as used in said article, to
be valid must be "supported by a consideration distinct from the price."
This is clearly inferred from the context of said article that a unilateral
promise to buy or to sell, even if accepted, is only binding if supported
by consideration. In other words, "an accepted unilateral promise can
only have a binding effect if supported by a consideration, which
means that the option can still be withdrawn, even if accepted, if the
same is not supported by any consideration. Hence, it is not disputed
that the option is without consideration. It can therefore be withdrawn
notwithstanding the acceptance made of it by appellee.
It is true that under Article 1324 of the new Civil Code, the general rule
regarding offer and acceptance is that, when the offerer gives to the
offeree a certain period to accept, "the offer may be withdrawn at any
time before acceptance" except when the option is founded upon
consideration, but this general rule must be interpreted as modified by
the provision of Article 1479 above referred to, which applies to "a
promise to buy and sell" specifically. As already stated, this rule
requires that a promise to sell to be valid must be supported by a
consideration distinct from the price.
In Diamante v. Court of Appeals, this Court further declared that:
A unilateral promise to buy or sell is a mere offer, which is not converted

into a contract except at the moment it is accepted. Acceptance is the
Page 17 of 66
CIVIL LAW
act that gives life to a juridical obligation, because, before the promise
is accepted, the promissor may withdraw it at any time. Upon
acceptance, however, a bilateral contract to sell and to buy is created,
and the offeree ipso facto assumes the obligations of a purchaser; the
offeror, on the other hand, would be liable for damages if he fails to
deliver the thing he had offered for sale.
xxxx
Even if the promise was accepted, private respondent was not bound
thereby in the absence of a distinct consideration. (Emphasis ours.)
In this case, it is undisputed that Roberto did not accept the terms stated in the
letter of Lourdes as he negotiated for a much lower price. Roberto's act of
negotiating for a much lower price was a counter-offer and is therefore not an
acceptance of the offer of Lourdes. Article 1319 of the Civil Code provides:
Consent is manifested by the meeting of the offer and the acceptance

upon the thing and the cause which are to constitute the contract. The
offer must be certain and the acceptance absolute. A qualified
acceptance constitutes a counter-offer. (Emphasis supplied.)
The counter-offer of Roberto for a much lower price was not accepted by
Lourdes. There is therefore no contract that was perfected between them with
regard to the sale of subject property. Roberto, thus, does not have any right
to demand that the property be sold to him at the price for which it was sold
to the De Leons neither does he have the right to demand that said sale to the
De Leons be annulled.
Equatorial Realty Development, Inc. v. Mayfair Theater, Inc. is not applicable

here. Despite Roberto’s claims, the facts in Equatorial radically differ from the
facts of this case. Roberto overlooked the fact that in Equatorial, there was
an express provision in the Contract of Lease that -
Page 18 of 66
CIVIL LAW
(i)f the LESSOR should desire to sell the leased properties, the LESSEE
shall be given 30-days exclusive option to purchase the same.
There is no such similar provision in the Contract of Lease between Roberto

and Lourdes. What is involved here is a separate and distinct offer made by
Lourdes through a letter dated January 2, 1995 wherein she is selling the
leased property to Roberto for a definite price and which gave the latter a
definite period for acceptance. Roberto was not given a right of first refusal.
The letter-offer of Lourdes did not form part of the Lease Contract because it
was made more than six months after the commencement of the lease.
It is also very clear that in Equatorial, the property was sold within the lease
period. In this case, the subject property was sold not only after the expiration
of the period provided in the letter-offer of Lourdes but also after the
effectivity of the Contract of Lease.
Moreover, even if the offer of Lourdes was accepted by Roberto, still the
former is not bound thereby because of the absence of a consideration
distinct and separate from the price. The argument of Roberto that the
separate consideration was the liberality on the part of Lourdes cannot stand.
A perusal of the letter-offer of Lourdes would show that what drove her to
offer the property to Roberto was her immediate need for funds as she was
already very old. Offering the property to Roberto was not an act of liberality
on the part of Lourdes but was a simple matter of convenience and
practicality as he was the one most likely to buy the property at that time as
he was then leasing the same.
All told, the facts of the case, as found by the RTC and the CA, do not support
Roberto's claims that the letter of Lourdes gave him a right of first refusal
which is similar to the one given to Mayfair Theater in the case of Equatorial.
Therefore, there is no justification to annul the deed of sale validly entered
into by Lourdes with the De Leons.
Page 19 of 66
CIVIL LAW
COMMUNITIES CAGAYAN, INC., PETITIONER vs. SPOUSES ARSENIO

(DECEASED) AND ANGELES NANOL AND ANYBODY CLAIMING RIGHTS
UNDER THEM, G.R. No. 176791, November 14, 2012
Respondent-spouses Arsenio and Angeles Nanol entered into a Contract to

Sell with petitioner Communities Cagayan, Inc., whereby the latter agreed to
sell to respondent-spouses a house and Lots 17 and 19 located at Block 16,
Camella Homes Subdivision, Cagayan de Oro City, for the price of
P368,000.00. Respondent-spouses, however, did not avail of petitioner’s
in-house financing due to its high interest rates. Instead, they obtained a loan
from Capitol Development Bank, a sister company of petitioner, using the
property as collateral. To facilitate the loan, a simulated sale over the
property was executed by petitioner in favor of respondent-spouses.
Accordingly, titles were transferred in the names of respondent-spouses under
Transfer Certificates of Title (TCT) Nos. 105202 and 105203, and submitted
to Capitol Development Bank for loan processing. Unfortunately, the bank
collapsed and closed before it could release the loan. Thereafter,
respondent-spouses entered into another Contract to Sell with petitioner over
the same property for the same price of P368,000.00, this time, respondent-
spouses availed of petitioner’s in-house financing undertaking to pay the loan
over four years, from 1997 to 2001. Sometime in 2000, respondent Arsenio
demolished the original house and constructed a three-story house allegedly
valued at P3.5 million, more or less. Respondent Arsenio died, leaving his
wife, herein respondent Angeles, to pay for the monthly amortizations.
Petitioner filed before Branch 3 of the Municipal Trial Court in Cities of
Cagayan de Oro City, an action for unlawful detainer for failure to pay
monthly amortizations. The case was later withdrawn and consequently
dismissed because the judge found out that the titles were already registered
under the names of respondent-spouses. Afterwards, a Complaint for
Cancellation of Title, Recovery of Possession, Reconveyance and Damages
against respondent-spouses and all persons claiming rights under them.
Petitioner alleged that the transfer of the titles in the names of respondent-
spouses was made only in compliance with the requirements of Capitol
Page 20 of 66
CIVIL LAW
Development Bank and that respondent-spouses failed to pay their monthly

amortizations beginning January 2000.
ISSUE 1: Whether respondent-spouses are entitled to the cash surrender value

of the payments on the property equivalent to 50% of the total payments
made.
RULING:
Considering that this case stemmed from a Contract to Sell executed by the
petitioner and the respondent-spouses, we agree with petitioner that the
Maceda Law, which governs sales of real estate on installment, should be
applied.
Sections 3, 4, and 5 of the Maceda Law provide for the rights of a defaulting
buyer, to wit:
Section 3. In all transactions or contracts involving the sale or financing

of real estate on installment payments, including residential
condominium apartments but excluding industrial lots, commercial
buildings and sales to tenants under Republic Act Numbered Thirty-
eight hundred forty-four, as amended by Republic Act Numbered Sixty-
three hundred eighty-nine, where the buyer has paid at least two years
of installments, the buyer is entitled to the following rights in case he
defaults in the payment of succeeding installments:
(a) To pay, without additional interest, the unpaid installments due

within the total grace period earned by him which is hereby fixed at the
rate of one month grace period for every one year of installment
payments made: Provided, That this right shall be exercised by the
buyer only once in every five years of the life of the contract and its
extensions, if any.
Page 21 of 66
CIVIL LAW
(b) If the contract is canceled, the seller shall refund to the buyer the
cash surrender value of the payments on the property equivalent to fifty
percent of the total payments made, and, after five years of
installments, an additional five per cent every year but not to exceed
ninety per cent of the total payments made: Provided, That the actual
cancellation of the contract shall take place after thirty days from
receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act and upon full payment of the
cash surrender value to the buyer.
Down payments, deposits or options on the contract shall be included in
the computation of the total number of installment payments made.
(Emphasis supplied.)
Section 4. In case where less than two years of installments were paid,
the seller shall give the buyer a grace period of not less than sixty days
from the date the installment became due.
If the buyer fails to pay the installments due at the expiration of the
grace period, the seller may cancel the contract after thirty days from
receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act.
Section 5. Under Sections 3 and 4, the buyer shall have the right to sell
his rights or assign the same to another person or to reinstate the
contract by updating the account during the grace period and before
actual cancellation of the contract. The deed of sale or assignment shall
be done by notarial act.
In this connection, we deem it necessary to point out that, under the Maceda
Law, the actual cancellation of a contract to sell takes place after 30 days
from receipt by the buyer of the notarized notice of cancellation, and upon full
payment of the cash surrender value to the buyer. In other words, before a
contract to sell can be validly and effectively cancelled, the seller has (1) to
send a notarized notice of cancellation to the buyer and (2) to refund the cash
surrender value. Until and unless the seller complies with these twin
mandatory requirements, the contract to sell between the parties remains
Page 22 of 66
CIVIL LAW
valid and subsisting. Thus, the buyer has the right to continue occupying the
property subject of the contract to sell,[54] and may “still reinstate the contract
by updating the account during the grace period and before the actual
cancellation” of the contract.
In this case, petitioner complied only with the first condition by sending a
notarized notice of cancellation to the respondent-spouses. It failed,
however, to refund the cash surrender value to the respondent-spouses.
Thus, the Contract to Sell remains valid and subsisting and supposedly,
respondent-spouses have the right to continue occupying the subject
property. Unfortunately, we cannot reverse the Decision of the RTC directing
respondent-spouses to vacate and turn-over possession of the subject
property to petitioner because respondent-spouses never appealed the
order. The RTC Decision as to respondent-spouses is therefore considered
final.
In addition, in view of respondent-spouses’ failure to appeal, they can no

longer reinstate the contract by updating the account. Allowing them to do so
would be unfair to the other party and is offensive to the rules of fair play,
justice, and due process. Thus, based on the factual milieu of the instant
case, the most that we can do is to order the return of the cash surrender
value. Since respondent-spouses paid at least two years of installment,[56]
they are entitled to receive the cash surrender value of the payments they had
made which, under Section 3(b) of the Maceda Law, is equivalent to 50% of
the total payments made.
ISSUE 2: Whether respondent-spouses are entitled to reimbursement of the

improvements made on the property.
RULING:
As a general rule, Article 448 on builders in good faith does not apply where
there is a contractual relation between the parties, such as in the instant case.
We went over the records of this case and we note that the parties failed to
Page 23 of 66
CIVIL LAW
attach a copy of the Contract to Sell. As such, we are constrained to apply

Article 448 of the Civil Code, which provides viz:
ART. 448. The owner of the land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the
works, sowing or planting, after payment of the indemnity provided for in
Articles 546 and 548, or to oblige the one who built or planted to pay the
price of the land, and the one who sowed, the proper rent. However, the
builder or planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In such case, he shall pay
reasonable rent, if the owner of the land does not choose to appropriate the
building or trees after proper indemnity. The parties shall agree upon the
terms of the lease and in case of disagreement, the court shall fix the terms
thereof.
Article 448 of the Civil Code applies when the builder believes that he is the
owner of the land or that by some title he has the right to build thereon, or
that, at least, he has a claim of title thereto.[61] Concededly, this is not present
in the instant case. The subject property is covered by a Contract to Sell
hence ownership still remains with petitioner being the seller. Nevertheless,
there were already instances where this Court applied Article 448 even if the
builders do not have a claim of title over the property. Thus:
This Court has ruled that this provision covers only cases in which the builders,
sowers or planters believe themselves to be owners of the land or, at least, to
have a claim of title thereto. It does not apply when the interest is merely that
of a holder, such as a mere tenant, agent or usufructuary. From these
pronouncements, good faith is identified by the belief that the land is owned;
or that – by some title – one has the right to build, plant, or sow thereon.
However, in some special cases, this Court has used Article 448 by
recognizing good faith beyond this limited definition. Thus, in Del Campo v.
Abesia, this provision was applied to one whose house – despite having been
built at the time he was still co-owner – overlapped with the land of another.
This article was also applied to cases wherein a builder had constructed
Page 24 of 66
CIVIL LAW
improvements with the consent of the owner. The Court ruled that the law
deemed the builder to be in good faith. In Sarmiento v. Agana, the builders
were found to be in good faith despite their reliance on the consent of
another, whom they had mistakenly believed to be the owner of the land.
The Court likewise applied Article 448 in Spouses Macasaet v. Spouses

Macasaet notwithstanding the fact that the builders therein knew they were
not the owners of the land. In said case, the parents who owned the land
allowed their son and his wife to build their residence and business thereon.
As found by this Court, their occupation was not by mere tolerance but “upon
the invitation of and with the complete approval of (their parents), who
desired that their children would occupy the premises. It arose from familial
love and a desire for family solidarity x x x.” Soon after, conflict between the
parties arose. The parents demanded their son and his wife to vacate the
premises. The Court thus ruled that as owners of the property, the parents
have the right to possession over it. However, they must reimburse their son
and his wife for the improvements they had introduced on the property
because they were considered builders in good faith even if they knew for a
fact that they did not own the property, thus:
Based on the aforecited special cases, Article 448 applies to the present
factual milieu. The established facts of this case show that respondents fully
consented to the improvements introduced by petitioners. In fact, because
the children occupied the lots upon their invitation, the parents certainly knew
and approved of the construction of the improvements introduced thereon.
Thus, petitioners may be deemed to have been in good faith when they built
the structures on those lots.
The instant case is factually similar to Javier v. Javier. In that case, this Court
deemed the son to be in good faith for building the improvement (the house)
with the knowledge and consent of his father, to whom belonged the land
upon which it was built. Thus, Article 448 was applied.
In fine, the Court applied Article 448 by construing good faith beyond its
limited definition. We find no reason not to apply the Court’s ruling in
Page 25 of 66
CIVIL LAW
Spouses Macasaet v. Spouses Macasaet in this case. We thus hold that

Article 448 is also applicable to the instant case. First, good faith is
presumed on the part of the respondent-spouses. Second, petitioner failed to
rebut this presumption. Third, no evidence was presented to show that
petitioner opposed or objected to the improvements introduced by the
respondent-spouses. Consequently, we can validly presume that petitioner
consented to the improvements being constructed. This presumption is
bolstered by the fact that as the subdivision developer, petitioner must have
given the respondent-spouses permits to commence and undertake the
construction. Under Article 453 of the Civil Code, “[i]t is understood that
there is bad faith on the part of the landowner whenever the act was done
with his knowledge and without opposition on his part.
In view of the foregoing, we find no error on the part of the RTC in requiring
petitioner to pay respondent-spouses the value of the new house minus the
cost of the old house based on Article 448 of the Civil Code, subject to
succeeding discussions.
ISSUE 3: Petitioner has two options under Article 448 and pursuant to the
ruling in Tuatis v. Escol.
RULING:
In Tuatis, we ruled that the seller (the owner of the land) has two options
under Article 448: (1) he may appropriate the improvements for himself after
reimbursing the buyer (the builder in good faith) the necessary and useful
expenses under Articles 546[67] and 548[68] of the Civil Code; or (2) he may
sell the land to the buyer, unless its value is considerably more than that of the
improvements, in which case, the buyer shall pay reasonable rent. Quoted
below are the pertinent portions of our ruling in that case:
Taking into consideration the provisions of the Deed of Sale by

Installment and Article 448 of the Civil Code, Visminda has the
following options:
Page 26 of 66
CIVIL LAW
Under the first option, Visminda may appropriate for herself the building
on the subject property after indemnifying Tuatis for the necessary and
useful expenses the latter incurred for said building, as provided in
Article 546 of the Civil Code.
It is worthy to mention that in Pecson v. Court of Appeals, the Court
pronounced that the amount to be refunded to the builder under Article
546 of the Civil Code should be the current market value of the
improvement, thus:
xxxx
Until Visminda appropriately indemnifies Tuatis for the building
constructed by the latter, Tuatis may retain possession of the building
and the subject property.
Under the second option, Visminda may choose not to appropriate the
building and, instead, oblige Tuatis to pay the present or current fair
value of the land. The P10,000.00 price of the subject property, as
stated in the Deed of Sale on Installment executed in November 1989,
shall no longer apply, since Visminda will be obliging Tuatis to pay for
the price of the land in the exercise of Visminda’s rights under Article
448 of the Civil Code, and not under the said Deed. Tuatis’ obligation
will then be statutory, and not contractual, arising only when Visminda
has chosen her option under Article 448 of the Civil Code.
Still under the second option, if the present or current value of the land,
the subject property herein, turns out to be considerably more than that
of the building built thereon, Tuatis cannot be obliged to pay for the
subject property, but she must pay Visminda reasonable rent for the
same. Visminda and Tuatis must agree on the terms of the lease;
otherwise, the court will fix the terms.
Necessarily, the RTC should conduct additional proceedings before
ordering the execution of the judgment in Civil Case No. S-618. Initially,
the RTC should determine which of the aforementioned options
Visminda will choose. Subsequently, the RTC should ascertain: (a) under
the first option, the amount of indemnification Visminda must pay Tuatis;
Page 27 of 66
CIVIL LAW
or (b) under the second option, the value of the subject property vis-à-
vis that of the building, and depending thereon, the price of, or the
reasonable rent for, the subject property, which Tuatis must pay
Visminda.
The Court highlights that the options under Article 448 are available to
Visminda, as the owner of the subject property. There is no basis for
Tuatis’ demand that, since the value of the building she constructed is
considerably higher than the subject property, she may choose
between buying the subject property from Visminda and selling the
building to Visminda for P502,073.00. Again, the choice of options is
for Visminda, not Tuatis, to make. And, depending on Visminda’s
choice, Tuatis’ rights as a builder under Article 448 are limited to the
following: (a) under the first option, a right to retain the building and
subject property until Visminda pays proper indemnity; and (b) under
the second option, a right not to be obliged to pay for the price of the
subject property, if it is considerably higher than the value of the
building, in which case, she can only be obliged to pay reasonable rent
for the same.
The rule that the choice under Article 448 of the Civil Code belongs to
the owner of the land is in accord with the principle of accession, i.e.,
that the accessory follows the principal and not the other way around.
Even as the option lies with the landowner, the grant to him,
nevertheless, is preclusive. The landowner cannot refuse to exercise
either option and compel instead the owner of the building to remove it
from the land.
The raison d’etre for this provision has been enunciated thus: Where the
builder, planter or sower has acted in good faith, a conflict of rights
arises between the owners, and it becomes necessary to protect the
owner of the improvements without causing injustice to the owner of the
land. In view of the impracticability of creating a state of forced co-
ownership, the law has provided a just solution by giving the owner of
the land the option to acquire the improvements after payment of the
proper indemnity, or to oblige the builder or planter to pay for the land
Page 28 of 66
CIVIL LAW
and the sower the proper rent. He cannot refuse to exercise either
option. It is the owner of the land who is authorized to exercise the
option, because his right is older, and because, by the principle of
accession, he is entitled to the ownership of the accessory thing.
Visminda’s Motion for Issuance of Writ of Execution cannot be deemed
as an expression of her choice to recover possession of the subject
property under the first option, since the options under Article 448 of
the Civil Code and their respective consequences were also not clearly
presented to her by the 19 April 1999 Decision of the RTC. She must
then be given the opportunity to make a choice between the options
available to her after being duly informed herein of her rights and
obligations under both. (Emphasis supplied.)
In conformity with the foregoing pronouncement, we hold that petitioner, as

landowner, has two options. It may appropriate the new house by
reimbursing respondent Angeles the current market value thereof minus the
cost of the old house. Under this option, respondent Angeles would have “a
right of retention which negates the obligation to pay rent.”[71] In the
alternative, petitioner may sell the lots to respondent Angeles at a price
equivalent to the current fair value thereof. However, if the value of the lots is
considerably more than the value of the improvement, respondent Angeles
cannot be compelled to purchase the lots. She can only be obliged to pay
petitioner reasonable rent.
In view of the foregoing disquisition and in accordance with Depra v. Dumlao

and Technogas Philippines Manufacturing Corporation v. Court of Appeals,
we find it necessary to remand this case to the court of origin for the purpose
of determining matters necessary for the proper application of Article 448, in
relation to Articles 546 and 548 of the Civil Code.
FRANCISCO LIM vs. EQUITABLE PCI BANK, G.R. No. 183918, January 15,
2014
Petitioner Francisco Lim (petitioner) executed an Irrevocable Special Power of

Attorney in favor of his brother, Franco Lim (Franco), authorizing the latter to
Page 29 of 66
CIVIL LAW
mortgage his share in the property covered by by Transfer Certificate of Title

(TCT) No. 57176,4 which they co-owned. Banco De Oro Savings and
Mortgage Bank released a loan in the amount of ₱8.5 million by virtue of the
said Irrevocable Special Power of Attorney, which was entered in the Register
of Deeds of San Juan, Metro Manila. The loan was fully paid by Franco.
Petitioner, Franco, and their mother Victoria Yao Lim (Victoria) obtained from
respondent Equitable PCI Bank (respondent; formerly Equitable Banking
Corporation) a loan in the amount of ₱30 million in favor of Sun Paper
Products, Inc. To secure the loan, petitioner and Franco executed in favor of
respondent a Real Estate Mortgage8 over the same property. However,
when the loan was not paid, respondent foreclosed the mortgaged property.
Petitioner filed before the RTC of Pasig a Motion for the Issuance of
Temporary Restraining Order (TRO) and a Complaint for Cancellation of
Special Power of Attorney, Mortgage Contract, Certificate of Sale, TCT No.
9470, and Tax Declaration No. 96-31807, with Damages and Issuance of
Preliminary Mandatory Injunction. RTC issued an Order granting petitioner’s
Motion for the issuance of a TRO to prevent respondent from enforcing the
Writ of Possession. Respondent, for its part, filed an Answer Cum Motion to
Dismiss contending that the trial court has no jurisdiction to issue a TRO or a
preliminary injunction enjoining the implementation of the Writ of Possession
issued by a co-equal court. Respondent also argued that it is not privy to the
execution of the Irrevocable Special Power of Attorney and that since there is
no allegation that the foreclosure was defective or void, there is no reason to
cancel TCT No. 9470 and Tax Declaration No. 96-31807. Thereafter, RTC
rendered a Decision in favor of petitioner. It ruled that petitioner was able to
prove by preponderance of evidence that he did not participate in the
execution of the mortgage contract giving rise to the presumption that his
signature was forged.
ISSUE 1: Whether petitioner was able to prove that his signature was forged.
RULING:
Allegations of forgery, like all other allegations, must be proved by clear,

positive, and convincing evidence by the party alleging it. It should not be
Page 30 of 66
CIVIL LAW
presumed but must be established by comparing the alleged forged signature

with the genuine signatures. Although handwriting experts are often offered
as witnesses, they are not indispensable because judges must exercise
independent judgment in determining the authenticity or genuineness of the
signatures in question.
In this case, the alleged forged signature was not compared with the genuine
signatures of petitioner as no sample signatures were submitted. What
petitioner submitted was another mortgage contract executed in favor of
Planters Development Bank, which he claims was also forged by his brother.
But except for this, no other evidence was submitted by petitioner to prove his
allegation of forgery. His allegation that he was in the US at the time of the
execution of the mortgage contract is also not sufficient proof that his
signature was forged.
ISSUE 2: Whether petitioner was able to prove negligence on the part of the
respondent.
RULING:
We are not unaware that all property of the marriage is presumed to be

conjugal, unless it is shown that it is owned exclusively by the husband or the
wife; that this presumption is not overcome by the fact that the property is
registered in the name of the husband or the wife alone; and that the consent
of both spouses is required before a conjugal property may be mortgaged.
However, we find it iniquitous to apply the foregoing presumption especially
since the nature of the mortgaged property was never raised as an issue
before the RTC, the CA, and even before this Court. In fact, petitioner never
alleged in his Complaint that the said property was conjugal in nature.
Hence, respondent had no opportunity to rebut the said presumption.
Worth mentioning, in passing, is the ruling in Philippine National Bank v.

Court of Appeals to wit:
Page 31 of 66
CIVIL LAW
The well-known rule in this jurisdiction is that a person dealing with a

registered land has a right to rely upon the face of the torrens certificate of
title and to dispense with the need of inquiring further, except when the party
concerned has actual knowledge of facts and circumstances that would impel
a reasonably cautious man to make such inquiry.
A torrens title concludes all controversy over ownership of the land covered
by a final [decree] of registration. Once the title is registered the owner may
rest assured without the necessity of stepping into the portals of the court or
sitting in the mirador de su casa to avoid the possibility of losing his land.
Article 160 of the Civil Code provides as follows:
"Art. 160. All property of the marriage is presumed to belong to the conjugal
partnership, unless it be proved that it pertains exclusively to the husband or
to the wife."
The presumption applies to property acquired during the lifetime of the

husband and wife. In this case, it appears on the face of the title that the
properties were acquired by Donata Montemayor when she was already a
widow. When the property is registered in the name of a spouse only and
there is no showing as to when the property was acquired by said spouse,
this is an indication that the property belongs exclusively to said spouse. And
this presumption under Article 160 of the Civil Code cannot prevail when the
title is in the name of only one spouse and the rights of innocent third parties
are involved.
The PNB had a reason to rely on what appears on the certificates of title of
the properties mortgaged. For all legal purposes, the PNB is a mortgagee in
good faith for at the time the mortgages covering said properties were
constituted the PNB was not aware to any flaw of the title of the mortgagor.
(Emphasis supplied)
ISSUE 3: Whether there is forgery.
RULING:
Page 32 of 66
CIVIL LAW
Moreover, petitioner’s subsequent actions belie his allegation of forgery.

Before the expiration of the redemption period, petitioner sent respondent a
letter signifying his intention to reacquire the said property. He even visited
the bank to discuss the matter. Clearly, his acts contradict his claim of
forgery, which appears to be an afterthought and a last-ditch effort to
recover the said property.
FIRST OPTIMA REALTY CORPORATION vs. SECURITRON SECURITY

SERVICES, INC., G.R. No. 199648, January 28, 2015
Petitioner First Optima Realty Corporation is a domestic corporation engaged

in the real estate business. It is the registered owner of a 256-square meter
parcel of land with improvements located in Pasay City, covered by Transfer
Certificate of Title No. 125318 (the subject property).6 Respondent Securitron
Security Services, Inc., on the other hand, is a domestic corporation with
offices located beside the subject property. Looking to expand its business
and add toits existing offices, respondent – through its General Manager,
Antonio Eleazar (Eleazar) – sent a December 9, 2004 Letter7 addressed to
petitioner – through its Executive Vice-President, Carolina T. Young (Young) –
offering to purchase the subject property at ₱6,000.00 per square meter.
series of telephone calls ensued, but only between Eleazar and Young’s
secretary;8 Eleazar likewise personally negotiated with a certain Maria
Remoso (Remoso), who was an employee of petitioner.9 At this point, Eleazar
was unable to personally negotiate with Young or the petitioner’s board of
directors. Sometime thereafter, Eleazar personally went to petitioner’s office
offering to pay for the subject property in cash, which he already brought
with him. However, Young declined to accept payment, saying that she still
needed to secure her sister’s advice on the matter.10 She likewise informed
Eleazar that prior approval of petitioner’s Board of Directors was required for
the transaction, to which remark Eleazar replied that respondent shall instead
await such approval. Thereafter, respondent sent a Letter12 of even date to
petitioner. It was accompanied by Philippine National Bank Check No.
24677 (the subject check), issued for ₱100,000.00 and made payable to
petitioner. Despite the delicate nature of the matter and large amount
involved, respondent did not deliver the letter and check directly to Young or
Page 33 of 66
CIVIL LAW
her office; instead, they were coursed through an ordinary receiving

clerk/receptionist of the petitioner, who thus received the same and therefor
issued and signed Provisional Receipt No. 33430. The check was eventually
deposited with and credited to petitioner’s bank account. Thereafter,
respondent through counsel demanded in writing that petitioner proceed with
the sale of the property. Respondent filed with the Pasay RTC a civil case
against petitioner for specific performance with damages to compel the latter
to consummate the supposed sale of the subject property. After due
proceedings were taken, the Pasay RTC issued its Decision directing
petitioner to comply with its obligation by accepting the remaining balance of
One Million Five Hundred Thirty-Six Thousand Pesos and Ninety-Nine
Centavos (₱1,536,000.99), and executing the corresponding deed of sale in
favor of the plaintiff Securitron Security Services, Inc. over the subject parcel
of land. CA issued the assailed Decision affirming the trial court’s decision.
ISSUE 1: Whether there was a contract between the parties.
RULING:
The stages of a contract of sale are: (1) negotiation, starting from the time the
prospective contracting parties indicate interest in the contract to the time the
contract is perfected; (2) perfection, which takes place upon the concurrence
of the essential elements of the sale; and (3) consummation, which
commences when the parties perform their respective undertakings under the
contract of sale, culminating in the extinguishment of the contract.
In the present case, the parties never got past the negotiation stage. Nothing
shows that the parties had agreed on any final arrangement containing the
essential elements of a contract of sale, namely, (1) consent or the meeting of
the minds of the parties; (2) object or subject matter of the contract; and (3)
price or consideration of the sale.
Respondent’s subsequent sending of the February 4, 2005 letter and check to

petitioner – without awaiting the approval of petitioner’s board of directors
and Young’s decision, or without making a new offer – constitutes a mere
Page 34 of 66
CIVIL LAW
reiteration of its original offer which was already rejected previously; thus,
petitioner was under no obligation to reply to the February 4, 2005 letter. It
would be absurd to require a party to reject the very same offer each and
every time it is made; otherwise, a perfected contract of sale could simply
arise from the failure to reject the same offer made for the hundredth time.
Thus, said letter cannot be considered as evidence of a perfected sale, which
does not exist in the first place; no binding obligation on the part of the
petitioner to sell its property arose as a consequence. The letter made no new
offer replacing the first which was rejected.
Since there is no perfected sale between the parties, respondent had no

obligation to make payment through the check; nor did it possess the right to
deliver earnest money to petitioner in order to bind the latter to a sale. As
contemplated under Art. 1482 of the Civil Code, "there must first be a
perfected contract of sale before we can speak of earnest money.” "Where
the parties merely exchanged offers and counter-offers, no contract is
perfected since they did not yet give their consent to such offers. Earnest
money applies to a perfected sale.”
ISSUE 2: Whether it is proper for a prior payment of earnest money before the
property owner can agree to sell his property.
RULING:
In a potential sale transaction, the prior payment of earnest money even

before the property owner can agree to sell his property is irregular, and
cannot be used to bind the owner to the obligations of a seller under an
otherwise perfected contract of sale; to cite a well-worn cliché, the carriage
cannot be placed before the horse. The property owner-prospective seller
may not be legally obliged to enter into a sale with a prospective buyer
through the latter’s employment of questionable practices which prevent the
owner from freely giving his consent to the transaction; this constitutes a
palpable transgression of the prospective seller’s rights of ownership over his
property, an anomaly which the Court will certainly not condone. An
agreement where the prior free consent of one party thereto is withheld or
Page 35 of 66
CIVIL LAW
suppressed will be struck down, and the Court shall always endeavor to
protect a property owner’s rights against devious practices that put his
property in danger of being lost or unduly disposed without his prior
knowledge or consent. As this ponente has held before, "[t]his Court cannot
presume the existence of a sale of land, absent any direct proof of it."
Nor will respondent's supposed payment be 'treated as a deposit or

guarantee; its actions will not be dignified and must be called for what they
are: they were done irregularly and with a view to acquiring the subject
property against petitioner's consent.
SPOUSES OSCAR and THELMA CACAYORIN vs. ARMED FORCES AND

POLICE MUTUAL BENEFIT ASSOCIATION, INC., G.R. No. 171298, April 15,
2013
Petitioner Oscar Cacayorin (Oscar) is a member of respondent Armed Forces

and Police Mutual Benefit Association, Inc. (AFPMBAI). He filed an
application with AFPMBAI to purchase a piece of property which the latter
owned, specifically Lot 5, Block 8, Phase I, Kalikasan Mutual Homes, San
Pedro, Puerto Princesa City (the property), through a loan facility. Oscar and
his wife and co-petitioner herein, Thelma, on one hand, and the Rural Bank of
San Teodoro (the Rural Bank) on the other, executed a Loan and Mortgage
Agreement5 with the former as borrowers and the Rural Bank as lender, under
the auspices of Pag-IBIG or Home Development Mutual Fund’s Home
Financing Program. The Rural Bank issued an August 22, 1994 letter of
guaranty. On the basis of the Rural Bank’s letter of guaranty, AFPMBAI
executed in petitioners’ favor a Deed of Absolute Sale,7 and a new title –
Transfer Certificate of Title No. 370178 (TCT No. 37017) – was issued in their
name, with the corresponding annotation of their mortgage agreement with
the Rural Bank, under Entry No. 3364. Unfortunately, the Pag-IBIG loan
facility did not push through and the Rural Bank closed and was placed under
receivership by the Philippine Deposit Insurance Corporation (PDIC).
Meanwhile, AFPMBAI somehow was able to take possession of petitioners’
loan documents and TCT No. 37017, while petitioners were unable to pay
the loan/consideration for the property. AFPMBAI made oral and written
Page 36 of 66
CIVIL LAW
demands for petitioners to pay the loan/ consideration for the property.
Petitioners filed a Complaint11 for consignation of loan payment, recovery of
title and cancellation of mortgage annotation against AFPMBAI, PDIC and the
Register of Deeds of Puerto Princesa City. AFPMBAI filed a Motion to Dismiss
since no prior valid tender of payment was made by petitioners, the
consignation case was fatally defective and susceptible to dismissal. The trial
court denied AFPMBAI’s Motion to Dismiss, declaring that since title has been
transferred in the name of petitioners and the action involves consignation of
loan payments, it possessed jurisdiction to continue with the case. It further
held that the only remaining unsettled transaction is between petitioners and
PDIC as the appointed receiver of the Rural Bank.
ISSUE: Whether there is a valid consignation.
RULING:
The settled principle is that "the allegations of the Complaint determine the
nature of the action and consequently the jurisdiction of the courts. This rule
applies whether or not the plaintiff is entitled to recover upon all or some of
the claims asserted therein as this is a matter that can be resolved only after
and as a result of the trial."
Under Article 1256 of the Civil Code, the debtor shall be released from
responsibility by the consignation of the thing or sum due, without need of
prior tender of payment, when the creditor is absent or unknown, or when he
is incapacitated to receive the payment at the time it is due, or when two or
more persons claim the same right to collect, or when the title to the
obligation has been lost. Applying Article 1256 to the petitioners’ case as
shaped by the allegations in their Complaint, the Court finds that a case for
consignation has been made out, as it now appears that there are two entities
which petitioners must deal with in order to fully secure their title to the
property: 1) the Rural Bank (through PDIC), which is the apparent creditor
under the July 4, 1994 Loan and Mortgage Agreement; and 2) AFPMBAI,
which is currently in possession of the loan documents and the certificate of
title, and the one making demands upon petitioners to pay. Clearly, the
Page 37 of 66
CIVIL LAW
allegations in the Complaint present a situation where the creditor is

unknown, or that two or more entities appear to possess the same right to
collect from petitioners. Whatever transpired between the Rural Bank or PDIC
and AFPMBAI in respect of petitioners’ loan account, if any, such that
AFPMBAI came into possession of the loan documents and TCT No. 37017, it
appears that petitioners were not informed thereof, nor made privy thereto.
Indeed, the instant case presents a unique situation where the buyer, through
no fault of his own, was able to obtain title to real property in his name even
before he could pay the purchase price in full. There appears to be no
vitiated consent, nor is there any other impediment to the consummation of
their agreement, just as it appears that it would be to the best interests of all
parties to the sale that it be once and for all completed and terminated. For
this reason, Civil Case No. 3812 should at this juncture be allowed to
proceed.
Finally, the lack of prior tender of payment by the petitioners is not fatal to
their consignation case. They filed the case for the exact reason that they
were at a loss as to which between the two – the Rural Bank or AFPMBAI –
was entitled to such a tender of payment. Besides, as earlier stated, Article
1256 authorizes consignation alone, without need of prior tender of payment,
where the ground for consignation is that the creditor is unknown, or does not
appear at the place of payment; or is incapacitated to receive the payment at
the time it is due; or when, without just cause, he refuses to give a receipt; or
when two or more persons claim the same right to collect; or when the title of
the obligation has been lost.
ISSUE 2: Whether the RTC has jurisdiction over the consignation case.
RULING:
Art. 1258. Consignation shall be made by depositing the things due at the
disposal of judicial authority, before whom the tender of payment shall be
proved, in a proper case, and the announcement of the consignation in other
cases.
Page 38 of 66
CIVIL LAW
The consignation having been made, the interested parties shall also be
notified thereof. (Emphasis and underscoring supplied)
The above provision clearly precludes consignation in venues other than the
courts. Elsewhere, what may be made is a valid tender of payment, but not
consignation. The two, however, are to be distinguished.
Tender of payment must be distinguished from consignation. Tender is the

antecedent of consignation, that is, an act preparatory to the consignation,
which is the principal, and from which are derived the immediate
consequences which the debtor desires or seeks to obtain. Tender of payment
may be extrajudicial, while consignation is necessarily judicial, and the
priority of the first is the attempt to make a private settlement before
proceeding to the solemnities of consignation. (8 Manresa 325).
While it may be true that petitioners’ claim relates to the terms and conditions
of the sale of AFPMBAI’s subdivision lot, this is overshadowed by the fact that
since the Complaint in Civil Case No. 3812 pleads a case for consignation,
the HLURB is without jurisdiction to try it, as such case may only be tried by
the regular court.
ANTONIO LOCSIN, II vs. MEKENI FOOD CORPORATION, G.R. NO.

192105, December 9, 2013
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 over see 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 Sheet5 which
was presented to petitioner. Subsequently, Locsin resigned effective February
25, 2006. By then, a total of ₱112,500.00 had been deducted from his
monthly salary and applied as part of the employee’s share in the car plan.
Page 39 of 66
CIVIL LAW
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 ₱116,380.00 if he opts to purchase the same.
Petitioner filed against Mekeni and/or its President, Prudencio S. Garcia, a
Complaint6for 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.
Mekeni asserts 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.
ISSUE: Whether there is unjust enrichment.
RULING:
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 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 necessaryto the full and effective promotion of its business. It may
Page 40 of 66
CIVIL LAW
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 counter part 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
SPOUSES DELFIN O. TUMIBAY and AURORA T. TUMIBAY-deceased vs.

SPOUSES MELVIN A. LOPEZ and ROWENA GAY T. VISITACION LOPEZ,
G.R. No.171692, June 3, 2013
Petitioners filed a Complaint7 for declaration of nullity ab initio of sale, and

recovery of ownership and possession of land with the RTC of Malaybalay
City. In their Complaint, petitioners alleged that they are the owners of a
parcel of land located in Sumpong, Malaybalay, Bukidnon covered by
Transfer Certificate of Title (TCT) No. T-253348 (subject land) in the name of
Page 41 of 66
CIVIL LAW
petitioner Aurora; that they are natural born Filipino citizens but petitioner
Delfin acquired American citizenship while his wife, petitioner Aurora,
remained a Filipino citizen; that petitioner Aurora is the sister of Reynalda
Visitacion (Reynalda);9that on July 23, 1997, Reynalda sold the subject land
to her daughter, Rowena Gay T. Visitacion Lopez (respondent Rowena),
through a deed of sale10 for an unconscionable amount of ₱95,000.00
although said property had a market value of more than ₱2,000,000.00;
that the subject sale was done without the knowledge and consent of
petitioners; and that, for these fraudulent acts, respondents should be held
liable for damages. Petitioners prayed that (1) the deed of sale dated July 23,
1997 be declared void ab initio, (2) the subject land be reconveyed to
petitioners, and (3) respondents be ordered to pay damages. RTC rendered
a Decision in favor of petitioners. CA rendered the assailed Decision
reversing the judgment of the trial court.
ISSUE 1: Whether petitioners and respondent Rowena entered into a contract

to sell over the subject land.
RULING:
We are, thus, inclined to rule that there was, indeed, a contractual

agreement between the parties for the purchase of the subject land and that
this agreement partook of an oral contract to sell for the sum of
₱800,000.00. A contract to sell has been defined as "a bilateral contract
whereby the prospective seller, while expressly reserving the ownership of the
subject property despite delivery thereof to the prospective buyer, binds
himself to sell the said property exclusively to the prospective buyer upon
fulfillment of the condition agreed upon, that is, full payment of the purchase
price."25 In a contract to sell, "ownership is retained by the seller and is not to
pass until the full payment of the price x x x." It is "commonly entered into so
as to protect the seller against a buyer who intends to buy the property in
installments by withholding ownership over the property until the buyer effects
full payment therefor."
Page 42 of 66
CIVIL LAW
In the case at bar, while there was no written agreement evincing the
intention of the parties to enter into a contract to sell, its existence and partial
execution were sufficiently established by, and may be reasonably inferred
from the actuations of the parties, to wit: (1) the title to the subject land was
not immediately transferred, through a formal deed of conveyance, in the
name of respondent Rowena prior to or at the time of the first payment of
$1,000.00 by respondent Rowena to petitioner Aurora on January 25, 1995;
(2) after this initial payment, petitioners received 22 intermittent monthly
installments from respondent Rowena in the sum of $500.00; and, (3) in her
testimony, respondent Rowena admitted that she had the title to the subject
land transferred in her name only later on or on July 23, 1997, through a
deed of sale, because she believed that she had substantially paid the
purchase price thereof, and that she was entitled thereto as a form of security
for the installments she had already paid.
ISSUE 2: Whether respondent Rowena was guilty of breach of contract.
RULING:
Although we rule that there was a contract to sell over the subject land
between petitioners and respondent Rowena, we find that respondent
Rowena was in breach thereof because, at the time the aforesaid deed of
sale was executed on July 23, 1997, the full price of the subject land was yet
to be paid.
ISSUE 3: Whether the contract to sell is rescissible.
RULING:
Article 1191 of the Civil Code provides:
Art. 1191. The power to rescind obligations is implied in reciprocal ones, in

case one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek
Page 43 of 66
CIVIL LAW
rescission even after he has chosen fulfillment, if the latter should become
impossible.
The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period. x x x
As a general rule, "rescission will not be permitted for a slight or casual

breach of the contract, but only for such breaches as are substantial and
fundamental as to defeat the object of the parties in making the agreement."41
In the case at bar, we find that respondent Rowena’s act of transferring the
title to the subject land in her name, without the knowledge and consent of
petitioners and despite non-payment of the full price thereof, constitutes a
substantial and fundamental breach of the contract to sell. As previously
noted, the main object or purpose of a seller in entering into a contract to sell
is to protect himself against a buyer who intends to buy the property in
installments by withholding ownership over the property until the buyer effects
full payment therefor.42 As a result, the seller’s obligation to convey and the
buyer’s right toconveyance of the property arise only upon full payment of the
price. Thus, a buyer who willfully contravenes this fundamental object or
purpose of the contract, by covertly transferring the ownership of the property
in his name at a time when the full purchase price has yet to be paid, commits
a substantial and fundamental breach which entitles the seller to rescission of
the contract.
Art. 1170. Those who in the performance of their obligations are guilty of
fraud, negligence, or delay, and those who in any manner contravene the
tenor thereof, are liable for damages.
Fraud or malice (dolo) has been defined as a "conscious and intentional

design to evade the normal fulfillment of existing obligations" and is, thus,
incompatible with good faith. In the case at bar, we find that respondent
Rowena was guilty of fraud in the performance of her obligation under the
Page 44 of 66
CIVIL LAW
subject contract to sell because (1) she knew that she had not yet paid the full
price (having paid only 32.58% thereof) when she had the title to the subject
land transferred to her name, and (2) she orchestrated the aforesaid transfer
of title without the knowledge and consent of petitioners. Her own testimony
and documentary evidence established this fact. Where fraud and bad faith
have been established, the award of moral damages is proper. Further,
under Article 2208(2) of the Civil Code, the award of attorney’s fees is
proper where the plaintiff is compelled to litigate with third persons or incur
expenses to protect his interest because of the defendant’s act or omission.
Here, respondent Rowena’s aforesaid acts caused petitioners to incur
expenses in litigating their just claims. We, thus, find respondent Rowena
liable for moral damages and attorney’s fees which we fix at ₱100,000.00
and ₱50,000.00, respectively.
ISSUE 4: Whether the sale of the subject land is void.
RULING:
Art. 1898. If the agent contracts in the name of the principal, exceeding the
scope of his authority, and the principal does not ratify the contract, it shall be
void if the party with whom the agent contracted is aware of the limits of the
powers granted by the principal. In this case, however, the agent is liable if
he undertook to secure the principal’s ratification.
That petitioners continued to receive four monthly installments even after the
premature titling of the subject land in the name of respondent Rowena,
through the deed of sale dated July 23, 1997, did not, by itself, establish that
petitioners ratified such sale. On the contrary, the fact that petitioners
continued to receive the aforesaid monthly installments tended to establish
that they had yet to discover the covert transfer of title in the name of
respondent Rowena. As stated earlier, the evidence on record established
that the subject sale was done without petitioners’ knowledge and consent
which would explain why receipt or acceptance by petitioners of the
Page 45 of 66
CIVIL LAW
aforementioned four monthly installments still occurred. Further, it runs

contrary to common human experience and reason that petitioners, as sellers,
would forego the reservation or retention of the ownership over the subject
land, which was intended to guarantee the full payment of the price under the
contract to sell, especially so in this case where respondent Rowena, as
buyer, had paid only 32.58% of the purchase price. In a contract to sell, it
would be unusual for the seller to consent to the transfer of ownership of the
property to the buyer prior to the full payment of the purchase price because
the reservation of the ownership in the seller is precisely intended to protect
the seller from the buyer. We, therefore, find that petitioners’ claim that they
did not ratify the subject sale, which was done without their knowledge and
consent, and that the subsequent discovery of the aforesaid fraudulent sale
led them to promptly file this case with the courts to be more credible and in
accord with the evidence on record. To rule otherwise would be to reward
respondent Rowena for the fraud that she committed on petitioners.
Based on the foregoing, we rule that (1) Reynalda, as agent, acted beyond
the scope of her authority under the SPA when she executed the deed of sale
dated July 23, 1997 in favor of respondent Rowena, as buyer, without the
knowledge and consent of petitioners, and conveyed the subject land to
respondent Rowena at a price not approved by petitioners, as principals and
sellers, (2) respondent Rowena was aware of the limits of the authority of
Reynalda under the SPA, and (3) petitioners did not ratify, impliedly or
expressly, the acts of Reynalda. Under Article 1898 of the Civil Code, the sale
is void and petitioners are, thus, entitled to the reconveyance of the subject
land.
IBM PHILIPPINES, INC. vs. PRIME SYSTEMS PLUS, INC., G.R. No. 203192,
August 15, 2016
Petitioner entered into an agreement with respondent whereby the former will
deliver 45 automated teller machines (ATMs) and several computer hardware
to respondent's customers for the total price of ₱24,743,610.43. Petitioner
instituted a Complaint for sum of money, attorney's fees, costs of litigation
with application for the issuance of a Writ of Preliminary Attachment5 against
Page 46 of 66
CIVIL LAW
respondent. In the said Complaint, petitioner sought to have respondent pay

the former ₱45,997,266.22 representing respondent's unpaid obligation
with 3% monthly interest. RTC rendered its Decision dated March 25, 2008
ordering respondent to pay the sum of ₱46,036,028.42 with interest at
6% per annum from March 15, 2006 and attorney's fees in the amount of
₱1,000,000.00. CA rendered its Decision dated January 30, 2012 partly
granting respondent's Petition, It ordered respondent to pay petitioner
₱24,622,394.72 with 6% annual interest from the time of filing of the
Complaint while it deleted the award of attorney's fees of Pl,000,000.00.
ISSUE 1: Did petitioner's imposition of 3% monthly interest constitute a written

stipulation under Article 1956 of the Civil Code?
RULING:
It has been a long-standing rule that for interest to become due and
demandable, two requisites must be present: (1) that there must be an express
stipulation for the payment of interest and (2) the agreement to pay interest is
reduced in writing.
This Court finds that the evidence points to respondent's lack of consent to a
3% monthly interest. Petitioner adamantly claims that respondent's act of
requesting for a lower interest rate shows the latter's agreement to a 3%
monthly interest. Such an askewed reasoning escapes us - especially here
where respondent's authorized representative never assented to petitioner's
letter. To accept petitioner's misplaced argument that the parties mutually
agreed to a 3% monthly interest when respondent subsequently ordered
ATMs despite receiving petitioner's letter in1posing a 3% monthly interest will
render the second condition - that the agreement be reduced in writing -
futile. Although respondent did agree to the imposition of interest per se, the
fact that there was never a clear rate of interest still leaves room to guess as
to how much interest respondent will pay. This is precisely the reason why
Article 1956 was included in the Civil Code - so that both parties clearly
agree to and are fully aware of the price to be paid in a contract.
Page 47 of 66
CIVIL LAW
In the absence of agreement as to the exact rate of interest, the CA properly

applied the legal rate of 6% annual interest following our ruling in Eastern
Shipping Lines, Inc. v. Court of Appeals and the Bangko Sentral ng Pilipinas
MB Circular No. 799, series of 2013.
ISSUE 2: Whether CA is correct in deleting the award of attorney’s fees.
RULING:
Finally, we find that the CA correctly deleted the award of attorney's fees for
failure of the trial court to discuss the basis of such. As we have said in
Philippine Airlines, Inc. v. Court of Appeals, "[ c ]urrent jurisprudence instructs
that in awarding attorney's fees, the trial court must state the factual, legal, or
equitable justification for awarding the same, bearing in mind that the award
of attorney's fees is the exception, not the general rule, and it is not sound
public policy to place a penalty on the right to litigate; nor should attorney's
fees be awarded every time a party wins a lawsuit. The matter of attorney's
fees cannot be dealt with only in the dispositive portion of the decision. The
text of the decision must state the reason behind the award of attorney's fees.
Otherwise, its award is totally unjustified."
CONCHITA A SONLEY vs. ANCHOR SAVINGS BANK/EQUICOM SAVINGS

BANK, G.R. No. 205623, August 10, 2016
The petitioner5 filed a Complaint6 for declaration of nullity of rescission of

contract and damages in the trial court7 against x x x Anchor Savings Bank
("Anchor"), a thrift banking institution organized and existing under the laws
of the Philippines [whose] business name x x x was [later] changed to Equicom
Savings Bank x x x. In the said complaint, petitioner alleged that, on January
28, 2005, she agreed to purchase a real property from [Anchor] for the sum
of x x x Php2,200,000.00 x x x. The said real property pertained to a parcel
of land that had been foreclosed by [Anchor] with an area of x x x 126.50
square meters x x x located at Fairview, Quezon City ("subject property").
Pursuant to the said agreement, the parties entered into a Contract to
Sell8 whereby the petitioner agreed to pay the amount of x x x
Page 48 of 66
CIVIL LAW
Php200,000.00 x x x as downpayment x x x with the balance of x x x

Php2,000,000.00 x x x payable in sixty (60) monthly installments amounting
to x x x Php47,580.00 x x x. Petitioner, however, defaulted in paying her
monthly obligations x x x which prompted [Anchor] to rescind the contract to
sell x x x. In filing the complaint x x x petitioner averred that the rescission of
the contract to sell was null and void because she had already substantially
paid her obligation to the bank. Subsequently, after the issuance of a Pre-
Trial Order by the trial court, the parties agreed to an amicable settlement
and entered into a Compromise Agreement.10 On the basis thereof, the trial
court rendered a Judgment11 x x x on August 16, 2010 whereby the petitioner
agreed to repurchase the subject property from [Anchor] for the amount of x x
x Php1,469,460.66 x x x plus x x x 12% x x x interest per annum. However,
[Anchor] later on filed a Manifestation and Motion for Execution12 in the trial
court claiming that petitioner had not been paying the agreed monthly
installments in accordance with the compromise agreement. Moreover, it
averred that all the checks which the petitioner issued to pay her obligations
were again dishonored. RTC granted the Manifestation and Motion for
Execution. CA ruled against the petitioner. In short, the CA held that
petitioner’s failure to abide by the terms and conditions of the Compromise
Agreement, which had the force and effect of a final and executory judgment
when it was approved by the trial court in its August 16, 2010 Judgment,
authorized the enforcement thereof by execution, and thus the trial court may
not be faulted for granting respondent’s motion for execution and directing
the issuance of the corresponding writ.
ISSUE 1: Whether respondent may rescind the compromise agreement.
RULING:
Under Article 2041 of the Civil Code, "(i)f one of the parties fails or refuses to
abide by the compromise, the other party may either enforce the compromise
or regard it as rescinded and insist upon his original demand." "The language
of this Article 2041 x x x denotes that no action for rescission is required x x x,
and that the party aggrieved by the breach of a compromise agreement may,
if he chooses, bring the suit contemplated or involved in his original demand,
Page 49 of 66
CIVIL LAW
as if there had never been any compromise agreement, without bringing an

action for rescission thereof. He need not seek a judicial declaration of
rescission, for he may ‘regard’ the compromise agreement already
‘rescinded’." This principle was reiterated in a subsequent case, thus:
In the case of Leonor v. Sycip, the Supreme Court (SC) had the occasion
to explain this provision of law. It ruled that Article 2041 does not
require an action for rescission, and the aggrieved party, by the breach
of compromise agreement, may just consider it already rescinded, to
wit:
It is worthy of notice, in this connection, that, unlike Article 2039 of the

same Code, which speaks of "a cause of annulment or rescission of the
compromise" and provides that "the compromise may be annulled r
rescinded" for the cause therein specified, thus suggesting an action for
annulment or rescission, said Article 2041 confers upon the party
concerned, not a "cause" for rescission, or the right to "demand" the
rescission of a compromise, but the authority, not only to "regard it as
rescinded", but, also, to "insist upon his original demand". The
language of this Article 2041, particularly when contrasted with that of
Article 2039, denotes that no action for rescission is required in said
Article 2041, and that the party aggrieved by the breach of a
compromise agreement may, if he chooses, bring the suit contemplated
or involved in his original demand, as if there had never been any
compromise agreement, without bringing an action for rescission
thereof. He need not seek a judicial declaration of rescission, for he
may "regard" the compromise agreement already "rescinded". 20
The parties’ Compromise Agreement states that –
(c) Penalty. In case of failure of the plaintiff to pay, for any reason
whatsoever, the amount provided in the Schedule of Payment, the
plaintiff hereby agrees to pay, in addition to, and separate from, the
interest rate agreed upon, a penalty charge of FIVE PERCENT (5%) per
month or a fraction thereof, based on unpaid installments computed
Page 50 of 66
CIVIL LAW
from due date until fully paid. This shall be without prejudice to the right
of the defendant to rescind this Compromise Agreement as provided
under the "Contract to Sell" dated 21 December 2007 upon
compliance with the requirements provided for under the law.
(Emphasis supplied)
The Contract to Sell provides, on the other hand, that –
The failure of the BUYER to pay on due date any monthly installment in
accordance with the Schedule of Payment provided in Paragraph 2 –
Manner of Payment, or if, at any time, the SELLER is of the opinion that
the BUYER would be unable to pay or meet his obligations under this
Contract or in case the BUYER was declared in default by any other
creditor, then the SELLER shall be entitled, as a matter of right, to
rescind this Contract. (Emphasis supplied)
While the assailed dispositions of the trial court and the CA do not specify the
remedies that respondent is entitled to, it is clear that rescission and eviction
were specifically sought and prayed for in respondent’s Manifestation and
Motion for Execution, and petitioner was given the opportunity to oppose the
same. In her Opposition to the Motion for Execution, she in fact
acknowledged and admitted that she was in default and that she violated the
Compromise Agreement by her failure to make regular payments as required
therein. Indeed, it may be said that respondent’s motion for execution, with a
prayer for rescission, for the application of petitioner’s payments as rental,
and for her eviction, constituted sufficient written notice to petitioner, and it
was duly heard; petitioner opposed the motion and even filed a rejoinder to
respondent’s reply, but she could not proffer any defense; quite the opposite,
she openly admitted liability. The facts, evidence, and pleadings are clear
and within the cognizance of the trial court; petitioner’s failure to abide by the
agreement should result in execution, cancellation and rescission of the
Compromise Agreement and Contract to Sell, and her eviction from the
property.
Page 51 of 66
CIVIL LAW
Certainly, a compromise agreement becomes the law between the parties

and will not be set aside other than [sic] the grounds mentioned above. In
Ramnani v. Court of Appeals, we held that the main purpose of a compromise
agreement is to put an end to litigation because of the uncertainty that may
arise from it. Once the compromise is perfected, the parties are bound to
abide by it in good faith. Should a party fail or refuse to comply with the terms
of a compromise or amicable settlement, the other party could either enforce
the compromise by a writ of execution or regard it as rescinded and so insist
upon his/her original demand.
SPOUSES DIONISIO ESTRADA and JOVITA R. ESTRADA vs. PHILIPPINE

RABBIT BUS LINES, INC., G.R. No. 203902, July 19, 2017
Petitioners filed with the Regional Trial Court a Complaint for Damages
against Philippine Rabbit and respondent Eduardo R. Saylan (Eduardo).
Dionisio argued that pursuant to the contract of carriage between him and
Philippine Rabbit, respondents were duty-bound to carry him safely as far as
human care and foresight can provide, with utmost diligence of a very
cautious person, and with due regard for all the circumstances from the point
of his origin in Urdaneta City to his destination in Pugo, La Union. However,
through the fault and negligence of Philippine Rabbit's driver, Eduardo, and
without human care, foresight, and due regard for all circumstances,
respondents failed to transport him safely by reason of the aforementioned
collision which resulted in the amputation of Dionisio's right arm. And since
demands for Philippine Rabbit7 to pay him damages for the injury he
sustained remained unheeded, Dionisio filed the said complaint wherein he
prayed for the following awards: moral damages of ₱500,000.00 actual
damages of ₱60,000.00, and attorney's fees of ₱25,000.00. Denying any
liability, Philippine Rabbit in its Answer9 averred that it carried Dionisio safely
as far as human care and foresight could provide with the utmost diligence of
a very cautious person and with due regard for all the circumstances
prevailing. While it did not contest that its bus figured in an accident,
Philippine Rabbit nevertheless argued that the cause thereof was an
extraordinary circumstance independent of its driver's action or a fortuitous
event. Hence, it claimed to be exempt from any liability arising therefrom. In
Page 52 of 66
CIVIL LAW
any case, Philippine Rabbit averred that it was the Isuzu truck coming from the
opposite direction which had the last clear chance to avoid the mishap.
Instead of slowing down upon seeing the bus, the said truck continued its
speed such that it bumped into the right side of the bus. The proximate cause
of the accident, therefore, was the wrongful and negligent manner in which
the Isuzu truck was operated by its driver. In view of this, Philippine Rabbit
believed that Dionisio has no cause of action against it. RTC ruled in favor of
the petitioner. The CA modified the RTC Decision in that it declared Philippine
Rabbit as solely and exclusively liable to Dionisio for actual damages in the
amount of ₱57,766.25 and deleted the award of moral damages and
attorney's fees.
ISSUE 1: Whether moral damages may be recovered in breach of contract.
RULING:
Moral damages include physical suffering, mental anguish, fright, serious

anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury. Though incapable of pecuniary computation,
moral damages may be recovered if they are the proximate result of the
defendant's wrongful act or omission.
Under Article 2219 of the Civil Code, moral damages are recoverable in the
following and analogous cases: (1) a criminal offense resulting in physical
injuries; (2) quasi-delicts causing physical injuries; (3) seduction, abduction,
rape or other lascivious acts; (4) adultery or concubinage; (5) illegal or
arbitrary detention or arrest; (6) illegal search; (7) libel, slander, or any other
form of defamation; (8) malicious prosecution; (9) acts mentioned in Article
309; and (1) acts and actions referred to in Articles 21, 26, 27 , 28, 29, 30,
32, 34, and 35.
x x x [C]ase law establishes the following requisites for the award of moral
damages: (1) there must be an injury clearly sustained by the claimant,
whether physical, mental or psychological; (2) there must be a culpable act or
omission factually established; (3) the wrongful act or omission of the
Page 53 of 66
CIVIL LAW
defendant is the proximate cause of the injury sustained by the claimant; and
(4) the award for damages is predicated on any of the cases stated in Article
2219 of the Civil Code.
Since breach of contract is not one of the items enumerated under Article
2219, moral damages, as a general rule, are not recoverable in actions for
damages predicated on breach of contract.
x x x As an exception, such damages are recoverable [in an action for breach

of contract:] (1) in cases in which the mishap results in the death of a
passenger, as provided in Article 1764, in relation to Article 2206(3)35 of the
Civil Code; and (2) in x x x cases in which the carrier is guilty of fraud or bad
faith, as provided in Article 2220
ISSUE 2: Whether petitioner may recover moral damages.
RULING:
It is obvious that this case does not come under the first of the
abovementioned exceptions since Dionisio did not die in the mishap but
merely suffered an injury. Nevertheless, petitioners contend that it falls under
the second category since they aver that Philippine Rabbit is guilty of fraud or
bad faith.
It has been held, however, that "allegations of bad faith and fraud must be
proved by clear and convincing evidence." They are never presumed
considering that they are serious accusations that can be so conveniently and
casually invoked. And unless convincingly substantiated by whoever is
alleging them, they amount to mere slogans or mudslinging.
In this case, the fraud or bad faith that must be convincingly proved by
petitioners should be one which was committed by Philippine Rabbit in
breaching its contract of carriage with Dionisio. Unfortunately for petitioners,
the Court finds no persuasive proof of such fraud or bad faith.
Page 54 of 66
CIVIL LAW
Fraud has been defined to include an inducement through insidious

machination. Insidious machination refers to a deceitful scheme or plot with
an evil or devious purpose. Deceit exists where the party, with intent to
deceive, conceals or omits to state material facts and, by reason of such
omission or concealment, the other party was induced to give consent that
would not otherwise have been given.
Bad faith, on the other hand, "does not simply connote bad judgment or
negligence; it imports a dishonest purpose or some moral obliquity and
conscious doing of a wrong, a breach of a known duty through some motive
or interest or ill will that partakes of the nature of fraud."
There is no showing here that Philippine Rabbit induced Dionisio to enter into
a contract of carriage with the former through insidious machination. Neither
is there any indication or even an allegation of deceit or concealment or
omission of material facts by reason of which Dionisio boarded the bus
owned by Philippine Rabbit. Likewise, it was not shown that Philippine
Rabbit's breach of its known duty, which was to transport Dionisio from
Urdaneta to La Union,43 was attended by some motive, interest, or ill will.
From these, no fraud or bad faith can be attributed to Philippine Rabbit.
Clearly, moral damages are not recoverable in this case. The CA, therefore,
did not err in deleting the award for moral damages.
ISSUE 3: Whether petitioner is entitled to actual damages for loss of earning

capacity.
RULING:
Loss or impairment of ean1ing capacity finds support under Article 2205 (1) of
the Civil Code, to wit:
Art. 2205. Damages may be recovered:
(1) For loss or impairment of earning capacity in cases of temporary or

permanent personal injury;
Page 55 of 66
CIVIL LAW
xxxx
It is, however, settled that "damages for loss [or impairment] of earning
capacity is in the nature of actual damages x x x."
Actual or compensatory damages are those awarded in order to compensate

a party for an injury or loss he suffered. They arise out of a sense of natural
justice, aimed at repairing the wrong done. To be recoverable, they must be
duly proved with a reasonable degree of certainty. A court cannot rely on
speculation, conjecture, or guesswork as to the fact and amount of damages,
but must depend upon competent proof that they have suffered, and on
evidence of the actual amount thereof.
Thus, as a rule, documentary evidence should be presented to substantiate

the claim for damages for loss of earning capacity. By way of exception,
damages for loss [or impairment] of earning capacity may be awarded
despite the absence of documentary evidence when (1) the deceased [or the
injured] was self-employed and earning less than the minimum wage under
current labor laws, in which case, judicial notice may be taken of the fact that
in the deceased's line of work no documentary evidence is available; or (2)
the deceased was employed as a daily worker earning less than the minimum
wage under current labor laws.
Here, it is unlikely that petitioners presented evidence to prove a claim for

actual damages based on loss/impairment of earning capacity since what
they were claiming at the outset was an award for moral damages. The Court
has nonetheless gone over the records to find out if they have sufficiently
shown during trial that they are entitled to such compensatory damages that
they are now claiming. Unfortunately, no documentary evidence supporting
Dionisio's actual income is extant on the records. What it bears is the mere
testimony of Dionisio on the matter.
It must be emphasized, though, that documentary proof of Dionisio's actual

income cannot be dispensed with since based on the above testimony,
Dionisio does not fall under any of the two exceptions aforementioned. Thus,
Page 56 of 66
CIVIL LAW
as it stands, there is no competent proof substantiating his actual income and

because of this, an award for actual damages for loss/ impairment of earning
capacity cannot be made.
Nonetheless, since it was established that Dionisio lost his right arm,
temperate damages in lieu of actual damages for loss/impairment of earning
capacity may be awarded in his favor. Under Article 2224, "[t]emperate or
moderate damages, which are more than nominal but less than
compensatory damages, may be recovered when the court finds that some
pecuniary loss has been suffered but its amount cannot, from the nature of the
case, be proved with certainty."
The case of Tan v. OMC Carriers, Inc. enumerates several instances wherein
the Court awarded temperate damages in lieu of actual damages for loss of
earning capacity, viz.:
In the past, we awarded temperate damages in lieu of actual damages for

loss of earning capacity where earning capacity is plainly established but no
evidence was presented to support the allegation of the injured party's actual
income.
In Pleno v. Court of Appeals, we sustained the award of temperate damages

in the amount of ₱200,000.00 instead of actual damages for loss of earning
capacity because the plaintiffs income was not sufficiently proven.
We did the same in People v. Singh, and People v. Almedilla, granting

temperate damages in place of actual damages for the failure of the
prosecution to present sufficient evidence of the deceased's income.
Similarly, in Victory Liner, Inc. v. Gammad, we deleted the award of

damages for loss of earning capacity for lack of evidentiary basis of the
actual extent of the loss. Nevertheless, because the income-earning capacity
lost was clearly established, we awarded the heirs ₱500,000.00 as
temperate damages.
Page 57 of 66
CIVIL LAW
ISSUE 4: Whether actual damages by way of medical expenses may be

recovered.
RULING:
Anent petitioners' assertion that actual damages should be awarded to them

for the cost of replacement of Dionisio's amputated right arm, suffice it to state
that petitioners failed to show during trial that the said amputated right arm
was actually replaced by an artificial one. All that petitioners submitted was a
quotation of ₱l60,000.00 for a unit of elbow prosthesis and nothing more. It
has been held that actual proof of expenses incurred for medicines and other
medical supplies necessary for treatment and rehabilitation must be
presented by the claimant, in the form of official receipts, to show the exact
cost of his medication and to prove that he indeed went through medication
and rehabilitation. In the absence of the same, such claim must be negated.
At any rate, the RTC already granted petitioners actual damages by way of
medical expenses based on the official hospital receipts submitted. There is,
however, a need to correct the amount, that is, there should be ₱57,658.25
as borne by the receipts and not ₱57,766.25 .
ANTIPOLO INING (DECEASED), SURVIVED BY MANUEL VILLANUEVA,

TEODORA VILLANUEVA-FRANCISCO, CAMILO FRANCISCO, ADOLFO
FRANCISCO, LUCIMO FRANCISCO, JR., MILAGROS
FRANCISCO,* CELEDONIO FRANCISCO, HERMINIGILDO FRANCISCO;
RAMON TRESVALLES, ROBERTO TAJONERA, NATIVIDAD INING-IBEA
(DECEASED) SURVIVED BY EDILBERTO IBEA, JOSEFA IBEA, MARTHA IBEA,
CARMEN IBEA, AMPARO IBEA-FERNANDEZ, HENRY RUIZ, EUGENIO RUIZ
AND PASTOR RUIZ; DOLORES INING-RIMON (DECEASED) SURVIVED BY
JESUS RIMON, CESARIA RIMON GONZALES AND REMEDIOS RIMON
CORDERO; AND PEDRO INING (DECEASED) SURVIVED BY ELISA TAN
INING (WIFE) AND PEDRO INING, JR. vs. LEONARDO R. VEGA, G.R. No.
174727, August 12, 2013
Page 58 of 66
CIVIL LAW
Leon Roldan (Leon), married to Rafaela Menez (Rafaela), is the owner of a

3,120-square meter parcel of land (subject property) in Kalibo, Aklan covered
by Original Certificate of Title No. (24071) RO-6305 (OCT RO-630). Leon
and Rafaela died without issue. Leon was survived by his siblings Romana
Roldan (Romana) and Gregoria Roldan Ining (Gregoria), who are now both
deceased.
Romana was survived by her daughter Anunciacion Vega and grandson,

herein respondent Leonardo R. Vega (Leonardo) (also both deceased).
Leonardo in turn is survived by his wife Lourdes and children Restonilo I.
Vega, Crispulo M. Vega, Milbuena Vega-Restituto and Lenard Vega, the
substituted respondents.
Gregoria, on the other hand, was survived by her six children: petitioners
Natividad Ining-Ibea (Natividad), Dolores Ining-Rimon (Dolores), Antipolo,
and Pedro; Jose; and Amando. Natividad is survived by Edilberto Ibea,
Josefa Ibea, Martha Ibea, Carmen Ibea, Amparo Ibea-Fernandez, Henry
Ruiz and Pastor Ruiz. Dolores is survived by Jesus Rimon, Cesaria Rimon
Gonzales and Remedios Rimon Cordero. Antipolo is survived by Manuel
Villanueva, daughter Teodora Villanueva-Francisco (Teodora), Camilo
Francisco (Camilo), Adolfo Francisco (Adolfo), Lucimo Francisco, Jr. (Lucimo
Jr.), Milagros Francisco, Celedonio Francisco, and Herminigildo Francisco
(Herminigildo). Pedro is survived by his wife, Elisa Tan Ining and Pedro Ining,
Jr. Amando died without issue. As for Jose, it is not clear from the records if he
was made party to the proceedings, or if he is alive at all.
In short, herein petitioners, except for Ramon Tresvalles (Tresvalles) and

Roberto Tajonera (Tajonera), are Gregoria’s grandchildren or spouses thereof
(Gregoria’s heirs).
Acting on the claim that one-half of subject property belonged to him as

Romana’s surviving heir, Leonardo filed with the Regional Trial Court (RTC) of
Kalibo, Aklan Civil Case No. 52756 for partition, recovery of ownership and
possession, with damages, against Gregoria’s heirs. In his Amended
Complaint,7 Leonardo alleged that on several occasions, he demanded the
Page 59 of 66
CIVIL LAW
partition of the property but Gregoria’s heirs refused to heed his demands;
that the matter reached the level of the Lupon Tagapamayapa, which issued
a certification to file a court action sometime in 1980; that Gregoria’s heirs
claimed sole ownership of the property; that portions of the property were
sold to Tresvalles and Tajonera, which portions must be collated and included
as part of the portion to be awarded to Gregoria’s heirs; that in 1979, Lucimo
Francisco, Sr. (Lucimo Sr.), husband of herein petitioner Teodora, illegally
claimed absolute ownership of the property and transferred in his name the
tax declaration covering the property; that from 1988, Lucimo Sr. and
Teodora have deprived him (Leonardo) of the fruits of the property estimated
at ₱1,000.00 per year; that as a result, he incurred expenses by way of
attorney’s fees and litigation costs. Leonardo thus prayed that he be declared
the owner of half of the subject property; that the same be partitioned after
collation and determination of the portion to which he is entitled; that
Gregoria’s heirs be ordered to execute the necessary documents or
agreements; and that he (Leonardo) be awarded actual damages in the
amount of ₱1,000.00 per year from 1988, attorney’s fees of ₱50,000.00,
and lawyer’s appearance fees of ₱500.00 per hearing.
ISSUE 1: Whether Leon sold the property to Lucimo Sr.
RULING:
The finding that Leon did not sell the property to Lucimo Sr. had long been
settled and had become final for failure of petitioners to appeal. Thus, the
property remained part of Leon’s estate.
ISSUE 2: Whether Gregoria’s and Romana’s heirs are co-owners of the

subject property.
RULING:
Since Leon died without issue, his heirs are his siblings, Romana and
Gregoria, who thus inherited the property in equal shares. In turn, Romana’s
and Gregoria’s heirs – the parties herein – became entitled to the property
Page 60 of 66
CIVIL LAW
upon the sisters’ passing. Under Article 777 of the Civil Code, the rights to the
succession are transmitted from the moment of death.
Thus, having succeeded to the property as heirs of Gregoria and Romana,

petitioners and respondents became co-owners thereof. As co-owners, they
may use the property owned in common, provided they do so in accordance
with the purpose for which it is intended and in such a way as not to injure the
interest of the co-ownership or prevent the other co-owners from using it
according to their rights. They have the full ownership of their parts and of the
fruits and benefits pertaining thereto, and may alienate, assign or mortgage
them, and even substitute another person in their enjoyment, except when
personal rights are involved. Each co-owner may demand at any time the
partition of the thing owned in common, insofar as his share is concerned.
Finally, no prescription shall run in favor of one of the co-heirs against the
others so long as he expressly or impliedly recognizes the co-ownership.
ISSUE 3: Whether there is prescription.
RULING:
Time and again, it has been held that "a co-owner cannot acquire by
prescription the share of the other co-owners, absent any clear repudiation of
the co-ownership. In order that the title may prescribe in favor of a co-owner,
the following requisites must concur: (1) the co-owner has performed
unequivocal acts of repudiation amounting to an ouster of the other co-
owners; (2) such positive acts of repudiation have been made known to the
other co-owners; and (3) the evidence thereof is clear and convincing."41
From the foregoing pronouncements, it is clear that the trial court erred in
reckoning the prescriptive period within which Leonardo may seek partition
from the death of Leon in 1962. Article 1141 and Article 494 (fifth paragraph)
provide that prescription shall begin to run in favor of a co-owner and against
the other co-owners only from the time he positively renounces the co-
ownership and makes known his repudiation to the other co-owners.
Page 61 of 66
CIVIL LAW
Lucimo Sr. challenged Leonardo’s co-ownership of the property only

sometime in 1979 and 1980, when the former executed the Affidavit of
Ownership of Land, obtained a new tax declaration exclusively in his name,
and informed the latter – before the Lupon Tagapamayapa – of his 1943
purchase of the property. These apparent acts of repudiation were followed
later on by Lucimo Sr.’s act of withholding Leonardo’s share in the fruits of the
property, beginning in 1988, as Leonardo himself claims in his Amended
Complaint. Considering these facts, the CA held that prescription began to
run against Leonardo only in 1979 – or even in 1980 – when it has been made
sufficiently clear to him that Lucimo Sr. has renounced the co-ownership and
has claimed sole ownership over the property. The CA thus concluded that
the filing of Civil Case No. 5275 in 1997, or just under 20 years counted from
1979, is clearly within the period prescribed under Article 1141.
What escaped the trial and appellate courts’ notice, however, is that while it
may be argued that Lucimo Sr. performed acts that may be characterized as
a repudiation of the co-ownership, the fact is, he is not a co-owner of the
property. Indeed, he is not an heir of Gregoria; he is merely Antipolo’s son-
in-law, being married to Antipolo’s daughter Teodora. Under the Family
Code, family relations, which is the primary basis for succession, exclude
relations by affinity.
Art. 150. Family relations include those:
(1) Between husband and wife;
(2) Between parents and children;
(3) Among other ascendants and descendants; and
(4) Among brothers and sisters, whether of the full or half blood.
In point of law, therefore, Lucimo Sr. is not a co-owner of the property;

Teodora is. Consequently, he cannot validly effect a repudiation of the co-
ownership, which he was never part of. For this reason, prescription did not
Page 62 of 66
CIVIL LAW
run adversely against Leonardo, and his right to seek a partition of the
property has not been lost.
Likewise, petitioners’ argument that Leonardo’s admission and

acknowledgment in his pleadings – that Lucimo Sr. was in possession of the
property since 1943 – should be taken against him, is unavailing. In 1943,
Leon remained the rightful owner of the land, and Lucimo Sr. knew this very
well, being married to Teodora, daughter of Antipolo, a nephew of Leon.
More significantly, the property, which is registered under the Torrens system
and covered by OCT RO-630, is in Leon’s name. Leon’s ownership ceased
only in 1962, upon his death when the property passed on to his heirs by
operation of law.
In fine, since none of the co-owners made a valid repudiation of the existing
co-ownership, Leonardo could seek partition of the property at any time.
SPS. ISAGANI CASTRO and DIOSDADA CASTRO vs. ANGELINA DE LEON

TAN, G.R. No. 168940, November 24, 2009
Respondent Angelina de Leon Tan, and her husband Ruben Tan were the
former registered owners of a 240-square meter residential lot, situated
at Barrio Canalate, Malolos, Bulacan and covered by Transfer Certificate of
Title No. T-8540. They entered into an agreement with petitioners spouses
Isagani and Diosdada Castro denominated as Kasulatan ng Sanglaan ng
Lupa at Bahay (Kasulatan) to secure a loan of ₱30,000.00 they obtained
from the latter. Under the Kasulatan, the spouses Tan undertook to pay the
mortgage debt within six months or until August 17, 1994, with an interest rate
of 5% per month, compounded monthly. When her husband died on
September 2, 1994, respondent Tan was left with the responsibility of paying
the loan. However, she failed to pay the same upon maturity. Thereafter, she
offered to pay petitioners the principal amount of ₱30,000.00 plus a portion
of the interest but petitioners refused and instead demanded payment of the
total accumulated sum of ₱359,000.00. Petitioners caused the extrajudicial
foreclosure of the real estate mortgage and emerged as the only bidder in the
auction sale that ensued. The period of redemption expired without
Page 63 of 66
CIVIL LAW
respondent Tan having redeemed the property; thus title over the same was
consolidated in favor of petitioners. After a writ of possession was issued, the
Sheriff ejected respondents from the property and delivered the possession
thereof to petitioners. Respondent Tan, joined by respondents Sps.
Concepcion T. Clemente and Alexander C. Clemente, Sps. Elizabeth T.
Carpio and Alvin Carpio, Sps. Marie Rose T. Soliman and Arvin Soliman and
Julius Amiel Tan filed a Complaint for Nullification of Mortgage and
Foreclosure and/or Partial Rescission of Documents and Damages. The trial
court rendered judgment in favor of respondents. Petitioners appealed to the
Court of Appeals which affirmed the trial court’s finding that the interest rate
stipulated in the Kasulatan is iniquitous or unconscionable and, thus, its
equitable reduction to the legal rate of 12% per annum is warranted.
ISSUE 1: Whether the Court of Appeals correctly found that the 5% monthly
interest, compounded monthly, is unconscionable and should be equitably
reduced to the legal rate of 12% per annum.
RULING:
In several cases, we have ruled that stipulations authorizing iniquitous or

unconscionable interests are contrary to morals, if not against the law. In
Medel v. Court of Appeals, we annulled a stipulated 5.5% per month or 66%
per annum interest on a ₱500,000.00 loan and a 6% per month or 72% per
annum interest on a ₱60,000.00 loan, respectively, for being excessive,
iniquitous, unconscionable and exorbitant. In Ruiz v. Court of Appeals, we
declared a 3% monthly interest imposed on four separate loans to be
excessive. In both cases, the interest rates were reduced to 12% per annum.
In this case, the 5% monthly interest rate, or 60% per annum, compounded
monthly, stipulated in the Kasulatan is even higher than the 3% monthly
interest rate imposed in the Ruiz case. Thus, we similarly hold the 5% monthly
interest to be excessive, iniquitous, unconscionable and exorbitant, contrary
to morals, and the law. It is therefore void ab initio for being violative of
Article 1306 of the Civil Code. With this, and in accord with the Medel and
Ruiz cases, we hold that the Court of Appeals correctly imposed the legal
Page 64 of 66
CIVIL LAW
interest of 12% per annum in place of the excessive interest stipulated in

the Kasulatan.
ISSUE 2: Whether the CA unilaterally change the terms and conditions of the
Contract of Mortgage entered into between the parties.
RULING:
To reiterate, we fully agree with the Court of Appeals in holding that the
compounded interest rate of 5% per month, is iniquitous and unconscionable.
Being a void stipulation, it is deemed inexistent from the beginning. The debt
is to be considered without the stipulation of the iniquitous and
unconscionable interest rate. Accordingly, the legal interest of 12% per annum
must be imposed in lieu of the excessive interest stipulated in the agreement.
From the foregoing, it is clear that there is no unilateral alteration of the terms
and conditions of the Kasulatan entered into by the parties. Surely, it is more
consonant with justice that the subject interest rate be equitably reduced and
the legal interest of 12% per annum is deemed fair and reasonable.
ISSUE 3: Whether the additional 1% per month penalty awarded as liquidated

damages have any legal basis.
RULING:
Although the issue of the liquidated damages was not presented squarely in
either Memorandum of the parties, this does not prevent us from ruling on the
matter. In the exercise of our appellate jurisdiction, we are clothed with
ample authority to review findings and rulings of lower courts even if they are
not assigned as errors. This is especially so if we find that their consideration is
necessary in arriving at a just decision of the case. We have consistently held
that an unassigned error closely related to an error properly assigned, or
upon which a determination of the question raised by the error properly
assigned is dependent, will be considered notwithstanding the failure to
assign it as an error. On this premise, we deem it proper to pass upon the
matter of liquidated damages.
Page 65 of 66
CIVIL LAW
Article 2226 of the Civil Code provides that "[L]iquidated damages are those
agreed upon by the parties to a contract, to be paid in case of breach
thereof."
In the instant case, a cursory reading of the Kasulatan would show that it is
devoid of any stipulation with respect to liquidated damages. Neither did any
of the parties allege or prove the existence of any agreement on liquidated
damages. Hence, for want of any stipulation on liquidated damages in the
Kasulatan entered into by the parties, we hold that the liquidated damages
awarded by the trial court and affirmed by the Court of Appeals to be without
legal basis and must be deleted.
Page 66 of 66

Del Castillo Rulings

Загружено:

Сведения о документе

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Del Castillo Rulings

Загружено:

Авторское право:

Доступные форматы

DEL CASTILLO RULINGS

CATHAY LAND, INC. and CATHAY METAL CORPORATION vs. AYALA

ISSUE: Whether a judgment based on compromise agreement shall be

It is settled that once a compromise agreement is approved by a final order of

Since the issuance of a writ of execution implementing a judicial compromise

Nevertheless, in implementing a compromise agreement, the "courts cannot

PEN DEVELOPMENT CORPORATION VS. MARTINEZ LEYBA, INC., G.R. No.

Plaintiff-Appellee Martinez Leyba, Inc. (hereafter Martinez) is a corporation

Cancellation of Title and Recovery of Ownership with Damages against Las

ISSUE 1: Whether petitioner is a builder in bad faith.

On the issue of being a builder in had faith, there is no question that

Under the Civil Code,

Moreover, it has been declared that

ISSUE 2: Whether respondent incurred laches in enforcing its putative right.

Jurisprudence consistently holds that ‘prescription and laches cannot apply to

SPOUSES ROMEO PAJARES AND IDA T. PAJARES vs. REMARKABLE

Remarkable Laundry and Dry Cleaning (respondent) filed a Complaint

ISSUE 1: Whether a complaint primarily seeking to enforce the accessory

Neither can we sustain respondent's contention that its Complaint is

Article IV: STANDARD REQUIRED QUOTA & PENALTIES

In consideration [sic] for such renewal of franchise-dealership rights, the

from being charge [sic] Php200/week on falling below required

The RL Main Operator has the option to cancel, terminate this

Concomitantly, what respondent primarily seeks in its Complaint is to recover

In sum, after juxtaposing Article IV of the Remarkable Dealer Outlet Contract

Paragraph 8, Section 19 of BP 129, as amended by Republic Act No. 7691,

The above jurisdictional amount had been increased to P200,000.00 on

FAJ CONSTRUCTION & DEVELOPMENT CORPORATION VS. SUSAN M.

Petitioner FAJ Construction and Development Corporation and respondent

shall be on a progress billing basis, after inspection of the work by

ISSUE 1: Whether the petitioner is liable in violating the construction

Petitioner endeavors to convince us to determine, yet again, the weight,

and passed upon by us. In Fong v. Velayo, we defined a question of

A question of law arises when there is doubt as to what the law is

It has already been held that the determination of the existence of a

There is no ground either to doubt the testimony of Calinawan, who testified

Since respondent suffered damages as a result of petitioner’s defective and

ISSUE 2: Whether petitioner is guilty of delay.

Finally, the imposition of 6% interest per annum is proper. Indeed, as

ROBERTO D. TUAZON vs. LOURDES Q. DEL ROSARIO-SUAREZ, G.R. No.

Respondent Lourdes Q. Del Rosario-Suarez (Lourdes) was the owner of a

In Beaumont v. Prieto, the nature of an option contract is explained thus:

In his Law Dictionary, edition of 1897, Bouvier defines an option as a

`A contract by virtue of which A, in consideration of the payment of a

An agreement in writing to give a person the `option' to purchase lands

On the other hand, in Ang Yu Asuncion v. Court of Appeals, an elucidation on

In the law on sales, the so-called `right of first refusal' is an innovative

as already intimated above, an unjustified disregard thereof, given, for

An accepted unilateral promise to buy or to sell a determinate thing for

In Diamante v. Court of Appeals, this Court further declared that:

A unilateral promise to buy or sell is a mere offer, which is not converted

Consent is manifested by the meeting of the offer and the acceptance

Equatorial Realty Development, Inc. v. Mayfair Theater, Inc. is not applicable

There is no such similar provision in the Contract of Lease between Roberto

COMMUNITIES CAGAYAN, INC., PETITIONER vs. SPOUSES ARSENIO

Respondent-spouses Arsenio and Angeles Nanol entered into a Contract to

Development Bank and that respondent-spouses failed to pay their monthly

ISSUE 1: Whether respondent-spouses are entitled to the cash surrender value

Section 3. In all transactions or contracts involving the sale or financing

(a) To pay, without additional interest, the unpaid installments due

In addition, in view of respondent-spouses’ failure to appeal, they can no

ISSUE 2: Whether respondent-spouses are entitled to reimbursement of the

attach a copy of the Contract to Sell. As such, we are constrained to apply

The Court likewise applied Article 448 in Spouses Macasaet v. Spouses