NACAR VS GALLERY FRAMES

FACTS

Dario Nacar filed a labor case against Gallery Frames and its owner Felipe Bordey, Jr. Nacar alleged that
he was dismissed without cause by Gallery Frames on January 24, 1997. On October 15, 1998, the Labor
Arbiter (LA) found Gallery Frames guilty of illegal dismissal hence the Arbiter awarded Nacar
P158,919.92 in damages consisting of backwages and separation pay.

Gallery Frames appealed all the way to the Supreme Court (SC). The Supreme Court affirmed the
decision of the Labor Arbiter and the decision became final on May 27, 2002.

After the finality of the SC decision, Nacar filed a motion before the LA for recomputation as he alleged
that his backwages should be computed from the time of his illegal dismissal (January 24, 1997) until the
finality of the SC decision (May 27, 2002) with interest. The LA denied the motion as he ruled that the
reckoning point of the computation should only be from the time Nacar was illegally dismissed (January
24, 1997) until the decision of the LA (October 15, 1998). The LA reasoned that the said date should be
the reckoning point because Nacar did not appeal hence as to him, that decision became final and
executory.

ISSUE:

Whether or not the Labor Arbiter is correct.

RULING

No. There are two parts of a decision when it comes to illegal dismissal cases (referring to cases where
the dismissed employee wins, or loses but wins on appeal). The first part is the ruling that the employee
was illegally dismissed. This is immediately final even if the employer appeals – but will be reversed if
employer wins on appeal. The second part is the ruling on the award of backwages and/or separation
pay. For backwages, it will be computed from the date of illegal dismissal until the date of the decision
of the Labor Arbiter. But if the employer appeals, then the end date shall be extended until the day
when the appellate court’s decision shall become final. Hence, as a consequence, the liability of the
employer, if he loses on appeal, will increase – this is just but a risk that the employer cannot avoid
when it continued to seek recourses against the Labor Arbiter’s decision. This is also in accordance with
Article 279 of the Labor Code.

194 BUENAVENTURA v METROPOLITAN BANK AND TRUST COMPANY

G.R. No. 167082 | 03 August 2016 | J. Bersamin | TIGLAO

TOPIC:

Contracts of Adhesion

DOCTRINE:

A contract of adhesion is so-called because its terms are preparedby only one party while the other
party merely affixes his signature signifying hisadhesion thereto. Such contract is just as binding as
ordinary contracts.It is true that we have, on occasion, struck down such contracts as void whenthe
weaker party is imposed upon in dealing with the dominant bargainingparty and is reduced to the
alternative of taking it or leaving it, completelydeprived of the opportunity to bargain on equal footing.
Nevertheless,contracts of adhesion are not invalid per se and they are not entirely prohibited.The one
who adheres to the contract is in reality free to reject it entirely, if headheres, he gives his consent.

FACTS:

1.

Buenaventure executed a PN payable to Metrobank.2.

For having failed to fully pay, Metrobank filed an action for collectionagainst Buenaventura.3.

Buenaventura argues that the PNs she executed were a contract ofadhesion because her only
participation was affixing her signature andthat the terms of the PN should be strictly construed against
Metrobank.4.

Metrobank counters that the terms and conditions of the PNs wereclear and unambigious; hence, there
was no need or room forinterpretation.

ISSUE/S:

W/N the promissory notes were contracts of adhesion

NO. But evenassuming that it was a contract of adhesion, such did not entitle her to bar
theirliteral enforcement.

HELD/RULING:

The promissory notes were written as follows:FOR VALUE RECEIVED, I/we jointly and severally promise
to payMetropolitan Bank and Trust Company, at its office x x x the principalsum of PESOS xx x, Philippine
currency, together with interest and credit

evaluation and supervision fee (CESF) thereon at the effective rate of•
 x x x per centum x x x per annum, inclusive, from date hereof and untilfully paid.What the petitioner
advocates is for the Court to now read into the promissorynotes terms and conditions that would
contradict their clear and unambiguousterms in the guise of such promissory notes being contracts of
adhesion. Thiscannot be permitted, for, even assuming that the promissory notes werecontracts of
adhesion, such circumstance alone did not necessarily entitle herto bar their literal enforcement against
her if their terms were unequivocal. It ispreposterous on her part to disparage the promissory notes for
being contractsof adhesion, for she thereby seems to forget that the validity and enforceabilityof
contracts of adhesion were the same as those of other valid contracts.As a rule, indeed, the contract of
adhesion is no different from any othercontract. Its interpretation still aligns with the literal meaning of
its terms andconditions absent any ambiguity, or with the intention of the parties. The termsand
conditions of the promissory notes involved herein, being clear and beyonddoubt, should then be
enforced accordingly.As fittingly declared in

The Insular Life Assurance Company, Ltd. vs. Court of Appeals and Sun Brothers & Company,

"[w]hen the language of the contract isexplicit leaving no doubt as to the intention of the drafters
thereof, the courtsmay not read into it any other intention that would contradict its plain
import."Accordingly, no court, even this Court, can "make new contracts for the partiesor ignore those
already made by them, simply to avoid seeming hardships.Neither abstract justice nor the rule of liberal
construction justifies the creationof a contract for the parties which they did not make themselves or
theimposition upon one party to a contract of an obligation not assumed.

AMPARO JOVEN DE CORTES v. MARY E. VENTURANZA, GR No. L-26058, 1977-10-28

Facts:

original plaintiffs in this case were Felix Cortes y Ochoa and Noel J. Cortes... original defendants were
Gregorio Venturanza, Mary E. Venturanza, Jose Oledan and Erlinda M. Oledan.

On December 11, 1967, defendant Gregorio Venturanza... died

Accordingly surviving spouse and children of the deceased Gregorio Venturanza, were substituted as
appellants, in place of... the deceased, by resolution of this Court dated February 28, 1968.

September 12, 1968, Felix Cortes y Ochoa died.

y Ochoa died

Plaintiff Felix Cortes y Ochoa and Noel J. Cortes filed the instant action for foreclosure of real estate
against the defendants... original owner of nine (9) parcels of land covered by Transfer Certificates of
Title Nos. 21334 to 21342,... Noel J. Cortes... original owner of twenty-four (24) parcels of land covered
by Transfer Certi-ficates of
Title Nos. 21343, 21345, 21347 to 21367

October 24, 1958 said plaintiffs sold and delivered to the defendants all the above-mentioned thirty-
three (33) parcels of land with all the improvements thereon for the total sum of P716,573.90...
defendants agreed to pay jointly and severally the plaintiffs the sum of P100,000.00 upon the signing
and execution of a deed of sale and P40,000.00 on January 1, 1959 thereby leaving a balance of
P576,573.90 which the defendants agreed and bound themselves,to pay plaintiffs jointly and severally
within three (3) years from January 1, 1959 with interest thereon at the rate of 6% per annum;... agreed
and bound them-selves to secure the payment of the said balance of P576,573.90 with a first mortgage
upon the... said 33 parcels of land with improvements;... defendants have already paid the plaintiffs the
total sum of P140,000.00 that of the unpaid balance owing to plaintiffs, P169,484.24 pertain(ing)s to
plaintiff Felix Cortes and P407,089.66 pertains to plaintiff Noel J.Cortes;... defendants have already paid
the plaintiffs the total sum of P140,000.00 that of the unpaid balance owing to plaintiffs, P169,484.24
pertain(ing)s to plaintiff Felix Cortes and P407,089.66 pertains to plaintiff Noel J.Cortes... mortgage
obligation fell due on January 1, 1962, but despite repeated demands for payment... defendants failed
and refused to pay the said balance of P576,573.90 to plaintiffs... due and demandable up to December
1, 1962 the total... interest due from the defendants 8103,783.32 computed at the stipulated interest of
6% per annum... obligated and bound to pay the plaintiffs' reasonable compensation for attorney's fees
which... plaintiffs fixed at P50,000.00.

Defendants... admit the allegations of the complaint regarding plaintiffs' former ownership of the lands
in question as well as their execution of the mortgage in favor of plaintiffs... allege that they are at
present the registered... owners of the same parcels of land by virtue of the sale thereof made to
them... he allotment of payment to plaintiffs of the balance of their obligation, but allege that the said
balance has not yet become due and demandable so that they have not incurred in... default.

defendants will pay the balance of the purchase price in the amount of P576,573.90 to the plaintiffs, and
the latter agreed... efendants Oledan allege that on December 28, 1958... executed and entered into an
agreement whereby they sold, transferred unto their co-defendants all their shares, ownership... and
interest in the property subject of a deed of sale with purchase money mortgage... soon as defendants
will have received from the Land Tenure Administration the purchase price of... their (defendants')
hacienda in Bugo, Cagayan de Oro in the amount of P360,000.00... the sum of P44,571.66 payable at the
time and in the manner specified in the written agreement... defendants have paid to... them the sum of
P22,285.83'balance still due and unpaid in the amount of P22,285.83... cross-defendants have failed to
pay within the period stipulated in their agreement... hall pay to them the sum of P6,367.30 for the
period August 8, 1960 to August 28, 1961; another amount of P6,367.30 for the period August 28, 1961
to August 28, 1962 and... still another amount of P6,367.30 for the period August 28, 1963 by way of
penalty,... despite repeated demands cross-defendants have failed to pay

There is no question that defendants are indebted to plaintiffs on the mortgage executed by them
contained in the document denominated as 'Deed of Sale with Purchase Money Mortgage' (Exhibit 'A')
to the tune of P576,573.90 with interest thereon at the stipulated... rate of 6% per annum.

the event that the vendees shall fail to pay to the vendors, in the form and manner provided... or should
the vendees make... default in the performance of any one or more of the conditions stipulated herein,
the Vendors shall have the right,... to foreclos(ur)e this mortgage... the vendors are hereby... appointed
the attorneys-in-fact, for the Vendees, with full power of... substitution, to enter upon and take
possession of the mortgaged properties, without the order of any court or any other authority other
than herein granted, and to sell and dispose of the same to the highest bidder at public auction

Defendants claim that there had been a novation of the contract between them and plaintiffs on
account of the transfer made by defendants Oledans of their interest in the property in favor of their co-
defendants Venturanzas, with the knowledge and consent of the... plaintiffs.

efendants are indeed indebted to plaintiffs on the mortgage constituted by them over the parcels of
land in question, the period of payment of the obligations having become due, plaintiffs are,
therefore,... entitled to a foreclosure of the said mortgage.

This is a clear case of an obligation with a definite period ex die, which period was incidentally
established for the benefit of the defendants.

The evidence presented by the plaintiffs to substantiate these facts approaches moral certainty, not
merely preponderance of evidence. Hence, defendants' defense of novation as to the period for
payment, fails.

Issues:

a. Whether, upon the filing by plaintiffs of their complaint against the defendants on December 12,
1962, the obligation of the defendants had not yet become due and demandable and, hence, the
complaint was filed prematurely.

b. Whether the payment of P576,573.90 with interest thereon at the stipulated rate of 6% per annum
was to be made dependent upon the consummation of the sale of the two haciendas of defendants
Venturanzas and, hence, there was a novation of the... contract of sale with purchase money mortgage,
Exhibit B, as a result of a change in the manner of payment.

c. Whether the sale on December 28, 1959 by the defendants Oledans to their co-defendants
Venturanzas, of all their rights and interests in the property, subject-matter of the deed of sale with
purchase money mortgage, Exhibit B, likewise... consti-tuted a novation thereof and, therefore, had the
effect of discharging the defendants Oledans from their original obligation to the plaintiffs.
Ruling:

judgment is hereby rendered in favor of plaintiffs and against the defendants, ordering the latter jointly
and severally to pay to the former or to deposit with the clerk of court the sum of P576,573.90 with
interest thereon at the stipulated rate of 6%... per annum until fully paid, within 90 days from notice
hereof. In default of such payment the mortgaged property will be sold at public auction to realize the
mortgage indebtedness and costs, in accordance with law.

The parties will bear their own costs and expenses of litigation... judgment is hereby rendered in favor of
plaintiffs and against the defendants ordering the latter, jointly and severally, to pay the former or to
deposit with the clerk of court the sum of P576,573.90 with interest thereon at the stipulated rate of 6%
per annum... from January 1, 1959 until fully paid, within 90 days from notice hereof. In default of such
payment the mort-gaged property will be sold at public auction to realize the mortgage indebtedness
and costs, in accordance with law.

parties will bear their own costs and expenses of litigation

The Supreme Court ruled... the PARTIES OF THE FIRST PART (the Venturanzas) will pay to the PARTIES OF
THE SECOND PART (the Oledans), and the latter hereby acknowledge receipt thereof, of the sum of

P22,285.83)... shall... be paid... within eight (8) months from the date and execution of this Agreement
and Deed of Sale... on or before August 28, 1960

Ligutan vs CA DOCTRINE: penalty clause is an accessory undertaking to assume greater liability on the
part of the obligor in case of breach. although parties are free to stipulate in their contract the terms,
courts may reduce interest if it is unconscionable F: Ligutan and de Llana obtained a lon from Security
bank and trust company. petitioners (ligutan and de llana) executed a promissory note binding
themselves solidarily to pay with an interest of 15.189% and pay a penalty of 5% for every month in case
of default and in addition, to pay 10% of the total amount due by way of attorneys fees if the matter
were indorsed to a lawyer. despite several demands, petitioner failed to pay.first demand was made on
may 20 1982. bank filed a case. RTC ruling: 1. sum of 114k with interest of 15%, 2% sservice charge, 5%
penalty charge,commencing on may 20 1982 until fully paid 2. pay further sum of 10% attorneys fees.
petitioners appealed. CA affirmed except on 2% service charge which was deleted pursuant to Cetral
bank circular 783. parties filed for motion for reconsideration. petitioners prayed for the reduction of
5%. bank on the other hand prayed that the payment of interest and penalty be commenced not from
the date of filinf but from the time of default. CA resolved the two motion thusly

SPS DELOS SANTOS VS METROBANK (GR NO. G.R. NO. 153852

OCTOBER 24, 2012)
Sps Delos Santos vs Metropolitan Bank & Trust Company
G.R. No. 153852 October 24, 2012

Facts: From December 9, 1996 until March 20, 1998, the petitioners took out several loans totaling P12,000,000.00
from Metrobank, Davao City Branch, the proceeds of which they would use in constructing a hotel on their 305-
square-meter parcel of land located in Davao City and covered by Transfer Certificate of Title No. I-218079 of the
Registry of Deeds of Davao City. They executed various promissory notes covering the loans, and constituted a
mortgage over their parcel of land to secure the performance of their obligation. The stipulated interest rates were
15.75% per annum for the long term loans (maturing on December 9, 2006) and 22.204% per annum for a short term
loan of P4,400,000.00 (maturing on March 12, 1999). The interest rates were fixed for the first year, subject to
escalation or de-escalation in certain events without advance notice to them. The loan agreements further stipulated
that the entire amount of the loans would become due and demandable upon default in the payment of any installment,
interest or other charges. On December 27, 1999, Metrobank sought the extrajudicial foreclosure of the real estate
mortgage after the petitioners defaulted in their installment payments. The petitioners were notified of the foreclosure
and of the forced sale being scheduled on March 7, 2000. The notice of the sale stated that the total amount of the
obligation was P16,414,801.36 as of October 26, 1999. On April 4, 2000, prior to the scheduled foreclosure sale (i.e.,
the original date of March 7, 2000 having been meanwhile reset to April 6, 2000), the petitioners filed in the RTC a
complaint (later amended) for damages, fixing of interest rate, and application of excess payments (with prayer for a
writ of preliminary injunction). They alleged therein that Metrobank had no right to foreclose the mortgage because
they were not in default of their obligations; that Metrobank had imposed interest rates (i.e., 15.75% per annum for
two long-term loans and 22.204% per annum for the short term loan) on three of their loans that were different from
the rate of 14.75% per annum agreed upon; that Metrobank had increased the interest rates on some of their loans
without any basis by invoking the escalation clause written in the loan agreement; that they had paid P2,561,557.87
instead of only P1,802,867.00 based on the stipulated interest rates, resulting in their excess payment of P758,690.87
as interest, which should then be applied to their accrued obligation; that they had requested the reduction of the
escalated interest rates on several occasions because of its damaging effect on their hotel business, but Metrobank had
denied their request; and that they were not yet in default because the long-term loans would become due and
demandable on December 9, 2006 yet and they had been paying interest on the short-term loan in advance.

Issue: Whether or not injunction may issue pending extrajudicial foreclosure.

Held: Yes. No writ of preliminary injunction to enjoin an impending extrajudicial foreclosure

sale should issue except upon a clear showing of a violation of the mortgagors’ unmistakable
right to the injunction.

Injunction will not protect contingent, abstract or future rights whose existence is doubtful or
disputed. Indeed, there must exist an actual right, because injunction will not be issued to protect
a right not in esse and which may never arise, or to restrain an act which does not give rise to a
cause of action. At any rate, an application for injunctive relief is strictly construed against the
pleader.
Nor do we discern any substantial controversy that had any real bearing on Metrobank’s right to
foreclose the mortgage. The mere possibility that the RTC would rule in the end in the
petitioners’ favor by lowering the interest rates and directing the application of the excess
payments to the accrued principal and interest did not diminish the fact that when Metrobank
filed its application for extrajudicial foreclosure they were already in default as to their
obligations and that their short-term loan of P4,400,000.00 had already matured. Under such
circumstances, their application for the writ of preliminary injunction could not but be viewed as
a futile attempt to deter or delay the forced sale of their property.

Escalation clauses are valid and do not contravene public policy. These clauses are common in
credit agreements as means of maintaining fiscal stability and retaining the value of money on
long-term contracts. To avoid any resulting one sided situation that escalation clauses may bring,
we required in Banco Filipino the inclusion in the parties’ agreement of a de-escalation clause
that would authorize a reduction in the interest rates corresponding to downward changes made
by law or by the Monetary Board.

The validity of escalation clauses notwithstanding, we cautioned that these clauses do not give
creditors the unbridled right to adjust interest rates unilaterally. As we said in the same Banco
Filipino case, any increase in the rate of interest made pursuant to an escalation clause must be
the result of an agreement between the parties. The minds of all the parties must meet on the
proposed modification as this modification affects an important aspect of the agreement. There
can be no contract in the true sense in the absence of the element of an agreement, i.e., the
parties’ mutual consent. Thus, any change must be mutually agreed upon, otherwise, the change
carries no binding effect. A stipulation on the validity or compliance with the contract that is left
solely to the will of one of the parties is void; the stipulation goes against the principle of
mutuality of contract under Article 1308 of the Civil Code.

As with all equitable remedies, injunction must be issued only at the instance of a party who
possesses sufficient interest in or title to the right or the property sought to be protected. It is
proper only when the applicant appears to be entitled to the relief demanded in the complaint,
which must aver the existence of the right and the violation of the right, or whose averments
must in the minimum constitute a prima facie showing of a right to the final relief sought.
Accordingly, the conditions for the issuance of the injunctive writ are: (a) that the right to be
protected exists prima facie; (b) that the act sought to be enjoined is violative of that right; and
(c) that there is an urgent and paramount necessity for the writ to prevent serious damage. An
injunction will not issue to protect a right not in esse, or a right which is merely contingent and
may never arise; or to restrain an act which does not give rise to a cause of action; or to prevent
the perpetration of an act prohibited by statute. Indeed, a right, to be protected by injunction,
means a right clearly founded on or granted by law or is enforceable as a matter of law.