Digested Cases in Civil Law Review 2

(2018-2019)

SY 2018-2019, 2nd Semester

Submitted to:
Atty. Crisostomo A. Uribe

Submitted by:
Anna Carmela G. Virtucio
Class No. 22
Saturday 8:00am to 12:00pm

June 2019
 TABLE OF CONTENTS

CIVIL LAW REVIEW II

OBLIGATIONS AND CONTRACTS Page
I. Obligations
A. In General
3. Prescription of Actions
1 SECOND DIVISION
SPOUSES ANTONIO BELTRAN AND FELISA BELTRAN,
PETITIONERS, VS. SPOUSES APOLONIO CANGAYDA, JR.
AND LORETA E. CANGAYDA, RESPONDENTS.
G.R. No. 225033; August 15,2018
Caguioa,J. 1
D. Kinds of Civil Obligations
1. As to perfection & extinguishment
c. With a term or period
2 SOCORRO T. CLEMENTE, AS SUBSTITUTED BY SALVADOR 2
T. CLEMENTE, PETITIONER, V. REPUBLIC OF THE
PHILIPPINES (DEPARTMENT OF PUBLIC WORKS AND
HIGHWAYS, REGION IV-A), RESPONDENT.
G.R. No 220008, February 20,2019
CARPIO, J.
5. As to the presence of an accessory undertaking in case of
breach
a. With a Penal Clause
3 SECOND DIVISION
D.M. RAGASA ENTERPRISES, INC., PETITIONER, V. BANCO
DE ORO, INC. (FORMERLY EQUITABLE PCI BANK, INC.),
RESPONDENT.
G.R. No 190512 June 20, 2018
CAGUIOA, J 4
G. Modes of Extinguishment of Obligations
6. Novation
4 FIRST DIVISION
SPOUSES CELONES VS METROPOLITAN BANK AND TRUST
COMPANY
GR NO 215691 November 21, 2018
TIJAM,J. 6
II. Contracts
D. Stages of Contracts
5 THIRD DIVISION
METRO RAIL TRANSIT DEVELOPMENT
CORPORATION, Petitioner vs GAMMON PHILIPPINES,
Respondent
G.R. No. 200401. January 17, 2018.
Ponente: LEONEN, J.
THIRD DIVISION 7
F. Forms of Contracts
6 FIRST DIVISION
HEIRS OF JOSE MARIANO AND HELEN S. MARIANO,
REPRESENTED BY DANILO DAVID S. MARIANO, MARY
THERESE IRENE S. MARIANO, MA. CATALINA SOPHIA S.
MARIANO, JOSE MARIO S. MARIANO, MA. LENOR S.
MARIANO, MACARIO S. MARIANO & HEIRS OF ERLINDA
MARIANO-VILLANUEVA, REPRESENTED IN THIS ACT BY
IRENE LOURDES M. VILLANUEVA THROUGH HER
ATTORNEY-IN-FACT EDITHA S. SANTUYO AND BENJAMIN B.
SANTUYO,Petitioners, v. CITY OF NAGA, Respondent.
G.R. No 197743, March 12, 2018
TIJAM, J.
9
 G. REFORMATION OF CONTRACTS
7 THIRD DIVISION
MAKATI TUSCANY CONDOMINIUM CORPORATION v. MULTI-
REALTY DEVELOPMENT CORPORATION
G.R No. 185530 April 18, 2018
Leonen, J. 11
I. KINDS OF CONTRACTS AS TO VALIDITY
4. VOID AND INEXISTENT CONTRACTS
8 FIRST DIVISION
CONCHITA GLORIA AND MARIA LOURDES GLORIA-
PAYDUAN v. BUILDERS SAVINGS AND LOAN ASSOCIATION,
INC.
G.R.No. 202324 June 04, 2018
Del Castillo, J.
12
SALES
B. Elements of a Contract of Sale
8 SECOND DIVISION
SPOUSES LUCIA A. OROZCO AND CRESENTE R. OROZCO
(DECEASED), SUBSTITUTED BY HIS HEIRS, NAMELY:
JOCELYN O. GUJELING, JUDITH O. SEMACIO, GENILYN O.
PERIABRAS, GEMMA O. PERALTA, ROCKY A. OROZCO AND
GISSA O. FERRER, PETITIONERS, V. FLORANTE G. LOZANO,
SR. (DECEASED), SUBSTITUTED BY HIS HEIRS, NAMELY:
EPIFANIA LOZANO, SHIRLEY L. SALCEDO, JOCELYN L.
BASTARECHE, RACHEL L. GILOS, FLORANTE G. LOZANO,
JR., AND ROBERT G. LOZANO, RESPONDENTS.
G.R. No. 222616, April 3, 2019
CARPIO, J.:
13
LEASE
III.RIGHTS AND OBLIGATIONS OF THE LESSOR & LESSEE
9 THIRD DIVISION
VICTORIA N. RACELIS, IN HER CAPACITY AS
ADMINISTRATOR v. SPOUSES GERMIL JAVIER AND
REBECCA JAVIER
G.R. No. 189609, January 29, 2018
Leonen, J.
15
Termination of Lease
5. Implied New Lease or Tacita Reconduccion
10 FIRST DIVISION
THELMA C. MULLER, GRACE M. GRECIA, KURT FREDERICK
FRITZ C. MULLER, AND HOPE C. MULLER, IN SUBSTITUTION
OF THE LATE FRITZ D. MULLER, Petitioners, v. PHILIPPINE
NATIONAL BANK, Respondent.
G.R. No. 215922, October 1, 2018
Del Castiilo,J. 17
AGENCY
II. KINDS OF AGENCY
11 THIRD DIVISION
BELINA CANCIO AND JEREMY PAMPOLINA v.
PERFORMANCE FOREIGN EXCHANGE CORPORATION
G.R. No. 182307, June 06, 2018
Leonen, J.

18
 PARTNERSHIP
I. IN GENERAL
12 FIRST DIVISION
ANICETO G. SALUDO, JR., Petitioner, v. PHILIPPINE
NATIONAL BANK, Respondent
G.R. No. 193138, August 20, 2018
JARDELEZA, J.
19
CHATTEL AND REAL ESTATE MORTGAGE
B. ESSENTIAL REQUISITES
13 FIRST DIVISION
COCA-COLA BOTTLERS PHILS., INC v. SPOUSES EFREN
AND LOLITA SORIANO
G.R. No. 211232; April 11, 2018
Tijam, J. 20
TORTS & DAMAGES
III.ELEMENTS OF QUASI DELICT
A. ACT OR OMISSION THERE BEING FAULT OR
NEGLIGENCE
1. CONCEPT OF NEGLIGENCE
14 THIRD DIVISION
LINDA CACHO, MINORS SARAH JANE, JACQUELINE, FIRE
RINA AND MARK LOUISE ALL SURNAMED CACHO, ALL
REPRESENTED BY THEIR MOTHER AND GUARDIAN AD
LITEM LINDA CACHO v. GERARDO MANAHAN, DAGUPAN
BUS CO., INC., AND RENATO
DE VERA DOING BUSINESS UNDER THE NAME R. M. DE
VERA CONSTRUCTION
G.R. No. 203081 January 17, 2018
Martires, J. 21
IV.LIABILITY FOR TORTS
B. KINDS OF DAMAGES
15 THIRD DIVISION
TERESA GUTIERREZ YAMAUCHI v. ROMEO F. SUÑ IGA
G.R. No. 199513 April 18, 2018
MARTIRES, J. 22
 I. Obligations
A. In General
3. Prescription of Actions
SECOND DIVISION
SPOUSES ANTONIO BELTRAN AND FELISA BELTRAN, PETITIONERS, VS.
SPOUSES APOLONIO CANGAYDA, JR. AND LORETA E. CANGAYDA,
RESPONDENTS.
G.R. No. 225033; August 15,2018
Caguioa,J.
Nature of the Action: Petition for Review on Certiorari

FACTS: Sometime in August 1989, respondents verbally agreed to sell the disputed
property to petitioners for P35,000.00. After making an initial payment, petitioners took
possession of the disputed property and built their family home thereon. Petitioners
subsequently made additional payments, which, together with their initial payment,
collectively amounted to P29,690.00. However, despite respondents' repeated
demands, petitioners failed to pay their remaining balance of P5,310.00. This prompted
respondents to refer the matter to the Office of the Barangay wherein the parties signed
an Amicable Settlement. However petitioner failed to pay within the period provided for
in the agreement. 17 years after the expiration of petitioner’s period to pay the balance,
respondents served a last and final demand to petitioners to vacate the property within
30 days. But nothing happened.

A complaint for recovery of possession and damages was filed by the respondents
before the RTC. Petitioner averred however that although they failed to settle their
unpaid balance within the period stipulated in the agreement, they attempted to tender
payment 2 days after said deadline to which respondent denied accepting and instead
asked for an additional payment. RTC ordered petitioners to vacate & held that
ownership over the disputed property never passed to petitioners as such oral
agreement is a contract to sell. Petitioners filed an MR which the RTC denied. Before
the CA, petitioners argued the agreement was a contract of sale & that the respondents'
complaint is an action upon a written agreement, as it is based on the Amicable
Settlement. Thus, petitioners conclude that respondents' action already prescribed,
since it was filed more than 10 years after the lapse of petitioners' period to pay their
outstanding balance. Petitioners further argue that it is also barred by laches,
considering that respondents allowed petitioners to continue staying in the disputed
property for a period of 17 years after such failure to pay, CA affirmed RTC.

ISSUE: Whether respondent’s action have prescribed?

RULING: Yes respondent’s cause of action is already barred by prescription.

Respondent’s action is one that proceeds from a breach of a written agreement which is
covered by Article 1144 of the Civil Code which provides that the following actions must
be brought within 10 years from the time the right of action accrues: upon a written
contract, upon an obligation created by law & upon a judgment. It is petitioner’s failure
to pay within the period set by the Amicable Settlement where the cause of action of
respondent lies. In the case at bar, the Court held that slight delay in the payment of
the purchase price is not a sufficient ground for rescission of the agreement. Assuming
arguendo that petitioner’s failure to pay within said period constitutes breach, the
complaint was filed 17 years after the expiration of the payment period stipulated hence
the action clearly has prescribed.
D. Kinds of Civil Obligations
1. As to perfection & extinguishment
c. With a term or period

SOCORRO T. CLEMENTE, AS SUBSTITUTED BY SALVADOR T. CLEMENTE,

PETITIONER, V. REPUBLIC OF THE PHILIPPINES (DEPARTMENT OF PUBLIC
WORKS AND HIGHWAYS, REGION IV-A), RESPONDENT.
G.R. No 220008, February 20,2019
CARPIO, J.
Nature of the Action: Petition for Review on Certiorari

FACTS: The Clemente Siblings were the owners of a parcel of land covered by TCTNo.
T-50896. During their lifetime, they executed a Deed of Donation over a one-hectare
portion of their property in favor of the Republic of the Philippines. The Deed of
Donation provides: Herein DONORS hereby voluntarily and freely give, transfer and
convey, by way of unconditional donation, unto said DONEE, his executors and
administrators, all of the rights, title and interest which the aforesaid DONORS have or
which pertain to them and which they owned exclusively in the above-described real
property over a one-hectare portion of the same, solely for hospital site only and for no
other else, where a Government Hospital shall be constructed, free from all liens and
encumbrances whatsoever, which portion of the land had been segregated in the
attached subdivision plan. In the same Deed of Donation, District Engineer II Ciceron A.
Guerrero of DPWH Region IV-A accepted said donation. Hence TCT No. T-50896 was
partially cancelled by TCT No. T-51745 covering the Subject Property and issued in the
name of the Province of Quezon. The construction of a building for a hospital was then
started but due to unknown reasons, the construction was never completed and only its
foundation was finished. Hence Soccoro and Rosario Clemente wrote to the District
Engineer to asked for information on the development of the government hospital to be
built as the construction on its foundation had already started. The District later informed
Socorro that the DPWH no longer have plans to construct a hospital as it had no more
budget. 41 years after said Deed of Donation was executed, Soccorro in her capacity as
heir & successor of Mayor Clemente filed a complaint for the revocation of the donation,
reconveyance and recovery of possession. It alleged that the Republic failed to comply
with the condition on the deed which was to use the property only for a hospital site
where a government hospital shall be constructed. RTC held that the Republic agreed
to comply with the condition but it was not completed for unknown reasons and that
when Socorro demanded the construction of the hospital, no hospital was built on the
donated property.

The RTC held that since the parties did not fix the period within which to comply with the
condition, but a period was indeed intended, the Court may fix the period for the
performance of the donee's obligation, under Article 1197 of the Civil Code. However,
since Socorro failed to pray for the fixing of the period, the RTC dismissed the case.
RTC denied the MR & affirmed that the donation was revocable before the fulfillment of
the resolutory condition to construct the government hospital, and that such condition
was subject to a period even if no period was actually stipulated in the Deed of
Donation. CA denied the appeal.

ISSUE: Whether or not there is a period fixed by the parties

RULING: Based on the Deed of Donation, however, it is apparent that a period was
indeed intended by the parties. For the construction of the hospital but the deed failed to
fixed a period for such. Hence Article 1197 of the Civil Code provides:
Article 1197. If the obligation does not fix a period, but from its nature and the
circumstances it can be inferred that a period was intended, the courts may fix the
duration thereof.
The courts shall also fix the duration of the period when it depends upon the will of the
debtor.
In every case, the courts shall determine such period as may under the circumstances
have been probably contemplated by the parties. Once fixed by the courts,
the period cannot be changed by them.

Thus, when the obligation does not fix a period but from its nature and circumstances it
can be inferred that a period was intended, the general rule provided in Art. 1197 of the
Civil Code applies which provides that the courts may fix the duration thereof because
the fulfillment of the obligation itself cannot be demanded until after the court has fixed
the period for compliance therewith and such period has arrived. However in this case,
more than enough time was given to petitioner to comply with the condition but it failed
to do so. Also to be considered it the fact that in 2003, Socorro already asked DPWH for
updates on the construction of the government hospital to which the latter informed that
there were no plans to build a hospital on said property. Hence by such act, it is evident
that the donee no longer intends to fulfill its obligation & will no longer comply with the
condition to build a hospital as a government hospital is already built in another
barangay. Hence the donor can seek rescission of the donation if the done manifests
his intent to not comply. Hence Article 1191 is applicable which provides: 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 the
fulfillment and the rescission of the obligation, with the payment of damages in either
case. He may also seek 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. This is understood to be without
prejudice to the rights of third persons who have acquired the thing, in accordance with
Articles 1385 and 1388 and the Mortgage Law.
5. As to the presence of an accessory undertaking in case of breach
a. With a Penal Clause
SECOND DIVISION
D.M. RAGASA ENTERPRISES, INC., PETITIONER, V. BANCO DE ORO, INC.
(FORMERLY EQUITABLE PCI BANK, INC.), RESPONDENT.
G.R. No 190512 June 20, 2018
CAGUIOA, J
Nature of Action: Petition for review on Certiorari

FACTS: On January 30, 1998, Ragasa and Equitable Bank executed a Contract of
Lease as lessor and lessee over the ground and second floors of a commercial building
located at 175 Tomas Morato Avenue corner Scout Castor, Quezon City for a period of
five years, commencing on February 1, 1998 up to January 31, 2003 with a monthly
rental of P122,607.00. The pertinent provisions of the Lease Contract state

8. The TENANT voluntarily binds himself and agrees to the following without any
coercion or force by the LESSOR;
xxxx
m) The full deposit shall be forfeited in favor of the LESSOR upon non-compliance of
the Term of the Contract of Lease by the TENANT, and cannot be applied to Rental;

10. In the event that a Court Litigation has been resorted to by the LESSOR or
LESSEE, due to non-compliance of any of the foregoing provisions, the aggrieved party
shall be paid by the other party, no less than fifteen thousand (P15,000) pesos,
Philippine Currency, for Attorney's fees, and other damages that the honorable court
may allow; the cost of litigations shall be born[e] or paid by the party in fault, or in
default. All unpaid accounts and obligations of the TENANT shall earn interest or bear
interest at the rate of 14% per annum or at the allowable rate of interest from the date of
default. The legal suits shall be brought in the town of Quezon City.

Equitable Bank paid the amount of P367,821.00 representing as three months advance
rentals and the amount of 367,821.00 representing three months rentals as security
deposit. The bank then entered into a merger with PCI Bank which resulted to Equitable
PCI Bank Inc which then merged with Banco De Oro to form the respondent bank. As a
result, the bank closed and joined the branches of its constituent banks which were in
close proximity with each other and one of the branches which had to be closed is the
branch located in the subject premises. Hence because of this, the bank sent a notice
on May 28, 2001 informing Ragasa that it was pre-terminating their Lease Contract
effective June 30 of the same year. Ragasa responded through a demand for the
monthly rentals for the remaining term of the lease contract as there is no express
provision in the contract which allows pre-termination.

The bank that its only liability for pre-terminating the contract is the forfeiture of its
security deposit pursuant to item 8(m) of the Lease Contract. Hence the bank vacated
without paying Ragasa.

Ragasa then filed with the RTC a Complaint for Collection of Sum of Money amounting
to a total of 3,146,596.42 which represents the monthly rentals under the Lease
Contract for the period July 1, 2001 to January 31, 2003 plus damages.

RTC ruled in favor of Ragasa. It held that the bank may not unilaterally pre-terminate
the Lease Contract; hence, it is still liable to pay the rentals for the remaining duration of
the said contract. Hence in addition to item 8(m) of the Lease Contract providing for the
forfeiture of the bank's security deposit, item 8(n) is also another
penalty clause providing for additional 3% of the monthly rental for each month of delay
in payment, also applies.
Bank filed an appeal with the CA contending that the contract was automatically
terminated by the act of the bank in pre-terminating the lease and that upon termination,
the bank is released from its future contractual obligations including the payment of
future rentals that may accrue. CA reversed RTC.

ISSUE: What is the nature of item 8(m) of the Lease Contract which provides that: "The
full deposit shall be forfeited in favor of the LESSOR upon non-compliance of the Term
of the Contract of Lease by the TENANT, and cannot be applied to Rental"?

RULING: Item No. 8(m) is penal clause. A penal clause is an accessory obligation
which the parties attach to a principal obligation for the purpose of insuring the
performance thereof by imposing on the debtor a special prestation which usually
consists in the payment of a sum of money in case the obligation is not fulfilled or is
irregularly or inadequately fulfilled.
A penal clause has a three-fold purpose: (1) to insure the performance of the obligation;
(2) to liquidate the amount of damages to be awarded to the injured party in case of
breach of the
principal obligation; and (3) to punish the obligor in case of breach of the principal
obligation, in certain exceptional cases.

Item 8(m) of the Lease Contract is an accessory obligation or prestation to the principal
obligation of lease. It specifies the stipulated amount of liquidated damages which is the
full deposit to be awarded to the injured party in case of breach of the term or period of
the principal obligation. Item 8(m) seeks to insure or guarantee the completion of the
lease period since its non-compliance shall be met with a penalty.
G. Modes of Extinguishment of Obligations
6. Novation
FIRST DIVISION
SPOUSES CELONES VS METROPOLITAN BANK AND TRUST COMPANY
GR NO 215691 November 21, 2018
TIJAM,J.
Nature of the Action: Petition for review on certiorari

FACTS: Herein spouses Celones obtained various loans amounting to 64,474,058.73

from Metrobank and for which they mortgaged various properties. They defaulted in
paying their loan and because of that Metrobank foreclosed all its mortgaged properties
and eventually was declared as the winning bidder and then filed petitions for issuance
of writs of possession. The spouses Celones later on offered to redeem the properties
so a Conditional Notice of Approval for Redemption was issued by Metrobank which
states that the offer of the spouses to redeem the property in the amount of 55Million
has been approved to be paid on or before December 20, 2007. It was herein
respondent Atty Dionido who agreed to loan them said amount of 55Millon. Hence a
Memorandum of Agreemene was executed by Spouses Celones, PPPC, Metrobank
and Atty Dionido wherein the agreement provided the subrogation of Atty Dionido to all
the rights and interests of Metrobank over the said loan obligation of Spouses Celones
and the foreclosed properties. Atty Dionido then gave two manager’s checks to
Metrobank to which the latter then issued payment slips in favor of Spouses Celones. It
also then caused the dismissal of the petitions for the issuance of the writs of
possession on the ground that Spouses Celones have already redeemed the said
properties. Hence because of this, the spouses Celones demanded from Metrobank the
issuance of a certificate of redemption. But such was refused as all its rights and
interests over the foreclosed properties had been transferred to Atty Dionido hence it is
the latter who should issue the certificate. Metrobank and Atty Dionido then averred that
the Memorandum of Agreement being of a later date have already superseded and
novated the Conditional Notice of Approval for Redemption. Hence the redemption
agreed by Metrobank and herein spouses Celones was not in control.

ISSUE: Whether or not there was a novation of the prior conditional notice upon the
execution of the Memorandum of Agreement?

RULING: No. It is provided that novation is a mode of extinguishing an obligation by

changing its objects or principal obligations by substituting a new debtor in place of the
old one or by subrogating a third person to the rights of the creditor. And in order that an
obligation may be extinguished by another which substitute the same, it must be
declared in unequivocal terms as such cannot be presumed and may be implied only if
the old and the new contracts are incompatible on every point. In this case, there is no
express stipulation as to the novation or extinction of the conditional notice of approval
for redemption in the memorandum of agreement. Also there is no implied novation as
both can be reconciled and can stand together.
Contracts
D. Stages of Contracts
THIRD DIVISION
METRO RAIL TRANSIT DEVELOPMENT CORPORATION, Petitioner vs GAMMON
PHILIPPINES, Respondent
G.R. No. 200401. January 17, 2018.
Ponente: LEONEN, J.
NATURE OF THE ACTION: Petition for Review on Certiorari

FACTS: Gammon Philippines received from Parsons Interpro JV which is the

management team authorized to oversee the execution of the construction of the
podium for the MRT’s MRT-3 North Triangle Description Project an invitation to bid for
the complete concrete works of of such project. Gammon Phils later submitted three (3)
separate bids and later on won the bid. Parsons then issued a letter of award and a first
notice to proceed to Gammon Phils. Gammon Phils then signed and returned the first
notice to proceed without the contract documents. Then transmitted a second letter
which is a signed letter of comfort to Parsons to guarantee its obligations in the said
project. MRT then wrote to Gammon averring that it would need one or two weeks
before it could issue a formal notice to proceed. Gammon then transmitted the said
contract documents to Parsons and in a facsimile transmission of the same day,
Parsons then directed Gammon to hold further mobilization activities. Gammon then
sent a facsimile to Parsons confirming if all requirements in the contract documents
were temporarily suspened pending the clarification of the project. Parsons later
confirmed temporary suspension. MRT then asked Gammon to redesign the plan which
later on adopted Gammon’s recommendation on the plan. Hence a second notice to
proceed was issued for the engineering services based on the redesigned plan. Such
notice to proceed is for the work to be rolled in into a Lump Sum Contract and that in the
event that the contract will not be finalized, any and all the expenses that are necessary
and directly incurred shall be reimbursed.
Gammon submitted to Parsons a Revised Lump Sum Price Proposal and the
breakdown of the Revised Extra Contract Expenses it allegedly incurred in connection
with the works’ suspension. A third notice to proceed was issued by MRT to which
Gammon acknowledged receipt and then requested a clarification of certain items.
Parsons then wrote Gammon stating that since building had been revised, structural
changes and quantities may change. Gammon then wrote back to Parsons confirming
readiness to start the mobilization and requested clarification of urgent issues. Later
Parson informed Gammon through a letter that MRT was temporarily rescinding the
third notice to proceed as it remains unaccepted by Gammon. Later Gammon received
from Parsons the contract for the construction and development of the MRT3- North
Triangle Project Amended notice to proceed which is the fourth notice to proceed. Said
terms of the fourth notice to proceed were different as it expressly cancelled the said
first and third notices to proceed.
Gammon qualifiedly accepted the fourth notice to proceed. MRT treated the
qualified acceptance as a new offer and rejected the same. Gammon was informed that
the contract will be awarded instead to Filsystems if Gammon would not accept the
fourth notice to proceed
within five days. Gammon then wrote to MRT acknowledging the intent to grant the
fourth notice to proceed to another party despite having granted the first notice to
proceed to Gammon. Hence it notified MRT of its claims for reimbursement for costs,
losses, charges, damages and expenses it incurred due to the rapid mobilization
program in response to MRT’s additional work instructions, suspension order, ongoing
discussions and the consequences of its award to another party. MRT however
expressed its disagreement with Gammon and its amenability to discuss the claims for
reimbursement. Gammon then notified Parsons of its claim for payment of all costs,
damages and expenses due to MRT’s suspension order and the consequences of its
award of the contract to another party. MRT informed Gammon of its willingness to
reimburse only 5% of the total claim. Gammon averred that MRT’s offer was not enough
to cover the expenses.
 Gammon filed a Notice of Claim before CIAC against MRT. CIAC awarded a
reasonable estimate of the loss incurred by Gammon. MRT argued that CIAC was not
entitled to the award since there was no perfected contract between MRT and
Gammon.

ISSUE: Whether there is a perfected contract between Gammon and MRT.

RULING: Yes there is a perfected contract. Also to wit there are three (3) stages in a
contract: negotiation, perfection, and consummation. Negotiation refers to the time the
parties signify interest in the contract up until the time the parties agree on its terms and
conditions. The perfection of the contract occurs when there is a meeting of the minds
of the parties such that there is a concurrence of offer and acceptance, and all the
essential elements of the contract – consent, object and cause are present. The
consummation of the contract covers the period when the parties perform their
obligations in the contract until it is finished or extinguished.

To determine when the contract was perfected, the acceptance of the offer must be
unqualified, unconditional and made known to the offeror. Before knowing of the
acceptance, the offeror may withdraw the offer. Moreover, if the offeror imposes the
manner of acceptance to be done by the offerree, the offerree must accept it in that
manner for the contract to be binding. If the offeree accepts the offer in a different
manner, it is not effective, but constitutes a counter-offer, which the offeror may accept
or reject. In bidding contracts, the award of the contract to the bidder is an acceptance
of the bidder’s offer. Its effect is to perfect a contract between the bidder and the
contractor upon notice of the award to the bidder. Thus, the award of a contract to a
bidder perfects the contract. MRT has already awarded the contract to Gammon, and
Gammon’s acceptance of the award was communicated to MRT before MRT rescinded
the contract. Gammon’s receipt of the notices to proceed constitutes acceptance that is
necessary to perfect the contract. All that remained was the formality of returning the
contract documents and the Letter of Comfort, which eventually was complied with by
Gammon. Thus, there is already mutual consent of the object of the contract and its
consideration, and an absolute acceptance of the offer. The meeting of the minds need
not always be put in writing, and the fact that the documents have not yet been signed
or notarized does not mean that the contract has not been perfected
F. Forms of Contracts
FIRST DIVISION
HEIRS OF JOSE MARIANO AND HELEN S. MARIANO, REPRESENTED BY DANILO
DAVID S. MARIANO, MARY THERESE IRENE S. MARIANO, MA. CATALINA
SOPHIA S. MARIANO, JOSE MARIO S. MARIANO, MA. LENOR S. MARIANO,
MACARIO S. MARIANO AND HEIRS OF ERLINDA MARIANO-VILLANUEVA,
REPRESENTED IN THIS ACT BY IRENE LOURDES M. VILLANUEVA THROUGH
HER ATTORNEY-IN-FACT EDITHA S. SANTUYO AND BENJAMIN B.
SANTUYO,Petitioners, v. CITY OF NAGA, Respondent.
G.R. No 197743, March 12, 2018
TIJAM, J.
Nature of the Action: Petition for Review on Certiorari under Rule 45
FACTS: The officers of City Heights Subdivision wrote to the mayor of the City of Naga
(City), offering to construct the Naga City Hall within the premises of the Subdivision.
Their letter indicated that the City Hall would be built on an area of not less than two
hectares within the Subdivision, which would be designated as the open space reserved
for a public purpose. The letter also indicated the terms of the construction contract and
provided that the City would be free to accept another party’s offer to construct the City
Hall if it found such to be favorable. The City Board later on passed Resolution No 75
asking the subdivision for a bigger area on which the city hall would stand. The
Subdivision amended its offer and agreed to donate five hectares to the City. The area
is a portion of the land registered in the names of Macario Mariano and Jose Gimenez
under TCT No. 671 measuring a total of 22.9301 hectares.

The amended offer was signed by Mariano and Gimenez to indicate their "conforme,"
together with their respective spouses, Irene Mariano and Rose Fitzgerald De Gimenez
through one Josie A. Gimenez. Thereafter, the Municipal Board adopted Resolution No.
89 accepting the Subdivision's offer of donation and its proposed contract and
authorized the City Mayor to executed deed of donation. Parties later submitted
divergent accounts on what happened after Resolution No 89 was passed.

According to the City, Mayor Imperial and the registered landowners, Mariano and
Gimenez,
executed a Deed of Donation on August 16, 1954, whereby the latter donated five
hectares of land. By virtue thereof, the City entered theproperty and began construction
of the government center. In contrast, the heirs of Mariano herein petitioners averred
that the plan to donate five hectares to the City did not materialize as the contract to
build the City Hall was not awarded to the Subdivision but to a another contractor
(Francisco Sabaria). Then a Resolution No 11 was adopted authorizing the City mayor
to enter into a contract with Sabaria for the construction of the City Hall. This caused
Mariano and officers of the Subdivision to meet with Mayor Imperial to demand the
return of the five-hectare lot as the condition for the donation was not complied with.
Mayor Imperial purportedly assured them that the City would buy the property from
them. Macario instructed the Subdivision's President to make a follow-up on the City's
payment for the subject lot. The purchase, however, did not materialize. In 1971,
Macario died without receiving
payment from the City. In 1976, a certain Tirso Mariano filed an action for partition of
Macario's estate.

The action was opposed by his widow, Irene, and their adopted children, Jose and
Erlinda. Irene died in 1988. Jose's heirs and Erlinda were declared as Irene's heirs.
Danilo Mariano, as administrator of Irene's estate, demanded upon the City Mayor to
vacate and return the subject property. When the City did not comply, petitioners, as
heirs of Jose and Erlinda, filed a Complaint for unlawful detainer against the City. The
MTC dismissed the complaint on the ground of lack of jurisdiction. It reasoned that the
City's defense, which involved a claim of ownership, removed the issue from the case of
unlawful detainer.
The RTC reversed the dismissal and ruled in favor of petitioners by ordering the City of
Naga and the other government agencies occupying the subject property to vacate
therefrom and pay back rentals to petitioners. Court of Appeals (CA), in an amended
decision, overturned the RTC and upheld the dismissal of the MTC. The CA thus
concluded that the existence and due execution of the Deed of Donation had been duly
established, warranting the dismissal of the ejectment case. The CA also found that
petitioners' claim was barred by laches, noting that the City had been in open, public
and adverse possession of the subject property for 49 years at the time the ejectment
case was filed.

ISSUE : Whether or not the deed of donation was valid

RULING: No. The purported donation lacked the formalities required for its validity.
Generally contracts are obligatory as provided for in Article 1356 which states that:
Contracts shall be obligatory in whatever form they may have been entered into
provided all the essential requisites for their validity are present. However when the law
requires that a contract be in some form in order that it may be valid or enforceable or
that contract be proved in a certain way, that requirement is absolute and indispensable.
And its non-observance renders the contract void and of no effect. And one such law
that requires to be made in a public document is a donation of an immovable. Article
749 provides that in order that the donation of an immovable may be valid, it must be
made in a public document. Thus the donation would be void without the formalities
specified in the provision. In the case at bar, the deed of donation cannot be considered
a public document. Because while it contains an acknowledgment before the notary,
such is defective as it was not made by the donors or by the done but by the officers of
the Subdivision. Hence not being in a public document, such is void and being a void
contract, it has no force and effect from the very beginning and such cannot be
validated either by ratification or prescription.
G. REFORMATION OF CONTRACTS
THIRD DIVISION
G.R. No. 185530, April 18, 2018
MAKATI TUSCANY CONDOMINIUM CORPORATION, Petitioner, v. MULTI-REALTY
DEVELOPMENT CORPORATION, Respondent.
LEONEN,J.
Nature of the Action: Petition for review on Certiorari

FACTS: Multi Realty Development Corporation built Makati Tuscany, a 26 storey

condominium building located at the corner of Ayala Ave. and Fonda St., Makati City. It
had a total of 160 units, with 156 ordinary units and 4 penthouse units. It also had 270
parking slots - one parking slot for each ordinary unit, two parking slots for each
penthouse unit, and the balance of the 106 slots were allocated as common areas.
Multi Realty executed Makati Tuscany’s Master Deed and Declaration of Restrictions.
Due to the passage of the Condominium Act, Multi Realty created and incorporated
Makati Tuscany Condominium Corporation to hold title over and manage Makati
Tuscany’s common areas. Thereafter, Multi-Realty executed a deed of transfer of
ownership of Makati Tuscany’s common areas to Makati Tuscany Condominum
Corporation.
Multi Realty filed a complaint for damages and/or reformation of instrument on the
ground that of the 106 parking slots designated in the Master Deed as part of the
common areas, only 8 slots were actually intended to be guest parking slots hence Multi
Realty retained ownership of the remaining 98 parking slots. Multi Realty claimed that
its ownership over the parking slots was mistakenly not reflected in the Master Deed.
RTC dismissed on the ground that Multi realty itself prepared the Master Deed and
Deed of Transfer hence it could not unlikely to not include the 98 parking slots among
the areas transferred to Makati Tuscany Condominium Corporation. CA dismissed on
prescription. MR filed wherein the court granted by directing the reformation of the
Master Deed and Deed of Transfer.

ISSUE: Whether reformation of the instrument is need for the Master Deed and Deed of
Transfer

RULING: Yes, there is a need to reform the Master Deed and the Deed of Transfer.
Reformation of an instrument as provided by law is a remedy in equity where a valid
existing contract is allowed by law to be revised to express the true intentions of the
contracting parties. In reforming an instrument, no new contract is created for the
parties, rather, the reformed instrument establishes the real agreement between the
parties as intended, but for some reason, was not embodied in the original instrument.
A plain reading of the Master Deed shows that all parking areas which are not
assigned to units come under petitioner’s authority because they are part of the
common areas. To substantiate its claim that there was a difference between the written
terms in the Master Deed and Deed of Transfer and the parties’ intention, respondent
refers to their prior and subsequent
acts as such is allowed if such subsequent and contemporaneous acts show that their
true intention was not accurately reflected in the written instrument. Said acts as
enunciated are: first, due to its inexperience with documentation of the condominium
developments, it failed to reflect the correct number of guest parking slots in the Master
Deed and Deed of Transfer; second, respondent, acting on the honest belief that it
continued to own the 98 parking slots, sold 26 of the 98 parking slots to Makati
Tuscany’s unit owners without any hint of complaint or opposition from petitioner; third,
petitioner’s BOD made repeated offers to purchase the parking slots from respondent
and that petitioner repeatedly cooperated and supported its sales through the issuance
of certificates of management for the condo unit and parking slots. Another is the
repeated offers to purchase the parking slots from respondent by the petitioner’s Board
of Directors and finally, it was only in September 1989 when the value of the
unallocated parking slots had risen that the petitioner first claimed ownership of the
remaining parking slots.
VOID AND INEXISTENT CONTRACTS
FIRST DIVISION
CONCHITA GLORIA AND MARIA LOURDES GLORIA-PAYDUAN v. BUILDERS
SAVINGS AND LOAN ASSOCIATION, INC.
G.R.No. 202324 June 04, 2018
Del Castillo, J.
Nature of the Action: Petition for Review on Certiorari

FACTS: Spouses Juan and herein petitioner Conchita Gloria are registered owners of
a parcel of land located in Kamuning, Quezon City covered by TCT No. 35814.
Petitioner Maria Lourdes Gloria-Payduan is their daughter. Conchita and Lourdes filed
before the RTC a complaint against respondent Builders Savings and Loan Association,
Inc., Benildo Biag and Manuel F. Lorenzo to declare null and void the real estate
mortgage and the promissory note and for the cancellation of the notation in the transfer
certificate of title and damages. Herein petitioner claim that Biag duped them into
surrendering TCT 35814 under the pretense that Biag would verify the title, which he
claimed might have been fraudulently transferred to another on account of a fire that
gutted the QC Registry of Deeds; that Biag claimed that the title need to be
reconstituted; that Biag instead used the title to mortgage the Kamuning property to
respondent Builders Savings; that Conchita was fraudulently made to sign the subject
loan and mortgage documents by Biag who deceived Conchita into believing that it was
actually Lourdes who requested that these documents be signed; that the subject
Mortgage and Promissory Note contained the signature not only of Conchita, but of
Juan, who was by then already long deceased, as mortgagor and co-maker; that at the
time the loan and mortgage documents were supposedly executed, Conchita was
already sickly and senile, and could no longer leave her house; that Biag and Builders
Savings conspired in the execution of the forged loan and mortgage documents, that
the forged loan and mortgage documents were not signed/affirmed before a notary
public; that on account of Biag and Builders Savings' collusion, the subject property was
foreclosed and sold at auction to the latter; and that the loan and mortgage documents,
as well as the foreclosure and sale proceedings, were null and void and should he
annulled. Builders Savings presented its Credit Investigator Danilo Reyes who testified
that he personally met Spouses Juan and Conchita Gloria, Maria Lourdes and her
husband, and Benildo Biag when they went to their office to apply for a loan. He also
saw the identification card presented by Juan to verify and confirm his identity. Likewise,
Conchita was a retired public school teacher who could not be cajoled to execute a real
estate mortgage on her property against her will. In the same vein, the fact that
Conchita submitted floor plans of her house and its tax declarations only signified that
she voluntarily mortgaged her property. RTC declared the real estate mortgage and the
promissory note null and void. CA dismissed the complaint.

ISSUE: Whether the mortgage and promissory notes have to be declared as null and
void?

RULING: Yes the Trial Court is correct in declaring null and void said promissory notes
and real estate mortgage as the evidence indicates that such were indeed simulated
and that title was merely entrusted to Biag for the purpose of reconstituting the same
and that they did not intend for Biag to mortgage the subject property in 1991 to secure
a loan without their knowledge and consent proceeded to do just that and in the
process, he falsified the loan and mortgage documents and the accompanying
promissory note by securing Conchita's signatures thereon through fraud and
misrepresentation and taking advantage of her advanced age and forged Juan's
signature and made it appear that the latter was still alive at the time, when in truth and
in fact, he had passed away in 1987. Article 1409 of the Civil Code of the Philippines
provides that one of the contracts which are inexistent and void are those absolutely
simulated or fictitious contracts. As a consequence of Biag's fraud and forgery of the
loan and mortgage documents, the same were rendered null and void. This proceeds
from the fact that Biag was not the owner of the subject property and may not thus
validly mortgage it, as well as the well-entrenched rule that a forged or fraudulent deed
is a nullity and conveys no title.
Sales
B. Elements of a Contract of Sale
SECOND DIVISION
SPOUSES LUCIA A. OROZCO AND CRESENTE R. OROZCO (DECEASED),
SUBSTITUTED BY HIS HEIRS, NAMELY: JOCELYN O. GUJELING, JUDITH O.
SEMACIO, GENILYN O. PERIABRAS, GEMMA O. PERALTA,ROCKY A. OROZCO
AND GISSA O. FERRER, PETITIONERS, V. FLORANTE G. LOZANO, SR.
(DECEASED), SUBSTITUTED BY HIS HEIRS, NAMELY: EPIFANIA LOZANO,
SHIRLEY L. SALCEDO, JOCELYN L. BASTARECHE, RACHEL L. GILOS,
FLORANTE G. LOZANO, JR., AND ROBERT G. LOZANO, RESPONDENTS.
G.R. No. 222616, April 3, 2019
CARPIO, J.:
Nature of the Action: Petition for review on certiorari

FACTS: Spouses Orozco purchased from Spouses Fuentes two residential lots both
situated in Barangay 2, San Francisco, Agusan del Sur. The lots are identified as Lot
No. 3780, Pls-67 and Lot No. 3105, Pls-67. Spouses Orozco sold half of Lot No. 3780 to
Florante G. Lozano, Sr. for P5,000.00. Half of Lot No. 3780 which was sold by Spouses
Orozco to Lozano was assigned as Lot No. 3780-A while the other half retained by
Spouses Orozco was designated as Lot No. 3780-B. At the time of the sale, Cresente
Orozco used a rope to measure Lot No. 3780, which Orozco thought had an area of 570
square meters. Lozano constructed a building between Lot No. 3780-A and Lot No.
3780-B which Lozano used as a boarding house. Spouses Orozco did not prevent
Lozano from building because the latter thought that the said boarding house was
constructed within the 285 square meter portion which Spouses Orozco sold to Lozano.
Hence the spouses Orozco were surprised when Lozano asked them to sign an
acknowledgment receipt of the payment of P500.00 for the additional area on top of the
285 square meters principally sold. Spouses Orozco claimed that they did not sign such
acknowledgment receipt because according to them there was no additional area sold
to Lozano. Lozano argued that Spouses Orozco agreed to sell to him an additional 62
square meters of Spouses Orozco's 325.5 square meter portion and that Lozano agreed
to make an additional payment of P1,000.00 in consideration for the said added portion.
Hence as evidenced by an acknowledgment receipt, Lozano paid Spouses Orozco
P400.00. Subsequently, Lozano paid Spouses Orozco P300.00, totaling P700.00,
leaving P300.00 as the remaining unpaid balance for the 62 square meter added
portion. Hence without receiving the full payment, Spouses Orozco made demands to
Lozano to vacate the portion of Spouses Orozco's lot that Lozano allegedly encroached
but the latter refused to vacate.

Spouses Orozco then filed a complaint for Recovery of Possession and Damages
with Application for Writ of Preliminary Injunction. MCTC ordered Lozano to vacate the
portion encroached upon and to restore the possession of the said portion to Spouses
Orozco. The MCTC ruled that the acknowledgment receipt was not a perfected contract
of sale for the added portion of the said property. Hence, there was no valid transfer of
ownership to Lozano. RTC reversed. RTC held that there was a valid contract of sale
between Spouses Orozco and Lozano. The MCTC held that where both the area and
the boundaries of an immovable are declared, the area covered within the boundaries
prevails over the stated area in the deed of sale. Through the perfected contract of sale,
Spouses Orozco bound themselves to deliver to Lozano one-half of the actual area
within the said boundaries of Lot No. 3780. Moreover, Orozco was not able to prove that
his signature in the subject acknowledgment receipt was forged. CA affirmed the
Decision of the RTC. The CA held that there was no encroachment on the part of
Lozano because the sale of Lot No. 3780-A partook of the nature of a sale of land in a
mass under Article 1542 of the Civil Code. By virtue of the valid contract of sale,
Spouses Orozco agreed to completely transfer the ownership of half of Lot No. 3780 to
Lozano.
ISSUE: Whether there is a perfected contract of sale?

RULING: Sale, by its very nature, is a consensual contract, because it is perfected by

mere consent. The essential elements of a contract of sale are the following: (a)
consent or meeting of the minds, that is, consent to transfer ownership in exchange for
the price; (b) determinate subject matter; and (c) price certain in money or its
equivalent. All these elements are present in the instant case.

In the case at bar, there was a perfected contract of sale for the 62 square meter
portion of Lot No. 3780-B from Spouses Orozco to Lozano. There was a meeting of the
minds between Spouses Orozco and Lozano when the latter offered to purchase for
P1,000.00 an additional 62 square meters of Lot No. 3780-B from Spouses Orozco to
extend the boundary of his property, Lot No. 3780-A, up to the mango tree. Lozano's
offer was accepted by Spouses Orozco and the initial payment of P400.00 was made by
Lozano as evidenced by the handwritten acknowledgment receipt signed by Orozco.
Subsequently, another payment of P300.00 by Lozano was made to Lucia Orozco,
totaling the payment of Lozano to P700.00, leaving a remaining unpaid balance of
P300.00, before the dispute was brought to the barangay by Spouses Orozco for
resolution.
Lease
III.Rights and Obligations of the Lessor & Lessee
THIRD DIVISION
VICTORIA N. RACELIS, IN HER CAPACITY AS ADMINISTRATOR v. SPOUSES
GERMIL JAVIER AND REBECCA JAVIER
G.R. No. 189609, January 29, 2018
Leonen, J.
Nature of the Action: Petition for Review

FACTS: Before the death of the late Pedro Nacu Sr, he appointed his daughter Racelis
to administer his properties. Among his properties is a residential house and lot in
Marikina. Nacu requested his heirs to sell his property first. With such request, Racelis
then advertised it for sale. Later in 2001, herein Spouses Javier offered to purchase the
said Marikina property. However, they could not afford to pay the price of 3,500,000.00
instead they offered to lease the property while they raise enough money. Racelis
hesitated but eventually agreed. The parties then agreed on a month-to-month lease
and rent of P10,000.00 per month which was later increased to P11,000.00. The
Spouses Javier used the property as their residence and as the site of their tutorial
school. Later in July 2002, Racelis inquired whether the Spouses Javier were still
interested to purchase the property. The Spouses Javier reassured her of their
commitment and even promised to pay P100,000.00 to buy them more time within
which to pay the purchase price. After some time, spouses Javier tendered the sum of
P65,000.00 representing "initial payment or goodwill money." On several occasions,
they tendered small sums of money to complete the promised P100,000.00. But by the
end of 2003, they were only able to pay a total of 78,000. Despite this, they still
continued to lease and consistently paid rent but started to fall behind. With this, Racelis
informed spouses Javier that they had decided to terminate the lease agreement and to
offer the property to other interested buyers. In the same letter, Racelis demanded that
they vacate the property by May 30, 2004. It was also mentioned by Racelis that it is a
common practice that earnest money will be forfeited in favor of the seller if the buyer
fails to consummate the sale after the lapse of a specified period for any reason so that
we have the legal right to forfeit your P78,000 on account of your failure to pursue the
purchase of the property you are leasing. However, as a consideration to you, we
undertake to return to you the said amount after we have sold the property and received
the purchase price from the prospective buyer. Spouses Javier stull refused to vacate
due to the ongoing operation of their tutorial business. Racelis then caused the
disconnection of the electrical service over the property forcing the Spouses Javier to
purchase a generator. Hence a complaint for damages was filed by Spouses Javier
against Racelis to which he was absolved from liability.

ISSUE: Whether or not respondents Spouses Javier can invoke their right to suspend
the payment of rent under Article 1658 of the Civil Code

RULING: No. A contract of lease is a "consensual, bilateral, onerous and commutative

contract by which the owner temporarily grants the use of his property to another who
undertakes to pay rent therefor." Article 1658 of the Civil Code allows a lessee to
postpone the payment of rent if the lessor fails to either (1) "make the necessary
repairs" on the property or (2) "maintain the lessee in peaceful and adequate enjoyment
of the property leased." This provision implements the obligation imposed on lessors
under Article 1654(3) of the Civil Code. The failure to maintain the lessee in the
peaceful and adequate enjoyment of the property leased does not contemplate all acts
of disturbance. Lessees may suspend the payment of rent under Article 1658 of the
Civil Code only if their legal possession is disrupted.
In this case, the disconnection of electrical service over the leased premises on May 14,
2004 was not just an act of physical disturbance but one that is meant to remove
respondents from the leased premises and disturb their legal possession as lessees.
Ordinarily, this would have entitled respondents to invoke the right accorded by Article
1658 of the Civil Code. However, this rule will not apply in the present case because
the lease had already expired when petitioner requested for the temporary
disconnection of electrical service. Petitioner demanded respondents to vacate the
premises by May 30, 2004. Instead of surrendering the premises to petitioner,
respondents unlawfully withheld possession of the property. Respondents continued to
stay in the premises until they moved to their new residence on September 26, 2004. At
that point, petitioner was no longer obligated to maintain respondents in the "peaceful
and adequate enjoyment of the lease for the entire duration of the contract." Therefore,
respondents cannot use the disconnection of electrical service as justification to
suspend the payment of rent.
V. Termination of Lease
5. Implied New Lease
FIRST DIVISION
THELMA C. MULLER, GRACE M. GRECIA, KURT FREDERICK FRITZ C. MULLER,
AND HOPE C. MULLER, IN SUBSTITUTION OF THE LATE FRITZ D.
MULLER, Petitioners, v. PHILIPPINE NATIONAL BANK, Respondent.
G.R. No. 215922 October 1, 2018
Del Castiilo,J.
Nature of the Action: Petition for Review on Certiorari

FACTS: Spouses Fritz and Thelma Muller are the occupants of two (2) parcels of land
with improvements located at Abeto Subdivision, Brgy. Sta. Rosa, Manduriao, Iloilo City
owned by Philippine National Bank with an aggregate area of 1,250 sq. meters. On May
26, 1987, PNB informed the Spouses Muller that their lease will expire on June 1, 1987
and that they had rental arrears for two and a half years amounting to PhP18,000.00.
Seeking to renew the lease contract for another year, Fritz Muller wrote to PNB
proposing to buy the said subject property, PNB however denied the request of the
lease. He was informed by PNB Iloilo that his offer to purchase the property was not
given due course by the Head Office. On March 17, 1988, PNB demanded for the
Mullers to vacate the property within 15 days from the said date as the lease is nearing
its expiration. Despite repeated demands, spouses Muller did not vacate the premises.
Hence PNB sent a final demand letter on Kuly 17, 2006 demanding from the spouses
Muller the payment of the rental arrears from June 1984 up to June 1, 2006. PNB filed a
complaint for ejectment. MCTC order spouses Muller to vacate. RTC ruled that the
reckoning point from which a claimant in an unlawful detainer case may invoke the
accrual of claims is the date of receipt of the last demand. CA ruled tht reasonable
compensation for the use and occupancy of the subject property should be reckoned
from receipt of initial demand and not receipt of last demand as ruled by the RTC.

ISSUE: Whether or not PNB is entitled to rentals in arrears

RULING: It is argued by petitioners that rentals may be awarded to respondents only

from time of the latest demand and not prior ones and that prior to said last demand,
PNB had no right to collect rent since it is only after receipt that they may be considered
illegally occupying and thus obligated to pay rent and that prior to said last demand,
their possession of the property may be said to have been tolerated by PNB and as
such not required to pay rent. Such arguments the Court ruled are wrong. Article 1670
of the Civil Code provides that: If at the end of the contract, the lessee should continue
enjoying the thing leased for fifteen days with the acquiescence of the lessor and unless
a notice to the contrary by either party has previously been given, it it understood that
there is an implied new lease not for the period of the original contract but for the time
established in Articles 1682 and 1687. The other terms of the original contract shall be
revived. Hence when petitioners’ lease agreement expired on June 1, 1986 and they did
not vacate, the terms of the written lease other than that covering the period were
revived hence the lease continued.
Agency
II. Kinds of Agency
THIRD DIVISION
BELINA CANCIO AND JEREMY PAMPOLINA v. PERFORMANCE FOREIGN
EXCHANGE CORPORATION
G.R. No. 182307, June 06, 2018
Leonen, J.
Nature of the Action: Petition for Review on Certiorari

FACTS: Herein petitioners opened a joint account with respondent, through their
broker, Hipol, to engage in foreign currency exchange trading. Respondent had a
leverage system of trading, wherein clients may use its credit line to facilitate
transactions. This means that clients may actually trade more than what was actually in
their accounts, signifying a higher degree of risk. The contract between petitioners and
respondent provided that respondent was irrevocably authorized to follow bonafide
instructions from petitioners or their broker. According to respondent, for instructions to
be considered "bonafide," there must be a signed purchase order form from the client.
Thus, by petitioners' own count, there were 15 transactions, not 29 transactions.
According to the Balance Ledger, commission was deducted from petitioners' account
15 times. Thus, commission was deducted for every successful transaction. The
eleventh and twelfth transactions occurred when petitioners were still actively trading.
This means that they executed more instructions to Hipol than what was covered by the
signed purchase order forms that he held without complaint. Petitioner Pampolina even
testified that they were constantly aware of the status of their account when they were
trading. Petitioners would have been aware that respondent could execute instructions
relayed by Hipol even without the required purchase order form. Otherwise, they would
have stopped executing orders upon their tenth transaction. However, petitioners
averred that there is an alleged unauthorized transactions executed after April 4, 2000,
when they allegedly stopped relaying instructions to Hipol. These alleged unauthorized
transactions breached respondent's contractual obligation to execute only bonafide
instructions from petitioners. Respondents on the other hand presented signed
purchase order forms for the contested transactions occurring after April 4, 2000. It
averred as well that the breach committed by respondent occurred when petitioners
actively traded and they would have been aware of this breach and not when they
stopped trading.

ISSUE: Whether or not Respondent could be held responsible for not disclosing to
petitioners any previous infractions committed by the latter’s agent?

RULING: NO. Hipol as petitioners' agent, was not employed with respondent. He was
categorized as an independent broker for commission. Respondent, not being Hipol's
employer, had no power of discipline over him. It could only cancel his accreditation,
which it did after a second incident was reported. This was the extent by which
respondent was obligated to act on Hipol's infractions.
Moreover, petitioners and respondent signed and agreed to absolve respondent
from actions, representations, and warranties of their agent made on their behalf.
Petitioners conferred trading authority to Hipol. Respondent was not obligated to
question whether Hipol exceeded that authority whenever he made purchase orders.
Respondent was likewise not privy on how petitioners instructed Hipol to carry out their
orders. It did not assign Hipol to be petitioners' agent. Hipol was the one who
approached petitioners and offered to be their agent.
Article 1900 of the Civil Code provides: So far as third persons are concerned, an act is
deemed to have been performed within the scope of the agent's authority, if such act is
within the terms of the power of attorney, as written, even if the agent has in fact
exceeded the limits of his authority according to an understanding between the principal
and the agent.
Partnership
I. In General
FIRST DIVISION
ANICETO G. SALUDO, JR., Petitioner, v. PHILIPPINE NATIONAL
BANK, Respondent
G.R. No. 193138, August 20, 2018
JARDELEZA, J.
Nature of the action: Petition for review on certiorari

FACTS: On June 11, 1998, Saludo Agpalo Fernandez and Aquino Law Office entered
into a Contract of Lease with PNB, whereby the latter agreed to lease 632 square
meters of the second floor of the PNB Financial Center Building in Quezon City for a
period of three years and for a monthly rental fee of P189,600.00. The rental fee is
subject to a yearly escalation rate of 10%. SAFA Law Office then occupied the leased
premises and paid advance rental fees and security deposit in the total amount of
P1,137,600.00. On August 1, 2001, the Contract of Lease expired. But SAFA Law
Office continued to occupy the leased premises until February 2005, but discontinued
paying its monthly rental obligations after December 2002. Hence on July 17, 2003,
PNB sent a demand letter for SAFA Law Office to pay its outstanding unpaid rents in
the
amount of P4,648,086.34. PNB sent another letter demanding the payment of unpaid
rents in the amount of P5,856,803.53 which was received by SAFA Law Office on
November 10, 2003. In a letter to PNB dated June 9, 2004, SAFA Law Office expressed
its intention to negotiate.
In February 2005, SAFA Law Office vacated the leased premises. PNB sent a
demand letter dated July 7, 2005 requiring the firm to pay its rental arrears in the total
amount of P10,951,948.32. In response, SAFA Law Office sent a letter dated June 8,
2006, proposing a settlement. PNB, declined the settlement proposal in a letter stating
that it was not amenable to the settlement's terms. PNB then made a final demand for
SAFA Law Office to pay its outstanding rental obligations in the amount of
P25,587,838.09. Saludo, in his capacity as managing partner of SAFA Law Office, filed
a complaint for accounting and/or recomputation of unpaid rentals and damages against
PNB in relation to the Contract of Lease.
PNB filed a motion to include an indispensable party as plaintiff, praying that
Saludo be ordered to amend anew his complaint to include SAFA Law Office as
principal plaintiff. PNB argued that the lessee in the Contract of Lease is not Saludo but
SAFA Law Office, and that Saludo merely signed the Contract of Lease as the
managing partner of the law firm. Thus, SAFA Law Office must be joined as a plaintiff in
the complaint because it is considered an indispensable party. RTC denied PNB’s
motion to include SAFA Law Office as plaintiff. It ruled that SAFA Law Office is a mere
single proprietorship and that it is a partnership in the practice of law hence a non-legal
entity which cannot be a proper party and cannot sue or be sued. CA affirmed.

ISSUE: Whether or not SAFA Law Office is a sole proprietorship or a partnership?

RULING: NO, it is a partnership. SAFA Law Office was constituted as a partnership at

the time its partners signed the Articles of Partnership wherein they bound themselves
to establish a partnership for the practice of law, contribute capital and industry for the
purpose, and receive compensation and benefits in the course of its operation. The
opening paragraph of the Articles of Partnership reveals the unequivocal intention of its
signatories to form a partnership. The subsequent registration of the Articles of
Partnership with the SEC, on the other hand, was made in compliance with Article 1772
of the Civil Code, since the initial capital of the partnership was P500,000.00. The other
provisions of the Articles of Partnership also positively identify SAFA Law Office as a
partnership. It constantly used the words "partners" and "partnership." It designated
Saludo, Jr. Saludo as managing partner, and Attys. Ruben E. Agpalo, Filemon L.
Fernandez, and Amado D. Aquino as industrial partners. It also provided for the term of
the partnership, distribution of net profits and losses, and management of the firm in
which "the partners shall have equal interest in the conduct of [its] affairs." Moreover, it
provided for the cause and manner of dissolution of the partnership. These provisions
would not have been necessary if what had been established was a sole proprietorship.
Chattel and Real Estate Mortgage
B) Essential Requisites
FIRST DIVISION
COCA-COLA BOTTLERS PHILS., INC v. SPOUSES EFREN AND LOLITA SORIANO
G.R. No. 211232; April 11, 2018
Tijam, J.
Nature of the Action: Petition for review on certiorari

FACTS: Spouses Efren and Lolita Soriano are engaged in the business of selling
defendant-appellant Coca-Cola products in Tuguegarao City, Cagayan. Defendant-
appellant thru Cipriano later informed plaintiffs-appellees that it required security for the
continuation of their business. Hence plaintiffs- appellees were convinced to hand over
two (2) certificates of titles over their property and were made to sign a document. They
were assured that it will be a mere formality and will never be notarized. Subsequently,
plaintiffs-appellees informed defendant-appellant Coca-Cola of their intent to stop
selling Coca-Cola products due to their advanced age. Thus latter verbally demanded
from defendant-appellant the return of their certificates of titles. But the titles were not
given back to them. Later they discovered that their land was mortgaged in favor of
defendant-appellant Coca-Cola and that it was already foreclosed.

Hence spouses Soriano filed a complaint for annulment of sheriff’s foreclosure sale.
They argued that they never signed a mortgaged document and that they were never
notified of the foreclosure sale. In addition, they averred that they never had monetary
obligations or debts with defendant-appellant. They always paid their product deliveries
in cash. Furthermore, they claimed that they merely signed a document in Tuguegarao.
They never signed any document in Ilagan, lsabela nor did they appear before a certain
Atty. Reymundo Ilagan on 06 January 2000 for the notarization of the said mortgage
document. On their part, defendant-appellant alleged that spouses Soriano are
indebted to them. Plaintiffs- appellees' admission that they signed the real estate
mortgage document in Tuguegarao, Cagayan indicates that the mortgage agreement
was duly executed. The failure of the parties to appear before the notary public for the
execution of the document does not render the same null and void or unenforceable.
RTC nullified the real estate mortgage and the foreclosure proceedings. CA affirming
the RTC decision. The CA ruled that the Real Estate Mortgage deed failed to comply
substantially with the required form. A careful perusal of the mortgage deed has
revealed that although the spouses signed the real estate mortgage deed, they never
acknowledged the same before the Clerk of Court during the notarization. Likewise, only
one witness has signed the document, instead of the required presence of two (2)
witnesses as provided by law.

ISSUE: Whether or not the Real Estate Mortgage Deed is valid.

RULING: YES. The law is clear on the requisites for the validity of a mortgage, to wit:
Art. 2085. The following requisites are essential to the contracts of pledge and
mortgage:
1. That they be constituted to secure the fulfillment of a principal obligation;
2. That the pledgor or mortgagor be the absolute owner of the thing pledged or
mortgaged;
3. That the persons constituting the pledge or mortgage have the free disposal of their
property, and in the absence thereof, that they be legally authorized for the purpose.
Third persons who are not parties to the principal obligation may secure the latter by
pledging or mortgaging their own property.
In relation thereto, Article 2125 provides: In addition to the requisites stated in Article
2085, it is indispensable, in order that a mortgage may be validly constituted, that the
document in which it appears be recorded in the Registry of Property. If the instrument
is not recorded, the mortgage is nevertheless binding between the parties. Thus, as
between the parties to a mortgage, the non-registration of a REM deed is immaterial to
its validity. Hence CA clearly erred in ruling that the parties in the instant case cannot
be bound by the REM deed.
Torts & Damages
II. Elements of Quasi -Delict
A. Act or Omission there being fault or negligence
1. Concept of Negligence
THIRD DIVISION
LINDA CACHO, MINORS SARAH JANE, JACQUELINE, FIRE RINA AND MARK
LOUISE ALL SURNAMED CACHO, ALL REPRESENTED BY THEIR MOTHER AND
GUARDIAN AD LITEM LINDA CACHO v. GERARDO MANAHAN, DAGUPAN BUS
CO., INC., AND RENATO
DE VERA DOING BUSINESS UNDER THE NAME R. M. DE VERA CONSTRUCTION
G.R. No. 203081 January 17, 2018
Martires, J.
Nature of the Action: Petition for review

FACTS: A vehicular accident occurred along the national highway of Pogo, Alaminos,
Pangasian near the Embarcadero bridge at 5am when Bismark Cacho was driving from
Alaminos Pangasinan to Bani Pangasinan when it collided with a Dagupan bus who
was traversing on the opposite lane. The car had already crossed the bridge when it
collided with the bus which was just about to enter the bridge. The collusion caused
severe damage to the bus, to the car and to the death of Bismark Cacho as well as
multiple injuries to the three (3) passengers inside the car. A complaint for damages
was filed by the wife and children of Bismark Cacho against Dagupan Bus Company
Inc, its driver Gerardo Manahan and Renato De Vera, owner of R.M De Vera
Construction. The complaint alleged that Cacho’s car was hit by the bus as it swerved to
the left lane in avoiding the pile of boulders placed on the shoulder of the road. Such
were negligently placed by De Vera Construction who was constructing some work at
the bridge. Dagupan Bus & its driver Manahan averred that it was Cacho who was
driving fast and that it was the negligent act of De Vera Construction in leaving the rocks
at the shoulder of the bridge which was the proximate cause of the accident. De Vera
Construction argued that he ensured the safety of the road by piling boulders in a safe
place and it was evidenced by its certificate of compliance issued by the municipal civil
engineer. All blamed Cacho for driving recklessly and causing the collision. The RTC
ruled that it was Manahan who was negligently driving at high speed and that he had
the last clear chance to avoid the collision. The CA reversed the ruling of the RTC ruling
that the proximate cause was the negligence of Cacho.

ISSUE: Whether or not it was Cacho or Manahan who was negligent in driving the bus.

RULING: Manahan was negligent in driving the bus. In the case at bar, the RTC gave
much credence to Camba's testimony as he was a passenger of the bus during the
accident. Camba testified that the bus was travelling at a high speed even if it was
nearing the Embarcadero Bridge. Also the bus was not on full stop upon entering the
bridge as the impact of the collision resulted
in the car being thrown about ninety (90) degrees counter-clockwise to the opposite
lane before resting perpendicular to the road. The resulting position of the vehicle after
the collision is incompatible with the conclusion that the bus was at full stop. Cacho's
car would not be thrown off and be turned counter-clockwise to the opposite direction of
its motion if there was no heavier and greater force that collided with it. This
circumstance was duly established by the photographs of the scene taken after the
accident. Hence Manahan was clearly negligent because the bus he was driving
already occupied a portion of the opposite lane, and he was driving at a high speed
while approaching the bridge. The Court used the test of negligence as cited in Picart
vs. Smith, thus; “Did the defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinary prudent person would have used in the
same situation? If not, then he is guilty of negligence.” The Court further ruled that
Dagupan is also liable for Manahan’s negligence because it was the employer of
Manahan and it failed to disprove its liability by proving that it exercised diligence in the
selection and supervision of Manahan
IV.Liability for Torts
B. Kinds of Damages
THIRD DIVISION
TERESA GUTIERREZ YAMAUCHI v. ROMEO F. SUÑ IGA
G.R. No. 199513 April 18, 2018
MARTIRES, J.
Nature of the Action: Petition for review on Certiorari

FACTS: Teresa Gutierrez Yamauchi (Yamauchi) owns a house in Sta. Rosa, Laguna.
Yamauchi consulted Suniga who is the husband of her cousin regarding the renovation
of the house. Yamauchi then gave Suniga a sketch of her intended renovations and
then the latter apprised her of its estimated cost. The total cost was ₱869,658.00-
₱849,658.00 for the renovation and ₱20,000.00 for permits and licenses. Yamauchi
gave a partial payment in the amount of ₱300,000.00 and another payment in the
amount of ₱100,000.00 on Jan 31, 2001. Later on, by January 2001, the renovation
stopped as Suniga was also constructing his house. Suñiga then gave Yamauchi a
Billing Summary stating that he had accomplished 47.02% of the intended renovations
and that Yamauchi is still liable for the remaining amount. Likewise, Suñiga gave
Yamauchi an Accomplishment Billing stating that he has accomplished 25.13% of the
additional works.mYamauchi inquired from Suñiga as to when the renovation would be
completed and
the latter asked for additional funds. The formed requested for the latter to advance the
expenses but Suñiga replied that he had no money. Thus, the intended renovation
was suspended. When Yamauchi consulted a neighbor, she learned that the amount
stated on the Bill of Materials could actually build a new house. Feeling deceived,
Yamauchi asked Suñiga to explain why she should pay the additional amount that he
was demanding. That confrontation led to a heated argument and so, Suñiga decided to
stop the work. Yamauchi then through counsel sent a letter to Suniga stating that
because of the bloated amount of the cost of renovation and the refusal to complete the
project, the latter was constrained to terminate the contract and demanded the payment
of 400,000 plus 12% interest. Suniga however averred that the demand for payment
was without basis since the stoppage of the renovation was due to the nonpayment of
the billing hence the latter demanded to be paid 49,512.50 representing the amount of
additional works that were partially accomplished.
Yamauchi the filed a complaint against Suñiga for rescission of contract with prayer for
damages. She alleged that Suñiga misrepresented himself as a licensed architect and
that Suñiga failed to comply with his obligation to finish the renovation by December
2000. On the other hand, Suñiga denied the allegations of Yamauchi. RTC favored
Yamauchi in rescinding the contract and awarded damages. CA affirmed except as to
the awarding of the damages.

ISSUE: What damages is Sunga liable to pay?

RULING: Actual or compensatory damages are awarded provided the pecuniary loss
has been duly proven. The injured party is required to prove two things: (1) the fact of
the injury or loss and (2) the actual amount of loss with reasonable degree of certainty
premised upon competent
proof and on the best evidence available. In the instant case, Yamauchi did not gain
anything from the incomplete renovation of her house. She, in fact, lost it in its entirety.
Hence it cannot ascertain the amount of loss suffered by Yamauchi and no exact
amount of loss on the Laguna Bel-Air house because Yamauchi did not present any
evidence on the values of the house before and after the incomplete renovation.
 Hence in the absence of competent proof on the amount of actual damages
suffered, a party is entitled to temperate damages. The amount of loss of Yamauchi
cannot be proved with certainty, but the fact that there has been loss on her part was
established. Thus, we find it proper to award temperate damages in lieu of actual or
compensatory damages. Such amount is usually left to the discretion of the courts but
the same should be reasonable, bearing in mind that temperate damages should be
more than nominal but less than compensatory. An award of temperate damages
equivalent to ₱500,000.00 is just and reasonable.

Moral damages may also be awarded when the defendant acted fraudulently or in
bad faith. Moral damages are recoverable only if the party from whom it is claimed has
acted fraudulently or in bad faith or in wanton disregard of his contractual obligations. In
the case at bar, Suñiga acted in bad faith when he misrepresented himself to be a
licensed architect and bloated the figures of the renovation expenses.

Exemplary damages, attorney's fees, and interest due are to be awarded.

Exemplary damages are awarded to set an example and serve as a warning to the
public and as a deterrent against the repetition of this kind of underhanded actions.
Lastly payment of attorney’s fees is to be awarded in the amount of 10% of the total
amount awarded.