Definition/Cause of Action

MAKATI STOCK EXCHANGE, INC., vs. MIGUEL V. CAMPOS

G.R. No. 138814
April 16, 2009

FACTS:

Respondent Miguel V. Campos filed a petition with the Securities, Investigation and
Clearing Department(SICD) of the Securities and Exchange Commission (SEC) against the
petitioners Makati Stock Exchange, Inc. (MKSE)The petition sought: (1) to nullify the
Resolution dated 3 June 1993 of the MKSE Board of Directors, which allegedly deprived him of
his right to participate equally in the allocation of Initial Public Offerings (IPO) of corporations
registered with MKSE; (2) the delivery of the IPO shares he was allegedly deprived of, for which
he would pay IPO prices;. SICD granted the issuance of a Temporary Restraining Order to enjoin
petitioners from implementing or enforcing the resolution of the MKSE. they also issued a writ
of preliminary injunction for the implementation or enforcement of the MKSE Board Resolution
in question. On March 11,1994, petitioners filed a motion to dismiss on the following grounds:
(1) Petition became moot due to the cancellation of the license of the MKSE (2) The SICD had
no jurisdiction over the petition and (3)the petition failed to state a cause of action. However, the
SICD denied petitioner’s motion to dismiss.

ISSUE:

Whether or not the petition failed to state a cause of action.

RULING:
 The petition filed by respondent Miguel Campos should be dismissed for failure to state a
cause of action. A cause of action is the act or omission by which a party violates a right of
another. It contains three essential elements: 1) the legal right of the plaintiff 2) the correlative
obligation of the defendant and 3) the act or omission of the defendant in violation of said legal
right. If these elements are absent, the complaint will be dismissed on the ground of failure to
state a cause of
action. Furthermore, the petition filed by respondent failed to lay down the source or basis of
respondent’s right and/or petitioner’s obligation. Article 1157 of the Civil Code, provides that
Obligations arise from: law, Contracts, Quasi-contracts, Acts or omissions punished by law and
quasi delicts. Therefore an obligation imposed on a person and the corresponding right granted to
another, must be rooted in at least one of these five sources. The mere assertion of a right and
claim of an obligation in an initiatory pleading, whether a Complaint or Petition,without
identifying the basis or source thereof, is merely a conclusion of fact and law. A pleading should
state the ultimate facts essential to the rights of action or defense asserted, as distinguished from
mere conclusions of fact or conclusions of law.
Natural Obligation

Development Bank of the Philippines (DBP) v. Adil, Confesor and Villafuerte,

et al.,
G.R. No. L-48889,
11 May 1989.

FACTS:

On February 10, 1940 spouses Patricio Confesor and Jovita Villafuerte obtained an
agricultural loan from the Agricultural and Industrial Bank (AIB), now the Development of the
Philippines (DBP), in the sum of P2,000.00, Philippine Currency, as evidenced by a promissory
note of said date whereby they bound themselves jointly and severally to pay the account in ten
(10) equal yearly amortizations. As the obligation remained outstanding and unpaid even after
the lapse of the aforesaid ten-year period, Confesor, who was by then a member of the Congress
of the Philippines, executed a second promissory note on April 11, 1961 expressly
acknowledging said loan and promising to pay the same on or before June 15, 1961. The trial
court ordered the spouses to pay the loan but this was reversed on appeal.

ISSUE:

Does prescription operate to discharge a debt even if it there was acknowledgment of the
debtor?

RULING:

This is not a mere case of acknowledgment of a debt that has prescribed but a new
promise to pay the debt. The consideration of the new promissory note is the pre-existing
obligation under the first promissory note. The statutory limitation bars the remedy but does not
discharge the debt. A new express promise to pay a debt barred … will take the case from the
operation of the statute of limitations as this proceeds upon the ground that as a statutory
limitation merely bars the remedy and does not discharge the debt, there is something more than
a mere moral obligation to support a promise, to wit a – pre-existing debt which is a sufficient
consideration for the new the new promise; upon this sufficient consideration constitutes, in fact,
a new cause of action.
Essential Elements of Obligations

Ang Yu Asuncion et al. vs. Court of Appeals and Buen Realty Corp.
G.R. No. 109125
December 2, 1994

FACTS:

Petitioners Ang Yu Asuncion et. al. are lessees of residential and commercial spaces
owned by the Unjiengs. They have been leasing the property and possessing it since 1935 and
have been paying rentals.In 1986, the Unjiengs informed Petitioners Ang Yu Asuncion that the
property was being sold and that Petitioners were being given priority to acquire them (Right of
First Refusal). They agreed on a price of P5M but they had not yet agreed on the terms and
conditions. Petitioners wrote to the Unjiengs twice, asking them to specify the terms and
conditions for the sale but received no reply. Later, the petitioners found out that the property
was already about to be sold, thus they instituted this case for Specific Performance [of the right
of first refusal].

The Trial Court dismissed the case. The trial court also held that the Unjieng’s offer to
sell was never accepted by the Petitioners for the reason that they did not agree upon the terms
and conditions of the proposed sale, hence, there was no contract of sale at all. Nonetheless, the
lower court ruled that should the defendants subsequently offer their property for sale at a price
of P11-million or below, plaintiffs will have the right of first refusal.

The Court of Appeals affirmed the decision of the Trial Court.

In the meantime, in 1990, the property was sold to De Buen Realty, Private Respondent
in this case. The title to the property was transferred into the name of De Buen and demanded
that the Petitioners vacate the premises.Because of this, Petitioners filed a motion for execution
of the CA judgement. At first, CA directed the Sheriff to execute an order directing the Unjiengs
to issue a Deed of Sale in the Petitioner’s favour and nullified the sale to De Buen Realty. But
then, the CA reversed itself when the Private Respondents Appealed.
ISSUE:

Buen Realty can be held bound by the writ of execution by virtue of the notice of lis
pendens, carried over on TCT No. 195816 issued in the name of Buen Realty, at the time of the...
latter's purchase of the property on 15 November 1991 from the Cu Unjiengs.

RULING:

We affirm the decision of the appellate court.An obligation is a juridical necessity to

give, to do or not to do (Art. 1156, Civil Code). The obligation is constituted upon the
concurrence of the essential elements thereof, viz: (a) The vinculum juris or juridical tie which is
the efficient cause established by the various sources of obligations (law, contracts, quasi-
contracts, delicts and quasi-delicts); (b) the object which is the prestation or conduct, required to
be observed (to give, to do or not to do); and (c) the subject-person who, viewed from the
demandability of the obligation, are the active (obligee) and the passive (obligor) subjects.

Among the sources of an obligation is a contract (Art. 1157, Civil Code), which is a
meeting of minds between two persons whereby one binds himself, with respect to the other, to
give something or to render some service (Art. 1305, Civil Code). A contract undergoes various
stages that include its negotiation or preparation, its perfection and, finally, its consummation.
Negotiation covers the period from the time the prospective contracting parties indicate interest
in the contract to the... time the contract is concluded (perfected). The perfection of the contract
takes place upon the concurrence of the essential elements thereof.
Sources of Obligation

The Metropolitan Bank and Trust Company vs

Ana Grace Rosales and Yo Yuk To
G.R. No. 183204
January 13, 2014

FACTS:

Petitioner Metrobank is a domestic banking corporation duly organized and existing

under the laws of the Philippines. Respondent Rosales is the owner of a travel agency while Yo
Yuk To is her mother. In 2000, respondents opened a Joint Peso Account10 with petitioner’s
Pritil-Tondo Branch.In May 2002, respondent Rosales accompanied her client Liu Chiu Fang, a
Taiwanese National applying for a retiree’s visa from the Philippine Leisure and Retirement
Authority (PLRA), to petitioner’s branch in Escolta to open a savings account. Since Liu Chiu
Fang could speak only in Mandarin, respondent Rosales acted as an interpreter for her. On
March 3, 2003, respondents opened with petitioner’s Pritil-Tondo Branch a Joint Dollar Account
with an initial deposit of US$14,000.00.

On July 31, 2003, petitioner issued a “Hold Out” order against respondents’ accounts.On
September 3, 2003, petitioner, through its Special Audit Department Head Antonio Ivan Aguirre,
filed before the Office of the Prosecutor of Manila a criminal casefor Estafa through False
Pretences, Misrepresentation, Deceit, and Use of Falsified Documents.Respondent Rosales,
however, denied taking part in the fraudulent and unauthorized withdrawal from the dollar
account of Liu Chiu Fang. On December 15, 2003, the Office of the City Prosecutor of Manila
issued a Resolution dismissing the criminal case for lack of probable cause. On September 10,
2004, respondents filed before the RTC of Manila a complaint for Breach of Obligation and
Contract with Damages.

ISSUE:
 Whether Metrobank breached its contract with respondents.

RULING:

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

Southern Philippines Power Corporation vs. Commissioner of Internal

Revenue
G.R. No. 179632
October 19, 2011

FACTS:

Petitioner Southern Philippines Power Corporation (SPP), a power company that

generates and sells electricity to the National Power Corporation (NPC), applied with the Bureau
of Internal Revenue (BIR) for zero-rating of its transactions under Section 108(B)(3) of the
National Internal Revenue Code (NIRC). The BIR approved the application for taxable years
1999 and 2000.On June 20, 2000 SPP filed a claim with respondent Commissioner of Internal
Revenue (CIR) for a P5,083,371.57 tax credit or refund for 1999. On July 13, 2001 SPP filed a
second claim of P6,221,078.44 in tax credit or refund for 2000. The amounts represented
unutilized input VAT attributable to SPP's zero-rated sale of electricity to NPC.

On September 29, 2001, before the lapse of the two-year prescriptive period for such
actions, SPP filed with the Court of Tax Appeals (CTA) Second Division a petition for review
covering its claims for refund or tax credit. The petition claimed only the aggregate amount of
P8,636,126.75 which covered the last two quarters of 1999 and the four quarters in 2000. In his
Comment on the petition, the CIR maintained that SPP is not entitled to tax credit or refund since
(a) the BIR was still examining SPP's claims for the same; (b) SPP failed to substantiate its
payment of input VAT; (c) its right to claim refund already prescribed, and (d) SPP has not
shown compliance with Section 204(c) in relation to Section 229 of the NIRC as amended and
Revenue Regulation (RR) 5-87 as amended by RR 3-88.

ISSUE:

Whether or not there is solutio indebiti.

RULING:
 A claim for tax credit or refund, arising out of zero-rated transactions, is essentially based
on excess payment. In zero-rating a transaction, the purpose is not to benefit the person legally
liable to pay the tax, like SPP, but to relieve exempt entities like NPC which supplies electricity
to factories, offices, and homes, from having to shoulder the tax burden that ultimately would be
passed to the public.

The principle of solutio indebiti should govern this case since the BIR received
something that it was not entitled to. Thus, it has to return the same. The government should not
use technicalities to hold on to money that does not belong to it. Only a preponderance of
evidence is needed to grant a claim for tax refund based on excess payment. Notably, SPP does
no other business except sell the power it produces to NPC, a fact that the CIR did not contest in
the parties joint stipulation of fact. Consequently, the likelihood that SPP would claim input taxes
paid on purchases attributed to sales that are not zero-rated is close to nil.
Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc.,
G.R. No. 184823
October 06, 2010

FACTS:

Respondent Aichi filed a claim for refund/credit of input VAT for the period July 1, 2002
to September 30, 2002, with the petitioner Commissioner of Internal Revenue (CIR), through the
Department of Finance (DOF) One-Stop Shop Inter-Agency Tax Credit and Duty Drawback
Center.On even date, respondent filed a Petition for Review with the CTA for the refund/credit
of the same input VAT. The CTA partially granted the petition. In a Motion for
Reconsideration, petitioner argued that the simultaneous filing of the administrative and the
judicial claims contravenes Sections 112 and 229 of the NIRC and a prior filing of an
administrative claim is a “condition precedent” before a judicial claim can be filed. The CTA En
Banc affirmed the division ruling.

ISSUE:

Whether the respondent’s judicial and administrative claims for tax refund/credit were
filed within the two-year prescriptive period as provided in Sections 112(A) and 229 of the
NIRC.

RULING:

No. The two-year period to file a claim for tax refund/credit for the period July 1, 2002 to
September 30, 2002 expired on September 30, 2004. Hence, respondent’s administrative claim
was timely filed.The filing of the judicial claim was premature. However, notwithstanding the
timely filing of the administrative claim, [the Supreme Court is] constrained to deny
respondent’s claim for tax refund/credit for having been filed in violation of Section 112(D).
Section 112(D) of the NIRC clearly provides that the CIR has “120 days, from the date of the
submission of the complete documents in support of the application [for tax refund/credit],”
within which to grant or deny the claim. In case of full or partial denial by the CIR, the
taxpayer’s recourse is to file an appeal before the CTA within 30 days from receipt of the
decision of the CIR. However, if after the 120-day period the CIR fails to act on the application
for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA
within 30 days.
In this case, the administrative and the judicial claims were simultaneously filed on
September 30, 2004. Obviously, respondent did not wait for the decision of the CIR or the lapse
of the 120-day period. For this reason, we find the filing of the judicial claim with the CTA
premature. The premature filing of respondent’s claim for refund/credit of input VAT before the
CTA warrants a dismissal inasmuch as no jurisdiction was acquired by the CTA.
 Moreo-Lentfer vs. Wolff
G.R. No. 152317
November 10, 2004

FACTS:

The petitioners are Gunter Lentfer, a German citizen; his Filipina wife, Victoria Moreo-
Lentfer; and John Craigie Young Cross, an Australian citizen, all residing in Sabang, Puerto
Galera, Oriental Mindoro. Respondent Hans Jurgen Wolff is a German citizen, residing in San
Lorenzo Village, Makati City. Petitioners alleged that with respondent, on March 6, 1992, they
engaged the notarial services of Atty. Rodrigo C. Dimayacyac for: (1) the sale of a beach house
owned by petitioner Cross in Sabang, Puerto Galera, Oriental Mindoro, and (2) the assignment of
Cross contract of lease on the land where the house stood. The sale of the beach house and the
assignment of the lease right would be in the name of petitioner Victoria Moreo-Lentfer, but the
total consideration of 220,000 Deutschmarks (DM) would be paid by respondent Hans Jurgen
Wolff. A promissory note was executed by said respondent in favor of petitioner Cross.

According to respondent, however, the Lentfer spouses were his confidants who held in
trust for him, a time deposit account in the amount of DM 200,000 at Solid Bank Corporation.
Apprised of his interest to own a house along a beach, the Lentfer couple urged him to buy
petitioner Cross beach house and lease rights in Puerto Galera. Respondent agreed and through a
bank-to-bank transaction, he paid Cross the amount of DM 221,700 as total consideration for the
sale and assignment of the lease rights. However, Cross, Moreo-Lentfer and Atty. Dimayacyac
surreptitiously executed a deed of sale whereby the beach house was made to appear as sold to
Moreo-Lentfer for only P100,000. The assignment of the lease right was likewise made in favor
of Moreo-Lentfer. Upon learning of this, respondent filed a Complaint docketed as Civil Case
No. R-4219 with the lower court for annulment of sale and reconveyance of property with
damages and prayer for a writ of attachment.

ISSUE:
 Does the principle of solutio indebiti under article 2154 of the new civil code, the
principle of justice and equity, apply in the case at bar?

RULING:

The quasi-contract of solutio indebiti harks back to the ancient principle that no one shall
enrich himself unjustly at the expense of another. It applies where (1) a payment is made when
there exists no binding relation between the payor, who has no duty to pay, and the person who
received the payment, and (2) the payment is made through mistake, and not through liberality or
some other cause.

In the instant case, records show that a bank-to-bank payment was made by respondent
Wolff to petitioner Cross in favor of co-petitioner Moreo-Lentfer. Respondent was under no duty
to make such payment for the benefit of Moreo-Lentfer. There was no binding relation between
respondent and the beneficiary, Moreo-Lentfer. The payment was clearly a mistake. Since
Moreo-Lentfer received something when there was no right to demand it, she had an obligation
to return it Following Article 22 of the New Civil Code, two conditions must concur to declare
that a person has unjustly enriched himself or herself, namely: (a) a person is unjustly benefited,
and (b) such benefit is derived at the expense of or to the damage of another.

We are convinced petitioner Moreo-Lentfer had been unjustly enriched at the expense of
respondent. She acquired the properties through deceit, fraud and abuse of confidence. The
principle of justice and equity does not work in her favor but in favor of respondent Wolff.
Whatever she may have received by mistake from and at the expense of respondent should thus
be returned to the latter, if the demands of justice are to be served.
 Roberto U. Genova vs. Levita De Castro
G.R. No. 132076
July 22, 2003

FACTS:

Petitioner was the owner of a parcel of land located in Sta. Ana, Manila, containing an
area of 399.6 square meters and registered in his name under Transfer Certificate of Title No.
172539 of the Register of Deeds of Manila. Sometime in 1989, petitioner ventured into the
business of movie production. In order to finance his film project, he obtained a loan from
respondent Levita de Castro for P1,000,000.00 with interest thereon at the rate of 5% per
annum. By way of security for the loan, and as required by respondent, petitioner turned over his
owners duplicate certificate of title and signed blank sheets of paper with the understanding that
their Deed of Mortgage will be printed thereon. Meanwhile, petitioner remained in possession of
the property.

It appears that previously, petitioner had obtained a loan from the United Coconut
Planters Bank secured by a real estate mortgage over the subject property. He defaulted in the
payment of his obligations, whereupon the bank caused the extrajudicial foreclosure of the
mortgage and purchased the property as the highest bidder at the sale at public auction.

Subsequently, respondent redeemed the property from UCPB and caused the cancellation
of TCT No. 172539 on the strength of a purported deed of sale from petitioner. It turned out that
instead of printing a Deed of Mortgage on the blank sheets of paper which petitioner had earlier
signed, respondent caused to be printed thereon an Absolute Deed of Sale of a Registered
Land in her favor. Thus, respondent obtained TCT No. 194123 in her name.

ISSUE:

Whether or not payments by the petitioner to the respondents must be returned based on
solution indebiti.
RULING:

Under Article 2154 of the Civil Code. There is solutio indebiti where: (1) payment is
made when there exists no binding relation between the payor, who has no duty to pay, and the
person who received the payment; and (2) the payment is made through mistake, and not through
liberality or some other cause. The quasi-contract of solutio indebiti is based on the ancient
principle that no one shall enrich himself unjustly at the expense of another. Article 2154 of the
Civil Code provides:

If something is received when there is no right to demand it, and it was unduly delivered
through mistake, the obligation to return it arises.

The first element of solutio indebiti is lacking. There can be no mistaken payment in this
case because petitioner made payments to respondent pursuant to an agreement to repurchase the
property. Hence, the principle of solutio indebiti finds no application in this case
 Philippine National Bank(PNB) vs. Court of Appeals
GR No. 97995
January 21, 1993

FACTS:
A US company, Star Kist Foods, Inc. USA (Star Kist) engaged local B.P. Mata Co. Inc
(Mata) in providing manning and crewing services for their company located in the United
States. Payment is settled through telegraphic transfer involving several banks namely Security
Pacific National Bank (SEPAC) of Los Angeles as the bank of Star Kist, Philippine National
Bank (PNB) as the bank with the agency arrangement with Star Kist, and Insular Bank of Asia
and America (IBAA) as the bank of Mata. PNB issued a Cashier’s Check amounting to $1,400
for the account of Mata representing payment for services rendered by Mata to Star Kist. PNB
effected another payment amounting to $14,000, which was said to be another payment made by
Star Kist. Prior February 24, the PNB International Department received notice for payment for
$14,000 to Mata but they returned the missive to SEPAC Bank noting an error. It was cleared by
SEPAC Bank that the notice should only be for $1,400 and NOT $14,000. PNB requested Mata
for refund of $14,000, which was mistakenly paid to them. PNB filed a civil case for collection
and refund of $14,000 against Mata using Article 14561 as basis for their argument.

ISSUE:

Whether or not the principle of solution indebiti is applicable in this case.

RULING:

The Supreme Court applied both Art. 1456 which is on constructive trust and Art. 2154
which is on solutio indebiti to the case. They determined that there is constructive trust involved
enforcing Art. 1456. A constructive trust is a form of implied trust. Constructive trusts occur
when “there is neither a promise nor any fiduciary relation to speak of and the so-called trustee
neither accepts any trust nor intends holding the property for the beneficiary.” Following the
aforementioned definitions, there is trust involved. There was no expression or contract
stipulating that Mata and PNB have a fiduciary relationship, however, the point that there was a
transaction that would infer such an arrangement (payment), constructive trust has been
established.

The Supreme Court also adapted Art. 2154 for the case clearly falls in this article. Mata
received money, which had not right to demand it, and there was also a mistake of
delivery. However, due to the prescription of Art. 2154, quasi-contract can no longer be an
alternative leaving constructive trust as the applicable option.

The Commisioner of Internal Revenue vs Acesite

G.R. No. 147295
February 16, 2007

FACTS:

Acesite is the owner and operator of the Holiday Inn Manila Pavilion Hotel along United
Nations Avenue in Manila. It leases 6,768.53 square meters of the hotels premises to the
Philippine Amusement and Gaming Corporation [hereafter, PAGCOR] for casino operations. It
also caters food and beverages to PAGCORs casino patrons through the hotels restaurant
outlets. For the period January (sic) 96 to April 1997, Acesite incurred VAT amounting to
P30,152,892.02 from its rental income and sale of food and beverages to PAGCOR during said
period. Acesite tried to shift the said taxes to PAGCOR by incorporating it in the amount
assessed to PAGCOR but the latter refused to pay the taxes on account of its tax exempt status.

Thus, PAGCOR paid the amount due to Acesite minus the P30,152,892.02 VAT while
the latter paid the VAT to the Commissioner of Internal Revenue [hereafter, CIR] as it feared the
legal consequences of non-payment of the tax. However, Acesite belatedly arrived at the
conclusion that its transaction with PAGCOR was subject to zero rate as it was rendered to a tax-
exempt entity. On 21 May 1998, Acesite filed an administrative claim for refund with the CIR
but the latter failed to resolve the same.
ISSUE:

Whether or not solution indebiti applies to the Government.

RULING:

Tax refunds are based on the principle of quasi-contract or solutio indebiti and the
pertinent laws governing this principle are found in Arts. 2142 and 2154 of the Civil Code,
which provide, thus:

Art. 2142. Certain lawful, voluntary, and unilateral acts give rise to the
juridical relation of quasi-contract to the end that no one shall be unjustly enriched or
benefited at the expense of another.

Art. 2154. If something is received when there is no right to demand it, and it
was unduly delivered through mistake, the obligation to return it arises.

When money is paid to another under the influence of a mistake of fact, that is to say, on
the mistaken supposition of the existence of a specific fact, where it would not have been known
that the fact was otherwise, it may be recovered. The ground upon which the right of recovery
rests is that money paid through misapprehension of facts belongs in equity and in good
conscience to the person who paid it.
 Faustino Cruz v JM Tuason Co. Inc
GR No. L-23749
April 29, 1977

FACTS:

Faustino Cruz has 20 Quinones of land, that 20 quinones formed part of the 50 quinones
of the Deudor Family. Faustino made permanent improvements on the land which was valued at
30,400 pesos, and also incurred expenses amounting to 7,781.74 pesos. In 1952, JM Tuason Co
Inc sought the help of Cruz to act as an intermediary in formulating a compromise agreement
between JM Tuason Co Inc and the Deudor Family in a Civil Case whichinvolved the 50
quinones of land of the Deudors. Cruz succeeded in executing a compromise agreement between
the 2 parties. The agreement was also duly approved by the court. Cruz alleged that 3,000 sqm.
out of 50 quinones of land was promised to him by JM Tuason CI as a form of consideration of
his assistance in the execution of the compromise agreement. This was to be delivered to him
within 10 years from the date of signing of the compromise agreement. Cruz filed an action for
the reason that the land was not delivered to him as promised.Also, Cruz alleged that JM Tuason
was unjustly enriched because of the improvements he made (par. 1, last part), and that JM
Tuason enjoyed the benefits of the improvements on land acquiredby JM Tuason.

ISSUE:

Whether or not JM Tuason was indeed unjustly enriched?

RULING:

No. The court stated that the reliance of Cruz on Art. 2142 is misplaced. The SC states
that for this case to fall under quasi-contracts, there must be an absence of an actual agreement
between the parties concerned. However in this case, there is already an existing contract that
covered the
subject matter. Furthermore, it is essential that the act by which the defendant is benefited must
have been voluntary and unilateral on the part of the plaintiff.As Article 2142 states, certain
lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end
that no one shall be unjustly enriched or benefited at the expense of another.
Delict

PEOPLE OF THE PHILIPPINES vs. JOSE C. GO

G.R. No. 191015
August 6, 2014
FACTS:

Orient Commercial Banking Corporation (OCBC), a commercial bank was ordered

closed by the BSP. PDIC was designated as OCBC receiver, and it took over the bank’s affairs,
assets and liabilities, records, and collected the bank’s receivables.

In 1997, it appears that fictitious loans in favor of two entities – Timmy’s, Inc. and Asia
Textile Mills, Inc. were approved, after which two manager’s checks representing the supposed
proceeds of these loans were issued but made payable to two different entities – Philippine
Recycler’s Inc. and Zeta International – without any documents issued by the supposed
borrowers Timmy’s, Inc. and Asia Textile Mills, Inc. assigning the supposed loan proceeds to the
two payees.

Thereafter, these two manager’s checks – together with several others totaling
P120,819,475.00 – were encashed, and then deposited in the OCBC Savings Account of Jose Go.
Then, several automatic transfer deposits were made from Go’s savings account to his OCBC
Current which were then used to fund Go’s previously dishonored personal checks.

ISSUE:

Whether or not the petitioner is also civilly liable

RULING:

In a criminal case in which the offended party is the State, the interest of the private
complainant or the offended party is limited to the civil liability arising there from. Hence, if a
criminal case is dismissed by the trial court or if there is an acquittal, a reconsideration of the
order of dismissal or acquittal may be undertaken, whenever legally feasible, insofar as the
criminal aspect thereof is concerned and may be made only by the public prosecutor; or in the
case of an appeal, by the State only, through the OSG. In so doing, the private complainant or
offended party need not secure the conformity of the public prosecutor.The contract between the
bank and its depositor is governed by the provisions of the Civil Code on simple loan.

The bank is the debtor and the depositor is the creditor. The depositor lends the bank
money and the bank agrees to pay the depositor on demand. Moreover, the banking laws impose
high standards on banks in view of the fiduciary nature of banking."This fiduciary relationship
means that the bank’s obligation to observe ‘high standards of integrity and performance’ is
deemed written into every deposit agreement between a bank and its depositor. The fiduciary
nature of banking requires banks to assume a degree of diligence higher than that of a good
father of a family."
Quasi-Delict

Andamo vs. V. Intermediate Appellate Court Et Al. (1990)

G.R. No. 74761
November 6, 1990

FACTS:

Missionaries of Our Lady of La Salette, Inc., a religious corporation, built through its
agents, waterpaths, water conductors and contrivances including an artificial lake within its land
inundated and eroded the spouses Emmanuel and Natividad Andamo's land, caused a young man
to drown, damaged petitioners' crops and plants, washed away costly fences, endangered the
lives of petitioners and their laborers during rainy and stormy seasons, and exposed plants and
other improvements to destruction. OnJuly 1982, spouses instituted a criminal action.Spouses
filed a civil case for damages. Court of Appeals affirmed trial court issued an
order suspending further hearings in Civil Case until after judgment in the related Criminal Case.
Spouses contend that the trial court and the Appellate Court erred in dismissing Civil Case since
it is predicated on a quasi-delict.

ISSUE:

Whether or not there is quasi-delict even if done in private property

RULING:

Yes. All the elements of a quasi-delict are present, to wit: (a) damages suffered by the
plaintiff; (b) fault or negligence of the defendant, or some other person for whose acts he must
respond; (c) the connection of cause and effect between the fault or negligence of the defendant
and the damages incurred by the plaintiff.

While the property involved in the cited case belonged to the public domain and the
property subject of the instant case is privately owned, the fact remains that petitioners'
complaint sufficiently alleges that petitioners have sustained and will continue to sustain damage
due to the waterpaths and contrivances built by respondent corporation
Real Obligation

JOSE DE LEON vs. ASUNCION SORIANO

G.R. No. L-2724
August 24, 1950

FACTS:

Jose de Leon, Cecilio de Leon and Albina de Leon, petitioners herein and defendants in
the court below, were natural children of Felix de Leon, deceased, while Asuncion Soriano,
respondent herein and plaintiff below, is his widow. The defendants made deliveries to the
plaintiff of 1,200 cavanes of palay in 1934, 700 in 1944, 200 in 1945, and another 200 in 1946, a
total of 2,300 cavanes which was 3,400 cavanes short of the 5,700 cavanes which should have
been delivered up to and including 1946. It was to recover this shortage or its value that this
action was commenced.

For answer, the defendants averred that their failure to pay the exact quantities of palay
promised for 1944, 1945 and 1946 was due to "the Huk troubles in Central Luzon which
rendered impossible full compliance with the terms of the agreement;" and it was contended that
"inasmuch as the obligations of the defendants to deliver the full amount of the palay is
depending upon the produce as this is in the nature of an annuity, the obligations of the
defendants have been fully fulfilled by delivering in good faith all that could be possible under
the circumstances." The court gave judgment for the plaintiff for 3,400 cavanes of palay or its
equivalent in cash, which was found to be 24,900, and legal interest.

ISSUE:

Whether or not the obligations to deliver cavanes of palay constitutes real obligation

RULING:

Where a person by a contract charges himself with an obligation possible to be

performed, he must perform it, unless its performance is rendered impossible by the act of God,
by the law, or by the other party, it being the rule that in case the party desires to be excused
from performance in the event of contingencies arising, it is his duty to provide therefor in his
contract. Hence, performance is not excused by subsequent" inability to perform, by unforseen
difficulties, by unusual or unexpected expenses, by danger, by inevitable accident, by the
breaking of machinery, by strikes, by sickness, by failure of a party to avail himself of the
benefits to be had under the contract, by weather conditions, by financial stringency, or by
stagnation of business. Neither is performance excused by the fact that the contract turns out to
be hard and improvident, unprofitable or impracticable, ill advised, or even foolish, or less
profitable, or unexpectedly burdensome.
 Hahn v. Court of Appeals
G.R. No. 113074
January 22, 1997

FACTS:
Petitioner Alfred Hahn is a Filipino citizen doing business under the name and style
"Hahn-Manila". On the other hand, private respondent (BMW) is a nonresident foreign
corporation existing under the laws of the former Federal Republic of Germany, with principal
office at Munich, Germany.But on February 16, 1993, in a meeting with a BMW representative
and the president of Columbia Motors Corporation (CMC), Jose Alvarez, petitioner was
informed that BMW was arranging to grant the exclusive dealership of BMW cars and products
to CMC, which had expressed interest in acquiring the same.
On February 24, 1993, petitioner received confirmation of the information from BMW
which, in a letter, expressed dissatisfaction with various aspects of petitioner's business,
mentioning among other things, decline in sales, deteriorating services, and inadequate
showroom and warehouse facilities, and petitioner's alleged failure to comply with the standards
for an exclusive BMW dealer.
Hahn found the proposal unacceptable. On May 14, 1993, he filed a complaint for
specific performance and damages against BMW to compel it to continue the exclusive
dealership.

ISSUE:

Whether petitioner Alfred Hahn is is civilly liable.

RULING:

Yes.The Supreme Court held that agency is shown when Hahn claimed he took orders for
BMW cars and transmits them to BMW. Then BMW fixes the down payment and pricing
charges and will notify Hahn of the scheduled production month for the orders, and
reconfirm the orders by signing and returning to Hahn the acceptance sheets. The
payment is made by the buyer directly to BMW. Title to cars purchased passed directly to
the buyer and Hahn never paid for the purchase price of BMW cars sold in the
Philippines. Hahn was credited with a commission equal to 14% of the purchase price
upon the invoicing of a vehicle order by BMW. Upon confirmation in writing that the
vehicles had been registered in the Philippines and serviced by him, Hahn received an
additional 3% of the full purchase price. Hahn performed after-sale services, including,
warranty services. for which he received reimbursement from BMW. All orders were on
invoices and forms of BMW.
Kinds/Modes of Delivery

Norkis Distributors Inc. vs. Court of Appeals, and Nepales

193 SCRA 694
February 1991

FACTS:

On September 20, 1979, private respondent Alberto Nepales bought from the Norkis
Distributors, Inc. (Norkis) in its Bacolod branch a brand new Yamaha Wonderbike motorcycle
Model YL2DX with Engine No.L2-329401K Frame No.NL2-0329401, color maroon, which was
then on display in the Norkis showroom. The Branch Manager Avelino Labajo agreed to accept
the P7,500.00 price payable by means of a Letter of Guaranty from the Development Bank of the
Philippines (DBP), Kabankalan. Hence, credit was extended to Nepales, and as security for the
loan, he executed a chattel mortgage on the motorcycle in favor of DBP. Labajo issued the
Norkis Sales Invoice No. 0120 perfecting the contract of sale, and Nepales signed the same to
conform to the terms of the sale, while the unit remained in Norkis' possession.

On November 6, 1979, it was registered under Alberto Nepales’ name in the Land
Transportation Commission. On January 22, 1980, the motorcycle was delivered to a certain
Julian Nepales who was allegedly the agent of Alberto Nepales but the latter denies it. The
record shows, however, that Alberto and Julian Nepales presented the unit to DBP's Appraiser-
Investigator Ernesto Arriesta at the DBP offices in Kabankalan, Negros Occidental Branch. On
February 3, 1980, the motorcycle met an accident at Binalbagan, Negros Occidental while being
driven by a certain ZacariasPayba. Norkis answered that the motorcycle had already been
delivered to private respondent before the accident, hence, he should bear the risk of loss or
damage as owner of the unit. The lower court ruled in favor of Nepales, and the Court of Appeals
affirmed the decision but deleted the award of damages "in the amount of P50.00 a day from
February 3, 1980 until payment of the present value of the damaged vehicle." Norkis concedes
that there was no "actual" delivery of the vehicle, but insists that there was constructive delivery
of the unit upon the issuance of the sales invoice, upon the registration of the unit in Nepales’
name, and upon the issuance of the official receipt.

ISSUE:

Who should bear the loss?

RULING:

Affirming the decision of the Court of Appeals, the Supreme Court reiterated that Article
1496 of the Civil Code which provides that "in the absence of an express assumption of risk by
the buyer, the things sold remain at seller's risk until the ownership thereof is transferred to the
buyer," is applicable in the case at bar for there was neither an actual nor constructive delivery of
the thing sold.

The Court of Appeals correctly ruled that the purpose of the execution of the sales
invoice dated September 20, 1979 and the registration of the vehicle in the name of Alberto
Nepales with the Land Registration Commission was not to transfer the ownership and dominion
over the motorcycle to him, but only to comply with the requirements of the DBP for processing
private respondent's motorcycle loan. The circumstances in the case itself more than amply rebut
the disputable presumption of delivery upon which Norkis anchors its defense to Nepales'
action.
Article 1164
Philippine National Bank vs.
Spouses Bernard and Cresencia Maranon
G.R. No. 189316
July 01, 2013

FACTS:

The case is a petition for review on certiorari under Rule 45 of the Rules of Court. The
antecedent events being the Spouses Maranon, owner of a piece of real property, erected with a
building occupied by various tenants. Said subject property was among the properties mortgaged
by spouses Montealegre to PNB as a security for a loan. Spouses Montealegre, through a
falsified Deed of Sale, acquired title to the property and used the property’s title which was
purportedly registered in the name of Emelie Montealegre. However, due to failure to pay the
loan, said property was foreclosed by PNB, and upon auction, was thereafter acquired by the
same bank, PNB. Spouses Maranon filed before the RTC a complaint for Annulment of Title,
Reconveyance and Damages against spouses Montealegre. Judgment of RTC was rendered in
favour of spouses Maranon, and also stipulated that the Real Estate Mortgage lien of PNB shall
stay and be respected. Such decision prompted PNB to also seek for entitlement to the fruits of
the property such as rentals paid by the tenants.

ISSUE:

Whether or not is PNB entitled to fruits of the disputed property.

RULING:

No. Rent is a civil fruit that belongs to the owner of the property producing it by right of
accession. The rightful recipient of the disputed rent in this case should be thus the owner of the
lot at the time the rent accrued. It is beyond question that spouses Maranon never lost ownership
over the subject lot, and that technically, there is no juridical tie created by a valid mortgage
contract that binds PNB to the subject lot because the mortgagors Montealegre were not the true
owners. PNB’s lien as a mortgagee in good faith pertains to the subject lot alone and not on the
erected building which was not foreclosed and still remained to be a property of Maranon. Thus,
PNB’s claim for the rents paid by the tenants has no basis.
Effect of Loss of Indeterminate Things

Bunge Corporation vs.

Elena Camenforte and Company
G.R. No. L-4440
August 29, 1952

FACTS:

Plaintiffs claim that on October 22, 1947, in the City of Cebu a contract was entered into
between the Visayan Products Company and Bunge Corporation (represented by the Universal
Commercial Agencies) whereby the former sold to the latter 500 long tons of merchantable
Philippine copra in bulk at the prices of $188.80, U.S. currency, per ton, less 1 per cent
brokerage per short ton of 2,000 pounds, C & F Pacific Coast, U.S.A.; that, according to the
terms and conditions of the contract, the vendor should ship the stipulated copra during the
month of November or December 1947, to San Francisco, California, U.S.A. for delivery to the
vendee; that, notwithstanding repeated demands made by the vendee, the vendor failed to ship
and deliver the copra during the period agreed upon; that believing in good faith that the vendor
would ship and deliver the copra on time, the vendee sold to El Dorado Oil Works the quantity
of copra it had purchased at the same price agreed upon; and that because of the failure of the
vendor to fulfill its contract to ship and deliver the quantity of copra agreed upon within the
period stipulated, the vendee has suffered damages in the amount of P180,00.

The contract was entered into believing that the company he was representing was the
one recently organized in Cebu; that he, Vicente Kho, did his best to comply with the contract,
but he failed because of force majeure as follows: he informed the plaintiffs sometime in
December, 1947, that he would have all the copra covered by the contract ready for shipment
somewhere in the port of San Ramon, Samar, in order that they may make an arrangement for
the booking of a ship, but before the arrival of the ship, a strong storm visited the place causing
the bodega where the copra was stored to be destroyed and the copra washed away into the sea;
and that, because of this force majeure, he cannot now be held liable for damages.

ISSUE:

Is the copra contemplated in the contract is generic and not specific?

RULING:

The decision appealed from is affirmed, with costs against appellants. It appearing that the
obligation of appellant is to deliver copra in a generic sense, the obligation cannot be deemed
extinguised by the destruction or disappearance of the copra stored in San Ramon, Samar. Their
obligation subsists as long as that commodity is available. A generic obligation is not
extinguished by the loss of a thing belonging to a particular genus. Genus nunquan perit.
Remedies Available to Creditors

Rosendo O. Chavez vs. Fructuoso Gonzales

G.R. No. L-27454
April 30, 1970

FACTS:

On July 1963, Rosendo Chavez brought his typewriter to Fructuoso Gonzales a typewriter
repairman for the cleaning and servicing of the said typewriter but the latter was not able to
finish the job. During October 1963, the plaintiff gave the amount of P6.00 to the defendant
which the latter asked from the plaintiff for the purchase of spare parts, because of the delay of
the repair the plaintiff decided to recover the typewriter to the defendant which he wrapped it
like a package. When the plaintiff reached their home he opened it and examined that some parts
and screws was lost. The following day, the defendant returned to the plaintiff some of the
missing parts, the interior cover and the P6.00. The plaintiff brought his typewriter to Freixas
Business Machines and the repair cost the amount of P89.85. He commenced this action on
August 23, 1965 in the City Court of Manila, demanding from the defendant the payment of
P90.00 as actual and compensatory damages, P100.00 for temperate damages, P500.00 for moral
damages, and P500.00 as attorney’s fees. The defendant made no denials of the facts narrated
above, except the claim of the plaintiff that the cost of the repair made by Freixas Business
Machines be fully chargeable against him.

ISSUE:

Whether or not the defendant is liable for the total cost of the repair made by Freixas
Business Machines with the plaintiff typewriter?

RULING:
 No, he is not liable for the total cost of the repair made by Freixas Business Machines
instead he is only liable for the cost of the missing parts and screws. The defendant contravened
the tenor of his obligation in repairing the typewriter of the plaintiff that he fails to repair it and
returned it with the missing parts, he is liable under “ART. 1167. If a person obliged to do
something fails to do it, the same shall be executed at his cost.This same rule shall be observed if
he does it in contravention of the tenor of the obligation. Furthermore it may be decreed that
what has been poorly done he undone.”
Article 1168, 1244 par 2.

Juan L. Perez vs. Court of Appeals

G.R. No. 107737
October 1, 1999

FACTS:

Along with Maria Perez, Fructuosa Perez, Victoria Perez, Apolonio Lorenzo and Vicente
Asuncion, petitioner Juan Perez is a usufructuary of a parcel of land popularly called the "Papaya
Fishpond. Covered by Transfer Certificate of Title No. 8498 of the Registry of Deeds for the
Province of Bulacan, the fishpond is located in Sto. Rosario, Hagonoy, Bulacan and has an area
of around 110 hectares. Paragraph 5 of the lease contract states that the lessee cannot sublease
the fishpond nor assign his rights to anyone.

Private respondent Luis Crisostomo, who reached only the 5th grade, is a businessman
engaged in the operation of fishponds. On September 20, 1977, while he was at his fishpond in
Almazar, Hermosa, Bataan, his bosom friend named Ming Cosim arrived with petitioner Charlie
Lee. The two persuaded private respondent to take over the operation of Papaya Fishpond as
petitioner Lee and his partner, petitioner Luis Keh, were allegedly losing money in its operation.
Private respondent incurred expenses for repairs in and improvement of the fishpond in the total
amount of P486,562.65.

Because of the threat to deprive him of earnings of around P700,000.00 that the 700,000
milkfish in the fishpond would yield, and the refusal of petitioners Keh, Juan Perez and Lee to
accept the rental for June 5, 1979 to June 6, 1980, private respondent filed on June 14, 1979 with
the then Court of First Instance of Bulacan an action for injunction and damages. He prayed for
the issuance of a restraining order enjoining therein defendants Keh, Perez and Lee from entering
the premises and taking possession of the fishpond. He also prayed for actual damages of
P50,000.00, moral damages of P20,000.00, exemplary damages in an amount that the court
might award, and attorneys fees of P10,000.00

ISSUE:

Who should be in possession of the Papaya Fishpond?

RULING:

Article 1168 of the Civil Code provides that when an obligation consists in not doing and
the obligor does what has been forbidden him, it shall also be undone at his expense. The lease
contract prohibited petitioner Luis Keh, as lessee, from subleasing the fishpond. In entering into
the agreement for pakiao-buwis with private respondent, not to mention the apparent artifice that
was his written agreement with petitioner Lee on January 9, 1978, petitioner Keh did exactly
what was prohibited of him under the contract to sublease the fishpond to a third party. That the
agreement for pakiao-buwis was actually a sublease is borne out by the fact that private
respondent paid petitioners Luis Keh and Juan Perez, through petitioner Tansinsin the amount of
annual rental agreed upon in the lease contract between the usufructuaries and petitioner
Keh. Petitioner Keh led private respondent to unwittingly incur expenses to improve the
operation of the fishpond.
By operation of law, therefore, petitioner Keh shall be liable to private respondent for the
value of the improvements he had made in the fishpond or for P486,562.65 with interest of six
percent (6%) per annum from the rendition of the decision of the trial court on September 6,
1989.
Default/Legal Delay

Social Security System v. Moonwalk Development & Housing Corporation

G.R. No. 73345
April 7, 1993

FACTS:

Plaintiff (SSS) approved the application of the defendant (Moonwalk) for an interim loan.
The loan was released to the Moonwalk. Moonwalk made a payment to SSS for the loan
principal released to it. The last payment made by Moonwalk was based on the Statement of
Account prepared by the SSS. After the settlement of the account, SSS issued to Moonwalk
the Release of Mortgage of Moonwalk’s mortgaged properties. In the letters to Moonwalk, SSS
alleged that it committed an honest mistake in releasing Moonwalk (in the mortgage).Moonwalk
replied in a letter that it had completely paid its obligations to SSS.

ISSUE:

Whether or not Moonwalk was in default (mora)

RULING:

No. A penalty is demandable in case of non performance or late performance of the main
obligation. There must be a breach of the obligation either by total or partial non fulfillment or
there is non-fulfillment in the point of time which is called mora or delay. There is no mora or
delay unless there is a demand.

In the present case, during all the period when the principal obligation was still
subsisting, although there was late amortizations there was no demand made by the creditor, for
the payment of the penalty. Therefore up to the time of the letter of SSS there was no demand for
the payment of the penalty, hence the debtor was no in mora in the payment of the penalty.
SSS issued its statement of account showing total obligation of Moonwalk, and forthwith
demanded payment from Moonwalk. Because of the demand for payment, Moonwalk made a
complete payment of its obligation. Because of this payment the obligation of Moonwalk was
considered extinguished, and pursuant to said extinguishment, the real estate mortgages given by
Moonwalk were released. For all purposes therefor the principal obligation of Moonwalk was
deemed extinguished as well as the accessory obligation of real estate mortgages.

Moonwalk is not in default since there was no mora prior to the demand.
 General Milling Corporation vs. Sps. Librado Ramos and Remedios Ramos
G.R. No. 193723
July 20, 2011

FACTS:

General Milling Corp. entered into a Growers Contract with Sps. Librado and Remedios
Ramos for the supply of broiler chickens to the spouses. The Growers Contract was accompanied
by a Deed of Real Estate Mortgage owned by the spouse. Sps. Ramos however were not able to
settle their account with GMC. Upon notification to the former, GMC instituted for Extrajudicial
Foreclosure of Mortgage. Sps. Ramos filed for the annulment of the extrajudicial foreclosure sale
and contended that it was null and void, since there was no compliance with the requirements of
posting and publication of notices. RTC and CA sustained that GMC’s action against Sps
.Ramos was premature, as they were not in default at the time the action was filed.

ISSUE:

Whether the Spouses Ramos were actually in default of their obligation to GMC.

RULING:

There are three requisites necessary for a finding of default.

1. the obligation is demandable and liquidated;
2. the debtor delays performance;
3. the creditor judicially or extrajudicially requires the debtor’s performance.

Based on the evidence on record, GMC did not make a demand on Sps. Ramos but
merely requested them to go to GMC’s office to discuss the settlement of their account. In spite
of the lack of demand made on the spouses, GMC proceeded with the foreclosure proceedings.
Neither was there any provision in the Deed of Real Estate Mortgage allowing GMC to
extrajudicially foreclose the mortgage without need of demand.
Thus, the Court held that GMC should have first made a demand on the spouses before
proceeding to foreclose the real estate mortgage. Petition is denied. Ruling of CA is affirmed.
 Atlantic Erectors, Inc. v. Court of Appeals
G.R. No. 170732/ 684 SCRA 55
October 11, 2012

FACTS:

Respondent Herbal Cove Realty Corporation (Herbal Cove) wanted to build a a

subdivision project somewhere in Tagaytay City. It hired petitioner Atlantic Erectors Inc.
(Atlantic) to build the project. The Construction Contract indicated a contract price of almost
P16.7Million and to finish building within 180 days. To secure payment in case of non
completion of the project, the contract also provides:

ARTICLE IX
FAILURE TO COMPLETE WORK
Section 1: The CONTRACTOR acknowledges that the OWNER shall not suffer [loss] by
the delay or failure of the CONTRACTOR to finish and complete the works called for under this
Contract within the time stipulated in Section 6, Article IV. The CONTRACTOR hereby
expresses covenants and agrees to pay to the Owner liquidated damages equivalent to the One-
Tenth of One Percent (1/10 of 1%) of the Contract Price per calendar day of delay until
completion, delivery and acceptance of the said Works by the OWNER to a maximum amount
not to exceed 10%.

Atlantic was asked to commence construction on July 8, 1996, but eventually, it asked for
an extension citing bad weather and delayed turnover of project sites which Herbal Cove granted
but ultimately, Atlantic failed to deliver. Herbal Cove terminated the contract on October 3, 1997
and demanded liquidated damages. Herbal Cove also hired another contractor to finish the job. It
filed a case with the Construction Industry Arbitration Commission (CIAC). The CIAC found in
favor of Herbal Cove but did not award liquidated damages for failure to comply with 15-day
notice of termination (provided for in its contract.). The CA awarded liquidated damages.
ISSUE:
Whether or not the Atlantic Erector, Inc. was in default

RULING:

Yes. As long as the contractor fails to finish the works within the period agreed upon by
the parties without justifiable reason and after the owner makes a demand, then liability for
damages as a consequence of such default arises.The CIAC disallowed liquidated damages
because Herbal Cove failed to comply with the rule on notice. However, the contract is the law
between the parties and there are provisions in the same contract which provide "the Contractor
shall be required to pay the Owner the liquidated damages in the amount stipulated in the
Contract Agreement, the said payment to be made as liquidated damages, and not by way of
penalty.

The Owner may deduct from any sum due or to become due the Contractor any sums
accruing for liquidated damages as herein stated." also, "Neither the taking over by the Owner of
the work for completion by administration nor the re-letting of the same to another Contractor
shall be construed as a waiver of the Owner’s rights to recover damages against the original
Contractor and/or his sureties for the failure to complete the work as stipulated." Thus, under the
contract, Herbal Cove's right to liquidated damages is distinct from the right to terminate
contract.
Robert Pascua v. G & G Real TV Corporation
G.R. No. 196383
October 15, 2012
FACTS:

On October 15, 1999, an Agreement was entered into between petitioner and respondent
for the construction of a four-storey commercial building and two-storey kitchen with dining
hall. Under said Agreement, petitioner undertook to provide all materials and adequate labor,
technical expertise and supervision for the said construction, while respondent obligated itself to
pay the amount of Eleven Million One Hundred Thousand Pesos (P11,100,000.00).During the
course of the construction project, respondent required petitioner to undertake several additional
works and change order works which were not covered by the original agreement. Since
respondent required petitioner to prioritize the change order and additional works, the
construction of the four-storey building had to be temporarily halted.

Sometime in 2000, petitioner was able to finish the construction of the four-storey
building and two-storey kitchen with dining hall, albeit behind the scheduled turnover date.The
parties then proceeded to punch list the minor repair works on the project. However, after
completing all punch listing requirements, respondent refused to settle its outstanding obligation
to petitioner. Hence, petitioner filed a Complaint for Sum of Money with Damages before the
Regional Trial Court of Pasig City.

ISSUE:

Whether or not petitioner was in default

RULING:

Withal, there is no more need for the appellate court to deviate from its original decision
as its factual findings were already supported by testimonies and evidence on record. As stated in
its original decision, it held that the evidence on record categorically showed that the alluded
delay in the completion of the subject project were traceable to the series of additional works and
change order works required by respondent which were not part of the original agreement.
Hence, in reversing its own decision, the appellate court completely disregarded the testimonial
and documentary evidence adduced below, and engaged in piecemeal evaluation of the case by
arriving at a decision which is supported by hearsay evidence.
All told, we are not persuaded with respondents bare claim that petitioner caused the delay in the
completion of the project. On the contrary, testimonial and documentary proof strongly show
that the delay was caused by the additional works and change order works required by
respondent which were not part of the original Agreement.

Development Bank of the Philippines(DBP) vs Guariña Agricultural and

Realty Development Corporation,
G.R. No. 160758
January 15, 2014

FACTS:

In July 1976, Guariña Corporation applied for a loan from DBP to finance the
development of its resort complex. The loan, in the amount of P3,387,000.00, was approved on
August 5, 1976. Guariña Corporation executed a promissory note that would be due on
November 3, 1988. On October 5, 1976, Guariña Corporation executed a real estate mortgage
over several real properties in favor of DBP as security for the repayment of the loan. On May
17, 1977, Guariña Corporation executed a chattelmortgage over the personal properties. The
loan was released in several installments, and Guariña Corporation used the proceeds to defray
the cost of additional improvements in the resort complex. In all, the amount released totaled
P3,003,617.49, from which DBP withheld P148,102.98 as interest.

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

ISSUE:

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

RULING:

No. The loan agreement between the parties is a reciprocal obligation.The agreement
between DBP and Guariña Corporation was a loan. Under the law, a loan requires the delivery of
money or any other consumable object by one party to another who acquires ownership thereof,
on the condition that the same amount or quality shall be paid. Loan is a reciprocal obligation, as
it arises from the same cause where one party is the creditor, and the other the debtor. The
obligation of one party in a reciprocal obligation is dependent upon the obligation of the other,
and the performance should ideally be simultaneous. This means that in a loan,
the creditor should release the full loan amount and the debtor repays it when it becomes due and
demandable.
Maybank Philippines, Inc. (formerly PNB-Republic Bank) vs. Sps. Oscar and
Nenita Tarrosa
G.R. No. 213014
October 14, 2015

FACTS:

On December 15, 1980, respondents-spouses Oscar and Nenita Tarrosa (Sps. Tarrosa)
obtained from then PNB-Republic Bank, now petitioner Maybank Philippines, Inc. (Maybank), a
loan in the amount of P91,000.00. The loan was secured by a Real Estate Mortgag dated January
5, 1981 (real estate mortgage) over a 500-square meter parcel of land situated in San Carlos City,
Negros Occidental (subject property), covered by TCT No. T-5649,and the improvements
thereon. After paying the said loan, or sometime in March 1983, Sps. Tarrosa obtained another
loan from Maybank in the amount of P60,000.00 (second loan), payable on March 11, 1984.
However, Sps. Tarrosa failed to settle the second loan upon maturity.Sometime in April 1998,
Sps. Tarrosa received a Final Demand Letter dated March 4, 1998 (final demand letter) from
Maybank requiring them to settle their outstanding loan in the aggregate amount of P564,579.91,
inclusive of principal, interests, and penalty charges.

They offered to pay a lesser amount, which Maybank refused. Thereafter, or on June 25,
1998, Maybank commenced extrajudicial foreclosure proceedings before the office of Ex-Officio
Provincial Sheriff Ildefonso Villanueva, Jr. (Sheriff Villanueva). The subject property was
eventually sold in a public auction sale held on July 29, 1998 for a total bid price of P600,000.00,
to the highest bidder, Philmay Property, Inc. (PPI), which was thereafter issued a Certificate of
Sale dated July 30, 1998.

On September 7, 1998, Sps. Tarrosa filed a complaint for declaration of nullity and
invalidity of the foreclosure of real estate and of public auction sale proceedings and damages
with prayer for preliminary injunction against Maybank
ISSUE:

Whether or not Spouses Tarrosa were in delay

RULING:

The cause of action in light of paragraph 5 of the real estate mortgage, which pertinently
provides:

5. In the event that the Mortgagor herein should fail or refuse to pay any of the sums of
money secured by this mortgage, or any part thereof, in accordance with the terms and
conditions herein set forth, or should he/it fail to perform any of the conditions stipulated herein,
then and in any such case, the Mortgagee shall have the right, at its election to foreclose this
mortgage, [x x x].

However, this provision merely articulated Maybank's right to elect foreclosure upon Sps.
Tarrosa's failure or refusal to comply with the obligation secured, which is one of the rights duly
accorded to mortgagees in a similar situation. In no way did it affect the general parameters of
default, particularly the need of prior demand under Article 1169 of the Civil Code, considering
that it did not expressly declare: (a) that demand shall not be necessary in order that the
mortgagor may be in default; or (b) that default shall commence upon mere failure to pay on the
maturity date of the loan.
Thus, considering that the existence of the loan had been admitted, the default on the part of the
debtors-mortgagors had been duly established, and the foreclosure proceedings had been initiated
within the prescriptive period as afore-discussed, the Court finds no reason to nullify the
extrajudicial foreclosure sale of the subject property.