Digest Oblicon

MEDICAL MALPRACTICE/ MEDICAL NEGLIGENCE

Erlinda Ramos v. Court of Appeals (CA)

G.R. No. 124354, December 29, 1999
Kapunan, J:
Digested by: Erika Charmain Faye P. Rico
FACTS:

Ramos was a robust woman Except for occasional complaints of

discomfort due to pains allegedly caused by the presence of a stone in her
gall bladder. Because the discomforts somehow interfered with her normal
ways, she sought professional advice. She was advised to undergo an
operation for the removal of a stone in her gall bladder. At about 12:15 P.M.,
Herminda Cruz, who was inside the operating room with the patient, heard
somebody say that "Dr. Hosaka is already here." She then saw people inside
the operating room "moving, doing this and that, preparing the patient for
the operation" As she held the hand of Ramos, she then saw Dr. Gutierrez
intubating the hapless patient. She thereafter heard Dr. Gutierrez say, "ang
hirap ma-intubate nito, mali yata ang pagkakapasok. O lumalaki ang tiyan",
because of the remarks of Dra. Gutierrez, she focused her attention on what
Dr. Gutierrez was doing. She thereafter noticed bluish discoloration of the
nailbeds of the left hand of the hapless Ramos even as Dr. Hosaka
approached her. She then heard Dr. Hosaka issue an order for someone to
call Dr. Calderon, another anesthesiologist.
ISSUE:
Whether or not the respondent doctors are negligent
RULING:
Res ipsa loquitur is a Latin phrase which literally means "the thing or
the transaction speaks for itself", for the rule that the fact of the occurrence
of an injury, taken with the surrounding circumstances, may permit an
inference or raise a presumption of negligence, or make out a plaintiff's
prima facie case, and present a question of fact for defendant to meet with
an explanation This kind of situation does not happen in the absence of
negligence of someone in the administration of anesthesia and in the use of
endotracheal tube. The instruments used in the administration of anesthesia,
including the endotracheal tube, were all under the control of private
respondents. Likewise, Ramos could not have been guilty of contributory
negligence because she was under the influence of anesthetics which
rendered her unconscious.
NOGALES VS. CAPITOL MEDICAL CENTER
GR No. 45641, December 19, 2006
Carpio, J:
FACTS:
Corazon was pregnant and she has an increase in her blood pressure
and she was admitted. Dr. Enriquez, an anesthesiologist, was notified of
Corazon’s admission. Subsequently he asked if Dr. Estrada needed his
service but the latter refused. Despite refusal he stayed to observe Corazon’s
condition. Corazon’s water bag ruptured spontaneously and started to
experience convulsions. Dr. Estrada ordered the injection of ten grams of
magnesium sulfate. However, Dr. Villaflor, who is assisting Dr. Estrada,
administered only 2.5 grams of magnesium sulfate. Dr. Estrada applied low
forceps to extract the baby. The baby came out in a weak and injured
condition and consequently had to be intubated and resuscitated. Corazon
began to manifest moderate vaginal bleeding which rapidly became profuse.
Dr. Estrada ordered blood typing and cross matching with bottled blood. Dr.
Espinola, head of the Obstetrics-Gynecology Department of the CMC, was
apprised of Corazon’s condition by telephone. Upon being informed of
Corazon’s profuse bleeding, Dr. Espinola ordered immediate hysterectomy.
Dr. Espinola, due to the inclement weather, arrived about an hour late. he
examined the patient but despite his efforts Corazon died. Petitioners filed a
case against CMC personnel and physicians on the ground that they were
negligent in the treatment and management of Corazon’s condition and
charged CMC with negligence in the selection and supervision of defendant
physicians and hospital staff. After more than 11 years the Trial Court
rendered its judgment finding Dr. Estrada solely liable for damages.
ISSUE:
Whether CMC is vicariously liable for the negligence of Dr. Estrada.
RULING:
In this case, CMC impliedly held out Dr. Estrada as a member of its
medical staff. First, CMC granted staff privileges to Dr. Estrada when it
extended its medical staff and facilities. Upon request to admit Corazon,
through its personnel, readily accommodated the patient and updated Dr.
Estrada of the patient’s condition. Second, CMC made Rogelio sign a consent
forms printed in CMC letterhead. And third, Dr. Estrada’s referral to Dr.
Espinola, who then was the Head of the Obstetrics and Gynecology
Department of CMC. Wherefore the court finds respondent Capitol Medical
Center vicariously liable for the negligence of Dr. Oscar Estrada.
DR. MILAGROS CANTRE V. SPS. JOHN DAVID AND NORA GO
G.R. NO. 160889, April 27, 2007
Quisimbing, J:
FACTS:
Nora Go gave birth to her 4th child. Two hours later, she suffered
profuse bleeding inside her womb due to some placenta parts which were
not completely expelled after delivery. She then suffered hypovolemic shock,
so her BP dropped to 40/0. Dr. Milagros Cantre, an Ob-Gyne specialist and
Nora's attending physician, together with an assisting resident physician,
performed various medical procedures to stop the bleeding and to restore
Nora's BP. While Dr. Cantre was massaging Nora's uterus for it to contract
and stop bleeding, she ordered a droplight to warm Nora and her baby. At
that time, she was unconscious.
While in the recovery room, Nora's husband John David noticed a fresh
gaping wound (2 1/2 x 3 1/2 in) in the inner portion of her left arm near the
armpit. When he asked the nurses about the cause of the injury, he was
informed that it was due to a burn. John David filed a request for
investigation. Dr. Cantre said that what caused the injury was the blood
pressure cuff. John David brought Nora to the NBI for a physical examination.
The medico-legal said that the injury appeared to be a burn and that a
droplight when placed near the skin for about 10 minutes could cause such
burn. He dismissed the likelihood that the wound was caused by a blood
pressure cuff since the scar was not around the arm, but just on one side of
the arm. Nora's injury was referred to a plastic surgeon for skin grafting.
However, her arm would never be the same--the surgery left an unsightly
scar, her movements are restricted, and the injured arm aches at the
slightest touch.
Sps. Go filed a complaint for damages against Dr. Cantre, the medical
director, and the hospital. In the RTC, parties have rested their respective
cases, but the court admitted additional exhibits [consist mostly of medical
records produced by the hospital during trial pursuant to a subpoena duces
tecum] offered by Sps. Go, which were not testified to by any witness. RTC
ruled in favor of the spouses. CA affirmed RTC with modification (complaint
dismissed with respect to the medical director and the hospital; only moral
damages awarded).
ISSUE:
Whether or not Dr. Cantre is liable for the injury suffered by Nora Go.
YES
RULING:
She promptly took care of the wound before infection set in. Since Nora was
in a critical condition at that time, saving her life became Dr. Cantre's
elemental concern. Still, her good intentions characteristics do not justify
negligence. The New Civil Code provisions applies: NCC 2176. Whoever by
act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage done. NCC 2217. Moral damages include
physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar
injury. Though incapable of pecuniary computation, moral damages may be
recovered if they are the proximate result of the defendant's wrongful act or
omission.
DR. FERNANDO P. SOLIDUM v. PEOPLE OF THE PHILIPPINES
G.R. No. 192123, March 10, 2014
Bersamin, J:
FACTS:
On June 2, 1992, Gerald Albert Gercayo (Gerald) was born with an

imperforate anus. Hence, two days after his birth, he underwentcolostomy
which enabled him to excrete through a colostomy bag attached to the side
of his body. Three years later or on May 17, 1995, he was admitted at the
Ospital ng Maynila for a pull-through operation. The surgical team consisted
of Dr. Resurreccion, Dr. Luceo, Dr. Valea, and Dr. Tibio. The anesthesiologists
included Dr. Abella, Dr. Razon and herein Petitioner Dr. Solidum. It was during
the said operation that Gerald experienced bradycardia or an abnormally
slow heart rate of less than 60 beats per minute. He subsequently went into
a coma which lasted for two weeks. When he regained consciousness after a
month, he could no longer see, hear, or move. Ma. Luz Gercayo (Luz) lodged
a complaint for reckless imprudence resulting in serious physical injuries
against the attending physicians. The RTC found Dr. Solidum guilty beyond
reasonable doubt of reckless imprudence resulting to serious physical
injuries. The CA affirmed the conviction of Dr. Solidum.
ISSUES:
Whether the CA correctly affirmed the conviction of Dr. Solidum for

criminal negligence
RULING:
The Court held that the application the doctrine of res ipsa loquitur in
the case at bar is inappropriate. The requisites for the doctrine to apply are
as follows: (1) the accident was of the kind that does not ordinarily occur
unless someone is negligent; (2) the instrumentality or agency that caused
the injury was under the exclusive control of the person charged; and (3) the
injury suffered must not have been due to any voluntary action or
contribution of the person injured. Elements 2 and 3 were present in the case
at bar. However, the first element was undeniably wanting. The Prosecution
failed to prove the existence of the elements of reckless imprudence beyond
reasonable doubt.
NILO ROSIT V. AND DR. ROLANDO G. GESTUVO,
GR NO. 210445 DECEMBER 7, 2015
Velasco Jr., :
Digested By: Erika Charmain Faye P. Rico
FACTS:
On January 15, 1999, Rosit figured in a motorcycle accident. The X-ray

soon taken the next day at the Davao Doctors Hospital (DDH) showed that he
fractured his jaw. Rosit was then referred to Dr. Gestuvo, a specialist in
mandibular injuries, who, on January 19, 1999, operated on Rosit. 1 Rollo, pp.
56-67. Penned by Associate During the operation, Dr. Gestuvo used a metal
plate fastened to the jaw with metal screws to immobilize the mandible. As
the operation required the smallest screws available, Dr. Gestuvo cut the
screws on hand to make them smaller. Dr. Gestuvo knew that there were
smaller titanium screws available in Manila, but did not so inform Rosit
supposing that the latter would not be able to afford the same.Following the
procedure, Rosit could not properly open and close his mouth and was in
pain. X-rays done on Rosit two (2) days after the operation showed that the
fracture in his jaw was aligned but the screws used on him touched his molar.
Given the X-ray results, Dr. Gestuvo referred Rosit to a dentist. The dentist
who checked Rosit, Dr. Pangan, opined that another operation is necessary
and that it is to be performed in Cebu. Alleging that the dentist told him that
the operation conducted on his mandible was improperly done, Rosit went
back to Dr. Gestuvo to demand a loan to defray the cost of the additional
operation as well as the expenses of the trip to Cebu. Dr. Gestuvo gave Rosit
₱4,500. Rosit went to Cebu on February 19, 1999, still suffering from pain
and could hardly open his mouth.
In Cebu, Dr. Pangan removed the plate and screws thus installed by Dr.
Gestuvo and replaced them with smaller titanium plate and screws. Dr.
Pangan also extracted Rosit’s molar that was hit with a screw and some bone
fragments. Three days after the operation, Rosit was able to eat and speak
well and could open and close his mouth normally.7On his return to Davao,
Rosit demanded that Dr. Gestuvo reimburse him for the cost of the operation
and the expenses he incurred in Cebu amounting to ₱140,000, as well as for
the ₱50,000 that Rosit would have to spend for the removal of the plate and
screws that Dr. Pangan installed. Dr. Gestuvo refused to pay.
ISSUE :
Whether the appellate court correctly absolved Dr. Gestuvo from liability.
RULING:
The essential requisites for the application of the doctrine of res ipsa loquitur
are present. the first essential requisite is present in this case. Anent the
second element for the res ipsa loquitur doctrine application, it is sufficient
that the operation which resulted in the screw hitting Rosit’s molar was,
indeed, performed by Dr. Gestuvo. No other doctor caused such fact. The CA
finds that Rosit is guilty of contributory negligence in having Dr. Pangan
operate on him during the healing period of his fractured mandible. What the
CA overlooked is that it was Dr. Gestuvo himself who referred Rosit to Dr.
Pangan. Nevertheless, Dr. Pangan’s participation could not have contributed
to the reality that the screw that Dr. Gestuvo installed hit Rosit’s molar.
Lastly, the third element that the injury suffered must not have been due to
any voluntary action or contribution of the person injured was satisfied in this
case. It was not shown that Rosit’s lung disease could have contributed to
the pain. What is clear is that he suffered because one of the screws that Dr.
Gestuvo installed hit Rosit’s molar.Clearly then, the res ipsa loquitur doctrine
finds application in the instant case and no expert testimony is required to
establish the negligence of defendant Dr. Gestuvo.Petitioner was deprived of
the opportunity to make an “informed consent” What is more damning for Dr.
Gestuvo is his failure to inform Rosit that such smaller screws were available
in Manila, albeit at a higher price.
CARLOS BORROMEO V. FAMILY CARE HOSPITAL

G.R. NO. 191018, JANUARY 25, 2016
Brion, J.:
Facts:
On July 13, 1999, Borromeo brought his wife to the family care hospital because she has
been complaining of acute pain at the lower stomach area and fever for two
days, she was admitted at the hospital and placed under the care of Dr. Inso. Dr. Inso
suspected that +ilian might be suering !rom acute a%%en&icitis( $oe'er, there
asinsu-cient &ata to rule out other %ossible causes an& to %rocee& ith an a%
%en&ectomy( .hus, he or&ere& +ilian/s connement !or testing an&
e'aluation( $o e'er, the tests ere not conclusi'e enough to conrm that she
ha& a%%en&icitis( +ilian abru%tly &e'elo%e& an acute surgical
ab&omen(On July 15, 1999, Dr( *nso &eci&e& to con&uct an e%loratory la%arotomy
on +ilian because o! the n&ings on her ab&omen an& his !ear that she might ha'e a
ru%ture& a%%en&i( During the o%eration, Dr( *nso conrme& that +ilian as
suering !rom acute a%%en&icitis( $e %rocee&e& to remo'e her a%%en&i hich as
alrea&y in!ecte& an& congeste& ith %us( .he o%eration as success!ul( )i hours a!
ter +ilian as brought bac  to her room, Dr( *nso as in!orme& that her
bloo& %ressure as lo ( !ter assessing her con&ition, he or&ere& the in!usion o!
more intra'enous 4* 7ui&s hich someho raise& her bloo& %ressure( )
ubse8uently, a nurse in!orme& him that +ilian as becoming restless( Dr( *nso
imme&iately ent to +ilian an& sa that she as 8uite %ale( $e imme&iately
re8ueste& a bloo& trans!usion( +ilian &i& not res%on& to the bloo&trans!
usion e'en a!ter recei'ing to 500 ccunits o! bloo&( 'entually, an
en&otracheal tube connecte& to an oygen tan as inserte& into +ilian
to ensure her airay as clear an& to com%ensate !or the lac o! circulating
oygen in her bo&y !rom the loss o! re& bloo& cells( ;e'ertheless, her
con&ition continue& to &eteriorate(t this %oint, Dr( *nso sus%ecte& that +ilian
ha& Disseminate& *ntra'ascular #oagulation 4D*#, a bloo& &isor&er
characteri<e& by blee&ing in many %arts o! her bo&y cause& by
the consum%tion or the loss o! the clotting !actors in the bloo&( $oe'er,
Dr( *nso &i& not ha'e the luury to con&uct !urther tests because the
imme&iate nee& as to resuscitate +ilian(Dr( *nso an& the nurses %er!orme&
#P= on +ilian( Dr( *nso also in!orme& her !amily that there may be a nee& to reo
%erate on her, but she oul& ha'e to be %ut in an *ntensi'e #are
>nit 4*#>( >n!ortunately, "amily #are &i& not ha'e an *#> because it as only a
secon&ary hos%ital an& as not re8uire& by the De%artment o! $ealth to ha'e
one( Dr( *nso then %ersonally coor&inate& ith the ?untinlu%a ?e&ical
#enter 4??# hich ha& an a'ailable be&( >%on reaching the ??#,
a me&ical team as on han& to resuscitate( >n!ortunately, +ilian %asse&
aay &es%ite eorts to resuscitate her( ccor&ing to the auto%sy re%ort, Dr( =eyes
conclu&e& that the cause o! +ilian/s &eath as haemorrhage &ue to blee&ing
%etechial bloo& 'essels: internal blee&ing( $e !urther conclu&e& that the internal
blee&ing as cause& by the 0(5  0(5 cm o%ening in the re%air site( $e o
%ine& that the blee&ing coul& ha'e been a'oi&e& i! the site as re%aire&
ith &ouble suturing instea& o! the single continuous suture re%air that he !
oun&(Base& on the auto%sy, the %etitioner le& a com%laint !or &amages against
"amily #are an& against Dr( *nso !or me&ical negligence(*ssue: @hether or not res
%on&ents are guilty o! me&ical negligence 4;O =uling:  me&ical %ro!essional
has the &uty to obser'e the stan&ar& o! care an& eercise the&egree o! sill,
nole&ge, an& training or&inarily e%ecte& o! other similarly traine& me&ical%ro!
essionals acting un&er the same circumstances(  breach o! the acce%te&
stan&ar& o! care constitutes negligence or mal%ractice an& ren&ers the &e!
en&ant liable !or the resultinginAury to his %atient(
MARITER MENDOZA vs. ADRIANO CASUMPANG, JENNIFER ADRIANE

AND JOHN ANDRE CASUMPANG
G.R. No. 197987, March 19, 2012
Abad., J:
FACTS:
Josephine Casumpang, who died before the trial could end, was
substituted by her respondent, husband, Adriano and their children Jennifer
and John, filed an action for damages against petitioner Dr. Mendoza in 1993
before the Regional Trial Court of Iloilo City. Josephine underwent
hysterectomy and myomectomy that Dr. Mendoza performed and after
operation, Josephine experienced recurring fever, nausea and vomiting.
Three months after the operation when she noticed something protruding
from her genital while taking a bath and she went to see Dr. Jamandre-
Guban since Dr. Mendoza was unavailable. Dr. Jamandre-Guban extracted a
foul smelling, partially expelled rolled gauze from her cervix. The RTC
rendered judgment, finding Dr. Mendoza guilty of neglect and reinstated by
the Court of Appeals, thus, prompted her to file the present petition.
ISSUE:
Whether or not there was a gross negligence on the part of the

petitioner, Dr. Mariter Mendoza. B.
RULING:
Yes, the petitioner is guilty of gross negligence. Gross negligence is a

flagrant failure to exercise the care that a reasonably
prudent person would exercise. A surgical operation is the responsibility
of surgeon performing it. He must personally ascertain that the counts of
instruments and materials used before the surgery and prior to the sewing
the patient up has been correctly done. In this kind of jurisprudence, it will
provide an example to the medical profession and to stress the need for
constant vigilance in attending to patient’s health.
CIRCUMVENTION OF THE TENOR OF OBLIGATION
PAZ P. ARRIETA AND VITALIADO ARRIETA V. NATIONAL RICE AND

CORN CORPORATION
G.R. NO. L-15645, JANUARY 31, 1964
Regala, J:
FACTS:
Paz Arrieta and Vitaliado Arrieta won on a public bidding with the
NARIC and they entered into a contract with the latter on July 1, 1952 and
obligated to deliver the 20,000 metric tons of Burmese Rice at $203.00 per
metric ton to the appellant. Due to the delay brought by the opening of the
Letter of Credit, the allocation of appellee’s supplier in Rangoon was
cancelled. The appellee endeavored, but failed, to restore the cancelled
Burmese rice allocation. When the futility of reinstating the same became
apparent the appellee offered to substitute Burmese Rice into Thailand Rice
to the defendant NARIC, communicating at the same time that the offer will
be amounted as a waiver.
ISSUE:
Whether or not the subsequent offer to substitute Thailand rice for the
originally contracted Burmese rice amounted to a waiver?
RULING:
No, because the substitution will not amount to a waiver and it is not
presumed and it must be clearly and convincingly shown either by express
stipulation or acts admitting no other reasonable explanation. There is no
such intent to waive has been established.
CATHAY PACIFIC AIRWAYS v. SPOUSES VASQUEZ

G.R. No. 150843 March 14, 2003
Davide, Jr., C.J:
FACTS:
Cathay is a common carrier engaged in transporting passenger and
goods by air. Spouses Vazquez are Gold Card Members of its Marc Polo Club.
The Spouses, with two friends and a maid went to HongKong for business.
Spouses have the Business class boarding passes and economy class for the
maid. When boarding, the ground stewardess declared a seat change from
Business class to First Class for the Vazquez. The Spouses refused but after
insistence by the stewardess, the spouses gave in. When the arrived in
Manila, spouses demanded to be indemnified in the amount of one million “
for the humiliation and embarrassment” caused by the employee. RTC ruled
for the Vazquez ordering Cathay Airways to pay the spouses, stating further
that there was a breach of contract not because of overbooking but because
the latter pushed through with the upgrading despite objections of the
spouses.
ISSUE:
Is an involuntary upgrading of an airline’s accommodation at no extra

costs cause a breach of contract of carriage?
RULING:
The Vazquezes are aware of the privileges, but such privileges may be
waived. Spouses should have been consulted first. It should not have been
imposed on them over their vehement objection. By insisting of the upgrade,
Pacific Airways breached its contract of carriage with the Vazquezes. Nominal
damages are adjudicated in order that the right of the plaintiff, which have
been violated may be vindicated or recognized and not for indemnifying the
plaintiff for any loss suffered by him.
Petition is partly granted. Court of Appeals’ decision is modified. Moral
damages deleted, nominal damages reduced to P5,000.
FORTUITOUS EVENT
VICTORIAS PLANTERS ASSOCIATION, INC. V. VICTORIAS MILLING CO.,

INC.
G.R. NO. L-6648, JULY 25, 1955
Padilla, J:
FACTS:
This is an action for declaratory judgment under Rule 66. The relief
prayed for calls for an interpretation of contracts entered into by and
between the sugar cane planters in the districts of Manapla, Cadiz and
Victorias, Occidental Negros, and the Victorias Milling Company, Inc.
ISSUE:
Whether there was a breach I the contract?
RULING:
Yes. The appellant contends that the term stipulated in the contracts is
thirty milling years and not thirty calendar years and postulates that the
planters fulfill their obligation — the six installments of their indebtedness--
which they failed to perform during the six milling years from 1941-42 to
1946-47. The reason the planters failed to deliver the sugar cane was the
war or a fortuitous event. The appellant ceased to run its mill due to the
same cause.
Fortuitous event relieves the obligor from fulfilling a contractual obligation.
The fact that the contracts make reference to "first milling" does not make
the period of thirty years one of thirty milling years. The term "first milling"
used in the contracts under consideration was for the purpose of reckoning
the thirty-year period stipulated therein. Even if the thirty-year period
provided for in the contracts be construed as milling years, the deduction or
extension of six years would not be justified. The obligee not being entitled
to demand from the obligors the performance of the latter’s' part of the
contracts under those circumstances cannot later on demand its fulfillment.
The performance of what the law has written off cannot be demanded and
required. The prayer that the plaintiffs be compelled to deliver sugar cane to
the appellant for six more years to make up for what they failed to deliver
during those trying years, the fulfillment of which was impossible, if granted,
would in effect be an extension of the term of the contracts entered into by
and between the parties.
PHILIPPINE COMMUNICATIONS SATELLITE CORP. V. GLOBE TELECOM

G.R. NO. 147324, MAY 24, 2004
Tinga, J:
Digested by: Erika Charmain faye P.
Facts:
Globe Telecom, Inc. (Globe) is engaged in the coordination of the provision of
various communication facilities for the military bases of the United States of
America (US) in the Clark Air Base and Subic Naval Base. Saud
communication facilities were installed and configured for the exclusive use
of the US Defense Communications Agency (USDCA). Globe contracted
Philippine Communications Satellite Corporation (Philcomsat) for the
provision of the communication facilities. Philcomsat and Globe entered into
an agreement whereby Philcomsat obliged itself to establish, operate and
provide an IBS Standard B earth station (earth station) for the exclusive use
of the USDCA. Globe promised to pay Philcomsat monthly rentals for each
leased circuit involved. Philcomsat installed and established the earth station
and the USDCA made use of the same. Senate passed and adopted its
resolution, expressing its decision not to concur in the ratification of the
Treaty of Friendship, Cooperation and Security and its Supplementary
Agreements that was supposed to extend the term of the use by the US of
Subic Naval Base, among others. PH government sent a Note Verbale to the
US government through the US Embassy, notifying it of the Philippine
termination of the RP-US Military Base Agreement. The withdrawal of all US
military forces from Subic Naval Base should be completed by December 31.
1992. Globe notified Philcomsat of its intention to discontinue the use of the
earth station. Philcomsat demand payment of rentals for the balance of lease
term, despite the non-use of earth station.
ISSUE:
Whether the termination of the RP-US Military Base Agreement, the non-
ratification of the Treaty of Friendship, Cooperation and Security, and the
consequent withdrawal of US military forces and personnel from Cubi Point
constitute force majeure which would exempt Globe from complying with its
obligation to pay rentals under its Agreement with Philcomsat.
RULING:
Yes. Philcomsat and Globe had no control over the non-renewal of the term of
the RP-US Military Base Agreement when the same expired in 1991, because
the prerogative to ratify the treaty extending the life thereof belonged to the
Senate. Neither did the parties have control over the subsequent withdrawal
of the US military forces and personnel from Cubi Point in December 1992.
As a consequence of the termination of the RP-US Military Base Agreement

the continued stay of all US Military forces and personnel from Subic Naval
Base would no longer be allowed, hence, plaintiff would no longer be in any
position to render service it was obligated under the Agreement.
Events made impossible the continuation of the Agreement until the end of
its five-year term without fault on the part of either party. Such fortuitous
events rendered Globe exempt from payment of rentals for the remainder of
the term of the Agreement.
Philcomsat would like to charge globe rentals for the balance of the lease
term without being any corresponding telecommunications service subject of
the lease. It will be grossly unfair and iniquitous to hold globe liable for lease
charges for a service that was not and could not have been rendered due to
an act of the government which was clearly beyond globes control.
PEDRO D. DIOQUINO V. FEDERICO, AIDA AND JUANITO LAUREANO

G.R. NO. L- 25906, MAY 28, 1970
Fernando, J:
FACTS:
Atty. Dioquino met patrol officer Federico Laureano in the MVO office in
Masbate to register his car. Laureano helped Dioquino in the facilitation of
the registration of his car. Thereby, Atty. Dioquino lent Laureano his car on a
commodatum basis but the car’s windshield was broken due to a stone
thrown by some mischievous boys. No satisfactory arrangements were made
about the damage caused on the windshield. Laureano believed that the
stone-throwing was merely accidental so he refused to file any charges
against the stone-thrower or the parents; and he also believed that he is not
liable for any damages because the incident was a force majeure.
ISSUE:
The issue is whether or not the breaking of the car’s windshield due to
the stone-throwing is a force majeure and thereby exculpating defendant
from civil liability in favor of Atty. Dioquino.
HELD:
YES, because Article 1174 of the Civil Code states that “Except in cases
expressly specified by the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation requires the assumption of
risk, no person shall be responsible for those events which could not be
foreseen, or which, though foreseen, were inevitable.” The stone-throwing
that yielded to the breaking of the windshield was clearly unforeseeable and
inevitable. Hence, Laureano cannot be compelled to pay the damages
caused on Atty. Dioquino’s car windshield.
GUILLERMO AUSTRIA V. THE COURT OF APPEALS

G.R. NO. L-29640, JUNE 10, 1971
Reyes, J.B.L., J:
FACTS:
Maria G. Abad received from Guillermo Austria one (1) pendant with
diamonds to be sold on commission basis or to be returned on demand.
Maria Abad while walking home, two men snatched her purse containing
jewelry and cash, and ran away. Thus, Abad failed to return the jewelry or
pay its value notwithstanding demands. Austria filed an action against Abad
and Abad’s husband for recovery of the pendant or of its value, and
damages. Abad raised the defense that the alleged robbery had extinguished
their obligation.
ISSUES:
Whether or not in a contract of agency (consignment of good for sole)

it is necessary that there be prior conviction for robbery before the loss of
the article shall exempt the consignee from liability for such loss.
RULING:
No. To avail of the exemption granted in the law, it is not necessary

that the persons responsible for the occurrence should be found or punished,
it would only be sufficient to establish that the enforceable event, the
robbery in this case did take place without any concurrence fault on the
debtor’s part, and this can be done by preponderance of evidence.
A court finding that a robbery has happened would not necessary

mean that those accused in the criminal action should be found guilty of the
crime; nor would a ruling that those actually accused did not commit the
robbery be inconsistent with a finding that a robbery did take place.
JIMMY CO v. COURT OF APPEALS

G.R. No. 124922, JUNE 22, 1998
Martinez, J:
FACTS:
Private respondent undertook to return the vehicle on July 21, 1990
fully serviced and supplied in accordance with the job contract. After
petitioner paid in full the repair bill in the amount of P1,397.00, private
respondent issued to him a gate pass for the release of the vehicle on said
date. But came July 21, 1990, the latter could not release the vehicle as its
battery was weak and was not yet replaced. Left with no option, petitioner
himself bought a new battery nearby and delivered it to private respondent
for installation on the same day. However, the battery was not installed and
the delivery of the car was rescheduled to July 24, 1990 or three (3) days
later. When petitioner sought to reclaim his car in the afternoon of July 24,
1990, he was told that it was carnapped earlier that morning while being
road-tested by private respondents employee along Pedro Gil and Perez
Streets in Paco, Manila. Private respondent said that the incident was
reported to the police.
ISSUE:
Whether or not a repair shop can be held liable for the loss of a
customers’ vehicle due to carnapping while the same is in its custody for
repair or other job services?
RULING:
It is a not a defense for a repair shop of motor vehicles to escape

liability simply because the damage or loss of a thing lawfully placed in its
possession was due to carnapping. Carnapping per se cannot be considered
as a fortuitous event. The fact that a thing was unlawfully and forcefully
taken from another’s rightful possession, as in cases of carnapping, does not
automatically give rise to a fortuitous event. Assuming further that there was
no delay, still working against private respondent is the legal presumption
under Article 1265 that its possession of the thing at the time it was lost was
due to its fault. This presumption is reasonable since he who has the custody
and care of the thing can easily explain the circumstances of the loss. The
vehicle owner has no duty to show that the repair shop was at fault. All that
petitioner needs to prove, as claimant, is the simple fact that private
respondent was in possession of the vehicle at the time it was lost. In this
case, private respondents possession at the time of the loss is undisputed.
Consequently, the burden shifts to the possessor who needs to present
controverting evidence sufficient enough to overcome that presumption.
Moreover, the exempting circumstances – earthquake, flood, storm or other
natural calamity – when the presumption of fault is not applicable do not
concur in this case. Accordingly, having failed to rebut the presumption and
since the case does not fall under the exceptions, private respondent is
answerable for the loss.
LEA MER INDUSTRIES INC VS MALAYAN INSURANCE CO, INC.
GR No. 161745, SEPTEMBER 30, 2005
FACTS
Ilian Silica Mining entered into a contract of carriage with the petitioner,Lea
Mer Industries Inc. for the shipment of 900 metric tons of silica sandworth
P565,000. The cargo was consigned to ulcan Industrial and Mining!
orporation and was to "e shipped from Palawan to Manila. The silica sandwas
"oarded to #ud$ II, the %essel leased "$ Lea Mer. &owe%er, during
thecourse of its %o$age, the %essel san' which led to the loss of the cargo.!
onse(uentl$, the respondent, as the insurer, paid ulcan the %alue of
thelost cargo. Mala$an Insurance !o., Inc. then collected from the
petitionerthe amount it paid to ulcan as reim"ursement and as its e)ercise
on theright of su"rogation. Lea Mer refused to pa$ which led Mala$an to
institutea complaint with the *T!. The *T! dismissed the complaint stating
that theloss was due to a fortuitous e%ent, T$phoon Trining. Petitioner
did not 'nowthat a t$phoon was coming and that it has "een cleared "$ the
Philippine!oast +uard to tra%el from Palawan to Manila. The ! re%ersed the
rulingof the trial court for the reason that said %essel was not seaworth$
when itsailed to Manila.
ISSUE
-hether or not the petitioner is lia"le for the loss of the cargo.
RULING:
!ommon carriers are "ound to o"ser%e e)traordinar$

diligence in their%igilance o%er the goods and the safet$ of the
passengers the$ transport,as re(uired "$ the nature of their "usiness and
for reasons of pu"lic polic$.:)traordinar$ diligence re(uires rendering ser%ice
with the greatest s'illand foresight to a%oid damage and destruction to the
goods entrusted forcarriage and deli%er$.
!  re % e r s e d . ! o m m o n c a rr i e r s a re p e r s o n s , c o r p o r a t i o n s ,  rm s
o r a s s o c i a t i o n s e n g a g e d i n t h e " u s i n e s s o f c a rr $ i n g o r t r a n s p o r
t i n g passengers or goods, or "oth / "$ land, water, or air / when this ser
%iceis oered to the pu"lic for compensation. Petitioner is clearl$ a
commoncarrier, "ecause it oers to the pu"lic its "usiness of transporting
goodsthrough its %essels. Thus, the !ourt corrects the trial court1s nding
thatpetitioner "ecame a pri%ate carrier when  ulcan chartered it.
ROBERT C. SICAM AND AGENCIA SICAM V. LULU JORGE ANS CESAR

JORGE
G.R. NO. 159617, AUGUST 08, 2007
Austria-Martinez, J:
Digested by: Erika Charmain faye P. Rico
FACTS:
On different dates from September to October 1987, Lulu V. Jorge
pawned several pieces of jewelry with Agencia de R. C. Sicam located at No.
17 Aguirre Ave., BF Homes Parañaque, Metro Manila, to secure a loan in the
total amount of P59, 500.00. On October 19, 1987, two armed men entered
the pawnshop and took away whatever cash and jewelry were found inside
the pawnshop vault. Petitioner Sicam sent respondent Lulu a letter dated
October 19, 1987 informing her of the loss of her jewelry due to the robbery
incident in the pawnshop. On November 2, 1987, respondent Lulu then wrote
a letter to petitioner Sicam expressing disbelief stating that when the
robbery happened, all jewelry pawned were deposited with Far East Bank
near the pawnshop since it had been the practice that before they could
withdraw, advance notice must be given to the pawnshop so it could
withdraw the jewelry from the bank. Respondent Lulu then requested
petitioner Sicam to prepare the pawned jewelry for withdrawal on November
6, 1987 but petitioner Sicam failed to return the jewelry.
On September 28, 1988, respondent Lulu joined by her husband, Cesar
Jorge, filed a complaint against petitioner Sicam with the Regional Trial Court
of Makati seeking indemnification for the loss of pawned jewelry and
payment of actual, moral and exemplary damages as well as attorney's fees.
However, petitioner Sicam contends that he is not the real party-in-interest
as the pawnshop was incorporated on April 20, 1987 and known as Agencia
de R.C. Sicam, Inc; that petitioner corporation had exercised due care and
diligence in the safekeeping of the articles pledged with it and could not be
made liable for an event that is fortuitous. After trial ,the RTC rendered its
Decision dismissing respondents’ complaint as well as petitioners’
counterclaim. The RTC held that robbery is a fortuitous event which exempts
the victim from liability for the loss and under Art. 1174 of the Civil Code. It
further held that the corresponding diligence required of a pawnshop is that
it should take steps to secure and protect the pledged items and should take
steps to insure itself against the loss of articles which are entrusted to its
custody as it derives earnings from the pawnshop trade which petitioners
failed to do and that robberies and hold-ups are foreseeable risks in that
those engaged in the pawnshop business are expected to foresee.
ISSUE:
Whether petitioners are liable for the loss of the pawned articles in
their possession.
RULING:
Fortuitous events by definition are extraordinary events not

foreseeable or avoidable. It is therefore, not enough that the event should
not have been foreseen or anticipated, as is commonly believed but it must
be one impossible to foresee or to avoid. The mere difficulty to foresee the
happening is not impossibility to foresee the same. To constitute a fortuitous
event, the following elements must concur: (a) the cause of the unforeseen
and unexpected occurrence or of the failure of the debtor to comply with
obligations must be independent of human will; (b) it must be impossible to
foresee the event that constitutes the caso fortuito or, if it can be foreseen, it
must be impossible to avoid; (c) the occurrence must be such as to render it
impossible for the debtor to fulfill obligations in a normal manner; and, (d)
the obligor must be free from any participation in the aggravation of the
injury or loss.
PHILIPPINE REALTY AND HOLDINGS CORP. V. LEY CONSTRUCTION

AND DEVELOPMENT
G.R. NO. 165548, JUNE 13, 2011
Sereno, J:
FACTS:
Sometime between April 1988 and October 1989, the two corporations
entered into four major construction projects, as evidenced by four duly
notarized "construction agreements." These were the four construction
projects the parties entered into involving a Project 1, Project 2, Project 3 (all
of which involve the Alexandra buildings) and a Tektite Building. LCDC
committed itself to the construction of the buildings needed by PRHC, which
in turn committed itself to pay the contract price agreed upon. Both parties
agreed to enter into another agreement. Abcede asked LCDC to advance the
amount necessary to complete construction. Its president acceded, on the
absolute condition that it be allowed to escalate the contract price. Abcede
replied that he would take this matter up with the board of directors of
PRHC.The board of directors turned down the request for an escalation
agreement. However, On 9 August 1991 Abcede sent a formal letter to LCDC,
asking for its conformity, to the effect that should it infuse P36 million into
the project, a contract price escalation for the same amount would be
granted in its favor by PRHC.
ISSUE:
Whether or not there is a fortuitous event in the case at bar.
RULING:
YES. Under Article 1174 of the Civil Code, to exempt the obligor from
liability for a breach of an obligation due to an "act of God" or force majeure,
the following must concur:
(a) the cause of the breach of the obligation must be independent of the will
of the debtor; (b) the event must be either unforseeable or unavoidable; (c)
the event must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner; and (d) the debtor must be free from any
participation in, or aggravation of the injury to the creditor. The shortage in
supplies and cement may be characterized as force majeure.64 In the
present case, hardware stores did not have enough cement available in their
supplies or stocks at the time of the construction in the 1990s. Likewise,
typhoons, power failures and interruptions of water supply all clearly fall
under force majeure. Since LCDC could not possibly continue constructing
the building under the circumstances prevailing, it cannot be held liable for
any delay that resulted from the causes aforementioned.
JUAN F. NAKPIL & SONS V. COURT OF APPEALS
G.R. NO. L-47851, OCTOBER 3, 1986
Paras, J.:
FACTS:
The private respondent (Philippine Bar Association) hired the services

of the petitioner to make the plans and specifications for the construction of
their office building. The building was completed by the contractor but
subsequently, an earthquake struck causing its partial collapse and damage.
ISSUE:
Is the petitioner liable for damages in this case?
RULING:
Yes. The petitioner made substantial deviations from the plans and
specifications and failed to observe requisite workmanship standards in the
construction of the building while their architect drew plans that contain
defects and other inadequacies. Both the contractor and the architect cannot
escape liability for damages when the building collapsed due to an
earthquake. Other buildings in the area withstood the tremor. The lower
court also found that the spirals in one of the columns in the ground floor has
been cut. One who creates a dangerous condition cannot escape liability
even if an act of God may have intervened as in this case. As such, the
liability of the contractor (herein petitioner) and the architect for the collapse
of the building is solidary.
VASQUEZ V. COURT OF APPEALS
G.R. NO. L-42926, SEPTEMBER 13, 1985
Melancio-Herrera, J:

FACTS:
MV 'Pioneer Cebu' was owned and operated by the defendant and used
in the transportation of goods and passengers in the interisland shipping. It
had a passenger capacity of three hundred twenty-two including the crew. It
undertook the said voyage on a special permit issued by the Collector of
Customs inasmuch as, upon inspection, it was found to be without an
emergency electrical power system. The special permit authorized the vessel
to carry only two hundred sixty passengers due to the said deficiency and for
lack of safety devices for 322 passengers. A headcount was made of the
passengers on board, resulting on the tallying of 168 adults and 20 minors,
although the passengers manifest only listed 106 passengers. It has been
admitted, however, that the headcount is not reliable. When the vessel left
Manila, its officers were already aware of the typhoon Klaring building up
somewhere in Mindanao. Plaintiffs seek the recovery of damages due to the
loss of Alfonso Vasquez, Filipinas Bagaipo and Mario Marlon Vasquez during
said voyage.
ISSUE:
Whether or not the respondent would be exempt from responsibility

due to its defense of fortuitous event.
RULING:
To constitute a caso fortuito that would exempt a person from

responsibility, it is necessary that (1) the event must be independent of the
human will; (2) the occurrence must render it impossible for the debtor to
fulfill the obligation in a normal manner; and that (3) the obligor must be free
of participation in, or aggravation of, the injury to the creditor. The event
must have been impossible to foresee, or if it could be foreseen, must have
been impossible to avoid. There must be an entire exclusion of human
agency from the cause of injury or loss. Under the circumstances, while,
indeed, the typhoon was an inevitable occurrence, yet, having been kept
posted on the course of the typhoon by weather bulletins at intervals of six
hours, the captain and crew were well aware of the risk they were taking as
they hopped from island to island from Romblon up to Tanguingui. They held
frequent conferences, and oblivious of the utmost diligence required of very
cautious persons, they decided to take a calculated risk. In so doing, they
failed to observe that extraordinary diligence required of them explicitly by
law for the safety of the passengers transported by them with due regard for
all circumstances and unnecessarily exposed the vessel and passengers to
the tragic mishap. They failed to overcome that presumption of fault or
negligence that arises in cases of death or injuries to passengers.
MEGAWORLD GLOBUS ASIA, INC. V. TANSECO
G.R. NO. 181206, OCTOBER 09, 2009
Carpio-Morales, J:
FACTS:
On July 7, 1995, petitioner Megaworld Globus Asia, Inc. (Megaworld)

and respondent Mila S. Tanseco (Tanseco) entered into a Contract to Buy and
Sell1 a 224 square-meter (more or less) condominium unit at a pre-selling
project. The purchase price was P16,802,037.32, to be paid as follows: (1)
30% less the reservation fee of P100,000, or P4,940,611.19, by postdated
check payable on July 14, 1995; (2) P9,241,120.50 through 30 equal monthly
installments of P308,037.35 from August 14, 1995 to January 14, 1998; and
(3) the balance of P2,520,305.63 on October 31, 1998, the stipulated
delivery date of the unit; provided that if the construction is completed
earlier, Tanseco would pay the balance within seven days from receipt of a
notice of turnover. Tanseco paid all installments due up to January, 1998,
leaving unpaid the balance of P2,520,305.63 pending delivery of the unit.
Megaworld, however, failed to deliver the unit within the stipulated period on
October 31, 1998 or April 30, 1999, the last day of the six-month grace
period.A few days shy of three years later, Megaworld, by notice dated April
23, 2002 (notice of turnover), informed Tanseco that the unit was ready for
inspection preparatory to delivery. Tanseco replied through counsel, by letter
of May 6, 2002, that in view of Megaworld’s failure to deliver the unit on
time, she was demanding the return of P14,281,731.70 representing the total
installment payment she had made, with interest at 12% per annum from
April 30, 1999, the expiration of the six-month grace period. Tanseco pointed
out that none of the excepted causes of delay existed.
ISSUE:
Whether or not there was a fortuitous event in the case at bar
RULING:
The Contract to Buy and Sell of the parties contains reciprocal obligations,
i.e., to complete and deliver the condominium unit on October 31, 1998 or
six months thereafter on the part of Megaworld, and to pay the balance of
the purchase price at or about the time of delivery on the part of Tanseco.
Compliance by Megaworld with its obligation is determinative of compliance
by Tanseco with her obligation to pay the balance of the purchase price.
Megaworld having failed to comply with its obligation under the contract, it is
liable therefor.
That Megaworld’s sending of a notice of turnover preceded Tanseco’s

demand for refund does not abate her cause. For demand would have been
useless, Megaworld admittedly having failed in its obligation to deliver the
unit on the agreed date. A real estate enterprise engaged in the pre-selling
of condominium units is concededly a master in projections on commodities
and currency movements, as well as business risks. The fluctuating
movement of the Philippine peso in the foreign exchange market is an
everyday occurrence, hence, not an instance of caso fortuito. Megaworld’s
excuse for its delay does not thus lie.
METRO CONCAST STEEL CORP., SPOUSES JOSE S. DYCHIAO AND

TIU OH YAN, ET AL. V. ALLIED BANK CORPORATION.
G.R. NO. 177921, DECEMBER 04, 2013
Perlas-Bernabe, J:
FACTS:
On various dates and for different amounts, Metro Concast through its
officers, obtained severalloans from Allied Bank.Petitioners failed to settle
their obligations. Allied Bank, through counsel, sent them
demandletters, all dated December 10, 1998, seeking payment of the total
amount of P51,064,093.62, butto no avail. Thus, Allied Bank was prompted
to file a complaint for collection of sum of moneyagainst petitioners before
the RTC. Metro Concast already ceased its business due to some
reason. Hence, in order to settle theirdebts with Allied Bank, they offered
the sale of Metro Concast’s remaining assets to Allied Bank,which the latter,
however, refused.Peakstar Oil Corporation, expressed interest in buying
the scrap metal. During the negotiationswith Peakstar, petitioners claimed
Atty. Saw, a member of Allied Bank’s legal department, actedas the latter’s
agent.A Memorandum of Agreement, through Atty. Saw, was drawn
between Metro Concast, represented by petitioner Jose Dychiao, and
Peakstar under which Peakstar obligated itself topurchase the scrap
metal. Unfortunately, Peakstar reneged on all its obligations under the MOA.
ISSUE:
Whether or not the loan obligations incurred by the petitioners under

the subject promissory noteand various trust receipts have already been
extinguished.
RULING:
No, Article 1231 of the Civil Code states that obligations are
extinguished either by payment orperformance, the loss of the thing due,
the condonation or remission of the debt, the confusion ormerger of the
rights of creditor and debtor, compensation or novation.Absent any showing
that the terms and conditions of the latter transactions have been, in
anyway, modifi ed or novated by the terms and conditions in the MoA,
said contracts should betreated separately and distinctly from each
other, such that the existence, performance or breachof one would not
depend on the existence, performance or breach of the other.
BERNALES V. NORTHWEST AIRLINES

G.R. NO. 182395, OCTOBER 05, 2015
Brion, J:
FACTS:
The petitioner Marito T. Bernales and several other prominent personalities

from Bicol were on their way to Honolulu, Hawaii, as the delegates of a trade
and tourism mission for the province. They were economy class passengers
of Northwest Airlines Flight No. 10 from Manila to Honolulu via Narita, Japan.
At around 6:00 p.m., a typhoon hit Japan, leading to the cancellation of most
flights, including NWA Flight No. 10. However, NWA did not cancel Flight No.
22, also bound for Honolulu later that night, to minimize delays and to
accommodate stranded passengers in case the typhoon would subside. The
delegates opted to be wait-listed for Flight No. 22. The passengers of Flight
22 were called for boarding at around 11:00 p.m. and the delegates boarded
the shuttle taking them to the airplane. But before the shuttle bus could
leave, NWA Customer Service Agent Tsuruki Ohashi entered the shuttle and
informed the petitioner that he could not take Flight 22 as no available seat
was left for him. Because of the incident, the other delegates refused to
board the airplane unless the petitioner was physically brought to them at
the tarmac. Unfortunately, Flight No. 22 failed to depart in time to beat the
Narita curfew and there was a delay.
ISSUE:
Whether or not the respondent is liable for breach of contract resulting

from a fortuitous event.
RULING:
The arrival of Typhoon Higos was an extraordinary and unavoidable
event. Its occurrence made it impossible for NWA to bring the petitioner to
Honolulu in time for his commitments. We cannot hold the respondent liable
for a breach of contract resulting from a fortuitous event. Moreover, we find
that NWA did not act in bad faith or in a wanton, fraudulent, reckless, or
oppressive manner. On the contrary, it exerted its best efforts to
accommodate the petitioner on Flight No. 22 and to lessen the petitioner's
discomfort when he and the other passengers were left to pass the night at
the terminal.
ENFORCEMENT OF CREDITOR’S REMEDIES
ADORABLE V. COURT OF APPEALS

G.R. NO. 119466, NOVEMBER 25, 1999
Mendoza, J:
FACTS:
Saturnino Bareng own 2 lot No. 661-D-5A with area 20,000 sq mtr and
lot No. 661 with area 1,062sq mtr. he and his son Francisco Bareng loan from
petitioner adorable the amoun&ng 26* +esos and in return
the will trans$er the +ossession and $ruit o$ lot No. 661-. Saturnino
Bareng sold to his son #rancisco
Bareng 1,500 sqr mtr $rom lot 661-D-A and his son sold to ose /amos a
+or&on ',000 sq mtr) o$ lot No
661-D-5A. Bareng $ailed to +a their inde(tedness amoun&ng to 56,5
+esos to the %e&&oner.
%e&&oner learned the contract (etween #ranscisco Bareng and ose
/amos. he %e&&oner led
annulment o$ contract (etween Bareng and /amos, howe3er on the said
hearing date the %e&&oner is
a(sent.
ISSUES:
'1) 4hether or not the %e&&oner has legal right to annul the contract
(etween #rancisco Bareng and
 ose /amos
'2) 4hether or not the A erred in sustaining the decision o$ the lower court
on the lac* o$ cause o$
ac&on.
E!":
'1) he %e&&oner has no legal right to annul the contract (etween
#rancisco Bareng and ose /amos due
to none +ament o$ the loan to the +e&&oner. he %e&&oner must ehaust
all legal means $or Bareng to
+aid the de(t since Bareng has other +ro+ert or other means to +a the
said loan to the %e&&oner. he
lesses ' %e&&oner) has +ersonal right (ut not real right there$ore the lot is
not su(7ect $or +ament
unless it is the onl +ro+ert remained to the de$endant.
'2) he A has no error in sustaining the decision o$ the lower court since
the +e&&oner does not a++ear
in the said date o$ hearing, thus the %e&&oner wa3e his right to +resent
e3idence and cross eamine (
the de$endant council that resulted to the decision o$ the the lower court to
dismiss n case $or lac* o$
cause o$ ac&on.
MARIMPERIO COMPANIA NAVIERA, S.A V. COURT OF APPEALS
G.R. NO. L-40234, DECEMBER 14, 1987
Paras, J:
FACTS:
In 1964 Philippine Traders Corporation and Union Import and Export

Corporation entered into a joint business venture for the purchase of copra
from Indonesia for sale in Europe. James Liu President and General Manager
of the Union took charge of the European market and the chartering of a
vessel to take the copra to Europe. Peter Yap of Philippine on the other hand,
found one P.T. Karkam in Dumai Sumatra who had around 4,000 tons of copra
for sale. Exequiel Toeg of Interocean was commissioned to look for a vessel
and he found the vessel "SS Paxoi" of Marimperio available. Philippine and
Union authorized Toeg to negotiate for its charter but with instructions to
keep confidential the fact that they are the real charterers. Consequently on
March 21, 1965, in London England, a "Uniform Time Charter" for the hire of
vessel "Paxoi" was entered into by the owner, Marimperio Compania Naviera,
S.A. through its agents N. & J. Vlassopulos Ltd. and Matthews Wrightson,
Burbridge, Ltd. to be referred to simply as Matthews, representing Interocean
Shipping Corporation, which was made to appear as charterer, although it
merely acted in behalf of the real charterers, private respondents herein. The
Charterer was however twice in default in its payments which were supposed
to have been done in advance.
ISSUE:
Whether or not the default of Charterer in the payment of the charter

hire within the time agreed upon gives petitioner a right to rescind the
charter party extra judicially.
RULING:
The answer to the question of whether or not the default of charterer in

the payment of the charter hire within the time agreed upon gives petitioner
a right to rescind the charter party extrajudicially, is undoubtedly in the
affirmative. Clause 6 of the Charter party specifically provides that the
petitioner has the right to withdraw the vessel fromthe service of the
charterers, without noting any protest and without interference of any court
or any formality in the event that the charterer defaults in the payment of
hire. The payment of hire was to be made every fifteen (1 5) days in
advance. The question that now arises is whether or not petitioner can
rescind the charter party extra-judicially. The answer is also in the
affirmative. A contract is the law between the contracting parties, and when
there is nothing in it which is contrary to law, morals, good customs, public
policy or public order, the validity of the contract must be sustained.
METROPOLITAN BANK AND TRUST COMPANY V. INTERNATIONAL
EXCHANGE BANK
G.R. NO. 176008, AUGUST 10, 2011
Peralta, J:
FACTS:
Sacramento Steel Corporation (SSC) is a Steel manufacturing and

producing corporation. SSC entered into a Credit Agreement with
International Exchange Bank (IEB) and as security for its loan obligations, the
former executed five separate deeds of chattel mortgage.SSC defaulted in
the payment of its obligations, where subsequently, IEB filed a petition for
extrajudicial foreclosure of chattel mortgage.Meanwhile, while the case were
still pending between SSC and IEB, petitioner METROBANK filed a motion
contending that it has legal interest in the properties subject of the litigation
between IEB and SSC because it is a creditor of SSC and that the mortgage
contracts between IEB and SSC were entered into to defraud the latter’s
creditors. Metrobank prayed for the rescission of the chattel mortgages
executed by SSC in favor of IEB.
ISSUE:
Whether the chattel mortgages executed by SSC in favor of IEB may be
rescinded.
RULING:
It is thus apparent that an action to rescind, or an accion pauliana, must be
of last resort.Without availing of the first and second remedies, Metrobank
simply undertook the third measure and filed an action for annulment of the
chattel mortgages. Rescission can only be availed of in the absence of any
other legal remedy to obtain reparation for the injury. This fact is not present
in this case. No evidence was presented nor even an allegation was offered
to show that Metrobank had availed of the abovementioned remedies before
it tried to question the validity of the contracts of chattel mortgage between
IEB and SSC.
KHE HONG CHENG V. COURT OF APPEALS
G.R. NO. 144169, MARCH 28, 2001
Kapunan, J:
FACTS:
Petitioner Khe Hong Cheng is the owner of Butuan Shipping Lines. On

or about October 4, 1985, the Philippine Agricultural Trading Corporation
shipped on board the vessel M/V Prince Eric, owned by petitioner, 3,400 bags
of copra at Masbate, Masbate, for delivery to Dipolog City, Zamboanga del
Norte. The said shipment was covered by a marine insurance policy issued
by American Home Insurance Company (respondent Philam’s assured). M/V
Prince Eric sank somewhere between Negros Island and Northeastern
Mindanao, resulting in the total loss of the shipment. Because of the loss, the
insurer, American Home, paid the amount of P354,000, which was the
equivalent value of the copra, to the consignee. Having been subrogated into
the rights of the consignee, American Home instituted a civil case to recover
the money paid to the consignee, based on breach of contract of carriage.
While the case was still pending, petitioner Khe Hong Cheng executed deeds
of donations of parcels of land in favor of his children, co-petitioners Sandra
Joy and Ray Steven. Despite earnest efforts, the sheriff found no property
under the name of Butuan Shipping Lines and/or petitioner Khe Hong Cheng
to levy or garnish for the satisfaction of the trial court’s decision. When the
sheriff, accompanied by counsel of respondent Philam, went to Butuan City,
however, they discovered that petitioner no longer had any property and
that he had conveyed the subject properties to his children.
ISSUE:
Has the action to rescind the donations prescribed?
HELD:
No. Respondent Philam only learned about the unlawful conveyances
made by petitioner Khe Hong Cheng in January 1997 when its counsel
accompanied the sheriff to Butuan City to attach the properties of petitioner
Khe Hong Cheng. There they found that he no longer had any properties in
his name. It was only then that respondent Philam’s action for rescission of
the deeds of donation accrued because then it could be said that respondent
Philam had exhausted all legal means to satisfy the trial court’s judgment in
its favor. Since respondent Philam filed its complaint for accion pauliana
against petitioners barely a month from its discovery that petitioner Khe
Hong Cheng had no other property to satisfy the judgment award against
him, its action for rescission of the subject deeds clearly had not yet
prescribed.
TRANSMISSIBILITY OF RIGHTS
ESTATE OF HEMADY V. LUZON SURETY CO., INC

100 PHIL 388, NOVEMBER 28, 1956
Reyes, J.B.L., J:
FACTS:
Luzon Surety filed a claim against the estate of K.H. Hemady based on
indemnity agreements (counterbonds) subscribed by distinct principals and
by the deceased K.H. Hemady as surety (solidary guarantor). As a contingent
claim, Luzon Surety prayed for the allowance of the alue of the indemnity
agreements it had e!ecuted. "he lower court dismissed the claim of Luzon
Surety on the ground that #whateer losses may occur after Hemady$s
death, are not chargeable to his estate, because upon his death he ceased to
be a guarantor.%
iSSUE:
&hat obligations are transmissible upon the death of the decedent' Are
contingent claims chargeable against the estate'
RULING:
nder the present iil ode (Article *+**), the rule is that #ontracts tae
effect only as between the parties, their assigns and heirs, e!cept in case
where the rights and obligations arising from the contract are not
transmissible by their nature, or by stipulation or by proision of law.%
&hile in our successional system the responsibility of the heirs for the debts
of their decedent cannot e!ceed the alue of the inheritance they
receie from him, the principle remains intact that these heirs succeed not
only to the rights of the deceased but also to his obligations. Articles -- and
--/ of the 0ew iil ode e!pressly so proide, thereby confirming Article
*+**.1n 2o3ica . 4ernandez, the Supreme ourt ruled 5 #nder the iil
ode the heirs, by irtue of the rights of succession are subrogated to
all the rights and obligations of the deceased (Article //*) and can not be
regarded as third parties with respect to a contract to which the deceased
was a party, touching the estate of the deceased ! ! ! which comes in to their
hands by right of inheritance6 they tae such property sub3ect to all
the obligations resting thereon in the hands of him from whom they derie
their rights.% "he third e!ception to the transmissibility of obligations
under Article *+** e!ists when they are 7
not transmissible by operation of law.’
"he proision maes reference to those cases where the law e!presses
thatthe rights or obligations are e!tinguished by death, as is the case in legal
support, parental authority, usufruct, contracts for a piece
of wor, partnership and agency. 8y contrast, the articles of the iil ode
that regulate guaranty or suretyship contain no proision that the guaranty
is e!tinguished upon the death of the guarantor or the surety."he contracts of
suretyship in faor of Luzon Surety o. not being rendered intransmissible
due to the nature of the undertaing, nor by stipulations of the contracts
themseles, nor by proision of law, his eentual liability therefrom
necessarily passed upon his death to his heirs. "he contracts, therefore, gie
rise to contingent claims proable against his estate. A contingent liability of
a deceased person is part and parcel of the mass of obligations that must be
paid if and when the contingent liability is conerted into a real liability.
"herefore, the settlement or final li9uidation of the estate must be deferred
until such time as the bonded indebtedness is paid.
SAN AGUSTIN V. COURT OF APPEALS
371 SCRA 348, DECEMBER 04, 2001
Quisimbing, J:
FACTS:
The GSIS sold to a certain Macaria, a parcel of residential land of the

GSIS Low Cost Housing Project. The sale is evidenced by a Deed of Absolute
Sale, which was, however, subject to certain encumbrances. A day after the
issuance of the TCT, Macaria sold the subject lot to private respondent as
evidenced by a Deed of Absolute Sale. This deed was notarized but was not
registered immediately upon its execution in because GSIS prohibited him
from registering the same in view of the five-year prohibition to sell.
Sometime in 1979, for being suspected as a subversive, an ASSO was issued
against private respondent. Upon learning that he was wanted by the
military, he voluntarily surrendered and was detained and eventually
released.
Subsequently, he discovered that the subject TCT was missing. An Affidavit
of Loss was filed with the Register of Deeds of Pasig and a certified copy of
TCT was issued to him. Respondent then filed a petition with the RTC for the
issuance of owners duplicate copy of TCT to replace the lost one. To show he
was the owner of the contested lot, he presented the Deed of Absolute Sale.
During the hearing, the Register of Deeds was not served notice, and the
Office of the Solicitor General and the Provincial Prosecutor who were notified
did not attend. There being no opposition, the trial court granted his petition.
Subsequently, petitioner received a copy of the decision. Claiming that he
was the present occupant of the property and the heir of Macaria, he filed his
Motion to Reopen Reconstitution Proceedings. The RTC and CA denied the
same, hence this petition.
ISSUE:
Whether the petitioner is entitled to notice?
RULING:
No. Consequently, it is sufficient that the notice, under Section 109 of

PD 1529, is sent to the Register of Deeds and to those persons who are
known to have, or appear to have, an interest in the property as shown in the
Memorandum of encumbrances at the back of the original or transfer
certificate of title on file in the office of the Register of Deeds. From a legal
standpoint, there are no other interested parties who should be notified,
except those mentioned since they are the only ones who may be deemed to
have a claim to the property involved. A person dealing with registered
property is not charged with notice of encumbrances not annotated on the
back of the title. Here, petitioner does not appear to have an interest in the
property based on the memorandum of encumbrances annotated at the back
of the title. His claim that he is an heir (nephew) of the original owner of the
lot covered by the disputed lot and the present occupant is not annotated in
the said memorandum of encumbrances. Neither was his claim entered on
the Certificate of Titles in the name of their original/former owners on file
with the Register of Deeds at the time of the filing or pendency of the land
registration case. Clearly, petitioner is not entitled to notice. The fact that
respondent complied with the order of publication of the petition in a
newspaper of general circulation, such is sufficient notice of the petition to
the public at large.
PROJECT BUILDERS, INC., V. COURT OF APPEALS
G.R. NO. 99433, JUNE 19, 2001
Vitug, J:
FACTS:
This collection suit was filed by IFC against petitioners, arising from an
alleged deficiency of P1,323,053.08, after the extrajudicial foreclosure of the
real estate mortgage. The petitioners deny liability and in their answer they
allege that respondent has no cause or right of action because the obligation
is already fully paid out of the proceeds of foreclosure sale of petitioners’
property. Further, they alleged that a proper accounting of the transaction
between the parties will show that it is the private respondent who is liable
to the petitioners.
ISSUE:
Whether the petitioners should still answer for any deficiency after the
mortgage with which they guaranty the collection of the assigned credit, had
been foreclosed?
RULING:
Yes. An assignment of credit is an act of transferring, either onerously

or gratuitously, the right of an assignor to an assignee who would then be
capable of proceeding against the debtor for enforcement or satisfaction of
the credit. The transfer of rights takes place upon perfection of the contract
and ownership of the right, including all appurtenant accessory rights, is
thereupon acquired by the assignee. The assignment binds the debtor only
upon acquiring knowledge of the assignment but he is entitled, even then, to
raise against the assignee the same defenses he could set up against the
assignor. Where the assignment is on account of pure liberality on the part of
the assignor, the rules on donation would likewise be pertinent; where
valuable consideration is involved, the assignment partakes of the nature of
a contract of sale or purchase. Upon an assignment of a contract to sell, the
assignee is effectively subrogated in place of the assignor and in a position
to enforce the contract to sell to the same extent as the assignor could. The
assignment was with recourse, and default in the payment of installments
had been duly established when petitioner corporation foreclosed on the
mortgaged parcels of land. The resort to foreclosure of the mortgaged
properties did not preclude private respondent from collecting interest from
the assigned Contracts To Sell from the time of foreclosure to the redemption
of the foreclosed property. The imposition of interest was a mere
enforcement or exercise of the right to the ownership of the credit or
receivables which the parties stipulated in the financing agreement.
UNION BANK OF THE PHILIPPINES V. SANTIBANEZ

G.R. NO. 149926, FEBRUARY 23, 2005
Callejo, Sr., J:
FACTS:
FCCC and Santibaez entered into a loan agreement to which the latter
together with his son, executed a promissory note in favor of the FCCC.
Subsequently, the parties entered into another loan agreement, to wit they
also executed another promissory note and a Continuing Guaranty
Agreement for the loan. Both loans were used to buy 2 tractors.
Subsequently, however, Efraim died, leaving a holographic will. After the
testate proceedings, it was agreed that the two children of Santibanez will
divide the tractors among them such that each of them was to assume the
indebtedness of their late father to FCCC, corresponding to the tractor
respectively taken by them.
Subsequently, FCC assigned all its assets and liabilities to the petitioner.
Demand letters for the settlement of his account were sent by petitioner but
the respondent failed to heed the same and refused to pay.
ISSUE:
Whether the heirs’ assumption of the indebtedness of the deceased is
valid?
RULING:
No. Perusing the joint agreement, it provides that the heirs as parties
thereto have agreed to divide between themselves and take possession and
use the above-described chattel and each of them to assume the
indebtedness corresponding to the chattel taken as herein after stated which
is in favor of First Countryside Credit Corp. The assumption of liability was
conditioned upon the happening of an event, that is, that each heir shall take
possession and use of their respective share under the agreement. It was
made dependent on the validity of the partition, and that they were to
assume the indebtedness corresponding to the chattel that they were each
to receive. The partition being invalid as earlier discussed, the heirs in effect
did not receive any such tractor. It follows then that the assumption of
liability cannot be given any force and effect. Also, it had not been
sufficiently shown that petitioner is the successor-in-interest of the Union
Savings and Mortgage Bank to which the FCCC assigned its assets and
liabilities.
WILLIAM GENATO V. JESUSITA BAYHON

G.R. NO. 171035, AUGUST 24, 2009
Puno, C.J.:
FACTS:
Respondent filed an action before the RTC seeking for the nullification
of a dacion en pago allegedly executed by respondent Bayhon in favor of
petitioner. Allegedly, the former obtained from the petitioner a loan; that to
cover the loan, he executed a Deed of Real Estate Mortgage over a property;
that, however, the execution of the Deed of Real Estate Mortgage was
conditioned upon the personal assurance of the petitioner that the said
instrument is only a private memorandum of indebtedness and that it would
neither be notarized nor enforced according to its tenor. Respondent also
assailed the dacion en pago as a forgery alleging that neither he nor his wife,
who had died 3 years earlier, had executed it. The petitioner however
alleged that on the date that the real estate mortgage was to be signed,
respondent introduced to him a woman as his wife who signed the dacion en
pago. While the case was pending in the CA, respondent Bayhon died.
ISSUE:
Whether the obligation of Respondent Bayhon is transmissible to his

heirs?
RULING:
No. As a general rule, obligations derived from a contract are

transmissible. The loan in this case was contracted by respondent. He died
while the case was pending before the Court of Appeals. While he may no
longer be compelled to pay the loan, the debt subsists against his estate. No
property or portion of the inheritance may be transmitted to his heirs unless
the debt has first been satisfied. Notably, throughout the appellate stage of
this case, the estate has been amply represented by the heirs of the
deceased, who are also his co-parties. The procedure in vindicating monetary
claims involving a defendant who dies before final judgment is to file a claim
against the estate of the deceased respondent.
USURIUS TRANSACTIONS
ANGEL JOSE WAREHOUSING CO., INC., V. CHELDA ENTERPRISES

G.R. NO. L-25704, APRIL 24, 1968
Bengzon, J.P., J:
FACTS:
Plaintiff corporation filed suit in the Court of First Instance of Manila on

May 29, 1964 against the partnership Chelda Enterprises and David Syjueco,
its capitalist partner, for recovery of alleged unpaid loans in the total amount
of P20,880.00, with legal interest from the filing of the complaint, plus
attorney’s fees of P5,000.00. Alleging that post dated checks issued by
defendants to pay said account were dishonored, that defendants’ industrial
partner, Chellaram I. Mohinani, had left the country, and that defendants
have removed or disposed of their property, or are about to do so, with intent
to defraud their creditors, preliminary attachment was also sought.
Answering, defendants averred that they obtained four loans from plaintiff in
the total amount of P26,500.00, of which P5,620.00 had been paid, leaving a
balance of P20,880.00; that plaintiff charged and deducted from the loan
usurious interests thereon, at rates of 2% and 2.5% per month, and,
consequently, plaintiff has no cause of action against defendants and should
not be permitted to recover under the law. A counterclaim for P2,000.00
attorney’s fees was interposed.
ISSUE
Whether or not the illegal terms as to payment of interest likewise
renders a nullity the legal terms as to payments of the principal debt.
RULING:
Article 1420 of the New Civil Code provides in this regard: “In case of a
divisible contract, if the illegal terms can be separated from the legal ones,
the latter may be enforced.”In simple loan with stipulation of usurious
interest, the prestation of the debtor to pay the principal debt, which is the
cause of the contract (Article 1350, Civil Code), is not illegal. The illegality
lies only as to the prestation to pay the stipulated interest; hence,
being separable, the latter only should be deemed void, since it is
the only one that is illegal.
SECURITY BANK AND TRUST COMPANY V. REGIONAL TRIAL COURT

G.R. NO. 113926, OCTOBER 23, 1996
Hermosisima Jr., J:
FACTS:
On April 27, 1983, private respondent Magtanggol Eusebio executed 3

Promissory Notes from different dates in favor of petitioner Security Bank
and Trust Co. (SBTC) in the amounts of 100,000, 100,000, and 65,000.
Respondent bound himself to pay the said amounts in six (6) monthly
installments plus 23% interest per annum.On all the abovementioned
promissory notes, private respondent Leila Ventura had signed as co-maker.
Upon maturity there were still principal balance remaining on the notes.
Eusebio refused to pay the balance payable, so SBTC filed a collection case
against him. The RTC rendered a judgment in favor of SBTC, although the
rate of interest imposed by the RTC was 12% p.a. instead of the agreed upon
23% p.a. The court denied the motion filed by SBTC to apply the 23% p.a.
instead of the 12% p.a.
ISSUE:
Did the RTC err in using 12% instead of the 23% as agreed upon by the
parties?
RULING:
Yes, the rate of interest was agreed upon by the parties freely.
Significantly, respondent did not question that rate. P.D. No. 1684 and C.B.
Circular No. 905 no more than allow contracting parties to stipulate freely
regarding any subsequent adjustment in the interest rate that shall accrue
on a loan or forbearance of money, goods or credits. It is not for respondent
court a quo to change the stipulations in the contract where it is not illegal.
Furthermore, Article 1306 of the New Civil Code provides that contracting
parties may establish such stipulations, clauses, terms and conditions as
they may deem convenient, provided they are not contrary to law, morals,
good customs, public order, or public policy. The 12% shall be applied for
obligations arising from loans, or forbearance of money in the absence of
express stipulations, IN VIEW OF THE FOREGOING, the decision of the
respondent court a quo, is hereby AFFIRMED with the MODIFICATION that the
rate of interest that should be imposed be 23% per annum.
ASIAN CATHAY FINANCE AND LEASING CORP. V. GRAVADOR

G.R. NO. 186550, JULY 05, 2010
Nachura, J:
FACTS:
On October 22, 1999, petitioner Asain Cathay Finance and Leasing

Corporation (ACFLC) extended a loan of Eight Hundred Thousand Pesos
(₱800,000.00) to respondent Cesario Gravador, with respondents Norma de
Vera and Emma Concepcion Dumigpi as co-makers. The loan was payable in
sixty (60)monthly installments of ₱24,000.00 each. To secure the loan,
respondent Cesario executed real estate mortgage over his property in Sta.
Maria, Bulacan, covered by Transfer Certificate of Title No. T-
29234.Respondents paid the initial installment due in November 1999.
However, they were unable to pay the subsequent ones. Consequently, on
February 1, 2000, respondents received a letter demanding payment
of ₱1,871,480.00 within five (5) days from receipt thereof. Respondents
requested for an additional period to settle their account, but ACFLC denied
the request. Petitioner filed a petition for extra judicial foreclosure of
mortgage with the Office of the Deputy Sherrif of Malolos, Bulacan.
ISSUE:
WON the Honorable Court of Appeals erred in invalidating the interest

rates imposed on the respondents’ loan, and the waiver of the right of redemption.
RULING:
No.The imposition of an unconscionable rate of interest on a money

debt, even if knowingly and voluntarily assumed, is immoral and unjust. It is
tantamount to a repugnant spoilation and an iniquitous deprivation of
property, repulsive to the common sense of man. It has no support on law, in
principles of justice, or in the human conscience nor is there any reason
whatsoever which may justify such imposition as righteous and as one that
may be sustained within the sphere of public or private morals. Settled is the
rule that for a waiver to be valid and effective, it must, in the first place, be
couched in clear and unequivocal terms which will leave no doubt as to the
intention of a party to give up a right or benefit which legally pertains to him.
SOLIDBANK CORP. V. PERMANENT HOMES, INC.

G.R. NO. 171925, JULY 23, 2010
Carpio, J:
FACTS:
The records disclose that PERMANENT HOMES is a real estate

development company, and to finance its housing project known as the “Buena
Vida Townhome” located within Merville Subdivision,Parañaque City, it applied and was
subsequently granted by SOLIDBANK with an “Omnibus Line” credit facility in the
total amount of SIXTY MILLION PESOS. Of the entire loan, FIFTY NINE MILLION
as time loan for a term of up to three hundred sixty (360) days, with interest
thereon at prevailing market rates, and subject to monthly repricing.
The remaining ONE MILLION was available for domestic bills purchase. To
secure the aforesaid loan, PERMANENT HOMES initially mortgaged three(3)
townhouse units within the Buena Vida project in Parañaque. At the time,
however, the instant complaint was filed against SOLIDBANK, a total of thirty
six (36) townhouse units were mortgaged with said bank. Of the 60 million
available to PERMANENT HOMES, it availed of a total of 41.5 million pesos
covered by three(3)promissory notes. There was a standing agreement by
the parties that any increase or decrease interest rates shall be subject to
the mutual agreement of the parties. For the three loan avails that
PERMANENT HOMES obtained, the herein respondent argued that
SOLIDBANK unilaterally and arbitrarily accelerated the interest rates without
any declared basis of such increases, of which PERMANENT HOMES had not
agreed to, or at the very least, been informed of.
ISSUES:
WON the Honorable Court of Appeals was correct in ruling that the
increases in the interest
rates on Permanent’s loans are void for having been unilate
rally imposed without basis.
RULING:
Yes. Although interest rates are no longer subject to a ceiling, the

lender still does not havean unbridled license to impose increased interest
rates. The lender and the borrower should agree onthe imposed rate, and
such imposed rate should be in writing of which was not provided by
petitioner.
VILLANUEVA V. COURT OF APPEALS

G.R. NO. 163433, AUGUST 22, 2011
Peralta, J:
FACTS:
Felipe Villanueva left a 15,336-square-meter parcel of land in Kalibo,

Capiz to his eight children: Simplicio, Benito, Leon, Eustaquio, Camila, Fausta
and Pedro. In 1952, Pedro declared under his name 1/6 portion of the
property (1,905 sq. m.). He held the remaining properties in trust for his co-
heirs who demanded the subdivision of the property but to no avail. After
Leon’s death in 1972, private respondents discovered that the shares of
Simplicio, Nicolasa, Fausta and Maria Baltazar had been purchased by Leon
through a deed of sale dated August 25, 1946 but registered only in 1971. In
July 1970, Leon also sold and partitioned the property in favor of petitioners,
his children, who thereafter secured separate and independent titles over
their respective pro- indiviso shares.
Private respondents, who are also descendants of Felipe, filed an action for
partition with annulment of documents and/or reconveyance and damages
against petitioners. They contended that Leon fraudulently obtained the sale
in his favor through machinations and false pretenses. The RTC declared that
private respondents’ action had been barred by res judicata and that
petitioners are the “legal owners of the property in question in accordance
with the individual titles issued to them.
ISSUE:
Whether or not laches apply against the minor’s property that was held
in trust.
RULING:
No. At the time of the signing of the Deed of Sale of August 26,1948,
private respondents Procerfina, Prosperedad, Ramon and Rosa were minors.
They could not be faulted for their failure to file a case to recover their
inheritance from their uncle Leon, since up to the age of majority, they
believed and considered Leon their co-heir administrator. It was only in 1975,
not in 1948, that they became aware of the actionable betrayal by their
uncle. Upon learning of their uncle’s actions, they filed for recovery. Hence,
the doctrine of stale demands formulated in Tijam cannot be applied here.
They did not sleep on their rights, contrary to petitioner’s assertion.
RGM INDUSTRIES, INC. V. UNITED PACIFIC CAPITAL CORPORATION

G.R. NO. 194781, JUNE 27, 2012
Reyes, J:
FACTS:
The respondent is a domestic corporation engaged in the business of

lending and financing. On March 3, 1997, it granted a thirty million pesos
short-term credit facility in favor of the petitioner. The loan amount was
sourced from a series of promissory notes that were issued by the petitioner
for the payment of the loan. The petitioner failed to satisfy the said
promissory notes. Consequently, on April 4, 1998, the petitioner issued in
favor of the respondent a consolidated promissory note in the principal
amount of P27,852,075.98 for a term of fourteen (14) days and maturing on
April 28, 1998. The stipulated interest on the consolidated promissory note
was 32% per annum. In case of default, a penalty charge was imposed in an
amount equivalent to 8% per month of the outstanding amount due and
unpaid computed from the date of default. The petitioner failed to satisfy the
consolidated promissory note, The respondent thus sent demand letters to
the petitioner but the latter failed to pay and instead asked for restructuring
of the loan.
ISSUE:
WON modified interest rates and penalty charges decreed by the CA

are still exorbitant and that the CA failed to appreciate the partial payments
already made
RULING:
We affirm the interest rate decreed by the CA. Stipulated interest rates are
illegal if they are unconscionable and courts are allowed to temper interest
rates when necessary. What may be iniquitous and unconscionable in one
case, may be just in another. The attorney’s fees must likewise be equitably
reduced considering that: (1) the petitioner has already made partial
payments; (2) the attorney’s fees are not an integral part of the cost of
borrowing but a mere incident of collection; and (3) the attorney’s fees were
intended as penal clause to answer for liquidated damages, hence, the rate
of 10% of the unpaid obligation is too onerous. Under the premises,
attorney’s fees equivalent to one percent (1%) of the outstanding balance is
reasonable.
VIRGILIO DAVID V. MISAMIS OCCIDENTAL II ELECTRIC COOPERATIVE,

INC.,
G.R. NO. 194785, JULY 11, 2012
Mendoza, J:
FACTS:
The petitioner Virgilio David was the proprietor of of VSD Electric Sales,
a company engaged in the business of supplying electrical hardware
including transformers for rural electric cooperatives. It entered into a
contract with the respondent Misamis Occidental II Electric Cooperative, Inc.
(MOELCI) in order to solve its problem of power shortage affecting some
areas within its coverage, MOELCI expressed its intention to purchase a 10
MVA power transformer from David. The General Manager of MOELCI, Engr.
Reynaldo Rada (Engr. Rada),went to meet David in the latter’s office in
Quezon City. David agreed to supply the power transformer provided that
MOELCI would secure a board resolution because the item would still have to
be imported. Both parties agreement on the purchase of transformers and its
terms amounting to P 5,000,000 and it was shipped even without the down
payment of MOELCI. After such time, nothing was heard from MOELCI and
David went to Ozamis City to confirm if the shipment was made, which
subsequently MOELCI had said that they were not still in physical possession
of the shipment. Contrary to what MOELCI had said, the shipment was
actually received by them and copies of the bill of lading evidenced the
receipt of the company of the said shipment. Several demand letters have
been made to collect the amount of the transformers and David filed a
complaint with the RTC for specific performance.
ISSUE:
Whether or not there is a perfected contract of sale and the delivery

consummated the contract
RULING:
Yes, the Court ruled that there was a perfected contract of sale since
there was a meetingof the minds, there was consent on the part of David to
transfer ownership of the power transformer to MOELCI in exchange for the
price, thereby complying with the first element.
ANCHOR SAVINGS BANK V. PINZMAN REALTY AND DEVELOPMENT

CORPORATION
G.R. NO. 192304, AUGUST 12, 2014
Villarama, Jr., J:
FACTS:
Sometime in December 1997, the private respondents obtained a loan

from the petitioner in the amount of ₱3,000,000 secured by a real estate
mortgage over parcels of land located in Cubao, Quezon City which were
registered in the name of herein private respondent Marylin Mafialac. Private
respondent Mafialac executed a Promissory Note and Disclosure Statement in
favor of the petitioner in the total amount of ₱3,308,447.74 which amount
already included payment for three months interest. The loan documents
stipulated that the first installment shall be for ₱148,640 and will be due on
December 26, 1997, the second installment will be for the same amount and
shall be due on January 26, 1998, and the third installment will be for
₱3,011,167.74 and will be due on February 26, 1998. Subsequently, the
private respondents received a Second Notice of Extrajudicial Sale for the
satisfaction of an obligation, which as of October 15, 1998 amounted to
₱4,577,269.42, excluding penalties, charges, attorney’s fees and costs of
foreclosure. On June 1,1999, the assailed foreclosure sale was held where the
petitioner emerged as the highest bidder of the disputed properties, and a
Certificate of Sale was issued in favor of the petitioner. Still, private
respondent Mañalac allegedly tried to settle the loan but was surprised when
petitioner issued a Statement of Account stating that as of October 29, 1999,
Pinzman Realty owed the petitioner ₱12,525,673.44.
ISSUE:
Whether or not Article 1956 of the civil code requires that rate of
interest to be stipulated.
RULING:
In the case at bar, the unlawful interest charge which led to the
demand for ₱4,577,269.42 as stated in the Notice of Extrajudicial Sale
resulted in the invalidity of the subsequent foreclosure sale held on June 1,
1999. The private respondents cannot be obliged to pay an inflated or
overstated mortgage indebtedness on account of excessive interest charges
without offending the basic tenets of due process and equity. The argument
of the petitioner that defects in the Notice of Sale cannot affect the validity
of the foreclosure sale cannot be given credence.
SPOUSES MALLARI V. PRUDENTIAL BANK

G.R. NO. 197861, JUNE 05, 2013
Peralta, J:
FACTS:
In 1984, Petitioner Florentino Mallari obtained a loan from respondent

Prudential Bank in the amount of P300,000.00. It was subject to an interest
rate of 21% per annum and, in case of default, a penalty of 12% per annum
of the total amount due and attorney’s fees equivalent of 15% of the total
amount due. This was secured by a Deed of Assignment (DOA) over
petitioner's time deposit account. In 1989, Spouses Florentino and Aurea
Mallari obtained another loan from respondent for P1.7 million, stipulating
interest of 23% per annum with the same penalties in case of default. This
was secured by Real Estate Mortgage (REM).
Petitioners defaulted. When computed in 1992, the total debt was
P571,218.54 and P2,991,294.82 for the first and second loans respectively.
Respondent tried to extrajudicially foreclose the mortgage. Petitioners on the
other hand tried to nullify the mortgage claiming that the Bank imposed
onerous terms and conditions and that the bank was unilaterally increasing
its charges and interest over and above those stipulated. The Bank claimed
that the basis for its computation was all written in the Promissory Notes.
The RTC ruled in favor of respondent bank. CA affirmed.
ISSUE:
Whether or not an interest rate of 23% per annum and 12% per annum
penalty is unconscionable.
RULING:
No. The Court has also ruled affirmed in a plethora of cases that
stipulated interest rates of 3% per month and higher are excessive,
unconscionable and exorbitant. thus, the 23% per annum interest rate
imposed on petitioners’ loan in this case can by no means be considered
excessive or unconscionable. And neither is the 12% per annum penalty
charge unconscionable as the court found in DBP vs. Family Foods (2009)
and Ruiz vs. Court of Appeals (2003).
PRESUMPTIONS REGARDING INTERESTS AND INSTALLMENTS
MANILA TRADING & SUPPLY CO. V. MEDINA

G.R. NO. L-16477, MAY 31, 1961
Reyes J.B.L., J:
FACTS:
The facts appear to be that prior to May 7, 1956, the defendant-

appellant Mariano Medina had certain accounts with appellee, Manila Trading
& Supply CO. These accounts were on said date consolidated into a total
balance due of P60,000.00, for which Medina executed a promissory note
(Exh. "A") for Sixty Thousand Pesos (P60,000.00), with interest at 12% per
annum, payable in monthly installments of P4,000.00 plus interest. The note
provided that upon failure to pay any of the installments "the whole sum
remaining then unpaid will immediately become due and payable, at the
option of the holder of this note", together with 33-1/3% of the amount due
for attorney's fees and expenses of collection, in addition to the costs of the
suit. On January 8, 1957, the payee Manila Trading & Supply Co. filed a
complaint against appellant Medina in the Court of First Instance of Manila,
claiming that the said debtor had failed to meet the installments due on the
note for the months of September, 1956 up to and including January 7, 1957,
and that due to such default, the balance of the note amounting to
P43,596.22, plus 12% interest thereon and 33-1/3% thereof by way of
attorney's fees and collection expenses, had become due and demandable;
and prayed for judgment in the amounts stated.
ISSUE:
Whether or not the presumptions on interest is correct a

RULING:
These differences between the defendant's disputed receipts and those

admitted by plaintiff, when coupled with the fact that appellant Medina's
answer expressly admitted the balance due as well as his failure to meet the
monthly installments from September, 1956 to January 1957; his lack of
corroboration; and the further circumstance that the admissions in his
answer were never withdrawn, nor was the answer containing them ever
amended, irresistibly show that the trial court's rejection of the genuineness
and validity of the disputed receipts constituted no error. The authenticity of
the signatures appended to them does not prove that they were issued. This
might be true if such receipts recited that they were issued for the
installments corresponding to the month of January, 1957; but nowhere does
that fact appear.
NUNELON MARQUEZ V. ELISAN CREDIT CORPORATION

G.R. NO. 194642, APRIL 06, 2015
Brion, J:
FACTS:
Marquez obtained from Elisan Credit Corporation a loan payable in

weekly installments and subject to annual interest with monthly penalties
and attorney’s fee in case of non-payment. A chattel mortgage was also
executed stipulating that “the motor vehicle shall stand as a security for all
other obligations of every kind already incurred or which hereafter may be
incurred.” The payment of that loan was acknowledge by both parties.
Subsequently Marquez obtained another loan evidenced by a promissory
note with the same terms and conditions. When the second loan matured
there still an unpaid remaining balance. Marques requested the creditor to
pay thus Marquez already paid a total amount greater than the amount of
the principal. Despite such the creditor filed a complaint for foreclosure of
the Cm on the ground Marquez allegedly failed to pay the second principal in
the second loan.
ISSUE:
Whether or not the daily payments made by the debtor be applied to

the interest.
RULING:
Yes. Notwithstanding the fact that it was not indicated in the receipts
whether the payments were applied to the principal or the interest, such
failure should not be taken against the creditor, Article 1253 of the Civil
Code, if the debts produces interest, payment of the principal shall not be
deemed to have been made until the interests have been covered, thus, the
creditor in this case has a right to credit the payments to the interest first.
KINDS OF OBLIGATION:
PURE OBLIGATION
HONGKONG AND SHANGHAI BANKING CORP. V. BROQUEZA

G.R. NO. 178610, NOVEMBER 17, 2010
Carpio, J:
Digested by: Erika Charmain Faye p. Rico
FACTS:
Petitioners are employees of HSBC, and are also members of

respondent trust fund. The HSBCL-SRP is a retirement plan established by
HSBC through its Board of Trustees for the benefit of the employees.
Petitioner Editha obtained a car loan and an appliance loan. On the other
hand, petitioner Gerong applied and was granted an emergency loan. These
loans are paid through automatic salary deduction. Subsequently, a labor
dispute arose between HSBC and its employees. Majority of HSBCs
employees were terminated, among whom are petitioners. The employees
then filed an illegal dismissal case before the NLRC against HSBC. Because of
their dismissal, petitioners were not able to pay the monthly amortizations of
their respective loans. Thus, respondent HSBCL-SRP considered the accounts
of petitioners’ delinquent. Demands to pay the respective obligations were
made upon petitioners, but they failed to pay. Hence a civil action for
recovery and collection of sums of money was initiated.
ISSUE:
Whether the obligation is a pure obligation?
RULING:
Yes. There is no date of payment indicated in the Promissory Notes.
The RTC is correct in ruling that since the Promissory Notes do not contain a
period, HSBCL-SRP has the right to demand immediate payment. The
spouses Broqueza’s obligation to pay HSBCL-SRP is a pure obligation. The
fact that HSBCL-SRP was content with the prior monthly check-off from
Editha Broquezas salary is of no moment. Once Editha Broqueza defaulted in
her monthly payment, HSBCL-SRP made a demand to enforce a pure
obligation. The HSBCL-SRP never agreed that the loans will be paid only
through salary deductions. Neither did HSBCL-SRP agree that if Editha
Broquezas salary is of no moment. Once Editha Broqueza defaulted in her
monthly payment, HSBCL-SRP made a demand to enforce a pure obligation.
The HSBCL-SRP never agreed that the loans will be paid only through salary
deductions. Neither did HSBCL-SRP agree that if Editha Broqueza ceases to
be an employee of HSBC, her obligation to pay the loans will be suspended.
HSBCL-SRP can immediately demand payment of the loans at anytime
because the obligation to pay has no period. Moreover, the spouses
Broqueza have already incurred in default in paying the monthly
installments.
MILA REYES V. VICTORIA TUPARAN
G.R. NO. 188064, JUNE 01, 2011
Mendoza, J:
FACTS:
In December 1989, respondent leased from petitioner a space on the
ground floor of the RBJ Building for her pawnshop business for a monthly
rental of ₱4,000.00. A close friendship developed between the two which led
to the respondent investing thousands of pesos in petitioner’s
financing/lending business from February 7, 1990 to May 27, 1990, with
interest at the rate of 6% a month. On June 20, 1988, petitioner mortgaged
the subject real properties to the Farmers Savings Bank and Loan Bank, Inc.
to secure a loan of ₱2,000,000.00 payable in installments. On November 15,
1990, petitioner’s outstanding account on the mortgage reached
₱2,278,078.13. Petitioner then decided to sell her real properties for at least
₱6,500,000.00 so she could liquidate her bank loan and finance her
businesses. As a gesture of friendship, respondent verbally offered to
conditionally buy petitioner’s real properties for ₱4,200,000.00 payable on
installment basis without interest and to assume the bank loan.
On November 26, 1990, the parties and FSL Bank executed the
corresponding Deed of Conditional Sale of Real Properties with Assumption of
Mortgage.
Respondent, however, defaulted in the payment of her obligations.
Respondent had only paid ₱395,000.00, leaving a balance of ₱805,000.00 as
principal on the unpaid installments and ₱466,893.25 as unpaid accumulated
interest.
Since December 1990, respondent had taken possession of the subject real
properties and had been continuously collecting and receiving monthly rental
income from the tenants of the buildings and vendors of the sidewalk
fronting the RBJ building without sharing it with petitioner.
ISSUE:
Whether or not petitioner has the right to rescind of the Deed of
Conditional Sale with Assumption of Mortgage.
RULING:
Accordingly, the petitioner’s obligation to sell the subject properties

becomes demandable only upon the happening of the positive suspensive
condition, which is the respondent’s full payment of the purchase price.
Without respondent’s full payment, there can be no breach of contract to
speak of because petitioner has no obligation yet to turn over the title.
Respondent’s failure to pay in full the purchase price is not the breach of
contract contemplated under Article 1191 of the New Civil Code but rather
just an event that prevents the petitioner from being bound to convey title to
the respondent.
HEIRS OF ATIENZA V. ESPIDOL

G.R. NO. 180665, AUGUST 11,2010
Abad, J:
FACTS:
This case is about the legal consequences when a buyer in a contract

to sell on installment fails to make the next payments that he promised.
On August 12, 2002 the Atienzas and respondent Domingo P. Espidol

entered into a contract called Kasunduan sa Pagbibili ng Lupa na may
Paunang-Bayad(contract to sell land with a down payment) covering the
property. They agreed on a price, payable in three installments.
When the Atienzas demanded payment of the second installment of

P1,750,000.00 in December 2002, however, respondent Espidol could not
pay it.Claiming that Espidol breached his obligation, on February 21,
2003 the Atienzas filed a complaint for the annulment of their agreement
with damages before the Regional Trial Court (RTC)of Cabanatuan City in a
Civil Case.
ISSUE:
Whether or not the Atienzas were entitled to the cancellation of the

contract to sell they entered into with respondent Espidol on the ground of
the latter’s failure to pay the second installment when it fell due.
RULING:
The Court declares the Kasunduan sa Pagbibili ng Lupa na may
Paunang-Bayad between petitioner Heirs of Paulino Atienza and respondent
Domingo P. Espidol dated August 12, 2002 cancelled and the Heirs’
obligation under it non-existent. Regarding the right to cancel the contract
for non-payment of an installment, there is need to initially determine if what
the parties had was a contract of sale or a contract to sell. In a contract of
sale, the title to the property passes to the buyer upon the delivery of the
thing sold. In a contract to sell, on the other hand, the ownership is, by
agreement, retained by the seller and is not to pass to the vendee until full
payment of the purchase price. In the first place, since Espidol failed to pay
the installment on a day certain fixed in their agreement, the Atienzas can
afterwards validly cancel and ignore the contract to sell because their
obligation to sell under it did not arise. Since the suspensive condition did
not arise, the parties stood as if the conditional obligation had never existed.
THE WELLEX GROUP, INC., V. U-LAND AIRLAINES, CO., Ltd.
G.R. NO. 167519, Jaunuary 14, 2015

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