Dayandayan vs.

Spouses Rojas
Case
G.R. No. 227411
Decision Date
Jul 15, 2020

Facts:

Ownership of the Property

Respondents, Spouses Eduardo P. Rojas and Enriquita A. Rojas, are the lawful owners of Lot No. 635 in
Isabel, Leyte, which they purchased on March 9, 1997, from Generoso and Julieta Pinar.

Petitioners' Occupation

Petitioners Teresita Dayandayan and Clara Talle allegedly asked for permission to build their houses on
the property, promising to vacate upon demand. Respondents, out of compassion, allowed them to stay
without rental fees. Later, their relatives also occupied the property.

Demand to Vacate

In January 2009, respondents demanded that petitioners vacate the property. When petitioners refused,
respondents filed a Complaint for Unlawful Detainer on April 17, 2009.

Petitioners' Defense

Petitioners argued that their houses were on government property, not respondents' lot, and that they
had been residing there since 1983 and 1984, long before respondents acquired the property in 1997.

Issue:

The main issue is whether the respondents sufficiently proved their claim of tolerance to sustain an
action for unlawful detainer.

Ruling:

The Supreme Court granted the petition, reversing the Court of Appeals' decision and reinstating the
Regional Trial Court's ruling. The Court held that respondents failed to prove that petitioners' possession
was based on their tolerance.

Ratio:

1. Tolerance Must Be Proven Clearly

In unlawful detainer cases, the plaintiff must prove that the defendant’s possession was initially
lawful, based on express or implied permission or tolerance. Respondents failed to provide
specific evidence of when and how they granted petitioners permission to occupy the property.

2. Prior Possession
Petitioners established that they had been residing on the property since 1983 and 1984, long
before respondents purchased it in 1997. This fact negates respondents' claim that petitioners
sought their permission to build houses.

3. Proper Remedy
Since respondents failed to prove tolerance, the proper remedy is not unlawful detainer but an
accion publiciana or accion reivindicatoria, which must be filed in the Regional Trial Court.

4. Bare Claims of Tolerance

Bare allegations of tolerance, without supporting evidence, are insufficient to sustain an
unlawful detainer action. Respondents’ self-serving statements and lack of specific details
undermined their claim.

5. No Violation of Due Process

The issue of tolerance was introduced by respondents themselves in their complaint. Thus, the
Court could rule on it without violating due process.
 The Court dismissed the unlawful detainer action but allowed respondents to pursue other legal
remedies to recover possession.

Case Summary (G.R. No. 227411)

Background of the Case

 Respondents, Spouses Eduardo P. Rojas and Enriquita A. Rojas, are the lawful owners of Lot
No. 635 in Marvel Isabel, Leyte, purchased from Generoso and Julieta Pinar on March 9, 1997.
 Petitioners, including Teresita Dayandayan, Yolly D. Laguna, Clara "Caring" Talle, and others,
initially sought permission from respondents to construct houses on a portion of the subject
property, promising to vacate upon demand.
 Respondents allowed petitioners to stay without charging rent, but later demanded their vacation
of the property starting in January 2009, which petitioners refused.
 Respondents filed a Complaint for Unlawful Detainer against petitioners in April 2009, leading
to a series of legal proceedings.

Ruling of the Municipal Circuit Trial Court (MCTC)

 On October 1, 2010, the MCTC ruled in favor of respondents, granting their complaint for
unlawful detainer.
 The MCTC found that respondents were entitled to possession of the property as they had
purchased it and were paying taxes.
 The MCTC ordered petitioners to vacate the premises and pay attorney's fees and litigation
expenses.

Ruling of the Regional Trial Court (RTC)

 The RTC reversed the MCTC's decision on May 13, 2011, dismissing the complaint for lack of
jurisdiction.
 The RTC concluded that respondents failed to prove the alleged tolerance of petitioners' stay,
noting that petitioners had resided on the property before respondents acquired it.
 The RTC clarified that the dismissal was due to lack of evidence, not jurisdiction, and ordered
respect for petitioners' possession.

Ruling of the Court of Appeals (CA)

 The CA reversed the RTC's decision on September 30, 2015, ruling that respondents sufficiently
alleged the necessary elements for unlawful detainer based on tolerance.
 The CA rejected petitioners' claims regarding the location of their houses and held that the
evidence favored respondents.
 The CA reinstated the MCTC's decision, ordering petitioners to vacate the property.

Core Issue
 The primary issue is the determination of who is entitled to possession of the subject property.
 Petitioners argue that respondents failed to prove tolerance and that they had been residing on the
property before respondents' acquisition.
 Respondents assert that they proved tolerance and that the property belongs to them.

Legal Principles on Possession and Ownership

 The owner of real property has the right to recover possession but must follow proper judicial
remedies.
 Actions for unlawful detainer require proof of initial lawful possession based on permission or
tolerance, which must be established clearly.
 The distinction between unlawful detainer and forcible entry is crucial, with unlawful detainer
arising from initially lawful possession that later becomes illegal.

Requirements for Unlawful Detainer

 The claimant must prove:
1. Initial possession was by contract or tolerance.
2. Possession became illegal upon notice of termination.
3. The defendant remained in possession after the notice.
4. The complaint was filed within one year of the last demand to vacate.

Analysis of Tolerance
 Tolerance must be present from the beginning of possession and must be proven with clear
evidence.
 The Court emphasized that mere silence or inaction does not equate to tolerance.
 The burden of proof lies with the claimant to establish the facts surrounding the permission or
tolerance.

Court's Findings on Tolerance

 Respondents failed to provide specific evidence of tolerance, relying on vague statements.
 The evidence presented by petitioners indicated they had been residing on the property prior to
respondents' acquisition.
 The Court found that the absence of clear proof of tolerance led to the dismissal of the unlawful
detainer action.

Conclusion and Final Ruling

 The Court granted the petition, reversing the CA's decision and reinstating the RTC's ruling.
 The Court emphasized that respondents did not meet the burden of proof required for their
unlawful detainer claim.
 Respondents are not without remedy and may pursue other legal avenues to recover possession
of the property.

Spouses Batalla vs. Prudential Bank

Case
G.R. No. 200676
Decision Date
Mar 25, 2019

Spouses Batalla sued Honda and Prudential Bank over alleged defects in a new car, seeking rescission of
contracts. The Supreme Court ruled the defects were minor, upheld the car's condition as brand new, and
maintained the validity of the loan agreement, denying rescission.

Facts:
Purchase of the Vehicle

In March 1998, Spouses Luis G. Batalla and Salvacion Batalla (Spouses Batalla) purchased a brand new
Honda Civic from Honda Cars San Pablo, Inc. (Honda). Alicia Rantael, then manager of Pilipinas Bank
(later merged with Prudential Bank), brokered the deal.

Financing the Purchase

To finance the purchase, Spouses Batalla applied for a car loan with Prudential Bank. On March 23,
1998, they executed a promissory note for P292,200.00, payable within 36 months. The Car Loan
Agreement was approved on May 29, 1998, and Prudential issued a Manager’s Check for the loan
amount payable to Honda. Spouses Batalla paid the remaining portion of the purchase price
(P214,000.00), delivery costs (P11,000.00), and insurance (P28,333.56).

Delivery and Alleged Defects

On April 21, 1998, Spouses Batalla received the car. However, after three days, the rear right door
malfunctioned. A mechanic, Jojo Sanchez, claimed the power lock was defective and that the car was
not brand new, as the roof paint appeared retouched. Spouses Batalla notified Prudential of the defects
and demanded a replacement. Honda offered to repair the vehicle, but Spouses Batalla insisted on a
brand new replacement.

Legal Action

Unable to secure a replacement, Spouses Batalla filed a Complaint for Rescission of Contracts and
Damages against Prudential Bank, Honda, and Alicia Rantael.

Issue:

1. Whether the motor vehicle delivered by Honda had hidden defects.

2. Whether Spouses Batalla may rescind the contract of sale, car loan agreement, and
promissory note due to the alleged defects of the motor vehicle.

Ruling:

The Supreme Court denied the petition, affirming the Court of Appeals' decision. The Court held that:

1. The motor vehicle delivered to Spouses Batalla was brand new, and the alleged defects were
minor and not attributable to Honda.

2. Spouses Batalla could not rescind the car loan agreement and promissory note with Prudential
Bank, as these were distinct from the contract of sale with Honda.

Ratio:

1. Brand New Vehicle: The evidence presented by Honda, including documents proving the car
was brand new, outweighed the claims of Spouses Batalla. The alleged defects (e.g., paint and
door issues) were minor and did not render the car unfit for its intended use.

2. Implied Warranty Against Hidden Defects: For rescission under Article 1561 of the Civil Code,
the defect must be serious, hidden, and exist at the time of sale. Spouses Batalla failed to prove
the defects were significant or existed at the time of delivery. The installation of a remote
control door mechanism raised doubts about the origin of the defects.

3. Distinct Contracts: The car loan agreement and promissory note with Prudential Bank were
separate from the contract of sale with Honda. The loan agreement was perfected upon delivery
of the loan proceeds, and Spouses Batalla remained obligated to repay the loan regardless of
the outcome of the sale.

4. No Basis for Rescission: Spouses Batalla’s reliance on Supercars Management & Development
Corporation v. Flores was misplaced, as the case involved rescission of a sale contract, not a loan
agreement. Their recourse was limited to Honda, not Prudential Bank.

Conclusion:
 The Supreme Court upheld the lower courts' rulings, emphasizing that Spouses Batalla failed to prove
the existence of hidden defects warranting rescission. The car loan agreement with Prudential Bank
remained valid and enforceable, independent of the contract of sale with Honda.

Case Summary (G.R. No. 200676)

Background of the Case

 Spouses Luis G. Batalla and Salvacion Batalla purchased a brand new Honda Civic from Honda Cars San
Pablo, Inc. in March 1998.
 The purchase was facilitated by Alicia Rantael, a broker from Prudential Bank.
 To finance the vehicle, the Batallas executed a promissory note for P292,200.00, which was approved on
May 29, 1998.
 The Batallas paid additional amounts for the remaining purchase price, delivery costs, and insurance.
 They received the vehicle on April 21, 1998, but soon discovered defects, including a malfunctioning rear
door and concerns about the car's condition.

Initial Complaints and Actions Taken

 On May 3, 1998, the Batallas notified Prudential of the defects and demanded a replacement.
 They sought a thorough evaluation of the vehicle, which confirmed their concerns about its condition.
 After rejecting an offer to repair the vehicle, the Batallas filed a Complaint for Rescission of Contracts
and Damages against Prudential and Honda.

Regional Trial Court (RTC) Decision

 The RTC dismissed the Batallas' complaint on July 23, 2008, ruling that the vehicle was indeed brand
new and that any defects were minor.
 The court found that the Batallas failed to prove that the defects were due to Honda's fault.
 The RTC ordered the Batallas to pay Prudential the loan amount and awarded attorney's fees to Honda
and Rantael.

Court of Appeals (CA) Decision

 The CA affirmed the RTC's decision on October 10, 2011, with a modification to reduce the attorney's
fees awarded to Honda.
 The appellate court ruled that the Batallas could not rescind the loan agreement based on the alleged
defects, as the loan and sale contracts were distinct.

Issues Raised by the Petitioners

 The Batallas contended that the vehicle had hidden defects and sought to rescind the contract of sale, car
loan agreement, and promissory note.
 They argued that the defects constituted a breach of the implied warranty against hidden defects.

Respondents' Counterarguments
 Prudential asserted that the loan agreement was separate from the sale contract and that it could not be
held liable for any defects in the vehicle.
 Rantael and Honda echoed this sentiment, emphasizing the distinct nature of the transactions.

Court's Ruling on the Petition

 The Supreme Court found the petition without merit, emphasizing that it only reviews questions of law.
 The Court noted that the findings of fact by the lower courts were consistent and supported by evidence.
 Analysis of Hidden Defects
 The Court examined the Batallas' claims regarding hidden defects and concluded that they failed to prove
the existence of significant defects that would warrant rescission.
 The testimony regarding the vehicle's condition was deemed insufficient, and the alleged defects did not
diminish the vehicle's fitness for use.

Distinction Between Loan Agreement and Sale Contract

 The Court clarified that the loan agreement with Prudential was independent of the sale contract with
Honda.
 The Batallas were bound to fulfill their obligations under the loan agreement regardless of the outcome of
the sale contract.

Conclusion
 The Supreme Court affirmed the CA's decision, denying the Batallas' petition for rescission of the
contracts.
 The ruling underscored the importance of distinguishing between separate legal transactions and the
burden of proof regarding claims of hidden defects.

Key Points
 The Batallas purchased a vehicle and financed it through a loan.
 They alleged defects in the vehicle and sought rescission of multiple contracts.
 The courts found the vehicle to be brand new and the defects to be minor.
 The loan agreement was deemed separate from the sale contract, and the Batallas were obligated to repay
the loan regardless of the vehicle's condition.

KT Construction Supply, Inc. vs. Philippine Savings Bank

Case
G.R. No. 228435
Decision Date
Jun 21, 2017

KT Construction defaulted on a P2.5M loan; SC upheld acceleration clause, attorney's fees, but absolved
Go and Go-Tan due to lack of jurisdiction.

Facts:

Loan Agreement and Promissory Note

• On October 12, 2006, KT Construction Supply, Inc. (KT Construction) obtained a loan of P2.5
million from Philippine Savings Bank (PSBank).

• The loan was evidenced by a Promissory Note signed by William K. Go (Vice-President/General

Manager) and Nancy Go-Tan (Secretary/Treasurer) on behalf of KT Construction. Both also
signed the note in their personal capacities.

• The loan was payable in 60 monthly installments from November 12, 2006, to October 12, 2011.

• The Promissory Note included an acceleration clause, making the entire obligation due and
demandable upon default in any installment. It also stipulated attorney's fees in case of
litigation.

Demand and Default

• On January 3, 2011, PSBank sent a demand letter to KT Construction for the outstanding
obligation of P725,438.81, excluding interest, penalties, and other charges.
 • KT Construction failed to pay, prompting PSBank to file a complaint for sum of money.

RTC Ruling

• The Regional Trial Court (RTC) ruled in favor of PSBank, holding KT Construction, Go, and Go-Tan
solidarily liable for the loan.

• The RTC reduced the interest rate and attorney's fees, deeming the original amounts
unconscionable.

• KT Construction, Go, and Go-Tan were ordered to pay P725,438.81 with 12% interest per annum
and P50,000 in attorney's fees.

CA Ruling

• The Court of Appeals (CA) affirmed the RTC decision but modified the interest rate to 6% per
annum from the finality of the decision until full payment.

• The CA upheld the solidary liability of Go and Go-Tan, stating they were co-makers of the
Promissory Note.

• The CA also affirmed the award of attorney's fees, citing the stipulation in the Promissory Note.

Issue:

1. Whether Go and Go-Tan are jointly and severally liable with KT Construction.

2. Whether the complaint was prematurely filed.

3. Whether the Promissory Note is null and void for being a contract of adhesion.

4. Whether the award of attorney's fees was proper.

Ruling:

• The Supreme Court (SC) ruled that the petition was partly meritorious.

• The SC upheld the validity of the acceleration clause, making the entire loan due and
demandable upon default.

• The SC rejected KT Construction's claim that the Promissory Note was a contract of adhesion,
stating that such contracts are not invalid per se.

• The SC affirmed the award of attorney's fees, as stipulated in the Promissory Note.

• However, the SC ruled that Go and Go-Tan could not be held solidarily liable because they were
not impleaded in the case, and the trial court never acquired jurisdiction over them.

Ratio:

1. Acceleration Clause: The acceleration clause in the Promissory Note is valid and enforceable.
Default in any installment makes the entire obligation due and demandable, even without
notice or demand.

2. Contract of Adhesion: A contract of adhesion is not inherently void. Parties are free to reject
such contracts, and by signing, they give their consent to the terms.

3. Attorney's Fees: The stipulation for attorney's fees in the Promissory Note is valid and
enforceable as a penal clause.

4. Jurisdiction Over Parties: A court's decision binds only those who are parties to the case. Since
Go and Go-Tan were not impleaded or served with summons, the court did not acquire
jurisdiction over them, and they cannot be held solidarily liable.

Final Disposition
 • The SC affirmed the CA decision with modification, holding only KT Construction liable for the
judgment award.

• Go and Go-Tan were absolved from liability due to lack of jurisdiction over their persons.

Case Summary (G.R. No. 228435)

Background of the Case

 KT Construction Supply, Inc. (KT Construction) obtained a loan of P2.5 million from Philippine Savings
Bank (PSBank) on October 12, 2006.
 The loan was documented through a Promissory Note signed by William K. Go and Nancy Go-Tan, both
in their capacities as corporate officers and personally.
 The Promissory Note stipulated a repayment period of 60 months, from November 12, 2006, to October
12, 2011, and included provisions for attorney's fees in case of litigation.

Demand and Initial Legal Proceedings

 On January 3, 2011, PSBank issued a demand letter to KT Construction for an outstanding obligation of
P725,438.81, excluding additional charges.
 Following KT Construction's failure to pay, PSBank filed a complaint for a sum of money against the
company.

Regional Trial Court (RTC) Decision

 The RTC ruled in favor of PSBank on June 11, 2014, stating that the promissory note's acceleration
clause made the entire obligation due upon default.
 The RTC reduced the interest rate and attorney's fees, declaring KT Construction, Go, and Go-Tan
solidarily liable for the amount owed, totaling P725,438.81 plus interest and attorney's fees.

Court of Appeals (CA) Ruling

 The CA affirmed the RTC's decision on April 22, 2016, emphasizing the validity of the acceleration
clause and rejecting KT Construction's claim that the promissory note was a contract of adhesion.
 The CA upheld the award of attorney's fees as stipulated in the promissory note and confirmed the
solidary liability of Go and Go-Tan.

KT Construction's Appeal and Arguments

 KT Construction appealed, arguing that Go and Go-Tan could not be held liable as they were not
impleaded or served with summons, thus the courts lacked jurisdiction over them.
 The company contended that the complaint was premature, asserting it had not defaulted on any payments
and that the promissory note was a contract of adhesion.
 KT Construction also challenged the award of attorney's fees, claiming it was contrary to the principle
that no premium should be placed on the right to litigate.

Philippine Savings Bank's Counterarguments

 PSBank countered that Go and Go-Tan were solidarily liable due to their signatures on the promissory
note, both as corporate officers and personally.
 PSBank maintained that the loan was due and demandable due to the acceleration clause and that the
promissory note was consensual.
 The bank argued that the award of attorney's fees was justified as it was part of the loan agreement.

Court's Ruling on the Appeal

 The Court found the petition partly meritorious, affirming the validity of the acceleration clause and the
due nature of the loan obligation upon default.
 The Court clarified that KT Construction could not evade liability by claiming non-receipt of the demand
letter, as the parties waived the necessity of demand.
 The burden of proof regarding payment rested on KT Construction, which failed to provide evidence of
payment.

Analysis of the Promissory Note and Attorney's Fees

 The Court ruled that the promissory note was not null and void as a contract of adhesion, emphasizing
that such contracts are not inherently invalid.
 The stipulation for attorney's fees was deemed valid and binding, as it was part of the agreed terms in the
promissory note.

Jurisdiction Over Parties and Liability

 The Court concluded that Go and Go-Tan could not be held solidarily liable as they were not parties to
the case, having not been impleaded or served with summons.
 The principle of due process requires that a judgment binds only those who are parties to the case, and
jurisdiction must be established through proper service or voluntary appearance.

Final Decision
 The Court modified the CA's ruling, affirming that only KT Construction is bound by the judgment
award, thereby excluding Go and Go-Tan from liability.
 The decision emphasized the importance of proper legal procedures in establishing liability and the
binding nature of contractual agreements.