KRISTINE LARA E, RIZOS​ ​ ​ ​ ​ CIVIL LAW REVIEW 2

DOCTRINE

The settled rule is that one who pleads payment has the burden of proving
it. Even when the creditor alleges non-payment, the general rule is that the
burden rests on the debtor to prove payment, rather than on the creditor to
prove non-payment. The debtor has the burden of showing with legal
certainty that the obligation has been discharged by payment.

CASE TITLE

Royal Cargo Corporation vs. DFS Sports Unlimited, Inc.

FACTS

Royal Cargo Corporation filed a complaint for collection of sum of money

against DFS Sports Unlimited, Inc. for P248,449.63 worth of trucking,
brokerage, storage, and other services rendered from April to July 1994.
DFS Sports denied engaging Royal Cargo's services except for one
transaction in May 1994. The Regional Trial Court and Court of Appeals
ruled in favor of DFS Sports, dismissing Royal Cargo's complaint.

ISSUE

Whether DFS Sports Unlimited, Inc. is liable to pay Royal Cargo

Corporation for the freight forwarding services rendered.

HELD

The Supreme Court reversed the lower courts' decisions and ordered DFS
Sports to pay Royal Cargo the amount claimed plus interest and attorney's
fees. The Court emphasized that an invoice, by itself, is not considered
evidence of payment. Possession of an invoice by a debtor does not raise
the presumption that the obligation has been paid. As the party pleading
payment, DFS Sports had the burden of proving that it had already paid its
obligation to Royal Cargo, which it failed to do.
WHEREFORE, the Petition for Review is GRANTED. The Decision dated
January 24, 2003 and the Resolution of June 4, 2003 of the Court of
Appeals as well as the Decision of the Regional Trial Court dated June 3,
1998 are REVERSED and SET ASIDE. Respondent is ORDERED to pay
petitioner: (1) the amount of Two Hundred Forty-Eight Thousand Four
Hundred Forty-Nine Pesos and Sixty-Three Centavos (P248,449.63) plus
legal interest of 6% per annum from February 10, 1995 until this Decision
becomes final and executory; (2) the legal interest of 12% per annum on
the total amount due from such finality until fully paid; (3) 10% of the total
amount due as and by way of attorney's fees, and (4) the costs of suit.

DOCTRINE

The principle of quantum meruit applies in cases where a contractor is

allowed to recover the reasonable value of services rendered despite the
lack of a written contract, to prevent unjust enrichment.

CASE TITLE

Rivelisa Realty, Inc. vs. First Sta. Clara Builders Corporation

FACTS

Rivelisa Realty, Inc. (petitioner) and First Sta. Clara Builders Corporation
(respondent) entered into a Joint Venture Agreement (JVA) for the
construction and development of a residential subdivision in Cabanatuan
City.

First Sta. Clara filed a complaint for rescission of the JVA against Rivelisa
Realty, claiming payment of damages for breach of contract.

The Regional Trial Court dismissed the complaint and ordered First Sta.
Clara to pay Rivelisa Realty on its counterclaims.

The Court of Appeals reversed this decision, finding Rivelisa Realty liable
for First Sta. Clara's actual accomplishments amounting to P3,000,000.00.

ISSUE
Whether First Sta. Clara is entitled to compensation for the work it had
accomplished under the JVA despite its rescission.

HELD

The Supreme Court affirmed the Court of Appeals' decision.

The Court ruled that First Sta. Clara was entitled to compensation based on
the principle of quantum meruit for the actual work it had accomplished.

The Court also noted that Rivelisa Realty's petition was filed out of time,
emphasizing that motions for extension of time to file a motion for
reconsideration are prohibited in all courts except the Supreme Court.

WHERFORE, the petition is DENIED. The Decision dated February 27,

2009, and Resolutions dated May 22, 2009 and September 8, 2009 of the
Court of Appeals in CA-G.R. CV No. 67198 are hereby AFFIRMED.

DOCTRINE

While not explicitly stated in the search results, the case appears to uphold
the principle that banks have a responsibility to honor their financial
obligations to investors, even in cases where internal changes (such as
conversion of investment instruments) have occurred. The bank cannot
unilaterally invalidate its obligations to investors without proper notice and
consent.

CASE TITLE

Philippine Commercial International Bank (now BDO Unibank) vs. Arturo P.

Franco

FACTS

Arturo P. Franco invested in Trust Indenture Certificates (TICs) issued by

Philippine Commercial International Bank (PCIB, now BDO Unibank) in
1986-1987.

In 1997, when Franco attempted to withdraw the funds, the bank refused
payment.
PCIB claimed that the TICs were null and void due to their conversion to
Common Trust Funds.

Franco filed a case for damages against PCIB.

ISSUE

Whether PCIB is liable to pay Franco the principal amounts of his

investments plus interest and damages.

HELD

The Supreme Court affirmed the rulings of the lower courts in favor of
Franco. PCIB (now BDO Unibank) was ordered to pay the principal
amounts of Franco's investments plus interest and damages.

WHEREFORE, premises considered, the instant Petition is DENIED. The

July 31, 2007 Decision and October 4, 2007 Resolution of the Court of
Appeals in CA-G.R. CV No. 82340, which affirmed the October 21, 2003
Decision of the Makati City Regional Trial Court, Branch 61, are
AFFIRMED.

DOCTRINE

In the absence of a written agreement between the employer and the

employee stating that sales commissions shall be paid in a foreign
currency, the employee has the right to be paid in such foreign currency
once it has become an established practice of the employer. The rate of
exchange at the time of payment, not the rate of exchange at the time of
the sales, controls.

CASE TITLE

Netlink Computer, Inc. vs. Eric Delmo, G.R. No. 160827, June 18, 2014

FACTS

●​ Eric Delmo was hired by Netlink Computer Incorporated as an

account manager.
●​ Delmo earned commissions in both Philippine pesos and US dollars.
 ●​ Netlink refused to pay Delmo's full commissions.
●​ Delmo filed a complaint for illegal dismissal.
●​ The Labor Arbiter ruled in favor of Delmo.
●​ The decision was modified by the NLRC and further modified by the
Court of Appeals

ISSUE

Whether Delmo is entitled to receive his US dollar commissions in US

dollars or their peso equivalent, and if in peso equivalent, at what exchange
rate should it be computed?

HELD

The Supreme Court affirmed the Court of Appeals decision, ruling that
Delmo was entitled to receive his US dollar commissions in US dollars or
their peso equivalent at the time of payment, not at the time of sale. The
Court held that the payment of US dollar commissions had ripened into a
company practice, and to rule otherwise would cause an unjust diminution
of the commissions due to Delmo.

WHEREFORE, the Court DENIES the petition for review on certiorari;

AFFIRMS the decision promulgated on May 9, 2003; and ORDERS the
petitioner to pay the costs of suit.

DOCTRINE

A bank has the right to debit a depositor's account when the depositor has
received money to which they are not entitled. However, the bank must
exercise due diligence and give proper notice to the depositor before taking
such action.

CASE TITLE

Bank of the Philippine Islands vs. Court of Appeals and Annabelle A.

Salazar

FACTS
 ●​ Annabelle A. Salazar deposited three checks payable to JRT
Construction and Trading (owned by Julio Templonuevo) into her
personal account without Templonuevo's endorsement.
●​ Bank of the Philippine Islands (BPI) credited the amount of
P267,707.70 to Salazar's account.
●​ Later, upon Templonuevo's demand, BPI paid him the amount and
debited it from Salazar's business account.
●​ Salazar filed an action against BPI for the recovery of the debited
amount.

ISSUE

Whether BPI had the right to debit Salazar's account for the amount of the
checks that were deposited without proper endorsement.

HELD

The Supreme Court partially granted BPI's petition. The Court ruled that:

BPI had the right to debit Salazar's account for the amount of the
improperly endorsed checks.

However, BPI was negligent in how it handled the situation, particularly in

failing to give proper notice to Salazar before debiting her account.

Due to this negligence, the Court affirmed the damages awarded to Salazar
by the lower courts.

WHEREFORE, the petition is partially GRANTED. The assailed Decision

dated April 3, 1998 and Resolution dated April 3, 1998 rendered by the
Court of Appeals in CA-G.R. CV No. 42241 are MODIFIED insofar as it
ordered petitioner Bank of the Philippine Islands to return the amount of
Two Hundred Sixty-seven Thousand Seven Hundred and Seven and
70/100 Pesos (P267,707.70) to respondent Annabelle A. Salazar, which
portion is REVERSED and SET ASIDE. In all other respects, the same are
AFFIRMED.

DOCTRINE
In cases involving fraudulent transactions, banks may be held liable for
failing to exercise the highest degree of care and diligence required of
them. When multiple banks are involved in a series of transactions that
result in loss to a depositor, they may be held jointly liable in proportion to
their negligence.

CASE TITLE

Allied Banking Corporation vs. Lim Sio Wan, G.R. No. 133179, March 27,
2008

FACTS

●​ Lim Sio Wan deposited a money market placement with Allied

Banking Corporation.
●​ The placement was fraudulently pre-terminated without Lim Sio
Wan's authorization.
●​ The proceeds were given to an impostor posing as Lim Sio Wan.
●​ A check for the proceeds was deposited in Filipinas Cement
Corporation's account at Metropolitan Bank and Trust Co.
(Metrobank) with a forged endorsement.
●​ Lim Sio Wan filed a case against Allied Bank to recover the proceeds
of her placement.

ISSUE

Whether Allied Banking Corporation and other involved banks are liable for
the loss incurred by Lim Sio Wan due to the fraudulent pre-termination and
encashment of her money market placement.

HELD

The Supreme Court ruled that both Allied Banking Corporation and
Metrobank are liable to pay Lim Sio Wan. The Court ordered them to pay in
a 60:40 ratio, with Allied Bank bearing the larger share of liability.
Additionally, Producers Bank was ordered to reimburse Allied Bank and
Metrobank for the amounts they were ordered to pay.
WHEREFORE, premises considered, the decision appealed from is
MODIFIED. Judgment is rendered ordering and sentencing
defendant-appellant Allied Banking Corporation to pay sixty (60%) percent
and defendant-appellee Metropolitan Bank and Trust Company forty (40%)
of the amount of P1,158,648.49 plus 12% interest per annum from March
16, 1984 until fully paid. The moral damages, attorney’s fees and costs of
suit adjudged shall likewise be paid by defendant-appellant Allied Banking
Corporation and defendant-appellee Metropolitan Bank and Trust Company
in the same proportion of 60-40. Except as thus modified, the decision
appealed from is AFFIRMED.

SO ORDERED.

Additionally and by way of MODIFICATION, Producers Bank is hereby

ordered to pay Allied and Metrobank the aforementioned amounts. The
liabilities of the parties are concurrent and independent of each other.

DOCTRINE

For consignation to be valid, the debtor must first make a valid tender of
payment, unless the creditor is either absent or unwilling to accept
payment. Consignation without prior tender of payment is generally
ineffective.

CASE TITLE

Elizabeth Del Carmen vs. Spouses Restituto Sabordo and Mima

Mahilum-Sabordo G.R. No.: 181723

FACTS

The case involves a dispute over the repurchase of two parcels of land
(Lots 506 and 514) previously owned by the Suico spouses.

The respondents, Spouses Restituto Sabordo and Mima Mahilum-Sabordo,

acquired these lots.
Elizabeth Del Carmen, the petitioner and one of the heirs of Toribio Suico,
filed a complaint seeking to compel the respondents and Republic Planters
Bank to interplead regarding the payment for the repurchase of the lots.

The Regional Trial Court dismissed the complaint, and this decision was
affirmed by the Court of Appeals.

ISSUE

Whether the petitioner, Elizabeth Del Carmen, has the right to compel the
respondents and Republic Planters Bank to interplead regarding the
payment for the repurchase of the disputed lots

HELD

No, the consignation was not valid. The Supreme Court held that a valid
tender of payment is generally a prerequisite to consignation. The
exceptions to this rule, such as the creditor's absence or refusal to accept
payment, were not present in this case. Therefore, the Suico heirs'
consignation without prior tender of payment was ineffective.

WHEREFORE, the instant petition is DENIED. The Decision of the Court of

Appeals, dated May 25, 2007, and its Resolution dated January 24, 2008,
both in CA-G.R. CV No. 75013, are AFFIRMED.

DOCTRINE

The Supreme Court reaffirmed that while parties to a loan agreement have
wide latitude to stipulate interest rates under Central Bank Circular No. 905
s. 1982, unconscionable interest rates may still be declared illegal.
Stipulations authorizing iniquitous or unconscionable interests are contrary
to morals and are illegal. In this case, the Court held that a stipulated
interest rate of 5% per month (or 60% per annum) is excessive,
unconscionable, contrary to morals, and thus illegal. Such a rate is void ab
initio for violating Article 1306 of the Civil Code.

CASE TITLE
 Leonardo Bognot vs. RRI Lending Corporation (G.R. No. 180144,
September 24, 2014)

FACTS

Leonardo Bognot and his brother Rolando obtained a P500,000 loan from
RRI Lending Corporation in 1996.

The loan was renewed several times.

When the loan remained unpaid, RRI Lending Corporation filed a complaint
for a sum of money against the Bognot siblings.

The Regional Trial Court ruled in favor of RRI Lending Corporation,

ordering the Bognot siblings to pay the loan amount plus interest and
penalties.

The Court of Appeals affirmed this decision.

ISSUE

Whether the stipulated interest rate of 5% per month (60% per annum) in
the promissory note is legal and enforceable.

HELD

The Supreme Court partially granted the petition. It modified the nature of
liability from solidary to joint and reduced the interest rate from 5% monthly
to 12% annually. The Court held that the stipulated interest rate of 5% per
month was excessive, unconscionable, contrary to morals, and thus illegal
and void ab initio.

WHEREFORE, premises considered, the Decision dated March 28, 2007

of the Court of Appeals in CA-G.R. CV No. 66915 is hereby AFFIRMED
with MODIFICATION, as follows:

1. The petitioner Leonardo A. Bognotand his brother, Rolando A. Bognot

are JOINTLY LIABLE to pay the sum of ₱500,000.00 plus 12% interest per
annum from December 3, 1997 until fully paid.
2. The rest of the Court of Appeals' dispositions are hereby AFFIRMED.

DOCTRINE

In cases involving monetary obligations, courts have the authority to reduce

iniquitous or unconscionable interest rates. When stipulated interest rates
are excessive, they may be equitably reduced to reasonable levels.

CASE TITLE

Rodrigo Rivera vs. Spouses Salvador C. Chua and Violeta S. Chua, G.R.
Nos. 184458/184472, January 14, 2015

FACTS

The case originated from a collection of sum of money suit filed by

Spouses Salvador and Violeta Chua against Rodrigo Rivera. The suit was
based on a promissory note for P120,000 signed by Rivera. The lower
courts ruled in favor of the Spouses Chua, finding the promissory note
valid. The Court of Appeals affirmed Rivera's liability but reduced the
stipulated interest rate from 60% to 12% per annum.

ISSUE

Whether the interest rate stipulated in the promissory note should be

upheld or reduced.

HELD

The Supreme Court held that the stipulated 5% monthly interest rate
(equivalent to 60% per annum) was deemed iniquitous and
unconscionable. The Supreme Court reduced the interest rate to 12% per
annum, aligning with the prevailing jurisprudence on equitable interest
rates.

WHEREFORE, the petition in G.R. No. 184458 is DENIED. The Decision of

the Court of Appeals in CA-G.R. SP No. 90609 is MODIFIED.

DOCTRINE
Rescission under Article 1191 of the Civil Code is a principal action
immediately available to a party when the other party breaches a reciprocal
obligation. It is not subject to the subsidiary nature of rescission under
Article 1383.

In cases of rescission, parties must return everything they have received as

a result of the contract, as mandated by Article 1385 of the Civil Code.

To constitute fraud under Article 1338 of the Civil Code, the words and
machinations must be so insidious or deceptive that the party induced to
enter into the contract would not have agreed to be bound by its terms if
they had been aware of the truth.

CASE TITLE

The Wellex Group, Inc. vs. U-Land Airlines, Co., Ltd., G.R. No. 167519,
January 14, 2015

FACTS

The Wellex Group, Inc. (Wellex) and U-Land Airlines, Co., Ltd. (U-Land)
entered into a Memorandum of Agreement (MOA) for Wellex to sell shares
in Air Philippines International Corporation (APIC) and Philippine Estates
Corporation (PEC) to U-Land.

The parties were required to execute a Share Purchase Agreement within a

specified timeframe, but failed to do so.

U-Land remitted $7,499,945 to Wellex as part of the agreement.

When no agreement was reached, U-Land sought rescission of the MOA

and the return of the funds.

ISSUE

Whether the rescission of the Memorandum of Agreement between Wellex

and U-Land is valid, and whether U-Land is entitled to the return of the
funds remitted to Wellex.

HELD
The Supreme Court affirmed the lower courts' rulings in favor of U-Land,
granting the rescission of the MOA and denying Wellex's petition. The
Court held that:

The rescission sought by U-Land was valid under Article 1191 of the Civil
Code, as it was based on Wellex's failure to comply with its obligations
under the MOA.

As a consequence of the rescission, both parties must return what they

have received from the contract. Therefore, Wellex is obligated to return the
$7,499,945 remitted by U-Land.

The Court found no evidence of fraud on U-Land's part that would

invalidate the rescission.

WHEREFORE, the petition is DENIED. The Decision of the Regional Trial

Court in Civil Case No. 99-1407 and the Decision of the Court of Appeals in
CA-G.R. CV No. 74850 are AFFIRMED. Costs against petitioner The
Wellex Group, Inc.

DOCTRINE

A valid tender of payment requires a fusion of intent, ability, and capability

to make good such offer, which must be absolute and cover the amount
due. While a check is not considered legal tender and a creditor may validly
refuse it if tendered as payment, a creditor who accepts a fully funded
check after the debtor's manifestation that it is given to settle an obligation
is estopped from later denouncing the efficacy of such tender.

CASE TITLE

Far East Bank and Trust Co. vs. Diaz Realty, Inc. GR. No. 138588, August
23, 2001

FACTS

In 1973, Diaz & Co. secured a ₱720,000 loan from Pacific Banking
Corporation (PaBC) with a real estate mortgage, initially at 12% interest,
later raised to 20%. In 1986, Far East Bank & Trust Co. (FEBTC) acquired
the loan without informing Diaz Realty until 1988.

On December 14, 1988, Diaz Realty tendered a ₱1,450,000 check to settle

the debt, but FEBTC directed them to deposit it pending approval. FEBTC
later suggested converting it into a money market placement, which
matured on April 14, 1989. With no further instructions, Diaz Realty sued
FEBTC in the RTC of Davao City.

ISSUE

Whether Diaz Realty's tender of payment through a check constituted a

valid tender of payment, thereby extinguishing its loan obligation to FEBTC.

HELD

Yes, Diaz Realty's tender of payment was valid. The Supreme Court held
that while a check is not considered legal tender and a creditor may validly
refuse it if tendered as payment, a creditor who accepts a fully funded
check after the debtor's manifestation that it is given to settle an obligation
is estopped from later denouncing the efficacy of such tender. In this case,
FEBTC's actions—advising Diaz Realty to deposit the check and later
suggesting its conversion into a money market placement—constituted
acceptance of the tender of payment. Therefore, Diaz Realty's obligation
was extinguished upon such tender.

WHEREFORE, the Petition is hereby DENIED. The assailed Decision of

the Court of Appeals is AFFIRMED with the following modifications:
Respondent Diaz Realty Inc. is ORDERED to pay Far East Bank and Trust
Co. its principal loan obligation in the amount of P1,067,000, with interest
thereon computed at 20 percent per annum until November 14, 1988, less
any interest payments made to PaBC, petitioner's assignor. Thereafter,
interest shall be computed at 12 percent per annum until fully paid.

DOCTRINE
A valid tender of payment requires the debtor to show a clear intent and
readiness to settle the obligation, accompanied by an actual offer of the
exact amount due. While checks are generally not considered legal tender,
if the creditor accepts the check without objection, it may constitute valid
payment.

CASE TITLE

Jaime B. Biana vs. George Gimenez, GR. No. 132768, September 9, 2005

FACTS

Mendones won a labor case against Gimenez and was awarded ₱1,520
plus ₱8 daily until reinstatement. A writ of execution led to the auction of
Gimenez’s land, with Mendones as the highest bidder. Gimenez attempted
to redeem the property with a ₱4,000 check, but the sheriff refused,
insisting on cash. The sheriff then issued a final deed of sale to Mendones.
Gimenez filed a petition, and the RTC ruled in his favor, ordering
acceptance of the payment and nullifying the sale. The Court of Appeals
affirmed, prompting Biana, who acquired Mendones’ rights, to elevate the
case to the Supreme Court.

ISSUE

Whether Gimenez's tender of a check for redemption constituted a valid

tender of payment.

HELD

The Supreme Court held that while checks are generally not considered
legal tender, the creditor's acceptance of the check without timely objection
can validate the payment. In this case, the sheriff's refusal to accept the
check was unjustified, especially since there was no indication that the
check would not be honored. Therefore, Gimenez's tender of payment was
valid, and he retained the right to redeem the property.

WHEREFORE, the instant petition is DENIED and the assailed Decision

and Resolution of the Court of Appeals AFFIRMED in toto.
 DOCTRINE

When a government agency acts in good faith and in compliance with a

final court judgment in an expropriation case, it cannot be held liable to pay
just compensation again to a different party claiming ownership of the same
property.

CASE TITLE

National Power Corporation vs. Lucman M. Ibrahim, G.R. No. 175863,

February 18, 2015

FACTS

The National Power Corporation (NPC) expropriated a parcel of land for its
Agus II Hydroelectric Project.

NPC paid compensation to Macapanton K. Mangondato based on a final

court decision in an expropriation case.

Later, the Ibrahims and Maruhoms filed a case claiming they were the true
owners of the land and sought compensation from the NPC.

The lower courts ruled in favor of the Ibrahims and Maruhoms, ordering
NPC to pay compensation again, finding that NPC acted in bad faith.

ISSUE

Whether NPC's payment to Mangondato, who was in possession of the

credit, extinguished its obligation to the rightful owners, the Ibrahim heirs.

HELD

Yes, NPC's payment to Mangondato, made in good faith, extinguished its

obligation. The Supreme Court held that under Article 1242 of the Civil
Code, payment made in good faith to a person in possession of the credit
releases the debtor. In this case, NPC reasonably believed Mangondato
was the rightful owner, as he possessed the title and was in possession of
the land. Therefore, NPC's payments to Mangondato, made without
knowledge of any other claimants, discharged its obligation.
WHEREFORE, premises considered, the instant petition is GRANTED. The
Decision dated 24 June2005 and Resolution dated 5 December 2006 of the
Court of Appeals in CA-G.R. CV No. 68061 is hereby SET ASIDE. The
Decision dated 16 April 1998 of the Regional Trial Court in Civil Case No.
967-93 is MODIFIED in that petitioner is absolved from any liability in that
case in favor of the respondents Lucman M. Ibrahim, Atty. Omar G.
Maruhom, Elias G. Maruhom, Bucay G. Maruhom, Mamod G. Maruhom,
Farouk G. Maruhom, Hidjara G. Maruhom, Rocania G. Maruhom, Potrisam
G. Maruhom, Lumba G. Maruhom, Sinab G. Maruhom, Acmad G.
Maruhom, Solayman G. Maruhom, Mohamad M. Ibrahim and Caironesa M.
Ibrahim. Civil Case No. 967-93 is DISMISSED as against petitioner.

DOCTRINE

A debtor's payment to a third person designated by the creditor is valid and

extinguishes the obligation.

The case affirms that when a party's obligation has been extinguished by
payment, they cannot be held liable for further claims related to that
obligation.

Additionally, the award of moral and exemplary damages requires proof of

bad faith or malice.

CASE TITLE

Dela Cruz vs. Marie Concepcion, G.R. No. 172825, October 11, 2012

FACTS

Spouses Miniano B. Dela Cruz and Leta L. Dela Cruz (petitioners) entered
into a Contract to Sell for a house and lot with Ana Marie Concepcion
(respondent).

The petitioners filed a Complaint for Sum of Money with Damages against
the respondent in the Regional Trial Court (RTC) of Antipolo, Rizal,
claiming unpaid obligations.
The RTC dismissed the case and awarded moral damages and attorney's
fees to the respondent.

The Court of Appeals (CA) affirmed the dismissal but deleted the award of
damages.

ISSUE

Whether Concepcion's payment to Adoracion Losloso, as directed by the

Dela Cruz spouses, effectively extinguished her obligation under the
Contract to Sell.

HELD

Yes, the payment to Losloso extinguished Concepcion's obligation. The

Supreme Court held that when a debtor pays a third person designated by
the creditor, the obligation is extinguished. In this case, the Dela Cruz
spouses authorized Losloso to receive payments on their behalf, making
Concepcion's payment valid. Furthermore, the Court found no basis for the
additional ₱209,000 claim, as the Dela Cruz spouses failed to substantiate
it. The award of moral and exemplary damages to Concepcion was
deemed proper due to the unfounded and malicious nature of the Dela
Cruz spouses' claim.

WHEREFORE, premises considered, the petition is DENIED for lack of

merit. The Court of Appeals Decision dated March 31, 2005 and Resolution
dated May 24, 2006 in CA-G.R. CV No. 83030, are AFFIRMED.

DOCTRINE

The Construction Industry Arbitration Commission (CIAC) possesses

jurisdiction over disputes arising from construction contracts between
parties, including government-owned and controlled corporations (GOCCs).

Claims for additional costs due to foreign exchange differentials are valid
when supported by contractual provisions and prevailing economic
conditions
 CASE TITLE

Hydro Resources vs. NIA, GR. No. 160215, November 10, 2004

FACTS

In 1978, NIA awarded Hydro Resources Contractors Corporation (Hydro) a

contract for civil works on the Magat River Multi-Purpose Project.

After completing the project, Hydro claimed additional payment due to

foreign exchange differentials, which NIA refused.

Hydro filed for arbitration with the Construction Industry Arbitration

Commission (CIAC), which ruled in Hydro's favor.

NIA appealed to the Court of Appeals, which reversed the CIAC decision.

Hydro then appealed to the Supreme Court.

ISSUE

Whether Hydro was entitled to additional payment from NIA due to foreign
exchange differentials as per their contract for the Magat River
Multi-Purpose Project.

HELD

The Supreme Court held that CIAC had jurisdiction over the dispute, as it
arose from a construction contract involving a GOCC. The Court also found
that Hydro's claim had not been prescribed, as the cause of action accrued
only upon NIA's denial of the claim, and Hydro promptly sought arbitration
thereafter. The Court reinstated CIAC's decision, awarding Hydro
compensation for the foreign exchange differentials incurred due to the
peso devaluation during the project period.

WHEREFORE, the petition is GRANTED. The Decision of the Court of

Appeals in CA-G.R. SP No. 44527 dated October 29, 2002 and the
Resolution dated September 24, 2003 are REVERSED and SET ASIDE.
The Decision of the Construction Industry Arbitration Commission dated
June 10, 1997 in CIAC Case No. 18-94 is REINSTATED.
 DOCTRINE

Compensation is a recognized mode of extinguishing obligations, subject to

specific conditions outlined in the Civil Code.

Banks have a fiduciary duty to treat depositors' accounts with meticulous

care, regardless of the amount involved, due to the public interest nature of
banking.

CASE TITLE

Citibank vs. Sabeniano, GR. No. 156132, February 6, 2007

FACTS

Modesta R. Sabeniano filed a complaint against Citibank, N.A. and FNCB

Finance for accounting, sum of money, and damages.

Sabeniano claimed that the petitioners refused to return her deposits and
money market placements.

The petitioners argued that Sabeniano had outstanding loans which were
offset against her accounts.

The case involved complex financial transactions, including loans, money

market placements, and bank accounts.

ISSUE

Whether the offsetting of Sabeniano's accounts against her outstanding

loans was valid and legal.

HELD

The Supreme Court partially granted the petition, affirming with modification
the Court of Appeals decision. The Court's ruling included the following
points:

●​ Some of the offsetting was deemed valid under the principle of

compensation.
 ●​ However, the remittance and application of Sabeniano's dollar
accounts from Citibank-Geneva were declared illegal and void.
●​ The Court emphasized the fiduciary nature of banking and the high
standards of integrity and performance required of banks.
●​ It reiterated that banks must treat all accounts with meticulous care,
regardless of the amount involved, and must record every transaction
accurately and promptly.

IN VIEW OF THE FOREGOING, petitioners’ Motion for Partial

Reconsideration of this Court’s Decision, dated 16 October 2006, and
respondent’s Motion for this Court to declare the same Decision already
final and executory, are both DENIED for lack of merit.

DOCTRINE

A consignee is liable for demurrage charges incurred due to the failure to

promptly retrieve cargo from the shipping company's containers, as
stipulated in the bill of lading and applicable tariffs.

CASE TITLE

Telengtan Brothers & Sons, Inc. vs. United States Lines, Inc. GR. No.
172284, February 28, 2006

FACTS

United States Lines, Inc. (respondent) filed a complaint against Telengtan

Brothers & Sons, Inc. (petitioner) seeking payment for demurrage charges.

The charges were incurred when the petitioner failed to withdraw its goods
from shipping containers within the 10-day free period.

The petitioner filed a counterclaim alleging that the respondent improperly

unloaded and stored the goods in warehouses without consent.

The Regional Trial Court ruled in favor of the respondent, ordering the
petitioner to pay demurrage charges, interest, attorney's fees, and
exemplary damages.
The Court of Appeals affirmed this decision.

ISSUE

Whether Telengtan is liable for the demurrage charges claimed by U.S.

Lines.

HELD

The Supreme Court affirmed the decisions of the RTC and CA, holding
Telengtan liable for the demurrage charges. The Court emphasized that
Telengtan's failure to promptly retrieve its cargo resulted in the accrual of
demurrage charges as stipulated in the bill of lading and applicable tariffs.

WHEREFORE, the petition is DENIED and the challenged decision of the

Court of Appeals in CA-G.R. CV No. 18349 AFFIRMED. Costs against
petitioner.

DOCTRINE

The lessor is primarily liable for the payment of VAT on lease transactions,
but may choose to pass it on to the lessee or absorb it.

Extraordinary inflation, which could warrant rental adjustments, exists when

there is an unusual decrease or increase in the purchasing power of the
Philippine currency that could not have been reasonably foreseen or was
manifestly beyond the contemplation of the parties at the time of
establishing the obligation.

CASE TITLE

Almeda vs. Bathala Marketing Industries, Inc. GR. No. 150806, January 28,
2008

FACTS

Eufemia and Romel Almeda (petitioners) and Bathala Marketing Industries,

Inc. (respondent) were involved in a dispute over the interpretation of
certain provisions in their lease contract. The respondent filed an action for
declaratory relief to determine the correct interpretation of clauses related
to VAT payment and rental adjustment due to inflation. The Regional Trial
Court ruled in favor of the respondent, which was affirmed with modification
by the Court of Appeals.

ISSUE

1.​ Whether the respondent (lessee) was liable for VAT payment under
the lease contract
2.​ Whether there was extraordinary inflation to warrant rental
adjustment

HELD

1.​ The Supreme Court held that the respondent is not liable for the 10%
VAT, as the lease contract did not stipulate that the lessee would
shoulder this tax. The lessor cannot unilaterally impose such charges
without contractual basis.
2.​ The Court also held that the respondent is not liable for rental
adjustments, as there was no evidence of extraordinary inflation or
devaluation that would justify such an increase under Article 1250 of
the Civil Code.

WHEREFORE, premises considered, the petition is DENIED. The Decision

of the Court of Appeals in CA-G.R. CV No. 67784, dated September 3,
2001, and its Resolution dated November 19, 2001, are AFFIRMED.

DOCTRINE

Escalation clauses in contracts are not void per se. However, an escalation
clause that grants the creditor an unbridled right to adjust the interest
independently and upwardly, completely depriving the debtor of the right to
assent to an important modification in the agreement, is void.

CASE TITLE

Equitable PCI Bank vs. Ng Sheung Ngor, GR. No. 171545, December 19,
2007
 FACTS

Ng Sheung Ngor, Ken Appliance Division, Inc., and Benjamin E. Go

(respondents) filed an action against Equitable PCI Bank (petitioner) for
annulment and/or reformation of documents and contracts. The
respondents claimed that the bank induced them to avail of credit facilities
with unfair escalation clauses. The Regional Trial Court (RTC) initially ruled
in favor of the respondents, awarding damages and invalidating the
escalation clause. Equitable PCI Bank attempted to appeal but was denied
due course. The bank then filed a petition for certiorari with the Court of
Appeals, which was dismissed.

ISSUE

Whether the escalation clause in the loan agreement between Equitable

PCI Bank and the respondents is valid and enforceable.

HELD

The Supreme Court held that the escalation clauses in the promissory
notes are void for violating the principle of mutuality of contracts. Such
clauses, which grant the lender the power to unilaterally increase interest
rates without the borrower's consent, are contrary to Article 1308 of the
Civil Code, which mandates that the validity or compliance of a contract
cannot be left to the will of one party.

ACCORDINGLY, the petition is hereby GRANTED.

The October 28, 2005 decision and February 3, 2006 resolution of the
Court of Appeals in CA-G.R. SP No. 83112 are hereby REVERSED and
SET ASIDE.

The March 24, 2004 omnibus order of the Regional Trial Court, Branch 16,
Cebu City in Civil Case No. CEB-26983 is hereby ANNULLED for being
rendered with grave abuse of discretion amounting to lack or excess of
jurisdiction. All proceedings undertaken pursuant thereto are likewise
declared null and void.
The March 1, 2004 order of the Regional Trial Court, Branch 16 of Cebu
City in Civil Case No. CEB-26983 is hereby SET ASIDE. The appeal of
petitioners Equitable PCI Bank, Aimee Yu and Bejan Lionel Apas is
therefore given due course.

The February 5, 2004 decision of the Regional Trial Court, Branch 16 of

Cebu City in Civil Case No. CEB-26983 is accordingly SET ASIDE.

DOCTRINE

For consignation to be valid and effective in extinguishing an obligation, the

debtor must provide proper notice to the creditor as required by law.

CASE TITLE

Dalton vs. FG.R. and Development Corp, GR. No. 172577, January 19,
2011

FACTS

Soledad Dalton was leasing a portion of property owned by Flora R. Dayrit.

The property was later sold to FGR Realty and Development Corporation.

Dayrit and FGR stopped accepting rental payments in an attempt to

terminate the lease.

Dalton consigned the rental payments with the court but failed to properly
notify the respondents of the consignation.

ISSUE

Whether the consignation of rental payments by Dalton was valid and

sufficient to prevent the termination of the lease.

HELD

The Supreme Court held that Dalton's consignation was invalid due to
non-compliance with the mandatory requisites for a valid consignation. The
Court emphasized that strict compliance with these requisites is necessary,
and substantial compliance is not sufficient.
WHEREFORE, the Court DENIES the petition. The Court AFFIRMS the 9
November 2005 Decision and 10 April 2006 Resolution of the Court of
Appeals in CA-G.R. CV No. 76536.

DOCTRINE

When a third party asserts ownership over properties subject to a chattel

mortgage foreclosure, the court must give due course to the third-party
claim and allow intervention to protect the third party's interests.

In cases of conflicting claims over personal property, the party with a prior
perfected lien, such as a chattel mortgage, generally has a superior right
over subsequent claimants, including lessors asserting a lien for unpaid
rentals.

CASE TITLE

Fort Bonifacio Development Corp. vs. Yllas Lending Corp., GR. No.
158997, October 6, 2008

FACTS

Fort Bonifacio Development Corporation (FBDC) leased property to

Tirreno, Inc.

Tirreno defaulted on lease payments, leading FBDC to terminate the lease

and take possession of Tirreno's properties on the premises.

Later, Yllas Lending Corporation filed for foreclosure of a chattel mortgage

on the same properties that Tirreno had mortgaged to them.

FBDC filed a third-party claim and a motion to intervene in the foreclosure

proceedings.

The trial court dismissed FBDC's third-party claim and denied their motion
to intervene.

ISSUE
Whether FBDC's claim over the equipment for unpaid rentals is superior to
Yllas Lending Corporation's rights as a chattel mortgagee.

HELD

The Supreme Court held that Yllas Lending Corporation's rights as a

chattel mortgagee were superior to FBDC's claim for unpaid rentals. The
Court emphasized that a chattel mortgage, once registered, creates a valid
lien on the mortgaged property, which takes precedence over subsequent
claims. FBDC's remedy for unpaid rentals should be directed against
Tirreno, Inc., not the equipment subject to the chattel mortgage.

WHEREFORE, we GRANT the petition. We SET ASIDE the Orders dated 7

March 2003 and 3 July 2003 of Branch 59 of the Regional Trial Court of
Makati City in Civil Case No. 01-1452 dismissing Fort Bonifacio
Development Corporation's Third Party Claim and denying Fort Bonifacio
Development Corporation's Motion to Intervene and Admit Complaint in
Intervention. We REINSTATE Fort Bonifacio Development Corporation's
Third Party Claim and GRANT its Motion to Intervene and Admit Complaint
in Intervention. Fort Bonifacio Development Corporation may hold the
Sheriff liable for the seizure and delivery of the properties subject of this
case because of the lack of an indemnity bond.

DOCTRINE

Pactum commissorium is void for being prohibited by law, regardless of

whether the contracts were freely and voluntarily executed by the parties.

CASE TITLE

Ong vs. Roban Lending Corp., GR. No. 172592, July 9, 2008

FACTS

Petitioner-spouses Wilfredo N. Ong and Edna Sheila Paguio-Ong obtained

loans from respondent Roban Lending Corporation, secured by a real
estate mortgage.
The spouses later executed a Memorandum of Agreement and Dacion in
Payment Agreement to consolidate and restructure their loans.

The petitioners filed a complaint in the Regional Trial Court of Tarlac City to
declare these agreements void for being pactum commissorium.

The RTC dismissed the complaint, which was upheld by the Court of
Appeals.

ISSUE

Whether the Memorandum of Agreement and Dacion in Payment

Agreement constitute pactum commissorium and are therefore void.

HELD

The Supreme Court reversed the lower courts' decisions and ruled in favor
of the petitioners. The Court held that:

The agreements were null and void for being pactum commissorium.

The elements of pactum commissorium were present: (1) there was

property mortgaged as security for payment of the principal obligation, and
(2) there was a stipulation for automatic appropriation by the creditor of the
mortgaged property in case of non-payment.

The alienation of the properties was by way of security, not by way of

satisfying the debt, which is characteristic of a true dacion en pago.

The fact that the contracts were freely and voluntarily executed by the
parties is irrelevant, as pactum commissorium is prohibited by law.

The case was remanded to the lower court for accounting.

WHEREFORE, the challenged Court of Appeals Decision is REVERSED

and SET ASIDE. The Memorandum of Agreement and the Dacion in
Payment executed by petitioner- spouses Wilfredo N. Ong and Edna Sheila
Paguio-Ong and respondent Roban Lending Corporation on February 12,
2001 are declared NULL AND VOID for being pactum commissorium.
 DOCTRINE

The execution of a Deed of Assignment does not automatically extinguish

the debt of the assignor. If the assigned receivables cannot be collected,
the assignor remains liable for the original debt.

CASE TITLE

Lo vs. KJS Eco-Formwork System Phil., Inc., GR. No. 149420, October 8,
2003

FACTS

Sonny Lo (petitioner) purchased scaffolding equipment from KJS

ECO-FORMWORK System Phil., Inc. (respondent).

Lo was unable to pay the full amount for the equipment.

To settle the debt, Lo and KJS executed a Deed of Assignment where Lo

assigned his receivables from Jomero Realty Corporation to KJS.

Jomero Realty Corporation refused to honor the assignment, claiming that

Lo was also indebted to them.

KJS filed a complaint for recovery of the sum of money against Lo.

The trial court dismissed the complaint, but the Court of Appeals reversed
the decision and ordered Lo to pay KJS.

ISSUE

Whether Lo is liable to pay KJS for the unpaid balance of the scaffolding
equipment despite the execution of the Deed of Assignment.

HELD

The Supreme Court held that the assignment of credit was not binding
upon Jomero Realty Corporation because Jomero was neither notified of
nor did it acknowledge the assignment. Therefore, KJS could not collect the
assigned receivables from Jomero. Consequently, Lo remained liable to
KJS for the unpaid balance of the scaffolding equipment.
WHEREFORE, in view of the foregoing, the Decision of the Court of
Appeals dated April 19, 2001 in CA-G.R. CV No. 47713, ordering petitioner
to pay respondent the sum of P335,462.14 with legal interest of 6% per
annum from January 10, 1991 until fully paid is AFFIRMED with
MODIFICATION. Upon finality of this Decision, the rate of legal interest
shall be 12% per annum, inasmuch as the obligation shall thereafter
become equivalent to a forbearance of credit.23 The award of attorney’s
fees is DELETED for lack of evidentiary basis.

DOCTRINE

Tender of payment, to be valid, must be accompanied by an actual offer of

payment in legal tender or must be properly consigned in court if the
creditor refuses to accept it. Mere allegations of uncertainty in the rightful
recipient do not excuse non-payment.

CASE TITLE

Pasricha vs. Don Luis Dison Realty, Inc. GR. No. 136409, March 14, 2008

FACTS

The Pasrichas leased commercial spaces from Don Luis Dison Realty, Inc.
(DLDRI) but stopped paying rent, citing confusion over internal disputes
within DLDRI regarding the rightful recipient of rental payments.

They claimed to have attempted tender of payment but did not deposit the
amount in court through consignation.

DLDRI filed an ejectment case, which was ruled in its favor by the lower
courts, leading to the Pasrichas' appeal to the Supreme Court.

ISSUE

Whether the Pasrichas' alleged tender of payment was valid, thereby

preventing their ejectment.

HELD
The Supreme Court ruled that the Pasrichas’ tender of payment was
invalid. They neither physically tendered payment in legal tender nor
properly consigned the rent with the court. The mere claim of willingness to
pay, without actual payment or consignation, does not exempt a debtor
from default. Consequently, their eviction was justified.

WHEREFORE, premises considered, the petition is DENIED and the

Status Quo Order dated January 18, 1999 is hereby LIFTED. The Decision
of the Court of Appeals dated May 26, 1998 and its Resolution dated
December 10, 1998 in CA-G.R. SP No. 37739 are AFFIRMED.

DOCTRINE

The doctrine of abuse of rights states that a person should not use their
rights in a way that causes injury to another. This principle applies in
contractual relations, where a party's refusal to accept valid payment
without justification can be considered an abuse of rights.

CASE TITLE

. Cinco vs. CA, GR. No. 151903, October 9, 2009

FACTS

Spouses Manuel and Araceli Go Cinco obtained a loan from Maasin

Traders Lending Corporation (MTLC), secured by a mortgage.

To pay off this loan, they applied for a new loan from Philippine National
Bank (PNB).

The spouses authorized Ester Servacio, MTLC's president, to collect the

PNB loan proceeds to settle the MTLC loan.

Servacio refused to collect the proceeds and release the mortgage, leading
to foreclosure proceedings.

The spouses of Go Cinco filed a case for specific performance and

damages.

ISSUE
Whether Servacio's refusal to accept payment and release the mortgage
constitutes an abuse of rights.

HELD

The Supreme Court ruled in favor of the spouses of Go Cinco. The Court
found that Servacio's refusal to accept payment was unjustified and
amounted to an abuse of rights. The Court held that Servacio's actions
were contrary to the principles of good faith and fair dealing in contractual
relations. By refusing to accept valid payment without proper justification,
Servacio abused her rights as a creditor, causing undue harm to the
spouses of Go Cinco.

WHEREFORE, we GRANT the petitioners’ petition for review on certiorari,

and REVERSE the decision of June 22, 2001 of the Court of Appeals in
CA-G.R. CV No. 47578, as well as the resolution of January 25, 2002 that
followed. We REINSTATE the decision dated August 16, 1994 of the
Regional Trial Court, Branch 25, Maasin, Southern Leyte, with the following
MODIFICATIONS:

(1) The respondents are hereby directed to accept the proceeds of the
spouses Go Cinco’s PNB loan, if still available, and to consent to the
release of the mortgage on the property given as security for the loan upon
PNB’s acknowledgment that the proceeds of the loan, sufficient to cover
the total indebtedness to respondent Maasin Traders Lending Corporation
computed as of June 20, 1989, shall forthwith be released;

(2) The award for loss of savings and unrealized profit is deleted;

(3) The award for moral damages is reduced to ₱100,000.00; and

(4) The awards for exemplary damages, attorney’s fees, and expenses of
litigation are retained.

The awards under (3) and (4) above shall be deducted from the amount of
the outstanding loan due the respondents as of June 20, 1989. Costs
against the respondents.
 DOCTRINE

The case establishes that matters involving consignation fall under the
jurisdiction of the Regional Trial Court (RTC) rather than the Housing and
Land Use Regulatory Board (HLURB), as consignation is necessarily
judicial in nature.

CASE TITLE

Spouses Cacayorin vs. Armed Forces and Police Mutual Benefit

Association, Inc. GR. No. 171298, April 15, 2013

FACTS

The Cacayorin spouses entered into a contract to purchase property from

AFPMBAI.

They were unable to pay for the property due to the closure of the Rural
Bank that was supposed to provide their loan.

The Cacayorins filed a complaint for consignation of loan payment,

recovery of title, and cancellation of mortgage annotation against
AFPMBAI, PDIC, and the Register of Deeds of Puerto Princesa City.

AFPMBAI filed a motion to dismiss, which was denied by the Regional Trial
Court.

The Court of Appeals ruled that the case falls under the jurisdiction of the
HLURB.

ISSUE

Whether the Regional Trial Court or the Housing and Land Use Regulatory
Board has jurisdiction over the case involving consignation of loan
payment, recovery of title, and cancellation of mortgage annotation.

HELD

The Supreme Court ruled that the case is properly within the jurisdiction of
the Regional Trial Court. The Court emphasized that consignation is
necessarily judicial in nature and requires court intervention. Therefore, the
RTC, not the HLURB, has jurisdiction over the matter.

WHEREFORE, premises considered, the Petition is GRANTED. The

September 29, 2005 Decision and January 12, 2006 Resolution of the
Court of Appeals in CA-G.R. SP No. 84446 are ANNULLED and SET
ASIDE. The October 16, 2003 and March 19, 2004 Orders of the Regional
Trial Court of Puerto Princesa City, Branch 47, are REINSTATED, and the
case is REMANDED to the said court for continuation of the proceedings.