Business Law

Task Performance
Case Digest

I. Elements of an obligation (Asuncion vs. CA, G.R. NO. 109125,

December 2, 1994)
FACT: Petitioners filed a complaint against Unjiengs, before the
Regional Trial Court alleging that Unjiengs informed Petitioners
that they are offering to sell the premises and are giving them
priority to acquire the same; that during the negotiations, Unjiengs
offered a price of P6-million while Petitioners made a counter offer
of P5-million; that Petitioners thereafter asked the Unjiengs to put
their offer in writing to which request defendants acceded; that in
reply to Unjiengs letter, plaintiffs asked to specify the terms and
conditions of the offer to sell; that when Petitioners did not receive
any reply, they sent another letter; that since defendants failed to
specify the terms and conditions of the offer to sell and because of
information received that defendants were about to sell the
property, Petitioners were compelled to file the complaint to
compel Unjiengs to sell the property to them. Judgment was
rendered in favor of the Unjiengs and against the Petitioners
summarily dismissing the complaint subject to the aforementioned
condition that if the defendants subsequently decide to offer their
property for sale for a purchase price of Eleven Million Pesos or
lower, then the Petitioners has the option to purchase the property
or of first refusal, otherwise, defendants need not offer the property
to the Petitioners if the purchase price is higher than Eleven Million
Pesos. While the case was pending consideration by the SC, the
Unjieng spouses executed a Deed of Sale to the Private
Defendant. Private Defendant wrote a letter to the Petitioners
demanding that the latter vacate the premises. Petitioners replied
to petitioner stating that petitioner brought the property subject to
the notice of lis pendens regarding Civil Case No. 87-41058
annotated on TCT No. 105254/T-881 in the name of the Cu
Unjiengs. The Petitioners filed a Motion for Execution to the RTC
who ordered defendants to execute the necessary Deed of Sale of
 the property in litigation in favor of the Petitioners for the
consideration of P15,000,000.00 and ordering the Register of
Deeds of the City of Manila, to cancel and set aside the title
already issued in favor of Private Defendant. The appellate court,
on appeal to it by Private Defendant, set aside and declared
without force and effect the above questioned orders of the court a
quo. Hence this case.

ISSUE: Whether the plaintiff can compel defendants to execute

the necessary Deed of Sale of the property in litigation in favor of
the plaintiffs who has a right of first refusal?

RULING: NO, The final judgment in in favor to the plaintiff was

merely a “right of first refusal”. The consequence of such a
declaration entails no more than what has heretofore been said. In
fine, if, as it is here so conveyed to us, petitioners are aggrieved by
the failure of private respondents to honor the right of first refusal,
the remedy is not a writ of execution on the judgment, since there
is none to execute, but an action for damages in a proper forum for
the purpose.

II. Classification of obligations – as to basis and enforceability

(Natural Obligations and Civil Obligations)(DBP vs. CONFESSOR,
G.R. NO. L-48889 May 11, 1989)

FACT: On February 10, 1940, spouses Patricio Confesor and

Jovita Villafuerte obtained an agricultural loan from Agricultural
and Industrial Bank, now Development Bank of the Philippines, in
the sum of P2,000, as evidenced by a promissory note of said date
whereby they bound themselves jointly and severally to pay the
amount in ten equal yearly amortizations. As the obligation
remained unpaid even after the lapse if the ten-year period,
Confesor, who was then a member of the Congress of the
Philippines, executed a second promissory note on April 11, 1961,
expressly acknowledging the said loan and promising to pay the
same on or before June 15, 1961. The spouses still failed to pay
the obligation on the specified date. As a result, the DBP filed a
complaint on September 11, 1970 in the City Court of Iloilo City.
 The city court ordered payment from spouses. The CFI of Iloilo
reversed the decision. Hence, this petition.

ISSUE: Whether or not a promissory which was executed in

consideration of a previous promissory note which has already
been barred by prescription is valid.

RULING: Yes, the second promissory note is valid because the

said promissory note is not a mere acknowledgement of the debt
that has prescribed already. Rather, it is a new promise to pay the
debt. A new promise is a new cause of action. Although a debt
barred by prescription is enforceable, a new contract recognizing
and assuming the prescribed debt would be valid and enforceable.

III. Sources of obligation

A. Obligations arising from law (Pelayo V. Lauron 12 Phil. 453)

FACT: Petitioner Pelayo, a physician, rendered a medical

assistance during the child delivery of the daughter-in-law of the
defendants. The just and equitable value of services rendered
by him was P500.00 which the defendants refused to pay
without alleging any good reason. With this, the plaintiff prayed
that the judgment be entered in his favor as against the
defendants for the sum of P500.00 and costs. The defendants
denied all of the allegation of the plaintiff, contending that their
daughter-in-law had died in consequence of the child-birth, and
that when she was alive, she lived with her husband
independently and in a separate house, that on the day she
gave birth she was in the house of the defendants and her stay
there was accidental and due to fortuitous circumstances.

ISSUE: Whether or not the defendants are obliged to pay the

petitioner for the medical assistance rendered to their daughter-
in-law.

RULING: According to Article 1089 of the Old Civil Code (now

1157), obligations are created by law, by contracts, by quasi-
 contracts, by illicit acts and omissions or by those which any
kind of fault or negligence occurs. Obligations arising from law
are not presumed. Those expressly determined in the Code or
in special law, etc., are the only demandable ones. The
rendering of medical assistance in case of illness is comprised
among the mutual obligations to which the spouses are bound
by way of mutual support as provided by the law or the Code.
Consequently, the obligation to pay the plaintiff for the medical
assistance rendered to the defendant’s daughter-in-law must be
couched on the husband. In the case at bar, the obligation of
the husband to furnish his wife in the indispensable services of
a physician at such critical moments is especially established
by the law and the compliance therewith is unavoidable.

B. Obligations arising from contracts (Metropolitan Bank and Trust

Company vs. Ana Grace Rosales and Yo Yuk To, G.R. NO.
183204, January 13, 2014)

FACTS: Petitioner Metrobank is a domestic banking corporation

duly organized and existing under the laws of the Philippines.
Respondent Rosales is the owner of a travel agency while Yo Yuk
To is her mother. In 2000, respondents opened a Joint Peso
Account10 with petitioner’s Pritil-Tondo Branch. In May 2002,
respondent Rosales accompanied her client Liu Chiu Fang, a
Taiwanese National applying for a retiree’s visa from the Philippine
Leisure and Retirement Authority (PLRA), to petitioner’s branch in
Escolta to open a savings account. Since Liu Chiu Fang could
speak only in Mandarin, respondent Rosales acted as an
interpreter for her. On March 3, 2003, respondents opened with
petitioner’s Pritil-Tondo Branch a Joint Dollar Account with an
initial deposit of US$14,000.00. On July 31, 2003, petitioner
issued a “Hold Out” order against respondents’ accounts. On
September 3, 2003, petitioner, through its Special Audit
Department Head Antonio Ivan Aguirre, filed before the Office of
the Prosecutor of Manila a criminal case for Estafa through False
Pretences, Misrepresentation, Deceit, and Use of Falsified
Documents. Respondent Rosales, however, denied taking part in
the fraudulent and unauthorized withdrawal from the dollar account
of Liu Chiu Fang. On December 15, 2003, the Office of the City
 Prosecutor of Manila issued a Resolution dismissing the criminal
case for lack of probable cause. On September 10, 2004,
respondents filed before the RTC of Manila a complaint for Breach
of Obligation and Contract with Damages.

ISSUE: Whether Metrobank breached its contract with

respondents.

RULING: YES. The Court held that Metrobank’s reliance on the

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

In addition to that the Petition is hereby DENIED. The assailed April 2,

2008 Decision and the May 30, 2008 Resolution of the Court of Appeals
in CA-G.R. CV No. 89086 are hereby AFFIRMED.

C. Obligations arising from quasi contract

I. Negotiorum gestio (Adille vs CA, G.R. NO. L-44546
January 29,1988)

FACTS: The property in dispute was originally owned by

Felisa Alzul who got married twice. Her child in the first
marriage was petitioner Rustico Adile and her children in
the second marriage were respondents Emetria Asejo et
al. During her lifetime, Felisa Alzul sodl the property in
pacto de retro with a three-year repurchase period. Felisa
died before she could repurchase the property. During the
redemption period, Rustico Adille repurchased the
property by himself alone at his own expense, and after
that, he executed a deed of extra-judicial partition
representing himself to be the only heir and child of his
mother Felisa. Consequently, he was able to secure title
in his name alone. His half-siblings, herein respondents,
filed a case for partition and accounting claiming that
Rustico was only a trustee on an implied trust when he
redeemed the property, and thus, he cannot claim
exclusive ownership of the entire property.

ISSUE: Whether or not a co-owner may acquire exclusive

ownership over the property held in common. Whether or
nor Rustico had constituted himself a negotiorum gestor

RULING: No. The right to repurchase may be exercised

by a co-owner with respect to his share alone. Although
Rustico Adille redeemed the property in its entirety,
shouldering the expenses did not make him the owner of
all of it. Yes. The petitioner, in taking over the property,
did so on behalf of his co-heirs, in which event, he had
constituted himself a negotiorum gestor under Art 2144 of
the Civil Code, or for his exclusive benefit, in which case,
he is guilty of fraud, and must act as trustee, the
respondents being the beneficiaries, pursuant to Art 1456.
 II. Solutio Indebiti (Andres vs. Manufacturers Hanover &
Tryst Corporation, G.R. NO. 82670 September 15,1989)

FACTS:Andres, using the business name “Irene’s

Wearing Apparel” was engaged in the manufacture of
ladies garments, children’s wear, men’s apparel and
linens for local and foreign buyers. Among its foreign
buyers was Facts of the United [Link] in
August 1980, Facts instructed the First National State
Bank (FNSB) of New Jersey to transfer $10,000 to Irene’s
Wearing Apparel via Philippine National Bank (PNB) Sta.
Cruz, Manila branch. FNSB instructed Manufacturers
Hanover and Trust Corporation (Mantrust) to effect the
transfer by charging the amount to the account of FNSB
with private respondent.

After Mantrust effected the transfer, the payment was not effected
immediately because the payee designated in the telex was only “Wearing
Apparel.” Private respondent sent PNB another telex stating that the
payment was to be made to “Irene’s Wearing Apparel.” On August 28,
1980, petitioner received the remittance of $10,000. After learning about
the delay, Facets informed FNSB about the situation. Facts, unaware that
petitioner had already received the remittance, informed private respondent
and amended its instruction y asking it to effect the payment to Philippine
Commercial and Industrial Bank (PCIB) instead of PNB. Private
respondent, also unaware that petitioner had already received the
remittance, instructed PCIB to pay $10,000 to petitioner. Hence, petitioner
received another $10,000 which was charged again to the account of
Facets with FNSB. FNSB discovered that private respondent had made a
duplication of remittance. Private respondent asked petitioner to return the
second remittance of $10,000 but the latter refused to do so contending
that the doctrine of solution indebiti does not apply because there was
negligence on the part of the respondents and that they were not unjustly
enriched since Facets still has a balance of $49,324.

ISSUE: Whether or not the private respondent has the

right to recover the second $10,000 remittance it had
delivered to petitioner
 HELD: Yes. Art 2154 of the New Civil Code is applicable.
For this article to apply, the following requisites must
concur: 1) that he who paid was not under obligation to do
so; and 2) that payment was made by reason of an
essential mistake of fact.

In addition to that there was a mistake, not negligence, in

the second remittance. It was evident by the fact that both
remittances have the same reference invoice number.

D. Obligations arising from delict (NAPOCOR vs. CA, G.R. NO.

124378, March 8, 2005)

FACT: Office of the President of the Philippines issued

Memorandum Order No. 398 – “Prescribing Measures to
Preserve the Lake Lanao Watershed, To Enforce the
Reservation of Areas Around the Lake Below Seven Hundred
And Two Meters Elevation, and for Other Purposes.” Said
decree instructed the NPC to build the Agus Regulation Dam at
the mouth of Agus River in Lanao del Sur, at a normal
maximum water level of Lake Lanao at 702 meters elevation.
Pursuant thereto, petitioner built and operated the said dam in
1978.

Private respondents Hadji Abdul Carim Abdullah and Caris

Abdullah were owners of fishponds in Barangay Bacong,
Municipality of Marantao, Lanao del Sur, while private
respondents Hadji Ali Langco and Diamael Pangcatan had their
fishponds built in Poona- Marantao, also in the same province.
All of these fishponds were sited along the Lake Lanao shore.

In October and November of 1986, all the improvements were

washed away when the water level of the lake escalated and
the subject lakeshore area was flooded. Private respondents
blamed the inundation on the Agus Regulation Dam built and
operated by the NPC
 In 1978. They theorized that NPC failed to increase the outflow
of water even as the water level of the lake rose due to the
heavy rains.

Respondents wrote separate letters to the NPC’s Vice-

President, a certain “R.B. Santos,” who was based in Ditucalan,
Iligan City. They sought assistance and compensation for the
damage suffered by each of them. NPC retorted that visible
monuments and benchmarks indicating the 702-meter elevation
had been established around the lake from 1974 to 1983, which
should have served as a warning to the private respondents not
to introduce any improvements below the 702-meter level as
this was outlawed.

Left with no other recourse, the private respondents filed a

complaint for damages before the RTC of Marawi City

DECISION OF LOWER COURT:

(1)RTC – Marawi City: judgment is hereby rendered in favor of

respondents. (2) CA: affirmed RTC.

ISSUE: Whether or not the Court of Appeals erred in affirming

the trial court’s verdict that petitioner was legally answerable for the
damages endured by the private respondents.

RULING:

No, NPC is liable.

With respect to its job to maintain the normal maximum level of

the lake at 702 meters, the Court of Appeals, echoing the trial
court, observed with alacrity that when the water level rises due
to the rainy season, the NPC ought to release more water to
the Agus River to avoid flooding and prevent the water from
going over the maximum level.

In the absence of any clear explanation on what other factors

could have explained the flooding in the neighboring properties
 of the dam, it is fair to reasonably infer that the incident
happened because of want of care on the part of NPC to
maintain the water level of the dam within the benchmarks at
the maximum normal lake elevation of 702 meters. An
application of the doctrine of res ipsa loquitur, the thing speaks
for itself, comes to fore.

Where the thing which causes injury is shown to be under the

management of the defendant, and the accident is such as in
the ordinary course of things does not happen if those who
have the management use proper care, it affords reasonable
evidence, in the absence of an explanation by the defendant,
that the accident arose from want of care.

Although the dam was built in 1978, the benchmarks were

installed only in July and August of 1984 and that apparently,
many had already worn-out, to be replaced only in October of
1986. At that time, many farms and houses were already
swamped and many fishponds, including those of the private
respondents, damaged.

Article 2176 of the New Civil Code provides that “whoever by

act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault
or negligence, if there is no pre-existing contractual relation
between the parties, is called a quasi- delict.”

Both the appellate court and the trial court uniformly found that
it was such negligence on the part of NPC which directly
caused the damage to the fishponds of private respondents.

VI. Nature and effects of obligation

A. Delay

1. Mora Solvendi (Santos Ventura Hocorma Foundation, INC., vs.

Santos, G.R. No. 153004, November 5,2004)
FACT:

On October 26, 1990, the parties executed a Compromise

Agreement wherein Foundation shall pay Santos P14 Million in
the following manner: (a) P1 Million immediately upon the
execution of this agreement; and (b) the balance of P13 Million
shall be paid, whether in lump sum or in installments, at the
discretion of the Foundation, within a period of not more than
two (2) years from the execution of this agreement.

In compliance with the Compromise Agreement, respondent

Santos moved for the dismissal of the aforesaid civil cases. He
also caused the lifting of the notices of lis pendens on the real
properties involved. For its part, petitioner SVHFI, paid P1
million to respondent Santos, leaving a balance of P13 million.
Subsequently, petitioner SVHFI sold to Development Exchange
Livelihood Corporation two real properties, which were
previously subjects of lis pendens. Discovering the disposition
made by the petitioner, respondent Santos sent a letter to the
petitioner demanding the payment of the remaining P13 million,
which was ignored by the latter. Respondent Santos sent
another letter to petitioner inquiring when it would pay the
balance of P13 million. There was no response from petitioner.
Consequently, respondent Santos applied with the Regional
Trial Court of Makati City for the issuance of a writ of execution.

On June 2, 1995, Santos and Riverland Inc. filed a Complaint

for Declaratory Relief and Damages alleging delay on the part
of SVHFI in paying the balance. They further alleged that under
the Compromise Agreement, the obligation became due on
October 26, 1992, but payment of the remaining balance was
effected only on November 22, 1994. Thus, respondents
prayed that petitioner be ordered to pay legal interest on the
obligation, penalty, attorney’s fees and costs of litigation. SVHFI
alleged that the legal interest on account of fault or delay was
not due and payable, considering that the obligation had been
superseded by the compromise agreement. Moreover, SVHFI
argued that absent a stipulation, Santos must ask for judicial
intervention for purposes of fixing the period.

ISSUE:

Whether or not SVHFI incurred in delay based on the

compromise agreement and thereby liable for legal interest

RULING:

Yes. SVHFI is liable for legal interest as penalty on account of

delay. The general rule is that a compromise has upon the
parties the effect and authority of res judicata, with respect to
the matter definitely stated therein, or which by implication from
its terms should be deemed to have been included therein. This
holds true even if the agreement has not been judicially
approved. Article 1169 of the New Civil Code provides that
those obliged to deliver or to do something incur in delay from
the time the obligee judicially or extrajudicially demands from
them the fulfillment of their obligation.

In order for the debtor to be in default, it is necessary that the

following requisites be present: (1) that the obligation be
demandable and already liquidated; (2) that the debtor delays
performance; and (3) that the creditor requires the performance
judicially or extrajudicially.

In the case at bar, the obligation was already due and

demandable after the lapse of the two-year period from the
execution of the contract. The Compromise Agreement was
entered into by the parties on October 26, 1990. It was judicially
approved on September 30, 1991. Applying existing
 jurisprudence, the compromise agreement as a consensual
contract became binding between the parties upon its execution
and not upon its court approval. From the time a compromise is
validly entered into, it becomes the source of the rights and
obligations of the parties thereto. Hence, the two-year period
must be counted from October 26, 1990. Verily, the petitioner is
liable for damages for the delay in the performance of its
obligation. This is provided for in Article 1170 of the New Civil
Code.

2. Mora Accipendi (Manuel vs. CA, G.R. NO. 95469 July 25,1991)

FACT:

This case had its inception in a complaint for ejectment filed by

herein private respondents against herein petitioner before the
Metropolitan Trial Court of Manila, for non-payment of rentals
on an apartment unit owned by private respondents and rented
by petitioner. The private respondents are the owners of an
apartment unit which was rented by the petitioner on a month to
month basis for a monthly rental of P466.00 payable in
advance; that the petitioner failed to pay the corresponding
rentals for the month of May 1987 up to the filing of the
complaint on August 31, 1987; that on July 9, 1987, private
respondents, through their counsel, sent a demand letter to the
petitioner requiring him to pay his rentals in arrears and to
vacate the leased premises within five (5) days from receipt
thereof, otherwise private respondents will be constrained to file
the appropriate legal action against him; that the demand letter
of private respondents' counsel was received by the petitioner
on July 14, 1987; that in response thereto, the petitioner
addressed a letter dated July 15, 1987 to private respondent
Carmen de Jesus, furnishing a copy thereof to her counsel,
stating that the amount of rentals, which the private
 respondents allegedly refused to receive, had been deposited
at United Coconut Planters Bank, Taft Avenue Branch, with
Account No. 8893 in the name of the petitioner's son, Mario
Manuel, and could be withdrawn upon notice of payment; that
in order to collect the said rentals allegedly deposited with the
bank, the private respondents' counsel sent a letter dated
August 14, 1987 to the petitioner, requesting the payment of the
unpaid rentals to his (private respondents' counsel) office; that
the said letter was received by the petitioner on August 18,
1987, and, instead of complying with private respondents'
counsel's request, the petitioner addressed a letter dated
August 24, 1987 to the private respondents' counsel requesting
that the rentals in arrears be paid to the private respondents at
petitioner's house. The private respondents did not heed the
petitioner's request. MTC render its decision in favor of the
private respondents. On appeal, both the RTC and the CA
affirmed the decision in toto, hence,this petition.

ISSUE:

WON, private respondents Spouse De Jesus under the

circumstances prevailing in this instant case, were really in
mora accipiendi that even if no deposit or consignation had
been made.

RULING:

No, the contention of petitioner that private respondents are in

mora accipiendi cannot be upheld either. The failure of the
owners to collect or their refusal to accept the rentals are not
valid. Consignation, under such circumstances, is necessary,
and by this we mean one that is effected in full compliance with
the specific requirements of the law therefor.

3. Compensatio Morae (Cortes vs. CA, G.R. NO. 126083, July

12,2006)

Facts:
Seeks the reversal of the June 13, 1996 Decision... which rescinded the
contract of sale entered into by petitioner Antonio Cortes (Cortes) and
private respondent Villa Esperanza Development Corporation... for the
purchase price of P3,700,000.00, the Corporation as buyer, and Cortes as
seller, entered into a contract of sale over the lots
Corporation advanced to Cortes the total sum of P1,213,000.00.
September 1983, the parties executed a deed of absolute sale
containing the following terms
Vendee shall pay
(P2,200,000.00) PESOS, Philippine Currency, less all advances paid
ONE MILLION AND FIVE HUNDRED THOUSAND [P1,500,000.00]
PESOS, Phil. Currency shall be payable within ONE (1) YEAR...
expense... for the registration of this document with the Register of
Deeds concerned, including the transfer tax, shall be divided equally
between the Vendor and the Vendee
Corporation filed the instant case[5] for specific performance seeking
to compel Cortes to deliver the TCTs and the original copy of the
Deed of Absolute Sale
Cortes refused delivery of the sought documents
Cortes claimed that the owner's duplicate copy of the three TCTs
were surrendered to the Corporation and it is the latter which refused
to pay in full the agreed down payment.
due to the Corporation's failure to pay in full the sum of
P2,200,000.00, he in turn failed to fully pay the disturbance fee of the
lessee who now refused to pay monthly... rentals. He thus prayed
that the Corporation be ordered to pay the outstanding balance plus
interest and in the alternative, to cancel the sale and forfeit the
P1,213,000.00 partial down payment, with damages in either case.
The Court finds no merit in the [Corporation's] Motion for
Reconsideration.
Motion for Reconsideration is hereby DENIED.
appeal, the Court of Appeals reversed the decision of the trial court
and directed Cortes to execute a Deed of Absolute Sale... purchase
price of P2,487,000.00
Cortes filed the instant petition praying that the decision of the trial
court rescinding the sale be reinstated.
reciprocal obligation of the parties.
They are to be performed simultaneously... the stipulation in the Deed
of Absolute Sale was that the Corporation shall pay in full the
P2,200,000.00 down payment upon execution of the contract... notes
reveal Cortes'... admission that he agreed that the Corporation's full
payment of the sum of P2,200,000.00 would depend upon his
delivery of the TCTs of the three lots
Corporation's obligation to pay in full the amount of P2,200,000.00,
can not be construed as referring solely to the signing of the deed.
Cortes' obligation is not only to affix his signature in the Deed, but
to... set into motion the process that would facilitate the transfer of
title of the lots
The Court of Appeals found that Cortes never surrendered said
documents to the Corporation. Cortes testified that he... delivered the
same to Manny Sanchez, the son of the broker, and that Manny told
him that her mother, Marcosa Sanchez, delivered the same to the
Corporation.
further strengthened the findings of the Court of Appeals that Cortes
did not surrender the subject documents

Issues:
Therefore is whether there is delay in the performance of the parties'
obligation that would justify the rescission of the contract of sale

Ruling:
June 24, 1993, the trial court rendered a decision rescinding the sale
and directed Cortes to return to the Corporation the amount of
P1,213,000.00, plus interest.
Corporation should have fully paid the amount of
P2,200,000.00 upon the execution of the contract.
And, having failed to pay in... full the amount of P2,200,000.00
despite Cortes' delivery of the Deed of Absolute Sale and the TCTs,
rescission of the contract is proper.
[the Corporation's] appeal is GRANTED. The decision appealed from
is hereby REVERSED and SET ASIDE and a new judgment rendered
ordering [Cortes] to execute a deed of absolute sale
Since Cortes did not perform his obligation to have the Deed
notarized and to surrender the same together with the TCTs, the trial
court erred in concluding that he performed his part in the contract of
sale... both parties were in delay. Considering that their obligation
was reciprocal, performance thereof must be simultaneous... as if no
one is guilty of delay.
Under Article 1169 of the Civil Code, from the moment one of the
parties fulfills his obligation, delay by the other begins. Since Cortes
did not perform his part, the provision of the contract requiring the
Corporation to pay in full the down payment never acquired...
obligatory force.
Court of Appeals therefore correctly ordered the parties to perform
their respective obligation in the contract of sale
Cortes to, among others, deliver the necessary documents to the
Corporation and for the latter to pay in full petition is DENIED

4. When demand not necessary (Rodrigo Rivera vs. Spouses

Salvador C. Chua and Violeta S. Chua/Salvador C. Chua and
Violeta S. Chua vs. Rodrigo Rivera, G.R. NO. 184458/174462
January 14, 2015 (1169)
FACT:
Rivera and Salvador are kumpadres
On 24 February 1995, Rivera obtained a loan from the Spouses Chua
RIVERA promise to pay spouses... he sum of One Hundred Twenty
Thousand Philippine Currency (P120,000.00) on December 31, 1995
FIVE PERCENT (5%) interest monthly
Spouses Chua received another check presumably issued by
Rivera... duly signed and dated, but blank as to payee and amount...
both checks were simply partial payment for Rivera's loan in the
principal amount of P120,000.00... two checks were dishonored for
the reason "account closed."
Rivera countered that: (1) he never executed the subject Promissory
Note... the loans were always covered by a security
Both trial courts found the Promissory Note as authentic and validly
bore the signature of Rivera

ISSUE:
Rivera claimed forgery of the subject Promissory Note and denied
his indebtedness
REDUCING THE INTEREST RATE FROM 60% PER ANNUM TO
12% PER ANNUM
Rivera continues to deny that he executed the Promissory Note
Rivera points out that the Spouses Chua "never demanded payment
for the loan nor interest thereof (sic) from [Rivera] for almost four (4)
years from the time of the alleged default in payment
Rivera offers no evidence for his asseveration
Rivera insists that: if that promissory note indeed exists, it is beyond
logic for a money lender to extend another loan on May 4, 1998
secured by a real estate mortgage, when he was already in default
and has not been paying any interest for a loan incurred in
February 1995. We disagree

RULING:
We cannot give credence to such a naked claim of forgery... bare
denial will not suffice
Rivera's bare assertion is unsubstantiated and directly disputed by
the testimony of a handwriting expert from the NBI
Article 1169 of the Civil Code... reciprocal obligations
 Article 2209 is specifically applicable in this instance where: (1) the
obligation is for a sum of money; (2) the debtor, Rivera, incurred in
delay when he failed to pay on or before 31 December 1995; and (3)
the Promissory Note provides for an indemnity for damages upon
default... of Rivera which is the payment of a 5% monthly interest
from the date of default.
Article 1226 of the Civil Code

B. Negligence
1. Degree of diligence (Phoenix Assurance Company of New
York, MCGEE & CO., INC., G.R. NO. 162467, May 8,2009
FACT:
Before us is a petition for review on certiorari[1] under Rule 45 of the 1997
Rules of Civil Procedure of the 29 October 2003[2] Decision of the Court of
Appeals and the 26 February 2004 Resolution[3] of the same court denying
petitioner's motion for reconsideration.
Del Monte Philippines, Inc. (Del Monte) contracted petitioner Mindanao
Terminal and Brokerage Service, Inc. (Mindanao Terminal), a stevedoring
company, to load and stow a shipment of 146,288 cartons of fresh green
Philippine bananas and 15,202 cartons of fresh pineapples... belonging to
Del Monte Fresh Produce International, Inc. (Del Monte Produce) into the
cargo hold of the vessel M/V Mistrau. The vessel was docked at the port of
Davao City and the goods were to be transported by it to the port of Inchon,
Korea in favor of consignee Taegu
Industries, Inc. Del Monte Produce insured the shipment under an "open
cargo policy" with private respondent Phoenix Assurance Company of New
York (Phoenix), a non-life insurance company, and private respondent
McGee & Co. Inc. (McGee), the underwriting manager/agent of Phoenix.

ISSUE:
To resolve the petition, three questions have to be answered: first, whether
Phoenix and McGee have a cause of action against Mindanao Terminal;
second, whether Mindanao Terminal, as a stevedoring company, is under
obligation... to observe the same extraordinary degree of diligence in the
conduct of its business as required by law for common carriers[15] and
warehousemen;[16] and third, whether Mindanao Terminal observed the
degree of diligence required by law... of a stevedoring company.

RULING:
We agree with the Court of Appeals that the complaint filed by Phoenix and
McGee against Mindanao Terminal, from which the present case has
arisen, states a cause of action. The present action is based on quasi-
delict, arising from the negligent and careless loading and stowing... of the
cargoes belonging to Del Monte Produce. Even assuming that both
Phoenix and McGee have only been subrogated in the rights of Del Monte
Produce, who is not a party to the contract of service between Mindanao
Terminal and Del Monte, still the insurance carriers may have a... cause of
action in light of the Court's consistent ruling that the act that breaks the
contract may be also a tort.[17] In fine, a liability for tort may arise even
under a contract, where tort is that which breaches the contract[18].
In the present case, Phoenix and McGee are not suing for damages for
injuries arising from the breach of the contract of service but from the
alleged negligent manner by which Mindanao Terminal handled the
cargoes
There is no specific provision of law that imposes a higher degree of
diligence... than ordinary diligence for a stevedoring company or one who is
charged only with the loading and stowing of cargoes. It was neither
alleged nor proven by Phoenix and McGee that Mindanao Terminal was
bound by contractual stipulation to observe a higher degree of diligence
than... that required of a good father of a family. We therefore conclude that
following Article 1173, Mindanao Terminal was required to observe ordinary
diligence only in loading and stowing the cargoes of Del Monte Produce
aboard M/V Mistrau.
C. Fortuitous event (Nakpil and Sons v. CA, G.R. No L – 47851 April
15,1988)

FACT:
The plaintiff, Philippine Bar Association, a civic-non-profit association,
incorporated under the Corporation Law, decided to construct an
office building on its 840 square meters lot located at the corner of
Aduana and Arzobispo Streets, Intramuros, Manila.
The… construction was undertaken by the United Construction, Inc.
on an “administration” basis, on the suggestion of Juan J. Carlos, the
president and general manager of said corporation.
The proposal was approved by plaintiff’s board of directors and
signed by its president
Roman Ozaeta, a third-party defendant in this case.
The plans and specifications for the building were prepared by the
other third-party defendants Juan F. Nakpil & Sons. The building was
completed in June, 1966.
In the early morning of August 2, 1968 an unusually strong
earthquake hit Manila and its environs and the building in question
sustained major damage. The front columns of the building buckled,
causing the building to tilt forward dangerously.
The tenants vacated the… building in view of its precarious condition.
As a temporary remedial measure, the building was shored up by
United Construction, Inc. at the cost of P13,661.28.
On November 29, 1968, the plaintiff commenced this action for the
recovery of damages arising from the partial collapse of the building
against United Construction, Inc. and its President and General
Manager Juan J. Carlos as defendants.
Defendants in turn filed a third-party complaint against the architects
who prepared the plans and specifications, alleging in essence that
the collapse of the building was due to the defects in the said plans
and specifications.

ISSUE:
The pivotal issue in this case is whether or not an act of God, - an
unusually strong earthquake – which caused the failure of the
building, exempts from liability, parties who are otherwise liable
because of their negligence.
RULING:
 The applicable law governing the rights and liabilities of the parties
herein is Article 1723 of the New Civil Code, which provides:
“Art. 1723. The engineer or architect who drew up the plans and
specifications for a building is liable for damages if within fifteen years
from the completion of the structure the same should collapse by
reason of a defect in those plans and specifications, or… due to the
defects in the ground. The contractor is likewise responsible for the
damage if the edifice falls within the same period on account of
defects in the construction or the use of materials of inferior quality
furnished by him, or due to any violation of the terms… of the
contract. If the engineer or architect supervises the construction, he
shall be solidarily liable with the contractor.
On the other hand, the general rule is that no person shall be
responsible for events which could not be foreseen or which, though
foreseen, were inevitable
There is no dispute that the earthquake of August 2, 1968 is a
fortuitous event or an act of God.
The principle embodied in the act of God doctrine strictly requires that
the act must be one occasioned exclusively by the violence of nature
and all human agencies are to be excluded from creating or entering
into the cause of the mischief.

VII. Kinds of Obligation

A. Pure obligations (HongKong and Shanghai Banking Corp. vs.
Broqueza G.R. NO. 178610 November 17,2010(1179)
FACT:
Editha Broqueza is an employee of Hongkong and Shanghai
Banking Corporation (HSBC) and a member of respondent Hongkong
Shanghai Banking Corporation, Ltd. Staff Retirement Plan. On
October 1, 1990, she obtained a car loan in the amount of
Php175,000.00. On December 12, 1991, she again applied and was
granted an appliance loan in the amount of Php 24,000.00. These
loans are paid through automatic salary deduction.
ISSUE:
 On October 1, 1990, she obtained a car loan in the amount of
Php175,000.00. On December 12, 1991, she again applied and was
granted an appliance loan in the amount of Php 24,000.00. These
loans are paid through automatic salary deduction. Meanwhile in
1993, a labor dispute arose between HSBC and its employees.
Majority of HSBC’s employees were terminated, among whom is
Editha Broqueza. The employees then filed an illegal dismissal case
before the National Labor Relations Commission against HSBC.
RULING:
The termination of Broqueza from employment disqualified them her
availing of benefits under their retirement plans. As a consequence,
there is no longer any security for the loans. HSBCL-SRP has a legal
right to demand immediate settlement of the unpaid balance because
of Editha Broqueza’s continued default in payment and failure to
provide new security for her loans.

B. Conditional Obligation
1. Suspensive Condition ( Reyes vs. Tuparan G.R. NO. 188064,
June 1,2011)

FACT:
Subject of this petition for review is the February 13, 2009
Decision… f the Court of Appeals (CA) which affirmed with
modification the February 22, 2006 Decision[2] of the Regional
Trial Court, Branch
172, Valenzuela City (RTC), in Civil Case No. 3945-V-92, an
action for Rescission of Contract with Damages.
On September 10, 1992, Mila A. Reyes… filed a complaint for
Rescission of Contract with Damages against Victoria T.
Tuparan
In her Complaint, petitioner alleged, among others, that she
was the registered owner of a
1,274 square meter residential and commercial lot located in
Karuhatan, Valenzuela City, and covered by TCT No. V-4130;
that on that property, she put up a three-storey commercial
building known as RBJ Building and a residential apartment
building; that since 1990, she had been… operating a drugstore
and cosmetics store on the ground floor of RBJ Building where
she also had been residing while the other areas of the
buildings including the sidewalks were being leased and
occupied by tenants and street vendors.
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 P4,000.00. 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,… On
November 15, 1990, petitioner’s outstanding account on the
mortgage reached
P2,278,078.13. Petitioner then decided to sell her real
properties for at least P6,500,000.00 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
P4,200,000.00 payable on installment basis without interest
To induce the petitioner to accept her offer, respondent offered
the following conditions/concessions:
That the conditional sale will be cancelled if the plaintiff
(petitioner) can find a buyer of said properties for the amount of
P6,500,000.00 within the next three (3) months provided all
amounts received by the plaintiff from the defendant.

ISSUE:

Petitioner further averred that despite her success in finding a

prospective buyer for the subject real properties within the 3-
month period agreed upon, respondent reneged on her promise
to allow the cancellation of their deed of conditional sale.
 Instead, respondent became… interested in owning the subject
real properties and even wanted to convert the entire property
into a modern commercial complex.

RULING:

On February 22, 2006, the RTC handed down its decision

finding that respondent failed to pay in full the P4.2 million total
purchase price of the subject real properties leaving a balance
of P805,000.00.

Thus, the dispositive portion of the RTC Decision reads:

WHEREFORE, judgment is hereby rendered as follows:

Directing the defendant to allow the plaintiff to continue using

the space occupied by her for drugstore and cosmetic store
without any rental pending payment

Ordering the defendant, upon her full payment of the purchase

price together with interest, to execute a contract of lease for
fifteen (15) years in favor of the plaintiff over the space for the
drugstore and cosmetic store at a fixed monthly rental of
P8,000.00;

Directing the plaintiff, upon full payment to her by the defendant

of the purchase price together with interest, to execute the
necessary deed of sale, as well as to pay the Capital Gains
Tax, documentary stamps and other miscellaneous expenses
necessary for securing the BIR.

2. Resolutory Condition (Central Philippine University vs. CA, G.R.

No. 112230 July 17,1995)

FACT:
 In 1939, the late Don Ramon Lopez was a member of the board
of trustees of Central Philippine University when he executed a
donation to the school, stating that the land must be for
exclusive use of a medical college. 50 years later, The heirs of
Ramon Lopez filed an action to annul the donation, stating the
failure of the school to construct the medical college over the
land. RTC ruled in favor of respondents, which the CA affirmed.

ISSUE: Whether there is a resolutory condition

RULING:

The donation was an onerous one, where failure of the school

to construct a medical college would give the heirs the power to
revoke the donation, reverting the property back to the heirs of
the donor. It is therefore a resolutory condition. Although, the
period was not stated, and the courts should have fixed a
period, in this case, 50 years has lapsed since the donation
was executed, thus fixing a period would serve no purpose and
the property must already be reverted back.

C. Obligations with a period (Rowena R. Solante vs. Commission on

Audit et. al. G.R. No. 207348 August 19,2014)

FACT:

On February 15, 2013, Solante received a Notice of Finality of

Decision (NFD)[14] stating that the COA Decision dated February 15,
2008 and Resolution dated November 5, 2012 have become final and
executory, a copy of the Resolution having been served on the…
parties on November 9, 2012 by registered mail. Notably, Solante
never received a copy of the COA Resolution. She came to get one
only on May 8, 2013 after inquiring from the Cebu Central Post
Office, which, in a Certification of Delivery dated May 8,… 2013,[15]
stated that the registered mail containing said copy was in fact not
delivered.
 ISSUE:

He resolution of the present controversy rests on the determination of

a sole issue: who between the City of Mandaue and F.F. Cruz owned
during the period material the properties that were demolished.

RULING:

The petition is meritorious. The COA and its audit team obviously
misread the relevant stipulations of the MOA in relation to the
provisions on project completion and termination of contract of the
Mandaue-F.F. Cruz reclamation contract.

Essentially, the COA is alleging that the Contract of Reclamation

establishes an obligation on the part of F.F. Cruz to finish the project
within the allotted period of six (6) years from contract execution in
August 1989. Prescinding from this premise, the COA would
conclude… that after the six (6)-year period, F.F. Cruz is
automatically deemed to be in delay, the contract considered as
completed, and the ownership of the structures built in accordance
with the MOA transferred to the City of Mandaue.

D. Solidary Obligation (Spouses Chin Kong Wong Choi and Ana O.

Chua vs. United Coconut Planters Bank, G.R. No. 207747 March
11,2015)

FACT:

Petitioner spouses Chin Kong Wong Choi and Ana O. Chua

(Spouses Choi) entered into a Contract to Sell with Primetown
Property Group, Inc. (Primetown), a domestic corporation engaged in
the business of condominium construction and real estate
development.
The Contract to Sell provided that Spouses Choi agreed to buy
condominium unit no. A-322 in Kiener Hills Cebu (Kiener) from
Primetown for a consideration of P1,151,718.75, with a down
payment of P100,000.00 and the remaining balance payable in 40
equal monthly installments of

P26,292.97 from 16 January 1997 to 16 April 2000.[9]

On 23 April 1998, respondent United Coconut Planters Bank (UCPB),

a commercial bank duly organized and existing under the laws of the
Philippines, executed a Memorandum of Agreement[10] and Sale of
Receivables and Assignment of Rights and Interests.

ISSUE:

An assignment of credit has been defined as an agreement by

virtue of which the owner of a credit, known as the assignor, by
a legal cause – such as sale, dation in payment or exchange or
donation – and without need of the debtor’s consent, transfers
that credit and its… accessory rights to another, known as the
assignee, who acquires the power to enforce it to the same
extent as the assignor could have enforced it against the
debtor.

RULING:

As for UCPB’s alleged solidary liability, we do not find any merit

in the claim of Spouses Choi that Luzon Development Bank v.
Enriquez[47] and Philippine Bank of Communications v.
Pridisons Realty Corporation[48] apply… to the present case.
Both cases involved the failure to comply with Sections 17, 18
and 25 of Presidential Decree No. 957, which made the banks
in those cases solidarily liable. A solidary obligation cannot be
inferred lightly, but exists only when expressly stated, or the
law… or nature of the obligation requires it.

Since there is no other ground to hold UCPB solidarily liable

with Primetown and there is no reason to depart from the ratio
decidendi in UCPB v. Ho, UCPB is only liable to refund
Spouses Choi the amount it indisputably received,… which is
 P26,292.97 based on the evidence presented by Spouses
Choi.

WHEREFORE, we DENY the petition and AFFIRM with

MODIFICATION the Decision dated 29 January 2013 and the
Resolution dated 27 May 2013 of the Court of Appeals in CA-
G.R. SP No. 117831. We ORDER respondent United Coconut
Planters Bank to RETURN to petitioner spouses Chin Kong
Wong Choi and Ana O. Chua the amount of P26,292.97, with
12% interest per annum from the time of its receipt on 3
February 1999 until 30 June 2013, then 6% interest per annum
from 1 July 2013 until fully paid.

E. Obligations with a Penal Clause (Country Bankers V. Court of

Appeals 201 SVRA 458)

FACT:

Respondent Oscar Ventanilla Enterprises Corporation (OVEC), as

lessor, and the petitioner Enrique F. Sy, as lessee, entered into a
lease agreement over the Avenue, Broadway and Capitol Theaters
and the land on which they are situated in Cabanatuan City, including
their… air-conditioning systems, projectors and accessories needed
for showing the films or motion pictures.

The term of the lease was for six (6) years commencing from June
13, 1977 and ending June 12, 1983. After more than two (2) years of
operation of the Avenue,… Broadway and Capitol Theaters, the
lessor OVEC made demands for the repossession of the said leased
properties in view of the Sy’s arrears in monthly rentals and non-
payment of amusement taxes. On August 8, 1979, OVEC and Sy
had a conference and by reason of Sy’s request… for reconsideration
of OVEC’s demand for re-possession of the three (3) theaters, the
former was allowed to continue operating the leased premises upon
his conformity to certain conditions imposed by the latter in a
supplemental agreement dated August 13, 1979.
 ISSUE:

Sy is not entitled to the reformation of the lease agreement

RULING:

A penal clause is an accessory obligation which the parties attach to

a principal obligation for the purpose of insuring the performance
thereof by imposing on the debtor a special prestation (generally…
consisting in the payment of a sum of money) in case the obligation is
not fulfilled or is irregularly or inadequately fulfilled. (Eduardo P.
Caguioa, Comments and Cases on Civil Law, Vol. IV, First Edition,
pp. 199-200) As a general rule, in obligations with a… penal clause,
the penalty shall substitute the indemnity for damages and the
payment of interests in case of non-compliance. This is specifically
provided for in Article 1226, par. 1, New Civil Code. In such case,
proof of actual damages suffered by the creditor is… not necessary in
order that the penalty may be demanded Article 1228, New Civil
Code.

VIII. Extinguishment of Obligations

A. Payment or Performance (Philippine Commercial International Bank

(now BDO UNIBANK, INC.), vs. Arturo P. Franco, substituted by his
heirs, namely: Mauricia P. Franco, Floribel P. Franco, and Alexander
P. Franco G.R. No. 180069, March 5,2014 (1271)

FACT:

Respondent who was 51 years old then decided to save up for his
retirement and to invest his hard earned money. He chose to deposit
his savings with defendant bank primarily because of the latters
representation that by making such investment, he was actually
providing for his future since his investment would be commingled,
pooled and automatically rolled-over for better investment return and
which will provide for his needs upon retirement, without need for him
to take any further action. Respondent secured from the bank several
Trust Indenture Certificates.
 ISSUE:

Whether or not plaintiff is entitled the relief he seeks

RULING: Yes. Petitioner Bank failed to adduce any documentary

evidence to establish the alleged fact that the four TICs were already
paid or cancelled, or that respondents participation therein was
already withdrawn. With all these findings, the CA concluded that the
claim of respondent is not yet barred by prescription, since the
maturity dates of the four TICs did not terminate the express trust
created between the parties. Jurisprudence abounds that, in civil
cases, one who pleads payment has the burden of proving it. Even
where the plaintiff must allege non-payment, the general rule is that
the burden rests on the defendant to prove payment, rather than on
the plaintiff to prove non-payment. When the creditor is in possession
of the document of credit, he need not prove non-payment for it is
presumed. The creditors possession of the evidence of debt is proof
that the debt has not been discharged by payment.

In this case, respondents possession of the original copies of the

subject TICs strongly supports his claim that petitioner Banks
obligation to return the principal plus interest of the money placement
has not been extinguished. The TICs in the hands of respondent is a
proof of indebtedness and a prima facie evidence that they have not
been paid. Petitioner Bank could have easily presented documentary
evidence to dispute the claim, but it did not. In its omission, it may be
reasonably deduced that no evidence to that effect really exist.
Worse, the testimonies of petitioner Banks own witnesses, reinforce,
rather than belie, respondents allegations of non-payment.

B. Compensation (Cesar V. Areza and Lolita B. Areza V Express

Savings Bank, Inc. and Michael Potenciano G.R. NO. 176697,
September 10,2014)

FACT:

They were engaged in the business of “buy and sell” of brand new
and second-hand motor vehicles. On 2 May 2000, they received an
order from a certain Gerry Mambuay (Mambuay) for the purchase of
a second-hand Mitsubishi Pajero and a brand-new Honda CRV.

About this occasion, petitioners claimed that Michael Potenciano

(Potenciano), the branch manager of respondent Express Savings
Bank (the Bank) was present during the transaction and immediately
offered the services of the Bank for the processing and eventual
crediting of the… said checks to petitioners’ account.

Petitioners deposited the said checks in their savings account with

the Bank. The Bank, in turn, deposited the checks with its depositary
bank, Equitable-PCI Bank, in Biñan, Laguna. Equitable-PCI Bank
presented the checks to the drawee, the Philippine

Veterans Bank, which honored the checks.

Potenciano informed petitioners that the checks they deposited with

the Bank were honored. He allegedly warned petitioners that the
clearing of the checks pertained only to the availability of funds and
did not mean that the checks were not infirmed.

Sometime in July 2000, the subject checks were returned by PVAO to

the drawee on the ground that the amount on the face of the checks
was altered from the original amount of P4,000.00 to P200,000.00.

ISSUE:

Whether or not the Honorable Court of Appeals committed a

reversible error of law and grave abuse of discretion in upholding the
legality and/or propriety of the Motion for Reconsideration filed in
violation of Section 5, Rule 15 of the Rules on Civil Procedure.

RULING:

Section 5. Notice of hearing. The notice of hearing shall be

addressed to all parties concerned, and shall specify the time and
date of the hearing which must not be later than ten (10) days after
the filing of the motion.
 Petitioners claim that the notice of hearing was addressed to the
Clerk of Court and not to the adverse party as the rules require.
Petitioners add that the hearing on the motion for reconsideration was
scheduled beyond 10 days from the date of filing.

As held in Maturan v. Araula,[11] the rule requiring that the notice be

addressed to the adverse party has been substantially complied with
when a copy of the motion for reconsideration was furnished to the
counsel of the adverse party, coupled with… the fact that the trial
court acted on said notice of hearing and, as prayed for, issued an
order[12] setting the hearing of the motion on 26 March 2004.

We would reiterate later that there is substantial compliance with the

foregoing Rule if a copy of the said motion for reconsideration was
furnished to the counsel of the adverse party.

C. Novation (Leonardo Bognot vs. RRI Lending Corporation,

represented by its General Manager, Dario J. Bernardez G.R. No.
180144 September 24,2014)

FACT:

RRI Lending Corporation (respondent) is an entity engaged in the

business of lending money to its borrowers within Metro Manila.

The petitioner and his younger brother, Rolando A. Bognot… applied

for and obtained a loan of Five Hundred Thousand Pesos… from the
respondent

Evidence on record shows that the petitioner renewed the loan

several times on a monthly basis.

He paid a renewal fee of P54,600.00 for each renewal, issued a new

post-dated check as security, and executed and/or renewed the
promissory note previously issued.

ISSUE:
1. Whether the CA committed a reversible error in holding the
petitioner solidarily liable with Rolando;

2. Whether the petitioner is relieved from liability by reason of the

material alteration in the promissory note.

3. Whether the parties’ obligation was extinguished by: (i) payment;

and (ii) novation by substitution of debtors.

RULING:
The petitioner submits that the CA erred in holding him solidarily
liable with Rolando and his wife.
The petitioner also argued that as a result of the alteration of the
promissory note without his consent… the respondent can no longer
collect on the tampered note, let alone, hold him solidarily liable with
Rolando for the payment of the loan.
Lastly, he claimed that he had been released from his indebtedness
by novation when Mrs. Bognot renewed the loan and assumed the
indebtedness.
The respondent submits that the issues the petitioner raised hinge on
the appreciation of the adduced evidence and of the factual lower
courts’ findings that, as a rule, are not reviewable by this Court.
We find the petition partly meritorious.
No Evidence Was Presented to
Establish the Fact of Payment
In the present case, the petitioner failed to satisfactorily prove that his
obligation had already been extinguished by payment. As the CA
correctly noted, the petitioner failed to present any evidence that the
respondent had in fact encashed his check and applied the
proceeds… to the payment of the loan. Neither did he present official
receipts evidencing payment, nor any proof that the check had been
dishonore
We note that the petitioner merely relied on the respondent’s
cancellation and return to him of the check
The evidence shows that this check was issued to secure the
indebtedness. The acts imputed on the respondent, standing alone,
do not constitute… sufficient evidence of payment.
Article 1249, paragraph 2 of the Civil Code
The delivery of promissory notes payable to order, or bills of
exchange or other mercantile documents shall produce the effect of
payment only when they have been cashed, or when through the fault
of the creditor they have been impaired.
To reiterate, no cash payment was proven by the petitioner. The
cancellation and return of the check… simply established his renewal
of the loan not the fact of payment. Furthermore, it has been
established during trial, through repeated acts, that the… respondent
cancelled and surrendered the post-dated check previously issued
whenever the loan is renewed.
In light of these exchanges, we find that the petitioner failed to
discharge his burden of proving payment.
The Alteration of the Promissory Note
Did Not Relieve the Petitioner From Liability
The petitioner raised as defense the alleged material alteration
He alleged that the respondent’s superimposition of the due date
“June 30, 1997” on the… promissory note without his consent
effectively relieved him of liability.
We find this defense untenable.