Obligations and Contracts Obligations and Contracts Definitions, Elements Definitions, Elements Cause in a Contract Cause in a Contract PNOC AND PNOC D
PNOC AND PNOC DOCKYARD AND ENGINEERING CORP. VS. KEPPEL PHILIPPINES HOLDINGS, INC.OCKYARD AND ENGINEERING CORP. VS. KEPPEL PHILIPPINES HOLDINGS, INC. G.R. NO. 202050 JULY 25, 2016 G.R. NO. 202050 JULY 25, 2016 BRION, J. BRION, J. FACTS: FACTS:
Keppel entered into a lease agreement with Luzon Stevedoring Co. for 25 years for P2.1M. At
Keppel entered into a lease agreement with Luzon Stevedoring Co. for 25 years for P2.1M. At the optionthe option of Luzsteveco, the rental fee could be totally or partially conver
of Luzsteveco, the rental fee could be totally or partially converted into equity shares in Keppel. ted into equity shares in Keppel. At theAt the end of the agreement, Keppel was given the option to
end of the agreement, Keppel was given the option to purchase the land for P4.09M provided that itpurchase the land for P4.09M provided that it acquired the necessary qualification. However, Keppel at the time
acquired the necessary qualification. However, Keppel at the time of the agreement was of the agreement was not qualifiednot qualified because less than 60% of its
because less than 60% of its shareholding was Filipino-shareholding was Filipino-owned. If at the end oowned. If at the end of the agreement, Keppelf the agreement, Keppel was still unqualified, the
was still unqualified, the lease agreement would automatically be renewed for another 25 lease agreement would automatically be renewed for another 25 years. Afteryears. After which, Keppel was again give the option to purchase the land up
which, Keppel was again give the option to purchase the land up to the 30th to the 30th year of the lease.year of the lease. Luzsteveco warranted not to sell the land or assign rights
Luzsteveco warranted not to sell the land or assign rights for the duration of the agreement unlessfor the duration of the agreement unless Keppel consents. PNOC acquired the land, and Keppel did not object so long
Keppel consents. PNOC acquired the land, and Keppel did not object so long as the agreement wasas the agreement was annotated on PNOC’s title, to which, t
annotated on PNOC’s title, to which, t he latter consented. When Keppel qualified to acquire the latter consented. When Keppel qualified to acquire t he land, ithe land, it expressed its intention to purchase the land several times, but PNOC did
expressed its intention to purchase the land several times, but PNOC did not favourably respond. PNOCnot favourably respond. PNOC stated that
stated that the agreement was illegal for circumventing the constitutional prohibition against aliensthe agreement was illegal for circumventing the constitutional prohibition against aliens holding lands in the Philippines. It also asserted that
holding lands in the Philippines. It also asserted that the option contract was void, as it the option contract was void, as it was unsupportedwas unsupported by a separate valuable consideration and that it
by a separate valuable consideration and that it was not privy to the agreement.was not privy to the agreement. ISSUE: Whether the option contract is void if it
ISSUE: Whether the option contract is void if it not supported by a separate value consideration,not supported by a separate value consideration, HELD:
HELD:
No. An option contract is a
No. An option contract is a contract where one person grants to another person the right or privilege tocontract where one person grants to another person the right or privilege to buy or to sell
buy or to sell a determinate thing at a fixed price, if a determinate thing at a fixed price, if he or she chooses to do he or she chooses to do so within an agreed period.so within an agreed period. It must necessarily have the essential elements of a
It must necessarily have the essential elements of a contract. The consideration in an option contractcontract. The consideration in an option contract may be anything of value, unlike in
may be anything of value, unlike in a sale where the purchase price must be in money a sale where the purchase price must be in money or its equivalent.or its equivalent. However, when the consideration is not monetary, the consideration must be clearly specified as such in However, when the consideration is not monetary, the consideration must be clearly specified as such in the option contract or clause. When the written agreement itself does not state
the option contract or clause. When the written agreement itself does not state the consideration forthe consideration for the option contract, the offeree or promisee bears the burden of
the option contract, the offeree or promisee bears the burden of proving the existence of a separateproving the existence of a separate consideration for the option.
consideration for the option. On the contrary, the option t
On the contrary, the option to convert the purchase price for shares should be deemed part of theo convert the purchase price for shares should be deemed part of the consideration for the contract of sale itself, since the shares are merely an
consideration for the contract of sale itself, since the shares are merely an alternative to the actual cashalternative to the actual cash price. The absence of consideration supporting the o
price. The absence of consideration supporting the option contract, however, does not ption contract, however, does not invalidate theinvalidate the offer to buy or
offer to buy or sell. An option unsupported by a separate consideration stands as an unaccepted offer tosell. An option unsupported by a separate consideration stands as an unaccepted offer to buy or sell which, when properly accepted, ripens into a contract to sell. Accordingly, when an option to buy or sell which, when properly accepted, ripens into a contract to sell. Accordingly, when an option to buy or to sell
buy or to sell is not supported by a consideration separate from the purchase price, the optionis not supported by a consideration separate from the purchase price, the option constitutes as an offer to
communication of the offeree's acceptance. When the offer is duly accepted, a mutual promise to communication of the offeree's acceptance. When the offer is duly accepted, a mutual promise to buybuy and to sell under the
and to sell under the first paragraph of Article 1479 of the Civil Code ensues and first paragraph of Article 1479 of the Civil Code ensues and the parties' respectivethe parties' respective obligations become recipro
obligations become reciprocally demandable. The court ruled that the offer to buy cally demandable. The court ruled that the offer to buy the land was timelythe land was timely accepted by Keppel. As early as 1994,
accepted by Keppel. As early as 1994, Keppel expresseKeppel expressed its desire to d its desire to exercise its option to buy the exercise its option to buy the land.land. Instead of rejecting outright Keppel's acceptance, PNOC referred the matter to
Instead of rejecting outright Keppel's acceptance, PNOC referred the matter to the Office of the Office of thethe Government Corporate Counsel (OGCC). Thus, when Keppel communicated its acceptance, the offer Government Corporate Counsel (OGCC). Thus, when Keppel communicated its acceptance, the offer toto purchase the Bauan land stood, not having been withdrawn by PNOC. The offer having been
purchase the Bauan land stood, not having been withdrawn by PNOC. The offer having been dulyduly accepted, a contract to sell the land
Sources of Obligations Prima facie execution and authenticity of deed of sale. Sources of Obligations Prima facie execution and authenticity of deed of sale. DAMASO T. AMBRAY AND CEFERINO T. AMBRAY, JR. VS.
DAMASO T. AMBRAY AND CEFERINO T. AMBRAY, JR. VS. SYLVIA A. TSOUROUS, ET. AL.SYLVIA A. TSOUROUS, ET. AL. G. R. NO. 209264, JULY 5, 2016 G. R. NO. 209264, JULY 5, 2016 PERLAS-BERNABE, J. PERLAS-BERNABE, J. FACTS: FACTS:
During their lifetime, Ceferino, Sr. and Estela owned several properties, one of which was a parcel of During their lifetime, Ceferino, Sr. and Estela owned several properties, one of which was a parcel of land located in San Pablo City
land located in San Pablo City denominated as Lot 2. On denominated as Lot 2. On December 28, 1977, Ceferino, Sr. mortgaged LotDecember 28, 1977, Ceferino, Sr. mortgaged Lot 2 with Manila Bank for the amount of P180,000.00. Prior to the discharge of the mortgage, Lot 2 was 2 with Manila Bank for the amount of P180,000.00. Prior to the discharge of the mortgage, Lot 2 was subdivided into three lots: Lot 2-A,
subdivided into three lots: Lot 2-A, Lot 2-B, and the Lot 2-B, and the subject property, Lot 2- C. Lot subject property, Lot 2- C. Lot 2-C was registered in2-C was registered in Ceferino, Sr.’s name.
Ceferino, Sr.’s name.In June 1996, respondent Maristela discovered that the title covering Lot 2-C In June 1996, respondent Maristela discovered that the title covering Lot 2-C waswas cancelled and another was issued in the name of
cancelled and another was issued in the name of petitioners. It appears that by virtue of a petitioners. It appears that by virtue of a notarizednotarized Deed of Absolute Sale date January 16,
Deed of Absolute Sale date January 16, 1978, Ceferino, Sr. allegedly sold such portion of Lot 1978, Ceferino, Sr. allegedly sold such portion of Lot 2 to2 to petitioners for a consideration of P150,000.00. This prompted the
petitioners for a consideration of P150,000.00. This prompted the respondents to file a criminal case forrespondents to file a criminal case for falsification of public document against petitioners before the MTCC of San Pablo City. The MTCC
falsification of public document against petitioners before the MTCC of San Pablo City. The MTCC acquitted the petitioners of the charge for failure of the prosecution to prove t
acquitted the petitioners of the charge for failure of the prosecution to prove t heir guilt beyondheir guilt beyond reasonable doubt. Thereafter, respondents filed the instant complaint for
reasonable doubt. Thereafter, respondents filed the instant complaint for annulment of title,annulment of title, reconveyance, and damages against petitioners allegin
reconveyance, and damages against petitioners alleging that the certificate of tg that the certificate of title and the Deed of itle and the Deed of SaleSale were null and void
were null and void because the signatures of Ceferino, Sr. and because the signatures of Ceferino, Sr. and Estela thereon were forgeries.Estela thereon were forgeries. ISSUE: Whether a delay in the registration of the sale
ISSUE: Whether a delay in the registration of the sale is a ground to invalidate the Deed ois a ground to invalidate the Deed of Salef Sale HELD:
HELD: As a rule,
As a rule, forgery cannot be presumed and must be proved by clear, positive and convincing evidence,forgery cannot be presumed and must be proved by clear, positive and convincing evidence, and the burden of proof lies on
and the burden of proof lies on the party alleging forgery. As against direct evidence consisting of thethe party alleging forgery. As against direct evidence consisting of the testimony of a witness who was
testimony of a witness who was physically present at the signing of the contract and who had physically present at the signing of the contract and who had personalpersonal knowledge thereof, the testimony of
knowledge thereof, the testimony of an expert witness constitutes indirect or an expert witness constitutes indirect or circumstantial evidence atcircumstantial evidence at best. Between the questioned documents report presented by th
best. Between the questioned documents report presented by th e respondents and the e respondents and the testimony giventestimony given by Estela in the falsification case in support of petitioners’ d
by Estela in the falsification case in support of petitioners’ defense, the Court finds greater evidentiaryefense, the Court finds greater evidentiary weight in favor of the latter. Estela gave t
weight in favor of the latter. Estela gave the positive testimony that Ceferino, Sr. himself who signed thehe positive testimony that Ceferino, Sr. himself who signed the Deed of Sale that conveyed Lot
Deed of Sale that conveyed Lot 2-C to petitioners and likewise verified her signature thereon. By virtue2-C to petitioners and likewise verified her signature thereon. By virtue of these
of these declarations, she confirmed the genuineness and authenticity of declarations, she confirmed the genuineness and authenticity of the questioned signatures.the questioned signatures. Thus, it follows that t
Thus, it follows that the Deed of Sale itself is valid he Deed of Sale itself is valid and duly executed, contrary to the finding of the and duly executed, contrary to the finding of the RTC,RTC, as affirmed by the CA,
as affirmed by the CA, that it was of that it was of spurious nature.spurious nature. Further lending credenc
Further lending credence to the validity of e to the validity of the Deed of Sale is ththe Deed of Sale is the well-settled principle that a dulye well-settled principle that a duly notarized contract enjoys prima facie presumption of authenticity and due execution as well as the notarized contract enjoys prima facie presumption of authenticity and due execution as well as the fullfull faith and credence attached to a public instrument. The delay in
faith and credence attached to a public instrument. The delay in the registration of the sale in favor othe registration of the sale in favor off petitioners neither affects nor invalidates the same, in light of the authenticity of
Civil Liability Civil Liability PNB V. PABLO RAYMUNDO PNB V. PABLO RAYMUNDO G.R. NO. 208672 DECEMBER 7, 2016 G.R. NO. 208672 DECEMBER 7, 2016 PERALTA, J, PERALTA, J, FACTS: FACTS:
Raymundo, then the Assistant Department Manager of PNB, approved for
Raymundo, then the Assistant Department Manager of PNB, approved for deposit a foreign draft checkdeposit a foreign draft check payable to Merry May Juan. Ms. Juan
payable to Merry May Juan. Ms. Juan drew and negotiated 6 (six) checks and were approved fordrew and negotiated 6 (six) checks and were approved for payment on the same day
payment on the same day by Raymundo, without waiting for the foreign draft check, intended to fundby Raymundo, without waiting for the foreign draft check, intended to fund the issued check, to
the issued check, to be cleared by the be cleared by the PNB Foreign Currency Clearing Unit. Subsequently, the foreignPNB Foreign Currency Clearing Unit. Subsequently, the foreign draft check was dishonored for being fraudulent. For irregularl
draft check was dishonored for being fraudulent. For irregularly approving the payment of the y approving the payment of the six (6)six (6) checks issued by Ms. Juan, without waiting for the
checks issued by Ms. Juan, without waiting for the foreign draft check to be cleared, Raymundo, as thenforeign draft check to be cleared, Raymundo, as then Department Manager of PNB San
Department Manager of PNB San Pedro Branch, was administratively charged by PNB foPedro Branch, was administratively charged by PNB for Conductr Conduct
Prejudicial to the Interest of the Service and/or Gross Violation of Bank's Rules and Regulations. The RTC Prejudicial to the Interest of the Service and/or Gross Violation of Bank's Rules and Regulations. The RTC held that it would be
held that it would be too harsh and inequitable to impose criminal liability upon Raymundo, whotoo harsh and inequitable to impose criminal liability upon Raymundo, who approved the withdrawal because of his belief that the checks were funded, due to
approved the withdrawal because of his belief that the checks were funded, due to the absence of thethe absence of the stamp mark "Returned Check'' on the checks, and check return slips. Considering that Raymundo's stamp mark "Returned Check'' on the checks, and check return slips. Considering that Raymundo's duties as Branch Manager entailed a lot of responsibility, the RTC
duties as Branch Manager entailed a lot of responsibility, the RTC found it almost unreasonable tofound it almost unreasonable to expect him to directly and personally check the books of
expect him to directly and personally check the books of accounts of each particular client every time aaccounts of each particular client every time a check is presented to the bank for
check is presented to the bank for payment and for his approval. Aggrieved, the PNB appealed from thepayment and for his approval. Aggrieved, the PNB appealed from the civil aspect of the RTC Decision
civil aspect of the RTC Decision
ISSUE: Whether the respondent may be held civilly liable despite his acquittal in the criminal action ISSUE: Whether the respondent may be held civilly liable despite his acquittal in the criminal action HELD:
HELD:
Our law recognizes two kinds of acquittal, with different effects on the civil liability of
Our law recognizes two kinds of acquittal, with different effects on the civil liability of the accused. Firstthe accused. First is an acquittal on t
is an acquittal on the ground that the accused is not he ground that the accused is not the author of the act the author of the act or omission complained of.or omission complained of. This instance closes the door to civil liability. The second instance is
This instance closes the door to civil liability. The second instance is an acquittal based on reasonablean acquittal based on reasonable doubt on the guilt of
doubt on the guilt of the accused. In this case, even if the the accused. In this case, even if the guilt of the accused has not been satisfactorilyguilt of the accused has not been satisfactorily established, he is not exempt from
established, he is not exempt from civil liability which may be proved by preponderance of evidencecivil liability which may be proved by preponderance of evidence only. Raymundo can still be held civilly liable for
only. Raymundo can still be held civilly liable for the charge of violation of Section 3(e) of R.A. the charge of violation of Section 3(e) of R.A. No. 3019No. 3019 because he was only acquitted for failure of the
because he was only acquitted for failure of the prosecution to establish his guilt beyond reasonableprosecution to establish his guilt beyond reasonable doubt. Raymundo’s gross negligence was shown through the comp
doubt. Raymundo’s gross negligence was shown through the complaints and affidavits submitted to thelaints and affidavits submitted to the court. It was shown that he
court. It was shown that he violated the proper protocol on such kind of violated the proper protocol on such kind of transactions. Raymundo's act oftransactions. Raymundo's act of approving the deposit to
approving the deposit to Ms. Juan's newly-opened peso checking account of Ms. Juan's newly-opened peso checking account of the peso conversionthe peso conversion [P4,752,689.65] of the
[P4,752,689.65] of the foreign check prior to the lapse of the 2foreign check prior to the lapse of the 21-day clearing period is the proximate1-day clearing period is the proximate cause why the six (6)
cause why the six (6) checks worth P4,000,000.00 were later encashed, thereby causing the PNB unduechecks worth P4,000,000.00 were later encashed, thereby causing the PNB undue injury.
Nature and Effects of
Nature and Effects of Obligations Kinds of ObligationsObligations Kinds of Obligations Solidary Obligation
Solidary Obligation
AFP RETIREMENT AND SEPARATION BENEFITS SYSTEM (AFPRSBS) VS. EDUARDO SANVICTORES AFP RETIREMENT AND SEPARATION BENEFITS SYSTEM (AFPRSBS) VS. EDUARDO SANVICTORES G.R. NO. 207586, AUGUST 17, 2016 G.R. NO. 207586, AUGUST 17, 2016 MENDOZA, J. MENDOZA, J. FACTS: FACTS:
Sometime in 1994, PEPI, formerly Antipolo Properties, Inc., offered to
Sometime in 1994, PEPI, formerly Antipolo Properties, Inc., offered to Sanvictores for sale on installmentSanvictores for sale on installment basis a parcel of land
basis a parcel of land in Village East Executive Homes situated in Binangonan, Rizal. On April 20, in Village East Executive Homes situated in Binangonan, Rizal. On April 20, 1994,1994, Sanvictores paid the required down payment
Sanvictores paid the required down payment of ₱81,949.04; that on June 9,of ₱81,949.04; that on June 9,1994, a Contract to Sell was1994, a Contract to Sell was executed by and between PEPI and AFPRSBS, as the
executed by and between PEPI and AFPRSBS, as the seller, and Sanvictores, as the buyer on February 27,seller, and Sanvictores, as the buyer on February 27, 1999, Sanvictores paid in full the
1999, Sanvictores paid in full the purchase price of thepurchase price of thesubject property in the amount of ₱534,378.79.subject property in the amount of ₱534,378.79. Despite the full payment, PEPI and
Despite the full payment, PEPI and AFPRSBS failed to execute the corresponding deed of absolute saleAFPRSBS failed to execute the corresponding deed of absolute sale on the subject property and deliver the corresponding title thereto; that on September 6, 2000,
on the subject property and deliver the corresponding title thereto; that on September 6, 2000, Sanvictores demanded from PEPI the execution of the deed of
Sanvictores demanded from PEPI the execution of the deed of sale and the delivery of the transfersale and the delivery of the transfer certificate of title. PEPI claimed that the t
certificate of title. PEPI claimed that the title of the subject property was still with the itle of the subject property was still with the PhilippinePhilippine National Bank (PNB) and could not be
National Bank (PNB) and could not be released due to the economic crisis. However, despite severalreleased due to the economic crisis. However, despite several follow-ups with PEPI, the latter did not
follow-ups with PEPI, the latter did not communicate with Sanvictorcommunicate with Sanvictores for a period of foes for a period of four (4) years.ur (4) years. Thereafter, Sanvictores file
Thereafter, Sanvictores filed a complaint for d a complaint for rescission of the contract to sell, refund of payment,rescission of the contract to sell, refund of payment, damages, and attorney's fees against PEPI and AFPRSBS as being the
damages, and attorney's fees against PEPI and AFPRSBS as being the subdivision developer and Espinasubdivision developer and Espina as the treasurer of PEPI.
as the treasurer of PEPI.
ISSUE: Whether the nature of the obligation of the parties under the contract
ISSUE: Whether the nature of the obligation of the parties under the contract to sell was solidary despiteto sell was solidary despite the absence of
the absence of stipulationstipulation HELD:
HELD:
A solidary obligation as one in
A solidary obligation as one in which each of the debtors is liable for which each of the debtors is liable for the entire obligation, and each ofthe entire obligation, and each of the creditors is entitled to demand the
the creditors is entitled to demand the satisfaction of the whole obligation from any or all osatisfaction of the whole obligation from any or all of thef the debtors. On the other hand, a
debtors. On the other hand, a joint obligation is one in which each debtor is joint obligation is one in which each debtor is liable only for aliable only for a proportionate part of the debt, and
proportionate part of the debt, and the creditor is entitled to demand only a the creditor is entitled to demand only a proportionate part of theproportionate part of the credit from each debtor. The
credit from each debtor. The well-entrenchwell-entrenched rule is that ed rule is that solidary obligations cannot be inferred lightly.solidary obligations cannot be inferred lightly. They must be positively and clearly expressed. A liability is solidary "only when the
They must be positively and clearly expressed. A liability is solidary "only when the obligation expresslyobligation expressly so states, when the
so states, when the law so provides or when the nature of law so provides or when the nature of the obligation so requires." In this regard,the obligation so requires." In this regard, Article 1207 of the
Article 1207 of the Civil Code proviCivil Code provides: “The concurrence of two ordes: “The concurrence of two ormore creditors or of two or moremore creditors or of two or more debtors in one and the same
debtors in one and the same obligation does not imply that each one of obligation does not imply that each one of the former has a right tothe former has a right to demand, or that each one of
demand, or that each one of the latter is bound to the latter is bound to render, entire compliance with the prestation. Thererender, entire compliance with the prestation. There is a solidary liability only when the obligation expressly so states,
is a solidary liability only when the obligation expressly so states, or when the law or the or when the law or the nature of thenature of the obligation requires s
obligation requires solidarity.”olidarity.” In this case, there was t
In this case, there was t hus no delineation as to the hus no delineation as to the rights and obligations of PEPI and AFPRSBS. Therights and obligations of PEPI and AFPRSBS. The Court held that there is no
Court held that there is no doubt that the nature of doubt that the nature of the obligation of PEPI and AFPRSBS under thethe obligation of PEPI and AFPRSBS under the subject contract to sell was solidary. In the said contract, P
subject contract to sell was solidary. In the said contract, P EPI and AFPRSBS were expressly referred toEPI and AFPRSBS were expressly referred to as the "SELLER" while Sanvictores was referred to as the "BUYER." Indeed, the contract to
state "SELLERS" but "SELLER." This could only mean t
state "SELLERS" but "SELLER." This could only mean that PEPI and AFPRSBS were considered as onehat PEPI and AFPRSBS were considered as one seller in the contract. Being that said, there could be
seller in the contract. Being that said, there could be no other conclusion except that PEPI and AFPRSBSno other conclusion except that PEPI and AFPRSBS came to the contracting table with the
came to the contracting table with the intention to be bound jointly and severally.intention to be bound jointly and severally. Also, the
Also, the signatories were Espina, representing PEPI; Mena, representing AFPRSBS; and Sanvictores.signatories were Espina, representing PEPI; Mena, representing AFPRSBS; and Sanvictores. Espina signed under PEPI as
Espina signed under PEPI as seller while Mena signed under AFPRSBS also seller while Mena signed under AFPRSBS also as seller. Furthermore, theas seller. Furthermore, the signatures of Espina and Mena were affixed again in the
signatures of Espina and Mena were affixed again in the last portion of the Deed of last portion of the Deed of Restrictions underRestrictions under the word "OWNER" with Espina signing for PEPI and Mena for
the word "OWNER" with Espina signing for PEPI and Mena for AFPRSBS. AFPRSBS is estopped fromAFPRSBS. AFPRSBS is estopped from denying Mena's authority to represent it. It is quite o
denying Mena's authority to represent it. It is quite obvious that AFPRSBS clothed Mena with apparentbvious that AFPRSBS clothed Mena with apparent authority to act on its behalf in the execution of the contract to sell.
Payment of solidary debtors Payment of solidary debtors
PHIL-NIPPON KYOEI, CORP. VS. ROSALIA T. GUDELOSAO, ET. AL. PHIL-NIPPON KYOEI, CORP. VS. ROSALIA T. GUDELOSAO, ET. AL. G. R. NO. 181375 JULY 13, 2016 G. R. NO. 181375 JULY 13, 2016 JARDELEZA, J. JARDELEZA, J. FACTS: FACTS:
Petitioner purchased a “Ro
Petitioner purchased a “Ro--Ro” passenger/cargo vessel “MV Mahlia” in Japan in February Ro” passenger/cargo vessel “MV Mahlia” in Japan in February 2003.2003.For theFor the vessel’s one
vessel’s one-month conduction voyage from Japan to the Philippines, petitioner, as local principal, and-month conduction voyage from Japan to the Philippines, petitioner, as local principal, and TMCL, as foreign principal, hired Edwin C. Gudelosao, Virgilio A. Tancontian, and six other crew
TMCL, as foreign principal, hired Edwin C. Gudelosao, Virgilio A. Tancontian, and six other crew members. They were hired through the local
members. They were hired through the local manning agency of TMCL, TEMMPC. Petitioner secured amanning agency of TMCL, TEMMPC. Petitioner secured a Marine Insurance Policy from SSSICI over the vessel for P10,800,000.00 against loss, damage, and Marine Insurance Policy from SSSICI over the vessel for P10,800,000.00 against loss, damage, and thirdthird party liability or expense, arising from the occurrence of the perils of the
party liability or expense, arising from the occurrence of the perils of the sea for the voyage of the sea for the voyage of the vesselvessel from Onomichi, Japan to Batangas, Philippines. On February 24, 2003,
from Onomichi, Japan to Batangas, Philippines. On February 24, 2003, while still in Japanese waters, thewhile still in Japanese waters, the vessel sank due
vessel sank due to extreme bad weather to extreme bad weather condition. Only the Chief Engineer survived the incident.condition. Only the Chief Engineer survived the incident. Respondents, as heirs and
Respondents, as heirs and beneficiaries of Gudelosao and Tancontian, filed separate beneficiaries of Gudelosao and Tancontian, filed separate complaints forcomplaints for death benefits and other damages against petitioner. On August 5, 20
death benefits and other damages against petitioner. On August 5, 20 04, the Labor Arbiter rendered a04, the Labor Arbiter rendered a Decision finding solidary liability among petitioner, TEMMPC, TMCL and Capt. Orbeta. On appeal, the Decision finding solidary liability among petitioner, TEMMPC, TMCL and Capt. Orbeta. On appeal, the NLRC absolved petitioner, TEMMPC, TMCL, and Capt. Orbeta from any liability based o
NLRC absolved petitioner, TEMMPC, TMCL, and Capt. Orbeta from any liability based o n the limitedn the limited liability rule.
liability rule.
ISSUE: Whether the liability of
ISSUE: Whether the liability of petitioner is extinguished upon SSSICI's payment of insurance petitioner is extinguished upon SSSICI's payment of insurance proceeds toproceeds to the heirs and
the heirs and beneficiariebeneficiaries of s of the deceased employeesthe deceased employees HELD:
HELD:
Petitioner is solidarily liable with TEMMPC and TMCL for the death
Petitioner is solidarily liable with TEMMPC and TMCL for the death benefits under the POEA-SEC. Thebenefits under the POEA-SEC. The basis of the solidary liability of t
basis of the solidary liability of the principal with the local manning agent is found in the he principal with the local manning agent is found in the secondsecond paragraph of Section 10 of the Migrant Workers and Overseas Filipino Act of
paragraph of Section 10 of the Migrant Workers and Overseas Filipino Act of 1995, which provides that1995, which provides that “the liability of the principal/employer and the r
“the liability of the principal/employer and the recruitment/placecruitment/placement agency for any ement agency for any and all claimsand all claims under this secti
under this section shall be joint and several.”on shall be joint and several.” The rule is that tThe rule is that the release of one solidary debtorhe release of one solidary debtor redounds to the benefit of the
redounds to the benefit of the others. Considering that petitioner is solidarily liable with TEMMPC andothers. Considering that petitioner is solidarily liable with TEMMPC and TMCL, the court holds that the
TMCL, the court holds that the Release and Quitclaim executed by respondents in favor of TEMMPC andRelease and Quitclaim executed by respondents in favor of TEMMPC and TMCL redounded to the
TMCL redounded to thepetitioner’s benefit. Accordingly, the liabilities opetitioner’s benefit. Accordingly, the liabilities of petitioner under Sectionf petitioner under Section 20(A)(1) and (4)(c) of the
Joint Obligations Joint Obligations
SPS. AMADO AND ESTHER IBAÑEZ V. JAMES HARPER
SPS. AMADO AND ESTHER IBAÑEZ V. JAMES HARPER G.R. No. 194272 February 15, 2017G.R. No. 194272 February 15, 2017 JARDELEZA, J.
JARDELEZA, J. FACTS:
FACTS:
Sps. Amado and Ibañez borrowed the amount of P
Sps. Amado and Ibañez borrowed the amount of P1,300.00 payable in three months, with 1,300.00 payable in three months, with the interestthe interest rate of 3% a
rate of 3% a month. The Sps. Ibañez issued a Promissory Note binding themselves jointly and severally tomonth. The Sps. Ibañez issued a Promissory Note binding themselves jointly and severally to pay Ma. Consuelo and Consuelo the loan amount with
pay Ma. Consuelo and Consuelo the loan amount with interest. As security, Sps. Ibañez executed a Deedinterest. As security, Sps. Ibañez executed a Deed of Real Estate Mortgage in favor of
of Real Estate Mortgage in favor of Ma. Consuelo and Consuelo over a parcel of land and Ma. Consuelo and Consuelo over a parcel of land and itsits improvements covered by TCT No. 202978 and the mortgage contained the same
improvements covered by TCT No. 202978 and the mortgage contained the same terms as theterms as the promissory note. All conditions of the mortgage have been violated and that
promissory note. All conditions of the mortgage have been violated and that all check payments wereall check payments were dishonored by the drawees and they applied for foreclosure of the real estate mortgage. The parties dishonored by the drawees and they applied for foreclosure of the real estate mortgage. The parties filed a Joint Motion for
filed a Joint Motion for Approval of Amended Compromise Agreement signeApproval of Amended Compromise Agreement signed by the Sps. Ibañez andd by the Sps. Ibañez and Francisco, for himself and on
Francisco, for himself and on behalf of Ma. behalf of Ma. Consuelo and Consuelo. The compromise agreement wasConsuelo and Consuelo. The compromise agreement was later on approved by the RTC.
later on approved by the RTC. ISSUE:
ISSUE: Whether the subsequeWhether the subsequent compromise agreement compromise agreement binds the parties to be liable solidarily asnt binds the parties to be liable solidarily as previously stipulated in the promissory note.
previously stipulated in the promissory note. HELD:
HELD:
The compromise agreement is binding on
The compromise agreement is binding on the contractual parties, being expressly acknowledged asthe contractual parties, being expressly acknowledged as juridical agre
juridical agreement between theement between them, and has the effect and authority of rm, and has the effect and authority of res judicata. Theres judicata. There is nothing ine is nothing in the Amended Compromise Agreement which shows a
the Amended Compromise Agreement which shows a declaration that the obligation created wasdeclaration that the obligation created was solidary. Pursuant to Article 1207, there is a
solidary. Pursuant to Article 1207, there is a solidary liability only when the obligation expressly sosolidary liability only when the obligation expressly so states, or when the law or
states, or when the law or the nature of the obligation requires solidarity. In this case, given thatthe nature of the obligation requires solidarity. In this case, given that solidarity could not be inferred from the agreement, the presumption under the law applies solidarity could not be inferred from the agreement, the presumption under the law applies – – the the obligation is joint.
obligation is joint.
As defined in Article 1208, a
As defined in Article 1208, a joint obligation is one where there is a joint obligation is one where there is a concurrencconcurrence of several creditors, ore of several creditors, or of several debtors, or of several debtors, or of
of several debtors, or of several debtors, or of several creditors and debtors, by virtue of which each ofseveral creditors and debtors, by virtue of which each of the creditors has a right to
the creditors has a right to demand, and each of the demand, and each of the debtors is bound to render compliance with hisdebtors is bound to render compliance with his proportionate part of the prestation which constitutes the object of the o
proportionate part of the prestation which constitutes the object of the o bligation. Each debtor answersbligation. Each debtor answers only for a part o
only for a part of the whole liability and to f the whole liability and to each oblige belongs only a part of each oblige belongs only a part of the correlative rights as it isthe correlative rights as it is only in solidary obligations that payment made to
only in solidary obligations that payment made to any one of the solidary creditors extinguishes theany one of the solidary creditors extinguishes the entire obligation. This means that Francisco, Ma. Consuelo and Consuelo are each entitled to equal entire obligation. This means that Francisco, Ma. Consuelo and Consuelo are each entitled to equal shares in the P3,000,000
shares in the P3,000,000 agreed upon in the Amended Compromise Agreement and that payment toagreed upon in the Amended Compromise Agreement and that payment to Consuelo and Ma. Consuelo will not have the effect of
Consuelo and Ma. Consuelo will not have the effect of discharging the obligation with respect todischarging the obligation with respect to Francisco.
Quantum Meruit Quantum Meruit
PHILIPPINE SCIENCE HIGH SCHOOL-CAGAYAN VALLEY CAMPUS
PHILIPPINE SCIENCE HIGH SCHOOL-CAGAYAN VALLEY CAMPUS (PSHS) VS. PIRRA (PSHS) VS. PIRRA CONSTRUCTICONSTRUCTIONON ENTERPRISES G.R. NO. 204423 SEPTEMBER 14, 2016
ENTERPRISES G.R. NO. 204423 SEPTEMBER 14, 2016 DEL CASTILLO, J.
DEL CASTILLO, J. Facts:
Facts:
PIRRA is engaged in contracting and a
PIRRA is engaged in contracting and a licensed contraclicensed contractor. It bid and tor. It bid and won in constructing thewon in constructing thePSHS’sPSHS’s construction projects whic
construction projects which consisted of Project A and Project C. Ph consisted of Project A and Project C. Project A was accepted as substantiallyroject A was accepted as substantially completed. As such, PIRRA asked for the
completed. As such, PIRRA asked for the payment of the completed project. It stated that payment of the completed project. It stated that the paymentthe payment thereof could not yet be made
thereof could not yet be made pending correctipending correction of the noted on of the noted defects and remaining work activities,defects and remaining work activities, the final inspection of the concerned agencies, among other reasons. Project A was subjected by the final inspection of the concerned agencies, among other reasons. Project A was subjected by inspection of the COA. However, PIRRA was absent during such inspection. A joint
inspection of the COA. However, PIRRA was absent during such inspection. A joint inspection agreemeinspection agreementnt was entered into by the
was entered into by the parties for COA’s reinspection but it did not materialize. PSHS parties for COA’s reinspection but it did not materialize. PSHS informed PIRRAinformed PIRRA that it was t
that it was taking over Project A in the aking over Project A in the interest of the government and to prepare for its occupancy forinterest of the government and to prepare for its occupancy for the incoming school year. PIRRA questioned the taking over as well as
the incoming school year. PIRRA questioned the taking over as well as the inspection made by the COA.the inspection made by the COA. On Project C, PIRRA requested for several time suspensions because of the several problems that
On Project C, PIRRA requested for several time suspensions because of the several problems that occurred. The parties entered into a joint inspection agreement but still the project was delayed to occurred. The parties entered into a joint inspection agreement but still the project was delayed to which PSHS attributed to the non-response of PIRRA. PIRRA
which PSHS attributed to the non-response of PIRRA. PIRRA suspended the work without approval. PSHSsuspended the work without approval. PSHS terminated the contract because of the events that occurred. PIRRA questioned such termination. PIRRA terminated the contract because of the events that occurred. PIRRA questioned such termination. PIRRA filed a complaint against PSHS before the CIAC for damages.
filed a complaint against PSHS before the CIAC for damages. ISSUE: Is PIRRA entitled to compensation despite the fact that
ISSUE: Is PIRRA entitled to compensation despite the fact that it was not able to it was not able to complete the projectcomplete the project entered into with PSHH-CVC?
entered into with PSHH-CVC? HELD:
HELD:
Yes. The Court agreed that Project A had been substantially completed, thus, payment
Yes. The Court agreed that Project A had been substantially completed, thus, payment must be made tomust be made to PIRRA. When PIRRA requested substantial acceptance and completion of Project A, PSHS did
PIRRA. When PIRRA requested substantial acceptance and completion of Project A, PSHS did not objectnot object to such a
to such a request. It acted upon it and even created an Inspectorate Team for punch request. It acted upon it and even created an Inspectorate Team for punch listing, and for thelisting, and for the purpose of determining PIRRA's Billing Statement. The existence of the of the defective or undelivered purpose of determining PIRRA's Billing Statement. The existence of the of the defective or undelivered items was not an
items was not an excuse to avoid payment of the excuse to avoid payment of the progress billingprogress billing, as the , as the payment was due on thepayment was due on the performed items that were completed or
performed items that were completed or were otherwise performedwere otherwise performed, save , save for the defects. Pursuant tofor the defects. Pursuant to Article 1234 of the
Article 1234 of the Civil Code, if the obligation had been substantially performed in good faith, theCivil Code, if the obligation had been substantially performed in good faith, the obligor, in this case, PIRRA, m
obligor, in this case, PIRRA, may recover as if it had ay recover as if it had strictly and completely fulfilled its obligation, less thestrictly and completely fulfilled its obligation, less the damages suffered by the obligee or in this
damages suffered by the obligee or in this instance, PSHS. Hence, PSHS should pay PIRRA for the servicesinstance, PSHS. Hence, PSHS should pay PIRRA for the services that it
that it rendered.rendered.
It was held that PIRRA PIRRA
It was held that PIRRA PIRRAincurred delay, suspended work without PSHS’ approval, and abandonedincurred delay, suspended work without PSHS’ approval, and abandoned the project. Because of such, PSHS may terminate the contract since such was stipulated in
the project. Because of such, PSHS may terminate the contract since such was stipulated in the contract.the contract. Nonetheless, PIRRA is entitled to the value of
Nonetheless, PIRRA is entitled to the value of the work done on Project C pursuant to the work done on Project C pursuant to the principle ofthe principle of quantum meruit and to avoid unjust
quantum meruit and to avoid unjust enrichment on the part of PIRRA. Quantum enrichment on the part of PIRRA. Quantum meruit means that, inmeruit means that, in an action for work and
an action for work and labor, payment shall be made in such amount labor, payment shall be made in such amount as the plaintiff reasonably deservesas the plaintiff reasonably deserves as it is
as it is unjust for a person to retain any benefit without paying unjust for a person to retain any benefit without paying for it.". To deny payment thereof wouldfor it.". To deny payment thereof would result in unjust enrichment of PSHS at the
Contracts Contracts
Indivisibility of contracts Indivisibility of contracts
SPOUSES ALEXANDER AND JULIE LAM v. KODAK PHILIPPINES, LTD. G.R. No. 1
SPOUSES ALEXANDER AND JULIE LAM v. KODAK PHILIPPINES, LTD. G.R. No. 1 67615 January 11, 67615 January 11, 20162016 LEONEN, J.:
LEONEN, J.: FACTS: FACTS:
On January 8, 1992,
On January 8, 1992, the Lam Spouses and Kodak Philippines, Ltd. entered into the Lam Spouses and Kodak Philippines, Ltd. entered into an agreement for the salean agreement for the sale of three (3) units of the Kodak Minilab System 22XL6 in the amount of P1,796,000.00 per unit. Kodak of three (3) units of the Kodak Minilab System 22XL6 in the amount of P1,796,000.00 per unit. Kodak Philippines, Ltd. delivered one (1) unit of the Minilab Equipment in Tagum,
Philippines, Ltd. delivered one (1) unit of the Minilab Equipment in Tagum, Davao Province. The LamDavao Province. The Lam Spouses issued postdated checks amounting to P35,000.00 each for 12
Spouses issued postdated checks amounting to P35,000.00 each for 12 months as payment for the months as payment for the firstfirst delivered unit. The Lam Spouses requested that Kodak Philippines, Ltd. not negotiate the check dated delivered unit. The Lam Spouses requested that Kodak Philippines, Ltd. not negotiate the check dated due to insufficiency of funds. However, both checks were negotiated by Kodak Philippines, Ltd. and were due to insufficiency of funds. However, both checks were negotiated by Kodak Philippines, Ltd. and were honored by the depository bank. The 10 other
honored by the depository bank. The 10 other checks were subsequentlchecks were subsequently dishonored after the Lamy dishonored after the Lam Spouses ordered the depository bank to stop payment. Kodak Philippines, Ltd. canceled the sale and Spouses ordered the depository bank to stop payment. Kodak Philippines, Ltd. canceled the sale and demanded that the Lam Spouses
demanded that the Lam Spouses return the unit it delivered together with its accessories. The Lamreturn the unit it delivered together with its accessories. The Lam Spouses ignored the demand but also rescinded the contract through the letter dated November 18, Spouses ignored the demand but also rescinded the contract through the letter dated November 18, 1992 on account of
1992 on account of Kodak Philippines, Ltd.'s failure to deliver the two (2) Kodak Philippines, Ltd.'s failure to deliver the two (2) remaining Minilab Equipremaining Minilab Equipmentment units.
units.
ISSUE: Whether the contract between petitioners and respondent pertained to
ISSUE: Whether the contract between petitioners and respondent pertained to obligations that areobligations that are severable, divisible, and susceptible to partial
severable, divisible, and susceptible to partial performanceperformance HELD:
HELD:
The intention of the parties to
The intention of the parties to bind themselves to an indivisible obligation can be further discernedbind themselves to an indivisible obligation can be further discerned through their direct acts in relation to the package deal. This
through their direct acts in relation to the package deal. This intent must prevail even though theintent must prevail even though the articles involved are physically separable and capable of
articles involved are physically separable and capable of being paid for and being paid for and delivered individually. Andelivered individually. An obligation is indivisible when it cannot be validly performed in parts, whatever may be t
obligation is indivisible when it cannot be validly performed in parts, whatever may be t he nature of thehe nature of the thing which is the object thereof. The indivisibility refers to the prestation and not
thing which is the object thereof. The indivisibility refers to the prestation and not to the object thereof.to the object thereof. The Agreement between the parties contained an
The Agreement between the parties contained an indivisible obligindivisible obligation. It contained a “packageation. It contained a “packagedeal"deal" involving three (3) units of the Kodak Minilab System 22XL.
involving three (3) units of the Kodak Minilab System 22XL. The intention of the parties is The intention of the parties is for there to befor there to be a single transaction covering all three (3) units of
a single transaction covering all three (3) units of the Minilab Equipment. Respondent's obligatithe Minilab Equipment. Respondent's obligation was toon was to deliver all products purchased under a "package," and, in turn, petitioners' obligation was to pay for t deliver all products purchased under a "package," and, in turn, petitioners' obligation was to pay for t hehe total purchase price, payable in installments. The intention of the parties to
total purchase price, payable in installments. The intention of the parties to bind themselves to anbind themselves to an indivisible obligation can be further discerned throug
indivisible obligation can be further discerned through their direct acts in relation to h their direct acts in relation to the package deal.the package deal. The Letter Agreement specified only one purpose for the buyer, which was to obtain these
The Letter Agreement specified only one purpose for the buyer, which was to obtain these units forunits for three different outlets. If the intention of the
three different outlets. If the intention of the parties were to have a divisible contract, then separateparties were to have a divisible contract, then separate agreements could have been made for each Minilab Equipment unit instead of covering all three in one agreements could have been made for each Minilab Equipment unit instead of covering all three in one package deal.
package deal.
Furthermore, the 19% multiple order discount as contained in the Letter Agreement was applied to Furthermore, the 19% multiple order discount as contained in the Letter Agreement was applied to allall three acquired units. There is no indication in the Letter Agreement that the
three acquired units. There is no indication in the Letter Agreement that the unit’sunit’spetitioners orderedpetitioners ordered were covered by three (3)
Reformation of Instruments Reformation of Instruments
B.F. CORPORATION AND HONORIO PINEDA V. FORM-EZE SYSTEMS, INC. G.R. NO. 192948 B.F. CORPORATION AND HONORIO PINEDA V. FORM-EZE SYSTEMS, INC. G.R. NO. 192948 DECEMBER 07, 2016 DECEMBER 07, 2016 PEREZ, J. PEREZ, J. FACTS: FACTS: On 29 August
On 29 August 2006, SM Prime Holdings, Inc. awarded the contract for general construction of the SM2006, SM Prime Holdings, Inc. awarded the contract for general construction of the SM City-Marikina mall to BFC. In turn, BFC engaged Form-Eze for the lease of
City-Marikina mall to BFC. In turn, BFC engaged Form-Eze for the lease of formwork system and relatedformwork system and related equipment for and needed by the Project. Five (5) contracts and two
equipment for and needed by the Project. Five (5) contracts and two (2) letter agreements were(2) letter agreements were executed by the BFC. On 30
executed by the BFC. On 30 March 2007, Form-Eze filed a Request for March 2007, Form-Eze filed a Request for Arbitration before the CIAC. In itsArbitration before the CIAC. In its Complaint, Form-Eze alleged that BFC has an unpaid obligation amounting to P9,189,024.58;
Complaint, Form-Eze alleged that BFC has an unpaid obligation amounting to P9,189,024.58; that BFCthat BFC wanted to re-negotiate the equipment leases; and that it
wanted to re-negotiate the equipment leases; and that it was not complying with the contractual andwas not complying with the contractual and supplemental agreeme
supplemental agreements in effect. BFC’s contentionnts in effect. BFC’s contentionis that the Contract #1 is that the Contract #1 must be reformed tomust be reformed to incorporate a provision that BFC shall deduct from said billing the cost of
incorporate a provision that BFC shall deduct from said billing the cost of labor supplied by it for thelabor supplied by it for the fabrication and assembly of the forming system and for
fabrication and assembly of the forming system and for the stripping, cleaning, resetting therethe stripping, cleaning, resetting thereof at theof at the rate of P60.00
rate of P60.00 per man-hour. BFC also demanded the refund of P5,773,440.00 as expenses for theper man-hour. BFC also demanded the refund of P5,773,440.00 as expenses for the manufacture of additional hardware to complete the 7,000 square meters of
manufacture of additional hardware to complete the 7,000 square meters of formwork required informwork required in Contract #1. BFC explained that Form-Eze had only furnished 4,682.4 square meters of
Contract #1. BFC explained that Form-Eze had only furnished 4,682.4 square meters of formwork.formwork. ISSUE: Whether the contract expressed their true intention; and, if not, whether it was due to
ISSUE: Whether the contract expressed their true intention; and, if not, whether it was due to mistake,mistake, fraud, inequitable conduct or accident
fraud, inequitable conduct or accident
Is reformation of contract proper to incorporate a provision that BFC shall furnish the
Is reformation of contract proper to incorporate a provision that BFC shall furnish the labor needed bylabor needed by assembling and that it shall deduct therefrom the agreed cost of
assembling and that it shall deduct therefrom the agreed cost of labor since it has been the intentionlabor since it has been the intention and agreement of the parties?
and agreement of the parties? HELD:
HELD:
Yes. Reformation is a remedy in equity, whereby a written instrument is
Yes. Reformation is a remedy in equity, whereby a written instrument is made or construed so as tomade or construed so as to express or conform to the real intention of
express or conform to the real intention of the parties, where some error or mistake has beenthe parties, where some error or mistake has been committed. BFC relies on the
committed. BFC relies on the Form-Eze Proposed SM Marikina Mall Project Elevated Beam Form-Eze Proposed SM Marikina Mall Project Elevated Beam and Slaband Slab Formwork dated 7 December 2006 to support its
Formwork dated 7 December 2006 to support its contention that Contract No. 1 should have contention that Contract No. 1 should have a provisiona provision on the cost of
on the cost of labor. Indeed, in the proposal, BFC has agreed "to furnish the labor required forlabor. Indeed, in the proposal, BFC has agreed "to furnish the labor required for fabrication and assembly of the forming equipment" and that "BFC will deduct from the
fabrication and assembly of the forming equipment" and that "BFC will deduct from the total contracttotal contract amount 50.00
amount 50.00 per man-hour each carpenter or laborer supplied to per man-hour each carpenter or laborer supplied to Form-Eze."Form-Eze." Notably, Contracts No. 2 and 3
Notably, Contracts No. 2 and 3 contain labor-guarantee provisioncontain labor-guarantee provisions considering that BFC has committeds considering that BFC has committed to provide the necessary labor for both contracts. The admission by Form-Eze bolsters the conclusion to provide the necessary labor for both contracts. The admission by Form-Eze bolsters the conclusion that the parties intended to include a
that the parties intended to include a labor guarantee provision in Contract No. 1. Both Contracts No. 2labor guarantee provision in Contract No. 1. Both Contracts No. 2 and 3 set
and 3 set the labor rate at P60the labor rate at P60.00 per carpenter man-hour. Considering that both parties admitted that.00 per carpenter man-hour. Considering that both parties admitted that there should be a labor guarantee clause in Contract No. 1
there should be a labor guarantee clause in Contract No. 1, it can be , it can be reasonably inferrreasonably inferred that the failureed that the failure to include said provision was due to m
to include said provision was due to mistake. A reformation is in order to include a istake. A reformation is in order to include a cost of laborcost of labor provision in Contract No. 1.
Amendment of Contract Amendment of Contract
BASES CONVERSION DEVELOPMENT AUTHORITY V. DMCI PROJECT DEVELOPERS, INC. BASES CONVERSION DEVELOPMENT AUTHORITY V. DMCI PROJECT DEVELOPERS, INC. G.R. NO. 173137 JANUARY 11, 2016 G.R. NO. 173137 JANUARY 11, 2016 LEONEN, J. LEONEN, J. FACTS: FACTS: On June 10, 1
On June 10, 1995, Bases Conversion Development Authority entered into a Joint Venture Agreement995, Bases Conversion Development Authority entered into a Joint Venture Agreement with Philippine National Railways and other
with Philippine National Railways and other foreign corporations. Under the Joint Venture Agreement,foreign corporations. Under the Joint Venture Agreement, the parties agreed to construct a railroad system from Manila to
the parties agreed to construct a railroad system from Manila to Clark with possible extensions to SubicClark with possible extensions to Subic Bay and La Union and
Bay and La Union and later, possibly to Ilocos Norte and Nueva Ecija. BCDA organized and incorporatedlater, possibly to Ilocos Norte and Nueva Ecija. BCDA organized and incorporated Northrail. Northrail was registere
Northrail. Northrail was registered with the Securities and Exchange Commission on August 22, 1995d with the Securities and Exchange Commission on August 22, 1995. On. On February 8, 1996, the
February 8, 1996, the Joint Venture Agreement was amended to include D.M. Consunji, Inc. and/or itsJoint Venture Agreement was amended to include D.M. Consunji, Inc. and/or its nominee as party. The
nominee as party. The conflict arose when Northrail withdrew from the SEC conflict arose when Northrail withdrew from the SEC its application for increasedits application for increased authorized capital stock. On September 27, 2000, DMCI-PDI started
authorized capital stock. On September 27, 2000, DMCI-PDI started demanding from BCDA and Northraildemanding from BCDA and Northrail the return of its P300
the return of its P300 million deposit. DMCI-PDI cited Northrail's failure to increase its authorized capitalmillion deposit. DMCI-PDI cited Northrail's failure to increase its authorized capital stock as reason for the
stock as reason for the demand. However, BCDA and Nortrail refused to do so. On August 17, demand. However, BCDA and Nortrail refused to do so. On August 17, 2005,2005, DMCIPDI served a demand for arbitration to BCDA and Northrail, citing the
DMCIPDI served a demand for arbitration to BCDA and Northrail, citing the arbitration clause in the Junearbitration clause in the June 10, 1995
10, 1995 Joint Venture Agreement. BCDA and Northrail failed to respond.Joint Venture Agreement. BCDA and Northrail failed to respond.
ISSUE: Whether DMCI-PDI may compel BCDA and Northrail to submit to arbitration when the former ISSUE: Whether DMCI-PDI may compel BCDA and Northrail to submit to arbitration when the former was not a
was not a party to the agreement containing the arbitration clause.party to the agreement containing the arbitration clause. HELD:
HELD:
DMCI-PDI may compel BCDA and Northrail to submit to
DMCI-PDI may compel BCDA and Northrail to submit to arbitration proceedingarbitration proceedings in light of s in light of the policy inthe policy in favor of arbitration. BCDA and Northrail assail DMCI-PDI's right to compel them to
favor of arbitration. BCDA and Northrail assail DMCI-PDI's right to compel them to submit to arbitrationsubmit to arbitration based on the assumption that
based on the assumption that DMCI-PDI was not a party DMCI-PDI was not a party to the agreement containing the arbitrationto the agreement containing the arbitration clause. However, three documents represent the agreement between BCDA, Northrail, and D.M. clause. However, three documents represent the agreement between BCDA, Northrail, and D.M. Consunji, Inc. Among the three documents, only the Joint
Consunji, Inc. Among the three documents, only the Joint Venture Agreement containVenture Agreement contains the arbitrations the arbitration clause. DMCI-PDI was allegedly not a party to the
clause. DMCI-PDI was allegedly not a party to the Joint Venture Agreement.Joint Venture Agreement.
Amendments or supplements to the agreement may be executed by contracting parties to address the Amendments or supplements to the agreement may be executed by contracting parties to address the circumstances or issues that arise while a contract subsists. When an agreement is amended, some circumstances or issues that arise while a contract subsists. When an agreement is amended, some provisions are changed. Certain parts or
provisions are changed. Certain parts or provisions may be added, removed, provisions may be added, removed, or corrected. Theseor corrected. These changes may cause effects that are inconsistent with the wordings of the contract before the changes changes may cause effects that are inconsistent with the wordings of the contract before the changes were applied. In that case, the old provisions shall be
were applied. In that case, the old provisions shall be deemed to have lost their force and effect, whiledeemed to have lost their force and effect, while the changes shall be deemed to have taken
the changes shall be deemed to have taken effect. Provisions that are not affected by the changeseffect. Provisions that are not affected by the changes usually remain effective. When a contract
usually remain effective. When a contract is supplemented, new provisions that are is supplemented, new provisions that are not inconsistentnot inconsistent with the old provisions are added. The nature, scope, and
with the old provisions are added. The nature, scope, and terms and conditions are expanded. A readingterms and conditions are expanded. A reading of all the
of all the documents of agreement shows that they were executed by the same parties. Initially, thedocuments of agreement shows that they were executed by the same parties. Initially, the Joint Venture Agreement was executed only by BCD A, P
Joint Venture Agreement was amended to include D.M. Consunji, Inc. and/or its nominee, D.M. Joint Venture Agreement was amended to include D.M. Consunji, Inc. and/or its nominee, D.M. Consunji, Inc. and/or its nominee were deemed to have been also a
Consunji, Inc. and/or its nominee were deemed to have been also a party to the original Joint Ventureparty to the original Joint Venture Agreement executed by BCDA, PNR, and the foreign corporations. D.M. Consunji, Inc. and/or its
Agreement executed by BCDA, PNR, and the foreign corporations. D.M. Consunji, Inc. and/or its nominee became bound to the terms of
nominee became bound to the terms of both the Joint Venture Agreement and its amendment.both the Joint Venture Agreement and its amendment. Each document of agreement represents a step toward the implementation of the project, such
Each document of agreement represents a step toward the implementation of the project, such that thethat the three agreements must be read
three agreements must be read together for a complete together for a complete understanding of the parties' whole agreement.understanding of the parties' whole agreement. The Joint Venture Agreement, the amended Joint Venture Agreement, and the Memorandum of
The Joint Venture Agreement, the amended Joint Venture Agreement, and the Memorandum of Agreement should be treated as one contract because they all form
Agreement should be treated as one contract because they all form part of a whole agreement. Hence,part of a whole agreement. Hence, the arbitration clause in the Joint
the arbitration clause in the Joint Venture Agreement should not be interpreted as applicable only toVenture Agreement should not be interpreted as applicable only to the Joint Venture
the Joint Venture Agreement's original parties. The succeeding agreements are deemed part of or Agreement's original parties. The succeeding agreements are deemed part of or aa continuation of the Joint Venture Agreement. The arbitration clause should extend to all the
continuation of the Joint Venture Agreement. The arbitration clause should extend to all the agreementsagreements and its parties since it
and its parties since it is still consistent with all the terms is still consistent with all the terms and conditions of the amendments andand conditions of the amendments and supplements.
Interpretation of Contracts Interpretation of Contracts Literal Application; Contracts Literal Application; Contracts
TERESITA I. BUENAVENTURA VS. METROPOLITAN BANK AND TRUST COMPANY TERESITA I. BUENAVENTURA VS. METROPOLITAN BANK AND TRUST COMPANY G.R. NO. 167082 AUGUST 3, 2016 G.R. NO. 167082 AUGUST 3, 2016 BERSAMIN, J. BERSAMIN, J. FACTS: FACTS: On January 20, 1997
On January 20, 1997 and April 17, 1997, and April 17, 1997, Teresita BuenaventurTeresita Buenaventura executed Promissory Notes eacha executed Promissory Notes each in the amount of
in the amount of P 1,500,000.00 and P 1,500,000.00 and payable to Metrobank with interest and credit evaluationpayable to Metrobank with interest and credit evaluation and supervision fee. Both PNs provide for penalty of 18%
and supervision fee. Both PNs provide for penalty of 18% per annum on the unpaid principal fromper annum on the unpaid principal from date of default until full
date of default until full payment of the obligation. Despite demands, there remained unpaid onpayment of the obligation. Despite demands, there remained unpaid on PN Nos. 232663 and 232711 the amounts of P2,061
PN Nos. 232663 and 232711 the amounts of P2,061,208.08 and P1,492,236.37, respectively, as,208.08 and P1,492,236.37, respectively, as of July 15,
of July 15, 1998, inclusive of interest and penalty. Consequently, appellee filed an action against1998, inclusive of interest and penalty. Consequently, appellee filed an action against appellant for recovery of said amounts, interest, penalty and attorney's fees before the Regional appellant for recovery of said amounts, interest, penalty and attorney's fees before the Regional Trial Court of Makati City. Petitioner averred that she is
Trial Court of Makati City. Petitioner averred that she is just a guarantor to the just a guarantor to the obligation of hisobligation of his nephew Rene Imperial and cannot be held liable unless the respondent exhausted all the
nephew Rene Imperial and cannot be held liable unless the respondent exhausted all the
properties of imperial. Petitioner also claimed that the Promissory Notes are contact of adhesion properties of imperial. Petitioner also claimed that the Promissory Notes are contact of adhesion and must be construed against the
and must be construed against the respondent.respondent. HELD:
HELD:
The Promissory Notes were valid. First, the terms and conditions of the P
The Promissory Notes were valid. First, the terms and conditions of the P romissory Notes wereromissory Notes were clear and unambiguous. Hence, the Court only needs to literally apply the contracts. While it is clear and unambiguous. Hence, the Court only needs to literally apply the contracts. While it is true that the Promissory Notes were considered contract of adhesion, such fact would not true that the Promissory Notes were considered contract of adhesion, such fact would not necessarily entitle the petitioner to
necessarily entitle the petitioner to bar their literal enforcement against her. Contracts ofbar their literal enforcement against her. Contracts of adhesion, such as in this case
adhesion, such as in this case have the same validity and enforceability with that of ordinaryhave the same validity and enforceability with that of ordinary contracts.
contracts.
Also, the claim of
Also, the claim of the petitioner that the Promissory Notes were meant as guaranties to securethe petitioner that the Promissory Notes were meant as guaranties to secure the payment of the checks by
the payment of the checks by Rene imperial was also denied. The Court ruled that a Rene imperial was also denied. The Court ruled that a contract ofcontract of guaranty is one where a person, the guarantor, binds himself or
guaranty is one where a person, the guarantor, binds himself or herself to another, the creditor,herself to another, the creditor, to fulfill the obligation of the
to fulfill the obligation of the principal debtor in case of failure of the latter to principal debtor in case of failure of the latter to do so. It cannot do so. It cannot bebe presumed, but must be express and in
special promise to answer for the debt, default or miscarriage of another. It being clear that the special promise to answer for the debt, default or miscarriage of another. It being clear that the promissory notes were entirely silent about the supposed guaranty in favor of Imperial, we must promissory notes were entirely silent about the supposed guaranty in favor of Imperial, we must read the promissory notes literally due to the absence of any
read the promissory notes literally due to the absence of any ambiguities about their languageambiguities about their language and meaning. In other words, the petitioner could not validly insist on
and meaning. In other words, the petitioner could not validly insist on the guaranty.Constructhe guaranty.Construction oftion of words and phrases in the contract
words and phrases in the contract
CENTURY PROPERTIES, INC. VS. EDWIN J.
CENTURY PROPERTIES, INC. VS. EDWIN J. BABIANO AND EMMA B. CONCEPCIONBABIANO AND EMMA B. CONCEPCION G. R. NO. 220978 JULY 5, 2016 G. R. NO. 220978 JULY 5, 2016 PERLAS-BERNABE, J. PERLAS-BERNABE, J. FACTS: FACTS:
Babiano was hired by CPI as Director of Sales,
Babiano was hired by CPI as Director of Sales, and was eventually appointed as Vice President forand was eventually appointed as Vice President for Sales effective September 1, 2007. During that same period, Concepcion was initially hired as Sales effective September 1, 2007. During that same period, Concepcion was initially hired as Sales Agent by CPI and was eventually promoted as P
Sales Agent by CPI and was eventually promoted as P roject Director on September 1, 2007. Asroject Director on September 1, 2007. As such, she signed an employment agreement, denominated as “
such, she signed an employment agreement, denominated as “ Contract of Agency for ProjectContract of Agency for Project Director” which provided, among others, that
Director” which provided, among others, that she would directly report to Babiano.she would directly report to Babiano. After receiving reports that Babiano, among
After receiving reports that Babiano, among others, spread false information regarding CPI andothers, spread false information regarding CPI and for being absent without official leave for five days, CPI sent
for being absent without official leave for five days, CPI sent Babiano a Notice to Explain. OnBabiano a Notice to Explain. On February 25, 2009, Babiano tendered his resignation and revealed that he had
February 25, 2009, Babiano tendered his resignation and revealed that he had been accepted asbeen accepted as Vice President of First
Vice President of First Global BYO Development Corporation, a competitor of CPI.Global BYO Development Corporation, a competitor of CPI.
Respondents filed a complaint for non-payment of commissions and damages against CPI before Respondents filed a complaint for non-payment of commissions and damages against CPI before the NLRC. The labor arbiter decided
the NLRC. The labor arbiter decided in CPI’s favor. On appeal, however, the in CPI’s favor. On appeal, however, the NLRC ruled in favorNLRC ruled in favor of the respondents. The CA later affirmed the NLRC
of the respondents. The CA later affirmed the NLRC ruling.ruling. HELD:
HELD:
Article 1370 of the Civil Code provides that “if the terms of a co
Article 1370 of the Civil Code provides that “if the terms of a contract are clear and leave nontract are clear and leave no doubt upon the intention of the
doubt upon the intention of the contracting parties, the literal meaning of its stipulations shallcontracting parties, the literal meaning of its stipulations shall control. In this case, the
control. In this case, the assailed “Confidentiality of Documents and Nonassailed “Confidentiality of Documents and Non--Compete Clause” foundCompete Clause” found in Babiano’s employment contract. Such clause states that
in Babiano’s employment contract. Such clause states that Babiano is barred to “work forBabiano is barred to “work for whatsoever capacity with any person whose business is in direct competition with CPI while he whatsoever capacity with any person whose business is in direct competition with CPI while he is employed and for a
is employed and for a period of one year for the period of one year for the date of his resignation or termination from thedate of his resignation or termination from the company
