oblicon cases 5 extinguishment of obligations.docx

7/26/2019 Oblicon Cases 5 Extinguishment of obligations.docx

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Republic of the Philippines

SUPREME COURT

Manila

FIRST DIVISION

G.R. No. 158361 April 10, 2013

INTERNATIONAL HOTEL CORPORATION, Petitioner,

vs.

FRANCISCO . !OA"UIN, !R. #$% RAFAEL SUARE&, Respondents.

D ! I S I O N

ERSAMIN, J.:

To avoid un"ust enrich#ent to a part$ fro# resultin% out of a substantiall$ perfor#ed contract, theprinciple of &uantu# #eruit #a$ be used to deter#ine his co#pensation in the absence of a 'ritten

a%ree#ent for that purpose. The principle of &uantu# #eruit "ustifies the pa$#ent of the reasonable

value of the services rendered b$ hi#.

T'( C#)(

(nder revie' is the decision the !ourt of )ppeals *!)+ pro#ul%ated on Nove#ber ,

--,/disposin%0

12RFOR, pre#ises considered, the decision dated )u%ust -3, /445 of the Re%ional Trial

!ourt, 6ranch /5, Manila in !ivil !ase No. R7-7-858 is )FFIRMD 'ith Modification as to thea#ounts a'arded as follo's0 defendant7appellant I2! is ordered to pa$ plaintiff7appellant

9oa&uin P:,. and plaintiff7appellant Suare;P-,., both to be paid in cash.

SO ORDRD.

A$*(+(%($*)

On Februar$ /, /434, respondent Francisco 6. 9oa&uin, 9r. sub#itted a proposal to the 6oard of

Directors of the International 2otel !orporation *I2!+ for hi# to render technical assistance in

securin% a forei%n loan for the construction of a hotel, to be %uaranteed b$ the Develop#ent 6an< of

the Philippines *D6P+.-

The proposal enco#passed nine phases, na#el$0 */+ the preparation of ane' pro"ect stud$= *-+ the settle#ent of the unre%istered #ort%a%e prior to the sub#ission of the

application for %uarant$ for processin% b$ D6P= *5+ the preparation of papers necessar$ to the

application for %uarant$= *8+ the securin% of a forei%n financier for the pro"ect= *>+ the securin% of the

approval of the D6P 6oard of ?overnors= *3+ the actual follo' up of the application 'ith D6P5=*:+ the

overall coordination in i#ple#entin% the pro"ections of the pro"ect stud$= *+ the preparation of the

staff for actual hotel operations= and *4+ the actual hotel operations.8
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The I2! 6oard of Directors approved phase one to phase si@ of the proposal durin% the special

board #eetin% on Februar$ //, /434, and ear#arThe co#plaint alle%ed that the cancellation

of the shares had been ille%al, and had deprived the# of their ri%ht to participate in the #eetin%s and

elections held b$ I2!= that 6arnes had been reco##ended b$ I2! President 6autista, not b$

9oa&uin= that the$ had failed to #eet their obli%ation because President 6autista and his son had

intervened and ne%otiated 'ith 6arnes instead of 1eston= that D6P had canceled the %uarant$

because 6arnes had failed to release the loan= and that I2! had a%reed to co#pensate their

services 'ith /:, shares of the co##on stoc< plus cash of P/,,../3
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I2!, to%ether 'ith Feli@ )n%elo 6autista, Ser%io O. Rustia, Mario 6. 9ulian and 6en"a#in 9. 6autista,

filed an ans'er clai#in% that the shares issued to 9oa&uin and Suare; as co#pensation for their

past and future services had been issued in violation of Section /3 of the !orporation !ode= that

9oa&uin and Suare; had not provided a forei%n financier acceptable to D6P= and that the$ had

alread$ received P43,5>. as pa$#ent for their services./:

On their part, Cira% and Cacerna denied an$


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6. DFND)NTS P)E PC)INTIFFS7)PPCC)NTS T1O MICCION SVN 2(NDRD

PSOS *sic+ *P-,:,.+, IN!C(DIN? INTRST T2RON FROM /4:5,

RPRSNTIN? T2 TOT)C O6CI?)TION D( PC)INTIFFS7)PPCC)NTS.-5

On the other hand, I2! attributed errors to the RT!, as follo's0

I.

T2 CO1R !O(RT RRD IN 2OCDIN? T2)T PC)INTIFFS7)PPCC)NTS 2)V NOT6N

!OMPCTCE P)ID FOR T2IR SRVI!S, )ND IN ORDRIN? T2 DFND)NT7)PPCC)NT

TO P)E T1O 2(NDRD T2O(S)ND PSOS *P-,.+ )ND FIFTE T2O(S)ND PSOS

*P>,.+ TO PC)INTIFFS7)PPCC)NTS FR)N!IS!O 6. 9O)G(IN )ND R)F)C S()RH,

RSP!TIVCE.

II.

T2 CO1R !O(RT RRD IN )1)RDIN? PC)INTIFFS7)PPCC)NTS )TTORNEAS FS)ND !OSTS OF S(IT.-8

In its &uestioned decision pro#ul%ated on Nove#ber , --, the !) concurred 'ith the RT!,

upholdin% I2!As liabilit$ under )rticle //3 of the !ivil !ode. It ruled that in the conte@t of )rticle

/-58 of the !ivil !ode, 9oa&uin had substantiall$ perfor#ed his obli%ations and had beco#e entitled

to be paid for his services= and that the issuance of the shares of stoc< 'as ultra vires for havin%

been issued as consideration for future services.

)nent ho' #uch 'as due to 9oa&uin and Suare;, the !) e@plained thusl$0

This !ourt does not subscribe to plaintiffs7appellantsA vie' that defendant7appellant I2! a%reed topa$ the#P-,,.. Plaintiff7appellant 9oa&uinAs letter to defendant7appellee F.). 6autista,

&uotin% defendant7appellant I2!As board resolutions 'hich supposedl$ authori;ed the pa$#ent of

such a#ount cannot be sustained. The resolutions are &uite clear and 'hen ta


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P-,. in co##on stoc< to Rafael Suare;, as associate in the Technical ?roup,

and P-,. in co##on stoc< to Francisco ?. 9oa&uin, 9r., also a #e#ber of the Technical

?roup.

It is apparent that not all of the P-,,. 'as allocated e@clusivel$ to co#pensate plaintiffs7

appellants. Rather, it 'as intended to fund the 'hole underta,. either in cash or in stoc< or both.

The a#ount a'arded b$ the lo'er court 'as therefore less than 'hat defendant7appellant I2!

a%reed to pa$ plaintiffs7appellants. 1hile this !ourt cannot decree that the cancelled shares be

restored, for the$ are 'ithout a doubt null and void, still and all, defendant7appellant I2! cannot no'

put up its o'n ultra vires act as an e@cuse to escape obli%ation to plaintiffs7appellants. Instead of

shares of stoc

I))()

In this appeal, the I2! raises as issues for our consideration and resolution the follo'in%0

I

12T2R OR NOT T2 !O(RT OF )PP)CS IS !ORR!T IN )1)RDIN? !OMPNS)TION

)ND VN MODIFEIN? T2 P)EMNT TO 2RIN RSPONDNTS DSPIT NON7

F(CFICCMNT OF T2IR O6CI?)TION TO 2RIN PTITIONR

II

12T2R OR NOT T2 !O(RT OF )PP)CS IS !ORR!T IN )1)RDIN? )TTORNEAS FS

TO RSPONDNTS-3

I2! #aintains that )rticle //3 of the !ivil !ode 'as erroneousl$ applied= that it had no intention of

preventin% 9oa&uin fro# co#pl$in% 'ith his obli%ations 'hen it adopted his reco##endation to

ne%otiate 'ith 6arnes= that )rticle /-58 of the !ivil !ode applied onl$ if there 'as a #erel$ sli%ht

deviation fro# the obli%ation, and the o#ission or defect 'as technical and uni#portant= that

substantial co#pliance 'as unacceptable because the forei%n loan 'as #aterial and 'as, in fact,the ulti#ate %oal of its contract 'ith 9oa&uin and Suare;= that because the obli%ation 'as indivisible

and sub"ect to a suspensive condition, )rticle /// of the !ivil !ode-:applied, under 'hich a partial

perfor#ance 'as e&uivalent to non7perfor#ance= and that the a'ard of attorne$As fees should be

deleted for lac< of le%al and factual bases.
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On the part of respondents, onl$ 9oa&uin filed a co##ent,-ar%uin% that the petition 'as fatall$

defective for raisin% &uestions of fact= that the obli%ation 'as divisible and capable of partial

perfor#ance= and that the suspensive condition 'as dee#ed fulfilled throu%h I2!As o'n actions.-4

Rli$-

1e den$ the petition for revie' on certiorari sub"ect to the ensuin% dis&uisitions.

/.

I2! raises &uestions of la'

1e first consider and resolve 'hether I2!As petition i#properl$ raised &uestions of fact.

) &uestion of la' e@ists 'hen there is doubt as to 'hat the la' is on a certain state of facts, but, in

contrast, a &uestion of fact e@ists 'hen the doubt arises as to the truth or falsit$ of the facts alle%ed.

) &uestion of la' does not involve an e@a#ination of the probative value of the evidence presentedb$ the liti%ants or b$ an$ of the#= the resolution of the issue #ust rest solel$ on 'hat the la'

provides on the %iven set of circu#stances.51hen there is no dispute as to the facts, the &uestion

of 'hether or not the conclusion dra'n fro# the facts is correct is a &uestion of la'.5/

!onsiderin% that 'hat I2! see


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The error lies in the !)As failure to deter#ine I2!As intent to pre7e#pt 9oa&uin fro# #eetin% his

obli%ations. The 9une -, /4: #inutes of I2!As special board #eetin% discloses that 9oa&uin

i#pressed upon the #e#bers of the 6oard that Materials 2andlin% 'as offerin% #ore favorable

ter#s for I2!, to 'it0

@ @ @ @

)t the #eetin% all the #e#bers of the 6oard of Directors of the International 2otel !orporation 'ere

present 'ith the e@ception of Directors 6en"a#in 9. 6autista and Ser%io O. Rustia 'ho as


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Nor do 'e a%ree 'ith the !)As upholdin% of I2!As liabilit$ b$ virtue of 9oa&uin and Suare;As

substantial perfor#ance. In so rulin%, the !) applied )rticle /-58 of the !ivil !ode, 'hich states0

)rticle /-58. If the obli%ation has been substantiall$ perfor#ed in %ood faith, the obli%or #a$ recover

as thou%h there had been a strict and co#plete fulfill#ent, less da#a%es suffered b$ the obli%ee.

It is 'ell to note that )rticle /-58 applies onl$ 'hen an obli%or ad#its breachin% the contract5>after

honestl$ and faithfull$ perfor#in% all the #aterial ele#ents thereof e@cept for so#e technical aspects

that cause no serious har# to the obli%ee.53I2! correctl$ sub#its that the provision refers to an

o#ission or deviation that is sli%ht, or technical and uni#portant, and does not affect the real

purpose of the contract.

Tolentino e@plains the character of the obli%orAs breach under )rticle /-58 in the follo'in% #anner, to

'it0

In order that there #a$ be substantial perfor#ance of an obli%ation, there #ust have been an

atte#pt in %ood faith to perfor#, 'ithout an$ 'illful or intentional departure therefro#. The deviationfro# the obli%ation #ust be sli%ht, and the o#ission or defect #ust be technical and uni#portant,

and #ust not pervade the 'hole or be so #aterial that the ob"ect 'hich the parties intended to

acco#plish in a particular #anner is not attained. The non7perfor#ance of a #aterial part of a

contract 'ill prevent the perfor#ance fro# a#ountin% to a substantial co#pliance.

The part$ clai#in% substantial perfor#ance #ust sho' that he has atte#pted in %ood faith to

perfor# his contract, but has throu%h oversi%ht, #isunderstandin% or an$ e@cusable ne%lect failed to

co#pletel$ perfor# in certain ne%li%ible respects, for 'hich the other part$ #a$ be ade&uatel$

inde#nified b$ an allo'ance and deduction fro# the contract price or b$ an a'ard of da#a%es. 6ut

a part$ 'ho


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The pri#ar$ ob"ective of the parties in enterin% into the services a%ree#ent 'as to obtain a forei%n

loan to finance the construction of I2!As hotel pro"ect. This ob"ective could be inferred fro# I2!As

approval of phase / to phase 3 of the proposal. Phase / and phase -, respectivel$ the preparation

of a ne' pro"ect stud$ and the settle#ent of the unre%istered #ort%a%e, 'ould pave the 'a$ for

9oa&uin and Suare; to render assistance to I2! in appl$in% for the D6P %uarant$ and thereafter to

loo< for an able and 'illin% forei%n financial institution acceptable to D6P. )ll the steps that 9oa&uinand Suare; undertoo< to acco#plish had a sin%le ob"ective J to secure a loan to fund the

construction and eventual operations of the hotel of I2!. In that re%ard, 9oa&uin hi#self ad#itted

that his assistance 'as specificall$ sou%ht to see< financin% for I2!As hotel pro"ect.8/

Needless to sa$, findin% the forei%n financier that D6P 'ould %uarantee 'as the essence of the

partiesA contract, so that the failure to co#pletel$ satisf$ such obli%ation could not be characteri;ed

as sli%ht and uni#portant as to have resulted in 9oa&uin and Suare;As substantial perfor#ance that

conse&uentiall$ benefitted I2!. 1hatever benefits I2! %ained fro# their services could onl$ be

#ini#al, and 'ere even probabl$ out'ei%hed b$ 'hatever losses I2! suffered fro# the dela$ed

construction of its hotel. !onse&uentl$, )rticle /-58 did not appl$.

3.

IHC i) $o$(*'(l()) li#/l( *o p# $%(r *'( rl( o$ +o$)*r+*i( lill($* o # i(%

+o$%i*io$#l o/li-#*io$

Not'ithstandin% the inapplicabilit$ of )rticle //3 and )rticle /-58 of the !ivil !ode, I2! 'as liable

based on the nature of the obli%ation.

!onsiderin% that the a%ree#ent bet'een the parties 'as not circu#scribed b$ a definite period, its

ter#ination 'as sub"ect to a condition J the happenin% of a future and uncertain event.8-The

prevailin% rule in conditional obli%ations is that the ac&uisition of ri%hts, as 'ell as the e@tin%uish#entor loss of those alread$ ac&uired, shall depend upon the happenin% of the event that constitutes the

condition.85

To recall, both the RT! and the !) held that 9oa&uin and Suare;As obli%ation 'as sub"ect to the

suspensive condition of successfull$ securin% a forei%n loan %uaranteed b$ D6P. I2! a%rees 'ith

both lo'er courts, and even ar%ues that the obli%ation 'ith a suspensive condition did not arise

'hen the event or occurrence did not happen. In that instance, partial perfor#ance of the contract

sub"ect to the suspensive condition 'as tanta#ount to no perfor#ance at all. )s such, the

respondents 'ere not entitled to an$ co#pensation.

1e have to disa%ree 'ith I2!As ar%u#ent.

To secure a D6P7%uaranteed forei%n loan did not solel$ depend on the dili%ence or the sole 'ill of

the respondents because it re&uired the action and discretion of third persons J an able and 'illin%

forei%n financial institution to provide the needed funds, and the D6P 6oard of ?overnors to

%uarantee the loan. Such third persons could not be le%all$ co#pelled to act in a #anner favorable

to I2!. There is no &uestion that 'hen the fulfill#ent of a condition is dependent partl$ on the 'ill of

one of the contractin% parties,88or of the obli%or, and partl$ on chance, ha;ard or the 'ill of a third
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person, the obli%ation is #[email protected]>The e@istin% rule in a #i@ed conditional obli%ation is that 'hen the

condition 'as not fulfilled but the obli%or did all in his po'er to co#pl$ 'ith the obli%ation, the

condition should be dee#ed satisfied.83

!onsiderin% that the respondents 'ere able to secure an a%ree#ent 'ith 1eston, and subse&uentl$

tried to reverse the prior cancellation of the %uarant$ b$ D6P, 'e rule that the$ thereb$ constructivel$fulfilled their obli%ation.

8.

Guantu# #eruit should appl$ in the absence of an e@press a%ree#ent on the fees

The ne@t issue to resolve is the a#ount of the fees that I2! should pa$ to 9oa&uin and Suare;.

9oa&uin clai#ed that aside fro# the approved P-,,. fee to i#ple#ent phase / to phase 3,

the I2! 6oard of Directors had approved an additional P>,. as pa$#ent for his services.

The RT! declared that he and Suare; 'ere entitled to P-,. each, but the !) revised thea#ounts to P:,. for 9oa&uin and P-,. for Suare;.

)nent the P-,,., the !) ri%htl$ concluded that the full a#ount of P-,,. could not

be a'arded to respondents because such a#ount 'as not allocated e@clusivel$ to co#pensate

respondents, but 'as intended to be the esti#ated #a@i#u# to fund the e@penses in underta


11/107

9oa&uinAs clai# for the additional su# of P>,. 'as si#ilarl$ 'ithout factual and le%al bases.

2e had re&uested the pa$#ent of that a#ount to cover services rendered and still to be rendered to

I2! separatel$ fro# those covered b$ the first si@ phases of the scope of 'or of #$ report dated Februar$ /, /434 and 'hich $ou

authori;ed us to do under 6oard Resolution of Februar$ //, /434. It is onl$ Phase 3 'hich no'

re#ains to be i#ple#ented. For #$ appoint#ent as !onsultant dated Ma$ /-, /434 and the 6oard

Resolution dated 9une -5, /434 'herein I 'as appointed to the Technical !o##ittee, it no' follo's

that I have been also authori;ed to i#ple#ent part of Phases : B .

) brief su##ar$ of #$ acco#plished 'or< has been as follo's0

/. I have revised and #ade the ne' Pro"ect Stud$ of $our hotel pro"ect, #a


12/107

8. I have prepared the application papers acceptable to the D6P b$ #eans of an advance

anal$sis and the presentation of the financial #echanics, 'hich 'as accepted b$ the D6P.

>. I have presented the financial #echanics of the loan 'herein the re&uire#ent of the D6P

for an additional P/4,,. in e&uit$ fro# the corporation beca#e unnecessar$.

3. The e@planation of the financial #echanics and the "ustification of this pro"ect 'as

instru#ental in chan%in% the ori%inal reco##endation of the Invest#ent 6an


13/107

III

The Third order of business is the co#pensation of Mr. Francisco ?. 9oa&uin, 9r. for his services in

the corporation.

)fter a brief discussion that ensued, upon #otion dul$ #ade and seconded, the stoc


14/107

Finall$, 'e sustain I2!As position that the %rant of attorne$As fees lac


15/107

versus

AVIA ILIPINAS INTERNATIONAL,

IN!.,

Respon"ent.

ME#!O$A, an"

PERLAS%ER#AE,JJ.

Pro"#$%&te':

&ebruar' (), (*+(

%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%

DE!ISION

PERALTA,J.

efore the Court is a petition for re-ie on certiorariun"er Rule /0 of the Rules of

Court, see1in2 the re-ersal an" settin2 asi"e of the June +3, (**) !ecision +an" the

October ++, (**) Resolution(of the Court of Appeals 4CA5 in CA%6.R. CV #o.

)37(0. The assaile" CA !ecision affirme" ith mo"ification the !ecision 7"ate"

March (+, (**7 of the Re2ional Trial Court 4RTC5 of 8ue9on Cit', ranch ((/, inCi-il Case #o. 8%3:%7/730, hile the CA Resolution "enie" petitioner;s Motion for

Reconsi"eration.

The factual an" proce"ural antece"ents are as follosuino =nternational Airport eclusi-el' for the

latter;s aircraft repair station an" charterin2 operations. The contract as for one 4+5'ear, be2innin2 September +, +33* until Au2ust 7+, +33+, ith a monthl' rental

of P?,0:*.**.

=n !ecember +33*, M=AA issue" A"ministrati-e Or"er #o. +, Series of +33*, hich

re-ise" the rates of "ues, char2es, fees or assessments for the use of its properties,

facilities an" ser-ices ithin the airport comple. The A"ministrati-e Or"er as ma"e

effecti-e on !ecember +, +33*. As a conse>uence, the monthl' rentals "ue from A&=Cas increase" toP+0,33?.0*. #onetheless, M=AA "i" not re>uire A&=C to pa' the ne

rental fee. Thus, it continue" to pa' the ori2inal fee of P?,0:*.**.

After the epiration of the contract, A&=C continue" to use an" occup' the lease"

premises 2i-in2 rise to an implie" lease contract on a monthl' basis. A&=C 1ept on

pa'in2 the ori2inal rental fee ithout protest on the part of M=AA.

Three 'ears after the epiration of the ori2inal contract of lease, M=AA informe"

A&=C, throu2h a billin2 statement "ate" October ?, +33/, that the monthl' rental o-er

the sub@ect premises as increase" to P+0,3??.0* be2innin2 September +, +33+,

hich is the "ate imme"iatel' folloin2 the epiration of the ori2inal contract of

lease. M=AA sou2ht reco-er' of the "ifference beteen the increase" rental rate an"

the ori2inal rental fee amountin2 to a total of P7/),7**.0* co-erin2 thirt'%se-en 47)5

months beteen September +, +33+ an" September 7+, +33/. e2innin2 October

+33/, A&=C pai" the increase" rental fee. oe-er, it refuse" to pa' the lump sum

of P7/),7**.0* sou2ht to be reco-ere" b' M=AA. &or the continue" refusal of A&=C

to pa' the sai" lump sum, its emplo'ees ere "enie" access to the lease" premises

from Jul' +, +33) until March ++, +33:. This, notithstan"in2, A&=C continue"


17/107

pa'in2 its rentals. Subse>uentl', A&=C as 2rante" temporar' access to the lease"

premises.

A&=C then file" ith the RTC of 8ue9on Cit' a Complaint for "ama2es ith

in@unction a2ainst M=AA an" its 6eneral Mana2er see1in2 uninterrupte" access to the

lease" premises, reco-er' of actual an" eemplar' "ama2es, refun" of its monthl'

rentals ith interest at the time that it as "enie" access to the area bein2 rente" as

ell as attorne';s fees.

=n its Anser ith Counterclaim, M=AA conten"e" that un"er its lease contract ithA&=C, M=AA is alloe" to either increase or "ecrease the monthl' rentalB A&=C has

rental arrears in the amount of P7/),7**.0*B A&=C as ron2 in claimin2 that M=AA

too1 the la into its on han"s in "en'in2 A&=C an" its emplo'ees access to the

lease" premises, because un"er the lease contract, in case of failure on the part of

A&=C to pa' rentals for at least to 4(5 months, the contract shall become

automaticall' terminate" an" cancele" ithout nee" of @u"icial action or process an"

it shall be laful for M=AA or an' person or persons "ul' authori9e" on its behalf to

ta1e possession of the propert' either b' pa"loc1in2 the premises or postin2 its 2uar"s

to pre-ent the entr' of an' person. M=AA pra'e" for the aar" of eemplar' "ama2es

as ell as attorne';s fees an" liti2ation epenses.

On March (+, (**7, the RTC ren"ere" its !ecision, the "ispositi-e portion of hich

rea"s as follosuent amen"ment to A"ministrati-e Or"er #o. /, Series of +3:(, hich

ill effect a "ecrease or escalation of the monthl' rental or impose ne an" a""itionalfees an" char2es, inclu"in2 but not limite" to 2o-ernmentGM=AA circulars, rules an"

re2ulation to this effect, shall be "eeme" incorporate" herein an" shall automaticall'

amen" this Contract insofar as the monthl' rental is concerne".3oe-er, the Court

a2rees ith the CA that the abo-e>uote" pro-ision of the lease contract shoul" not be

rea" in isolation. Rather, it shoul" be rea" to2ether ith the pro-isions of Article V===,

Para2raph :.+7, hich pro-i"e that Dan' amen"ment, alteration or mo"ification

of thDe Contract shall not be -ali" an" bin"in2, unless an" until ma"e in ritin2 an"

si2ne" b' the parties thereto.+*

=t is clear from the fore2oin2 that the intention of theparties is to sub@ect such amen"ment to the conformit' of both petitioner an"

respon"ent. =n the instant case, there is no shoin2 that respon"ent 2a-e his

ac>uiescence to the sai" amen"ment or mo"ification of the contract.

The situation is "ifferent ith respect to the pa'ments of the increase" rental fee ma"e

b' respon"ent be2innin2 October +33/ because b' then the amen"ment to the contract

as ma"e in ritin2 throu2h a bill sent b' petitioner to respon"ent.++

The fact thatrespon"ent subse>uentl' settle" the sai" bill pro-es that he acce"e" to the increase in

rental fee. The same ma' not be sai" ith respect to the >uestione" rental fees sou2ht

to be reco-ere" b' petitioner beteen September +33+ an" September +33/ because

no bill as ma"e an" forar"e" to respon"ent on the basis of hich it coul" ha-e

2i-en or ithhel" its conformit' thereto.

=t ma' not be amiss to point out that "urin2 the abo-ementione" perio", respon"entcontinue" to pa' an" petitioner 1ept on recei-in2 the ori2inal rental fee

of P?,0:*.** ithout an' reser-ations or protests from the latter.+(#either "i"

petitioner in"icate in the official receipts it issue" that the pa'ments ma"e b'

respon"ent constitute onl' partial fulfillment of the latter;s obli2ations. Article +(70 of

the Ci-il Co"e clearl' states that Dhen the obli2ee accepts the performance 1noin2
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its incompleteness or irre2ularit', an" ithout epressin2 an' protest or ob@ection, the

obli2ation is "eeme" full' complie" ith. &or failin2 to ma1e an' protest or ob@ection,

petitioner is alrea"' estoppe" from see1in2 reco-er' of the amount claime".

Anent the secon" issue, since it has been establishe" that petitioner has no le2al basis

in re>uirin2 respon"ent to pa' a""itional rental fees from September +, +33+ to

September 7*, +33/, it, thus, follos that petitioner;s act of "en'in2 respon"ent an" its

emplo'ees access to the lease" premises from Jul' +, +33) until March ++, +33:, b'

reason of respon"ent;s non%pa'ment of the sai" a""itional fees, is li1eise un@ustifie".

Hn"er Para2raph 7, Article +?0/ of the Ci-il Co"e, the lessor is obli2e" Dto maintain

the lessee in the peaceful an" a"e>uate en@o'ment of the lease for the entire "uration

of the contract.

Moreo-er, Article +?0: of the same Co"e pro-i"es that Dthe lessee ma' suspen" the

pa'ment of the rent in case the lessor fails to ma1e the necessar' repairs or to

maintain the lessee in peaceful an" a"e>uate en@o'ment of the propert' lease".

&urthermore, as correctl' cite" b' the RTC, Article +3 of the Ci-il Co"e pro-i"es that

De-er' person must, in the eercise of his ri2hts an" in the performance of his "uties,

act ith @ustice, 2i-e e-er'one his "ue, an" obser-e honest' an" 2oo" faith.

Article (( of the same Co"e also states that De-er' person ho throu2h an act of

performance b' another, or an' other means, ac>uires or comes into possession of

somethin2 at the epense of the latter ithout @ust or le2al 2roun", shall return the

same to him. =n accor"ance ith @urispru"ence, there is un@ust enrichment hen a

person un@ustl' retains a benefit to the loss of another, or hen a person retains mone'

or propert' of another a2ainst the fun"amental principles of @ustice, e>uit' an" 2oo"


23/107

conscience.+7The principle of un@ust enrichment essentiall' contemplates pa'ment

hen there is no "ut' to pa', an" the person ho recei-es the pa'ment has no ri2ht to

recei-e it.+/

=n the instant case, it is clear that petitioner faile" to maintain respon"ent in the

peaceful an" a"e>uate en@o'ment of the lease" premises b' un@ustifiabl' pre-entin2

the latter access thereto. Conse>uentl', in accor"ance ith Article +?0: of the Ci-il

Co"e, respon"ent ha" no "ut' to ma1e rent pa'ments. !espite that, respon"ent still

continue" to pa' the rental fees a2ree" upon in the ori2inal contract. Thus, it oul" be

the hei2ht of ine>uit' an" in@ustice as ell as un@ust enrichment on the part of

petitioner if the rental fees pai" b' respon"ent "urin2 the time that it as "enie"

access to an" pre-ente" from usin2 the lease" premises be not returne" to it.

ith respect to attorne';s fees, the Court fin"s no error on the part of the CA in

sustainin2 such aar" on the 2roun" that petitioner;s act of "en'in2 respon"ent an"

its emplo'ees access to the lease" premises has compelle" respon"ent to liti2ate an"

incur epenses to protect its interest.+0The Court li1eise a2rees ith the CA that,

un"er the circumstances pre-ailin2 in the present case, attorne';s fees ma' be 2rante"

on 2roun"s of @ustice an" e>uit'.+?

&inall', the Court "eems it proper to reiterate the pro-isions of Supreme Court

A"ministrati-e Circular #o. +*%(*** hich en@oins all @u"2es of loer courts to

obser-e utmost caution, pru"ence an" @u"iciousness in the issuance of rits of

eecution to satisf' mone' @u"2ments a2ainst 2o-ernment a2encies an" local

2o-ernment units.

(HEREORE, the petition is DENIED. The June +3, (**) !ecision an"

October ++, (**) Resolution of the Court of Appeals in CA%6.R. CV #o. )37(0

are AIRMED. The Re2ional Trial Court of 8ue9on Cit', ranch ((/

is ORDEREDto compl' ith the "irecti-es of Supreme Court A"ministrati-e

Circular #o. +*%(***.
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SO ORDERED.

Republic of the PhilippinesSHPREME COHRT

Manila

SECO#! !=V=S=O#

ALLIED )AN*ING G.R. No. 1++1-

!ORPORATION,

Petitioner, Presentuent release

to Santos.D(0

Conse>uentl', Lim Sio an file" ith the RTC a Complaint "ate" &ebruar' +7,+3:/D(?"oc1ete" as Ci-il Case #o. ?)0) a2ainst Allie" to reco-er the procee"s of

her first mone' mar1et placement. Sometime in &ebruar' +3:/, she ith"re her

secon" placement from Allie".

Allie" file" a thir" part' complaintD()a2ainst Metroban1 an" Santos. =n turn,

Metroban1 file" a fourth part' complaintD(:a2ainst &CC. &CC for its part file" a

fifth part' complaintD(3a2ainst Pro"ucers an1. Summonses ere "ul' ser-e"

upon all the parties ecept for Santos, ho as no lon2er connecte" ith

Pro"ucers an1.D7*

On Ma' +0, +3:/, or more than si 4?5 months after fun"in2 the chec1, Allie"

informe" Metroban1 that the si2nature on the chec1 as for2e".D7+Thus,

Metroban1 ithhel" the amount represente" b' the chec1 from &CC. Later on,

Metroban1 a2ree" to release the amount to &CC after the latter eecute" an

Hn"erta1in2, promisin2 to in"emnif' Metroban1 in case it as ma"e to reimburse

the amount.D7(

Lim Sio an thereafter file" an amen"e" complaint to inclu"e Metroban1 as

a part'%"efen"ant, alon2 ith Allie".D77The RTC a"mitte" the amen"e" complaint

"espite the opposition of Metroban1.D7/Conse>uentl', Allie"s thir" part' complaint

a2ainst Metroban1 as con-erte" into a cross%claim an" the latters fourth part'

complaint a2ainst &CC as con-erte" into a thir" part' complaint.D70
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After trial, the RTC issue" its !ecision, hol"in2 as follosuestion of fact. hen the CA affirms the fin"in2s

of fact of the RTC, the factual fin"in2s of both courts are bin"in2 on this Court.D73

e also a2ree ith the CA hen it sai" that it coul" not "isturb the trial courts

fin"in2s on the cre"ibilit' of itness So inasmuch as it as the trial court that

hear" the itness an" ha" the opportunit' to obser-e closel' her "eportment an"
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manner of testif'in2. Hnless the trial court ha" plainl' o-erloo1e" facts of

substance or -alue, hich, if consi"ere", mi2ht affect the result of the case, D/*e

fin" it best to "efer to the trial court on matters pertainin2 to cre"ibilit' of

itnesses.

A""itionall', this Court has hel" that the matter of ne2li2ence is also a factual>uestion.D/+Thus, the fin"in2 of the RTC, affirme" b' the CA, that the respecti-e

parties ere ne2li2ent in the eercise of their obli2ations is also conclusi-e upon

this Court.

T/e L&5$t o2 t/e P&rtes

As to the liabilit' of the parties, e fin" that Allie" is liable to Lim Sio

an. &un"amental an" familiar is the "octrine that the relationship beteen a ban1an" a client is one of "ebtor%cre"itor.

Articles +307 an" +3:* of the Ci-il Co"e pro-i"euires the onership thereof, an" is boun" to pa' to the cre"itoran e>ual amount of the same 1in" an" >ualit'.

Art. +3:*. &ie", sa-in2s, an" current "eposits of mone' in ban1s an"

similar institutions shall be 2o-erne" b' the pro-isions concernin2simple loan.

Thus, e ha-e rule" in a line of cases that a ban1 "eposit is in the nature of asimple loan or mutuum.D/(More succinctl', in Citibank, N.A.(ormerl! irst

National Cit! Bank" v. Sabeniano, this Court rule" that a mone' mar1et placementis a simple loan or mutuum. D/7&urther, e "efine" a mone' mar1et in Cebu

#nternational inance Corporation v. Court o$ Appeals,as follosualification, arrants to all subse>uent hol"ers in "ue courseB

a5 T/e "&tters &n' t/n%s "entone' n s#5'sons 9&,95 &n' 9 o2 t/e ne;t 3ree'n% setonB an"

b5 That the instrument is at the time of his in"orsement -ali"

an" subsistin2BAn" in a""ition, he en2a2es that on "ue presentment, it shall be

accepte" or pai", or both, as the case ma' be accor"in2 to its tenor, an"that if it be "ishonore", an" the necessar' procee"in2s on "ishonor be"ul' ta1en, he ill pa' the amount thereof to the hol"er, or to an'subse>uent in"orser ho ma' be compelle" to pa' it.

Section ?0. Warrant! &here negotiation b! deliver!, so

$orth.E-er' person ne2otiatin2 an instrument b' "eli-er' or b' a>ualifie" in"orsement, arrantsuall' to the success of the impostor inencashin2 the procee"s of the for2e" chec1s. Hn"er these circumstances, e appl'Article (+)3 of the Ci-il Co"e to the effect that hile respon"ent CC ma'reco-er its losses, such losses are sub@ect to miti2ation b' the courts. 4SeePhoeniConstruction =nc. -. =nterme"iate Appellate Courts, +/: SCRA 707 D+3:)5.

Consi"erin2 the comparati-e ne2li2ence of the to 4(5 ban1s, e rule that

the "eman"s of substantial @ustice are satisfie" b' allocatin2 the loss of
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P(,/+7,(+0.+? an" the costs of the arbitration procee"in2 in the amount ofP),(0*.** an" the cost of liti2ation on a ?*%/* ratio.D0(

Similarl', e rule" inAssociated Bank v. Court o$ Appeals thatthe issuin2

institution an" the collectin2 ban1 shoul" e>uall' share the liabilit' for the loss ofamount represente" b' the chec1s concerne" "ue to the ne2li2ence of both partiesuall' liable. ence, the ?*


37/107

The abo-e pro-ision of la as clarifie" in'e!es v. Lim, here e rule"

that Dthere is un@ust enrichment hen a person un@ustl' retains a benefit to the loss

of another, or hen a person retains mone' or propert' of another a2ainst the

fun"amental principles of @ustice, e>uit' an" 2oo" conscience.D0:

=n amio v. icson, e further clarifie" the principle of un@ust

enrichment, thus< Hn"er Article (( of the Ci-il Co"e, there is un@ust enrichment

hen 4+5 a person is un@ustl' benefite", an" 4(5 such benefit is "eri-e" at the

epense of or ith "ama2es to another.D03

=n the instant case, Lim Sio ans mone' mar1et placement in Allie" an1

as pre%terminate" an" ith"ran ithout her consent. Moreo-er, the procee"s ofthe placement ere "eposite" in Pro"ucers an1s account in Metroban1 ithout

an' @ustification. =n other or"s, there is no reason that the procee"s of Lim Sio

ans placement shoul" be "eposite" in &CCs account purporte"l' as pa'ment for

&CCs mone' mar1et placement an" interest in Pro"ucers an1. ith such

pa'ment, Pro"ucers an1s in"ebte"ness to &CC as etin2uishe", thereb'

benefittin2 the former. Clearl', Pro"ucers an1 as un@ustl' enriche" at the

epense of Lim Sio an. ase" on the facts an" circumstances of the case,

Pro"ucers an1 shoul" reimburse Allie" an" Metroban1 for the amounts the to

latter ban1s are or"ere" to pa' Lim Sio an.

=t cannot be -ali"l' claime" that &CC, an" not Pro"ucers an1, shoul" be

consi"ere" as ha-in2 been un@ustl' enriche". =t must be remembere" that &CCs

mone' mar1et placement ith Pro"ucers an1 as alrea"' "ue an" "eman"ableB

thus, Pro"ucers an1s pa'ment thereof as @ustifie". &CC as entitle" to such

pa'ment. As earlier state", the fact that the in"orsement on the chec1 as for2e"

cannot be raise" a2ainst &CC hich as not a part in an' sta2e of the ne2otiation of

the chec1. &CC as not un@ustl' enriche".

&rom the facts of the instant case, e see that Santos coul" be the architect

of the entire contro-ers'. Hnfortunatel', since summons ha" not been ser-e"

on Santos, the courts ha-e not ac>uire" @uris"iction o-er her.D?*e, therefore,

cannot ascribe to her liabilit' in the instant case.
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Clearl', Pro"ucers an1 must be hel" liable to Allie" an" Metroban1 for the

amount of the chec1 plus +(F interest per annum, moral "ama2es, attorne's fees,

an" costs of suit hich Allie" an" Metroban1 are a"@u"2e" to pa' Lim Sio an

base" on a proportion of ?*


39/107

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

G.R. No. 16640 (+(/(r 20, 2006

AGRIFINA A"UINTE7,petitioner,vs.SPOUSES FELICIA AN RICO TIONG,respondents.

D ! I S I O N

CALLE!O, SR., J.

6efore us is a petition for revie' under Rule 8> of the Revised Rules on !ivil Procedure of theDecision/of the !ourt of )ppeals in !)7?.R. !V No. ::>, 'hich affir#ed 'ith #odification theDecision-of the Re%ional Trial !ourt *RT!+, 6ranch 3/, 6a%uio !it$, and the Resolution5of theappellate court den$in% reconsideration thereof.

T'( A$*(+(%($*)

On Ma$ 3, /444, petitioner )%rifina )&uinte$ filed before the RT! of 6a%uio !it$, a co#plaint for su#

of #one$ and da#a%es a%ainst the respondents, spouses Felicidad and Rico Tibon%. )%rifinaalle%ed that Felicidad had secured loans fro# her on several occasions, at #onthl$ interest rates of3 to :. Despite de#ands, the spouses Tibon% failed to pa$ their outstandin% loan, a#ountin%to P::5,. e@clusive of interests. The co#plaint contained the follo'in% pra$er0

12RFOR, pre#ises considered, it is #ost respectfull$ pra$ed of this 2onorable !ourt,after due notice and hearin%, to render "ud%#ent orderin% defendants to pa$ plaintiff thefollo'in%0

a+. SVN 2(NDRD SVNTE7T2R T2O(S)ND PSOS *P::5,.+representin% the principal obli%ation of the defendants 'ith the stipulated interests ofsi@ *3+ percent per #onth fro# Ma$ //, /444 to date and or those that are

stipulated on the contracts as #entioned fro# para%raph t'o *-+ of the co#plaint.

b+. FIFTN PR!NT */>+ of the total accu#ulated obli%ations as attorne$sfees.

c+. )ctual e@penses representin% the filin% fee and other char%es and e@penses to beincurred durin% the prosecution of this case.

Further pra$s for such other relief and re#edies "ust and e&uitable under the pre#ises.8
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)%rifina appended a cop$ of the !ounter7)ffidavit e@ecuted b$ Felicidad in I.S. No. 457558, as 'ellas copies of the pro#issor$ notes and ac


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8,. 9une , /44 7 7

>,. 9une /5, /44 3 On de#and

3,. )u%. /3, /44 : 9anuar$ /44

->,. Oct. /5, /44 : 9anuar$ /44

/-,. Oct. /4, /44 : 9anuar$ /44

-,. Nov. /-, /44 3 )pril -, /44

/,. 9une /5, /44 7 7

,. 9an. 8, /44 7 7

58,. 7 3 October /4, /44

/,. 9ul$ /8, /44 > October /44/5

)ccordin% to )%rifina, Felicidad 'as able to pa$ onl$ her loans a#ountin% to P/--,3../8

In 9ul$ /44, Felicidad %ave to )%rifina !it$ Trust 6an< !hec< No. /-38 dated )u%ust ->, /44 inthe a#ount of P>,. as partial pa$#ent./>2o'ever, the chec< 'as dishonored for havin% beendra'n a%ainst insufficient funds./3)%rifina then filed a cri#inal case a%ainst Felicidad in the Office ofthe !it$ Prosecutor. )n Infor#ation for violation of Batas Pambansa Bilang 22'as filed a%ainstFelicidad, doc,.. Felicidad co#plied and paid the face value of the chec


42/107

proposal./4)%rifina, Felicidad, and the latters debtors had a conference-'here )tt$. )7a$oe@plained that )%rifina could appl$ her collections as pa$#ents of Felicidads account.-/

Fro# )u%ust :, /44 to October, /44, Felicidad e@ecuted deeds of assi%n#ent of credits*obli%ations+--dul$ notari;ed b$ )tt$. )7a$o, in 'hich Felicidad transferred and assi%ned to )%rifinathe total a#ount of P>83,8>4. due fro# her debtors.-5In the said deeds, Felicidad confir#ed that

her debtors 'ere no lon%er indebted to her for their respective loans. For her part, )%rifinaconfor#ed to the deeds of assi%n#ent relative to the loans of Vir%inia Morada and !ora;onDalisa$.-8She 'as furnished copies of the deeds as 'ell as the pro#issor$ notes. ->

The follo'in% debtors of Felicidad e@ecuted pro#issor$ notes 'here the$ obli%ed the#selves to pa$directl$ to )%rifina0

Debtors )ccount Date of Instru#ent Date Pa$able

9uliet B To##$ Tibon% P>,.)u%ust :, /44 Nove#ber 8, /44 and Februar$8, /44/

!ora;on Dalisa$ ,. )u%ust :, /44 No date

Rita !ho#aco% 8,8. )u%ust , /44 Septe#ber -5, /44

)ntoinette Manuel /-,.October /4, /44 March 5, /44/

Rose#arie 6andas ,. )u%ust , /44 Februar$ 5, /44/

Fel$ !irilo 35,3. Septe#ber /5, /44 No date

Vir%inia Morada 3-,5:4. )u%ust 4, /44 Februar$ 4, /44/

!ar#elita !asu%a >4,. )u%ust -, /44 Februar$ -, /44/

Merlinda ?elacio /:,-. )u%ust -4, /44 Nove#ber -4, /44-3

T o t a l P-8,3>4.
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)%rifina narrated that Felicidad sho'ed to her the 'a$ to the debtors houses to enable her to collectfro# the#. One of the debtors, 2elen !aban%, did not e@ecute an$ pro#issor$ note but confor#edto the Deed of )ssi%n#ent of !redit 'hich Felicidad e@ecuted in favor of )%rifina.-:li;a )banceconfor#ed to the deed of assi%n#ent for and in behalf of her sister, Fel$ !irilo.-dna Papat7i' 'asnot able to affi@ her si%nature on the deed of assi%n#ent nor si%n the pro#issor$ note because she'as in Taipei, Tai'an.-4

Follo'in% the e@ecution of the deeds of assi%n#ent and pro#issor$ notes, )%rifina 'as able tocollect the total a#ount of P5/,. fro# Felicidads debtors.5In )pril /44, she tried to collectthe balance of Felicidads account, but the latter told her to 'ait until her debtors had #one$.5/1henFelicidad rene%ed on her pro#ise, )%rifina filed a co#plaint in the Office of the Barangay!aptain forthe collection of P::5,.. 2o'ever, no settle#ent 'as arrived at.5-

T'( C#)( or R()po$%($*)

Felicidad testified that she and her friend )%rifina had been en%a%ed in the #one$7lendin%business.55)%rifina 'ould lend her #one$ 'ith #onthl$ interest,58and she, in turn, 'ould re7lend the#one$ to borro'ers at a hi%her interest rate. Their business relationship turned sour 'hen )%rifina

started co#plainin% that she *Felicidad+ 'as actuall$ earnin% #ore than )%rifina.5>

6efore therespective #aturit$ dates of her debtors loans, )%rifina as, shall bededucted fro# the total accu#ulated interest for the sa#e 'as alread$ paid b$ the defendantas ad#itted b$ the plaintiff in her co#plaint,

-. P->, as attorne$s fees,

5. To pa$ the costs.
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SO ORDRD.83

The trial court ruled that Felicidads obli%ation had not been novated b$ the deeds of assi%n#ent andthe pro#issor$ notes e@ecuted b$ Felicidads borro'ers. It e@plained that the docu#ents did notcontain an$ e@press a%ree#ent to novate and e@tin%uish Felicidads obli%ation. It declared that thedeeds and notes 'ere separate contracts 'hich could stand alone fro# the ori%inal indebtedness of

Felicidad. !onsiderin%, ho'ever, )%rifinas ad#ission that she 'as able to collect fro# Felicidadsdebtors the total a#ount of P5/,., this should be deducted fro# the lattersaccountabilit$.8:2ence, the balance, e@clusive of interests, a#ounted to P8:-,..

On appeal, the !) affir#ed 'ith #odification the decision of the RT! and stated that, based on thepro#issor$ notes and ac,3>4. 'ascovered b$ the deeds of assi%n#ent and pro#issor$ notes= hence, the balance of Felicidads

account a#ounted to onl$ P>/,58/.. The falloof the decision reads0

9HEREFORE, in vie' of the fore%oin%, the decision dated 9anuar$ -, -5 of the RT!,6a%uio !it$, 6ranch 3/ in !ivil !ase No. 85:7R is hereb$ MOIFIE. Defendants7appellants are hereb$ ordered to pa$ the balance of the total indebtedness in the a#ountof P>/,58/. plus the stipulated interest of 3 per #onth fro# Ma$ //, /444 until thefinalit$ of this decision.

SO ORERE.8

The appellate court sustained the trial courts rulin% that Felicidads obli%ation to )%rifina had notbeen novated b$ the deeds of assi%n#ent and pro#issor$ notes e@ecuted in the latters favor.

)lthou%h )%rifina 'as subro%ated as a ne' creditor in lieu of Felicidad, Felicidads obli%ation to)%rifina under the loan transaction re#ained= there 'as no intention on their part to novate theori%inal obli%ation. Nonetheless, the appellate court held that the le%al effects of the deeds ofassi%n#ent could not be totall$ disre%arded. The assi%n#ents of credits 'ere onerous, hence, hadthe effect of pa$#ent,pro tanto, of the outstandin% obli%ation. The fact that )%rifina never repudiatedor rescinded such assi%n#ents onl$ sho's that she had accepted and confor#ed to it.!onse&uentl$, she cannot collect both fro# Felicidad and her individual debtors 'ithout runnin%afoul to the principle of un"ust enrich#ent. )%rifinas pri#ar$ recourse then is a%ainst Felicidadsindividual debtors on the basis of the deeds of assi%n#ent and pro#issor$ notes.

The !) further declared that the deeds of assi%n#ent e@ecuted b$ Felicidad had the effect ofpa$#ent of her outstandin% obli%ation to )%rifina in the a#ount of P>>,3>4.. It ruled that, sincean assi%n#ent of credit is in the nature of a sale, the assi%nors re#ained liable for the 'arranties as

the$ are responsible for the e@istence and le%alit$ of the credit at the ti#e of the assi%n#ent.

6oth parties #oved to have the decision reconsidered,84but the appellate court denied both #otionson Dece#ber -/, -8.>

)%rifina, no' petitioner, filed the instant petition, contendin% that

/. The 2onorable !ourt of )ppeals erred in rulin% that the deeds of assi%n#ent in favor ofpetitioner has the effect of pa$#ent of the ori%inal obli%ation even as it ruled out that the
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ori%inal obli%ation and the assi%ned credit are distinct and separate and can standindependentl$ fro# each other=

-. The 2onorable !ourt of )ppeals erred in passin% upon issues raised for the first ti#e onappeal= and

5. The 2onorable !ourt of )ppeals erred in resolvin% fact not in issue.>/

Petitioner avers that the appellate court erred in rulin% that respondents ori%inal obli%ation a#ountedto onl$P35:,. *instead of P::5,.+ si#pl$ because she lost the pro#issor$ notesQreceipts'hich evidenced the loans e@ecuted b$ respondent Felicidad Tibon%. She insists that the issue of'hether Felicidad o'ed her less than P::5,. 'as not raised b$ respondents durin% pre7trialand in their appellate brief= the appellate court 'as thus proscribed fro# ta>,3>4. coveredb$ the deeds of assi%n#ent e@ecuted b$ Felicidad and the pro#issor$ notes e@ecuted b$ the lattersdebtors, and that the balance of respondents account 'as onl$ P>/,58/.. Moreover, the appellatecourts rulin% that there 'as no novation runs counter to its holdin% that the pri#ar$ recourse 'asa%ainst Felicidads debtors. Petitioner avers that of the // deeds of assi%n#ent and pro#issor$notes, onl$ t'o bore her si%nature.>-She insists that she is not bound b$ the deeds 'hich she didnot si%n. 6$ assi%nin% the obli%ation to pa$ petitioner their loan accounts, Felicidads debtors #erel$assu#ed the latters obli%ation and beca#e co7debtors to petitioner. Respondents 'ere not releasedfro# their obli%ation under their loan transactions, and she had the option to de#and pa$#ent fro#the# or their debtors. !itin% the rulin% of this !ourt in Magdalena Estates, Inc. v.odrig!e",>5petitioner insists that the first debtor is not released fro# responsibilit$ upon reachin%an a%ree#ent 'ith the creditor. The pa$#ent b$ a third person of the first debtors obli%ation doesnot constitute novation, and the creditor can still enforce the obli%ation a%ainst the ori%inal debtor.Petitioner also cites the rulin% of this !ourt in #!errero v. $o!rt of %ppeals.>8

In their !o##ent on the petition, respondents aver that b$ virtue of respondent Felicidads e@ecutionof the deeds of assi%n#ent, and the ori%inal debtors e@ecution of the pro#issor$ notes *alon% 'iththeir confor#it$ to the deeds of assi%n#ent 'ith petitioners consent+, their loan accounts 'ithpetitioner a#ountin% to P>>,3>4. had been effectivel$ e@tin%uished. Respondents point out thatthis is in accordance 'ith )rticle /-4/, para%raph -, of the !ivil !ode. Thus, the ori%inal debtors ofrespondents had been substituted as petitioners ne' debtors.

Respondents counter that petitioner had been subro%ated to their ri%ht to collect the loan accountsof their debtors. In fact, petitioner, as the ne' creditor of respondents for#er debtors had been ableto collect the latters loan accounts 'hich a#ounted to P5/,.. The su#s received b$respondents debtors 'ere the sa#e loans 'hich the$ obli%ed to pa$ to petitioner under thepro#issor$ notes e@ecuted in petitioners favor.

Respondents aver that their obli%ation to petitioner cannot stand or e@ist separatel$ fro# the ori%inaldebtors obli%ation to petitioner as the ne' creditor. If allo'ed to collect fro# the# as 'ell as fro#their ori%inal debtors, petitioner 'ould be enrichin% herself at the e@pense of respondents. Thus,
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despite the fact that petitioner had collected P/:-,3. fro# respondents and P5/,. fro#the ori%inal debtors, petitioner still sou%ht to collect P::5,. fro# the# in the RT!. (nder thedeeds of assi%n#ent e@ecuted b$ Felicidad and the ori%inal debtors pro#issor$ notes, the ori%inaldebtors accounts 'ere assi%ned to petitioner 'ho 'ould be the ne' creditor. In fine, respondentsare no lon%er liable to petitioner for the balance of their loan account inclusive of interests.Respondents also insist that petitioner failed to prove that she *petitioner+ 'as #erel$ authori;ed to

collect the accounts of the ori%inal debtors so as to to facilitate the pa$#ent of respondents loanobli%ation.

T'( I))()

The threshold issues are0 */+ 'hether respondent Felicidad Tibon% borro'ed P::5,. fro#petitioner= and *-+ 'hether the obli%ation of respondents to pa$ the balance of their loans, includin%interest, 'as partiall$ e@tin%uished b$ the e@ecution of the deeds of assi%n#ent in favor of petitioner,relative to the loans of dna Papat7i', 2elen !aban%, )ntoinette Manuel, and Fel$ !irilo in the totala#ount of P5:/,..

T'( Rli$- o *'( Cor*

1e have carefull$ revie'ed the brief of respondents as appellants in the !), and find that, indeed,the$ had raised the issue of 'hether the$ received P::5,. b$ 'a$ of loans fro# petitioner.The$ averred that, as %leaned fro# the docu#entar$ evidence of petitioner in the RT!, the totala#ount the$ borro'ed 'as onl$P3:5,.. The$ asserted that petitioner failed to adduce concreteevidence that the$ received P::5,. fro# her.>>

1e a%ree, ho'ever, 'ith petitioner that the appellate court erred in reversin% the findin% of the RT!si#pl$ because petitioner failed to present an$ docu#ent or receipt si%ned b$ Felicidad.

Section /, Rule of the Rules of !ivil Procedure re&uires a defendant to specif$ each #aterialalle%ation of fact the truth of 'hich he does not ad#it and, 'henever practicable, @ @ @ set forth the

substance of the #atters upon 'hich he relies to support his denial.

>3

Section //, Rule of the sa#e Rules provides that alle%ations of the co#plaint not specificall$denied are dee#ed ad#itted.>:

The purpose of re&uirin% the defendant to #a4Thus, the ans'er should be so definite and certainin its alle%ations that the pleaders adversar$ should not be left in doubt as to 'hat is ad#itted, 'hatis denied, and 'hat is covered b$ denials of


47/107

-. That defendants are indebted to the plaintiff in the principal a#ount of SVN 2(NDRDSVNTE7T2R T2O(S)ND PSOS *P::5,.+ Philippine !urrenc$ 'ith a stipulatedinterest 'hich are bro


48/107

(nder )rticle /-5/*b+ of the Ne' !ivil !ode, novation is enu#erated as one of the 'a$s b$ 'hichobli%ations are e@tin%uished. Obli%ations #a$ be #odified b$ chan%in% their ob"ect or principalcreditor or b$ substitutin% the person of the debtor.35The burden to prove the defense that anobli%ation has been e@tin%uished b$ novation falls on the debtor.38The nature of novation 'ase@tensivel$ e@plained in Iloilo &raders 'inance, Inc. v. (eirs of )ps. *scar )oriano, +r.,3>as follo's0

Novation #a$ either be e@tinctive or #odificator$, #uch bein% dependent on the nature ofthe chan%e and the intention of the parties. @tinctive novation is never presu#ed= there#ust be an e@press intention to novate= in cases 'here it is i#plied, the acts of the parties#ust clearl$ de#onstrate their intent to dissolve the old obli%ation as the #ovin%consideration for the e#er%ence of the ne' one. I#plied novation necessitates that theinco#patibilit$ bet'een the old and ne' obli%ation be total on ever$ point such that the oldobli%ation is co#pletel$ superseded b$ the ne' one. The test of inco#patibilit$ is 'hetherthe$ can stand to%ether, each one havin% an independent e@istence= if the$ cannot and areirreconciliable, the subse&uent obli%ation 'ould also e@tin%uish the first.

)n e@tinctive novation'ould thus have the t'in effects of, first, e@tin%uishin% an e@istin%obli%ation and, second, creatin% a ne' one in its stead. This


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1e find in this case that the !) correctl$ found that respondents obli%ation to pa$ the balance oftheir account 'ith petitioner 'as e@tin%uished,pro tanto, b$ the deeds of assi%n#ent of credite@ecuted b$ respondent Felicidad in favor of petitioner.

)n assi%n#ent of credit is an a%ree#ent b$ virtue of 'hich the o'ner of a credit,


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ac&uired b$ the assi%nee. The la' does not re&uire an$ for#al notice to bind the debtor to theassi%nee, all that the la' re&uires is nowledgeof the assi%n#ent. ven if the debtor had not beennotified, but ca#e to


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prepared b$ the assi%nee, it 'ill be construed #ost strictl$ a%ainst hi# or her.>One 'ho choosesthe 'ords b$ 'hich a ri%ht is %iven ou%ht to be held to the strict interpretation of the#, rather thanthe other 'ho onl$ accepts the#.3

!onsiderin% all the fore%oin%, 'e find that respondents still have a balance on their account topetitioner in the principal a#ount of P55,8/., the difference bet'een their loan of P::5,.

less P>>,3>4., the pa$#ent of respondents other debtors a#ountin% to P/5,>., andthe P>,. pa$#ent #ade b$ respondents.

IN LIGHT OF ALL THE FOREGOING, the petition is ENIE. The Decision and Resolution of the!ourt of )ppeals are AFFIRME'ith MOIFICATIONin that the balance of the principal account ofthe respondents to the petitioner is P55,8/.. No costs.

SO ORERE.

FIRST DIVISION

=G.R. No. 1>20. O+*o/(r 8, 2003?

SONN7 LO,petitioner, vs.@!S ECOFORM9OR@ S7STEM PHIL.,

INC., respondent.

E C I S I O N

7NARESSANTIAGO, J.

Respondent 9S !O7FORM1OR S$ste# Phil., Inc. is a corporation

en%a%ed in the sale of steel scaffoldin%s, 'hile petitioner Sonn$ C. Co, doin%

business under the na#e and st$le Sans nterprises, is a buildin%

contractor. On Februar$ --, /44, petitioner ordered scaffoldin% e&uip#ents

fro# respondent 'orth P>8,8->.. /2e paid a do'npa$#ent in the a#ount

of P/>,.. The balance 'as #ade pa$able in ten #onthl$ install#ents.

Respondent delivered the scaffoldin%s to petitioner.-Petitioner 'as able to

pa$ the first t'o #onthl$ install#ents. 2is business, ho'ever, encountered

financial difficulties and he 'as unable to settle his obli%ation to respondent

despite oral and 'ritten de#ands #ade a%ainst hi#.5
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On October //, /44, petitioner and respondent e@ecuted a Deed of

)ssi%n#ent,8'hereb$ petitioner assi%ned to respondent his receivables in the

a#ount of P55>,83-./8 fro# 9o#ero Realt$ !orporation. Pertinent portions of

the Deed provide0

EREAS, the ASS=6#OR is the contractor for the construction of a resi"ential

house locate" at 6reenmea"o A-enue, 8ue9on Cit' one" b' Jomero Realt'

CorporationB

EREAS, in the construction of the aforementione" resi"ential house, the

ASS=6#OR purchase" on account scaffol"in2 e>uipments from the ASS=6#EE

pa'able to the latterB

EREAS, up to the present the ASS=6#OR has an obli2ation to the ASS=6#EE forthe purchase of the aforementione" scaffol"in2s no in the amount of Three un"re"

Thirt' &i-e Thousan" &our un"re" Sit' To an" +/G+** Pesos 4P770,/?(.+/5B

#O, TERE&ORE, for an" in consi"eration of the sum of Three un"re" Thirt'

&i-e Thousan" &our un"re" Sit' To an" +/G+** Pesos 4P770,/?(.+/5, Philippine

Currenc' hich represents part of the ASS=6#ORs collectible from Jomero Realt'

Corp., sai" ASS=6#OR hereb' assi2ns, transfers an" sets o-er unto the ASS=6#EE

all collectibles amountin2 to the sai" amount of P770, /?(.+/B

An" the ASS=6#OR "oes hereb' 2rant the ASS=6#EE, its successors an" assi2ns,

the full poer an" authorit' to "eman", collect, recei-e, compoun", compromise an"

2i-e ac>uittance for the same or an' part thereof, an" in the name an" stea" of the sai"

ASS=6#ORB

An" the ASS=6#OR "oes hereb' a2ree an" stipulate to an" ith sai" ASS=6#EE, its

successors an" assi2ns that sai" "ebt is @ustl' oin2 an" "ue to the ASS=6#OR for

Jomero Realt' Corporation an" that sai" ASS=6#OR has not "one an" ill not cause

an'thin2 to be "one to "iminish or "ischar2e sai" "ebt, or "ela' or to pre-ent theASS=6#EE, its successors or assi2ns, from collectin2 the sameB

An" the ASS=6#OR further a2rees an" stipulates as aforesai" that the sai"

ASS=6#OR, his heirs, eecutors, a"ministrators, or assi2ns, shall an" ill at times

hereafter, at the re>uest of sai" ASS=6#EE, its successors or assi2ns, at his cost an"

epense, eecute and do all such $urther acts and deeds as shall be reasonabl!
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necessar! to e$$ectuall! enable said ASS#/N to recover &hatever collectibles said

ASS#/N)' has in accordance &ith the true intent and meaning o$ these presents.

>4=talics supplie"5

2o'ever, 'hen respondent tried to collect the said credit fro# 9o#eroRealt$ !orporation, the latter refused to honor the Deed of )ssi%n#ent

because it clai#ed that petitioner 'as also indebted to it. 3On Nove#ber -3,

/44, respondent sent a letter:to petitioner de#andin% pa$#ent of his

obli%ation, but petitioner refused to pa$ clai#in% that his obli%ation had been

e@tin%uished 'hen the$ e@ecuted the Deed of )ssi%n#ent.

!onse&uentl$, on 9anuar$ /, /44/, respondent filed an action for

recover$ of a su# of #one$ a%ainst the petitioner before the Re%ional Trial

!ourt of Ma


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ith le2al interest of ?F per annum from Januar' +*, +33+ 4filin2 of the Complaint5

until full' pai" an" attorne's fees e>ui-alent to +*F of the amount "ue an" costs of

the suit.

SO OR!ERE!.//

In findin% that the Deed of )ssi%n#ent did not e@tin%uish the obli%ation of

the petitioner to the respondent, the !ourt of )ppeals held that */+ petitioner

failed to co#pl$ 'ith his 'arrant$ under the Deed= *-+ the ob"ect of the Deed

did not e@ist at the ti#e of the transaction, renderin% it void pursuant to )rticle

/84 of the !ivil !ode= and *5+ petitioner violated the ter#s of the Deed of

)ssi%n#ent 'hen he failed to e@ecute and do all acts and deeds as shall be

necessar$ to effectuall$ enable the respondent to recover the collectibles./-

Petitioner filed a #otion for reconsideration of the said decision, 'hich 'as

denied b$ the !ourt of )ppeals./5

In this petition for revie', petitioner assi%ns the follo'in% errors0

I

TE O#ORALE COHRT O& APPEALS COMM=TTE! A 6RAVE ERROR

=# !ECLAR=#6 TE !EE! O& ASS=6#ME#T 4E. /5 AS #HLL A#!

VO=! &OR LAC O& OJECT O# TE AS=S O& A MERE EARSAI

CLA=M.

II

T2 2ONOR)6C !O(RT OF )PP)CS RRD IN 2OCDIN? T2)T T2 DD OF

)SSI?NMNT *2. 8+ DID NOT TIN?(IS2 PTITIONRS O6CI?)TION ON T2

1RON? NOTION T2)T PTITIONR F)ICD TO !OMPCE 1IT2 2IS 1)RR)NTE

T2R(NDR.

III

T2 2ONOR)6C !O(RT OF )PP)CS RRD IN RVRSIN? T2 D!ISION

OF T2 TRI)C !O(RT )ND IN ORDRIN? P)EMNT OF INTRSTS )ND

)TTORNES FS./8

The petition is 'ithout #erit.
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55/107

)n assi%n#ent of credit is an a%ree#ent b$ virtue of 'hich the o'ner of a

credit,


56/107

assi%n#ent. 1hen 9o#ero clai#ed that it 'as no lon%er indebted to petitioner

since the latter also had an unpaid obli%ation to it, it essentiall$ #eant that its

obli%ation to petitioner has been e@tin%uished b$ co#pensation.-/In other

'ords, respondent alle%ed the non7e@istence of the credit and asserted its

clai# to petitioners 'arrant$ under the assi%n#ent. Therefore, it behooved onpetitioner to #a


57/107

e&uivalent to a forbearance of credit.-5The a'ard of attorne$s fees is

DCTD for lac< of evidentiar$ basis.

SO ORERE.

IRST DIVISION

ORT )ONIA!IO

DEVELOPMENT !ORPORATION,

Petitioner,

% -ersus %

YLLAS LENDING !ORPORATION

&n' OSE S. LAURAYA, n /s

o22&$ &3&t &s Pres'ent,

Respon"ents.

G.R. No. 1>8--

Presentuestions of ho has a better ri2ht o-er the properties of Tirreno an" hether

&!C has a ri2ht to inter-ene in respon"ents complaint for foreclosure of chattelmort2a2e.

=n "eci"in2 a2ainst &!C, the trial court "eclare" that Section (( of the lease

contract beteen &!C an" Tirreno is -oi" un"er Article (*:: of the Ci-il Co"e.D:The trial court state" that Section (( of the lease contract ple"2es the properties

foun" in the lease" premises as securit' for the pa'ment of the unpai"

rentals. Moreo-er, Section (( pro-i"es for the automatic appropriation of the

properties one" b' Tirreno in the e-ent of its "efault in the pa'ment of monthl'

rentals to &!C. Since Section (( is -oi", it cannot -est title of onership o-er thesei9e" properties. Therefore, &!C cannot assert that its ri2ht is superior to

respon"ents, ho are the mort2a2ees of the "ispute" properties.

The trial court >uote" fromBa!er -hils. v. AganaD3to @ustif' its rulin2 that &!C

shoul" ha-e file" a separate complaint a2ainst respon"ents instea" of filin2 a

motion to inter-ene.The trial court >uote" fromBa!eras follosuestions of la.

T/e Iss#es

&!C alle2es that the trial court erre" in the folloin2uire" in or"er to allo a fullan" conclusi-e "etermination of the case. hen the mort2a2ee see1sa reple-in in or"er to effect the e-entual foreclosure of the mort2a2e, it is


69/107

not onl' the eistence of, but also the mort2a2ors "efault on, the chattelmort2a2e that, amon2 other thin2s, can properl' uphol" the ri2htto reple-' the propert'. The bur"en to establish a -ali" @ustification forthat action lies ith the plaintiff D%mort2a2ee. An &'erse 3ossessor,uire respon"ents to file an

in"emnit' bon" for &!Cs protection. The trial court, on the other han", "i" not

mention the in"emnit' bon" in its Or"ers "ate" ) March (**7 an" 7 Jul' (**7.

Pursuant to Section +/ of Rule 0), the sheriff is not obli2ate" to turn o-er to

respon"ents the properties sub@ect of this case in -ie of respon"ents failure to file

a bon". The bon" in Section +/ of Rule 0) 4procee"in2s here propert' is claime"

b' thir" person5 is "ifferent from the bon" in Section 7 of the same rule 4affi"a-it

an" bon"5. Hn"er Section +/ of Rule 0), the purpose of the bon" is to in"emnif'

the sheriff a2ainst an' claim b' the inter-enor to the propert' sei9e" or for

"ama2es arisin2 from such sei9ure, hich the sheriff as ma1in2 an" for hich the

sheriff as "irectl' responsible to the thir" part'. Section 7, Rule 0), on the otherhan", refers to the attachment bon" to assure the return of "efen"ants personal

propert' or the pa'ment of "ama2es to the "efen"ant if the plaintiffs action to

reco-er possession of the same propert' fails, in or"er to protect the plaintiffs ri2ht

of possession of sai" propert', or pre-ent the "efen"ant from "estro'in2 the same

"urin2 the pen"enc' of the suit.
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ecause of the absence of the in"emnit' bon" in the present case, &!C ma' also

hol" the sheriff for "ama2es for the ta1in2 or 1eepin2 of the properties sei9e" from

&!C.

(HEREORE,e GRANT the petition. e SET ASIDE the Or"ers "ate" )March (**7 an" 7 Jul' (**7 of ranch 03 of the Re2ional Trial Court

of Ma1ati Cit' in Ci-il Case #o. *+%+/0( "ismissin2 &ort onifacio !e-elopment

Corporations Thir" Part' Claim an" "en'in2 &ort onifacio !e-elopment

Corporations Motion to =nter-ene an" A"mit Complaint in

=nter-ention. e REINSTATE &ort onifacio !e-elopment Corporations Thir"

Part' Claim an" GRANT its Motion to =nter-ene an" A"mit Complaint in

=nter-ention. &ort onifacio !e-elopment Corporation ma' hol" the Sheriff liable

for the sei9ure an" "eli-er' of the properties sub@ect of this case because of thelac1 of an in"emnit' bon".

SO ORDERED.

IRST DIVISION

E4UITA)LE P!I )AN*,@6.R. #o. +)+0/0AIMEE YU &n' )EAN

LIONEL APAS,

Pettoners, Presentuitable

authorit' to increase interest rates ithout their consent.D:

E>uitable, in its anser, asserte" that respon"ents 1noin2l' accepte" all the terms

an" con"itions containe" in the promissor' notes.D3=n fact, the' continuousl'

a-aile" of an" benefite" from E>uitable;s cre"it facilities for fi-e 'ears.D+*

After trial, the RTC uphel" the -ali"it' of the promissor' notes. =t foun" that, in

(**+ alone, E>uitable restructure" respon"ents;loans amountin2 to HSN((:,(**

an" P+,***,***.D++The trial court, hoe-er, in-ali"ate" the escalation clause

containe" therein because it -iolate" the principle of mutualit' of contracts.
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D+(#e-ertheless, it too1 @u"icial notice of the steep "epreciation of the peso "urin2

the inter-enin2 perio"D+7an" "eclare" the eistence of etraor"inar' "eflation.

D+/Conse>uentl', the RTC or"ere" the use of the +33? "ollar echan2e rate in

computin2 respon"ents; "ollar%"enominate" loans.D+0Lastl', because the business

reputation of respon"entsas 4alle2e"l'5 se-erel' "ama2e" hen E>uitable fro9e

their accounts,D+?th

oblicon cases 5 extinguishment of obligations.docx

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