● Edgardo A. Quilo and Adnaloy Villahermosa vs. Teodula Bajao G.R. No. 186199
● Doroteo C. Gaerlan vs. Philippine National Bank G.R. No. 217356
September 14, 2016
● Philippine Science High School - Cagayan Valley Campus vs. Pirra Construction Enterprises
G.R. No. 204423 September 21, 2016
● Marphil Export Corporation and Ireneo Lim vs. Allied Banking Corporation substituted by Philippine National Bank
G.R. No. 187922
● Rizal Commercial Banking Corporation vs. Teodoro G. Bernardino G.R. No. 183947
September 28, 2016
Philippine Economic Zone Authority vs. Pilhino Sales Corporation G.R. No. 185765
Edgardo A. Quilo and Adnaloy Villahermosa v. Teodula Bajao G.R. No. 186199
September 7, 2016 Topic: Prescription
Facts: Bajao filed an ejectment complain against Saclag. On 20 November 1998, MeTC ruled in
favor of Bajao. RTC affirmed the MeTC. SC issued an entry of judgment declaring that the resolution has become final and executory on 28 July 2000. Bajao filed a motion for execution on 8 August 2000. 7 years thereafter, RTC ordered the remand of the records of the case to the MeTC. MeTC issued a writ of execution. Quilo received a notice to pay / vacate and demolish premises, directing the to vacate the property and remove their houses. Quilo filed a motion to quash claiming that the writ of execution was issued beyond the lapse of the 5-year period within which to execute a judgment.
Issue: Whether the issuance of the writ of execution on 28 November 2007 to implement the
decision rendered on 20 November 1998 is beyond the period to implement judgment?
Held: As the Decision became final and executory on 28 July 2000, Bajao has 5 years within
which to move for its execution. Indeed, Bajao, in compliance with Rule 39, timely moved for the execution of the Decision when he filed a Motion for Execution on 8 August 2000. However, as mandated by Section 6, Rule 39, if the prevailing party fails to have the decision enforced by a motion after the lapse of 5 years, the said judgment is reduced to a right of action which must be enforced by the institution of a complaint in a regular court within 10 years from the time the judgment becomes final. In the case at bar, the Decision, despite the timely motion to execute the same, was not implemented by the court. The failure to implement the Decision impelled Bajao to again file another motion to execute. However, Bajao's course of action to execute the Decision is not in accordance with Section 6, Rule 39; Bajao merely filed a motion. The correct remedy is to file a complaint for revival of judgment in a regular court within ten 10 years from the time the judgment becomes final. Actions for revival of judgment are governed by Article 1144 (3), Article 1152 of the Civil Code and Section 6, Rule 39 of the Rules of Court. Thus: Art. 1144. The following actions must be brought within ten years from the time the right of action accrues: xxx (3) Upon a judgment.
Art. 1152. The period for prescription of actions to demand the fulfillment of obligation declared by a judgment commences from the time the judgment became final.
Clearly, the proper remedy is to file a complaint for revival of judgment, which Bajao did not avail of. Application of the aforesaid rules would dictate that this Court must rule in favor of the petitioners and grant the petition on the ground of failure to comply with Section 6, Rule 39. However, the circumstances of the present case are replete with peculiarities which impel this Court to exercise its equity jurisdiction. This case has been raised to this Court for the second time, and there is nothing more imperative than for the Court to finally settle all controversies and dispose of a protracted and long dragging case. In pursuit of equity justice this Court
Doroteo C. Gaerlan v. Philippine National Bank G.R. No. 217356
September 7, 2016
Topic Under: Different Kinds of Obligations; Joint and Solidary Obligations
Facts: Supreme Marine Company (SMCI) and MCG Marine Services (MCG) obtained from
PNB a 5 year Foreign Currency Deposit Unit (FCDU) term loan of not exceeding $4M and a domestic bills purchase line (DBP line) not exceeding P10M. This agreement was signed by Robert Jaworski (president of SMCI) and Doroteo Gaerlan (president of MCG) as borrowers and Inocencio Deza Jr (EVP of PNB) as lender. The loan had an annual interest rate equivalent to 90- day London inter-bank offered rate plus spread of 2.5% from initial drawdown until its full payment.
To secure the loan, Gaerlan and Jaworski executed the Chattel Mortgage with Power of Attomey over the an oil tanker and, as additional security and by way of payment to the loan, Gaerlan, as president of MGG, executed the Deed of Assignment in favor of PNB, pertaining to its monthly income of at least P6,000,000.00 arising from the proceeds of the Consecutive Voyage Charter Party between Petron Corporation (Petron) and MGG. To personally guarantee the loan, Jaworski and his wife, Evelyn (Spouses Jaworski), together with Gaerlan and his wife Marilen
(Spouses Gaerlan), executed the Joint and Solidary Agreement (JSA), whereby the parties
absolutely, unconditionally and irrevocably bound themselves, jointly and severally, to pay PNB in case the principal debtors defaulted in the payment of the loan.
When SMCI and PCG defaulted in the payment of their loan obligation, PNB sent a demand letter but it was unheeded.
To protect its interest, PNB instituted a petition for the extrajudicial foreclosure sale of Spouses Gaerlan’s real property.
Gaerlan filed a complaint before the RTC-QC for the nullification of contracts of loan, real estate mortgage and extrajudicial foreclosure sale. Gaerlan alleged that the stipulated interests and penalties were must higher than 12% per annum and that all loans secured by the promissory notes and real estate mortgage was null and void as they violated the Usury Law and in view of the nullity of the contracts of loan and the promissory notes, the real estate mortgage and the extrajudicial foreclosure sale were likewise null and void.
Meanwhile, Spouses Jaworski filed an action for declaratory relief before the RTC-Manila contending that Jaworski and Gaerlan had executed a Memorandum of Agreement whereby the parties had entered into a business divorce and agreed that the ownership of the oil tanker would be transferred to Gaerlan in favor of the latter’s assumption of all the loans extended by PNB. RTC-Manila granted the action and released the spouses from their duties and responsibilities under the Joint and Solidary Agreement.
Finally, RTC-QC declared the contracts of loan and extrajudicial foreclosure sale null and void and releasing Gaerlan from liability. The RTC-QC stated that because the JSA was declared void
in the January 13, 2004 Order of the RTC-Manila, the principal obligation, guaranteed by the said agreement, and the real estate mortgage were likewise void pursuant to the principle of res
judicata in the concept of conclusiveness of judgment.
Issue: Whether the decision of the RTC-Manila, which released Spouses Jaworski from liability
constitutes res judicata redounding to the benefit of petitioner?
Held: NO. The DOCTRINE OF RES JUDICATA provides that a final judgment or decree on
the merits by a court of competent jurisdiction is conclusive of the rights of the parties or their privies in all later suits on points and matters determined in the former suit.
In the present case, neither of the two concepts of res judicata finds relevant application. There is no identity of subject matter and cause of action. The case filed in RTC-Manila was a complaint for declaratory relief filed by Spouses Jaworski for the extinguishment of their liability under the JSA on the basis of the MOA stating their business divorce; whereas the present case stemmed from a complaint for nullification of loan contracts, real estate mortgage and extrajudicial foreclosure sale questioning the alleged usurious interest imposed by PNB and the latter’s non- compliance with the requirements of publication and posting of notices.
Furthermore, nowhere in the said order did it pronounce the entire Joint and Solidary Agreement invalid as to render it without force and effect. As surety to the contract of loan, Gaerlan’s liability subsists. It must be emphasized that a surety is bound equally and absolutely with the principal and his liability is immediate and direct. The Court has no alternative but to enforce the
contractual stipulations in the manner they have been agreed upon and written. It could not
relieve the parties from obligations voluntarily assumed simply because their contract turned out to be disastrous or unwise investments. Hence, in view of the principal borrowers' failure to pay their outstanding obligation upon demand, it was proper for PNB to exercise its right to foreclose on the mortgaged property. This right of PNB to extrajudicially foreclose on the real estate mortgage is provided under the various contracts ofthe parties.
With respect to the claim of petitioner that the stipulated interest on the contract of loan was usurious, the Court finds the same untenable. The law and jurisprudence empowers the courts to temper interest rates and penalty charges that are iniquitous, unconscionable and exorbitant. In exercising this vested power, however, the Court must consider the circumstances of the case for what may be iniquitous and unconscionable in one may be totally just and equitable in another. In the present case, petitioner failed to show that the stipulated rate of interest was indeed exorbitant. He did not present the Omnibus Agreement after the loan contract was restructured or any other evidence to support his claim.
Philippine Science High School - Cagayan Valley Campus v. Pirra Construction Enterprises
G.R. No. 204423 September 14, 2016
Topic under: Extinguishment of Obligations; Payment or Performance
Facts: Pirra Construction Enterprises filed with the Construction Industry Arbitration
Commission (CIAC) a Complaint for Damages against Philippine Science High School (PSHS) relative to the construction contracts for PSHS’ Project A (consisting of a few phases of Academic Building I and Girls’ Dormitory Building I) and Project C (consisting of a few phases of Academic Building II, Boys’ Dormitory Building, and School Canteen).
Project A: Pirra participated in and won the bidding for Project A. Pirra and PSHS then entered into a Contract Agreement. The duration of Project A was for 180 days from December 20, 2008, with approved 65-day extension until August 22, 2009. PSHS paid Pirra 15% of the contract price and an amount of P23,194,020.95 for Partial Billing Nos. 1 to 4. Subsequently, Pirra requested payment for Partial Billing No. 5. It sent PSHS a letter requesting for substantial acceptance and completion of Project A and submitted its Summary of Accomplishment Report stating that completion of Project A was already at 94.09%. PSHS reminded Pirra that the due date of the contract as a month later but the power distribution activities had not yet been installed. PSHS created an Inspectorate Team which conducted punch listing on Project A. PSHS then replied to Pirra’s request for substantial acceptance and completion and for payment of PB No. 5. It however stated that the payment could not yet be made pending correction of the noted defects and remaining work activities, the final inspection of concerned agencies, among other reasons. PSHS also declared that it considered PB No. 5 as Pirra’s final billing so it had to account Pirra’s liabilities relating to the project. To validate Pirra’s accomplishment, the COA proceeded to inspect the project. Pirra failed to attend because it allegedly received the notice late. PSHS informed Pirra that its PB No. 5 could not be processed yet as it was awaiting the COA Report. Pirra and PSHS entered into a Joint Inspection Agreement and agreed to jointly request the COA for a re-inspection of a portion of Project A. PSHS informed Pirra that it would take over Project A in the interest of the government and to prepare for its occupancy for School Year 2010-2011. It also stated that it would implement the repair of the identified defects through a third party, the expenses of which would be deducted from Pirra’s final billing. Pirra questioned PSHS’ takeover of the project and claimed that such takeover is violative of its rights as the winning contractor.
Project C: Pirra participated in and won the bidding for Project C. The parties entered into a Contract Agreement. The project duration was 150 days. PSHS paid Pirra 15% of the contract price as mobilization fee. Pirra requested a time suspension on Project C because of affected footings, columns, and footing tie beams. PSHS informed Pirra that suspension was not the solution, there being no changes in the structural design. Instead, it directed Pirra to file a variation order (VO) with time extension. The parties agreed that Pirra shall submit to the Consultant the shop drawing for the foundation and the Consultant shall submit the cross- sections of the foundation and evaluate Pirra’s claim. Pirra sent a letter to PSHS stating that delay was incurred on Project C because it received no response from PSHS or from the
Consultant on its request for time suspension. PSHS, in its reply, alleged that it found out that Pirra suspended work on Project C without its approval. PSHS informed Pirra that it was terminating the Project C contract because of Pirra’s delay, default, and abandonment. PSHS then issued an Order of Termination against Pirra. Pirra contended that the termination is unjustified as PSHS failed to give it the intended revisions of the building plan as well as the necessary documents to secure a building permit, thus as a result, Project C was stopped and Pirra incurred a slippage of 75.99%.
Ruling of the CIAC: The tribunal ruled in favor of Pirra. PSHS is held liable for delay in paying PB No. 5 and in taking over Project A without any legal basis. It is also held liable for delay in submitting the revised drawings and extra work order to Pirra. CIAC held that PSHS breached its obligations and invalidly terminated the contract for Project C.
Ruling of the CA: As regards Project A, the CA ruled that when PSHS created an Inspectorate Team, it treated Project A substantially completed, thus PSHS should be held liable for PB No. 5 less the defective works. Anent Project C, the CA held that PSHS validly terminated the contract. There was no showing that the affected work fell on critical path so there was no reason for suspension of work. Nevertheless, PSHS is liable for the value of the work done on Project C because otherwise there would be unjust enrichment on the part of PSHS.
Issues: 1) Whether PSHS treated Project A as substantially completed such that it is liable for
the residual value of PB No. 5?
2) Whether PSHS validly terminated the contract for Project C?
Held:
1. PSHS accepted and treated Project A as a substantially completed project. When Pirra requested substantial acceptance and completion of Project A, PSHS did not object to such request. It acted upon it and even created an Inspectorate Team for punch listing. PSHS also repeatedly referred to PB No. 5 as the final billing for Project A. In fact, PSHS initially expressed its willingness to pay only to put it on hold because of the COA Report. Nonetheless, such report cannot affect PSHS’ obligation to pay Pirra because the existence of the defective or undelivered items was not an excuse to avoid payment of the progress billing, as the payment was due on the performed items that were completed or were otherwise performed, save for the defects. As provided for under Article 1234 of the Civil Code, if the obligation had been substantially performed in good faith, the obligor, in this case Pirra, may recover as if it had strictly and completely fulfilled its obligation, less the damages suffered by the obligee or in this instance, PSHS. PSHS is thus liable to pay Pirra the residual value of PB No. 5.
2. The Court agrees with the CA that the contract for Project C was validly terminated. The parties agreed on how to proceed with the contract for Project C in November 20, 2009. While records reveal that PSHS failed to submit the revised drawing for the preparation of a variation order, Pirra is not entirely faultless. After the November 20, 2009
abide by the November 20, 2009 agreement. The suspension of work made by Pirra on Project C without PSHS’ approval cannot be ignored. Pursuant to the General Conditions of Contract, PSHS may terminate the contract if Pirra incurs delay, abandons the project, causes stoppage of work without the authority of PSHS, among other grounds. Indeed, by reason of Pirra’s delay, suspension of work without any approval from PSHS, and abandonment of the project, PSHS has sufficient basis to terminate the contract for Project C. Nonetheless, Pirra is entitled to the value of the work done on Project C pursuant to the principle of quantum meruit (in an action for work and labor, payment shall be made in such amount as the plaintiff reasonably deserves) and to avoid unjust enrichment.
Marphil Export Corporation and Ireneo Lim v. Allied Banking Corporation substituted by Philippine National Bank
G.R. No. 187922 September 21, 2016
Topic: Legal Compensation
Facts: Marphil Export Corporation (Marphil) is engaged in the exportation of cuttlefish, cashew
nuts and similar agricultural products. To finance its purchase and export of these products, Allied Bank granted a credit line from which it availed of several loans evidenced by promissory notes. Upon negotiations of export bills/drafts that Allied Bank purchases from Marphil, the amount of the face value of the letters of credit is credited in favor of the latter. Marphil exported cashew nuts to Intan Tading Ltd. Hongkong (Intan). Intan applied for and opened Letter of Credit No. 21970 with Nanyang Bank in China for $185,000.00, with Marphil as beneficiary and Allied Bank as correspondent bank. After receiving the export documents, Allied Bank credited Marphil in the amount of Php1,913,763.45. However, Allied Bank received a cable from Nanyang Bank noting discrepancies in the shipping documents and that Intan refused to accept the discrepancies. Nanyang Bank refused to reimburse Allied Bank. The latter informed Marphil of the dishonor of L/C No. 21970 and that it was reversing its earlier credit of entry. Both the RTC and the CA held Marphil liable for the amount of Php1,913,763.45, the amount equal to the face value of L/C No. 21970.
Issue: Whether or not Allied Bank may unilaterally debit the amount it credited to Marphil’s
account?
Held: Allied bank, the collecting bank, has a right to debit Marphil’s account for the value of a
dishonored check it previously credited by virtue of the principle of legal compensation. Since the relationship between banks and depositors is that of creditor and debtor in a simple loan, legal compensation may take place when the conditions in Article 1279 of the Civil Code are present: (1) that each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other; (2) that both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated; (3) that the two debts be due; (4) that they be liquidated and demandable; and (5) that over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor. When Allied Bank credited Marphil's account, it became the debtor of Marphil. However, once Nanyang Bank dishonored the export documents, Marphil became the debtor of Allied Bank for the amount by virtue of its obligation to reimburse