Belina Cancio and Jeremy Pampolina vs Performance Foreign Exchange Corporation

G.R. No. 182307, June 6, 2018

FACTS:

Performance Forex is a corporation operating as a financial broker/agent between market

participants in foreign exchange transactions.

Cancio and Pampolina, petitioners, accepted Ronald Hipol’s invitation to open a joint account with
Performance Forex wherein they deposited the required margin account deposit of US$100,000. The
parties, among others, executed an agreement for appointment of an agent Hipol in behalf of Cancio and
Pampolina. The trust/trading facilities agreement between Performance Forex, Cancio and Pampolina
provided that the former shall not be responsible for any actions or any warranties or representations Hipol
may have made. Later, Hipol confessed to Cancio that he made unauthorized transactions using the joint
account. Upon conferring with Performance Forex officers, the latter confirmed that there were also
previous unauthorized transactions made by Hipol under other accounts, they offered US$5,000.00 to settle
the matter but the petitioners rejected the offer. A complaint for damages was filed against Performance
Forex and Hipol before the RTC wherein the trial court ruled that the respondent and Hipol are solidarily
liable to Cancio and Pampolina for damages. RTC held that Performance Forex should have disclosed to
Cancio and Pampolina that Hipol made similar unauthorized activities in the past and that innocent third
persons should not be prejudiced due to Performance Forex’s failure to adopt the necessary measures to
prevent unauthorized trading by its agents. On appeal before the CA, the decision was reversed and it held
that Performance Forex acted only on whatever their clients or their representatives would order. It also
noted that Hipol being an independent broker, respondents’ non disclosure of Hipol’s prior unauthorized
transactions was irrelevant and that he was not his employee.

ISSUE:
Whether the respondent should be held solidarily liable with Hipol.

HELD:
No. Petitioners conferred trading authority to Hipol. Respondent was not obligated to question
whether Hipol exceeded that authority whenever he made purchase orders. Respondent was likewise not
privy on how petitioners instructed Hipol to carry out their orders. Under Article 1900 of the Civil Code: “So
far as third persons are concerned, an act is deemed to have been performed within the scope of the
agent’s authority, if such act is within the terms of the power of attorney, as written, even if the agent has
in fact exceeded the limits of his authority according to an understanding between the principal and the
agent. Before a claimant can be entitled to damages, the claimant should satisfactorily show the existence
of the factual basis of damages and its causal connection to defendant’s acts. The acts of petitioners’
agent, Hipol were the direct cause of their injury.

WHEREFORE, the petition is DENIED.

SECURITY BANK CORPORATION vs SPS. RODRIGO and ERLINDA MERCADO/

SPS. RODRIGO and ERLINDA MERCADO vs SECURITY BANK and TRUST COMPANY
G.R. No. 192934/ G.R. No. 197010, June 27, 2018

FACTS:
Security Bank granted spouses Mercado a revolving credit line in the amount of P1,000,000.00.
The terms and conditions provided “Interest on Availments – xxx I hereby agree that the basis for the
determination of the interest rate y Security Bank on my outstanding Availments will be Security Bank’s
prevailing lending rate. Spouses Mercado executed a Real Estate Mortgage in favor of the bank over their
properties in Lipa and San Jose, Batangas. Another REM was executed to secure an additional P7M under
the same revolving credit agreement. Subsequently, the spouses defaulted in their payment under the
revolving credit line agreement. Thereafter, a petition for extrajudicial foreclosure was filed before the RTC.
However, the publication of the notices of the foreclosure of the properties contained errors with respect to
their technical descriptions. The bank caused the publication of an erratum in a newspaper to correct the
errors. The foreclosure sale was held and Security Bank was adjudged as the winning bidder over the
properties of the spouses Mercado. Spouses Mercado offered to redeem the foreclosed properties for
P10M. However, the bank refused and made a counter-offer in the amount of p15M.

The spouses filed a complaint for annulment of foreclosure sale, with the RTC and they averred, among
others, that the properties should not have been foreclosed together because they are covered by separate
REM and that the interests and penalties imposed by the bank were iniquitous and unconscionable. RTC
ruled in favor of the spouses and declared that the foreclosure sales are void; that the interest rates are
void as well for being potestative or solely based on the will of the bank. On appeal, CA affirmed with
modification the decision of the RTC with respect to the interest rate imposed from 6% to 12% from the
date of extrajudicial demand and imposed the stipulated 2% monthly penalty under the revolving credit line
agreement. Hence, these consolidated petitions.

ISSUE
 Whether the provisions on interest rate in the revolving credit line agreement and its addendum are
void for being violative of the principle of mutuality of contracts.

HELD:
Yes. The RTC and CA were correct in holding that the interest provisions in the revolving credit
line agreement and its addendum violate the principle of mutuality of contracts. The principle of mutuality
of contracts is found in Article 1308 of the New Civil Code, which states that contracts must bind both
contracting parties, and its validity or compliance cannot be left to the will of one of them. The binding effect
of any agreement between parties to a contract is premised on two settled principles: (1) that any obligation
arising from contract has the force o flaw between the parties; and (2) that there must be mutuality between
the parties based on their essential equality. As such, any contract which appears to be heavily weighed
in favor o f one o f the parties so as to lead to an unconscionable result is void. Likewise, any stipulation
regarding the validity or compliance of the contract that is potestative or is left solely to the will of one of the
parties is invalid. Stipulations as to the payment of interest are subject to the principle of mutuality of
contracts. As principal obligation and an important component in contracts of loans, interest rates are only
allowed if agreed upon by express stipulation of the parties, and only when reduced into writing. We found
that the method in fixing interest rates is based solely on the will of the bank. The method is “one-sided,
indeterminate, and based on subjective criteria such as profitability, cost of money, bank costs, xxx” It is
arbitrary for there is no fixed standard or margin of above or below these considerations. More, it is worded
in such a way that the borrower shall agree to whatever interest rate the bank fixes. Hence, the element of
consent from or agreement by the borrower is completely lacking.

LILY S. VILLAMIL etc. vs SPOUSES JUANITO ERGUIZA and MILA ERGUIZA

G.R. No. 195999, June 20, 2018

FACTS:

Plaintiff together with her deceased sister, Corazon Villamil, deceased brother Teddy Villamil
entered into an agreement with Juanito Erguiza for selling a parcel of land subject to the condition that
plaintiff and her siblings would file a petition to secure authorization for minor children from the proper
courts. That failure of the plaintiff and her siblings to obtains such authority, the payment shall be applied
as rent for 2o years.

The original title was cancelled and a new title was issued by virtue of a quitclaim executed by
Corazon and her children and by virtue of Deed of Sale executed by Efren Villamil and Teddy Villamil in
favor of plaintiff. After the lapse of 20 years, plaintiff demanded from the defendants to return possession
of the property but the latter failed and refused to do so. Thus, a complaint for recovery of possession and
damages was filed against respondent spouses. Respondent-spouses filed their Answer denying the
material allegations in petitioner’s complaint and aver that the agreement between the co-heirs of plaintiff
and defendants is for the sale of the subject property that it transfers ownership to the vendees even if
conditional. MTCC ruled in favor of the plaintiff and the same was affirmed by the RTC. On appeal before
the CA, the decision was reversed and held that the agreement was contract to sell involving subject
property because the vendors reserved ownership and it was subject to a suspensive condition.

ISSUE:
Whether the contract entered into by the parties is a contract to sell or a contract of sale.

HELD:
The parties entered into a contract to sell. A contract to sell is defined as a bilateral contract
whereby the prospective seller, while expressly reserving the ownership of the subject property despite
delivery thereof to the prospective buyer, binds himself to sell the said property exclusively to the latter
upon his fulfillment of the conditions agreed upon, the full payment of the purchase price and/or compliance
with the other obligations stated in the contract to sell. In a contract to sell, the fulfillment of the suspensive
condition will not automatically transfer ownership to the buyer although the property may have been
previously delivered to him. The prospective seller still has to convey title to the prospective buyer by
entering into a contract of absolute sale. On the other hand, in a conditional contract of sale, the fulfillment
of the suspensive condition renders the sale absolute and the previous delivery of the property has the
effect of automatically transferring the seller’s ownership or title to the property to the buyer.

The Civil Code defines a contract of sale, thus:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership
of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.
Sale, by its very nature, is a consensual contract because it is perfected by mere consent. The essential
elements of a contract of sale are the following:
a) Consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price;
b) Determinate subject matter; and
 c) Price certain in money or its equivalent.

Article 1186 of the Civil Code provides that the condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfillment. Here, there is no doubt that petitioner prevented the fulfillment of the
suspensive condition. She herself admitted that they did not file any petition to seek approval of the court
as regards the sale of the shares of the minor. In addition, the other co-owners sold their shares to petitioner
such owners. In addition, the other co-owners sold their shares to petitioner such that she was able to
consolidate the title in her name. Thus the condition is deemed constructively fulfilled, as the intent to
prevent fulfillment of the condition and actual prevention thereof were definitely present. Consequently, it
was incumbent upon the sellers to enter into a contract with respondent-spouses for the purchase of the
subject property.

WHEREFORE, the petition is DENIED.

ASTRID A. VAN DE BRUG, MARTIN G. AGUILAR and GLENN G. AGUILAR vs PHILIPPINE

NATIONAL BANK
G.R. No. 207004, June 6, 2018

FACTS:
The late spouses Romulus and Evelyn Aguilar used to be borrowing clients of PNB and their loans
were secured by real estate mortgage over parcels of land. For failure of the spouses to comply with their
obligations, the property were foreclosed. With the enactment of RA 7202, late Romulus Aguilar wrote to
PNB, he stated “Since our indebtedness with the PNB had been foreclosed, we are asking your good office
for a reconsideration of our account based on the Sugar Restitution Law”. After Romulus death, Evelyn
received a letter from PNB informing her that while the subject loan was covered by RA 7202, they still
need to comply with other matters. Plaintiffs-appellees claimed that they complied with the requirements
and that PNB furnished them Statements of Account which reflected the total amount due. Aguilars
requested PNB to commence restructuring of the loan account. However, PNB maintained that it acquired
the property at foreclosure sale and can exercise its rights as owner. Hence, the case of implementation
of RA 7202 was filed. PNB emphasized that Aguilars failed to comply with the requirements thus, the latter
has no cause of action. RTC ruled in favor of the Aguilar and held that what [PNB] has done in denying to
the [Aguilars] the benefits of the Sugar Restitution Law is against the spirit that created the said Law, i.e. to
help the sugar producers, the [Aguilars] herein included, who suffered due to the acts of government
agencies. On appeal, CA reversed the decision of the RTC.

ISSUE:
Whether the PNB has an obligation to accord Aguilars regarding the crediting of the CARP
proceeds to their respective agricultural lots and against their respective sugar crop loans covered by RA
7202.

HELD:
None. The sources of obligations under Article 1157 of the Civil Code are: (1) law; (2) contracts;
(3) quasi-contracts; (4) acts or omissions punished by law; and (5) quasi-delicts. Immediately, sources (2),
(3) and (4) are inapplicable in this case. The Aguilars are not privies to the Compromise Agreement between
PNB and the spouses Pfleider. Regarding law, as PNB's source of obligation, the CA correctly ruled that
the Aguilars are not entitled to restitution under RA 7202. Thus, RA 7202 cannot be invoked as the statutory
basis to compel PNB to treat the Aguilars similarly with the spouses Pfleider. In order to be liable for
damages under the abuse of rights principle, the following requisites must concur: (a) the existence of a
legal right or duty; (b) which is exercised in bad faith; and (c) for the sole intent of prejudicing or injuring
another. To make PNB liable under the principle of abuse of rights, the Aguilars have the burden to prove
the requisites enumerated above. They claim that they are similarly circumstanced as the spouses Pfleider
and there was no reason for PNB to treat them differently.

LOLITA ESPIRITU SANTO MENDOZA and SPS. ALEXANDER and ELIZABETH GUTIERREZ vs SPS.
RAMONS, SR. and NATIVIDAD PALUGOD
G.R. No. 220517, June 20. 2018

FACTS:
Lolita Espiritu Santo Mendoza and Jasminia Palugod were close friends. They bought the subject
lot on installment for one year and constructed residential house therein. Jasminia executed a Deed of
Absolute Sale over the property in favor of Lolita who mortgaged the same to Elizabeth Gutierrez as a
security for a loan.

However, spouses Ramon, Sr. and Natividad Palugod alleged that Jasminia, who died due to breast cancer,
acquired the property and that Lolita has no means of livelihood of her own and was dependent to Jasminia.
Before Jasminia’s death, she told Natividad that the subject property shall go to her brother but Lolita shall
be allowed to stay therein. Upon learning of the mortgaged of the property, Sps. Palugod filed a complaint
for Declaration of Nullity of the Deed of Absolute Sale and the Deed of Real Estate Mortgage with the RTC.
RTC ruled in favor of the respondents. On appeal, the CA affirmed the decision of the RTC.

ISSUE:
Whether the CA erred in not upholding as applicable to the case the legal principle that a written
contract is for a valuable consideration.

HELD:
The petition is meritorious. As correctly pointed out by petitioner Lolita, the DAS is itself the proof
that the sale of the property is supported by sufficient consideration. This is anchored on the disputable
presumption of consideration inherent in every contract. Thus, Article 1354 of the Civil Code provides:
"Although the cause is not stated in the contract, it is presumed that it exists and is lawful, unless the debtor
proves the contrary. The petitioner stand to benefit from the disputable presumption of consideration with
the presentation of the DAS. With the presumption in favor of petitioner Lolita who is the vendee, it became
incumbent upon respondents to present preponderant evidence to prove lack of consideration.

WHEREFORE, the petition is GRANTED.