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1. MetroBank vs. Rosales

G.R. No. 183204 January 13, 2014

THE METROPOLITAN BANK AND TRUST COMPANY,Petitioner,vs.ANA GRACE ROSALES AND YO YUK TO,Respondents.

D E C I S I O N

DEL CASTILLO, J. :

Bank deposits, which are in the nature of a simple loan or mutuum,1must be paid upon demand by thedepositor.2

This Petition for Review on Certiorari3under Rule 45 of the Rules of Court assails the April 2, 2008Decision4and the May 30, 2008 Resolution5of he Court of Appeals CA) in CA-G.R. CV No. 89086.

Factual Antecedents

Petitioner Metropolitan Bank and Trust Company is a domestic banking corporation duly organized andexisting under the laws of the Philippines.6Respondent Ana Grace Rosales (Rosales) is the owner ofChina Golden Bridge Travel Services,7a travel agency.8Respondent Yo Yuk To is the mother ofrespondent Rosales.9

In 2000, respondents opened a Joint Peso Account10with petitionersPritil-Tondo Branch.11As ofAugust 4, 2004, respondents Joint Peso Account showed a balance ofP2,515,693.52.12

In May 2002, respondent Rosales accompanied her client Liu Chiu Fang, a Taiwanese Nationalapplying for a retirees visa from the Philippine Leisure and Retirement Authority (PLRA), to petitionersbranch in Escolta to open a savings account, as required by the PLRA.13Since Liu Chiu Fang couldspeak only in Mandarin, respondent Rosales acted as an interpreter for her.14

On March 3, 2003, respondents opened with petitioners Pritil-Tondo Branch a Joint DollarAccount15with an initial deposit of US$14,000.00.16

On July 31, 2003, petitioner issued a "Hold Out" order against respondents accounts.17

On September 3, 2003, petitioner, through its Special Audit Department Head Antonio Ivan Aguirre,filed before the Office of the Prosecutor of Manila a criminal case for Estafa through False Pretences,Misrepresentation, Deceit, and Use of Falsified Documents, docketed as I.S. No. 03I-25014,18againstrespondent Rosales.19Petitioner accused respondent Rosales and an unidentified woman as the onesresponsible for the unauthorized and fraudulent withdrawal of US$75,000.00 from Liu Chiu Fangsdollar account with petitioners Escolta Branch.20Petitioner alleged that on February 5, 2003, its branchin Escolta received from the PLRA a Withdrawal Clearance for the dollar account of Liu ChiuFang;21that in the afternoon of the same day, respondent Rosales went to petitioners Escolta Branchto inform its Branch Head, Celia A. Gutierrez (Gutierrez), that Liu Chiu Fang was going to withdraw herdollar deposits in cash;22that Gutierrez told respondent Rosales to come back the following daybecause the bank did not have enough dollars;23that on February 6, 2003, respondent Rosalesaccompanied an unidentified impostor of Liu Chiu Fang to the bank;24that the impostor was able towithdraw Liu Chiu Fangs dollar deposit in the amount of US$75,000.00;25that on March 3, 2003,respondents opened a dollar account with petitioner; and that the bank later discovered that the serialnumbers of the dollar notes deposited by respondents in the amount of US$11,800.00 were the sameas those withdrawn by the impostor.26

Respondent Rosales, however, denied taking part in the fraudulent and unauthorized withdrawal fromthe dollar account of Liu Chiu Fang.27Respondent Rosales claimed that she did not go to the bank onFebruary 5, 2003.28Neither did she inform Gutierrez that Liu Chiu Fang was going to close heraccount.29Respondent Rosales further claimed that after Liu Chiu Fang opened an account withpetitioner, she lost track of her.30Respondent Rosales version of the events that transpired thereafteris as follows:

On February 6, 2003, she received a call from Gutierrez informing her that Liu Chiu Fang was at thebank to close her account.31At noon of the same day, respondent Rosales went to the bank to make atransaction.32While she was transacting with the teller, she caught a glimpse of a woman seated at thedesk of the Branch Operating Officer, Melinda Perez (Perez).33After completing her transaction,

respondent Rosales approached Perez who informed her that Liu Chiu Fang had closed her accountand had already left.34Perez then gave a copy of the W ithdrawal Clearance issued by the PLRA torespondent Rosales.35On June 16, 2003, respondent Rosales received a call from Liu Chiu Fanginquiring about the extension of her PLRA Visa and her dollar account.36It was only then that Liu ChiuFang found out that her account had been closed without her knowledge.37Respondent Rosales thenwent to the bank to inform Gutierrez and Perez of the unauthorized withdrawal.38On June 23, 2003,respondent Rosales and Liu Chiu Fang went to the PLRA Office, where they were informed that theWithdrawal Clearance was issued on the basis of a Special Power of Attorney (SPA) executed by LiuChiu Fang in favor of a certain Richard So.39Liu Chiu Fang, however, denied executing the SPA.40Thefollowing day, respondent Rosales, Liu Chiu Fang, Gutierrez, and Perez met at the PLRA Office todiscuss the unauthorized withdrawal.41During the conference, the bank officers assured Liu Chiu Fangthat the money would be returned to her.42

On December 15, 2003, the Office of the City Prosecutor of Manila issued a Resolution dismissing thecriminal case for lack of probable cause.43Unfazed, petitioner moved for reconsideration.

On September 10, 2004, respondents filed before the Regional Trial Court (RTC) of Manila aComplaint44for Breach of Obligation and Contract with Damages, docketed as Civil Case No.04110895 and raffled to Branch 21, against petitioner. Respondents alleged that they attemptedseveral times to withdraw their deposits but were unable to because petitioner had placed theiraccounts under "Hold Out" status.45No explanation, however, was given by petitioner as to why itissued the "Hold Out" order.46Thus, they prayed that the "Hold Out" order be lifted and that they beallowed to withdraw their deposits.47They likewise prayed for actual, moral, and exemplary damages,as well as attorneys fees.48

Petitioner alleged that respondents have no cause of action because it has a valid reason for issuingthe "Hold Out" order.49It averred that due to the fraudulent scheme of respondent Rosales, it wascompelled to reimburse Liu Chiu Fang the amount of US$75,000.0050and to file a criminal complaint forEstafa against respondent Rosales.51

While the case for breach of contract was being tried, the City Prosecutor of Manila issued aResolution dated February 18, 2005, reversing the dismissal of the criminal complaint.52An Information,docketed as Criminal Case No. 05-236103,53was then filed charging respondent Rosales with Estafabefore Branch 14 of the RTC of Manila.54

Ruling of the Regional Trial Court

On January 15, 2007, the RTC rendered a Decision55finding petitioner liable for damages for breach ofcontract.56The RTC ruled that it is the duty of petitioner to release the deposit to respondents as the actof withdrawal of a bank deposit is an act of demand by the creditor.57The RTC also said that therecourse of petitioner is against its negligent employees and not against respondents.58The dispositiveportion of the Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering [petitioner]

METROPOLITAN BANK & TRUST COMPANY to allow [respondents] ANA GRACE ROSALES andYO YUK TO to withdraw their Savings and Time Deposits with the agreed interest, actual damages
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of P50,000.00, moral damages of P50,000.00, exemplary damages of P30,000.00 and 10% of the

amount due [respondents] as and for attorneys fees plus the cost of suit.

The counterclaim of [petitioner] is hereby DISMISSED for lack of merit.

SO ORDERED.59

Ruling of the Court of Appeals

Aggrieved, petitioner appealed to the CA.

On April 2, 2008, the CA affirmed the ruling of the RTC but deleted the award of actual damagesbecause "the basis for [respondents] claim for such damages is the professional fee that they paid totheir legal counsel for [respondent] Rosales defense against the criminal complaint of [petitioner] forestafa before the Office of the City Prosecutor of Manila and not this case."60Thus, the CA disposed ofthe case in this wise:

WHEREFORE, premises considered, the Decision dated January 15, 2007 of the RTC, Branch 21,Manila in Civil Case No. 04-110895 is AFFIRMED with MODIFICATION that the award of actualdamages to [respondents] Rosales and Yo Yuk To is hereby DELETED.

SO ORDERED.61

Petitioner sought reconsideration but the same was denied by the CA in its May 30, 2008 Resolution.62

Issues

Hence, this recourse by petitioner raising the following issues:

A. THE [CA] ERRED IN RULING THAT THE "HOLD-OUT" PROVISION IN THEAPPLICATION AND AGREEMENT FOR DEPOSIT ACCOUNT DOES NOT APPLY IN THISCASE.

B. THE [CA] ERRED WHEN IT RULED THAT PETITIONERS EMPLOYEES WERENEGLIGENT IN RELEASING LIU CHIU FANGS FUNDS.

C. THE [CA] ERRED IN AFFIRMING THE AWARD OF MORAL DAMAGES, EXEMPLARYDAMAGES, AND ATTORNEYS FEES.63

Petitioners Arguments

Petitioner contends that the CA erred in not applying the "Hold Out" clause stipulated in the Applicationand Agreement for Deposit Account.64It posits that the said clause applies to any and all kinds ofobligation as it does not distinguish between obligations arising ex contractu or ex delictu.65Petitioneralso contends that the fraud committed by respondent Rosales was clearly established byevidence;66thus, it was justified in issuing the "Hold-Out" order.67Petitioner likewise denies that itsemployees were negligent in releasing the dollars.68It claims that it was the deception employed byrespondent Rosales that caused petitioners employees to release Liu Chiu Fangs funds to theimpostor.69

Lastly, petitioner puts in issue the award of moral and exemplary damages and attorneys fees. Itinsists that respondents failed to prove that it acted in bad faith or in a wanton, f raudulent, oppressiveor malevolent manner.70

Respondents Arguments

Respondents, on the other hand, argue that t here is no legal basis for petitioner to withhold theirdeposits because they have no monetary obligation to petitioner.71They insist that petitioner miserablyfailed to prove its accusations against respondent Rosales.72In fact, no documentary evidence waspresented to show that respondent Rosales participated in the unauthorized withdrawal.73They also

question the fact that the list of the serial numbers of the dollar notes fraudulently withdrawn onFebruary 6, 2003, was not signed or acknowledged by the alleged impostor.74Respondents likewisemaintain that what was established during the trial was the negligence of petitioners employees asthey allowed the withdrawal of the funds without properly verifying the identity of thedepositor.75Furthermore, respondents contend that their deposits are in the nature of a loan; thus,petitioner had the obligation to return the deposits to them upon demand.76Failing to do so makespetitioner liable to pay respondents moral and exemplary damages, as well as attorneys fees.77

Our Ruling

The Petition is bereft of merit.

At the outset, the relevant issues in this case are (1) whether petitioner breached its contract withrespondents, and (2) if so, whether it is liable for damages. The issue of whether petitioners

employees were negligent in allowing the withdrawal of Liu Chiu Fangs dollar deposits has no bearingin the resolution of this case. Thus, we find no need to discuss the same.

The "Hold Out" clause does not apply

to the instant case.

Petitioner claims that it did not breach its contract with respondents because it has a valid reason forissuing the "Hold Out" order. Petitioner anchors its right to withhold respondents deposits on theApplication and Agreement for Deposit Account, which reads:

Authority to Withhold, Sell and/or Set Off:

The Bank is hereby authorized to withhold as security for any and all obligations with the Bank, allmonies, properties or securities of the Depositor now in or which may hereafter come into thepossession or under the control of the Bank, whether left with the Bank for safekeeping or otherwise, orcoming into the hands of the Bank in any way, for so much thereof as will be sufficient to pay any or allobligations incurred by Depositor under the Account or by reason of any other transactions betweenthe same parties now existing or hereafter contracted, to sell in any public or private sale any of suchproperties or securities of Depositor, and to apply the proceeds to the payment of any Depositorsobligations heretofore mentioned.

x x x x

JOINT ACCOUNT

x x x x
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The Bank may, at any time in its discretion and with or without notice to all of the Depositors, assert alien on any balance of the Account and apply all or any part thereof against any indebtedness, maturedor unmatured, that may then be owing t o the Bank by any or all of the Depositors. It is understood thatif said indebtedness is only owing from any of the Depositors, then this provision constitutes theconsent by all of the depositors to have the Account answer for the said indebtedness to the extent ofthe equal share of the debtor in the amount credited to the Account.78

Petitioners reliance on the "Hold Out" clause in the Application and Agreement for Deposit Account ismisplaced.

The "Hold Out" clause applies only if there is a valid and existing obligation arising from any of thesources of obligation enumerated in Art icle 115779of the Civil Code, to wit: law, contracts, quasi-contracts, delict, and quasi-delict. In this case, petitioner failed to show that respondents have anobligation to it under any law, contract, quasi-contract, delict, or quasi-delict. And although a criminalcase was filed by petitioner against respondent Rosales, this is not enough reason for petitioner toissue a "Hold Out" order as the case is still pending and no final judgment of conviction has beenrendered against respondent Rosales. In fact, it is significant to note that at t he time petitioner issuedthe "Hold Out" order, the criminal complaint had not yet been filed. Thus, considering that respondentRosales is not liable under any of the five sources of obligation, there was no legal basis for petitionerto issue the "Hold Out" order. Accordingly, we agree with the findings of the RTC and the CA that the"Hold Out" clause does not apply in the instant case.

In view of the foregoing, we find that petitioner is guilty of breach of contract when it unjustifiablyrefused to release respondents deposit despite demand. Having breached itscontract withrespondents, petitioner is liable for damages.

Respondents are entitled to moral andexemplary damages and attorneys fees. 1wphi1

In cases of breach of contract, moral damages may be recovered only if the defendant actedfraudulently or in bad faith,80or is "guilty of gross negligence amounting to bad faith, or in wantondisregard of his contractual obligations."81

In this case, a review of the circumstances surrounding the issuance of the "Hold Out" order revealsthat petitioner issued the "Hold Out" order in bad faith. First of all, the order was issued without anylegal basis. Second, petitioner did not inform respondents of the reason for the "Hold Out."82Third, theorder was issued prior to the filing of the criminal complaint. Records show that the "Hold Out" orderwas issued on July 31, 2003,83while the criminal complaint was filed only on September 3, 2003.84Allthese taken together lead us to conclude that petitioner acted in bad faith when it breached its contractwith respondents. As we see it then, respondents are entitled to moral damages.

As to the award of exemplary damages, Article 222985of the Civil Code provides that exemplarydamages may be imposed "by way of example or correction for the public good, in addition to themoral, temperate, liquidated or compensatory damages." They are awarded only if the guilty partyacted in a wanton, fraudulent, reckless, oppressive or malevolent manner.86

In this case, we find that petitioner indeed acted in a wanton, fraudulent, reckless, oppressive ormalevolent manner when it refused to release the deposits of respondents without any legal basis. Weneed not belabor the fact that the banking industry is impressed with public interest.87As such, "thehighest degree of diligence is expected, and high standards of integrity and performance are evenrequired of it."88It must therefore "treat the accounts of its depositors with meticulous care and alwaysto have in mind the fiduciary nature of its relationship with them."89For failing to do this, an award ofexemplary damages is justified to set an example.

The award of attorney's fees is likewise proper pursuant to paragraph 1, Article 220890

of the CivilCode.

In closing, it must be stressed that while we recognize that petitioner has the right to protect itself fromfraud or suspicions of fraud, the exercise of his right should be done within the bounds of the law andin accordance with due process, and not in bad faith or in a wanton disregard of its contractualobligation to respondents.

WHEREFORE, the Petition is hereby DENIED. The assailed April 2, 2008 Decision and the May 30,2008 Resolution of the Court of Appeals in CA-G.R. CV No. 89086 are hereby AFFIRMED. SOORDERED.

2. PSBA vs. CA

G.R. No. 84698 February 4, 1992

PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION, JUAN D. LIM, BENJAMIN P. PAULINO,ANTONIO M. MAGTALAS, COL. PEDRO SACRO and LT. M. SORIANO, petitioners,vs.COURT OF APPEALS, HON. REGINA ORDOEZ-BENITEZ, in her capacity as Presiding Judge ofBranch 47, Regional Trial Court, Manila, SEGUNDA R. BAUTISTA and ARSENIA D.BAUTISTA, respondents.

Balgos and Perez for petitioners.

Collantes, Ramirez & Associates for private respondents.

PADILLA, J. :

A stabbing incident on 30 August 1985 which caused the death of Carlitos Bautista while on thesecond-floor premises of the Philippine School of Business Administration (PSBA) prompted theparents of the deceased to file suit in the Regional Trial Court of Manila (Branch 47) presided over byJudge (now Court of Appeals justice) Regina Ordoez-Benitez, for damages against the said PSBAand its corporate officers. At the time of his death, Carlitos was enrolled in the third year commercecourse at the PSBA. It was established that his assailants were not members of the school's academiccommunity but were elements from outside the school.

Specifically, the suit impleaded the PSBA and the following school authorities: Juan D. Lim (President),Benjamin P. Paulino (Vice-President), Antonio M. Magtalas (Treasurer/Cashier), Col. Pedro Sacro(Chief of Security) and a Lt. M. Soriano (Assistant Chief of Security). Substantially, the plaintiffs (nowprivate respondents) sought to adjudge them liable for the victim's untimely demise due to their allegednegligence, recklessness and lack of security precautions, means and methods before, during andafter the attack on the victim. During the proceedings a quo, Lt. M. Soriano terminated his relationshipwith the other petitioners by resigning from his position in the school.

Defendants a quo(now petitioners) sought to have the suit dismissed, alleging that since they arepresumably sued under Article 2180 of the Civil Code, the complaint states no cause of action againstthem, as jurisprudence on the subject is to the effect that academic institutions, such as the PSBA, arebeyond the ambit of the rule in the afore-stated article.

The respondent trial court, however, overruled petitioners' contention and thru an order dated 8

December 1987, denied their motion to dismiss. A subsequent motion f or reconsideration was similarlydealt with by an order dated 25 January 1988. Petitioners then assailed the trial court's disposition
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omission of that degree of diligence which is required by the nature of the obligation and correspondingto the circumstances of persons, time and place. 9

As the proceedings a quo have yet to commence on the substance of the private respondents'complaint, the record is bereft of all the material facts. Obviously, at this stage, only the tr ial court canmake such a determination from the evidence still to unfold.

WHEREFORE, the foregoing premises considered, the petition is DENIED. The court of origin (RTC,Manila, Br. 47) is hereby ordered to continue proceedings consistent with this ruling of the Court. Costsagainst the petitioners.

SO ORDERED.

3. Cruz vs. Gruspe

G.R. No. 191431 March 13, 2013

RODOLFO G. CRUZ and ESPERANZA IBIAS, Petitioners,vs.ATTY. DELFIN GRUSPE, Respondent.

D E C I S I O N

BRION, J.:

Before the Court is the petition for review on certiorari1filed under Rule 45 of the Rules of Court,assailing the decision2dated July 30, 2009 and the resolution3dated February 19, 2010 of the Court ofAppeals (CA) in CA-G.R. CV No. 86083. The CA rulings affirmed with modification the decision datedSeptember 27, 2004 of the Regional Trial Court (RTC) of Bacoor, Cavite, Branch 19, in Civil Case No.BCV-99-146 which granted respondent Atty. Delfin Grupes claim for payment of sum of money againstpetitioners Rodolfo G. Cruz and Esperanza Ibias.4

THE FACTUAL BACKGROUND

The claim arose from an accident that occurred on October 24, 1999, when the mini bus owned andoperated by Cruz and driven by one Art uro Davin collided with the Toyota Corolla car of Gruspe;Gruspes car was a total wreck. The next day, on October 25, 1999, Cruz, along with Leonardo Q. Ibias

went to Gruspes office, apologized for the incident, and executed a Joint Affidavit ofUndertakingpromising jointly and severally to replace the Gruspes damaged car in 20 days, or until November 15,1999, of the same model and of at least the same quality; or, alternatively, they would pay the cost ofGruspes car amounting toP350,000.00, with interest at

12% per month for any delayed payment after November 15, 1999, until fully paid.5When Cruz andLeonardo failed to comply with their undertaking, Gruspe filed a complaint for collection of sum ofmoney against them on November 19, 1999 before the RTC.

In their answer, Cruz and Leonardo denied Gruspes allegation, claiming that Gruspe, a lawyer,prepared the Joint Affidavit of Undertaking and forced them to affix their signatures thereon, withoutexplaining and informing them of its contents; Cruz affixed his signature so that his mini bus could bereleased as it was his only means of income; Leonardo, a barangay official, accompanied Cruz toGruspes office for the release of the mini bus, but was also deceived into signing the Joint Affidavit ofUndertaking.

Leonardo died during the pendency of the case and was substituted by his widow, Esperanza.Meanwhile, Gruspe sold the wrecked car for P130,000.00.

In a decision dated September 27, 2004, the RTC ruled in favor of Gruspe and ordered Cruz andLeonardo to pay P220,000.00,6plus 15% per annum from November 15, 1999 until fully paid, and the

cost of suit.

On appeal, the CA affirmed the RTC decision, but reduced the interest rate to 12% per annumpursuant to the Joint Affidavit of Undertaking.7It declared that despite its title, the Joint Affidavit ofUndertaking is a contract, as it has all the essential elements of consent, object certain, and

consideration required under Article 1318 of the Civil

Code. The CA further said that Cruz and Leonardo failed to present evidence to support t heircontention of vitiated consent. By signing t he Joint Affidavit of Undertaking, they voluntarily assumedthe obligation for the damage they caused to Gruspes car; Leonardo, who was not a party to theincident, could have refused to sign the affidavit, but he did not.

THE PETITION

In their appeal by certiorari with the Court, Cruz and Esperanza assail the CA ruling, contending thatthe Joint Affidavit of Undertaking is not a contract that can be the basis of an obligation to pay a sum ofmoney in favor of Gruspe. They consider an affidavit as different from a contract: an affidavits purposeis simply to attest to facts that are within his knowledge, while a contract requires that there be ameeting of the minds between the two contracting parties.

Even if the Joint Affidavit of Undertaking was considered as a contract, Cruz and Esperanza claim thatit is invalid because Cruz and Leonardos consent thereto was vitiated; the contractwas prepared byGruspe who is a lawyer, and its contents were never explained to them. Moreover, Cruz and Leonardowere simply forced to affix their signatures, otherwise, the mini van would not be released.

Also, they claim that prior to the filing of the complaint for sum of money, Gruspe did not make anydemand upon them. Hence, pursuant to Article 1169 of the Civil Code, they could not be considered indefault. Without this demand, Cruz and Esperanza contend that Gruspe could not yet take any action.

THE COURTS RULING

The Court finds the petition partly meritorious and accordingly modifies the judgment of the CA.

Contracts are obligatory no matter what their forms may be, whenever the essential requisites for theirvalidity are present. In determining whether a document is an affidavit or a contract, the Court looksbeyond the title of the document, since the denomination or title given by t he parties in their documentis not conclusive of the nature of its contents.8In the construction or interpretation of an instrument, theintention of the parties is primordial and is to be pursued. If the terms of t he document are clear andleave no doubt on the intention of the contracting parties, the literal meaning of its stipulations shallcontrol. If the words appear to be contrary to the parties evident intention, the latter shall prevail overthe former.9

A simple reading of the terms of the Joint Affidavit of Undertaking readily discloses that it containsstipulations characteristic of a contract. As quoted in the CA decision,10the Joint Affidavit ofUndertaking contained a stipulation where Cruz and Leonardo promised to replace the damaged car ofGruspe, 20 days from October 25, 1999 or up to November 15, 1999, of the same model and of atleast the same quality. In the event that they cannot replace the car within the same period, they wouldpay the cost of Gruspes car in the total amount ofP350,000.00, with interest at 12% per month for any

delayed payment after November 15, 1999, until fully paid. These, as read by the CA, are very simpleterms that both Cruz and Leonardo could easily understand.
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6/17

There is also no merit to t he argument of vitiated consent.1wphi1An allegation of vitiated consentmust be proven by preponderance of evidence; Cruz and Leonardo failed to support their allegation.

Although the undertaking in the affidavit appears to be onerous and lopsided, this does not necessarilyprove the alleged vitiation of consent. They, in fact, admitted the genuineness and due execution of theJoint Affidavit and Undertaking when they said that they signed the same to secure possession of theirvehicle. If they truly believed that the vehicle had been illegally impounded, they could have refused tosign the Joint Affidavit of Undertaking and filed a complaint, but they did not. That the release of theirmini bus was conditioned on their signing the Joint Affidavit of Undertaking does not, by itself, indicatethat their consent was forcedthey may have given it grudgingly, but it is not indicative of a vitiatedconsent that is a ground for the annulment of a contract.

Thus, on the issue of the validity and enforceability of the Joint Affidavit of Undertaking, the CA did notcommit any legal error that merits the reversal of the assailed decision.

Nevertheless, the CA glossed over the issue of demand which is material in the computation of intereston the amount due. The RTC ordered Cruz and Leonardo to pay Gruspe "P350,000.00 as cost of the

car xxx plus fifteen percent (15%) per annum from November 15, 1999 until fully paid."11The 15%interest (later modified by the CA to be 12%) was computed from November 15, 1999the datestipulated in the Joint Affidavit of Undertaking for the payment of the value of Gruspes car. In theabsence of a finding by the lower courts that Gruspe made a demand prior to the filing of thecomplaint, the interest cannot be computed from November 15, 1999 because until a demand hasbeen made, Cruz and Leonardo could not be said to be in default.12"In order that the debtor may be indefault, it is necessary that the following requisites be present: (1) that the obligation be demandableand already liquidated; (2) that the debtor delays performance; and (3) that the creditor requires theperformance judicially and extrajudicially."13Default generally begins from the moment the creditor

demands the performance of the obligation. In this case, demand could be considered to have beenmade upon the filing of the complaint on November 19, 1999, and it is only from this date that theinterest should be computed.

Although the CA upheld the Joint Affidavit of Undertaking, we note that it imposed interest rate on a perannum basis, instead of the per month basis that was stated in the Joint Affidavit of Undertakingwithout explaining its reason for doing so.14Neither party, however, questioned the change.Nonetheless, the Court affirms the change in the interest rate from 12% per month to 12% per annum,as we find the interest rate agreed upon in the Joint Affidavit of Undertaking excessive.15

WHEREFORE, we AFFIRM the decision dated July 30, 2009 and the resolution dated February 19,2010 of the Court of Appeals in CA-G.R. CV No. 86083, subject to the Modification that the twelvepercent (12%) per annum interest imposed on the amount due shall accrue only from November 19,1999, when judicial demand was made.

SO ORDERED.

4. ACE Foods, Inc. vs. Micro Pacific

G.R. No. 200602 December 11, 2013

ACE FOODS, INC.,Petitioner,vs.MICRO PACIFIC TECHNOLOGIES CO., LTD.1,Respondent.

D E C I S I O N

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari2are the Decision3dated October 21, 2011 andResolution4dated February 8, 2012 of the Court of Appeals (CA) in CA-G.R. CV No. 89426 whichreversed and set aside the Decision5dated February 28, 2007 of the Regional Trial Court of Makati,Branch 148 (RTC) in Civil Case No. 02-1248, holding petitioner ACE Foods, Inc. (ACE Foods) liable torespondent Micro Pacific Technologies Co., Ltd. (MTCL) for the payment of Cisco Routers and FrameRelay Products (subject products) amounting toP646,464.00 pursuant to a perfected contract of sale.

The Facts

ACE Foods is a domestic corporation engaged in the trading and distribution of consumer goods inwholesale and retail bases,6while MTCL is one engaged in the supply of computer hardware andequipment.7

On September 26, 2001, MTCL sent a letter-proposal8for the delivery and sale of the subject productsto be installed at various offices of ACE Foods. Aside from the itemization of the products offered forsale, the said proposal further provides for the following terms, viz.:9

TERMS : Thirty (30) days upon delivery

VALIDITY : Prices are based on current dollar rate and subject to changes without prior notice.

DELIVERY : Immediate delivery for items on stock, otherwise thirty (30) to forty-five days upon receiptof [Purchase Order]

WARRANTY : One (1) year on parts and services. Accessories not included in warranty.

On October 29, 2001, ACE Foods accepted MTCLs proposal and accordingly issued Purchase OrderNo. 10002310(Purchase Order) for the subject products amounting to P646,464.00 (purchase price).Thereafter, or on March 4, 2002, MTCL delivered the said products to ACE Foods as reflected inInvoice No. 773311(Invoice Receipt). The fine print of the invoice states, inter alia, that "[t]itle to soldproperty is reserved in MICROPACIFIC TECHNOLOGIES CO., LTD. until full compliance of the termsand conditions of above and payment of the price"12(title reservation stipulation). After delivery, thesubject products were then installed and configured inACE Foodss premises. MTCLs demandsagainst ACE Foods to pay the purchase price, however, remained unheeded.13Instead of paying thepurchase price, ACE Foods sent MTCL a Letter14dated September 19, 2002, stating that it "ha[s] beenreturning the [subject products] to [MTCL] thru [its] sales representative Mr. Mark Anteola who has

agreed to pull out the said [products] but had failed to do so up to now."

Eventually, or on October 16, 2002, ACE Foods lodged a Complaint15against MTCL before the RTC,praying that the latter pull out from its premises the subject products since MTCL breached its "afterdelivery services" obligations to it, particularly, to: (a) install and configure the subject products; (b)submit a cost benefit study to justify the purchase of the subject products; and (c) train ACE Foodsstechnicians on how to use and maintain the subject products.16ACE Foods likewise claimed that thesubject products MTCL delivered are defective and not working.17

For its part, MTCL, in its Answer with Counterclaim,18maintained that it had duly complied with itsobligations to ACE Foods and that the subject products were in good working condition when theywere delivered, installed and configured in ACE Foodss premises. Thereafter, MTCL even conducteda training course for ACE Foodss representatives/employees; MTCL, however, alleged that there wasactually no agreement as to the purported "after delivery services." Further, MTCL posited that ACEFoods refused and failed to pay the purchase price for the subject products despite the latters use of

the same for a period of nine (9) months. As such, MTCL prayed that ACE Foods be compelled to paythe purchase price, as well as damages related to t he transaction.19
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7/17

The RTC Ruling

On February 28, 2007, the RTC rendered a Decision,20directing MTCL to remove the subject productsfrom ACE Foodss premises and pay actual damages and attorney fees in the amounts ofP200,000.00and P100,000.00, respectively.21

At the outset, it observed that the agreement between ACE Foods and MTCL is in the nature of acontract to sell. Its conclusion was based on the fine print of the Invoice Receipt which expresslyindicated that "title to sold property is reserved in MICROPACIFIC TECHNOLOGIES CO., LTD. untilfull compliance of the terms and conditions of above and payment of the price," noting further that in a

contract to sell, the prospective seller explicitly reserves the transfer of title to the prospective buyer,and said transfer is conditioned upon the full payment of the purchase price.22Thus, notwithstandingthe execution of the Purchase Order and the delivery and installation of the subject products at theoffices of ACE Foods, by express stipulation stated in the Invoice Receipt issued by MTCL and signedby ACE Foods, i.e., the title reservation stipulation, it is still the former who holds title to the productsuntil full payment of the purchase price therefor. In this relation, it noted that the full payment of theprice is a positive suspensive condition, the non-payment of which prevents the obligation to sell on thepart of the seller/vendor from materializing at all.23Since title remained with MTCL, the RTC thereforedirected it to withdraw the subject products from ACE Foodss premises. Also, in view of the foregoing,the RTC found it unnecessary to delve into the allegations of breach since the non-happening of theaforesaid suspensive condition ipso jure prevented the obligation to sell from arising.24

Dissatisfied, MTCL elevated the matter on appeal.25

The CA Ruling

In a Decision26dated October 21, 2011, the CA reversed and set aside the RTCs ruling, ordering ACEFoods to pay MTCL the amount of P646,464.00, plus legal interest at the rate of 6% per annum to becomputed from April 4, 2002, and attorneys fees amounting toP50,000.00.27

It found that the agreement between the parties is in the nature of a contract of sale, observing that thesaid contract had been perfected from the time ACE Foods sent the Purchase Order to MTCL which, inturn, delivered the subject products covered by the Invoice Receipt and subsequently installed andconfigured them in ACE Foodss premises.28Thus, considering that MTCL had already complied withits obligation, ACE Foodss corresponding obligation arose and was then duty bound to pay the agreedpurchase price within thirty (30) days from March 5, 2002.29In this light, the CA concluded that it waserroneous for ACE Foods not to pay the purchase price therefor, despite its receipt of the subjectproducts, because its refusal to pay disregards the very essence of reciprocity in a contract ofsale.30The CA also dismissed ACE Foodss claim regarding MTCLs failure to perform its "afterdelivery services" obligations since the letter-proposal, Purchase Order and Invoice Receipt do not

reflect any agreement to that effect.31

Aggrieved, ACE Foods moved for reconsideration which was, however, denied in a Resolution32datedFebruary 8, 2012, hence, this petition.

The Issue Before the Court

The essential issue in this case is whether ACE Foods should pay MTCL the purchase price for thesubject products.

The Courts Ruling

The petition lacks merit.

A contract is what the law defines it to be, taking into consideration its essential elements, and not whatthe contracting parties call it.33The real nature of a contract may be determined from the express termsof the written agreement and from the contemporaneous and subsequent acts of the contractingparties. However, in the construction or interpretation of an instrument, the intention of the parties isprimordial and is to be pursued. The denomination or title given by the parties in their contract is notconclusive of the nature of its contents.34

The very essence of a contract of sale is the transfer of ownership in exchange for a price paid orpromised.35This may be gleaned from Article 1458 of the Civil Code which defines a contract of saleas follows:

Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer theownership and to deliver a determinate thing, and the other to pay therefor a price certain in moneyor its equivalent.

A contract of sale may be absolute or conditional. (Emphasis supplied)

Corollary thereto, a contract of sale is classified as a consensual contract, which means that the saleis perfected by mere consent. No particular form is required for its validity. Upon perfection of thecontract, the parties may reciprocally demand performance, i.e., the vendee may compel transfer ofownership of the object of the sale, and the vendor may require the vendee to pay the thing sold.36

In contrast, a contract to sell is defined as a bilateral contract whereby the prospective seller, whileexpressly reserving the ownership of the property despite delivery thereof to the prospective buyer,binds himself to sell the property exclusively to the prospective buyer upon fulfillment of the conditionagreed upon, i.e., the full payment of the purchase price. A contract to sell may not even be consideredas a conditional contract of sale where the seller may likewise reserve title to the property subject ofthe sale until the fulfillment of a suspensive condition, because in a conditional contract of sale, the firstelement of consent is present, although it is conditioned upon the happening of a contingent eventwhich may or may not occur.37

In this case, the Court concurs with the CA that the parties have agreed to a contract of sale and not toa contract to sell as adjudged by the RTC. Bearing in mind its consensual nature, a contract of salehad been perfected at the precise moment ACE Foods, as evinced by its act of sending MTCL thePurchase Order, accepted the latters proposal to sell the subject products in consideration of thepurchase price of P646,464.00. From that point in time, t he reciprocal obligations of the partiesi.e.,on the one hand, of MTCL to deliver the said products to ACE Foods, and, on the other hand, of ACEFoods to pay the purchase price therefor within thirty (30) days from deliveryalready arose andconsequently may be demanded. Article 1475 of the Civil Code makes this clear:

Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thingwhich is the object of the contract and upon the price.

From that moment, the parties may reciprocally demand performance, subject to the provisions of thelaw governing the form of contracts.

At this juncture, the Court must dispel the notion that the stipulation anent MTCLs reservation ofownership of the subject products as reflected in the Invoice Receipt, i.e., the title reservationstipulation, changed the complexion of the transaction from a contract of sale into a contract to sell.Records are bereft of any showing that t he said stipulation novated the contract of sale between theparties which, to repeat, already existed at the precise moment ACE Foods accepted MTCLsproposal. To be sure, novation, in its broad concept, may either be extinctive or modificatory. It isextinctive when an old obligation is terminated by the creation of a new obligation that takes the placeof the former; it is merely modificatory when the old obligation subsists to the extent it remains

compatible with the amendatory agreement. In either case, however, novation is never presumed, andthe animus novandi, whether totally or partially, must appear by express agreement of the parties, orby their acts that are too clear and unequivocal to be mistaken.38
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8/17

In the present case, it has not been shown that the title reservation stipulation appearing in the InvoiceReceipt had been included or had subsequently modified or superseded the original agreement of theparties. The fact that the Invoice Receipt was signed by a representative of ACE Foods does not, byand of itself, prove animus novandi since: (a) it was not shown that the signatory was authorized byACE Foods (the actual party to the transaction) to novate the original agreement; (b) the signature onlyproves that the Invoice Receipt was received by a representative of ACE Foods to show the fact ofdelivery; and (c) as matter of judicial notice, invoices are generally issued at the consummation stageof the contract and not its perfection, and have been even treated as documents which are notactionableper se, although they may prove sufficient delivery. 39Thus, absent any clear indication thatthe title reservation stipulation was actually agreed upon, the Court must deem the same to be a mereunilateral imposition on the part of MTCL which has no effect on the nature of the parties originalagreement as a contract of sale. Perforce, the obligations arising thereto, among others, ACE Foodssobligationto pay the purchase price as well as to accept the delivery of the goods,40remainenforceable and subsisting.1wphi1

As a final point, it may not be amiss to state that the return of the subject products pursuant to arescissory action41is neither warranted by ACE Foodss claims of breach either with respect toMTCLs breach of its purported "after delivery services" obligations or the defective condition of theproducts - since such claims were not adequately proven in this case. The rule is clear: each partymust prove his own affirmative allegation; one who asserts the affirmative of the issue has the burdenof presenting at the trial such amount of evidence required by law to obtain a favorable judgment,which in civil cases, is by preponderance of evidence. 42This, however, ACE Foods failed to observeas regards its allegations of breach. Hence, the same cannot be sustained.

WHEREFORE, the petition is DENIED.Accordingly, the Decision dated October 21, 2011 andResolution dated February 8, 2012 of the Court of Appeals in CA-G.R. CV No. 89426 are

hereby AFFIRMED.

SO ORDERED.

5. Locsin II vs. Mekeni Food Corporation

G.R. NO. 192105 December 9, 2013

ANTONIO LOCSIN, II,Petitioner,vs.MEKENI FOOD CORPORATION,Respondent.

D E C I S I O N

DEL CASTILLO, J. :

In the absence of specific terms and conditions governing a car plan agreement between the employerand employe former may not retain the installment payments made by the latter on the car plan andtreat them as rents for the use of the service vehicle, in the event that the employee ceases hisemployment and is unable to complete the installment payments on the vehicle. The underlying reasonis that the service vehicle was precisely used in the former' s business; any personal benefit obtainedby the employee from its use is merely incidental. This Petition for Review on Certiorari1assails theJanuary 27, 2010 Decision2of the Court of Appeals (CA) in CA-G.R. SP No. 109550, as well as itsApril 23, 2010 Resolution3denying petitioners Motion for Partial Reconsideration.4

Factual Antecedents

In February 2004, respondent Mekeni Food Corporation(Mekeni)a Philippine company engaged infood manufacturing and meat processingoffered petitioner Antonio Locsin II the position of Regional

Sales Manager to over see Mekenis National Capital Region Supermarket/Food Service and SouthLuzon operations. In addition to a compensation and benefit package, Mekeni offered petitioner a carplan, under which one-half of the cost of the vehicle is to be paid by the company and the other half tobe deducted from petitioners salary. Mekenis offer was contained in an Offer Sheet5which waspresented to petitioner.

Petitioner began his stint as Mekeni Regional Sales Manager on March 17, 2004. To be able toeffectively cover his appointed sales territory, Mekeni furnished petitioner with a used Honda Civic carvalued at P280,000.00, which used to be the service vehicle of petitioners immediate supervisor.Petitioner paid for his 50% share through salary deductions of P5,000.00 each month.

Subsequently, Locsin resigned effective February 25, 2006. By then, a total of P112,500.00 had beendeducted from his monthly salary and applied as part of the employees share in the car plan. Mekenisupposedly put in an equivalent amount as its share under the car plan. In his resignation letter,petitioner made an offer to purchase his service vehicle by paying the outstanding balance thereon.The parties negotiated, but could not agree on the terms of the proposed purchase. Petitioner thusreturned the vehicle to Mekeni on May 2, 2006.

Petitioner made personal and written follow-ups regarding his unpaid salaries, commissions, benefits,and offer to purchase his service vehicle. Mekeni replied that the company car plan benefit applied onlyto employees who have been with the company for five years; for this rea

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