Case # 4 corresponding renewal premium amounting to P15,024.

54 was paid
EJERCITO v ORIENTAL ASSURANCE CORP by the insured corporation under Official Receipt No. 100262.
GR No 192099 | July 8, 2015 | 1st Division FFV Travel & Tours, Inc. has been declared in default for failure to
Sereno, CJ | Consensuality of Contracts pay its obligations amounting to P5,484,086.97 and USD 18,760.98
PETTIONER: PAULINO M. EJERCITO, JESSIE M. EJERCITO and as of 31 July 2000. Consequently, IATA demanded payment of the
JOHNNY D. CHANG bond, and respondent heeded the demand on 28 November 2000 as
RESPONDENT: ORIENTAL ASSURANCE CORPORATION evidenced by China Bank Check No. 104949. IATA executed a
Release of Claim on 29 November 2000 acknowledging payment of
Nature of the action: Petition for Review on Certiorari the surety bond.

DOCTRINE: Respondent sent demand letters to petitioners and Somes for

the Deed of Indemnity is a contract of adhesion, the Court has reimbursement of the P3 million pursuant to the indemnity
consistently held that contracts of adhesion are not invalid per se and agreement. For their failure to reimburse respondent, the latter filed a
that their binding effects have been upheld on numerous occasions. collection suit.
The pretension that petitioners did not consent to the renewal of the
bond is belied by the fact that the terms of the contract which they RTC RULING: dismissed the complaint against petitioners for lack of
voluntarily entered into contained a clause granting authority to the merit and pronouncing Somes liable to pay the amount of P3 million
Company to grant or consent to the renewal of the bond. Having and interest per annum at the rate of 12% of the principal obligation
entered into the contract with full knowledge of its terms and from the date the complaint was filed up to the date the obligation
conditions, petitioners are estopped from asserting that they did so would have been fully paid.
under the ignorance of the legal effect of the contract or the
undertaking. The RTC found that there was no written agreement to show the
intention of petitioners to renew the Deed of Indemnity. The absence
FACTS: thereof was evidenced by the nonappearance of any signature on
May 10 1999: respondent Oriental Assurance Corporation, through the Renewal Notice, which was not signed by Somes. However, she
its Executive Vice President Luz N. Cotoco issued a Surety Bond in was held liable to pay the surety value of the cost of tickets as she
favor of FFV Travel & Tours, Inc. (Company). The bond was had paid the premium for the renewal of the Surety Bond and used
intended to guarantee the Company's payment of airline tickets the renewed bond by submitting it to IATA.
purchased on credit from participating members of International Air
Transport Association (IATA) to the extent of P3 million. CA RULING: reversed the finding of the RTC and ruled that
petitioners could not escape liability, as they had authorized
On the same day, petitioners and Merissa C. Somes (Somes) respondent to grant any renewals or extensions pursuant to the
executed a Deed of Indemnity in favor of respondent. The Surety indemnity agreement. The Deed of Indemnity contained a stipulation
Bond was effective for one year from its issuance until 10 May 2000. that the signatories (petitioners) were authorizing the Company
It was renewed for another year, from 10 May 2000 to 10 May 2001, (respondent) to grant or consent to the grant of any extension,
as shown in Bond Endorsement No. dated 17 April 2000. The continuation, increase, modification, change or alteration, and/or
renewal of the original bond. Petitioners voluntarily signed the
agreement and, are educated persons (Paulino, being a lawyer), so INCONTESTABILITY OF PAYMENTS MADE BY THE COMPANY:
they could not have misunderstood the legal effects of the —
undertaking they had signed. Any payment or disbursement made by the COMPANY on account
of the above-mentioned Bond, its renewals, extensions,
ISSUE: W/N the Honorable Court of Appeals erred in ruling modifications or substitutions either in the belief that the Company
that petitioners are liable to indemnify the respondent under the deed was obligated to make such payment or in the belief that said
of indemnity considering that petitioners did not give their consent to payment was necessary in
be bound thereby beyond the one (1) year effectivity period of the order to avoid greater losses or obligation for which the company
original surety bond? might be liable by virtue of the terms of the above-mentioned Bond,
its renewals, extensions, modifications or substitutions shall be final
RULING: and will not be disputed by the undersigned who jointly and
severally bind themselves to indemnify the COMPANY of any
We find no merit in the Petition. and all such payments as stated in the preceding clauses.
RENEWALS, ALTERATIONS AND SUBSTITUTIONS: — The
The contract of indemnity is the law between the parties. It is a undersigned hereby empower and authorize the Company to
cardinal rule in the interpretation of a contract that if its terms are grant or consent to the granting of, any extension, continuation,
clear and leave no doubt on the intention of the contracting parties, increase, modifications, change, alteration and/or renewal of the
the literal meaning of its stipulation shall control. The CA aptly found original bond herein referred to, and to execute or consent to the
provisions in the contract that could not exonerate petitioners from execution of any substitution for said bond with the same or different
their liability. conditions and parties, and the undersigned hereby hold themselves
jointly and severally liable to the Company for the original bond
The Deed of Indemnity contains the following stipulations: hereinabove mentioned or for any extension, continuation, increase,
modification, change, alteration, renewal or substitution thereof until
MATURITY OF OUR OBLIGATIONS AS CONTRACTED the full amount including principal interests, premiums, costs
HEREWITH: — and other expenses due to the Company thereunder is fully paid
The said indemnities will be paid to the COMPANY as soon as up.
demand is received from the Creditor, or as soon as it becomes
liable to make payment of any sum under the terms of the Clearly, as far as respondent is concerned, petitioners have
abovementioned Bond, its renewals, extension, modifications or expressly bound themselves to the contract, which provides for the
substitutions, whether the said sum or sums or part thereof, have terms granting authority to the Company to renew the original bond.
been actually paid or not. We authorize the COMPANY to accept in The terms of the contract are clear, explicit and unequivocal.
any case and at its entire discretion, from any of us, payment on Therefore, the subsequent acts of the Company, through Somes,
account of the pending obligation, and to grant extensions to any of that led to the renewal of the surety bond are binding on petitioners
us, to liquidate said obligations, without necessity of previous as well.
knowledge or consent from the obligors.
xxx xxx xxx
The intention of Somes to renew the bond cannot be denied, as she
paid the renewal premium and even submitted the renewed bond to
IATA.

It is true that on some occasions, the Court has struck down such
contract as void when the weaker party is imposed upon in dealing
with the dominant party and is reduced to the alternative of accepting
the contract or leaving it, completely deprived of the opportunity to
bargain on equal footing. This reasoning cannot be used in the
instant case. One of the petitioners, Paulino M. Ejercito, is a lawyer
who cannot feign ignorance of the legal effect of his undertaking.
Petitioners could have easily inserted a remark in the clause granting
authority to the Company to renew the original bond, if the renewal
thereof was not their intention.

The rule that ignorance of the contents of an instrument does not

ordinarily affect the liability of the one who signs it may also be
applied to this Indemnity Agreement. And the mistake of petitioners
as to the legal effect of their obligation is ordinarily no reason for
relieving them of liability.

WHEREFORE, premises considered, the Petition is DENIED. The

Court of Appeals Decision dated 2 October 2009 and Resolution
dated 14 April 2010 in CA-G.R. CV No. 90828 are AFFIRMED.
Case # 13 the reason "Account Closed"; and, that respondents acted with fraud,
MBTC v REYNADO deceit, and abuse of confidence.
GR No 164538 | Aug. 9, 2010 | 1st Division In their defense, respondents denied responsibility in the anomalous
Del Castillo, J | Obligatory force of contracts transactions with Universal and claimed that they only intended to
PETITIONER: METROPOLITAN BANK and TRUST COMPANY help the Port Area branch solicit and increase its deposit accounts
RESPONDENT: ROGELIO REYNADO and JOSE C. ADRANDEA and daily transactions. Meanwhile, on February 26, 1997, petitioner
and Universal entered into a Debt Settlement Agreement whereby
Nature of the action: Petition for Review on Certiorari under Rule 45 the latter acknowledged its indebtedness to the former in the total
of the Rules of Court amount of P50,990,976.27 as of February 4, 1997 and undertook to
pay the same in bi-monthly amortizations in the sum of P300,000.00
DOCTRINE: starting January 15, 1997, covered by postdated checks, "plus
Novation not a mode of extinguishing criminal liability for estafa; balloon payment of the remaining principal balance and interest and
Criminal liability for estafa not affected by compromise or novation of other charges, if any, on December 31, 2001."
contract.
FINDINGS OF THE PROSECUTOR:
FACTS: Assistant City Prosecutor Winnie M. Edad (Prosecutor Edad) in her
Resolution dated July 10, 1997 found petitioner's evidence
January 31, 1997: petitioner MBTC charged respondents before the insufficient to hold respondents liable for estafa
Office of the City Prosecutor of Manila with the crime of estafa under
Article 315, paragraph 1 (b) of the Revised Penal Code. In the The execution of the Debt Settlement Agreement puts
affidavit of petitioner's audit officer, Antonio Ivan S. Aguirre, it was complainant bank in estoppel to argue that the liability is
alleged that the special audit conducted on the cash and lending criminal. Since the agreement was made even before the
operations of its Port Area branch uncovered anomalous/fraudulent filing of this case, the relations between the parties [have]
transactions perpetrated by respondents in connivance with client change[d], novation has set in and prevented the incipience
Universal Converter Philippines, Inc. (Universal); that respondents of any criminal liability on the part of respondents.
were the only voting members of the branch's credit committee
authorized to extend credit accommodation to clients up to Prosecutor Edad recommended the dismissal of the case:
P200,000.00; that through the so-called Bills Purchase Transaction, WHEREFORE, for insufficiency of evidence, it is respectfully
Universal, which has a paid-up capital of only P125,000.00 and recommended that the case be dismissed
actual maintaining balance of P5,000.00, was able to make
withdrawals totaling P81,652,000.00 against uncleared regional Petitioner appealed the Resolution of Prosecutor Edad to the
checks deposited in its account at petitioner's Port Area branch; that, Department of Justice (DOJ) by means of a Petition for Review
consequently, Universal was able to utilize petitioner's funds even
before the seven-day clearing period for regional checks expired; DOJ RULING: Dismissed the petition.
that Universal's withdrawals against uncleared regional check
deposits were without prior approval of petitioner's head office; that There is no estafa in the instant case as it was not clearly shown how
the uncleared checks were later dishonored by the drawee bank for respondents misappropriated the P53,873,500.00 which Universal
owed your client after its checks deposited with Metrobank were Novation not a mode of extinguishing criminal liability for
dishonored. estafa; Criminal liability for estafa not affected by compromise
Moreover, fraud is not present considering that the Executive or novation of contract.
Committee and the Credit Committee of Metrobank were duly
notified of these transactions which they approved. Further, no In a catena of cases, it was ruled that criminal liability for estafa is not
damage was caused to your client as it agreed [to] the settlement affected by a compromise or novation of contract. In Firaza v. People
[with] Universal. and Recuerdo v. People, this Court ruled that in a crime of estafa,
reimbursement or belated payment to the offended party of the
MR was filed by petitioner but was denied. CA filed a petition for money swindled by the accused does not extinguish the criminal
certiorari and mandamus. liability of the latter. We also held in People v. Moreno and in People
v. Ladera that "criminal liability for estafa is not affected by
CA’s RULING: compromise or novation of contract, for it is a public offense which
must be prosecuted and punished by the Government on its own
CA affirmed the twin resolutions of the Secretary of Justice. While motion even though complete reparation should have been made of
novation does not extinguish criminal liability, it may prevent the rise the damage suffered by the offended party." Similarly in the case of
of such liability as long as it occurs prior to the filing of the criminal Metropolitan Bank and Trust Company v. Tonda cited by petitioner,
information in court. Hence, according to the CA, "[j]ust as Universal we held that in a crime of estafa, reimbursement of or compromise
cannot be held responsible under the bills purchase transactions on as to the amount misappropriated, after the commission of the crime,
account of novation, private respondents, who acted in complicity affects only the civil liability of the offender, and not his criminal
with the former, cannot be made liable [for] the same transactions." liability.
The CA added that "[s]ince the dismissal of the complaint is founded
on legal ground, public respondents may not be compelled by Thus, the doctrine that evolved from the aforecited cases is that a
mandamus to file an information in court." compromise or settlement entered into after the commission of the
XXXXX crime does not extinguish accused's liability for estafa. Neither will
WHEREFORE, the petition is DENIED due course and, accordingly, the same bar the prosecution of said crime. Accordingly, in such a
DISMISSED. Consequently, the resolutions dated June 22, 1998 and situation, as in this case, the complaint for estafa against
March 1, 2000 of the Secretary of Justice are AFFIRMED. respondents should not be dismissed just because petitioner entered
into a Debt Settlement Agreement with Universal.
Hence, this instant petition before this court.
Unfortunately for petitioner, the above observation of the OSG was
ISSUE: W/N Novation and undertaking to pay the amount embezzled wittingly glossed over in the body of the assailed Decision of the CA.
do not extinguish criminal liability?
WHEREFORE, the petition is GRANTED. The assailed Decision of
RULING: the Court of Appeals in CA-G.R. SP No. 58548 promulgated on
October 21, 2002 affirming the Resolutions dated June 22, 1998 and
We find the petition highly meritorious. March 1, 2000 of the Secretary of Justice, and its Resolution dated
July 12, 2004 denying reconsideration thereon are hereby
REVERSED and SET ASIDE. The public prosecutor is ordered to file
the necessary information for estafa against the respondents.
Case # 22 Petitioner withdrew the vessel from Charterer’s service and held
MARIMPERIO v. CA said Charterer responsible for unpaid hirings and all legal claims.
GR No L-40234 | Dec. 14, 1987 | 1st Division The Charterer again remitted an amount corresponding to the 3rd
Paras, J Relativity of contracts 15-day hire of the vessel PAXOI, but this time the remittance was
PETITIONER: MARIMPERIO COMPAÑIA NAVIERA, S.A. refused. Union and Philin filed a complaint against the Unknown
RESPONDENT: COURT OF APPEALS and UNION IMPORT & Owners of the Vessel “SS Paxoi”, which was amended to identify the
EXPORT CORPORATION and PHILIN TRADERS CORPORATION defendant as Marimperio Compañia Naviera S.A for specific
performance with prayer for preliminary attachment. Petitioner
Nature of the action: Petition for certiorari under Section 1, Rule 65 alleged that he has no agreement or relationship whatsoever with the
of the Rules of Court respondents and are unknown to petitioner; that the charter party
entered into by petitioner with the Interocean Shipping Co. over the
DOCTRINE: vessel "SS PAXOI" does not authorize a sub-charter of said vessel to
According to Article 1311 of the Civil Code, a contract takes effect other parties; and that at any rate, any such sub-charter was without
between the parties who made it, and also their assigns and heirs, the knowledge or consent of the petitioner or its agent, and therefore,
except in cases where the rights and obligations arising from the has no effect and/or is not binding upon the petitioner. The CFI of
contract are not transmissible by their nature, or by stipulation or by Manila rendered its decision in favor of Marimperio. Union and Philin
provision of law. Since a contract may be violated only by the parties, filed a Motion for Reconsideration . Acting on the two motions for
thereto as against each other, in an action upon that contract, the reconsideration, the trial court reversed its stand in its amended
real parties in interest, either as plaintiff or as defendant, must be decision and ruled in favor of Union, Philin and Interocean. On
parties to said contract. Therefore, a party who has not taken part in Appeal, the Court of Appeals affirmed the amended decision of the
it cannot sue or be sued for performance or for cancellation thereof, lower court except the portion granting commission to Interocean,
unless he shows that he has a real interest affected thereby. It is not which it reversed thereby dismissing the complaint-in-intervention.
the sub-lessee, but the lessor, who can bring the action. In the Marimperio filed with the Supreme Court its petition for review on
instant case, it is clear that the sub-lessee or the private respondent certiorari.
as such cannot maintain the suit they filed with the trial court.
ISSUE: W/N respondents have the legal capacity to bring the suit for
FACTS: specific performance against petitioner based on the charter party?
Philin Traders Corporation and Union Import and Export Corporation NO
entered into a joint business venture for the purchase of copra from
Indonesia for sale in Europe. Philin and Union authorized Toeg to RULING:
negotiate for its charter but with instructions to keep confidential the It is undisputed that the charter party, basis of the complaint, was
fact that they are the real charterers. Interocean Shipping entered into between petitioner Marimperio Compañia Naviera, S.A.,
Corporation, was made to appear as charterer, although it merely through its duly authorized agent in London, the N & J Vlassopulos,
acted in behalf of the real charterers, private respondents herein Ltd., and the Interocean Shipping Company of Manila through the
entered into an agreement with the owner, Marimperio for the hire of latter's duly authorized broker, the Overseas Steamship Co., Inc.,
vessel “Paxoi” The Charterer was however twice in default in its represented by Matthews, Wrightson Burbridge Ltd., for the Charter
payments which were supposed to have been done in advance. of the "SS PAXOI". It is also alleged in both the Complaint and the
Amended Complaint that the Interocean Shipping Company sublet and preservation of the thing leased in the manner stipulated
the said vessel to respondent Union Import and Export Corporation between the lessor and the lessee."
which in turn sublet the same to respondent Philin Traders
Corporation. It is admitted by respondents that the charterer is the Article 1652 reads:
Interocean Shipping Company. Even paragraph 3 of the complaint- "The sub-lessee is subsidiarily liable to the lessor for any rent due
in-intervention alleges that Time Charter . . ." which precisely from the lessee. However, the sub-lessee shall not be responsible
provides for the subletting of the vessel by the charterer beyond the amount of rent due from him, in accordance with the
Furthermore, Article 652 of the Code of Commerce provides that the terms of the sub-lease, at the time of the extra-judicial demand by
charter party shall contain, among others, the name, surname, and the lessor.
domicile of the charterer, and if he states that he is acting by
commission, that of the person for whose account he makes the Payments of rent in advance by the sub-lessee shall be deemed not
contract. It is obvious from the disclosure made in the charter party to have been made, so far as the lessor's claim is concerned, unless
by the authorized broker, the Overseas Steamship Co., Inc., that the said payments were effected in virtue of the custom of the place."
real charterer is the Interocean Shipping Company (which sublet the
vessel to Union Import and Export Corporation which in turn sublet it It will be noted however that in said two Articles it is not the sub-
to Philin Traders Corporation). lessee, but the lessor, who can bring the action. In the instant case, it
is clear that the sub-lessee as such cannot maintain the suit they
In a sub-lease, there are two leases and two distinct judicial relations filed with the trial court.
although intimately connected and related to each other, unlike in a
case of assignment of lease, where the lessee transmits absolutely In the law of agency "with an undisclosed principal, the Civil Code in
his right, and his personality disappears; there only remains in the Article 1883 reads:
juridical relation two persons, the lessor and the assignee who is
converted into a lessee. In other words, in a contract of sub-lease, "If an agent acts in his own name, the principal has no right of action
the personality of the lessee does not disappear; he does not against the persons with whom the agent has contracted; neither
transmit absolutely his rights and obligations to the sub-lessee; and have such persons against the principal.
the sublessee generally does not have any direct action against the
owner of the premises as lessor, to require the compliance of the In such case the agent is the one directly bound in favor of the
obligations contracted with the plaintiff as lessee, or vice versa. person with whom he has contracted, as if the transaction were his
own, except when the contract involves things belonging to the
However, there are at least two instances in the Civil Code which principal.
allow the lessor to bring an action directly (accion directa) against the
sub-lessee (use and preservation of the premises under Art. 1651, The provisions of this article shall be understood to be without
and rentals under Article 1652). prejudice to the actions between the principal and agent."

Art. 1651 reads: While in the instant case, the true charterers of the vessel were the
"Without prejudice to his obligation toward the sub-lessor, the private respondents herein and they chartered the vessel through an
sublessee is bound to the lessor for all acts which refer to the use intermediary which upon instructions from them did no t disclose their
names. Article 1883 cannot help the private respondents, because
although they were the actual principals in the charter of the vessel,
the law does not allow them to bring any action against the adverse
party and vice-versa.

PREMISES CONSIDERED, (1) the decision of the Court of Appeals

affirming the amended decision of the Court of First Instance of
Manila, Branch VIII, is hereby REVERSED and SET ASIDE except
for that portion of the decision dismissing the complaint-in-
intervention; and (2) the original decision of the trial court is hereby
REINSTATED.