Case Digest Compendium

Constitutional Law.............................................................................................................. 2 Criminal Law .................................................................................................................... 23 PERSONS ......................................................................................................................... 34 Legal Ethics ...................................................................................................................... 91 Mercantile Law ................................................................................................................. 99 Labor Law....................................................................................................................... 117 Remedial Law ................................................................................................................. 127 Tax Law .......................................................................................................................... 143 1

Constitutional Law

UNILAB, INC. vs. ERNESTO ISIP and/or SHALIMAR PHILIPPINES G.R. No. 163858. June 28, 2005 Facts: UNILAB hired a private investigator to investigate a place purported to be manufacturing fake UNILAB products, especially Revicon multivitamins. The agent took some photographs where the clandestine manufacturing operation was taking place. UNILAB then sought the help of the NBI, which thereafter filed an application for the issuance of search warrant in the RTC of Manila. After finding probable cause, the court issued a search warrant directing the police to seize finished or unfinished products of UNILAB, particularly REVICON multivitamins. No fake Revicon was however found; instead, sealed boxes where seized, which, when opened contained 60 ml bottles of Disudrin and 200mg tablets of Inoflox, both were brands used by UNILAB. NBI prayed that some of the sized items be turned over to the custody of the Bureau of Food and Drugs (BFAD) for examination. The court granted the motion. The respondents then filed a motion to quash the search warrant or to suppress evidence, alleging that the seized items are considered to be fruit of a poisonous tree, and therefore inadmissible for any purpose in any proceeding, which the petitioners opposed alleging that the boxes of Disudrin and Inoflox were seized under the plain view doctrine. The court, however, granted the motion of the respondents. Issue: Whether or not the seizure of the sealed boxes which, when opened, contained Disudrin syrup and Inoflox, were valid under the plain view doctrine. Held: It is true that things not described in the warrant may be seized under the plain view doctrine. However, seized things not described in the warrant cannot be presumed as plain view. The State must adduce evidence to prove that the elements for the doctrine to apply are present, namely: (a) the executing law enforcement officer has a prior justification for an initial intrusion or otherwise properly in a position from which he can view a particular order; (b) the officer must discover incriminating evidence inadvertently; and (c) it must be immediately apparent to the police that the items they observe may be evidence of a crime, contraband, or otherwise subject to seizure It was thus incumbent on the NBI and the petitioner to prove that the items were seized on plain view. It is not enough that the sealed boxes were in the plain view of the NBI agents. However, the NBI failed to present any of officers who were present when the warrant was enforced to prove that the the sealed boxes was discovered inadvertently, and that such boxes and their contents were incriminating and immediately apparent. It must be stressed that only the enforcing officers had personal knowledge whether the sealed boxes and their contents thereof were incriminating and that they were immediately apparent. There is even no showing that the NBI agents knew the contents of the sealed boxes before they were opened. In sum then, the petitioner and the NBI

failed to prove that the plain view doctrine applies to the seized items. FREEDOM OF EXPRESSION PEOPLES JOURNAL et. al. vs. FRANCIS THOENEN G.R. No. 143372 December 13, 2005 Facts: On 30 September 1990, a news item appeared in the Peoples Journal claiming that a certain Francis Thoenen, a Swiss national who allegedly shoots wayward neighbors pets that he finds in his domain. It also claimed that BF Homes residents, in a letter through lawyer Atty. Efren Angara, requested for the deportation of Thoenen to prevent the recurrence of such incident in the future. Thoenen claimed that the article destroyed the respect and admiration he enjoyed in the community. He is seeking for damages. The petitioners admitted publication of the news item, ostensibly out of a social and moral duty to inform the public on matters of general interest, promote the public good and protect the moral public (sic) of the people, and that the story was published in good faith and without malice. Issue: Whether or not the news report fall under privileged communication and therefore protected by the constitutional provision on freedom of speech. Held: The right of free speech is not absolute. Libel is not protected speech. In the instant case, even if we assume that the letter written by Atty. Angara is privileged communication, it lost its character when the matter was published in the newspaper and circulated among the general population, especially since the individual alleged to be defamed is neither a public official nor a public figure. Moreover, the news item contained falsehoods on two levels. First, the BF Homes residents did not ask for the deportation of Thoenen, more so because the letter of the Atty. Anagara was a mere request for verification of Thoenens status as a foreign resident. The article is also untrue because the events she reported never happened. Worse, the main source of information, Atty. Efren Angara, apparently either does not exist, or is not a lawyer. There is no constitutional value in false statements of fact. Neither the intentional lie nor the careless error materially advances societys interest in uninhibited, robust, and wideopen debate. Calculated falsehood falls into that class of utterances which are no essential part of any exposition of ideas, and are of such slight social value as a step to truth that any benefit that may be derived from them is clearly outweighed by the social interest in order and morality The knowingly false statement and the false statement made with reckless disregard of the truth, do not enjoy constitutional protection CUSTOMS SEARCH TOMAS SALVADOR vs. THE PEOPLE OF THE PHILIPPINES G.R. No. 146706. July 15, 2005 Facts: On June 3, 1994, a Special Mission Group from the PAF Special Operations

Squadron conducted routine surveillance operations at the Manila Domestic Airport to check on reports of alleged drug trafficking and smuggling being facilitated by certain PAL personnel. They were ordered to keep close watch on the second airplane, an Airbus 300 parked inside the Domestic Airport terminal. At around 11:30 that same evening, three (3) persons had boarded the Airbus 300. The team did not move, but continued its surveillance. At 12:15 a.m. the team leader reported that the three (3) persons who earlier boarded the Airbus 300 had disembarked with their abdominal areas bulging and then boarded an airplane tow truck with its lights off. At the Lima Gate of the Domestic Airport, the team blocked and stopped the tow truck. The team leader identified himself and asked the four (4) persons on board to alight, and approached Aurelio Mandin whose uniform was partly open, showing a girdle. Then, a package wrapped in brown packaging tape fell. Suspecting that the package contained smuggled items, the leader yelled to his teammates, Positive! Thereupon, the rest of the team surrounded petitioner and his two co-accused who surrendered without a fight. The team searched their bodies and found that the three were wearing girdles beneath their uniforms, all containing packets wrapped in packaging tape. Mandin yielded five (5) packets, while petitioner and Santos had four (4) each. The team confiscated the packets and brought all the accused to the PAFSECOM Office. Issue: Whether or not the seized items are admissible in evidence. Held: Our jurisprudence provides for privileged areas where searches and seizures may lawfully be effected sans a search warrant. These recognized exceptions include: (1) search of moving vehicles; (2) search in plain view; (3) customs searches; (4) waiver or consented searches; (5) stop-and-frisk situations; and (6) search incidental to a lawful arrest. Here, it should be noted that during the incident in question, the special mission of the PAF operatives was to conduct a surveillance operation to verify reports of drug trafficking and smuggling by certain PAL personnel in the vicinity of the airport. In other words, the search made by the PAF team on petitioner and his co-accused was in the nature of a customs search. As such, the team properly effected the search and seizure without a search warrant since it exercised police authority under the customs law. Law enforcers who are tasked to effect the enforcement of the customs and tariff laws are authorized to search and seize, without a search warrant, any article, cargo or other movable property when there is reasonable cause to suspect that the said items have been introduced into the Philippines in violation of the tariff and customs law. They may likewise conduct a warrantless search of any vehicle or person suspected of holding or conveying the said articles, as in the case at bar. DOUBLE JEOPARDY MARCELO LASOY and FELIX BANISA, vs. HON. MONINA A. ZENAROSA G.R. No. 129472. April 12, 2005 Facts: On July 2, 1996 the accused were arrested fro possession and transport of marijuana leaves (in bricks). They were charged with the violation of the Dangerous

Drugs Act of 1972, with the information containing the fact that they were in possession of and were transporting, selling or offering to sell 42.410 grams of dried marijuana fruiting tops. The accused was then arraigned, pleaded guilty and convicted. Subsequently they applied for probation. Thereafter the prosecutors office filed two motions to admit amended information (claiming that the marijuana recovered was 42.410 kilos, not grams) and to set aside the arraignment of the accused; the accused then moved to quash the motion raising the constitutional protection against double jeopardy. Issue: Whether or not double jeopardy attaches. Held: To invoke the defense of double jeopardy, the following requisites must be present: (1) a valid complaint or information; (2) the court has jurisdiction to try the case; (3) the accused has pleaded to the charge; and (4) he has been convicted or acquitted or the case against him dismissed or otherwise terminated without his express consent. An information is valid as long as it distinctly states the statutory designation of the offense and the acts or omissions constitutive thereof. In other words, if the offense is stated in such a way that a person of ordinary intelligence may immediately know what is meant, and the court can decide the matter according to law, the inevitable conclusion is that the information is valid. The inescapable conclusion, then, is that the first information is valid inasmuch as it sufficiently alleges the manner by which the crime was committed. Verily the purpose of the law, that is, to apprise the accused of the nature of the charge against them, is reasonably complied with. Moreover, an administrative order of the Supreme Court designated Regional Trial Courts to exclusively try and decide cases of violation of the Dangerous Drugs Act of 1972, as amended, regardless of the quantity of the drugs involved. (PP. vs. Velasco) Therefore, the requisites of double jeopardy being present, the defense attaches. EMINENT DOMAIN REPUBLIC, as represented by the NIA vs. CA and FRANCISCO DIAZ G.R. No. 147245. March 31, 2005 Facts: Manuel Diaz owned approximately 172 hectares of property devoted to the planting of palay. The property was located in La Fuente, Sta. Rosa, Nueva Ecija, and allegedly yielded between 132 to 200 cavans of palay per hectare every year. After Manuel Diazs death, his son, Franciso Diaz, was appointed administrator of the property. In 1972, the National Irrigation Administration bulldozed ten (10) hectares of the Property to build two irrigation canals. Although the canals when finished occupied only a portion of the 10 hectares, the entire area became prone to flooding two months out of every year because of the side-burrow method NIA used in the construction of the canals. NIA completed the canals without instituting expropriation proceedings or indemnifying the propertys owners. Respondent then sought compensation from NIA for the land affected by the canals, as well as for losses due to unrealized profits. In 1980, NIA belatedly offered to buy the portions of the Property occupied by the canals pursuant to NIAs expansion program. The 1980 deeds of sale were never implemented. Respondent did not receive any consideration pursuant to these deeds. On 20 August 1993,

respondent, as administrator of the Property, filed an action for damages and just compensation against NIA. NIA countered that respondents right to bring the action had prescribed in accordance with RA 3601, as amended by PD 552. NIA also argued that respondents failure to pursue the implementation of the 1980 deeds of sale amounted to laches. Issue: Whether or not prescription or laches bars the respondents right to just compensation. Held: The principle of laches finds no application in the present case. There is nothing inequitable in giving due course to respondents claim for compensation. Both equity and the law direct that a property owner should be compensated if his property is taken for public use. Eminent domain is the inherent power of a sovereign state to appropriate private property to particular uses to promote public welfare. No one questions NIAs authority to exercise the delegated power of eminent domain. However, the power of eminent domain is not limitless. NIA cannot exercise the power with wanton disregard for property rights. One basic limitation on the States power of eminent domain is the constitutional directive that, private property shall not be taken for public use without just compensation. The thirteen-year interval between the execution of the 1980 deeds of sale and the 1993 filing of the complaint does not bar the claim for compensation. This Court reiterated the long-standing rule that where private property is taken by the Government for public use without first acquiring title thereto either through expropriation or negotiated sale, the owners action to recover the land or the value thereof does not prescribe. BAIL JUDGE NAPOLEON INOTURAN, vs. JUDGE MANUEL Q. LIMSIACO, JR A.M. No. MTJ-01-1362. May 6, 2005 Facts: Mario Balucero was charged before the RTC of Makati Branch 133, the presiding judge of which is Napoleon Inoturan, with the violation of BP 22. Balucero, however, failed to appear during arraignment despite notice. Inoturan then issued a bench warrant against him. Balucero was subsequently arrested in Bacolod City, but was released upon posting of a property bail before the MCTC of Pulupundan, Negros Occidental, which order was signed by Judge Manuel Limsiaco, Jr. The arraignment of Balucero was subsequently set, but he failed to appear notwithstanding his receipt of notices. Inoturan then ordered that the property bond be cancelled and forfeited. He then ordered Ignacio Denila, the Clerk of Court of the MCTC to forward the property bond. Unable to comply with Inoturans order, Denila was cited in contempt and was detained. Denila was ordered released by Limisiaco. Upon investigation, the Office of Court Administrator found that Judge Limsiaco ordered the release of the some other accused although they did not post bail. Limsiaco was administratively charged for gross ignorance of the law and negligence in the performance of his duties. Issue: What are the requisites before an order for release can be given in cases of bail?

Held: Bail is the security given for the release of a person in custody of the law, furnished by him or a bondsman, conditioned upon his appearance before any court as required under the conditions herein after specified. It is thus clear that without bail, an accused under detention cannot be released. As found by the investigating Judges, accused Balucero did not post bail but still respondent Judge Limsiaco ordered his release. A person applying for bail should be in the custody of the law or otherwise deprived of liberty. Indeed, bail is unavailing with respect to an accused who has not voluntarily surrendered or has yet to be placed in legal custody. In this case, Limsiaco issued the Order for the release of accused Balucero on November 21, 1996 or fifteen (15) days before December 6, 1996, the day he was actually arrested. Moreover, Limsiaco acted without authority in approving Baluceros alleged application for bail. Section 17, Rule 114 of the Revised Rules of Criminal Procedure provides that if the accused is arrested in a province, city of municipality, other than where the case is pending, bail may be filed with any Regional Trial Court of said place, or if no judge thereof is available, with any metropolitan trial judge, municipal trial judge, or municipal circuit trial judge therein. Here, respondent should not have approved Baluceros application for bail. It is only one of the 14 Branches of the RTC in Bacolod City which has the authority to act thereon. POLICE POWER LUCENA GRAND CENTRAL TERMINAL, INC., petitioner, vs. JAC LINER, INC., respondent. G.R. No. 148339. February 23, 2005 Facts: The City of Lucena enacted an ordinance which provides, inter alia, that: all buses, mini-buses and out-of-town passenger jeepneys shall be prohibited from entering the city and are hereby directed to proceed to the common terminal, for picking-up and/or dropping of their passengers; and (b) all temporary terminals in the City of Lucena are hereby declared inoperable starting from the effectivity of this ordinance. It also provides that all jeepneys, mini-buses, and buses shall use the grand central terminal of the city. JAC Liner, Inc. assailed the city ordinance as unconstitutional on the ground that, inter alia, the same constituted an invalid exercise of police power, an undue taking of private property, and a violation of the constitutional prohibition against monopolies. Issue: Whether or not the ordinance satisfies the requisite of valid exercise of police power, i.e. lawful subject and lawful means. Held: The local government may be considered as having properly exercised its police power only if the following requisites are met: (1) the interests of the public generally, as distinguished from those of a particular class, require the interference of the State, and (2) the means employed are reasonably necessary for the attainment of the object sought to be accomplished and not unduly oppressive upon individuals. Otherwise stated, there must be a concurrence of a lawful subject and lawful method The questioned ordinances having been enacted with the objective of relieving traffic

congestion in the City of Lucena, they involve public interest warranting the interference of the State. The first requisite for the proper exercise of police power is thus present. This leaves for determination the issue of whether the means employed by the Lucena Sangguniang Panlungsod to attain its professed objective were reasonably necessary and not unduly oppressive upon individuals. The ordinances assailed herein are characterized by overbreadth. They go beyond what is reasonably necessary to solve the traffic problem. Additionally, since the compulsory use of the terminal operated by petitioner would subject the users thereof to fees, rentals and charges, such measure is unduly oppressive, as correctly found by the appellate court. What should have been done was to determine exactly where the problem lies and then to stop it right there. The true role of Constitutional Law is to effect an equilibrium between authority and liberty so that rights are exercised within the framework of the law and the laws are enacted with due deference to rights. It is its reasonableness, not its effectiveness, which bears upon its constitutionality. If the constitutionality of a law were measured by its effectiveness, then even tyrannical laws may be justified whenever they happen to be effective. ADMINISTRATIVE LAW COMMISSION OF SIMPLE NEGLIGENCE, VIOLATION OF REVENUE REGULATION NO. 4-93

BUREAU OF INTERNAL REVENUE, et al vs. LILIA B. ORGANO G.R. No. 14995, February 26, 2004

Facts: Respondent Lilia B. Organo is a revenue collection officer of the BIR, Revenue Region 7, Quezon City. On May 13, 1997, then BIR Commissioner Liwayway VinsonsChato filed with the BIR a formal administrative charge against petitioner for grave misconduct and dishonesty. Respondent filed a verified answer, in which she admitted that she had no specific authority allowing her to receive withholding tax returns and check payments. She alleged in her counter-affidavit that her duties as collection officer consisted merely of collecting delinquent accounts and performing other tasks that her supervisor would assign to her from time to time; and that her acceptance of the withholding tax returns and check payments for transmittal to BIR-authorized banks was a mere assistance extended to taxpayers, without any consideration. The administrative case against respondent was transferred to the Office of Ombudsman, which adopted the proceedings, evidence/exhibits presented at the administrative proceedings before the BIR. In due course, it rendered its decision finding respondent guilty of grave misconduct. Issue: Whether or not respondent is liable for grave misconduct. Held: The Court held that by accommodating and accepting withholding tax returns and

checks payments respondent disregarded as established BIR rule. Revenue Regulation No. 4-93 requires payments through the banks precisely to avoid, whenever possible, BIR employees direct receipt of tax payments. Yet, respondent was not deterred from making accommodations that circumvented this provision. To compound matters, her acts were essential ingredients paving the way for the commission of fraud against, and consequent damage to, the government. Her claimed ignorance thereof cannot erase her liability. Obviously, she disregarded the established practice and rules. In the face of her silence, the fact that the checks ended up in an unauthorized BIR account eloquently speaks, at the very least, of her gross negligence in taking care of collections that should not have passed through her hands in the first place. Because of her complicity in the transgression of the cited BIR regulation as well as her gross negligence, respondent is administratively liable for simple misconduct and is suspended for six months. POWER OF COA RODOLFO S. DE JESUS, ET AL. vs. COMMISSION ON AUDIT G.R. No. 149154, June 10, 2003 Facts: The Board of Directors (BOD) of the Catbalogan Water District granted to themselves RATA, rice allowance, productivity incentive, anniversary, and year-end bonus and cash gifts, as authorized by Resolution No. 313 of the Local Water Utilities Administration (LWUA). The COA disallowed and ordered the refund of these allowances as they are not allowed by P.D. No. 198, the Provincial Water Utilities Act of 1973. Issue: Whether COA is vested with authority to disallow release of allowance not authorized by law even if authorized by the LWUA. Held: Art. IX, Sec. 2 D of the Constitution mandates the COA to audit all the government agencies, including government-owned and controlled corporations (GOCC) with original charters. The COA is vested with authority to disallow illegal or irregular disbursements of government funds. A Water District is a GOCC with a special charter since it is created pursuant to special law, PD 198. The COA can disallow allowances not authorized by law, even if authorized by the LWUA. Considering that the disallowed allowances were received in good faith, without knowledge that payment had no legal basis, the allowances need not to be refunded. QUASI-LEGISLATIVE & QUASI-JUDICIAL POWERS; RULE ON EXHAUSTION OF ADMINISTRATIVE REMEDIES; DOCTRINE OF PRIMARY JURISDICTION;WHEN APPLICABLE

SMART COMMUNICATIONS, INC. ET AL. V. NATIONAL TELECOMMUNICATIONS COMMISSION (NTC) G.R. 151908, August 12, 2003

Facts: The NTC issued Billing Circular 13-6-2000 which promulgated rules and regulations on the billing of telecommunications services. Petitioners filed with the RTC a petition to declare the circular as unconstitutional. A motion to dismiss was filed by the NTC on the ground of petitioners to exhaust administrative remedies. The RTC denied the motion to dismiss but on certiorari, the CA reversed RTC. Held: 1. Administrative bodies had (a) quasi-legislative or rule-making powers and (b) quasi-judicial or administrative adjudicatory powers. Quasi-legislative or rule-making power is the power to make rules and regulations which results in delegated legislation that is within the confines of the granting statute and the doctrine of non-delegability and separability of powers. To be valid, such rules and regulations must conform to, and be consistent with, the provisions of enabling statute. Quasi-judicial or administrative adjudicatory power is the power to hear and determine questions of fact to which the legislative policy is to apply and to decide in accordance with the standards laid down by law itself in enforcing and administering the same law. In carrying out their quasi-judicial functions, the administrative officers or bodies are required to investigate facts or ascertain the existence of facts, hold hearings, weigh evidence, and draw conclusions from them for their official action and exercise of discretion in a judicial. 2. The determination of whether a specific rule or set of rules issued by an administrative body contravenes the law or the constitution is within the judicial power as defined by the Constitution which is the duty of the Courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there haw been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government. The NTC circular was issued pursuant to its quasi-legislative or rule-making power. Hence, the action must be filed directly with the regular courts without requiring exhaustion of administrative remedies. 3. Where the act of administrative agency was performed pursuant to its quasi-judicial function, exhaustion of administrative remedy is required, before going to court. 4. The doctrine of primary jurisdiction applies only where the administrative agency exercises its quasi-judicial or adjudicatory function. Thus, in cases involving specialized disputes, the same must be referred to an administrative agency of special competence pursuant to the doctrine of primary jurisdiction. This doctrine of primary jurisdiction applies where the claim requires the resolution of issues which, under a regulatory scheme, has been placed within the special competence of an administrative body. In such case, the judicial process is suspended pending referral of such issues to the administrative body for its view.

REPUBLIC ACT NO. 6770 ( THE OMBUDSMAN ACT OF 1998) PENALTIES WHICH ARE FINAL AND UNAPPEALABLE; RENATO HERRERA v. ELMER BOHOL G.R. No. 155320. February 5,2004

10

Facts: Renato F. Herrera, former Director III at DAR Central Office, approved the request for shift of item number of Plaridel Elmer J. Bohol, a Senior Agrarian Reform officer at the BARIE. The shift or item number from 577-1 of Fund 108 to 562-3 of Fund 101 resulted to Bohol ontaining his salary under Fund 101. When Bohol was informed that he could not draw his salary under such item anymore because his item was recalled and was given to another person, he charged Herrera before the Office of the Ombudsman, with Grave Misconduct and/or Inefficiency and Incompetence. The Ombudsman found Renato Herrera guilty of simple misconduct and was suspended for one month without pay. Such decision was contested by Herrera and he even appealed to the CA on the ground that he did not fail to take measures to correct respondents recall; but, such petition was just denied by the CA.A petition for review was raised to the SC stressing that one month suspension, as stated in the Ombudsman Act of 1998, is appealable considering that it is not among those enumerated as final and unappealable. Issue: Whether or not the provision in R.A. No. 6770, otherwise known as the Ombudsman Act of 1998, providing suspension of not more than one months salary is final and unappealable. Held: Sec. 27 of RA No. 6770 states that: any order, directive or decision imposing the penalty of public censure, reprimand, suspension of not more than one months salary shall be final and unappealable Salary suspension is an effect of work suspension following the no work, no pay principle. It will be the employee concerned who will be suspended and such suspension without pay,being final, and unappealable, is clearly expressed the law. RA No. 6770, therefore, is a legal and clear basis of denying the petitioners appeal. COMMAND RESPONSIBILITY;HEAD OF A DEPARTMENT OR A SUPERIOR OFFICER SHALL NOT BE CIVILLY LIABLE FOR THE WRONGFUL ACTS.OMISSION OF DUTY, NEGLIGENCE FOR MISFEASANCE OF HIS SUBORDINATE.UNLESS HE HAS ACTUALLY AUTHORIZE BY WRITTEN ORDER OF THE SPECIFIC ACT OR MISCONDUCT COMPLAINED OF ALBERTO V. REYES, ET AL. v. RURAL BANK OF SAN MIGUEL (BULACAN), INC.ET. AL,. G.R. No. 154499, February 27, 2004 Facts: In a letter dated May 19,1999, addressed to then BSP Governor Singson, RBSMI charge the petitioner with violation of RA No. 6713 ( code of Conduct and Ethical Standards for Public Officials and Employees). The Monetary Board (MB) of the BSP created an Ad Hoc Committee to investigate the matter. The ensuing investigation disclosed that sometime in September 1996, RBSMI, which had a history of major violations/exceptions dating back to 1995, underwent periodic examination by the BSP. The examination team headed by Principio noted serious 20 exceptions/violations and deficiencies of RBSMI. Through Resolution No. 96, the MB required RBSMI to submit within 15 days a written

11

explanation with respect to the findings of the examiner. It also directed the Department of Rural Banks DRB), to verify, monitor and report to the Deputy Governor, Supervision and Examination Sector (SES) on the findings noted, until the same shall have been corrected. Meanwhile on June 13,1997, the MB approved Resolution No. 724 ordering RBSMI to correct the major exceptions noted within 30 days from receipt of the advice, and to remit to the BSP the amount of P2,538,483.00 as fines and penalties for incurring deficiencies in reserves against deposit liabilities. More than a year after, however, the RBSMI asked for a reconsideration of MB Resolution No. 724 insofar as the imposition of fine amounting to P P2,538,483.00.On January 21, 1999, the MB adopted Resolution No. 71, authorizing the conditional reversal of sixty of the dispute on the findings on reserve deficiency. Subsequently, on April 7, 1999, the MB approved the interim reversal of the entire amount of the penalty pending the outcome of the study on the legal and factual basis for the imposition of the penalty. The above incidents, particularly the alleged brokering by Reyes and the petitioners unsupported recommendation to impose a penalty of P2,538,483.00 for legal reserve deficiency, prompted the respondent to file the letter-complaint charging the petitioners with unprofessionalism. In the Decision if March 14,2003, this Court found Deputy Governor Reyes and Director Domo-ong liable for violation of the standards of professionalism prescribed by RA 6713in that they used the distressed financial condition of respondent RBSMI as the subject of a case study in one of the BSP seminars and did the brokering of the sale of RBSMI. The Court modified the decision of the CA by reducing the penalty imposed from the a fine equivalent to six monthssalary to a fine of 2 months salary for Reyes and one month salary for Domo-ong. The court exonerated petitioner Proncipio of the Administrative charges. The exoneration is subject to RBSMIs Motion for Partial Reconsideration. Issue: Whether or not the Superior officer shall not be civilly liable for the wrongful acts, omissions of duty, negligence or misfeasance of his subordinate officer. Held: The immunity of public officers from liability for nonfeasance, negligence or omissions of duty of their official subordinate and even for the latters misfeasance or positive wrong rests, according to MECHEM, upon obvious considerations of public policy, the necessities of the public service and the perplexities and embarrassments of a contrary doctrine. These official subordinates are themselves public officers though of an inferior grade, and therefore directly liable in the cases in which any public officer is liable, for their own misdeeds or defaults. Under the Admin Code of 1987, which provides that head of a department or a superior officer shall not be civilly liable for the wrongful acts, omissions of duty, negligence, misfeasance of his subordinates, unless he has actually authorized by written order the specific act or misconduct complained of. ELECTION LAW

12

RONALD ALLAN POE a.k.a. FERNANDO POE, JR. VS. GLORIA MACAPAGALARROYO P.E.T. CASE No. 002. March 29, 2005 Facts: In the 2004 election, Gloria Macapagal Arroyo (GMA) was proclaimed the duly elected President of the Philippines. The second-placer in the elections, Fernando Poe, Jr. (FPJ), filed an election protest before the Electoral Tribunal. When the Protestant died in the course of his medical treatment, his widow, Mrs. Jesusa Sonora Poe a.k.a. Susan Roces filed a motion to intervene as a substitute for deceased protestant FPJ. She claims that there is an urgent need for her to continue and substitute for her late husband to ascertain the true and genuine will of the electorate in the interest of the Filipino people. The Protestee, GMA asserts that the widow of a deceased candidate is not the proper party to replace the deceased protestant since a public office is personal and not a property that passes on to the heirs. Protestee also contends that under the Rules of the Presidential Electoral Tribunal, only the registered candidates who obtained the 2nd and 3rd highest votes for the presidency may contest the election of the president. Issue: May the widow substitute/intervene for the protestant who died during the pendency of the latters protest case? Held: Only the registered candidate for President or for Vice-President of the Philippines who received the second or third highest number of votes may contest the election of the President or the Vice-President, as the case may be, by filing a verified petition with the Clerk of the Presidential Electoral Tribunal within thirty (30) days after the proclamation of the winner. An election protest is not purely personal and exclusive to the protestant or to the protestee, hence, substitution and intervention is allowed but only by a real party in interest. Note that Mrs. FPJ herself denies any claim to the office of President but rather stresses that it is with the paramount public interest in mind that she desires to pursue the process commenced by her late husband. However, nobility of intention is not the point of reference in determining whether a person may intervene in an election protest. In such intervention, the interest which allows a person to intervene in a suit must be in the matter of litigation and of such direct and immediate character that the intervenor will either gain or lose by the effect of the judgment. In this protest, Mrs. FPJ will not immediately and directly benefit from the outcome should it be determined that the declared president did not truly get the highest number of votes. INFORMATION TECHNOLOGY FOUNDATION OF THE PHILIPPINES, ET AL. VS. COMMISSION ON ELECTIONS, COMELEC CHAIRMAN BENJAMIN ABALOS, SR., ET AL. G.R. No. 159139. January 13, 2004 Facts: On June 7, 1995, Congress passed R.A. 8046 (An act authorizing the COMELEC to conduct a nationwide demonstration of a computerized election system and pilot-test it in the March 1996 elections in the Autonomous Region in Muslim Mindanao (ARMM) and for other purposes). On December 22, 1997, Congress enacted R.A. 8436 (An act

13

authorizing the COMELEC to use an automated election system in the May 11, 1998 national or local elections and in subsequent national and local electoral exercises, providing funds therefore and for other purposes). On October 29, 2002, COMELEC adopted its Resolution 02-0170 a modernization program for the 2004 elections. It resolved to conduct biddings for the three phases of its Automated Election System: namely, Phase I-Voter Registration and Validation System; Phase II-Automated Counting and Canvassing System; and Phase III-Electronic Transmissions. President Gloria Macapagal-Arroyo issued EO No. 172, which allocated the sum of P 2.5 billion to fund the AES for May 10, 2004 elections. She authorized the release of an additional P 500 million, upon the request of COMELEC. The COMELEC issued an Invitation to Apply for Eligibility and to Bid. There are 57 bidders who participated therein. The Bids and Awards Committee (BAC) found MPC and the Total Information Management Corporation (TIMC) eligible. Both were referred to Technical Working Group (TWG) and the Department of Science and Technology (DOST). However, the DOST said in its Report on the Evaluation of Technical Proposals on Phase II that both MPC and TIMC had obtained a number of failed marks in technical evaluation. Notwithstanding these failures, the COMELEC en banc issued Resolution No. 6074, awarding the project to MPC. Wherefore, petitioners Information Technology Foundation of the Philippines wrote a letter to the COMELEC chairman Benjamin Abalos, Sr. They protested the award of the contract to respondent MPC. However in a letter-reply, the COMELEC rejected the protest. Issue: Whether or not the COMELEC committed grave abuse of discretion in awarding the contract to MPC in violation of law and in disregard of its own bidding rules and procedure. Held: The Court has explained that COMELEC flagrantly violated the public policy on public biddings (1) by allowing MPC/MPEI to participate in the bidding even though it was not qualified to do so; and (2) by eventually awarding the contract to MPC/MPEI. It is clear that the Commission further desecrated the law on public bidding by permitting the winning bidder to alter the subject of the contract, in effect allowing a substantive amendment without public bidding. SPECIAL ELECTION ARTURO TOLENTINO AND ARTURO MOJICA VS. COMMISSION ON ELECTIONS, SENATOR RALPH RECTO AND SENATOR GREGORIO HONASAN G.R. No. 148334. January 21, 2004 Facts: Following the appointment of Senator Teofisto Guingona as Vice-President of the Philippines, the Senate on February 8, 2001 passed Resolution No. 84, calling on COMELEC to fill the vacancy through a special election to be held simultaneously with the regular elections on May 14, 2001. Twelve senators, with 6-year term each, were due

14

to be elected in that election. The resolution further provides that the Senatorial candidate garnering the 13th highest number of votes shall serve only for the unexpired term of former Senator Teofisto Guingona, Jr. which ends on June 30, 2004. On June 5, 2001, after canvassing the election results, the COMELEC proclaimed 13 candidates as the elected Senators, with the first 12 Senators to serve the unexpired term of 6 years and the 13th Senator to serve the full term of 3 years of Senator Teofisto Guingona, Jr. Gregorio Honasan ranked 13th. Petitioners Arturo Tolentino and Arturo Mojica, as voters and taxpayers, filed the instant petition for prohibition, praying for the nullification of Resolution No. 01-005. Issue: Whether or not the Special Election held on May 14, 2001 should be nullified: (1) for failure to give notice by the body empowered to and (2) for not following the procedure of filling up the vacancy pursuant to R.A. 6645. Held: (1) Where the law does not fix the time and place for holding a special election but empowers some authority to fix the time and place after the happening of a condition precedent, the statutory provision on the giving of notice is considered mandatory, and failure to do so will render the election a nullity. The test in determining the validity of a special election in relation to the failure to give notice of the special election is whether want of notice has resulted in misleading a sufficient number of voters as would change the result of special election. If the lack of official notice misled a substantial number of voters who wrongly believed that there was no special election to fill vacancy, a choice by small percentage of voters would be void. (2) There is no basis in the petitioners claim that the manner by which the COMELEC conducted the special Senatorial election on May 14, 2001 is a nullity because the COMELEC failed to document separately the candidates and to canvass separately the votes cast for the special election. No such requirement exists in our election laws. What is mandatory under Section 2 of R.A. 6645 is that the COMELEC fix the date of election, if necessary, and state among others, the office/s to be voted for. Significantly, the method adopted by the COMELEC in conducting the special election on May 14, 2001 merely implemented the procedure specified by the Senate in Resolution No. 84. Initially, the original draft of said resolution as introduced by Senator Francisco Tatad made no mention of the manner by which the seat vacated by former Senator Guingona would be filled. However, upon the suggestion of Senator Raul Roco, the Senate agreed to amend the resolution by providing as it now appears, that the senatorial cabdidate garnering the 13th highest number of votes shall serve only for the unexpired term of former Senator Teofisto Giongona, Jr.

ADMINISTRATIVE POWERS OF COMELEC BAYTAN ET AL. VS. COMELEC GR No. 153945. February 4, 2003 Facts: Reynato Baytan registered as a voter in two precincts and the COMELEC En Banc affirmed the recommendation of its Law Department to file information of double

15

registration in violation of the Election Code. Baytan filed with the Supreme Court a petition for certiorari on the grounds, among others, that there was no probable cause and that election cases must first be heard and decided by a Division before the COMELEC En Banc can assume jurisdiction. Held: 1. It is well- settled that the finding of probable cause in the prosecution of election offenses rests in the sound discretion of the COMELEC. Generally, the Court will not interfere with such finding of the COMELEC, absent a clear showing of grave abuse of discretion. This principle emanates from the exclusive power of the COMELEC to conduct preliminary investigation of all election investigation of all election offenses and to prosecute the same. 2. Under Sec. 2, Art. IX-C of the Constitution, the COMELEC exercises both administrative and quasi-judicial powers. The administrative powers are found in Sec 2. (1), (3) to (9) of Art IX-C. The Constitution does not provide on whether these administrative powers shall be exercised by the COMELEC en banc or in division. The COMELEC en banc therefore can act on administrative matters, and this had been the practice under the 1973 and 1987 Constitutions. The prosecution by the COMELEC of violations of election laws is an administrative power. 3. The exercise by the COMELEC of its quasi-judicial powers is subject to Sec.3, Art.IXC which expressly requires that all election cases, including pre-proclamation controversies, shall be decided by the COMELEC in division, and the motion for reconsideration shall be decided by the COMELEC en banc. IMMUNITY FROM CRIMINAL LIABILITY BAROT VS. COMELEC ET AL. GR No. 149147. June 18, 2003 Facts: In the May 14, 2001 elections Barot was proclaimed the 10th winning candidate for councilor of Tanjay City, Negros Oriental. On May 29, 2001 the Chairman of the Board of Canvassers sent a Memorandum to the COMELEC requesting for authority to correct the Certificate of Canvass and to proclaim Tabaloc, instead of Barot, as the 10th winning candidate for Councilor, by errors committed by the Board of Canvassers. The COMELEC considered the Memorandum as a petition, and after notice and hearing, granted the request. Tabaloc was proclaimed the 10th winning Councilor. Barot filed with the Supreme Court a petition for and prohibition. Held: 1. Rule 27, Sec.5, par (b) of the COMELEC Rules provides that a petition for correction must be filed not later than five (5) days following the date of proclamation, impleading the candidates who may be adversely affected thereby. Rule 1, Sec.4 of the COMELEC Rules also provides that in the interest of justice and in the order to obtain speedy disposition of all matters pending before the Commission, these rules or any option thereof may be suspended by the Commission. The filing of the petition beyond the 5- day period was upheld in the interest of justice, it having been clearly shown that it was Tabaloc and not Barot who was the 10th winning candidate for councilor. 2. The COMELEC had the authority to consider the Memorandum of the Chairman of the

16

Board of Canvassers, after notice and hearing, may even motu propio correct errors committed by in the tabulation of the votes.

PRE-PROCLAMATION CONTROVERSY NAVARRO VS. COMELEC GR No. 150799. February 3, 2003 Facts: Petitioner was a candidate for Mayor in the May 14, 2001 elections and during the canvassing, he petitioned the Board of Canvassers (BOC) to exclude the election returns contained in nine (9) ballot boxes on the ground that said boxes were not secured by the required 3 padlocks. The BOC denied the petition and petitioner appealed to the COMELEC. The COMELEC en banc denied the appeal and ordered the BOC to proceed with the canvassing and proclaim the winning local candidates. Petitioner lost in the election. Held: 1. Lack of the required number of padlocks on the ballot boxes is not a proper issue in a pre-proclamation controversy. The issues that may be raised in a pre-proclamation controversy are enumerated in Sec 243 of the Omnibus Election Code, to wit: a. Illegal composition or proceeding of the board of canvassers; b. The canvassed election returns are incomplete, contain material defects, and appear to be tampered with or falsified, or contain discrepancies in the same returns or in other authentic copies thereof as mentioned in Sections 233, 234, 235, and 236 of this Code; c. The election returns were prepared under duress, threats, coercion, or intimidation, or they are obviously manufactured or not authentic; and d. When substitute or fraudulent returns in controverted polling places were canvassed, the results of which materially affected the standing of the aggrieved candidate or candidates. This enumeration is exclusive. 2. A pre-proclamation controversy is limited to an examination of the election returns on their face and the COMELEC as a general rule need not go beyond the face of the returns and investigate the alleged election irregularities. In the case of Baterina, et al. v. COMELEC, 205 SCRA 1, the following facts were shown: (a) failure to close the entries with the signatures of the election inspectors; (b) lack of inner and outer seals; (c) canvassing by the Board of copies not intended for it; (d) lack of time and date receipt by the Board of the election returns; (e) lack of signatures of petitioners watchers; and (f) lack of authority of the person receiving the election returns. It was held that while said facts may, indeed, involve violation of the rules governing the preparation and delivery of election returns for canvassing, they do not necessarily affect the authenticity and genuineness of the subject election returns as to warrant their exclusion from the canvassing. Above facts are clearly defects in form insufficient to support a conclusion that the election returns were tampered with or spurious.

17

3. The COMELEC en banc validly ordered the proclamation of the winning candidate even during the pendency of the appeal to the COMELEC from the BOCs denial of the petition for exclusion of the questioned election returns. RA 7166, Sec 20 (I) provides as follows: (i) The BOC shall not proclaim any candidate as winner unless authorized by the Commission after the latter has ruled on the objection brought to it on appeal by the losing party. Any proclamation in violation hereof shall be void ab initio, unless the contested returns will not adversely affect the results of the election. Above-quoted provision applies only where the objection deals with a pre-proclamation controversy. IMMUNITY FROM CRIMINAL LIABILITY COMELEC VS. TAGLE, ET AL. GR No.s 148948 & 148951, February 17, 2003 Facts: In connection with the May 11, 1998 elections, candidate for Mayor Florentino A. Bautista filed a complaint against Mayor Federico Poblete et al. for vote buying in violation of Sec 261 (a) and (b) of the Omnibus Election Code. The Information was docketed as Criminal Case No. 7034-99 of the RTC of Imus, Cavite. Subsequently, a complaint for vote-selling in violation of Sec 261 (a) of the Omnibus Election Code was filed with the Prosecutors Office as witnesses in Criminal Case No. 7034-99 and the Provincial Prosecutor in Imus, Cavite filed separate Informations for vote-selling against said witnesses. On appeal, the COMELEC en banc declared that the witnesses in Criminal Case No. 7034-99 were exempt from criminal prosecution pursuant to 4th paragraph of Sec 28, RA No. 6646, otherwise known as The Electoral Reforms Law of 1987 which grants immunity from criminal prosecution to persons who voluntarily give information and willingly testify against those liable for vote-buying or vote-selling. The Law Department of the COMELEC moved to dismiss the Informations against the said witnesses but the RTC in Imus, Cavite denied the motion to dismiss.

Held: 1. One of the effective ways of preventing the commission of vote-buying and of prosecuting those committing it is the grant of immunity from criminal liability in favor of the party whose vote was bought. Sec 28 of RA No. 6646 concludes with the following paragraph: The giver, offeror, the promissory as well as the solicitor, acceptor, recipient and conspirator referred to in paragraphs (a) and (b) of Section 261 of Batas Pambansa Blg. 881 shall be liable as principals: Provided, that any person, otherwise guilty under said paragraphs who voluntarily gives information and willingly testifies on any violation thereof in any official investigation or proceeding shall be exempt from prosecution and punishment for the offenses with reference to which his information and testimony were given: Provided, further, that nothing herein shall exempt such person from criminal prosecution for perjury or false testimony. 2. To avoid possible fabrication of evidence against the vote-buyers, especially by the latters opponents, Congress saw it fit to warn vote-sellers who denounce the vote-

18

buying that they could be liable for perjury or false testimony should they not tell the truth. 3. The prosecution witnesses in Criminal Case No. 7034-99 are exempt from criminal prosecution for vote-selling by virtue of the proviso in the last paragraph of Section 28, RA 6646. At the time when the complaint for vote-selling was filed with the office of the Provincial Prosecutor, the respondents had already executed sworn statements attesting to the corrupt practice of vote-buying. It cannot then be denied that they had already voluntarily given information in the vote-buying case. In fact, they willingly testified in Crim. Case No. 7034-99. 4. The COMELEC has the exclusive power to conduct preliminary investigation of all election offenses punishable under the election laws and to prosecute the same. The Chief State Prosecutor, all Provincial and City Prosecutors, or their respective assistants are, however, given continuing authority, as deputies of the COMELEC to conduct preliminary investigation of complaints involving election offenses and to prosecute the same. This authority may be revoked or withdrawn by the COMELEC anytime whenever, in its judgment, such revocation or withdrawal is necessary to protect the integrity of the COMELEC and to promote the common good, or when it believes that the successful prosecution of the case can be done by the COMELEC. When the COMELEC nullified the resolution of the Provincial Prosecutor, it in effect withdrew the deputation granted by the COMELEC. PREMATURE CAMPAIGNING PANGKAT LAGUNA VS. COMELEC ET AL. G.R. No. 148075. February 4, 2002 Facts: On January 30, 2001 then Vice Governor Teresita Lazaro succeeded to the office of the Governor of Laguna when then Gov. Jose Lina was appointed Secretary of the DILG. Upon assumption of office as Governor, Lazaro publicly declared her intention to run for Governor in the coming May 2001 elections. Subsequently, she ordered the purchase of trophies, basketballs, volleyballs, chessboard sets, t-shirts, medals and pins, and other sports materials worth P4.5 millions. Gov. Lazaro bidded 79 public works projects on March 28, 2001. Pangkat Laguna, a registered political party, filed a petition for disqualification of Gov. Lazaro for premature campaigning. Held: 1. The act of Gov. Lazaro in ordering the purchase of various items and the consequent distribution thereof of Laguna, in line with the local government units sports and education program is not election campaigning or partisan political activity contemplated and explicitly prescribed under the pertinent provisions of Sec 80 of the Omnibus Election Code. 2. Evidence is wanting to sufficiently establish the allegation that public funds were released, disbursed, or expended during the 45-day prohibitive period provided under the law and implementing rules. Absent such clear and convincing proof, the factual findings of the COMELEC cannot be disturbed considering that the COMELEC is the constitutional body tasked to decide, except those involving the right to vote, all questions affecting elections.

19

PUBLIC CORPORATION / PUBLIC OFFICERS LOCAL GOVERNMENTS; SANGGUNIANG PANLALAWIGAN; MAJORITY OF ALL THE MEMBERS REQUIRED TO CONSTITUTE QUORUM MANUEL ZAMORA VS. GOV. JOSE CABALLERO, ET AL. G.R. No. 147767. January 14, 2002 Facts: Manuel Zamora, a member of the Sangguniang Panlalawigan of Compostela Valley, filed before the RTC a petition to invalidate all acts executed and resolutions issued by the Sanggunian during its sessions held on February 8 and 26, 2001 for lack of quorum. Said sessions noted the resignation letter of Board Member Sotto, declared the entire province under a state of calamity and approved the Governor to enter into the contract with the Allado Company. Zamora, the petitioner, argued that the Sanggunian, during its February 26 session, conducted official business without a quorum since only 7 out of the 14 members were present. He further questioned the February 8 sessions validity arguing that only 7 members were present and the failure to provide written notice to all members at least 24 hours before the holding of the special session. Respondents argued that Board Member Sotto was in the United States during such sessions and that the actual number of Board Members in the country was only 13 which, they claimed, should be the basis for the determination of a quorum. Such petition raised by Zamora was dismissed by the RTC but reversed and granted by the Supreme Court. Issues: 1) Whether or not Section 53 (a) of the LGC provides and specifies applicable rule regarding the determination of a quorum. 2) Whether or not Sanggunian Members who are abroad should not be included in the counting of the entire Sangguniang body. 3) Whether or not the approved decisions during the sessions, alleged to be without quorum, is deemed to be valid. Held: Section 53 (a) of the LGC states that : A majority of all members of the Sanggunian who have been elected and qualified shall constitute a quorum to transact official business. Quorum is defined as the number of members of a body which, when legally assembled, will enable the body to transact its proper business or that number which makes a lawful body and gives it power to pass upon a law or ordinance or do any valid act. When required to constitute a quorum, majority means the number greater than half or more than half of the total. As further stated, it requires the majority of ALL members of the Sanggunian. Quorum should, thus, be based on the total number of members regardless of whether or not a member is said to be abroad. Therefore, in cases where decisions have been made during sessions deemed to have not met the required quorum, such sessions and decisions shall be considered void.

20

LOCAL GOVERNMENT; 3-TERM LIMIT RAYMUNDO ADORMEO VS. COMELEC, ET AL. G.R. No. 147927. February 4, 2002 Facts: Respondent Talaga was elected Mayor of Lucena City in 1992, re-elected in 1995, but lost to Tagarao in 1998 elections. Tagarao was recalled and in the May 12, 2000 recall elections, Talaga won and served the unexpired term of Tagarao until June 30, 2001. Talaga was candidate for Mayor in the May 14, 2001 elections, and a petition for cancellation of his certificate of candidacy was filed on the ground that he has served as Mayor for three consecutive terms. Issue: Whether or not Talaga has served as Mayor of Lucena City for three consecutive terms. Held: The term limit for elective local officials must be taken to refer to the right to be elected as well as the right to serve in the same elective position. Consequently, it is not enough that an individual has served three consecutive terms in an elective local office. He must also have been elected to the same position for the same number of times before the disqualification can apply. In the case at bar, Talaga did not serve for 3 consecutive terms. For nearly 2 years, he was a private citizen. The continuity of his mayorship was disrupted by his defeat in the 1998 elections. If one is elected representative to serve the unexpired term of another, that unexpired term, no matter how short, will be considered one term for the purpose of computing the number of successive terms allowedthis comment of Constitutional Commissioner Fr. Bernas applies only to members of the House of Representatives. Unlike government officials, there is no recall election for members of Congress. PUBLIC OFFICERS; ANTI-GRAFT MAYOR ALVIN GARCIA VS. HON. PRIMO. MIRA, ET AL. G.R. No. 148944. February 5, 2003 Facts: City Mayor Garcia was charged by Ombudsman Special Prosecution Officer Jesus Rodrigo Tagaan for violation of the Anti-Graft Law as a result of his having entered into a contract with F.E. Zuellig for the supply of asphalt batching plant for three years. The joint affidavits of State Auditors Cabreros and Quejada alleged that petitioner entered into the contract without available funds appropriated to cover the expenditure in violation of Sections 85 and 86 of P.D. 1445 or the State Audit Code of the Phil.; that petitioner exceeded the authority granted him by the Sangguniang Panlungsod; and that the contract is manifestly disadvantageous to the City. Note however that thereafter, Special Prosecution Officer Tagaan resigned from his office and his name was withdrawn as complainant in the case. Instead of filing a counter-affidavit, Garcia filed with the Supreme Court a petition to prohibit the Ombudsman from conducting the preliminary investigation on the ground that there is no sufficient complaint.

21

Issue: Whether or not the complaint/affidavits filed against Garcia is sufficient in form or manner. Held: For purposes of initiating a preliminary investigation before the Office of the Ombudsman, a complaint in any form or manner is sufficient. The Constitution states that the Ombudsman and his Deputies, as protectors of the people, shall act promptly on complaints filed in any form or manner against public officials or employees of the government. In Almonte vs. Vasquez, 244 SCRA 286, we held that even unverified and anonymous letters may suffice to start an investigation. The Office of the Ombudsman is different from the other investigatory and prosecutory agencies of the government because those subject to its jurisdiction are public officials who, through official pressure and influence, can quash, delay, or dismiss investigations against them. The joint affidavits of State Auditors Cabreros and Quejada contain allegations specific enough for petitioner to prepare his evidence and counter-arguments. The fact that Special Prosecution Officer Tagaan already resigned from his office and that his name was withdrawn as complainant in the case is of no consequence. First, Tagaans report and affidavit still form part of the records of the case. He can still be called by subpoena, if necessary. Second, Tagaan was only a nominal party whose duty as special prosecutor was to investigate the commission of crimes and file the corresponding complaint whenever warranted. Since the illegal acts committed are public offenses, the real complainant is the State, which is represented by the remaining complainants. PUBLIC OFFICERS; APPOINTMENT; CONFIRMATION BY COA ATTY. ELPIDIO SORIANO III VS. REUBEN LISTA, ET AL. G.R. No. 153881. March 24, 2003 Facts: Eight officers of the Philippine Coast Guard (PCG) were promoted by the President to Vice Admiral, Rear Admiral, Commodore, Naval Captain, and they assumed office without confirmation by the Commission on Appointments (COA). Petitioner, as a taxpayer, filed a petition with the Supreme Court questioning the constitutionality of their assumption of office, which requires confirmation of the COA. Held: Petitioner has no locus standi. A party bringing a suit challenging the constitutionality of an act or statute must show not only that the law or act is invalid, but also that he has sustained, or is in immediate or imminent danger of sustaining some direct injury as a result of its enforcement and not merely that he suffers thereby in some indefinite way. The instant petition cannot even be classified as a taxpayers suit because petitioner has no interest as such and this case does not involve the exercise by Congress of its taxing power. Pursuant to Executive Order of President Ramos, the PCG was transferred from the Department of National Defense to the Office of the President, and later to the Department of Transportation and Communication (DOTC).

22

Criminal Law EVANGELINE LADONGA VS. PEOPLE OF THE PHILIPPINES G.R. No. 141066. February 17, 2005

Facts: In 1989, spouses Adronico and Evangeline Ladonga became Alfredo Oculams regular customers in his pawnshop business. Sometime in May 1990, the Ladonga spouses obtained a P9,075.55 loan from him, guaranteed by United Coconut Planters Bank (UCPB) Check No. 284743, post dated to July 7, 1990 issued by Adronico; sometime in the last week of April 1990 and during the first week of May 1990, the Ladonga spouses obtained an additional loan of P12,730.00, guaranteed by UCPB Check No. 284744, post dated to July 26, 1990 issued by Adronico; between May and June 1990, the Ladonga spouses obtained a third loan in the amount of P8,496.55, guaranteed by UCPB Check No. 106136, post dated to July 22, 1990 issued by Adronico; the three checks bounced upon presentment for the reason CLOSED ACCOUNT; when the Ladonga spouses failed to redeem the check, despite repeated demands, he filed a criminal complaint against them. While admitting that the checks issued by Adronico bounced because there was no sufficient deposit or the account was closed, the Ladonga spouses claimed that the checks were issued only to guarantee the obligation, with an agreement that Oculam should not encash the checks when they mature; and, that petitioner is not a signatory of the checks and had no participation in the issuance thereof. The RTC rendered a joint decision finding the Ladonga spouses guilty beyond reasonable doubt of violating B.P. Blg. 22. Petitioner brought the case to the Court of Appeals. The Court of Appeals affirmed the conviction of petitioner. Issue: Whether or not the petitioner who was not the drawer or issuer of the three checks that bounced but her co-accused husband under the latters account could be held liable for violations of Batas Pambansa Bilang 22 as conspirator. Held: The conviction must be set aside. Article 8 of the RPC provides that a conspiracy exists when two or more persons come to an agreement concerning the commission of a felony and decide to commit it. To be held guilty as a co-principal by reason of conspiracy, the accused must be shown to have performed an overt act in pursuance or furtherance of the complicity. The overt act or acts of the accused may consist of active participation in the actual commission of the crime itself or may consist of moral assistance to his co-conspirators by moving them to execute or implement the criminal plan. In the present case, the prosecution failed to prove that petitioner performed any overt act in furtherance of the alleged conspiracy. Apparently, the only semblance of overt act that may be attributed to petitioner is that she was present when the first check was issued. However, this inference cannot be stretched to mean concurrence with the criminal design. Conspiracy must be established, not by conjectures, but by positive and conclusive evidence. Conspiracy transcends mere companionship and mere presence at the scene of the crime does not in itself amount to conspiracy. Even knowledge, acquiescence in or agreement to cooperate, is not enough to constitute one as a party to a conspiracy, absent any active participation in the commission of the crime with a view to

23

the furtherance of the common design and purpose PEOPLE OF THE PHILIPPINES VS. ANTONIO MENDOZA Y BUTONES G.R. No. 152589 & 152758. January 31, 2005 Facts: Before us is the Motion for Reconsideration filed by herein accused-appellant of our Decision dated 24 October 2003 in G.R. No. 152589 and No. 152758. In said decision, we modified the ruling of the Regional Trial Court (RTC), Branch 61, Gumaca, Quezon, in Crim. Case No. 6636-G finding accused-appellant guilty of rape under Articles 266-A and 266-B of the Revised Penal Code and instead, we adjudged him guilty only of attempted rape. We, however, upheld the ruling of the court a quo with regard to Crim. Case No. 6637-G finding accused-appellant guilty of incestuous rape of a minor under Art. 266-B of the Revised Penal Code as amended by Republic Act No. 8353 and for this, we sentenced accused-appellant to suffer the ultimate penalty of death. Issue: Whether or not the accused committed attempted rape or acts of lasciviousness. Held: After a thorough review and evaluation of the records of this case, we find no sufficient basis to modify our earlier decision convicting accused-appellant of attempted rape in Crim. Case No. 6636-G.There is an attempt to commit rape when the offender commences its commission directly by overt acts but does not perform all the acts of execution which should produce the felony by reason of some cause or accident other than his own spontaneous desistance. Upon the other hand, Article 366 of the Revised Penal Code states: (a)ny person who shall commit any act of lasciviousness upon the other person of either sex, under any of the circumstances mentioned in the preceding article, shall be punished by prision correccional. As explained by an eminent author of criminal law, rape and acts of lasciviousness have the same nature. There is, however, a fundamental difference between the two. In rape, there is the intent to lie with a woman whereas this element is absent in acts of lasciviousness. In this case, the series of appalling events which took place on the night of 18 March 1998 inside the humble home of private complainant and of accused-appellant, establish beyond doubt that the latter intended to ravish his very own flesh and blood. As vividly narrated by private complainant before the trial court, accused-appellant, taking advantage of the cover of darkness and of the absence of his wife, removed her (private complainants) clothing and thereafter placed himself on top of her. Accused-appellant, who was similarly naked as private complainant, then proceeded to kiss the latter and he likewise touched her breasts until finally, he rendered private complainant unconscious by boxing her in the stomach. These dastardly acts of accused-appellant constitute the first or some subsequent step in a direct movement towards the commission of the offense after the preparations are made. Far from being mere obscenity or lewdness, they are indisputably overt acts executed in order to consummate the crime of rape against the person of private complainant. SALVADOR D. FLOR VS. PEOPLE OF THE PHILIPPINES G.R. No. 139987. March 31, 2005

24

Facts: Information for libel was filed before the RTC, Branch 20, Naga City, against the petitioner and Ramos who were then the managing editor and correspondent, respectively, of the Bicol Forum, a local weekly newspaper circulated in the Bicol Region. It states: On or about the 18th day up to the 24th day of August, 1986, in the Bicol Region comprised by the Provinces of Albay, Catanduanes, Sorsogon, Masbate, Camarines Sur, and Camarines Norte, and the Cities of Iriga and Naga, Philippines, and within the jurisdiction of this Honorable Court under R.A. No. 4363, and B.P. Blg. 129, the above-named accused who are the news correspondent and the managing editor, respectively, of the local weekly newspaper Bicol Forum, did then and there willfully, unlawfully and feloniously, without justifiable motive and with malicious intent of impeaching, discrediting and destroying the honor, integrity, good name and reputation of the complainant as Minister of the Presidential Commission on Government Reorganization and concurrently Governor of the Province of Camarines Sur, and to expose him to public hatred, ridicule and contempt, write, edit, publish and circulate an issue of the local weekly newspaper BICOL FORUM throughout the Bicol Region, with banner headline and front page news item read by the public throughout the Bicol Region VILLAFUERTES DENIAL CONVINCES NO ONE. The trial court found the petitioner guilty. The Court of Appeals likewise upheld the decision of the trial court. Issue: Whether or not the questioned news item is libelous. Held: No. Libel is defined as a public and malicious imputation of a crime, or of a vice or defect, real or imaginary, or any act, omission, condition, status, or circumstance tending to cause the dishonor, discredit, or contempt of a natural person or juridical person, or to blacken the memory of one who is dead. The law recognizes two kinds of privileged matters. First are those which are classified as absolutely privileged which enjoy immunity from libel suits regardless of the existence of malice in fact. The other kind of privileged matters are the qualifiedly or conditionally privileged communications which, unlike the first classification, may be susceptible to a finding of libel provided the prosecution establishes the presence of malice in fact. The exceptions provided for in Article 354 of the Revised Penal Code fall into this category. The interest of society and the maintenance of good government demand a full discussion of public affairs. Complete liberty to comment on the conduct of public men is a scalpel in the case of free speech. The sharp incision of its probe relieves the abscesses of officialdom. Men in public life may suffer under a hostile and an unjust accusation; the wound can be assuaged with the balm of a clear conscience. Rising superior to any official, or set of officials, to the Chief Executive, to the Legislature, to the Judiciary to any or all the agencies of Government public opinion should be the constant source of liberty and democracy. NORMA A. ABDULLA versus PEOPLE OF THE PHILIPPINES G.R. NO. 150129 April 6, 2005 Facts: Convicted by the Sandiganbayan in its Crim. Case No. 23261 of the crime of illegal use of public funds defined and penalized under Article 220 of the Revised Penal

25

Code, or more commonly known as technical malversation, appellant Norma A. Abdulla is now before this Court on petition for review under Rule 45. Along with Nenita Aguil and Mahmud Darkis, appellant was charged under an Information which pertinently reads: That on or about November, 1989 or sometime prior or subsequent thereto, in Jolo, Sulu, Philippines and within the jurisdiction of this Honorable Court, the above-named accused: NORMA A. ABDULLA and NENITA P. AGUIL, both public officers, being then the President and cashier, respectively, of the Sulu State College, and as such by reason of their positions and duties are accountable for public funds under their administration, while in the performance of their functions, conspiring and confederating with MAHMUD I. DARKIS, also a public officer, being then the Administrative Officer V of the said school, did then and there willfully, unlawfully and feloniously, without lawful authority, apply for the payment of wages of casuals, the amount of FORTY THOUSAND PESOS (P40,000.00), Philippine Currency, which amount was appropriated for the payment of the salary differentials of secondary school teachers of the said school, to the damage and prejudice of public service .Appellants co-accused, Nenita Aguil and Mahmud Darkis, were both acquitted. Only appellant was found guilty and sentenced by the Sandiganbayan in its decision. Upon motion for reconsideration, the Sandiganbayan amended appellants sentence by deleting the temporary special disqualification imposed upon her. Still dissatisfied, appellant, now before this Court, persistently pleas innocence of the crime charged. Issue: 1) Whether or not there was unlawful intent on the appellants part. 2) Whether or not the essential elements of the crime of technical malversation is present. Held: The Court must have to part ways with the Sandiganbayan in its reliance on Section 5 (b) of Rule 131 as basis for its imputation of criminal intent upon appellant. The presumption of criminal intent will not automatically apply to all charges of technical malversation because disbursement of public funds for public use is per se not an unlawful act. Here, appellant cannot be said to have committed an unlawful act when she paid the obligation of the Sulu State College to its employees in the form of terminal leave benefits such employees were entitled to under existing civil service laws. There is no dispute that the money was spent for a public purpose payment of the wages of laborers working on various projects in the municipality. It is pertinent to note the high priority which laborers wages enjoy as claims against the employers funds and resources. Settled is the rule that conviction should rest on the strength of evidence of the prosecution and not on the weakness of the defense. Absent this required quantum of evidence would mean exoneration for accused-appellant. The Sandiganbayans improper reliance on Sec. 5(b) of Rule 131 does not save the day for the prosecutions deficiency in proving the existence of criminal intent nor could it ever tilt the scale from the constitutional presumption of innocence to that of guilt. In the absence of criminal intent, this Court has no basis to affirm appellants conviction. 2. The Court notes that there is no particular appropriation for salary differentials of secondary school teachers of the Sulu State College in RA 6688. The third element of the crime of technical malversation which requires that the public fund used should have been appropriated by law, is therefore absent. The authorization given by the Department of Budget and Management for the use of the forty thousand pesos (P40,000.00) allotment for payment of salary

26

differentials of 34 secondary school teachers is not an ordinance or law contemplated in Article 220 of the Revised Penal Code. Appellant herein, who used the remainder of the forty thousand pesos (P40,000.00) released by the DBM for salary differentials, for the payment of the terminal leave benefits of other school teachers of the Sulu State College, cannot be held guilty of technical malversation in the absence, as here, of any provision in RA 6688 specifically appropriating said amount for payment of salary differentials only. In fine, the third and fourth elements of the crime defined in Article 220 of the Revised Penal Code are lacking in this case. Acquittal is thus in order. ENRIQUE TOTOY RIVERA Y DE GUZMAN VS. PEOPLE OF THE PHILIPPINES G.R. No. 138553. June 30, 2005 Facts: On May 6, 1993, in the Regional Trial Court at La Trinidad, Benguet an information for direct assault was filed against petitioner, allegedly committed, as follows: That on or about the 20th day of March, 1993, at Tomay, Shilan, Municipality of La Trinidad, Province of Benguet, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, did then and there willfully, unlawfully and feloniously attack, employ force and seriously resist one Lt. EDWARD M. LEYGO, knowing him to be a policeman, by then and there challenging the latter to a fistfight and thereafter grappling and hitting the said policeman on his face, thus injuring him in the process while the latter was actually engaged in the performance of his official duties. The trial court convicted petitioner of the crime of direct assault. The Court of Appeals affirmed the decision of the trial court. Issue: Whether or not the Court of Appeals erred in affirming the judgment of conviction rendered by the trial court. Held: Direct assault, a crime against public order, may be committed in two ways: first, by any person or persons who, without a public uprising, shall employ force or intimidation for the attainment of any of the purposes enumerated in defining the crimes of rebellion and sedition; and second, by any person or persons who, without a public uprising, shall attack, employ force, or seriously intimidate or resist any person in authority or any of his agents, while engaged in the performance of official duties, or on occasion of such performance. Unquestionably, petitioners case falls under the second mode, which is the more common form of assault and is aggravated when: (a) the assault is committed with a weapon; or (b) when the offender is a public officer or employee; or (c) when the offender lays hand upon a person in authority. In any event, this Court has said time and again that the assessment of the credibility of witnesses and their testimonies is best undertaken by the trial court, what with reality that it has the opportunity to observe the witnesses first-hand and to note their demeanor, conduct, and attitude while testifying. Its findings on such matters, absent, as here, of any arbitrariness or oversight of facts or circumstances of weight and substance, are final and conclusive upon this Court and will not to be disturbed on appeal. FRUSTRATED HOMICIDE- ESSENTIAL REQUISITES FOR COMPLETE SELFDEFENSE

27

CONRADO CASITAS VS. PEOPLE OF THE PHILIPPINES G.R. No.152358, February 5, 2004 Facts: Early in the morning of August 25, 1994, Romeo C. Boringot was awakened by his wife Aida, the latter having heard somebody shouting invectives at her husband, viz: You ought to be killed, you devil. So Romeo stood up and peeped to see who was outside. When he did not see anybody, he proceeded towards the road. Upon passing by a coconut tree, he was suddenly hacked at the back with bolo which was more that 1 foot long. He looked back at his assailant and he recognized him to be appellant Conrado whom he knew since the 1970s and whose face he clearly saw as light from the moon illuminated the place. Appellant went on hacking him, hitting him in different parts of the body, including ears and the head. While hitting him, appellant was shouting invectives at him. Appellant also hit him with a guitar causing Romeo to sustain an injury on his forehead. All in all, he sustained 11 wounds. Petitioner invoked self-defense. The trial court rejected petitioners plea of self-defense and convicted him of frustrated homicide. Issue: Whether or not petitioner acted in self-defense. Held: The petitioner was burdened to prove, with clear and convincing evidence, the confluence of the three essential requisites for complete self-defense: (a) unlawful aggression on the part of the victim; (b) reasonable means used by the person defending himself to repel or prevent the unlawful to repel or prevent the unlawful aggression; (c) lack of sufficient provocation on the part of the person defending himself. By invoking self-defense, the petitioner thereby submitted having deliberately caused the victims injuries. The burden of proof is shifted to him to prove with clear and convincing all the requisites of his affirmative defense. He must rely on the strength of his own evidence and not the weakness of that of the disbelieved after the petitioner admitted inflicting the mortal injuries on the victim. In this case, the petitioner failed to prove his affirmative defense. The number, nature and location of the victims wounds belie the petitioners claim that the said wounds or the victim were inflicted as they duel with each other. Witness for the petitioner testified that the wounds sustained by petitioner could not have been caused by bolo. Petitioner never surrendered voluntarily to the police and admitted that he had injured the victim. This would have bolstered his claim that he hacked the victim to defend himself. The petitioner did not do so. BIGAMY; ELEMENTS, EFFECT OF DECLARATION OF NULLITY OFSECOND MARRIAGE ON THE GROUND OF PSYCHOLOGICAL INCAPACITY; PENALTY VERONICO TENEBRO VS. THE HONORABLE COURT OF APPEALS G.R. No. 150758, February 18, 2004 Facts: Veronico Tenebro contracted marriage with Leticia Ancajas on April 10, 1990. The two were wed by a judge at Lapu-Lapu City. The two lived together continuously

28

and without interruption until the later part of 1991, when Tenebro informed Ancajas that he had been previously married to a certain Hilda Villareyes on Nov. 10, 1986. Tenebro showed Ancajas a photocopy of a marriage contract between him and Villareyes. Invoking this previous marriage, petitioner thereafter left the conjugal dwelling which he shared with Ancajas, stating that he was going to cohabit with Villareyes. On January 25, 1993, petitioner contracted yet another marriage, this one with a certain Nilda Villegas. When Ancajas learned of this third marriage, she verified from Villareyes whether the latter was indeed married to the petitioner. Villareyes confirmed in handwritten letter that indeed Tenebro was her husband. Ancajas thereafter filed a complaint for bigamy against petitioner. During trial, Tenebro admitted having married to Villareyes and produced two children. However, he denied that he and Villareyes were validly married to each other, claiming that no marriage ceremony took place. He alleged that he signed a marriage contract merely to enable her to get the allotment from his office in connection with his work as a seaman. The trial court found him guilty of bigamy. Issues: (1) Whether or not the petitioner is guilty of the crime of bigamy. (2) What is the effect of declaration of nullity of the second marriage of the petitioner on the ground of psychological incapacity? Held: (1) Yes, petitioner is guilty of the crime of bigamy. Under Article 349 of the Revised Penal Code, the elements of the crime of bigamy are: (1) that the offender has been legally married; (2) that the first marriage has not been legally dissolved or, in case his or her spouse is absent, the absent spouse could not yet be presumed dead according to the Civil Code; (3) that he contracts a second or subsequent marriage; and (4) that the second or subsequent marriage has all the essential requisites for validity. The prosecution sufficient evidence, both documentary and oral, proved the existence of the marriage between petitioner and Villareyes. (2) A second or subsequent marriage contracted during subsistence of petitioners valid marriage to Villareyes, petitioners marriage to Ancajas would be null and void ab initio completely regardless of petitioners psychological capacity or incapacity. Since a marriage contracted during the subsistence of a valid marriage is automatically void, the nullity of this second marriage is not per se an argument for the avoidance of criminal liability for bigamy. Pertinently, Article 349 of the RPC criminalizes any person who shall contract a second or subsequent marriage before the former marriage has been legally dissolved, or before the absent spouse has been declared presumptively dead by means of a judgment rendered in the proper proceedings. A plain reading of the law, therefore, would indicate that the provision penalizes the mere act of contracting a second or subsequent marriage during the subsistence of a valid marriage. KIDNAPPING FOR RANSOM PEOPLE OF THE PHILIPPINES VS. ABDILA SILONGAN, ET. AL. G.R. No. 137182, Apirl 24, 2003 Facts: On March 16, 1996, businessman Alexander Saldaa went to Sultan Kudarat with

29

three other men to meet a certain Macapagal Silongan alias Commander Lambada. They arrived in the morning and were able to talk to Macapagal concerning the gold nuggets that purportedly being sold by the latter. The business transaction was postponed and continued in the afternoon due to the death of Macapagals relative and that he has to pick his brother in Cotabato City. Then at around 8:30 PM, as they headed to the highway, Macapagal ordered the driver to stop. Suddenly, 15 armed men appeared. Alexander and his three companions were ordered to go out of the vehicle, they were tied up, and blindfolded. Macapagal and Teddy were also tied and blindfolded, but nothing more was done to them. Alexander identified all the abductors including the brothers of Macapagal. The four victims were taken to the mountain hideout in Maguindanao. The kidnappers demanded P15, 000,000 from Alexanders wife for his release, but the amount was reduced to twelve million. The victims were then transferred from one place to another. They made Alexander write a letter to his wife for his ransom. But on several occasions, a person named Mayangkang himself would write to Alexanders wife. The two other victims managed to escape but Alexander was released after payment of ransom. The trial court convicted Macapagal and his companions of the crime of Kidnapping for Ransom with Serious Illegal Detention. Issue: Whether it is necessary that there is actual payment of ransom in the crime of Kidnapping. Held: No, it is necessary that there is actual payment of ransom in the crime of Kidnapping. For the crime to be committed, at least one overt act of demanding ransom must be made. It is not necessary that there be actual payment of ransom because what the law requires is merely the existence of the purpose of demanding ransom. In this case, the records are replete with instances when the kidnappers demanded ransom from the victim. At the mountain hideout where Alexander was first taken, he was made a letter to his wife asking her to pay ransom of twelve million. Also Mayangkang himself wrote more letters to his family threatened the family to kill Alexander if the ransom was not paid. ESTAFA; TRUST RECEIPTS LAW EDWARD ONG VS. COURT OF APPEALS G.R. No. 119858, April 29, 2003 Facts: Petitioner Edward Ong, representing ARMAGRI International Corporation (ARMAGRI), executed two trust receipts acknowledging receipt from the Solid Bank Corp. of goods valued at P 2,532,500 and P 2, 050,000. In addition, he bounded himself to any increase or decrease of interest rate in case Central Bank floated rates and to pay any additional penalty until the trust receipts are fully paid. When the trust receipts became due and demandable, ARMAGRI failed to pay or deliver the goods to the Bank despite several demand letters. The trial court convicted Ong of two counts of estafa for violation of the Trust Receipts Law.

30

Issue: Whether the appellant is guilty of two counts estafa for violation of the Trust Receipts Law. Held: Yes, he is guilty for failure by the entrustee to account for the goods received in trust constitutes estafa. The Trust Receipts Law is violated whenever the entrustee fails to: (1) turn over the proceeds of the sale of goods, or (2) return the goods covered by the trust receipts if the good are not sold. The mere failure to account or return gives rise to the crime which is malum prohibitum. There is no requirement to prove intent to defraud. The Bank released the goods to ARMAGRI upon execution of the trust receipts and as part of the loan transactions of ARMAGRI. The Bank had a right to demand from ARMAGRI payment or at least a return of the goods. ARMAGRI failed tom pay or return the goods despite repeated demands by the Bank. It is well-settled doctrine long before the enactment of the Trust Receipts Law, that the failure to account, upon demand, for funds or property held in trust is evidence of conversion or misappropriation. Under the law, mere failure by the entrustee to account for the goods received in trust constitutes estafa. The Trust Receipts Law punishes dishonesty and abuse of confidence in the handling of money or goods to prejudice the public order. The mere failure to deliver proceeds of the sale or the goods if not sold constitutes a criminal offense that causes prejudice not only to the creditor, but also to the public interest. Evidently, the Bank suffered prejudice for neither money nor the goods were turned over the Bank. PARRICIDE; ELEMENTS PEOPLE OF THE PHILIPPINES VS. PO3 ARMANDO DALAG G.R. No. 129895, April 30, 2003 Facts: Armando Dalag, a member of the Philippine National Police, was lawfully married to Leah Nolido Dalag. They had three children. Their marriage was far from idyllic. Their covertures were marred by violent quarrels, with Leah always at the losing end. Each time the couple had a quarrel, she sustained contusions, bruises and lumps on different parts of her body. On August 15, 1996, Armando was drinking when Leah admonished him not to do so. Leah was then banged on the wall by Armando. Then he pushed and kicked Leah on the left side of her body which caused her to fall on the ground. Even as Leah was already lying prostrate, Armando continued to beat her up, punching her on the different parts of her body. Leah then fled to the house of Felia Horilla but Armando ran after her and herded her back to their house. Leah fell again to the ground and lost her consciousness. The trial court convicted Armando of parricide. Issue: Whether the trial court correctly convicted the accused. Held: Yes, the trial court correctly concluded that the injuries sustained by Leah that caused her death were the consequence of the appellants deliberate and intentional acts. The crime of parricide is defined by Article 246 of the Revised Penal Code thus: Any person who shall kill his father, mother, or child, whether legitimate or illegitimate, or

31

any of his ascendants, or descendants, or his spouse, shall be guilty of parricide and shall be punished by the penalty of reclusion perpetua to death. The prosecution is mandated to prove the following essential elements: (1) a person is killed; (2) the deceased is killed by the accused; and (3) the deceased is the father, mother or child, whether legitimate or illegitimate, or a legitimate other ascendant or other descendant, or the legitimate spouse of the accused. The prescribed penalty for the crime is reclusion perpetua to death. The key element in parricide of a spouse, the best proof of the relationship between the accused and the deceased would be the marriage certificate. STATUTORY RAPE; INFORMATION; TIME NOT AN ESSENTIAL ELEMENT PEOPLE OF THE PHILIPPINES VS. BENJAMIN HILET G.R. No. 146685-86, April 30, 2003 Facts: Sometime in 1998, ten-year old Richelle Cosada was told by appellant Benjamin Hilet, the common law husband of her mother not to go to school and watch the house. At about 10 AM, while her mother was out selling fish, Richelle saw appellant sharpening his bolo. Moments later, appellant dragged her towards the room and raped her. She kept the afternoon of March 17, 1999. Richelle finally confided to her mother. The latter asked their neighbor to report the incident to the police. The trial court convicted the appellant guilty of two counts of statutory rape. Issue: Whether time is an essential element of statutory rape. Held: No, time is not an essential element of statutory rape. An information is valid as long as it distinctly states the elements of the offense and the acts or omission constitutive thereof. The exact date of the commission of a crime is not an essential element of rape. Thus, in a prosecution of rape, the material fact or circumstance to be considered is the occurrence of rape, not the time of its commission. It is not necessary to state the precise time when the offense was committed except when time is a material ingredient of the offense. In statutory rape, time is not an essential element. What is important is the information alleges that the victim is a minor under twelve years of age and the accused had carnal knowledge of her, even if no force or intimidation was used or she was not otherwise deprived of reason. STATUTORY RAPE; INFORMATION; TIME IS NOT AN ESSENTIAL ELEMENT PEOPLE OF THE PHILIPPINES VS. LOZADA Facts: Reynaldo Diaz, a tricycle driver, went to a coffee shop to meet Ronnie Sanchez and this Sanchez disclosed to Diaz his plan to rob Rosita Sy. Thereafter Belleza Lozada arrived. They planned to wait Rosita Sy as she would normally leave her drugstore between 10:30 and 11 PM. They have also planned to kill Rosita Sy, upon realizing that Sy would be killed, Diaz excused himself on the pretext that he would get a weapon but he delayed himself and the plan was not implemented that night because of the delay. They have agreed to pursue it the next day. Diaz deliberately stayed away from their

32

meeting place the next day. The following day, he learned over the radio that a lifeless body of Rosita was found in a remote area. Issue: Whether or not all elements of a Robbery with Homicide are present to constitute a penalty of death. Held: The SC ruled that all the elements were present. The taking with animo lurid or personal property belonging to another person by means of violence against or intimidation of person or using force upon thing constitutes robbery, and the complex crime of robbery with homicide arises when by reason or on the occasion of robbery, someone is killed. All these elements have satisfactorily been shown by the prosecution. BATTERED WOMAN SYNDROMEAS A VIABLE PLEA WITHIN THE CONCEPT OF SELF-DEFENSE PEOPLE OF THE PHILIPPINES VS. MARIVIC GENOSA G.R. No. 135981. September 29, 2000 Facts: On or about the 15th day of November 1995, at Barangay Bilwang, Municipality of Isabel, province of Leyte, accused Marivic Genosa, with intent to kill, with treachery and evident premeditation, did then and there willfully, unlawfully and feloniously attack, assault, hit and wound BEN GENOSA, her legitimate husband, with the use of a hard deadly weapon, which the accused had provided herself for the purpose, inflicting several wounds which caused his death. The lower court found the accused, Marivic Genosa y Isidro, GUILTY beyond reasonable doubt of the crime of parricide and sentenced the accused with the penalty of DEATH. On appeal, the appellant alleged that despite the evidence on record of repeated and severe beatings she had suffered at the hands of her husband, the lower court failed to appreciate her self-defense theory. She claimed that under the surrounding circumstances, her act of killing her husband was equivalent to self-defense. Issue: Whether or not the battered woman syndrome as a viable plea within the concept of self-defense is applicable in this case. Held: No. The court, however, is not discounting the possibility of self-defense arising from the battered woman syndrome. We now sum up our main points. First, each of the phases of the cycle of violence must be proven to have characterized at least two battering episodes between the appellant and her intimate partner. Second, the final acute battering episode preceding the killing of the batterer must have produced in the battered persons mind an actual fear of an imminent harm, from her batterer and an honest belief that she needed to use force in order to save her life. Third, at the time of the killing, the batterer must have posed probablenot necessarily immediate and actualgrave harm to the accused, based on the history of violence perpetrated by the former against the latter. Taken altogether, these circumstances could satisfy the requisites of self-defense. Under the existing facts of the present case, however, not all of these elements were duly established.

33

RAPE; TOUCHING WHEN APPLIED TO RAPE CASES PEOPLE OF TH PHILIPPINES vs. LEVI SUMARAGO G.R. No. 140873-77, February 6, 2004 Facts: The spouses Vivencio and Teodora Brigole had four children. Two of them were girls and named- Norelyn and Doneza. Teodora left Vivencio and kept custody of their fpur children. Then, Teodora and Levi started living together as husband and wife. Sometime in 1995, Norelyn, who was barely ten years old, was gathering firewood with the appellant Levi in his farm. While they were nearing a guava tree, the appellant suddenly boxed her on the stomach. Norelyn lost consciousness. She had her clothes when she woke up. She had a terrible headache and felt pain in her vagina. She also had a bruise in the middle portion of her right leg. The appellant warned not to tell her mother about it, otherwise he would kill her. The sexual assaults were repeated several times so she decided to tell her sister and eventually her mother. The trial court found the accused guilty of the crime rape and sentenced him to death. Issue: Whether or not the accused is guilty of the crime charged. Held: Yes, the accused is guilty of the crime charged. For the accused to held guilty of consummated rape, the prosecution must prove beyond reasonable doubt that: 1) there had been carnal knowledge of the victim by the accused; 20 the accused achieves the act through force or intimidation upon the victim because the latter is deprived of reason or otherwise unconscious. Carnal knowledge of the victim by the accused may be proved either by direct evidence or by circumstantial evidence that rape had been committed and that the accused is the perpetrator thereof. A finding of guilt of the accused for rape may be based solely on the victims testimony if such testimony meets the test of credibility. Corroborating testimony frequently unavailable in rape cases is not indispensable to warrant a conviction of the accused for the crime. This Court has ruled that when a woman states that she has been raped, she says in effect all that would necessary to show rape did take place. However, the testimony of the victim must be scrutinized with extreme caution. The prosecution must stand or fall on its own merits. The credibility of Norelyn and the probative weight of her testimony cannot be assailed simply because her admission that it took the appellant only short time to insert his penis into her vagina and to satiate his lust. The mere entry of his penis into the labia of the pudendum, even if only for a short while, is enough insofar as the consummation of the crime of rape is concerned, the brevity of time that the appellant inserted penis into the victims vagina is of no particular importance. PERSONS PRESUMPTIVE DEATH

Republic of the Philippines VS. Bermudez Lorino

34

G.R. No. 160258. January 19, 2005 Facts: Gloria Bermudez and Francisco Lorino were married in June 1987. The wife was unaware that her husband was a habitual drinker with violent attitude and character and had the propensity to go out with his friends to the point of being unable to work. In 1991 she left him and returned to her parents together with her three children. She went abroad to work for her support her children. From the time she left him, she had no communication with him or his relatives. In 2000, nine years after leaving her husband, Gloria filed a verified petition with the RTC under the rules on Summary Judicial Proceedings in the Family Law. The lower court issued an order for the publication of the petition in a newspaper of general circulation. In November 7, 2001, the RTC granted the summary petition. Although the judgment was final and executors under the provisions of Act. 247 of the Family Code, the OSG for the Republic of the Philippines filed a notice of appeal. Issue: Whether or not the factual and legal bases for a judicial declaration of presumptive death under Art 41 of the Family Code were duly established. Held: Art. 238 of the Family Code under Title XI Summary Judicial Proceeding in the Family Law, sets the tenor for cases scoured by these rules, to wit: Art238. Until modified by the Supreme Court, the procedural rules in this Title shall apply in all cases provided for in this Code requiring summary court proceeding. Such cases shall be decided in an expeditions manner with out regards technical rules. The judge of the RTC fully complied with the above-cited provision by expeditiously rending judgment within ninety (90) days after the formal offer of evidence by the petitioner.

CO- OWNERSHIP Buenaventura VS. CA G.R. Nos. 127358 and G.R. Nos. 127449 March 31, 2005 Facts: Noel Buenaventura filed a position for the declaration of nullity of marriage on the ground that both he and his wife were psychologically incapacitated. The RTC in its decision, declared the marriage entered into between petitioner and respondent null and violation ordered the liquidation of the assets of the conjugal partnership property; ordered petitioner a regular support in favor of his son in the amount of 15,000 monthly, subject to modification as the necessity arises, and awarded the care and custody of the minor to his mother. Petitioner appealed before the CA. While the appeal was pending, the CA, upon respondents motion issued a resolution increasing the support pendants like to P20, 000. The CA dismissal petitioner appeal for lack of merit and affirmed in to the RTC decision. Petitioner motion for reconsideration was denied, hence this petition.

35

Issue: Whether or not co-ownership is applicable to valid marriage. Held: Since the present case does not involve the annulment of a bigamous marriage, the provisions of article 50 in relation to articles 41, 42 and 43 of the Family Code, providing for the dissolution of the absolute community or conjugal partnership of gains, as the case maybe, do not apply. Rather the general rule applies, which is in case a marriage is declared void ab initio, the property regime applicable to be liquidated, partitioned and distributed is that of equal co-ownership. Since the properties ordered to be distributed by the court a quo were found, both by the RTC and the CA, to have been acquired during the union of the parties, the same would be covered by the co-ownership. No fruits of a separate property of one of the parties appear to have been included or involved in said distribution.

ADOPTION; ILLEGITIMATE CHILD

IN THE MATTER OF THE ADOPTION OF STEPHANIE NATHY ASTORGA GARCIA G.R. No. 148311. March 31, 2005 Facts: Honorato B. Catindig filed a petition to adopt his minor illegitimate child Stephanie Astorga Garcia. He averred that Stephanie was born on June 26, 1994; that Stephanie had been using her mothers middle name and surname; and that he is now a widower and qualified to be her adopting parent. He prayed that Stephanies middle name be changedto Garcia, her mothers surname, and that her surname Garcia be changed to Catindig his surname. The RTC granted the petition for adoption, and ordered that pursuant to article 189 of the Family Code, the minor shall be known as Stephanie Nathy Catindig. Honorato filed a motion for classification and/or reconsideration praying that Stephanie be allowed to use the surname of her natural mother (Garcia) as her middle name. The lower court denied petitioners motion for reconsideration holding that there is no law or jurisprudence allowing an adopted child to use the surname of his biological mother as his middle name. Issue: Whether or not an illegitimate child may use the surname of her mother as her middle name when she is subsequently adopted by her natural father. Held: One of the effects of adoption is that the adopted is deemed to be a legitimate child of the adapter for all intents and purposes pursuant to Article 189 of the Family Code and Section 17 of Article V of RA 8557. Being a legitimate by virtue of her adoption, it follows that Stephanie is entitled to all the rights provided by law to a legitimate child without discrimination of any kind, including the right to bear the surname of her father and her mother. This is consistent with the intention of the members of the Civil Code and Family Law Committees. In fact, it is a Filipino custom that the initial or surname of the mother should immediately precede the

36

surname of the father. JUDICIAL DECLARATION OF NULLITY Cojuangco vs Palma A.C. No. 2474 June 30, 2005 Facts: On June 22, 1982, respondent Atty. Leo J. Palma, despite his subsisting marriage, wed Maria Luisa Cojuangco, the daughter of complainant Eduardo M. Cojuangco, Jr. Thus, the latter filed on November 1982, a complaint disbarment against respondent. Palma moved to dismiss the complaint. On March 2, 1983, the court referred the case to OSG for investigation and recommendation. The Assistant Solicitor General heard the testimonies of the complainant and his witness in the presence of respondents counsel. On March 19, 1984 respondent filed with the OSG an urgent motion to suspend proceedings on the ground that the final actions of his civil case for the declaration of nullity of marriage between him and his wife Lisa, poses a prejudicial question to the disbarment proceeding, but it was denied. The OSG transferred the disbarment case to the IBP, the latter found respondent guilty of gross immoral conduct and violation of his oath as a lawyer, hence, was suspended from the practice of law for a period of three years. In his motion for reconsideration, respondent alleged that he acted under a firm factual and legal conviction in declaring before the Hong Kong Marriage Registry that he is a bachelor because his first marriage is void even if there is judicial declaration of nullity. Issue: Whether or not a subsequent void marriage still needs a judicial declaration of nullity for the purpose of remarriage. Held: Respondents arguments that he was of the firm factual and legal conviction when he declared before the HIC authorities that he was a bachelor since his first marriage is void and does not need judicial declaration of nullity cannot exonerate him. In Terre vs Terre, the same defense was raised by respondent lawyer whose disbarment was also sought. We held: xxx respondent Jordan Terre, being a lawyer, knew or should have known that such an argument ran counter to the prevailing case law of this court which holds that purposes of determining whether a person is legally free to contract a second marriage, a judicial declaration that the first marriage was null and void an initio is essential. Even if we were to assume, arguendo merely, that Jordan Terre held that mistaken belief in good faith, the same result will follow. For if we are to hold Jordan Terre to his own argument, his frist marriage to complainant Dorothy Terre must be deemed valid, with the result that his second marriage must be regarded as bigamous and criminal.

MARITAL CONSENT Pelayo vs. Perez

37

G.R. No. 141323 Facts: David Pelayo through a Deed of Absolute Sale executed a deed of sale and transferred to Melki Perez two parcel of agricultural lands. Loreza Pelayo and another one whose signature is eligible witnesses such execution of deed. Loreza signed only on the third page in the space provided for witnesses, as such, Perez application was denied. Perez asked Loreza to sign on the first and should pages of the deed of sale but she refused. He then filed a complaint for specific performance against the Pelayo spouses. The spouses moved to dismiss the complaint on the ground for lack of marital consent as provided by art166 of the Civil Code. Issue: Whether or not the deed of sale was null and viol for lack of marital consent. Held: Under Art 173, in relation to Art166, both of the NCC, W/C was still in effect on January 11, 1988 when the deed in question was executed, the lack of marital consent to the disposition of conjugal property does not make the contract viol of initio but Merely violable. Said provisions of law provide: Art 166. Unless the wife has been declared a non compass mentis or a spedthriff, or is under civil interdiction or is confined in a lepresarium, the husband connot alienate or encumber any real property not the Longugal property w/o the wifes consent. It she refuses nreasonable to give her consent, the court may compel her to grant the same. Art 173. The wife may during the marriage and w/in 10 years the transaction questioned, ask the court for the annulment of any contract of the husband w/c tends to defraud her or impair interest in the conjugal partnership property. Should the wife fail to exercise this right she her heir, after the dissolution of the marriage may demand the value of property fraudulently alienated by the husband. MARITAL CONSENT BRAVO ET AL. VS. COURT OF APPEALS Facts: Spouses Mauricio and Simons owned two parcel of land. It contain a large residential dwelling or smaller house and other improvements. They had three children Roland, Cesar and Lily, Cesar died. Lily married David and had a son, David Jr,, Senia, Benjamin and their half-sister, Ofelia. Simona executed a General Power of Attorney (GPA) on June 17, 1966, appointing her husband as her attorney-in-fact. He subsequently mortgaged the land to the PNB and DBP. On October 25, 1970, Mauricio executed a Deed of Sale with assumption of Real Estate Mortgage transferring the properties to Roland, Ofelia and Elizabeth. It was conditioned on the payment of P1,000 and on the assumption of the vendees of the PNB and DBP mortgages over the properties. The deed of sale was notarized but was not annotated on TCT, neither was it presented to DBP and PNB. The mortgage loans and receipts for loan payment issued by the two banks continued to be in Mauricios name even after his death November 1973. Simona

38

passed away in 1977. Issue: Whether or not the deed of sale was void for lack of marital consent. Held: Art. 166. Unless the wife has been declared a non compos mentis or a spendthrift, or is under civil interdiction or is confined in a leprosarium, the husband cannot alienate or encumber any real property of the conjugal partnership without the wife's consent. If she refuses unreasonably to give her consent, the court may compel her to grant the same. This article shall not apply to property acquired by the conjugal partnerships before the effective date of this Code. Article 166 expressly applies only to properties acquired by the conjugal partnership after the effectivity of the Civil Code of the Philippines ("Civil Code"). The Civil Code came into force on 30 August 1950.1161 Although there is no dispute that the Properties were conjugal properties of Mauricio and Simona, the records do not show, and the parties did not stipulate, when the Properties were acquired.1171 Under Article 1413 of the old Spanish Civil Code, the husband could alienate conjugal partnership property for valuable consideration without the wife's consent.1181 Even under the present Civil Code, however, the Deed of Sale is not void. It is wellsettled that contracts alienating conjugal real property without the wife's consent are merely voidable under the Civil Code - that is, binding on the parties unless annulled by a competent court - and not void ab initial Article 166 must be read in conjunction with Article 173 of the Civil Code ("Article 173"). The latter prescribes certain conditions before a sale of conjugal property can be annulled for lack of the wife's consent, as follows: Art. 173. The wife may, during the marriage and within ten years from the transaction questioned, ask the courts for the annulment of any contract of the husband entered into without her consent, when such consent is required, or any act or contract of the husband which tends to defraud her or impair her interest in the conjugal partnership property. Should the wife fail to exercise this right, she or her heirs after the dissolution of the marriage, may demand the value of property fraudulently alienated by the husband. (Emphasis supplied) Under the Civil Code, only the wife can ask to annul a contract that disposes of conjugal real property without her consent. The wife must file the action for annulment during the marriage and within ten years from the questioned transaction. Article 173 is explicit on the remedies available if the wife fails to exercise this right within the specified period. In such case, the wife or her heir; can only demand the value of the property provided they prove that the husband fraudulently alienated the property. Fraud is never presumed, but must be established by clear and convincing evidence. ILLEGITIMATE CHILDS SURNAME ALBA vs. COURT OF APPEALS G.R. No. 164041, July 29, 2005 Facts: Private respondent Rosendo C. Herrera filed a petition for cancellation of the

39

following entries in the birth certificate of Rosendo Alba Herrera, Jr, to wit: (1) the surname Herrera as appended to the name of the said child; (2) the reference to private respondent as the father of Rosendo Alba Herrera Jr.; and (3) the alleged marriage of private respondent to all childs mother, Armi A. Alba He averred that such challenged entries are false. Private respondent contended that he married only once, as evidenced by certification from NSO and Civil Registrar of Mandaluyong. The RTC, finding the petition to be sufficient in form and substance the hearing was set. On the scheduled hearing the counsel from the OSG appeared but filed no opposition, Armi was not present. The court a quo rendered a decision ordering the correction of the entries in the Certification of Live Birth of Rosendo Alba Herrera, Jr. Armi filed a petition for the annulment of the judgment, contending that she came to know of the decision of the RTC where the school where her son was enrolled, was furnished by private respondent with a copy of a court order directing the change of petitioners surname from Herrera to Alba. Armi contended that she and private respondent cohabited and after their separation, he continued to give support to their son. Private respondent denied paternity of petitioner minor and his purported cohabitation with Armi. Issue: Whether or not an illegitimate child shall use the surname of their mother. Held: Under Art. 176 of the Family Code as amended by RA No. 9255, w/c took effect on March 19, 2004, illegitimate children shall use the surname of their mother , unless their father recognizes their filiation, in w/c case they may bear the fathers surname. In Wang vs. Cebu Civil Registrar it was held that an illegitimate child whose filiations is not recognized by the father bears only a given name and his mothers surname. The name of the unrecognized illegitimate child identifies him as such. It is only when said child is recognized that he may use his fathers surname, reflecting his status us an acknowledged illegitimate held.

CHILD CUSTODY PABLO-GUALBERTO VS. COURT OF APPEALS G.R. Nos. 154994 and 156254 June 28, 2005 Facts: Crisanto Rafaelito G. Gualberto V filed before the RTC a petition for declaration of nullity of his marriage to Joycelyn w/ an ancillary prayer for custody pendente lite of their almost 4 year old son, Rafaello, whom her wife took away w/ her from their conjugal home and his school when she left him. The RTC granted the ancillary prayer for custody pendente lite, since the wife failed to appear despite notice. A house helper of the spouses testified that the mother does not care for the child as she very often goes out of the house and even saw her slapping the child. Another witness testified that after surveillance he found out that the wife is having lesbian relations.

40

The judge issued the assailed order reversing her previous order, and this time awarded the custody of the child to the mother. Finding that the reason stated by Crisanto not to be a compelling reason as provided in Art 213 of the Family Code. Issue: Whether or not the custody of the minor child should be awarded to the mother. Held: Article 213 of the Family Code provided: Art 213. In case of separation of parents parental authority shall be exercised by the parent des granted by the court. The court shall take into account all relevant consideration, especially the choice of the child over seven years of age, unless the parent chosen is unfit. No child under seven yrs of age shall be separated from the mother unless the court finds compelling reasons to order otherwise, This Court has held that when the parents separated, legally or otherwise, the foregoing provision governs the custody of their child. Article 213 takes its bearing from Article 363 of the Civil Code, w/c reads: Art 363. In all question on the care, custody, education and property pf children, the latter welfare shall be paramount. No mother shall be separated from her child under seven years of age, unless the court finds compelling reason for such measure. ANNULMENT OF MARRIAGE; PSYCHOLOGICAL INCAPACITY DEBEL VS. COURT OF APPEALS, ET AL. G.R. No. 151867. January 29, 2004

Facts: David Debel met Sharon Corpuz while he was working in the advertising business of his father. The acquaintance led to courtship and romantic relations, culminating into marriage before the City Court of Pasay on September 28, 1966. On May 20, 1967, the civil marriage was ratified in a church wedding. The union produced four children. The petitioner avers that during the marriage Sharon turned out to be an irresponsible and immature wife and mother. She had an illicit affair with several men and then later to a Jordanian national named Ibrahim. Sharon was once confined for psychiatric treatment but she didnt stop her illicit relationship with the Jordanian national whom she married and whom she had two children. Ibrahim left Sharon so she returned back to the petitioner who had accepted her back. However on December 9, 1995, Sharon abandoned the petitioner and joined Ibrahim in Jordan with their two children. After giving up all hope for reconciliation, petitioner filed on April 1, 1997 a petition seeking the declaration of nullity of his marriage on the ground of psychological incapacity. The RTC granted the nullity of the marriage. It was appealed in the CA which set aside the decision of RTC and ordered dismissal of the case. Hence, the instant petition was filed to the Supreme Court. Issue: Whether or not private respondents sexual infidelity or perversion and abandonment fall within the term of psychological incapacity. Held: In this case private respondents sexual infidelity or perversion and abandonment

41

can hardly qualify as mental or psychological illness to such extent that she could not have known the obligation she was assuming. It appears that private respondents promiscuity did not exist prior to or at the inception of the marriage; in fact, the record disclosed that there was a blissful marital union. It must be shown that the acts are a manifestation of a disordered personality which makes respondent completely unable to discharge the essential obligations of marital state, not merely due to her youth, immaturity or sexual promiscuity.

ACTION FOR RECOGNITION OF ILLEGITIMATE CHILDREN WHO ARE MINORS AT THE TIME OF THE EFFECTIVITY OF THE FAMILY CODE MAY BE BROUGHT FOR A PERIOD OF 4 YEARS FROM ATTAINING MAJORITY AGE; SPURIOUS CHILDREN BERNABE VS. ALEJO G.R. No. 140500. January 21, 2002 Facts: The late Fiscal Ernesto Bernabe allegedly fathered a son with his secretary Carolina Alejo and was named Adrian Bernabe who was born on September 18, 1981. After Ernesto Bernabe and Rosalina, his legal wife died, the only heir left is Erestina. Carolina, in behalf of Adrian, filed a complaint praying that Adrian be declared an acknowledged illegitimate son of Fiscal Bernabe and be given a share of his fathers estate. Issue: Whether or not Adrian Bernabe may be declared an acknowledged illegitimate son. Held: Under the new law, an action for the recognition of an illegitimate child must be brought within the lifetime of the alleged parent. The Family Code makes no distinction on whether the former was still a minor when the latter died. Thus, the putative parent is given by the new code a chance to dispute the claim, considering that illegitimate children are usually begotten and raised in secrecy and without the legitimate family being aware of their existence. OBLIGATIONS AND CONTRACTS SAN MIGUEL CORPORATION vs. TROY FRANCIS L. MONASTERIO G.R. No. 151037. June 23, 2005 Facts: SMC entered into an Exclusive Warehouse Agreement with SMB Warehousing Services, represented by its manager, Troy Francis L. Monasterio. SMB undertook to provide land, physical structures, equipment and personnel for storage, warehousing and related services such as, but not limited to, segregation of empty bottles, stock handling, and receiving SMC products for its route operations. From September 1993 to September 1997 and May 1995 to November 1997, aside from rendering service as warehouseman, Monasterio was given the additional task of cashiering in SMCs Sorsogon and Camarines Norte sales offices for which he was promised a separate fee. But it was only

42

on December 1, 1997, that petitioner SMC started paying respondent P11,400 per month for his cashiering services. Monasterio demanded P82,959.32 for warehousing fees, P11,400 for cashiering fees for the month of September, 1998, as well as exemplary damages, and attorneys fees in the amount of P500,000 and P300,000, respectively. SMC filed a Motion to Dismiss on the ground of improper venue The RTC denied the motion. Issue: Did the RTC of Naga City err in denying the motion to dismiss filed by SMC alleging improper venue? Held: Exclusive venue stipulation embodied in a contract restricts or confines parties thereto when the suit relates to breach of the said contract. But where the exclusivity clause does not make it necessarily all encompassing, such that even those not related to the enforcement of the contract should be subject to the exclusive venue, the stipulation designating exclusive venues should be strictly confined to the specific undertaking or agreement. Otherwise, the basic principles of freedom to contract might work to the great disadvantage of a weak party-suitor who ought to be allowed free access to courts of justice. GF EQUITY, INC. vs. ARTURO VALENZONA G.R. No. 156841. June 30, 2005 Facts: GF Equity hired Valenzona as Head Coach of the Alaska basketball team in the Philippine Basketball Association under a Contract of Employment where GF Equity would pay Valenzona the sum of P35,000.00 monthly. While the employment period agreed upon was for two years commencing, the last sentence of paragraph 3 of the contract carried the following condition: 3. x x x If at any time during the contract, the COACH, in the sole opinion of the CORPORATION, fails to exhibit sufficient skill or competitive ability to coach the team, the CORPORATION may terminate this contract. The caveat notwithstanding, Valenzona still acceded to the terms of the contract. Thereafter, Valenzona was terminated as coach of the Alaska team. Valenzona demanded from GF Equity payment of compensation arising from the arbitrary and unilateral termination of his employment. GF Equity, however, refused the claim. Valenzona thus filed before the RTC Manila a complaint against GF Equity for breach of contract with damages. The trial court, upholding the validity of the assailed provision of the contract, dismissed the complaint. Issue: Whether the questioned last sentence of paragraph 3 is violative of the principle of mutuality of contracts. Held: Mutuality is one of the characteristics of a contract, its validity or performance or compliance of which cannot be left to the will of only one of the parties. The ultimate purpose of the mutuality principle is thus to nullify a contract containing a condition which makes its fulfillment or pre-termination dependent exclusively upon the uncontrolled will of one of the contracting parties. In the case at bar, the contract incorporates in paragraph 3 the right of GF Equity to pre-terminate the contract. The assailed condition clearly transgresses the principle of mutuality of contracts. GF Equity

43

was given an unbridled prerogative to pre-terminate the contract irrespective of the soundness, fairness or reasonableness, or even lack of basis of its opinion. The assailed stipulation being violative of the mutuality principle underlying Article 1308 of the Civil Code, it is null and void. NORKIS FREE & INDEPENDENT WORKERS UNION vs. NORKIS TRADING COMPANY, INC. G.R. No. 157098 June 30, 2005 Facts: On January 27, 1998, a Memorandum of Agreement was forged between the parties wherein petitioner shall grant a salary increase to all regular and permanent employees Ten pesos per day increase effective August 1, 1997; Ten pesos per day increase effective August 1, 1998. On March 10, 1998, the RTWPB of Region VII issued Wage Order ROVII-06 which established the minimum wage of P165.00, by mandating a wage increase of five (P5.00) pesos per day beginning April 1, 1998, thereby raising the daily minimum wage to P160.00 and another increase of five (P5.00) pesos per day beginning October 1, 1998, thereby raising the daily minimum wage to P165.00 per day. In accordance with the Wage Order and Section 2, Article XII of the CBA, petitioner demanded an across-the-board increase. Respondent, however, refused to implement the Wage Order, insisting that since it has been paying its workers the new minimum wage of P165.00 even before the issuance of the Wage Order, it cannot be made to comply with said Wage Order. Issue: Whether respondent violated the CBA in its refusal to grant its employees an across-the-board increase as a result of the passage of Wage Order No. ROVII-06. Held: The employees are not entitled to the claimed salary increase, simply because they are not within the coverage of the Wage Order, as they were already receiving salaries greater than the minimum wage fixed by the Order. Concededly, there is an increase necessarily resulting from raising the minimum wage level, but not across-the-board. Indeed, a double burden cannot be imposed upon an employer except by clear provision of law. It would be unjust, therefore, to interpret Wage Order No. ROVII-06 to mean that respondent should grant an across-the-board increase. Such interpretation of the Order is not sustained by its text. CONCEPCION R. AINZA, substituted by her legal heirs, DR. NATIVIDAD A. TULIAO, CORAZON A. JALECO and LILIA A. OLAYON vs. SPOUSES ANTONIO PADUA and EUGENIA PADUA G.R. No. 165420. June 30, 2005 Facts: Spouses Eugenia and Antonio Padua owned a 216.40 sq. m. lot with an unfinished residential house Thereafter, Concepcion Ainza bought one-half of an undivided portion of the property from her daughter, Eugenia and the latters husband, Antonio, for P100,000.00. No Deed of Absolute Sale was executed to evidence the transaction, but cash payment was received by the respondents, and ownership was transferred to Concepcion through physical delivery to Natividad Tuliao. However, respondents caused the subdivision of the property into three portions and registered it in their names in

44

violation of the restrictions annotated at the back of the title. Antonio claimed that his wife, Eugenia, admitted that Concepcion offered to buy 1/3 of the property who gave her small amounts over several years which totaled P100,000.00 by 1987 and for which she signed a receipt. Issue: Whether there was a valid contract of sale between Eugenia and Concepcion. Held: There was a perfected contract of sale between Eugenia and Concepcion. The records show that Eugenia offered to sell a portion of the property to Concepcion, who accepted the offer and agreed to pay P100,000.00 as consideration. The contract of sale was consummated when both parties fully complied with their respective obligations. Eugenia delivered the property to Concepcion, who in turn, paid Eugenia the price of P100,000.00, as evidenced by the receipt. The verbal contract of sale between Eugenia and Concepcion did not violate the provisions of the Statute of Frauds. When a verbal contract has been completed, executed or partially consummated, as in this case, its enforceability will not be barred by the Statute of Frauds, which applies only to an executory agreement. However, the sale of the conjugal property by Eugenia without the consent of her husband is voidable. It is undisputed that the subject property was conjugal and sold by Eugenia in April 1987 or prior to the effectivity of the Family Code on August 3, 1988. Thus, the contract of sale between Eugenia and Concepcion being an oral contract, the action to annul the same must be commenced within six years from the time the right of action accrued. It is binding unless annulled. Antonio failed to exercise his right to ask for the annulment within the prescribed period, hence, he is now barred from questioning the validity of the sale between his wife and Concepcion. OLIVERIO LAPERAL& FILIPINAS GOLF & COUNTRY CLUB INC. vs. SOLID HOMES, INC. G.R. No. 130913. June 21, 2005 Facts: Filipinas Golf Sales and Development Corporation, predecessor-in-interest of Filipinas Golf and Country Club, Inc., represented by its then President, Oliverio Laperal, entered into a Development and Management Agreement with respondent Solid Homes, Inc., a registered subdivision developer, involving several parcels of land owned by Laperal and FGSDC. Under the terms and conditions of the aforementioned Agreement and the Supplement, respondent undertook to convert at its own expense the land subject of the agreement into a first-class residential subdivision, in consideration of which respondent will get 45% of the lot titles of the saleable area in the entire project. The aforementioned Agreement was cancelled by the parties, and, in lieu thereof, two contracts identically denominated Revised Development and Management Agreement were entered into by respondent with the two successors-in-interest of FGSDC. Unlike the original agreement, both Revised Agreements omitted the obligation of petitioners Laperal and FGCCI to make available to respondent Solid Homes, Inc. the owners duplicate copies of the titles covering the subject parcels of land. It appears, however, that even as the Revised Agreements already provided for the non-surrender of the owners duplicate copies of the titles, respondent persisted in its request for the delivery thereof .Then, petitioners served on respondent notices of rescission of the Revised Agreements with a demand to vacate the subject properties and yield possession thereof to them.

45

Issue: Whether the termination of the Revised Agreement and Addendum, because of the contractual breach committed by respondent solid homes, carried with it the effect provided under Article 1385 of the New Civil Code. Held: Mutual restitution is required in cases involving rescission under Article 1191. Since Article 1385 of the Civil Code expressly and clearly states that rescission creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest, the Court finds no justification to sustain petitioners position that said Article 1385 does not apply to rescission under Article 1191.As a consequence of the resolution by petitioners, rights to the lot should be restored to private respondent or the same should be replaced by another acceptable lot. Applying the clear language of the law and the consistent jurisprudence on the matter, therefore, the Court rules that rescission under Article 1191 in the present case, carries with it the corresponding obligation of restitution. MONDRAGON LEISURE AND RESORTS CORPORATION vs. COURT OF APPEALS, ASIAN BANK CORPORATION, FAR EAST BANK AND TRUST COMPANY, and UNITED COCONUT PLANTERS BANK G.R. No. 154188 June 15, 2005 Facts: Mondragon International Philippines, Inc., Mondragon Securities Corporation and herein petitioner entered into a lease agreement with the Clark Development Corporation for the development of what is now known as the Mimosa Leisure Estate.To help finance the project, petitioner, entered into an Omnibus Loan and Security Agreement with respondent banks for a syndicated term loan in the aggregate principal amount of US$20M. Under the agreement, the proceeds of the loan were to be released through advances evidenced by promissory notes to be executed by petitioner in favor of each lender-bank, and to be paid within a six-year period from the date of initial advance inclusive of a one year and two quarters grace period. Petitioner, which had regularly paid the monthly interests due on the promissory notes until October 1998, thereafter failed to make payments. Consequently, written notices of default, acceleration of payment and demand letters were sent by the lenders to the petitioner. Then, respondents filed a complaint for the foreclosure of leasehold rights against petitioner. Petitioner moved for the dismissal of the complaint but was denied. Issue: Whether or not respondents have a cause of action against the petitioner? Held: Under the foregoing provisions of the Agreement, petitioner may be validly declared in default for failure to pay the interest. As a consequence of default, the unpaid amount shall earn default interest, and the respondent-banks have four alternative remedies without prejudice to the application of the provisions on collaterals and any other steps or action which may be adopted by the majority lender. The four remedies are alternative, with the right of choice given to the lenders, in this case the respondents. Under Article 1201 of the Civil Code, the choice shall produce no effect except from the time it has been communicated. In the present case, we find that written notices were sent

46

to the petitioner by the respondents. The notices clearly indicate respondents choice of remedy: to accelerate all payments payable under the loan agreement It should be noted that the agreement also provides that the choice of remedy is without prejudice to the action on the collaterals. Thus, respondents could properly file an action for foreclosure of the leasehold rights to obtain payment for the amount demanded. SPS. FELIPE AND LETICIA CANNU vs. SPS. GIL AND FERNANDINA GALANG AND NATIONAL HOME MORTGAGE FINANCE CORPORATION, G.R. No. 139523. May 26, 2005 Facts: Gil and Fernandina Galang obtained a loan from Fortune Savings & Loan Association for P173, 800.00 to purchase a house and lot located at Pulang Lupa, Las Pias, To secure payment, a real estate mortgage was constituted on the said house and lot in favor of Fortune Savings & Loan Association. In early 1990, NHMFC purchased the mortgage loan of respondents-spouses from Fortune Savings & Loan Association for P173, 800.00. Petitioner Leticia Cannu agreed to buy the property for P120, 000.00 and to assume the balance of the mortgage obligations with the NHMFC and with CERF Realty. Of the P120, 000. 00, several payments were made leaving a balance of P45, 000.00. A Deed of Sale with Assumption of Mortgage Obligation was made and entered into by and between spouses Fernandina and Gil Galang and spouses Leticia and Felipe Cannu over the house and lot. Petitioners immediately took possession and occupied the house and lot. Despite requests from Adelina R. Timbang and Fernandina Galang to pay the balance of P45,000.00 or in the alternative to vacate the property in question, petitioners refused to do so. Issues: 1) Whether or not the breach of the obligation is substantial. 2) Whether or not there was substantial compliance with the obligation to pay the monthly amortization with NHMFC. 3) Whether or not respondents-spouses Galang demanded from petitioners a strict and/or faithful compliance of the Deed of Sale with Assumption of Mortgage. 4. Whether or not the action for rescission is subsidiary. Held: 1) Rescission may be had only for such breaches that are substantial and fundamental as to defeat the object of the parties in making the agreement. The question of whether a breach of contract is substantial depends upon the attending circumstances and not merely on the percentage of the amount not paid. In the case at bar, we find petitioners failure to pay the remaining balance of P45,000.00 to be substantial. Taken together with the fact that the last payment made was on 28 November 1991, eighteen months before the respondent Fernandina Galang paid the outstanding balance of the mortgage loan with NHMFC, the intention of petitioners to renege on their obligation is utterly clear. 2) The petitioners were not religious in paying the amortization with the NHMFC. As admitted by them, in the span of three years from 1990 to 1993, their payments covered only thirty months. This, indeed, constitutes another breach or violation of the Deed of Sale with Assumption of Mortgage. On top of this, there was no formal assumption of the

47

mortgage obligation with NHMFC because of the lack of approval by the NHMFC on account of petitioners non-submission of requirements in order to be considered as assignees/successors-in-interest over the property covered by the mortgage obligation. 3) There is sufficient evidence showing that demands were made from petitioners to comply with their obligation. Adelina R. Timbang, attorney-in-fact of respondentsspouses, per instruction of respondent Fernandina Galang, made constant follow-ups after the last payment made on 28 November 1991, but petitioners did not pay. Sometime in March 1993, due to the fact that full payment has not been paid and that the monthly amortizations with the NHMFC have not been fully updated, she made her intentions clear with petitioner Leticia Cannu that she will rescind or annul the Deed of Sale with Assumption of Mortgage. 4. The subsidiary character of the action for rescission applies to contracts enumerated in Articles 1381 of the Civil Code. The contract involved in the case before us is not one of those mentioned therein. The provision that applies in the case at bar is Article 1191.As a consequence of the rescission or, more accurately, resolution of the Deed of Sale with Assumption of Mortgage, it is the duty of the court to require the parties to surrender whatever they may have received from the other. The parties should be restored to their original situation. ROMAGO ELECTRIC CO., INC. vs. HONORABLE COURT OF APPEALS, SOLEDAD C. CAC, JOEPHIL BIEN, RENATO CUNANAN and DELFIN INCIONG G.R. No. 130721. May 26, 2005 Facts: The National Power Corporation entered into an agreement with ROMAGO ELECTRIC CO., INC. for the erection and installation of NPCs 69 KV 3-Phase Transmission Lines for P2,657,856.40. Subsequently, ROMAGO subcontracted the project to BICC Construction, an unregistered loose partnership composed of Soledad Cac, Delfin Inciong, Joephil Bien and Renato Cunanan, for P1,614,387.99. When the project was completed, there was an outstanding balance due to BICC Construction from ROMAGO, part of which was the formers share in the CPA amounting to 70% of the NPC-ROMAGO contract or P175,545.05. Mrs. Soledad Cac, wrote NPC to hold its payment to ROMAGO of the aforementioned CPA amounting to P250,778.65. Payment was nonetheless released to ROMAGO by virtue of a sworn affidavit executed that there does not exist any lien or encumbrances against the said NPC-ROMAGO contract. It appears that Mariano Cac, authorized representative and husband of Soledad Cac, was paid the amount of P38,712.70 in full payment of accounts including retention of various works at NPC-Isabela under defendants Cash Disbursement Voucher No. 23162 dated 03 October 1983.When BICCs demands for payment were ignored by ROMAGO, the partners, thru Mrs. Soledad Cac as lone plaintiff, filed a complaint for collection of sum of money with damages. Issues: 1) Whether or not the private respondents are entitled to the CPA accorded to the petitioner by NPC. 2) Whether or not the particulars of petitioners cash disbursement voucher no. 23162 signed by private respondents authorized representative / agent acknowledging receipt of said amount did not extinguish, relieve, release any and all claims including contract price adjustment which private respondents may have against petitioner on the

48

subcontract. Held: 1. Contrary to the petitioners asseverations that the CPA was not intended to be made applicable to the Romago-BICC subcontract, it must be remembered that the petitioner and the private respondents expressly agreed what documents were going to be incorporated in the principal subcontract. We agree with the appellate court that the qualifying phrase obligations and responsibilities contained in the Romago-BICC subcontract was applicable only to the NPC-Romago contract. What is more, the CPA is not found in the NPC-Romago contract, but in the NPC's Plans and Specifications which was expressly included as part of the Contract Documents. 2. Said pleading expressly states that the CPA is not included in the computation. This is precisely because the petitioner believes that the private respondents are not entitled to the CPA, hence, there is no basis for including it. Said CPA not being part of the subcontract price of P1,614,387.99, the release mentioned in the cash voucher cannot, therefore, be construed as a release of the CPA. FELIPE O. MAGBANUA, CARLOS DE LA CRUZ, REMY ARNAIZ, BILLY ARNAIZ, ROLLY ARNAIZ, DOMINGO SALARDA, JULIO CAHILIG and NICANOR LABUEN, vs. RIZALINO UY G.R. No. 161003. May 6, 2005 Facts: As a final consequence of the final and executory decision of the Supreme Court which affirmed with modification the decision of the NLRC, hearings were conducted to determine the amount of wage differentials due the eight petitioners. The petitioners filed a Motion for Issuance of Writ of Execution. Rizalino Uy filed a Manifestation requesting that the cases be terminated and closed, stating that the judgment award as computed had been complied with to the satisfaction of petitioners. Said Manifestation was also signed by the eight petitioners. Together with the manifestation is a Joint Affidavit dated May 5, 1997 of petitioners, attesting to the receipt of payment from respondent and waiving all other benefits due them in connection with their complaint. On October 20, 1997, six of the eight petitioners filed a Manifestation requesting that the cases be considered closed and terminated as they are already satisfied of what they have received from respondent. Together with said Manifestation is a Joint Affidavit in the local dialect, of the six petitioners attesting that they have no more collectible amount from respondent and if there is any, they are abandoning and waiving the same. Issues: 1. Whether or not the final and executory judgment of the Supreme Court could be subject to compromise settlement; 2. Whether or not the petitioners affidavit waiving their awards in the labor case executed without the assistance of their counsel and labor arbiter is valid. Held: 1. There is no justification to disallow a compromise agreement, solely because it was entered into after final judgment. The validity of the agreement is determined by compliance with the requisites and principles of contracts, not by when it was entered into. Petitioners voluntarily entered into the compromise agreement. Circumstances also reveal that respondent has already complied with its obligation pursuant to the

49

compromise agreement. Having already benefited from the agreement, estoppel bars petitioners from challenging it. 2. The presence or the absence of counsel when a waiver is executed does not determine its validity. There is no law requiring the presence of a counsel to validate a waiver. The test is whether it was executed voluntarily, freely and intelligently; and whether the consideration for it was credible and reasonable. Where there is clear proof that a waiver was wangled from an unsuspecting or a gullible person, the law must step in to annul such transaction. In the present case, petitioners failed to present any evidence to show that their consent had been vitiated. SPOUSES DANILO and CRISTINA DECENA, vs. SPOUSES PEDRO and VALERIA PIQUERO G.R. No. 155736. March 31, 2005 Facts: Spouses Danilo and Cristina Decena were the owners of a house and lot in Paraaque City. The petitioners and the respondents, the Spouses Pedro and Valeria Piquero, executed a Memorandum of Agreement in which the former sold the property to the latter for P940,250.00 payable in six (6) installments via postdated checks. The vendees forthwith took possession of the property. It appears in the MOA that the petitioners obliged themselves to transfer the property to the respondents upon the execution of the MOA with the condition that if two of the postdated checks would be dishonored by the drawee bank, the latter would be obliged to reconvey the property to the petitioners. On May 17, 1999, the petitioners, then residents of Malolos, Bulacan, filed a Complaint against the respondents with the RTC Malolos, Bulacan, for the annulment of the sale/MOA, recovery of possession and damages. The petitioners alleged therein that, they did not transfer the property to and in the names of the respondents as vendees because the first two checks drawn and issued by them in payment for the purchase price of the property were dishonored by the drawee bank, and were not replaced with cash despite demands therefor. Issue: Whether or not venue was properly laid by the petitioners in the RTC of Malolos, Bulacan. Held: After due consideration of the foregoing, we find and so rule that Section 5(c), Rule 2 of the Rules of Court does not apply. This is so because the petitioners, as plaintiffs in the court a quo, had only one cause of action against the respondents, namely, the breach of the MOA upon the latters refusal to pay the first two installments in payment of the property as agreed upon, and turn over to the petitioners the possession of the real property, as well as the house constructed thereon occupied by the respondents. The claim for damages for reasonable compensation for the respondents use and occupation of the property, in the interim, as well as moral and exemplary damages suffered by the petitioners on account of the aforestated breach of contract of the respondents are merely incidental to the main cause of action, and are not independent or separate causes of action. The action of the petitioners for the rescission of the MOA on account of the respondents breach thereof and the latters failure to return the premises subject of the complaint to the petitioners, and the respondents

50

eviction therefrom is a real action. As such, the action should have been filed in the proper court where the property is located, namely, in Paraaque City, conformably with Section 1, Rule 4 of the Rules of Court. Since the petitioners, who were residents of Malolos, Bulacan, filed their complaint in the said RTC, venue was improperly laid; hence, the trial court acted conformably with Section 1(c), Rule 16 of the Rules of Court when it ordered the dismissal of the complaint. LIABILITY FOR PRICE ESCALATION FOR LABOR AND MATERIAL COST H.L. CARLOS CONSTRUCTION, INC. VS. MARINA PROPERTIES CORPORATION, ET AL. G.R No. 147614, January 29, 2004 Facts: Marina Properties Corporation entered into a contract with H.L. Carlos Construction, Inc. to construct a condominium complex for a total consideration of P35.58 million within a period of 365 days from receipt of notice to proceed. The original completion date of the project was May 16, 1989, but it was extended to October 31, 1989 with a grace period until November 30, 1989. On December 15, 1989, HLC instituted a case for sum of money, among others, for costs of labor escalation, change orders and material price escalation. The Construction Contract contains the provision that no cost escalation shall be allowed except on the labor component of the work. HLC argues that it is entitled to price escalation for both labor and material because MPC was delayed for paying its obligations. MPC, on the other hand, avers that HLC was delayed in finishing its project; hence, it is not entitled to price increases. Issue: Whether or not MPC is liable for price escalation. Held: MPC is liable for price escalation, but only for the labor component. The Construction Contract contains the provision that no cost escalation shall be allowed except on the labor component of the work. Since the contract allows escalation only of the labor component, the implication is that material cost escalations are barred. There appears to be no provision, either in the original or in the amended contract that would justify billing of increased cost of material. HLC attempts to pass off material cost escalation as a form of damages suffered by it as a natural consequence of the delay in the payment of billings. However, the contentious billing itself contains no claim for material cost escalation. STAGES OF CONTRACT; WITHDRAWAL OF OFFER BEFORE ACCEPTANCE INSURANCE LIFE ASSURANCE COMPANY, LTD. VS. ASSET BUILDERS CORPORATION G.R. No. 147410, February 5, 2004 Facts: Insular Life Insurance Company, Limited invited companies to participate in the bidding of the proposed Insular Life building. The Instruction to Bidders prepared by Insular Life expressly required a formal acceptance and a period within which such

51

acceptance was to be made known to the winner. Asset Builders Corporation submitted a bid proposal secured by bid bonds valid for 60 days. Under its proposal form, Asset Builders bound and obliged itself to enter into a contract with Insular Life within 10 days from the notice of the award, with good and sufficient securities. The project was awarded to the Asset Builders and a notice to proceed with the construction was sent by Insular Life to the former. However, Asset Builders project. Neither did it execute any construction agreement. It informed Insular Life that it will not proceed with the project. Issue: Whether or not there is a perfected contract between Insular Life and Asset Builders. Held: There was indeed no acceptance of the offer by Asset Builders. Such failure to comply with the condition imposed for the perfection of the contract resulted in the failure of the contract. There are three distinct stages of a contract- preparation or negotiation, perfection or consummation. Negotiation begins when the prospective contracting parties manifest their interest in the contract and ends at the moment of their agreement. Perfection occurs when they agree upon the essential elements thereof. The last stage is the consummation where they fulfill the terms agreed upon culminating in the extinguishment of the contract. CONTACTS ARE PERFECTED BY MERE CONSENT; EFFECTS OF PERFECTION OF CONTRACTS METROPOLITAN MANILA DEVELOPMENT AUTHORITY VS. JANCOM ENVIRONMENTAL CORPORATION GR No. 147465, January 30, 2002 Facts: A build-Operate-Transfer Contract for the waste-to energy project was signed between JANCOM and the Philippine Government. The BOT Contract was submitted to President Ramos for approval but was then too close to the end of his term that his term expired without him signing the contract. He, however, endorsed the same to incoming President Estrada. With the change in administration came changes in policy and economic environment, thus the BOT contract was not pursued and implemented. JANCOM appealed to the President for reconsideration and despite the pendency of the appeal, MMDA caused the publication of an invitation to pre-qualify and submit proposals for solid waste management. Issue: Whether or not there is a valid and binding contract between the Republic of the Philippines and JANCOM. Held: There is a valid and binding contract between JANCOM and the Republic of the Philippines. Under Articles 1305 of the Civil Code, A contract is a meeting of the minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. Art. 1315 of the Civil Code provides that a contract is perfected by mere consent. Consent, on the other hand, is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to

52

constitute the contract (Art. 1319, Civil Code). In the case at bar, the signing and execution of the contract by the parties clearly show that, as between the parties, there was a concurrence of offer and acceptance with respect to the material details of the contract, thereby giving rise to the perfection of the absence of Presidents signature is untenable. Significantly, the contract itself provides that the signature of the President is necessary only for its effectivity, not its perfection. There being a perfected contract, MMDA cannot revoke or renounce the same without the consent of the other. From the moment of perfection, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. (Art. 1315) It is a general principle of law that no one may be permitted to change hid mind or disavow and go back upon his own acts, or to proceed contrary thereto, to the prejudice of the other party. PENALTY CLAUSE LIGUTAN VS. COURT OF APPEALS G.R. No. 147465, February 12, 2002 Facts: Ligutan and dela Llana obtained a loan from Security Bank and Trust Co. They executed a promissory note binding themselves jointly and severally to pay the sum borrowed with an interest of 15.89% per annum upon maturity and to pay a penalty of 5% every month on the outstanding principal and interest in case of default. In addition, they agreed to pay 10% of the total amount due by way of attorneys fees if the matter were indorsed to a lawyer for collection or if a suit were instituted to enforce payment. Ligutan and dela Llana failed to settle the debt. A complaint for recovery of the amount due was filed with the RTC. The court held, among others, the borrowers were liable for a 3% per month penalty (instead of 5%) and 10% of the total amount of the indebtedness for attorneys fee, in addition to the principal loan. Issue: Whether the court is correct in holding the borrowers liable for the penalty. Held: A penalty clause, expressly recognized by law, is an accessory undertaking to assume greater liability on the part of an obligor in case of breach of an obligation. It functions to strengthen the coercive force of the obligation and to provide for what could be the stipulated indemnity without the necessity of proof on the existence and on the measure of damages caused by the breach. Although the court may not at liberty ignore the freedom of the parties to agree on such terms and conditions as they see fit, a stipulated penalty, nevertheless may be equitably reduced by the courts if iniquitous or unconscionable or if the principal obligation has been partly or irregularly complied with. The reduction is justified by the facts that the borrowers were able to partly comply with their obligations.

SIMULATED CONTRACTS

53

CRUZ VS. BANCOM FINANCE CORPORATION G.R. No. 147788 March 19, 2002 Facts: Norma Sulit was introduced by Candelaria Sanchez to Edilberto and Simplicio Cruz and offered to purchase the parcel of land owned by the Cruz brothers. The askingprice for the land was P700, 000, but Sulit had only P25,000 which Edilberto accepted as earnest money with the agreement that title would pass to Sulit on the payment of the balance. Sulit failed to pay the balance. Capitalizing on the close relationship of Sanchez with the brothers, Sulit succeeded in having the brothers execute a document of sale in favor of Sanchez who would then obtain a bank loan in her name using the said land as collateral. On the same day, Sanchez executed another Deed of Absolute Sale in favor of Sulit. Sulit assumed all the obligations of Sanchez to the original owners of the land in a Special Agreement. Unknown to the brothers, Sulit managed to obtain a loan from Bancom secured by a mortgage over the land. Because Sulit failed to pay the purchase price stipulated in the Special Agreement, the brothers filed a complaint for reconveyance. Sulit also defaulted in her payment to the Bank and her mortgage was foreclosed. At the auction sale, Bancom was declared the highest bidder. Issue: Whether or not the Deeds of Sale were valid and binding. Held: Simulation takes place when the parties do not really want the contract they have executed to produce the legal effects expressed by its wordings. Art. 1345 states that simulation of a contract may be absolute or relative. The former takes place when the parties conceal their true agreement while Art. 1346 states that an absolutely simulated contract is void. A relative stimulation, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or pubic policy binds the parties to their agreement. The Deeds of Sale were executed merely to facilitate the use of the property as collateral to secure a loan from a bank. Although the Deed of Sale between the brothers and Sanchez stipulated a consideration, there was actually no exchange of money. Moreover, the failure of Sulit to take possession of the property sold to her was a clear badge of simulation that rendered the whole transaction void and without force and effect. NOVATION PILIPINAS BANK VS. ONG 387 SCRA 97, August 8, 2002 Facts: On April 1991, Baliwag Mahogany Corporation (BMC), through its president, respondent Alfredo T. Ong, applied for a domestic commercial letter credit with petitioner Pilipinas Bank (the bank) to finance the purchase of Air Dried, Dark Lauan sawn lumber. The bank approved the application and issued a Letter of Credit. To secure payment of the amount, BMC, through respondent Ong, executed two (2) trust receipts providing that it shall turn over the proceeds of the goods to the bank, if sold, or return the goods, if unsold, upon maturity on July 28, 1991 and August 4, 1981.

54

On due dates, BMC failed to comply with the trust receipt agreement. On November 22, 1991, it filed with the Securities and Exchange Commission (SEC) a Petition for Rehabilitation and for a Declaration in a State of Suspension of Payments. On January 8, 1992, the SEC issued an order creating a Management Committee wherein the bank is represented. On October 13, 1992, BMC and a consortium of 14 of its creditor banks entered into a Memorandum of Agreement (MOA) rescheduling the payment of BMCs existing debts. On November 27, 1992, the SEC rendered a Decision approving the Rehabilitation Plan of BMC as contained in the MOA and declaring it in a state of suspension of payments. However, BMC and respondent Ong defaulted in the payment of the obligations under the rescheduled payment scheme provided in the MOA. On April 1994, the bank filed a complaint charging respondents Ong and Leoncia Lim (as president and treasurer of BMC) with violation of the Trust Receipts Law (PD 115). The bank alleged that both respondents failed to pay their obligation under the trust receipt despite demand. The Court of Appeals renders its decision holding that the execution of the MOA constitutes novation which places petitioner bank in estoppel to insist on the original trust relation and constitutes a bar to the filing of any criminal information for violation of the trust receipts law. The Motion for Reconsideration was denied. Hence this Petition. Issue: Whether or not the MOA was a novation of the trust agreement between the parties. Held: Petition is DENIED, MOA novates the trust agreement. Mere failure to deliver the proceeds of the sale of the goods, if not sold, constitutes violation of PD 115. However, what is being punished by the law is the dishonesty and abuse of confidence in the handling of money or goods to the prejudice of another regardless of whether the latter is the owner. It bears emphasis that when the petitioner bank made a demand upon a BMC on February 11, 1994 to comply with its obligations under the trust receipts, the latter was already under the control of the Management Committee created by SEC. The Management Committee took custody of all BMCs assets and liabilities, including the red lauan lumber subject of trust receipts, and authorized their use in the ordinary course of business operations. Clearly, it was the Management Committee which could settle BMCs obligations. In Quinto vs. People, this Court held that there are two ways which could indicate the presence of novation, thereby producing the effect of extinguishing an obligation by another which substitutes the same. The first is when novation has been stated and declared in unequivocal terms. The second is when the old and the new obligations are incompatible on every point. The test of incompatibility is whether or not the two obligations can stand together. If they cannot, they are incompatible and the latter obligation novates the first. The incompatibility must take place in any of the essential elements of the obligation, such as its object, cause or principal conditions. Contrary to petitioners contention, the MOA did not only reschedule BMCs debts, but more importantly, it provided principal conditions, which are incompatible with the trust agreement. The execution of the MOA extinguished respondents obligation under the trust receipts. Respondents liability, if any, would only be civil in nature since the trust

55

receipts were transformed into mere loan documents after the execution of the MOA. CONDITIONAL OBLIGATION; WHERE THE VENDEE DOES NOT COMPLY WITH HIS OBLIGATION TO PAY THE BALANCE OF THE PURCHASE PRICE, THE VENDORS OBLIGATION TO EXECUTE A DEED OF ABSOLUTE SALE WILL NOT ARISE. CORINTHIAN REALTY, INC. VS. COURT OF APPEALS 349 SCRA 260, December 26, 2002 Facts: Private respondents and petitioner entered into a Deed of Conditional Sale (the deed) of a parcel of land. Under the deed, the remaining balance will be paid by the vendee to the vendors within the period of ninety (90) days from the execution of the deed; and if for no justifiable reason, the vendee fails and/ or refuses to comply with this obligation, the vendors, without prior notice to the vendee, shall forfeit the earnest money, but as soon as the vendee complies with his obligations under the contract, then the vendors shall immediately execute the absolute deed of sale. CONTRACTS TANONGON VS. SAMSON 382 SCRA 130, May 9, 2002 Facts: Cayco Marine Service (CAYCO) is engaged in the business of hauling oil. It is operated by Illuminada Cayco Olizon (Olizon). Resondents Felicidad Samson, Casiano Osin, Alberto Belbes and Luisito Venus were among the employees of CAYCO and/or Olizon. On MARCH 9, 1994, respondents filed a complaint against CAYCO and Olixzon for illegal dismissal, underpayment of wages, non-payment of holiday pay, rest day pay and leave pay. The labor arbiter dismissed the complaint for lack of merit. On appeal, it was reversed by the NLRC. On June 25, 1997, the NLRC Research and Investigation Unit submitted to the labor arbiter the judgment award for each respondent. On June 24, 1997, a writ of execution was issued directing the NLRC sheriff to collect from CAYCO and Olizon the responding award due for each respondent On August 8, 1997, after the notice of levy/sale on execution of personal property was issued, CAYCO nad Olizons motor tanker was seized, to be sold at public auction on August 19, 1997. On August 15, 1997, petitioner Doretea Tanongon, filed a third party claim before the labor arbiter, alleging that she was the owner of the subject motor tanker, having acquired the same from Olizon on July 29, 1997, and in consideration. On October 15, 1997, the labor arbiter issued an order dismissing the third party claim for lack of merit. On appeal, the NLRC reversed that of the labor arbiter thereby lifting the levy and restrained execution. The Court of Appeals debunked the claim that the petitioner was a buyer in good faith on the ground that purchasers could not close their eyes to facts that should put reasonable persons on guard. The records show that the sale was hastily concluded; the tanker and

56

the necessary documents were immediately delivered to the new owner to the new owner. These facts confirmed respondents suspicion that Olizon had intended to overcome the enforcement of the Writ of Execution. Hence this Petition. Issue: Whether or not petitioner Dorotea Tanongon is a buyer in good faith and for value. Held: Petition is DENIED; Petitioner Dorotea Tanongon is not a purchaser in good faith and for value. There is sufficient basis to affirm the CA finding that petitioner was a buyer in abs faith. The writ of Execution was issued by the labor arbiter on July 24, 1997. And the sale of the levied tanker was made only on July 29, 1997. The CA correctly ruled that the act of Olizon was a cavalier attempt to evade payment of the judgment debt. She obviously got word of the issuance of these antecedents, petitioner bought the tanker barely ten days before it was levied upon on August 8, 1997. Purchaser in good faith or an innocent purchaser for value is one who buys properly and pays a full and fair price for it at the time of the purchase or before any notice of some other persons claim on or interest in it. Petitioner should have inquired whether Olizon had other unsettled obligations and encumbrances that could burden the subject property. Any person engaged in business would be wary of buying from a company that is closing shop, because it may be dissipating its assets to defraud its creditors. PROPERTY ISSUANCE OF WRIT OF POSSESSION; REAL ESTATE MORTGAGE

TERESITA V. IDOLOR VS. HON. COURT OF APPEALS, SPOUSES GUMERSINDO DE GUZMAN and ILUMINADA DE GUZMAN and HON. JOSE G. PINEDA, Presiding Judge of Regional Trial Court, National Capital Judicial Region, Branch 220, Quezon City G.R. No. 161028. January 31, 2005 Facts: Petitioner Teresita V. Idolor obtained a loan from respondent-spouses Gumersindo and Iluminada De Guzman secured by a real estate mortgage over a property covered by TCT No. 25659. Upon default by petitioner in the payment of her obligation, respondent instituted extra-judicial foreclosure proceedings against the real estate mortgage.During the auction sale, respondents emerged as the highest bidder and were issued a Certificate of Sale. On June 25, 1998, petitioner filed a complaint for annulment of the Certificate of Sale with prayer for the issuance of a TRO and a writ of preliminary injunction. The RTC issued a writ of preliminary injunction, however, the Court of Appeals annulled the same on the ground of grave abuse of discretion. The ownership over the subject property having been consolidated in their name, respondent-spouses De Guzman moved for the issuance of a writ of possession with the Regional Trial Court where the case for the

57

annulment of the Certificate of Sale was pending.[5] On May 27, 2002, the trial court denied the motion, ruling that the the lifting of the writ of preliminary injunction does not ipso facto entitle defendant De Guzman to the issuance of a writ of possession over the property in question. It only allows the defendant Sheriff to issue a final deed of sale and confirmation sale and the defendant De Guzman to consolidate the ownership/title over the subject property in his name. In a petition for certiorari before the Court of Appeals, the appellate court found that the trial court gravely abused its discretion in denying the motion for the issuance of the writ of possession to the mortgagee or the winning bidder is a ministerial function of the court and that the pendency of an action questioning the validity of a mortgage cannot bar the issuance of the writ of possession after title to the property has been consolidated in the mortgagee.[7] Hence, it reversed and set aside the May 27, 2002 order of the trial court. Issue: Whether or not the mortgage, by mere motion, not by petition, may apply for a Writ of Possession in the same case for annulment of the Certificate of Sale of which he is a defendant. Held: A writ of possession is an order whereby the sheriff is commanded to place a person in possession of a real or personal property. It may be issued under the following instances: (1) land registration proceedings under Sec. 17 of Act 496; (2) judicial foreclosure, provided the debtor is in possession of the mortgaged realty and no third person, not a party to the foreclosure suit, had intervened; and (3) extrajudicial foreclosure of a real estate mortgage under Sec. 7 of Act 3135 as amended by Act 4118, to which the present case falls. Under the provision cited above, the purchaser in a foreclosure sale may apply for a writ of possession during the redemption period by filing for that purpose an ex parte motion under oath, in the corresponding registration or cadastral proceeding in the case of a property with torrens title. Upon the filing of such motion and the approval of the corresponding bond, the court is expressly directed to issue the writ. Upon the expiration of the redemption period, the right of the purchaser to the possession of the foreclosed property becomes absolute. The basis of this right to possession is the purchasers ownership of the property. Mere filing of an ex parte motion for the issuance of the writ of possession would suffice, and the bond required is no longer necessary, since possession becomes an absolute right of the purchaser as the confirmed owner. In this case, respondent-spouses acquired an absolute right over the property upon the failure of petitioner to exercise her right of redemption and upon the consolidation of the title in their name. An ex-parte petition for issuance of possessory writ under Section 7 of Act No. 3135 is not, strictly speaking, a judicial process. Even if the same may be considered a judicial proceeding for the enforcement of ones right of possession as purchaser in a foreclosure sale, it is not an ordinary suit filed in court, by which one party sues another for the enforcement or protection of a right, or the prevention or redress of a wrong.[18] It is a non-litigious proceeding and summary in nature as well. As such, the rigid and technical application of the rules on legal fees may be relaxed in order to avoid manifest injustice to the respondent This rule is applicable in the present case. Although respondent-

58

spouses have been declared as the highest bidder and despite having consolidated the title in their name, they still failed to take possession of the property through numerous legal maneuverings of the petitioner. A simple ex parte application for the issuance of a writ of possession has become a litigious and protracted proceeding.

SPOUSES JUAN NUGUID AND ERLINDA T. NUGUID VS. HON. COURT OF APPEALS AND PEDRO P. PECSON G.R. No. 151815. February 23, 2005 Facts: Pedro P. Pecson owned a commercial lot on which he built a 4-door 2-storey apartment building. For failure to pay realty taxes, the lot was sold at public auction to Mamerto Nepomuceno, who in turn sold it to the spouses Juan and Erlinda Nuguid. Pecson challenged the validity of the auction sale before the RTC of Quezon City, which upheld the spouses title but declared that the apartment building was not included in the auction sale. This was affirmed in toto by the Court of Appeals and thereafter by this Court. On June 23, 1993, by virtue of the Entry of Judgment, the Nuguids became the uncontested owners of the 256-square meter commercial lot. As a result, the Nuguid spouses moved for delivery of possession of the lot and the apartment building. The trial court, relying upon Article 546[1][7] of the Civil Code, ruled that the Spouses Nuguid were to reimburse Pecson for his construction cost, the spouses Nuguid were entitled to immediate issuance of a writ of possession over the lot and improvements. The RTC also directed Pecson to pay the same amount of monthly rentals to the Nuguids as paid by the tenants occupying the apartment units. Pecson duly moved for reconsideration, the RTC issued a Writ of Possession,directing the deputy sheriff to put the spouses Nuguid in possession of the subject property with all the improvements thereon and to eject all the occupants therein.Pecson then filed a special civil action for certiorari and prohibition with the Court of Appeals, which affirmed the order of payment of construction costs but rendered the issue of possession moot on appeal. Frustrated by this turn of events, Pecson filed a petition for review before this Court. On May 26, 1995, the Court handed down the decision remanding to the trial court for it to determine the current market value of the apartment building on the lot. The value so determined shall be forthwith paid by Spouses Juan and Erlinda Nuguid] to Pedro Pecson otherwise the petitioner shall be restored to the possession of the apartment building until payment of the required indemnity. On the basis of this Courts decision, Pecson filed a Motion to Restore Possession and a Motion to Render Accounting, praying respectively for restoration of his possession over the subject 256-square meter commercial lot and for the spouses Nuguid to be directed to render an accounting under oath, of the income derived from the subject four-door apartment from November 22, 1993 until possession of the same was restored to him. Issue: Whether or not the petitioners are liable to pay rent over and above the current market value of the improvement and that such increased award of rentals by the RTC was reasonable and equitable.

59

Held: It is not disputed that the construction of the 4-door 2-storey apartment, subject of this dispute, was undertaken at the time when Pecson was still the owner of the lot. When the Nuguids became the uncontested owner of the lot, by virtue of entry of judgment of the Courts decision, the apartment building was already in existence and occupied by tenants. Under Article 448, the landowner is given the option, either to appropriate the improvement as his own upon payment of the proper amount of indemnity or to sell the land to the possessor in good faith. Relatedly, Article 546 provides that a builder in good faith is entitled to full reimbursement for all the necessary and useful expenses incurred; it also gives him right of retention until full reimbursement is made. As we earlier held, since petitioners opted to appropriate the improvement for themselves as early as June 1993, when they applied for a writ of execution despite knowledge that the auction sale did not include the apartment building, they could not benefit from the lots improvement, until they reimbursed the improver in full, based on the current market value of the property. Despite the Courts recognition of Pecsons right of ownership over the apartment building, the petitioners still insisted on dispossessing Pecson by filing for a Writ of Possession to cover both the lot and the building. Clearly, this resulted in a violation of respondents right of retention. Worse, petitioners took advantage of the situation to benefit from the highly valued, income-yielding, four-unit apartment building by collecting rentals thereon, before they paid for the cost of the apartment building. It was only 4 years later that they finally paid its full value to the respondent. Given the circumstances of the instant case where the builder in good faith has been clearly denied his right of retention for almost half a decade, we find that the increased award of rentals by the RTC was reasonable and equitable. The petitioners had reaped all the benefits from the improvement introduced by the respondent during said period, without paying any amount to the latter as reimbursement for his construction costs and expenses. They should account and pay for such benefits. We need not belabor now the appellate courts recognition of herein respondents entitlement to rentals from the date of the determination of the current market value until its full payment. Respondent is clearly entitled to payment by virtue of his right of retention over the said improvement.

HEIRS OF JUAN PANGANIBAN & INES PANGANIBAN, namely: ERLINDA B. PACURSA, ERNESTO P. BACONGA, EVELYN BACONGA, AMY B. BIHAG, SIEGFREDO BACONGA, IMELDA B. PACALDO, BACONGA, IMELDA B. PACALDO, REBECCA B. LI, OFELIA B. OALIVAR, GEMMA BACONGA, MARIE INES BACONGA, MELANIE BACONGA, and ANITA FUENTES VS. ANGELINA N. DAYRIT. G.R. No. 151235, July 28, 2005 Facts: The property subject of controversy is a 2,025-square meter portion of a lot denominated as Lot 1436, situated at Kauswagan, Cagayan de Oro City. It constitutes 3/4 of Lot 1436, one of the 3 lots covered by OCT No. 7864, the other two being Lots 1441

60

and 1485. Said OCT was registered in the names of Juan and Ines Panganiban, father and daughter respectively. Herein petitioners alleged that they are the possessors and owners of Lot 1436 which they inherited from the late Juan and Ines. They acknowledge that Lot 1436 was the only remaining lot covered by OCT No. 7864, Lots 1485 and 1441 having been sold in 1949 to Galo Sabanal and Pablo Dagbay respectively. The owners duplicate copy of OCT No. 7864 covering Lot 1436 had been lost but upon petition with the trial court in 1977 by Erlinda B. Pacursa, one of the heirs of Ines and a petitioner herein, the trial court granted the petition. Accordingly, the Register of Deeds of Misamis Oriental issued an owners duplicate certificate of the OCT Erlinda. Petitioners further alleged that unknown to them, a certain Cristobal Salcedo asserted ownership over Lot 1436 and believing that it was unregistered, sold a portion of it to respondent. The latter subsequently discovered that what she had bought was registered land. Unable to annotate the deed of sale at the back of OCT No. 7864, respondent fraudulently filed a petition for issuance of the owners copy of said title, alleging that the copy issued to Erlinda was lost in the fire that razed Lapasan, Cagayan de Oro City in 1981. The petition was granted and the Register of Deeds of Misamis Oriental issued the second owners duplicate certificate of OCT to respondent which contained an annotation of a Notice of Adverse Claim filed by Erlinda. The Notice of Adverse Claim alleged in part that Erlinda is one of the lawful heirs of Juan and Ines, the registered owners of the property, and as such, she has a legitimate claim thereto. Petitioners further alleged that the newly issued owners duplicate certificate of OCT to respondent was prejudicial to their previously issued title which is still in existence. Thus, they prayed among others that they be declared as the rightful owners of the property in question and that the duplicate certificate of OCT in their possession be deemed valid and subsisting. In her answer to the amended complaint, respondent denied all the material allegations but alleged that Lot 1436 was actually sold sometime in 1947 by the petitioners themselves and their father, Mauricio Baconga. The sale was purportedly covered by a Deed of Definite Sale. Salcedo then came into ownership, possession and enjoyment of the property in question and sold a portion of Lot 1436 with an area of 2,025 square meters, more or less, to respondent. From then on, the property in question has been in her actual and physical enjoyment. Respondent further alleged that the complaint was barred by the principles of estoppel and laches by virtue of the sales executed by petitioners themselves and their father. After due trial and consideration of the documentary and testimonial evidence adduced by both parties, the trial court rendered a decision against petitioners and in favor of respondent which declared defendant as the true and real owner of the lot in question; and thatthe owners duplicate copy of Original Certificate of Title No. 7864 null and void same being obtained by plaintiffs when they were not owners anymore of Lot 1436; the owners duplicate copy of OCT obtained by defendant as the one valid. The Regional Trial Court Decision was modified by the CA on appeal by petitioners. The appellate court held that contrary to the ruling of the trial court, the valid and subsisting duplicate certificate of OCT No. 7864 was the one issued to Erlinda, not to respondent, considering that respondent had failed to comply with the mandatory jurisdictional

61

requirements of law for the reconstitution of title under Sec. 13 of Republic Act No. 26. The CA invoked the doctrine that a trial court does not acquire jurisdiction over a petition for the issuance of a new owners duplicate certificate of title if the original is in fact not lost. Nonetheless, the CA affirmed in all other respects the ruling of the trial court, including the critical holding that respondent was the owner of the subject property. The decision of the trial court is modified so as to order the cancellation of the owners duplicate copy of OCT No. 7864 issued to defendant Angelina Dayrit and declaring the owners duplicate copy of OCT No. 7864 to be still valid for all intents and purposes. Issues: 1. Who between petitioners and respondent is the rightful owner of the property in dispute. 2. Whether petitioners right to recover the property is barred by laches assuming they are the rightful owners thereof as they claim. 3. Which owners duplicate certificate of title is valid and subsisting, the one in petitioners possession or the one issued to respondent. Held: The resolution of the foregoing issues hinges on the question of What appears on the face of the title is controlling in questions of ownership since the certificate of title is an absolute and indefeasible evidence of ownership of the property in favor of the person whose name appears therein. The CA correctly ruled that the duplicate certificate of title in petitioners possession is valid and subsisting. This Court had already ruled in Serra Serra v. Court of Appeals that if a certificate of title has not been lost but is in fact in the possession of another person, the reconstituted title is void and the court rendering the decision has not acquired jurisdiction over the petition for issuance of a new title. Since the owners duplicate copy of OCT No. 7864 earlier issued to Erlinda is still in existence, the lower court did not acquire jurisdiction over respondents petition for reconstitution of title. The duplicate certificate of title subsequently issued to respondent is therefore void and of no effect. The registered owners of OCT No. 7864 on the face of the valid and subsisting duplicate certificate of title are still Juan and Ines, petitioners predecessors in interest. Per Section 46 of the Land Registration Act, no title to registered land in derogation to that of the registered owner shall be acquired by prescription or adverse possession. This rule taken in conjunction with the indefeasibility of a Torrens title leads to the conclusion that the rightful owners of the property in dispute are petitioners. These premises considered, it was error on the part of the trial court to rule that respondent was the owner of the subject property and for the CA to have affirmed such holding. We rule instead that the successors-in-interest of Juan and Ines are the legal owners of the subject property, namely petitioners herein. Petitioners ownership of the property having been established, the question now is whether they are entitled to its possession. On this point, the Court rules in the negative. Petitioners are no longer entitled to recover possession of the property by virtue of the equitable defense of laches. Thus, petitioners argument that laches is not applicable to them has no merit. By laches is meant: the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier, it is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned it

62

or declined to assert it. The defense of laches is an equitable one and does not concern itself with the character of the defendants title but only with whether or not by reason of plaintiffs long inaction or inexcusable neglect, he should be barred from asserting his claim at all, because to allow him to do so would be inequitable and unjust to defendant. In our jurisdiction, it is an enshrined rule that even a registered owner of property may be barred from recovering possession of property by virtue of laches. In this case, both the lower court and the appellate court found that contrary to respondents claim of possession, it was Salcedo, respondents predecessor-in-interest who had been in actual possession of the property. Salcedo was the owner and the one in possession of the land until 1978 when respondent became the possessor thereof based from the ocular inspection by the lower court. It was only 45 years from the time Salcedo took possession of the property that petitioners made an attempt to claim it as their own. Petitioners declared the property for tax purposes, registered their adverse claim to respondents title, and filed the instant case all in 1992. These actuations of petitioners point to the fact that for forty-five (45) years, they did nothing to assert their right of ownership and possession over the subject property. Given the circumstances in the case at bar, the application of the equitable defense of laches is more than justified. All the four (4) elements of laches prescribed by this Court in the case of Go Chi Gun, et al. v. Co Cho, et al.[42] and reiterated in the cases of Mejia de Lucas v. Gamponia, Miguel v. Catalino and Claverias v. Quingco are present in the case at bar, to wit: (1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation of which complaint is made for which the complaint seeks a remedy; (2) delay in asserting the complainants rights, the complainant having had knowledge or notice, of the defendants conduct and having been afforded an opportunity to institute a suit; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which he bases his suit; and (4) injury or prejudice to the defendant in the event relief is accorded to the complainant, or the suit is not held to be barred. RUBEN S. SIA VS. HEIRS OF JOSE P. MARIANO (Helen S. Mariano, Jose M.S. Mariano, Danilo D.S. Mariano, Ma. Sofia C.S. Mariano, Ma. Leonor S. Mariano), TESTATE ESTATE OF IRENE P. MARIANO, and ERLINDA MARIANOVILLANUEVA G.R. No. 143606. June 29, 2005 Facts: Spouses Macario and Irene P. Mariano during their lifetime owned the following six parcels of land covered by five titles: Lot 15-A (TCT No. 1962), Lot 15-B (TCT No. 1963), Lot 15-C (TCT No. 1964), Lots 545 and 2348 (TCT No. 259)[2] and Lot 612 (TCT No. 219). On December 1, 1972, Macario died and the surviving heirs, spouse Irene and children, Jose and Erlinda, were issued new titles in their names. On December 9, 1974, Irene married Rolando S. Relucio Four months later, Irene executed a Deed of Absolute Sale covering the six parcels of land in favor of Raul Santos, Rolandos first cousin, for a total consideration of P150,000.00.

63

On June 7, 1979, Irene sold Lot 612 to Greta Tinga de los Reyes. On March 10, 1982, Irene executed another Deed of Absolute Sale in favor of Raul covering Lots 545 and 2348. On October 2, 1987, the three remaining lots were transferred in the name of Raul. Previously, on November 24, 1986, Lot 15-C was levied upon in favor of Francisco Bautista in Civil Case No. R-570 before Branch 22 of the Regional Trial Court of Camarines Sur. On December 9, 1988, it was sold at public auction to Ruben Sia. On June 26, 1988, Irene died. Three weeks later, Jose and Erlinda filed a complaint against Rolando, Raul and the Register of Deeds of Naga City before the RTC of Naga City for annulment of sale with damages, docketed as Civil Case No. 88-1506. They sought the annulment of the Deed of Absolute Sale on grounds of forgery and simulated sale, the reconveyance of the properties, and damages. When Jose died on December 2, 1989 he was substituted by his surviving heirs, likewise, when Rolando died, he was substituted by his surviving heirs. Meanwhile, on August 9, 1990, Lot 15-A was transferred to Amado Sanao under a Deed of Sale with Real Estate Mortgage. Heirs of Jose and the Testate Estate of Irene filed a complaint for annulment of title and deed with damages. Such Civil Case was consolidated for joint trial with former Civil Case and a Joint Judgment was rendered by the trial court dismissing the complaints and counterclaims and upholding the validity of the Deeds of Absolute Sale executed by Irene in favor of Raul. On appeal, the CA held that: only four lots are subject of the case; despite the execution of the two Deeds of Absolute Sale in favor of Raul, Irene continued to possess, exercise management and control over the subject properties. Irene constructed a building on Lots 545 and 2348; such acts of dominion demonstrate that the two Deeds of Absolute Sale executed by Irene in favor of Raul are simulated or fictitious contracts. Accordingly, TCT issued in the name of Raul Santos and Amado Sanao are ordered cancelled. A Motion for Reconsideration was filed by Raul. The Heirs of Jose and Erlinda M. Mariano filed a Motion for Partial Reconsideration/Clarification. Thus, the assailed Resolution, and Motion for Reconsideration filed separately by Raul Santos and as well as the Motion for Reconsideration/Clarification filed by Heirs of Jose P. Mariano and Erlinda were denied, while the Supplemental Motion to Restore Possession and Administration to PlaintiffsAppellants was granted. Finally, plaintiffs-appellants are declared to have the right to redeem Lot 15-C from Ruben Sia. Issue: Whether or not the Court of Appeals erred in having declared in its resolution that plaintiffs-appellants have the right to redeem Lot 15-C from herein petitioner. Held: Three undisputed facts are prominent in the present petition which have great bearing in the disposition thereof: (1) petitioner is neither a party before the trial court nor in the CA; (2) Lot 15-C is not a subject matter of the case; and (3) our decision in G.R. Nos. 94617 and 95281, wherein herein respondent Erlinda Villanueva and petitioner Sia are parties, had expressly declared that respondents have the right to redeem the lot covered by TCT No. 17745 which refers to Lot 15-C. There is no question that Lot 15-C is not one of the parcels of land involved in the appeal before the CA. In its decision, it specifically mentioned only Lot 15-A, Lot 15-B, Lot 545 and Lot 2348 as the lots subject of the case. Thus, this fact and the fact that petitioner is not a party to the case, militate against the propriety of declaring in the assailed

64

Resolution that respondents have the right to redeem Lot 15-C. Finally, there is no longer any actual case or controversy between the parties insofar as the issue of redemption of Lot 15-C is concerned. This is settled by the decision of this Court which orders the Provincial Sheriff of Camarines Sur to accept payment of redemption money for the property levied in Civil Case No. R-570 from petitioner Erlinda Mariano, to execute and deliver to Erlinda Mariano a duly accomplished certificate of redemption of said property. The Definite Deed of Sale and writ of execution issued in favor of Ruben Sia are nullified. MODE OF ACQUIRING OWNERSIP; PRESCRIPTION; A POSSESSOR IN THE CONCEPT OF OWNER SOLEDAD CALICDAN, ETC. VS. SILVERIO CENDANA, ETC. G.R. No.155080, February 5, 2004 Facts: On August 25, 1947, Fermina, widow of Sixto Calicdan, who died intestate, executed a deed of donation intervivos whereby she conveyed a 750-square meter of unregistered land located in Mangaldan, Pangasinan formerly owned by Sixto to respondent Silverio Cendana who immediately entered into possession of the land. Sometime in 1949, Cendana constructed a two-storey residential house thereon where he resided until his death in 1998. On June 19, 1992, petitioner Soledad, daughter of Fermina, through her legal guardian, Guadalupe Castillo, filed a Complaint for Recovery of Ownership, Possession and Damages against the respondent alleging that; 1) the donation was void; 2) the respondent took advantage of her incompetence in acquiring the land; and 3) she merely tolerated respondents possession of the land as well as the construction of his house thereon. In his answer with Motion to dismiss, respondent contended that; 1)the land was donated to him by Fermina in 1947; 2) he had been publicly, peacefully, continuously and adversely in possession of the land for a period of 45 years; and 3) the complaint was barred by prior judgment in the special proceedings. In its decision dated November 12, 1996, the trial court ordered Silverio Cendana to vacate the land and surrender ownersip and possession of the same to petitioner. On appeal, the Court of Appeals reversed the trial courts decision and declared that the donation was valid and that the petitioner lost her ownership of the property by prescription. Issue: Whether or not the deed of donation inter vivos executed on August 25, 1947 was void. Held: Prescription is another mode of acquiring ownersip and other real right over immovable property. It is concerned with lapse of time in the manner and uner conditions laid down by law, namely, that the possession should be in the concept of an owner, public, peaceful, uninterrupted and adverse. The good failth of the possessor consists in the reasonable belief that the person from whom he received the thing was the owner thereof, and could transmit his ownership. For purposes of prescription, there is just title

65

when the adverse claimant came into possession of the property through one of the modes recognized by law for the acquisition of ownership or other real rights, but the grantor was not the owner or could not transmit any right. In this case at bar, as it demands that the possession be in good faith and with just title and there is no evidence on record to prove respondents good faith, nevertheless, his adverse possession of the land for more than 45 years aptly shows he has met the requirements for extraordinary acquisitive prescription to set in. DONATION MORTIS CAUSA OR INTER VIVOS MA. ESTELA MAGLASANG VS. THE HEIRS OF CORAZON CABATINGAN G.R. No.131953, June 5, 2002 Facts: Conchita Cabatingan executed in favor of her brother, Nicolas Cabatingan, a Deed of Conditional Donation Inter Vivos for House and Lot. Four other deeds of donation were subsequently executed by Conchita Cabatingan bestowing parcels of land upon Estela Maglasang, Nicolas Cabatingan and Merly Cabatingan. These deeds of donation contain similar provisions, which state that the donation, will become effective upon the death of the donor; provided, however, that in the event that the donee should die before the donor, the present donation shall be deemed automatically rescinded and of no further force and effect. Later, Conchita Cabatingan died. Issue: Whether or not the donations were inter vivos or mortis causa. Held: In a donation mortis causa, the right of disposition is not transferred to the donee while the donor is still alive. In determining whether a donation is one of mortis causa, the following characteristics must be taken into account: 1.) It conveys no title or ownership to the transferee before the death of the transferor; or what amounts to the same thing, that the transferor should retain the ownership and control of the property while alive; 2.) That before his death, the transfer should be revocable by the transferor at will, ad nutum; but the revocability may be provided for indirectly by means of a reserved power in the donor to dispose of the properties conveyed; and 3.) That the transfer should be void if the transferor should survive the transferee. The disputed donations are donations mortis causa. In the present case, the nature of the donations as mortis causa is confirmed by the fact that the donations do not contain any clear provision that intends to pass propriety rights to donee prior to Cabatingans dearh. Cabatingan did not intend to transfer the ownership of the properties to the donee during her lifetime. SALES SALE BY A CO-OWNER; CO-OWNERSHIP

66

AGUIRRE ET, AL. VS. COURT OF APPEALS, ET AL. G.R. No. 122249. January 29, 2004 Facts: Leocadio Medrano and his first wife Emilia owned a piece of land. After the death of Emilia, Leocadio married his second wife Miguela. When Leocadio died, all his heirs agreed that Sixto Medrano, a child of the first marriage, should manage and administer the said property. After Sixto died, his heirs learned that he had executed an Affidavit of Transfer of Real Property in which he falsely stated that he was only heirs of Leocadio. Sixto, then living, was able to sell the property to Maria Bacong a portion of the property, and another portion to Tiburcio Balitaan. Maria Bacong later sold the said portion to Rosendo Bacong. Petitioners, all heirs of Leocadio who were affected by the sale demanded reconveyance of the portions sold by Sixto but the 3 vendees refused. So, petitioners sued them seeking the nullity of the documents and partition. The vendees contended that they acquired the property under the valid deed of sale and petitioners cause of action was bared by laches and prescription. Tiburcio also contended that he is an innocent purchaser for value. Issue: Whether there was a valid sale made by a co-owner ( Sixto) without the consent of the other co-owners. Held: A sale by a co-owner of the whole property as his will affect only his own share but not those of the other co-owners who did not consent to the sale ( Art. 493, NCC). It clearly provides that the sale or other disposition affects only the sellers share pro indiviso, and the transferee gets only what corresponds to his grantors share in the partition of the property owned in common. Since a co-owner is entitled to sell his undivided share, a sale of the entire property by one co-owner without the consent of the other co-owner is NOT NULL AND VOID; only the rights of the co-owner-seller are transferred, thereby making the buyer a co-owner of the property. The proper action in cases like this is not for the nullification of the sale or for the recovery of possession of the things owned in common from the third person who substituted the co-owner or coowners who alienated their shares, but the DIVISION of the common property as if it continued to remain in the possession of the co-owners who possessed and administered it. ( Mainit v. Bandoy). It is clear therefore that the deed of sale executed by Sixto in favor of Tiburcio Balitaan is valid conveyance only insofar as the share of Sixto in the co-ownership is concerned. As we have enunciated in Salvador v. CA (1995), to wit: this Court has held that the possession of a co-owner is like that of a trustee and shall not be regarded as adverse to the other co-owners but in fact beneficial to all of them. Acts which may be considered adverse to strangers may not be considered adverse in so far as co-owners are concerned. A mere silent possession by a co-owner, his receipts of rentals, fruits or profits from the property, the erection of buildings and fences and planting of trees thereon, and the payment of land taxes, cannot serve as proof of exclusive ownership, if it is not borne out by clear and convincing evidence that he exercised such acts of possession which unequivocally constituted an ouster or deprivation of the rights of the other co-owners. Thus, in order that a co-owners possession may be deemed adverse to the cetui que trust or the other co-owners, the following elements must concur: (1) that he has performed

67

unequivocal acts of repudiation amounting to an ouster of the cetui que trust or the other co-owners; (2) that such positive acts of repudiation have been known to the cestui que trust or the other co-owners; and (3) that the evidence thereon must be clear and convincing. Tested against these guidelines, the respondents failed to present competent evidence that the acts of Sixto adversely and clearly repudiate the existing co-ownership among the heirs of Leocadio Medrano. Respondents reliance on the tax declaration in the name of Sixto Medrano is unworthy of credit since we have held on several occasions that tax declarations by themselves do not conclusively prove title to land. Further, respondents failed to show that the Affidavit executed by Sixto to the effect that he is the sole owner of the subject property was known or made known to the other co-heirs of Leocadio Medrano.

RESCISION OF CONTRACT TO BUY ANAMA VS. COURT OF APPEALS, ET AL. GR. No. 128609. January 29, 2004 Facts: The property was previously owned by Douglas Anamas parents, who mortgaged it to Philippine Savings Bank and later was foreclosed. Douglas and the PSBank entered into an agreement denominated as a Contract to Buy whereby the bank agreed to sell to Douglas the said land with all the improvements thereon. The Contract to Buy provides that Anama shall purchase the property of a certain amount and shall pay to the PSBank; it also provides that (1) Anama shall apply with the bank for a loan, the proceeds of which answer for the balance of the purchase price; (2) should the petitioner fail to comply with any of the terms of contract, all amounts paid are forfeited in favor of PSBank, the latter having the option either to demand full payment of total price or to rescind the contract. Anama was able to pay the first and second installments; however, he failed to pay the third installment when it became due. There were several transactions between them to settle the amount due. But later, the bank executed an Affidavit of Cancellation rescinding the contract, and forfeited the payments made by Anama which were applied as rentals of the use of the property. Anama was then advised to vacate the property despite his opposition to the rescission of the Contract to Buy. The bank sold the property to spouses Co, in whose favor TCT was issued. Anama then filed a case for Declaration of Nullity of Deed of Sale, Cancellation of TCT, and Specific Performance with Damages. Issue: Whether the rescission of the Contract to Buy was valid. Held: Since Anama failed to pay the third installment, PSBank was entitled to rescind the Contract to Buy. The contract provides the Bank two options in the event that petitioner fails to pay any of the installments. This was either (1) to rescind the contract outright and forfeit all amounts paid by the petitioner, or (2) to demand the satisfaction of the contract and insist on the full payment of the total price. After petitioner repeatedly failed to pay the third installment, the Bank chose to exercise the first option.

68

The Contract to Buy is actually a contract to sell whereby the vendor reserves ownership of the property and is not to pass until full payment. Such payment is a positive suspensive condition, the failure of which is not a breach but simply an event that prevents the obligation of the vendor to convey title from acquiring binding force. Since ownership of the subject property was not pass to petitioner until fill payment of the purchase price, his failure to pay on the date stipulated, or in the extension granted, prevented the obligation for the Bank to pass title of the property to Anama. The bank could validly sell the property to the spouses Co, the right of the bank to sell the property being unequivocal.

IMPOSTION OF 12% ANNUAL INTEREST RATE ALMEDA VS. CARIO ET AL. GR. No. 152143. January 13, 2003 Facts: Ponciano L. Almeda (vendee) and Avelino Cario (vendor), predecessors-ininterest of petitioners and respondents, entered into two agreements to sell, one covering eight titled properties, and the other, three untitled properties. The agreed price of the eight titled properties was P 1,743,800.00, twenty percent (20%) of which was to be paid upon the signing and execution of the agreement and the balance to be paid in four equal semi-annual installments, beginning six (6) months from the signing thereof, with the balance earning twelve percent (12%) interest per annum. On the other hand, the purchase price of the three untitled properties was P1,208,580.00, fifteen percent (15%) of which was to be paid upon the signing and execution of the agreement, and the balance, bearing a twelve percent (12%) annual interest from the signing thereof, to be paid as follows: fifteen percent (15%) of the purchase price plus interest to be paid upon the issuance of titles to the lots, and the balance plus interests to be paid in semi-annual installments starting form the date of issuance of the respective certificates of title to the lots involved, which must not be later than March 30, 1982. Later, Cario and Almeda executed an amendment to their agreements to sell (a) extending the deadline for the production of the titles to the untitled properties, (b) providing for a partial payment of P300,000.00 for the titled properties, (c) requiring Cario to render an accounting of the proceeds of the sugar cane crop on the properties subject of the sale up to the 1982 harvest season, and (d) obliging Cario to pay Almeda the sum of P10,000.00 a month in case of the failure of the former to produce the certificates of title to the untitled properties by June 30, 1982. Almeda asked Cario for the execution of a Deed of Absolute Sale over the eight titled properties although they had not been fully paid. Cario granted the request and executed the Deed of Sale over the eight titled lots in favor of Almeda. The latter executed an undertaking to pay Cario the balance of the purchase price. Deeds of Sale for two of the three untitled lots were also executed. Cario made demands for the full and final payment of the balance due him in the amount of P477,589.47 and the interest thereon. Despite demand letters sent to Almeda, the balance was not paid. Hence, Cario filed before the RTC a complaint against Almeda. Cario prayed that Almeda be ordered to pay him the balance, the legal interests

69

thereon from demand to full payment, fifteen percent (15%) of all the amounts due, including interests as attorneys fees, litigation expenses, moral, exemplary, and nominal damages and the costs of the suit. The RTC found the claim of Cario to be well founded and gave judgment in his favor. The CA subsequently affirmed the lower courts decision. The Almedas claim that the imposition of a 12% annual interest is erroneous because it is contrary to law and jurisprudence. According to them, the applicable rate is 6% since the case does not involve a loan or forbearance of money, as provided for under Central Bank Circular No. 416. Issue: Whether or not the contention of Almeda is meritorious. Held: This contention is without merit. Art. 2209, NCC provides: If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum. The contracts to sell of the parties stipulated that the balance of the purchase price shall earn an interest rate of 12% per annum upon signing of the contract. Such stipulations have the force of law between the contracting parties and should be complied with in good faith. The interest in this case should be allowed to run from March 9, 1993, respondents extrajudicial demand for payment of the remaining balance plus interest having begun on said date. In addition, in accordance with our decision in Eastern Shipping Lines, Inc. vs. Court of Appeals, when the judgment of the court awarding the sum of money becomes final and executory, a 12% interest per annum shall also be imposed from such finality until satisfaction thereof, this interim period by deemed to be by then an equivalent to a forbearance of credit. EQUITABLE MORTGAGE HILADO VS. HEIRS OF RAFAEL MEDALLA 377 SCRA 257. February 15, 2002 Facts: Gorgonio Macainan was the owner of the several properties. After his death, his estate was divided among his heirs, including his children by his first wife, a contract ( Anita, Rosita & Berbonio) As Berbonio had predeceased Gorgonio, her children ( Rafael, Lourdes&Teresita surnamed Medalla) succeeded to her inheritance. Respondents herein are the heirs of Rafael Medalla. Rafael Medalla executed a Deed of Absolute Sale purporting to sell his share in the inheritance to Gorgonio Hilado. Later, he executed anotherDeed of Absolute Sale in favor of Hilado over his share in another inherited property. Over the next 2 years, Hilado and Medalla executed 3 more contracts concerning the sold properties;(1) Memorandum of Agreement,(2) Deed of Resale, whereby Hilado resold to Medalla two of the 5 hectares a lot, and (3)Agreement. Anita Macainan (his aunt) tried to redeem the first property that was sold from Hilado but

70

she failed, so she filed a suit against Rafael and Hilado for Legal redemption before the RTC. So, Rafael filed a cross-claim against Hilado, alleging that the first deed of sale was in fact an equitable mortgage to secure a loan from Hilado. The latter denied that the agreement between them was a loan but a Deed of Sale, reflecting their true agreement. Issue: Whether the Deed of Absolute Sale executed by Medalla and Hilado is in fact an equitable mortgage. Held: Under Art. 1602 in relation to Art. 1604, NCC, a contract purporting to be an absolute sale is presumed to be an equitable mortgage--- (1) when the price of a sale.is unusually inadequate; (2) when the vendor remains in possession as lessee or otherwise;(3) when after the expiration of the right to repurchase another instrument extending the period of the redemption or granting a new period is executed;(4) when the purchaser retains for himself a part of the purchase price;(5) when the vendor binds himself to pay the taxes on the thing sold;(6) in any other case where it may be fairly inferred that theh real intention of the parties is that the presence of any of these circumstances is sufficient for a contract to be presumed as an equitable mortgage. In view of the conclusions we have reached, it is unnecessary to pass upon Hilados contention that respondents are bound by the terms of the Deed of Sale in question as the law between the parties. It will suffice to say that even if a document appears on its face to be a sale, the owner of the property may prove that the contract is really a loan with a mortgage that the document does not express the true intent and agreement of the parties. CONTRACTS OF SALE; ELEMENTS;CONTRACT WHERE CONSENT IS VITIATED IS VOIDABLE;ANNULMENT AND RESTITUTION OF THE PROPERTY AND ITS FRUITS TO THE RESPONDENT IS JUST AND PROPER. KATIPUNAN VS. KATIPUNAN, JR. 3537 SCRA 199. January 30, 2002

Facts: Respondent Braulio Katipunan Jr. is the registered owner of a lot and a five-door apartment constructed thereon, which were occupied by lessees. Respondent assisted by his brother petitioner Miguel entered into a Deed of Absolute Sale with brothers Edardo Balguma and Leopoldo Balguma, Jr. ( co-petitioners), represented by their lawyer-father involving the subject property for a consideration of P187,000.00. So, the title was registered in the names of the Balguma brothers and they started collecting rentals thereon. Later, Braulio filed a complaint for annulment of the Deed of Absolute Sale, contending that his brother Miguel, Atty. Balguma and Inocencio Valdez ( one of the petitioners) convinced him to work abroad. Through insidious words and machinations, they made him sign a document purportedly a contract of employment, which document turned out to be a Deed of Absolute Sale. He further alleged that he did not receive the consideration stated in the contract. He claimed that there was evident bad faith and conspiracy in taking advantage of his ignorance, he being only a third grader.

71

The RTC dismissed the complaint because Braulio failed to prove his cause of action since he admitted that he obtained loans from the Balgumas, he signed the Deed of Absolute Sale, and he acknowledged selling the property and stopped collecting the rentals. But when the case was elevated, the decision of RTC was reversed and it was held that Braulio was incompetent, has very low I.Q., illiterate and has a slow comprehension. The CA based its decision on Arts.1332 and 1390 of NCC and Sec. 2, Rule 92 of the Rules of Court, concerning the incompetence of a party in contract. Issue: Whether there was a valid contract of sale between the parties. Held: The Supreme Court found the petition devoid of merit. There was a vitiated consent on the part of the respondent as he signed the Deed of Absolute Sale without the remotest idea of what it was and received no consideration thereof. The contract entered into by the parties being voidable contract, was correctly annulled on appeal. A contract of sale is born from the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. This meeting of minds speaks of the intent of the parties in entering the contract respecting the subject matter and the consideration thereof. Thus, the elements of a contract of a sale are consent, object, and price in money or its equivalent. Under Art. 1330 of NCC, consent may be vitiated by any of the following: mistake, violence, intimidation, undue influence, and fraud. The presence of any of these vices renders the contract voidable. A contract where one of the parties is incapable of giving consent or where consent is vitiated by mistake, fraud, or intimidation is not void ab initio but only voidable and is binding upon the parties unless annulled proper court action. The effect of annulment is to restore the parties to the status quo ante insofar as legally and equitably possible---this much is dictated by Art. 1398 provides that when the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not obliged to make any restitution, except when he has been benefited by the things or price received by him. Thus, since the Deed of Absolute Sale between respondent and Balguma brothers is voidable and hereby annulled, then the restitution of the property and its fruits to respondent is just and proper.

SALE BY AN AGENT;SPECIAL POWER OF ATTORNEY PINEDA VS. COURT OF APPEALS 367 SCRA 222. February 6,2002 Facts: Nelson and Mercedez Baez are the original owners of a parcel of land together with its improvements located at White Plains, Q.C.(Q.C. Property) while Alejandria Pineda is the owner of a house located at Los Angeles, California (California Property), the two parties executed an Agreement to Exchange Real Properties. In the agreement, they agreed to: 1) exchange their respective properties, 2) Pineda to pay an earnest money of $ 12,000 on February 1983, and 3) to consummate the exchange of properties not later than June 1983. It was agreed also that both should undertake to clear the mortgages over their respective properties.

72

The Baez were allowed to occupy or lease to a tenant the California property, and Pineda was authorized to occupy the Q.C. property. Pursuant to the agreement, Pineda paid the earnest money of $12,000, but the latter failed to clear the mortgages over her California property. Later, unknown to the Baezes, Pineda and spouses Duque executed an Agreement to Sell over the Q.C. property whereby Pineda sold the property to the spouse Duque for 1.6 M. The record shows that pursuant to the agreement to sell, there were payments that occupying their Q.C. property. The latter were interested in the property so the Baezes did not insist on the return of said property. So, there were negotiations for the purchase of the property that was held between them, but the same failed which resulted in the Baezes demanding for the Duques to vacate the property and later filed a case before the court. Issue: Whether the Duques validly acquired the Q.C. property. Held: Pinedas sale of the property to Duques was not authorized by the real owners of the land Baez. The Civil Code provides that in a sale of a parcel of land or any interest therein made through an agent, a special power of attorney is essential. This authority must be in writing; otherwise the sale shall be void. In his testimony, Duque confirmed that at the time he purchased the property from Pineda, the latter had no special power of attorney to sell the property. A special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired for a valuable consideration. Without an authority in writing, Pineda could not validly sell the subject property to Duque. Hence, any sale in favor of Duque is void. As the consent of the real owner of the property was not obtained, no contract was perfected (Art. 1318 of the Civil Code)

LAND TITLES AND DEEDS JURISDICTION MATEO vs. COURT OF APPEALS G.R. No. 128392 April 29, 2005 Facts: Casimiro Development Corporation (CDC) alleged that it was the owner of a parcel of registered land since it acquired the same from the previous owner, China Banking Corporation (CBC). After the sale CDC advised the petitioners that it was the new owner and that they had failed to pay the rentals due to it and to its predecessors-ininterest. The petitioners refused to pay and vacate the premises despite demands to settle their obligations and notice to vacate were served upon them. This prompted CDC to file a complaint for Unlawful Detainer against the petitioners before the Metropolitan Trial Court (MeTC). The petitioners maintained that since the land was classified as agricultural as evidenced by a Tax Declaration Certificate, it is the Department of Agrarian Reform Adjudication Board (DARAB) that has jurisdiction over the case. It

73

should be noted that the land is covered by a Transfer Certificate of Title in the name of CDCs predecessor-in-interest CBC. Issue: Whether or not jurisdiction over the subject matter lies with the DARAB or with the Metropolitan Trial Court. Held: For the DARAB to have jurisdiction over the case, there must be a tenancy relationship between the parties. One of the indispensable elements in order for a tenancy agreement to take hold over a dispute is that the parties are the landowner and the tenant or agricultural lessee. It must be noted that the petitioners failed to adequately prove ownership of the land. They merely showed tax declarations. As against a transfer certificate of title, tax declarations or receipts are not adequate proofs of ownership. Hence, it is the MeTC that has jurisdiction over the subject matter there being no proof of tenancy relationship.

RECONVEYANCE HEIRS OF POMPOSA SALUDARES VS. COURT OF APPEALS G.R. No. 128254. January 16, 2004 Facts: The heirs and their father, Juan Dator executed a Deed of Extrajudicial Partition of the share of Pomposa in the Tanza estate with the eastern portion thereof going to Juan and the western half to the children. Juan remained in possession of his share until his death. Isabel Dator applied for a free patent over the entire Tanza estate in behalf of the heirs thus it was awarded. Private respondents filed an action for reconveyance against petitioner heirs. They alleged that they were the owners in fee simple and they were in possession of the land, and Isabel Dator obtained free patent in favor of the heirs by means of fraud and misrepresentation. Petitioners alleged that they and their predecessors in interest had been in actual, continuous, adverse and public possession of the land in the concept of owners since time immemorial, and the title to the lot was issued to them after faithful compliance with the requirements for the issuance of a free patent. Issues: 1) Whether or not the reconveyance is still available notwithstanding the indefeasibility of the Torrens Title. 2) Whether or not the heirs have been in open and continuous possession of the disputed lot. Held: 1) The registered owner may still be compelled to reconvey the registered property to its true owner. Reconveyance does not set aside or re-subject to review the findings of fact of the Bureau of Lands. Thus, the decree of registration is respected as incontrovertible. What is sought is the transfer of the property or its title, which has been wrongfully or erroneously registered in another persons name, to its rightful or legal owner or to the one with a better right.

74

2) The heirs convincingly established their open and continuous occupation of the entire Tanza estate. The farm was under the administration of Beata and Isabel Dator who took over its management after Petra Dator died; heirs tenant Miguel Dahilig had been consistently tending the land since 1947 and was the one who planted the various crops and trees on the lot. EXTRINSIC FRAUD REXLON REALTY GROUP, INC. VS. COURT OF APPEALS G.R. No. 128412. March 15, 2002 Facts: Respondent Alex David was the registered owner of two parcel of land. Petitioner Rexlon Realty Group, Inc. (Rexlon) entered into an agreement with respondent for the purchase of the two parcels of land as evidenced by an absolute deed of sale. Respondent filed with the Regional Trial Court a petition for the issuance of the owners duplicate copies which were allegedly lost; petition granted by the court. Rexlon then filed with the Court of Appeals a petition for annulment of the decision of the trial court on the ground that David allegedly employed fraud and deception in securing the replacement owners duplicate copies. Issue: Whether or not such misrepresentation or fraud of respondent David can be characterized as an extrinsic fraud as to merit the annulment of the trial courts decision. Held: Extrinsic fraud contemplates a situation where a litigant commits acts outside the trial of the case; the effect of which prevents a party from having a trial, a real contest, or from presenting all of his case to the court, or where it operates upon matters pertaining to the judgment itself, but to the manner in which it was produced so that there is not a fair submission of the controversy. It is well settled that the use of forged instrument or prejudiced testimonials during trial is not an extrinsic fraud, because such evidence does not preclude the participation of any party in the proceedings. While a perjured testimony may prevent a fair and just determination of a case, it does not bar the adverse party from rebutting or opposing the use of such evidence. Furthermore, it should be stressed that extrinsic fraud pertains to an act committed outside of the trial. The alleged fraud in this case was perpetrated during the trial. PRESCRIPTION DOES NOT RUN AGAINST THE STATE PAGKATIPUNAN VS. COURT OF APPEALS G.R. No. 129682. March 21, 2002 Facts: On June 15, 1967, the Court of First Instance of Gumaca, Quezon promulgated a decision confirming petitioners title to properties located in San Narciso, Quezon. Almost eighteen (18) years later, the Republic of the Philippines filed with the Intermediate Appellate Court an action to declare the proceedings in the LRC case null and void and to cancel the original certificate of title and to confirm the subject land as part of the public domain. The Republic claimed that the subject land was classified as

75

timberland; hence, inalienable and not subject to registration. On the other hand, petitioners raised the special defense of indefeasibility of title and res judicata. Issues: 1) Whether or not prescription runs against the state. 2) Whether or not occupation will ripen into ownership. Held: 1) Prescription does not run against the state. The lengthy occupation of the disputed land by petitioners cannot be counted in their favor, as it remained part of the patrimonial property of the state which is inalienable and not disposable. 2) Unless public land is shown to have been reclassified or alienated to a private person by the state it remains part of the inalienable public domain. Occupation thereof in the concept of owner, no matter how long, cannot ripen into ownership and be registered as a title.

A TORRENS TITLE, ONCE REGISTERED, SERVES AS NOTICE TO THE WHOLE WORLD ALVARICO VS. SOLA G.R. No. 138953. June 6, 2002 Facts: Fermina Lopez executed a Deed of Self-Adjudication and Transfer of Rights over lot 5 in favor of Amelita Sola, who agreed to assume all the obligations, duties and conditions imposed which was approved by the Bureau of Lands. Castorio Alvarico filed a civil case for reconveyance against Amelita. He claimed that Fermina donated the land to him and immediately thereafter, he took possession of the same. He averred that the donations to him had the effect of withdrawing the earlier transfer to Amelita. Amelita maintained that the donation to petitioner was void because Fermina was no longer the owner of the property when it was allegedly donated to petitioner, the property having been transferred earlier to her. She added that the donation was void because of lack of approval from the Bureau of Lands and that she had validly acquired the land as Ferminas rightful heir. Issue: Who between the petitioner and respondent has a better claim to the land? Held: The execution of public documents, as in the case of Affidavits of Adjudication is entitled to the presumption of regularity, hence convincing evidence is required to assail and controvert them. A Torrens title, once registered, serves as notice to the whole world. All persons must take notice and no one can plead ignorance of its registration. Clearly then, petitioner has no standing at all to question the validity of Amelitas title. It follows that he cannot recover the property because he has not shown that he is the rightful owner thereof.

76

OPEN, CONTINUOUS, AND NOTORIOUS POSSESSION OF THE LAND DEL ROSARIO VS. REPUBLIC G.R. No. 148338. June 6, 2002 Facts: Petitioner filed an application for registration of a parcel of land. The clerk of court transmitted to the Land Registration Authority (LRA) the duplicate copy of petitioners application for registration, the original tracing cloth plan, and the other documents submitted by petitioner in support of his application. During the initial hearing, no oppositor appeared except for the provincial prosecutor who appeared on behalf of the Solicitor General in representation of the Republic of the Philippines. The trial court granted the application. Respondent appealed for failure of petitioner to submit in evidence the original tracing cloth plan and to establish that he and his predecessors in interest had been in open, continuous, and notorious possession of the land. Issues: 1) Whether or not the submission in evidence of the original tracing cloth plan is a mandatory requirement. 2) Whether or not petitioners had been in open, continuous, and notorious possession of the land. Held: 1) The submission in evidence of the original tracing cloth plan duly approved by the Bureau of Lands in cases for application of original registration of land is mandatory requirement. The reason for the rule is to establish the true identity of the land to ensure that it does not overlap a parcel of land or portion thereof already covered by a previous land registration, and to forestall the possibility that it will be overlapped by a subsequent registration. 2) A mere casual cultivation of portions of the land by the claimant does not constitute possession under claim of ownership for him. Possession is not exclusive and notorious so as to give rise to a presumptive grant from the state. The possession of the land however long the period thereof may have extended never confers title thereto upon the possessor because the Statute of Limitations with regard to public land does not operate against the state unless the occupant can prove possession and occupation of the same under the claim of ownership for the required number of years.

REDEMPTION PERIOD OF THE PROPERTY RECAA VS. COURT OF APPEALS

77

G.R. No. 123850. January 5, 2001 Facts: Lot 6 of Block 2 of the Tondo Foreshore Land of the Land Tenure Administration was sold to Macario Arboleda, petitioner-spouses predecessor in interest. The land was covered by an original certificate in the name of Arboleda. The city treasurer of Manila auctioned the lot at a public auction sale due to tax delinquency. Spouses Cirilo and Miguela Montejo sold the property to petitioner-spouses who refunded the amount equivalent to the delinquent taxes and other expenses entailed. Private respondents, the other children and heirs of Macarion Arboleda filed for declaration of co-ownership and partition against petitioner. They asserted that the repurchase by the petitioner of the lot redounded to their benefit as co-heirs and now as co-owners. Petitioners contended that Section 4 of R.A. 1597, the law governing the subdivision of the Tondo Foreshore Lands from which the subject property emanated does not apply to the attendant facts in this case. Instead they instead that it was Section 78 of P.D. 464 which was applicable. Issue: Which of the two laws, Section 4 of R.A. 1597 or Section 78 of P.D. 464, should apply in so far as the redemption period of the subject property is concerned? Held: A special statute, provided for a particular case or class of cases, is not repealed by a subsequent statute, general in its terms, provisions and applications, unless the intent to repeal or alter is manifest although the terms of the general law are broad enough to include the cases embraced in the special law. Repeal of laws should be made clear and express. The failure to add a specific repealing clause indicates that the intent was not to repeal any existing law unless there is an irreconcilable or repugnancy between Section 4 of R.A. 1597 and Section 78 of P.D. 464. The former law is of special and exclusive application to lots acquired from the Tondo Foreshore Land only. The latter is a law or decree of general application. Petitioners repurchase of the subject lot within the fiveyear redemption period of Section 4 of R.A. 1597 is within the purview of redemption by a co-owner which inures to the benefit of all the other co-owners of the property. INNOCENT PURCHASER FOR VALUE NAZARENO VS. COURT OF APPEALS G.R. No. 138842. October 18, 2000 Facts: Petitioners and respondent Romeo Nazareno are three of the five children of spouses Maximino and Aurea Nazareno, who during their marriage had acquired properties. After the death of Maximino, Sr., Romeo filed for intestate proceedings and he was thereafter appointed administrator of his fathers estate. Romeo discovered a deed o f sale selling petitioner Natividad six lots including Lot-3b occupied by Romeo but which was sold to petitioner Maximino, Jr. Maximino, Jr. filed an action for recovery of possession which was favored by the court. Romeo in turn filed an annulment of the sales on the ground of lack of consideration in that the transfer was merely to avoid inheritance tax and that Natividad was only to hold the said lots in trust for her siblings. Petitioners on the other hand filed a third party complaint against Romeo and his wife Eliza seeking the annulment of the transfer to Romeo of Lot 3 which is granted by the trial court except

78

as to Lots 3, 13-b, 13 and 14 which had passed on to third persons. Issue: Whether or not a person dealing with a registered land may rely on the certificate of title. Held: The sale of Lots 13 and 14 to Ros-Alva Marketing will have to be upheld for RosAlva Marketing is an innocent purchaser for value which relied on the title of Natividad. The rule is settled that every person dealing with registered land may safely rely on the correctness of the certificate of title issued therefore and the law will in no way oblige him to go behind the certificate to determine the condition of the property. TORTS AND DAMAGES YHT Realty Corp, et al vs. Court of Appeals G.R. No. 126780. February 17, 2005 Facts: MAURICE McLaughlin is an Australian national who comes to the Philippines for business. During his trips he stays in Tropicana, a hotel recommended to him by Brunhilda Tan. McLaughlin deposited cash and jewelry to the safety deposit box of the Hotel. The safety deposit box cannot be opened unless the key of the guest and that of the management are present. Lainez and Payam are employees of Tropicana who is charged with the custody of the keys. Thereafter, McLaughlin found out that some of the money and jewelry he deposited were missing. Lainez and Payam admitted that they assisted Tan to open his deposit box. Tan admitted that she stole McLaughlins keys. Tan executed a promissory note to cover the amount of the stolen money and jewelry. McLaughlin wanted to make the management liable. Issue: Whether or not a hotel may evade liability for the loss of items left with it for safekeeping by its guests, by having these guests execute written waivers holding the establishment or its employees free from blame for such loss in light of Article 2003 of the Civil Code which voids such waivers. Held: The issue of whether the Undertaking For The Use of Safety Deposit Box executed by McLoughlin is tainted with nullity presents a legal question appropriate for resolution in this petition. Notably, both the trial court and the appellate court found the same to be null and void. We find no reason to reverse their common conclusion. Article 2003 is controlling, thus: Art. 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is not liable for the articles brought by the guest. Any stipulation between the hotel-keeper and the guest whereby the responsibility of the former as set forth in Articles 1998 to 2001[37] is suppressed or diminished shall be void. Article 2003 was incorporated in the New Civil Code as an expression of public policy precisely to apply to situations such as that presented in this case. The hotel business like the common carriers business is imbued with public interest. Catering to the public, hotelkeepers are bound to provide not only lodging for hotel guests and security to their persons and belongings. The twin duty constitutes the essence of the business. The law in turn does not allow such duty to the public to be negated or diluted by any contrary stipulation in so-called undertakings that ordinarily appear in prepared forms imposed by hotel keepers on guests for their signature.

79

Nikko Hotel Manila Garden & Ruby Lim vs. Reyes G.R. No. 154259. February 28, 2005 Facts: Robeto Reyes known as Amay Bisaya saw in a hotel lobby his friend Dr. Violeta Filart who he said to have invite him the party of the hotels outgoing manager. So Reyes carried the fruit basket of Filart to the penthuse where the party is. However, Ruby Lim, the coordinator of the party asked him to leave since it is an exclusive party and he is not one of those invited. Reyes did not leave the party as was instructed but created a scene, thereby he was escorted out. He sued the hotel and Ruby Lim for damages. Issue: Whether or not Ruby Lim acted abusively in asking Roberto Reyes, a.k.a. Amay Bisaya, to leave the party where he was not invited by the celebrant thereof thereby becomes liable under Articles 19 and 21 of the Civil Code. Held: The Supreme Court ruled that Ruby Lim did not act abusively in asking Roberto Reyes in leaving the party to which he is not invited. In the absence of any proof of motive on the part of Ms. Lim to humiliate Mr. Reyes and expose him to ridicule and shame, it is highly unlikely that she would shout at him from a very close distance. Ms. Lim having been in the hotel business for twenty years wherein being polite and discreet are virtues to be emulated, the testimony of Mr. Reyes that she acted to the contrary does not inspire belief and is indeed incredible. Thus, the lower court was correct in observing that Considering the closeness of defendant Lim to plaintiff when the request for the latter to leave the party was made such that they nearly kissed each other, the request was meant to be heard by him only and there could have been no intention on her part to cause embarrassment to him. It was plaintiffs reaction to the request that must have made the other guests aware of what transpired between them, had plaintiff simply left the party as requested; there was no need for the police to take him out. Article 19 involves a legal wrong committed for which the wrongdoer must be responsible. The object of this article, therefore, is to set certain standards which must be observed not only in the exercise of ones rights but also in the performance of ones duties. Its elements are the following: (1) There is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring another. When Article 19 is violated, an action for damages is proper under Articles 20 or 21 of the Civil Code. Article 20 pertains to damages arising from a violation of law which does not obtain herein as Ms. Lim was perfectly within her right to ask Mr. Reyes to leave. Article 21refers to acts contra bonus mores and has the following elements: (1) There is an act which is legal; (2) but which is contrary to morals, good custom, public order, or public policy; and (3) it is done with intent to injure. Under the above mentioned articles the act must be intentional. Absent such intention and as the Court observed the conduct of Lim of asking Reyes to leave was in an exemplary manner, there can be no damages to be awarded. Any damage suffered by Reyes must be borne by him alone. Quezon City Government vs. Dacara G R No. 150304 June 15, 2005 Facts: Dacara Jr.s car turned turtle upon hitting a rammed into a pile of earth/street diggings found at Matahimik St., Quezon City, which was then being repaired by the Quezon City government. As a result, Dacarra (sic), Jr. allegedly sustained bodily injuries and the vehicle suffered extensive damage. Thus his father Fulgencio Dacara Senior

80

(Fulgencio) filed a calim for damages against the Local Government. The LGU contended that the fault is with the driver, since the LGU have out up warning signs. The trial court ruled that the LGU is liable. Issue: Whether or not the Quezon City Government is liable for moral and exemplary damges due to the injuries suffered by Dacara Jr. Held: To award moral damages, a court must be satisfied with proof of the following requisites: (1) an injury -- whether physical mental, or psychological -- clearly sustained by the claimant; (2) a culpable act or omission factually established; (3) a wrongful act or omission of the defendant as the proximate cause of the injury sustained by the claimant; and (4) the award of damages predicated on any of the cases stated in Article 2219. In the present case, the Complaint alleged that respondents son Fulgencio Jr. sustained physical injuries. The son testified that he suffered a deep cut on his left arm when the car overturned after hitting a pile of earth that had been left in the open without any warning device whatsoever. It is apparent from the Decisions of the trial and the appellate courts, however, that no other evidence (such as a medical certificate or proof of medical expenses) was presented to prove Fulgencio Jr.s bare assertion of physical injury. Thus, there was no credible proof that would justify an award of moral damages based on Article 2219(2) of the Civil Code. Moreover, the Decisions are conspicuously silent with respect to the claim of respondent that his moral sufferings were due to the negligence of petitioners. The Decision of the trial court, which summarizes the testimony of respondents four witnesses, makes no mention of any statement regarding moral suffering, such as mental anguish, besmirched reputation, wounded feelings, social humiliation and the like. well-settled is the rule that moral damages cannot be awarded -whether in a civilor a criminal case, in the absence of proof of physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, or similar injury. The award of moral damages must be solidly anchored on a definite showing that respondent actually experienced emotional and mental sufferings. Mere allegations do not suffice; they must be substantiated by clear and convincing proof. Article 2231 of the Civil Code mandates that in cases of quasi-delicts, exemplary damages may be recovered if the defendant acted with gross negligence. Gross negligence means such utter want of care as to raise a presumption that the persons at fault must have been conscious of the probable consequences of their carelessness, and that they must have nevertheless been indifferent (or worse) to the danger of injury to the person or property of others. The negligence must amount to a reckless disregard for the safety of persons or property. Such a circumstance obtains in the instant case. A finding of gross negligence can be discerned from the Decisions of both the CA and the trial court. We quote from the RTC Decision: Sad to state that the City Government through its instrumentalities have failed to show the modicum of responsibility, much less, care expected of them (sic) by the constituents of this City. It is even more deplorable that it was a case of a street digging in a side street which caused the accident in the so-called premier city. Article 2229 of the Civil Code provides that exemplary damages may be imposed by way of example or correction for the public good. The award of these damages is meant to be a deterrent to socially deleterious actions. Public policy requires such imposition to suppress wanton acts of an offender. It must be emphasized that local governments and their employees should be responsible not only for the maintenance of

81

roads and streets, but also for the safety of the public. Thus, they must secure construction areas with adequate precautionary measures. SUCCESSION AZNAR BROTHERS REALTY COMPANY VS. LAURENCIO AYING G.R. No. 144773. May 16, 2005 Facts: The disputed property is Lot No. 4399 with an area of 34,325 square meters located at Dapdap, Lapu-Lapu City. Crisanta Maloloy-on petitioned for the issuance of a cadastral decree in her favor over said parcel of land. After her death in 1930, the Cadastral Court issued a Decision directing the issuance of a decree in the name of Crisanta Maloloy-ons eight children, namely: Juan, Celedonio, Emiliano, Francisco, Simeon, Bernabe, Roberta and Fausta, all surnamed Aying. The certificate of title was, however, lost during the war. The siblings extra-judicially sold the lot however, three siblings, namely, Roberta, Emiliano and Simeon Aying did not participate in the extrajudicial partition. After the partition the lot was sold. 29 years after, the Roberta, Emiliano and Simen filed a case for the ejectment of the present occupants. Issue: Whether or not respondents cause of action is imprescriptible Held: The facts on record show that petitioner acquired the entire parcel of land with the mistaken belief that all the heirs have executed the subject document. Thus, the trial court is correct that the provision of law applicable to this case is Article 1456 of the Civil Code which states: ART. 1456. If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. The rule that a trustee cannot acquire by prescription ownership over property entrusted to him until and unless he repudiates the trust, applies to express trusts and resulting implied trusts. However, in constructive implied trusts, prescription may supervene even if the trustee does not repudiate the relationship. Necessarily, repudiation of said trust is not a condition precedent to the running of the prescriptive period. An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years and not otherwise. A long line of decisions of this Court, and of very recent vintage at that, illustrates this rule. Undoubtedly, it is now well-settled that an action for reconveyance based on an implied or constructive trust prescribes in ten years from the issuance of the Torrens title over the property. With regard to petitioners argument that the provision of Article 1104 of the Civil Code, stating that a partition made with preterition of any of the compulsory heirs shall not be rescinded, should be applied, suffice it to say that the Extra-Judicial Partition of Real Estate with Deed of Absolute Sale is not being rescinded. In fact, its validity had been upheld but only as to the parties who participated in the execution of the same. As discussed above, what was conveyed to petitioner was ownership over the shares of the heirs who executed the subject document. Thus, the law, particularly, Article 1456 of the Civil Code, imposed the obligation upon petitioner to act as a trustee for the benefit of respondent heirs of Emiliano and Simeon Aying who, having brought their action within the prescriptive period, are now entitled to the reconveyance of their share in the land in dispute. TESTATE ESTATE OF THE LATE ALIPIO ABADA, BELINDA CAPONONG-

82

NOBLE, petitioner, vs. ALIPIO ABAJA and NOEL ABELLAR G.R. No. 147145. January 31, 2005 Facts: This is a case of the probate of the will of Alipio Abada. Thereafter, the probate of the will of Paula Toray was also filed with the court. The oppositors in the will of Abada nand Toray are their nephews and nieces. The ground for opposition is that decedent left no will or if there is a will it was executed not in consonance with the law. Belinda Caponong-Noble was assigned as the administratix of the estate of Abada by the trial court. Thereafter, Abellar was appointed administratix of Torays property. The RTC ruled only on , whether the will of Abada has an attestation clause as required by law. The RTC-Kabankalan further held that the failure of the oppositors to raise any other matter forecloses all other issues. Unsatisfied with the decision Caponong-Noble appealed. Issue: Whether or not the will of Abada has an attestation clause, and if so, whether the attestation clause complies with the requirements of the applicable laws. Held: The Court of Appeals did not err in sustaining the RTC-Kabankalan in admitting to probate the will of Abada. Abada executed his will on 4 June 1932. The laws in force at that time are the Civil Code of 1889 or the Old Civil Code, and Act No. 190 or the Code of Civil Procedurewhich governed the execution of wills before the enactment of the New Civil Code. The matter in dispute in the present case is the attestation clause in the will of Abada. Section 618 of the Code of Civil Procedure, as amended by Act No. 2645 governs the form of the attestation clause of Abadas will. There is no statutory requirement to state in the will itself that the testator knew the language or dialect used in the will. This is a matter that a party may establish by proof aliunde. Caponong-Noble further argues that Alipio, in his testimony, has failed, among others, to show that Abada knew or understood the contents of the will and the Spanish language used in the will. However, Alipio testified that Abada used to gather Spanishspeaking people in their place. In these gatherings, Abada and his companions would talk in the Spanish language. This sufficiently proves that Abada speaks the Spanish language. An attestation clause is made for the purpose of preserving, in permanent form, a record of the facts attending the execution of the will, so that in case of failure of the memory of the subscribing witnesses, or other casualty, they may still be proved. (Thompson on Wills, 2d ed., sec. 132.) A will, therefore, should not be rejected where its attestation clause serves the purpose of the law. We rule to apply the liberal construction in the probate of Abadas will. Abadas will clearly shows four signatures: that of Abada and of three other persons. It is reasonable to conclude that there are three witnesses to the will. The question on the number of the witnesses is answered by an examination of the will itself and without the need for presentation of evidence aliunde. The Court explained the extent and limits of the rule on liberal construction. Precision of language in the drafting of an attestation clause is desirable. However, it is not imperative that a parrot-like copy of the words of the statute be made. It is sufficient if from the language employed it can reasonably be deduced that the attestation clause fulfills what the law expects of it. PRESCRIPTIVE PERIOD TO RECOVER PROPERTY OBTAINED BY FRAUD GIVING RISE TO AN IMPLIED TRUST; PROBATE FOR WILL SPOUSES RICARDO PASCUAL AND CONSOLACION SISON VS. COURT OF

83

APPEALS AND REMEDIOS EGUENIO-GINO G.R. No. 115925. August 15, 2003 Facts: Petitioner Sison and respondent Eugenio-Gino are the niece and granddaughter , respectively of the late Canuto Sison. Canuto and 11 other individuals including his sister Catalina and his brother Victoriano were co-owners of a property known as Lot 2 covered by an original certificate of title. On September 26, 1956, Canuto and Consolacion executed a Kasulatan ng Bilihang Tuluyan under which, Canuto sold his share in Lot 2 in favor of Consolacion. On October 23, 1968, the surviving children of Canuto, namely Felicidad and Beatriz, executed a joint affidavit affirming the Kasulatan in favor of Consolacion, which the latter registered with the Office of the Register of Deeds. On February 4, 1988, Remedios filed a complaint against Consolacion and her spouse, Ricardo Pascual for annulment of transfer of certificate of title because the former claimed that she is the owner of the lots since Catalina devised the land to her in Catalinas last will. Remedies also added that the lots were obtained through fraudulent means since the area covered by the TCT is twice the size of Canuto. Petitioner sought to dismiss the complaint on the ground of prescription. Petitioners claim that the basis of the action is fraud and the action should have been filed within four years from the registration of Consolacions title on October 28, 1968 and not some 19 years later on February 4, 1988. The trial court denied petitioners motion to dismiss holding that the reckoning of the prescriptive period for filing complaint is evidentiary in nature and must await the presentation of the parties evidence during the trial. Issue: Whether or not the action for annulment or cancellation of transfer of certificate of title by Remedios has prescribed. Held: The four-year prescriptive period relied upon by the trial court applies only if the fraud does not give rise to an implied trust and the action is to annul a voidable contract under Article 1390 of the Civil Code. In such a case, the four-year prescriptive period begins to run from the time of the discovery of the mistake, violence, intimidation, undue influence or fraud. It is now well-settled that the prescriptive period to recover property obtained by fraud or mistake, giving rise to an implied trust under Article 1456 of the Civil Code is ten years pursuant to Article 1144. this ten-year prescriptive period begins to run from the date the adverse party repudiates the implied trust which repudiation takes place when the adverse party registers the land. Remedies filed her complaint on February 4, 1988 or more than 19 years after Consolacion registered her title over the lot on October 28, 1968. Unquestionably, Remedios filed the complaint late thus warranting its dismissal. Remedies anchors her right in filing the suit on her being a devisee of Catalinas last will. However, since the probate court has not admitted Catalinas last will, Remedios has not acquired any right under the last will. Remedies is thus without any cause of action either to seek reconveyance of Lot 2 or to enforce an implied trust over these lots. It was inappropriate to order the reconveyance of the subject lots to Remedios in her capacity as executrix of Catalinas last will because she sued petitioners not in such capacity but as the alleged owner of the disputed lots.

84

SUCCESSION; PARTITION INTER VIVOS MAY BE DONE FOR AS LONG AS LEGITIMATES ARE NOT PRECLUDED; LEGITIME OF COMPULSORY HEIRS IS DETERMINED AFTER COLLATION; PROPERTY CERTIFICATE NOT SUBJECT TO COLLATERAL ATTACK SPOUSES FLORENTINO ZARAGOZA AND ERLINDA ENRIQUEZ-ZARAGOZA VS. THE HONORABLE COURT OF APPEALS G.R. No. 106401. September 29, 2000 Facts: Flavio Zaragoza Cano was the registered owner of certain parcels of land. He had four children namely: Gloria, Zacariaz, Florentino and Alberta, all surnamed Zaragoza. On December 9, 1964, he died without a will and was survived by his four children. On December 28, 1981, private respondent Alberta Zaragoza-Morgan filed a complaint with the Court of First Instance against petitioner-spouses Florentino and Erlinda for delivery of her inheritance share and for payment of damages. She claims that she is a natural-born Filipino citizen and the youngest child of the late Flavio. She further alleged that her father in his lifetime partitioned the properties among his four children. The shares of her brothers and sister were given to them in advance by way of deed of sale, but without valid consideration, while her share was not conveyed by way of deed of sale then. Petitioners denied knowledge of an alleged distribution by way of deeds of sale to them by their father. They denied knowledge of the alleged intention of their father to convey the cited lots to Alberta, much more, the reason for his failure to do so because she became an American citizen. They denied that there was partitioning of the estate of their father during his lifetime. The Regional Trial Court rendered judgment adjudicating Lot 471 in the name of Flavio Zaragoza Cano to Alberta Zaragoza-Morgan as appertaining her share in his estate. Issues: (1) Whether the partition inter vivos by Flavio Zaragoza Cano of his properties is valid. (2) Whether the validity of the deed of sale and consequently, the transfer certificate of title over the lot registered in the name of petitioners can be a valid subject matter of the entire proceeding for the delivery of inheritance share. Held: Both the trial court and the public respondent found that during the lifetime of Flavio, he already partitioned and distributed his properties among his three children, excepting private respondent through deeds of sale. A deed of sale was not executed in favor of private respondent because she had become an American citizen and the Constitution prohibited a sale in her favor. It is basic in the law of succession that a partition inter vivos may be done for as long as legitimes are not prejudiced. Unfortunately, collation cannot be done in this case where the original petition for delivery of inheritance share only impleaded one of the other compulsory heirs. The petition must therefore be dismissed without prejudice to the institution of a new proceeding where all the indispensable parties are present for the rightful determination of their respective legitime and if the legitimes were prejudiced by the partitioning inter vivos. Private respondent, in submitting her petition for the delivery of inheritance share, was in effect questioning the validity of the deed of sale in favor of petitioner and consequently, the transfer of certificate of title issued in the latters name. although the trial court, as an

85

obiter, made a finding of validity of the conveyance of the said lot, since according to it, private respondent did not question the genuineness of the signature of the deceased, nevertheless, when the case was elevated to the Court of Appeals, the latter declared the sale to be fictitious because of finding of marked differences in the signature of Flavio in the deed of sale vis--vis signatures found in earlier documents. Could this be done? The petition is a collateral attack. A certificate of title shall not be subject to collateral attack. It cannot be altered, modified or cancelled except in a direct proceeding in accordance with law. CREDIT TRANSACTIONS FIRST FIL-SIN LENDING CORPORATION VS. GLORIA PADILLO G.R. No. 160533. January 12, 2005 Facts: Respondent Gloria D. Padillo obtained a P500,000.00 loan from petitioner First Fil-Sin Lending Corp. and subsequently obtained another P500,000.00 loan from the same. In both instances, respondent executed a promissory note and disclosure statement. For the first loan, respondent made 13 monthly interest payments of P22,500.00 each before she settled the P500,000.00 outstanding principal obligation. As regards the second loan, respondent made 11 monthly interest payments of P25,000.00 each before paying the principal loan of P500,000.00. In sum, respondent paid a total of P792,500.00 for the first loan and P775,000.00 for the second loan. Thereafter, respondent filed an action for sum of money against petitioner alleging that she only agreed to pay interest at the rates of 4.5% and 5% per annum, respectively, for the two loans, and not 4.5% and 5% per month. The trial court dismissed respondents complaint. On appeal, the appellate court ruled that, based on the disclosure statements executed by respondent, the interest rates should be imposed on a monthly basis but only for the 3-month term of the loan. Thereafter, the legal interest rate will apply. The court also found the penalty charges pegged at 1% per day of delay highly unconscionable as it would translate to 365% per annum. Thus, it was reduced to 1% per month or 12% per annum. Petitioner maintains that the interest rates are to be imposed on a monthly and not on a per annum basis. However, it insists that the 4.5% and 5% monthly interest shall be imposed until the outstanding obligations have been fully paid. As to the penalty charges, petitioner argues that the 12% per annum penalty imposed by the Court of Appeals in lieu of the 1% per day as agreed upon by the parties violates their freedom to stipulate terms and conditions as they may deem proper. Respondent avers that the interest on the loans is per annum as expressly stated in the promissory notes and disclosure statements. The provision as to annual interest rate is clear and requires no room for interpretation. Respondent asserts that any ambiguity in the promissory notes and disclosure statements should not favor petitioner since the loan documents were prepared by the latter. Issue: Whether or not the applicable interest should be the legal interest of twelve percent (12%) per annum despite the clear agreement of the parties on another applicable rate. Held: Perusal of the promissory notes and the disclosure statements pertinent to the loan obligations of respondent clearly and unambiguously provide for interest rates of 4.5% per annum and 5% per annum, respectively. Nowhere was it stated that the interest rates

86

shall be applied on a monthly basis. Thus, when the terms of the agreement are clear and explicit that they do not justify an attempt to read into it any alleged intention of the parties, the terms are to be understood literally just as they appear on the face of the contract. It is only in instances when the language of a contract is ambiguous or obscure that courts ought to apply certain established rules of construction in order to ascertain the supposed intent of the parties. PHILIPPINE NATIONAL BANK VS. COURT OF APPEALS G.R. No. 126908. January 16, 2003 Facts: Spouses Mateo and Carlita Cruz owned a parcel of land. They obtained a loan from the Philippine National Bank (PNB) in the amount of Php70,000 and constituted a real estate mortgage using their parcel of land to secure said loan. Subsequently, Mateo Cruz obtained an agricultural crop loan from PNB in the amount of Php156,000 which was also secured by a real estate mortgage. After Land Bank remitted to PNB Php359, 500 in bonds, Php174.43 in cash and transferred Php25,500 in bonds, PNB issued a Deed of Release of Real Estate Mortgage in favor of the Spouses Cruz. Consequently, PNB released all titles to them. Later Spouses Cruz loaned again from PNB and secured it with another real estate mortgage. Spouses Antonio and Soledad So Hu paid for the release of the mortgaged property since they were interested in it. Thus a Deed of Absolute Sale was entered into by Spouses So Hu and Spouses Cruz, conveying the property to the former. PNB conducted a public auction sale covering the property in question under the contention that Spouses Cruz failed to pay their loan. Since it was the sole and highest bidder, it now claimed the property. When PNB found Spouses So Hu In possession of the property, they were asked to vacate the property. Issue: Is the extra judicial foreclosure of the third mortgage valid? Held: It is manifested in records that Spouses So Hu had already paid the principal obligation secured by the third mortgage. A contract of mortgage is an accessory contract which derives its existence from the principal contract. Thus, if the principal ceases to be it also ceases. In this case, with the extinguishment of the loan, the mortgage is also extinguished. Note that the loan secured by the mortgage was already paid prior to the foreclosure. Thus, the property can no longer be validly foreclosed since it would be a foreclosure that satisfies an extinguished obligation. RAMIREZ VS. COURT OF APPEALS G.R. No. 133841. August 15, 2003 Facts: On December 29, 1965, private respondent spouses Loreto Claravall and Victoria Claravall executed a deed of sale in favor of spouses Francisco and Carolina Ramirez covering a parcel of land including the improvements thereon with an option to repurchase within a period of two years. At the expiration of the two-year period, the Claravalls failed to redeem the property, prompting them to file a complaint against the spouses Ramirez to compel the latter to sell the property back to them. The Supreme Court found that the Deed of Absolute sale with option to repurchase was one of equitable mortgage. Following the death of Francisco Ramirez, the spouses Claravall filed a complaint for accounting and damages against the Intestate Estate of Francisco Ramirez alleging

87

among others that the spouses Ramirez acted fraudulently and in bad faith in refusing and obstructing the redemption of the property by the private respondents from January 2, 1968 to December 31, 1993 during which petitioners were receiving rentals from the tenants of the property which must be accounted for and returned to private respondents. Issue: Whether or not petitioners were entitled to the fruits of the property as prior to the redemption thereof, they were the registered owners and not private respondents. Held: The declaration by the Supreme Court in the first case that the deed of sale with option to repurchase entered into by the spouses Ramirez and private respondents was an equitable mortgage necessarily takes the deed out of the ambit of the law on sales and puts into operation the law on mortgage. It is a well-established doctrine that the mortgagors default does not operate to vest the mortgagee the ownership of the encumbered property and the act of the mortgagee in registering the mortgaged property in his own name upon the mortgagors failure to redeem the property amounts to pactum commissorium, a forfeiture clause declared by the Court as contrary to good morals and public policy and, therefore, void. Before perfect title over a mortgaged property may thus be secured by the mortgagee, he must, in case of non-payment of the debt, foreclose the mortgage first and thereafter purchase the mortgaged property at the foreclosure sale. CONTRACT OF LOAN; REAL CONTRACT; RECIPROCAL OBLIGATION BPI INVESTMENT CORPORATION VS. COURT OF APPEALS 377 SCRA 177. February 15, 2002 Facts: Frank Roa obtained a loan Ayala Investment and Development Corporation (AIDC), the predecessor of BPIIC, for the construction of a house on his lot in Muntinlupa. Said house and lot were mortgaged to AIDC to secure the loan. In 1980, Roa sold the house and lot to respondents ALS Management and Development Corporation (ALS) and Antonio Litonjua. As paty of the purchase price, ALS and Litonjua assumed the balance of the Roas indebtedness with AIDC. Thereafter, AIDC granted the respondents a new loan of P500 000 to be applied to Roas debt and such loan to be secured by the property, at an interest rate of 20% per annum and service fee of 1% per annum on the outstanding principal balance payable within ten years. On March 31, 1981, respondents executed a mortgage deed containing the above stipulations with the provision that payments of monthly amortization shall commence on May 1, 1981. On September 13, 1982, BPIIC released to respondents P&146.87 purporting to be what was left of the latter5s loan after fully paying the loan of Roa. On June 1984, BPIIC instituted foreclosure proceedings against the respondents because of their failure to pay the mortgage indebtedness. However, respondents filed a civil case against BPIIC opposing the foreclosure proceedings. In the said case, BPIIC claims that a contract of loan is a consensual contract and a contract of loan is perfected at the time the contract of mortgage is executed conformably with the ruling in Bonnevie vs. CA (125 SCRA 122). In the present case, the loan contract was perfected on March 31, 1981, the date when the mortgage deed was executed; hence, the amortization and interests on the loan should be computed from the said date. On the other hand, respondents argue that based on Article 1934 of the NCC, a simple loan was perfected upon the delivery of the

88

contract, hence a real contract. In this case, it was only on September 13, 1982 that the loan contract was perfected, the date when the full loan was released to the respondents. The trial court rendered a decision in favor of the respondents, which was subsequently affirmed by the Court of Appeals. Issue: Whether or not a contract of loan is a consensual contract or real contract. Held: A contract of loan is not a consensual contract but a real contract. It is perfected only upon the delivery of the object of the contract. Petitioner misapplied the Bonnevie case. The contract in Bonnevie declared by this Court as a perfected consensual contract falls under the first clause of Art. 1934 of the NCC. It is an accepted promise to deliver something by way of a simple loan. Also, a contract of loan involves a reciprocal obligation wherein the obligation of each party is the consideration for that of the other. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him; only when a party has performed his part if the contract can he demand that the other party also fulfill his own obligation an if the latter fails, default sets in. Consequently, petitioner could not demand for the payment of the monthly amortization after September 134, 1982 for it was only then when it complied with its obligation under the loan contract. Therefore, in computing the amount due, the starting date is October 13, 1982 not May 1981. MORTGAGE; BANKING INSTITUTION BENJAMIN NAVARRO VS. SECOND LAGUNA DEVT. BANK G.R. No. 129428. February 27, 2003 Facts: Spouse Catalino and Consuelo Navarro owned a certain registered land and sold 5/6 of the said lot to their five children. By virtue of the sale, petitioners Benjamin and Rosita Navarro are listed as co-owners of the property. Without the knowledge and consent of the petitioners, the other owners of the property executed a falsified deed of absolute sale wherein they made it appear that the entire lot was sold to spouses Donalito Velasco and Esther Navarro. Thus a new TCT was issued in the name of the spouses Velasco. Subsequently, spouses Velasco mortgaged the property to respondent Laguna Development Bank to secure payment of a loan. Thereafter, the bank had the mortgaged foreclosed. On two occasions, petitioners wrote the bank, offering to redeem the property which petitioner failed to do and led to the consolidation of the ownership over the property in favor of the respondent bank. Petitioners filed a complaint praying, inter alia, the annulment of the mortgage. They alleged that the sale of the lot with respect to their 1/6 share is void ab initio considering the signatures appearing in the Deed of Absolute Sale were falsified and as such the mortgage contract involving their share executed by spouses alleging that the respondent spouses were purchasers in bad faith because they knew of the pending litigation concerning the property. Issue: Whether or not the respondent bank acted in bad faith when it accepted said mortgage the property subject of a falsified Deed of Sale and when it subsequently sold

89

property to respondent spouses Guzman. Held: Respondent did not act in bad faith. This Court stressed that a mortgagee-bank is expected to exercise greater care and prudence before entering into a mortgage contract, even those involving registered land. The ascertainment of the status or the consdition of a property offered to it as a security for a loan must be a standard and indispensable part of its operation. In entering into a mortgage contract with spouses Velasco, there was no indication that respondent bank acted in bad faith. Spouses Velasco presented to the bank their TCT showing they were then the absolute owners thereof. Indeed there was no circumstances or indications that aroused respondent banks suspicion that the title was defective. Moreover, it is a settled jurisprudence that whoever alleges bad faith in any transaction must substantiate his allegation, since, it is presumed that a person takes ordinary care of his concerns and that private transactions are entered into in good faith. Clearly, petitioners are wanting in this respect. In this connection, it bears reiterating that in their two letters to respondent bank earlier mentioned, petitioners did not state that spouses Velasco falsified their signatures appearing in the Deed of Absolute Sale. Nor did they question the validity of the mortgage and its foreclosure. Indeed, those letters could have led the bank to believe that petitioners recognize the validity of the Deed of Absolute Sale and the mortgage as well as its subsequent foreclosure. MORTGAGE; BANKING INSTITUTION CRUZ VS. BANCOM FINANCE CORPORATION 379 SCRA 490. March 19, 2002 Facts: Petitioners Edilberto and Simplicio Cruz were registered owners of a parcel of agricultural land. They sold the land for P700,000 to Norma Sulit who gave P25, 000 as earnest money. However, Sulit failed to pay the balance price; consequently, the petitioners did not transfer the title of the land to Sulit. But capitalizing on the close relationship of one Candelaria Sanchez with the petitioners, Sulit succeeded in having the petitioners execute a document of sale of the land in favor of Sanchez and on the same day, Sanchez executed another deed of absolute sale over the said land in favor of Sulit. As a result, Sulit was able to effect the transfer of the title in her name. In a special agreement, Sulit assumed Sanchezs obligation to pay the petitioners within six months. Unknown to the petitioners, Sulit managed to obtain a loan from respondent Bancom secured by a mortgage over the land. On account of Sulits failure to pay the amount stipulated, petitioners filed a complaint for reconveyance of the land. Bancom intervened in the case and claimed priority as mortgagee in good faith. Meanwhile, Sulit defaulted in her payment to Bancom and her mortgage was foreclosed. Petitioners argue that respondent was not a mortgagee in good faith because at the time it registered the real estate mortgage over the subject matter, their adverse claim and notice of lis pendens had already been annotated in the title. On the other hand, respondent maintains that petitioners were the ones in bad faith because they already had knowledge of the existence of the mortgage over the property when they caused the annotations. Respondent further claims that, being an innocent mortgagee, it

90

should not be required to conduct an exhaustive investigation on the mortgagors title before it could extend a loan. Issue: Whether or not respondent Bancom is a mortgagee in good faith. Held: First, as a general rule, every person dealing with a registered land may safely rely on the correctness of the certificate of title and is no longer required to look behind the certificate in order to determine the actual owner. This rule, however, is subject to the right of a person deprived of the land through fraud to bring an action for rconveyance, provided the rights of innocent purchaser for value and in good faith are not prejudiced. An innocent purchaser for value includes an innocent lessee, mortgage or any other encumbrancer for value. Respondent, however, is not an ordinary mortgagee; it is a mortgagee bank. As such, unlike private individuals, it is expected to exercise greater care and prudence in its dealings, including those involving registered lands. The ascertainment of the status for a loan must be a standard and indispensable part of its operations. Respondent was clearly wanting in the observance of the necessary precautions to ascertain flaws in the title of Sulit. It should have not simply relied on the face of the certificate of title as its ancillary function of investing funds required a greater degree of diligence. The rule that persons dealing with registered lands can rely solely on the certificate of title does not apply to banks. Second, respondent was already aware that there was an adverse claim and notice of lis pendens annotated on the certificate of title when it registered the mortgage. Although, registration is not the operative act for a mortgage to be binding between parties, to third persons, it is indispensable. Thus, petitioners being third parties to the unregistered mortgage were not bound by it. Legal Ethics MARIA ELENA MORENO VS. ATTY. ERNESTO ARANETA A.C. No. 1109. April 27, 2005 Facts: Ernesto Araneta issued two checks to Elena Moreno for his indebtedness which amounts to P11, 000.00, the checks were dishonored. It was dishonored because the account against which is drawn is closed. Thereafter the case was forwarded to the IBP Commission on Bar Discipline pursuant to Rule 139-B of the Rules of Court. The Commission recommended the suspension from the practice of law for three (3) months. On 15 October 2002, IBP Director for Bar Discipline Victor C. Fernandez, transmitted the records of this case back to this Court pursuant to Rule 139-B, Sec. 12(b) of the Rules of Court. Thereafter, the Office of the Bar Confidant filed a Report regarding various aspects of the case. The Report further made mention of a Resolution from this Court indefinitely suspending the respondent for having been convicted by final judgment of estafa through falsification of a commercial document. Issue: Whether or not Araneta should be disbarred due to the issuance of checks drawn against a closed account.

91

Held: The Court held that the act of a person in issuing a check knowing at the time of the issuance that he or she does not have sufficient funds in, or credit with, the drawee bank for the payment of the check in full upon its presentment, is a manifestation of moral turpitude. In Co v. Bernardino and Lao v. Medel, we held that for issuing worthless checks, a lawyer may be sanctioned with one years suspension from the practice of law, or a suspension of six months upon partial payment of the obligation. In the instant case, however, herein respondent has, apparently been found guilty by final judgment of estafa thru falsification of a commercial document, a crime involving moral turpitude, for which he has been indefinitely suspended. Considering that he had previously committed a similarly fraudulent act, and that this case likewise involves moral turpitude, we are constrained to impose a more severe penalty. In fact, we have long held that disbarment is the appropriate penalty for conviction by final judgment of a crime involving moral turpitude. As we said in In The Matter of Disbarment Proceedings v. Narciso N. Jaramillo, the review of respondent's conviction no longer rests upon us. The judgment not only has become final but has been executed. No elaborate argument is necessary to hold the respondent unworthy of the privilege bestowed on him as a member of the bar. Suffice it to say that, by his conviction, the respondent has proved himself unfit to protect the administration of justice. Spouses OLBES VS. Atty. VICTOR V. DECIEMBRE AC-5365. April 27, 2005 Facts: Atty. Victor V. Deciembre was given five blank checks by Spouses Olbes for security of a loan. After the loan was paid and a receipt issued, Atty. Deciembre filled up four of the five checks for P50, 000 with different maturity date. All checks were dishonored. Thus, Atty. Deciembre fled a case for estafa against the spouses Olbes. This prompted the spouses Olbes to file a disbarment case against Atty. Deciembre with the Office of the Bar Confidant of this Court. In the report, Commissioner Dulay recommended that respondent be suspended from the practice of law for two years for violating Rule 1.01 of the Code of Professional Responsibility. Issue: Whether or not the suspension of Atty. Deciembre was in accord with his fault. Held: Membership in the legal profession is a special privilege burdened with conditions. It is bestowed upon individuals who are not only learned in the law, but also known to possess good moral character. A lawyer is an oath-bound servant of society whose conduct is clearly circumscribed by inflexible norms of law and ethics, and whose primary duty is the advancement of the quest for truth and justice, for which he has sworn to be a fearless crusader. By taking the lawyers oath, an attorney becomes a guardian of truth and the rule of law, and an indispensable instrument in the fair and impartial administration of justice. Lawyers should act and comport themselves with honesty and integrity in a manner beyond reproach, in order to promote the publics faith in the legal profession. It is also glaringly clear that the Code of Professional Responsibility was seriously transgressed by his malevolent act of filling up the blank checks by indicating amounts that had not been agreed upon at all and despite respondents full knowledge that the loan supposed to be secured by the checks had already been paid. His was a

92

brazen act of falsification of a commercial document, resorted to for his material gain. Deception and other fraudulent acts are not merely unacceptable practices that are disgraceful and dishonorable; they reveal a basic moral flaw. The standards of the legal profession are not satisfied by conduct that merely enables one to escape the penalties of criminal laws. Considering the depravity of the offense committed by respondent, we find the penalty recommended by the IBP of suspension for two years from the practice of law to be too mild. His propensity for employing deceit and misrepresentation is reprehensible. His misuse of the filled-up checks that led to the detention of one petitioner is loathsome. Thus, he is sentenced suspended indefinitely from the practice of law effective immediately. NORTHWESTERN UNIVERSITY, INC., and BEN A. NICOLAS vs. Atty. MACARIO D. ARQUILLO A.C. No. 6632. August 2, 2005 Facts: Atty. Macatrio D. Arquillo represented opposing parties in one a case before the before the National Labor Relations Commission, Regional Arbitration Branch in San Fernando, La Union. Herein, complainants accuse Atty. Arquillo of deceit, malpractice, gross misconduct and/or violation of his oath as attorney by representing conflicting interests. The case was filed with the IBP-Commission on Bar Discipline which found Atty. Arquillo guilty of the charge and recommended a penalty of suspension for 6 months. The governors of the IBP increased the penalty for 2 years. Issue: Whether or not the acts of Arquillo merits his suspension from the practice of law. Held: The Code of Professional Responsibility requires lawyers to observe candor, fairness and loyalty in all their dealings and transactions with their clients. Corollary to this duty, lawyers shall not represent conflicting interests, except with all the concerned clients written consent, given after a full disclosure of the facts. When a lawyer represents two or more opposing parties, there is a conflict of interests, the existence of which is determined by three separate tests: (1) when, in representation of one client, a lawyer is required to fight for an issue or claim, but is also duty-bound to oppose it for another client; (2) when the acceptance of the new retainer will require an attorney to perform an act that may injuriously affect the first client or, when called upon in a new relation, to use against the first one any knowledge acquired through their professional connection; or (3) when the acceptance of a new relation would prevent the full discharge of an attorneys duty to give undivided fidelity and loyalty to the client or would invite suspicion of unfaithfulness or double dealing in the performance of that duty. An attorney cannot represent adverse interests. It is a hornbook doctrine grounded on public policy that a lawyers representation of both sides of an issue is highly improper. The proscription applies when the conflicting interests arise with respect to the same general matter, however slight such conflict may be. It applies even when the attorney acts from honest intentions or in good faith. In accordance with previous rulings from this court Atty. Arquillo is suspended for 1 year from the practice of law.

93

RE: LETTER DATED 21 FEBRUARY 2005 OF ATTY. NOEL S. SORREDA. A.M. No. 05-3-04-SC July 22, 2005 Facts: Atty. Noel S. Sorreda wrote a letter addressed to the Chief Justice over his frustrations of the outcome of his cases decided by the Supreme Court. The letter contained derogatory and malignant remarks which are highly insulting. The Court accorded Atty. Sorreda to explain, however, instead of appearing before the court, he wrote another letter with insulting remarks as the first one. The court was thus offended with his remarks. Issue: Whether or not Atty. Sorreda can be held guilty of contempt due to the remarks he has made in his letters addressed to the court. Held: Unfounded accusations or allegations or words tending to embarrass the court or to bring it into disrepute have no place in a pleading. Their employment serves no useful purpose. On the contrary, they constitute direct contempt of court or contempt in facie curiae and a violation of the lawyers oath and a transgression of the Code of Professional Responsibility. As officer of the court, Atty. Sorreda has the duty to uphold the dignity and authority of the courts and to promote confidence in the fair administration of justice.[24] No less must this be and with greater reasons in the case of the countrys highest court, the Supreme Court, as the last bulwark of justice and democracy Atty. Sorreda must be reminded that his first duty is not to his client but to the administration of justice, to which his clients success is wholly subordinate. His conduct ought to and must always be scrupulously observant of law and ethics. The use of intemperate language and unkind ascription can hardly be justified nor can it have a place in the dignity of judicial forum. Civility among members of the legal profession is a treasured tradition that must at no time be lost to it. Hence, Atty. Sorreda has transcended the permissible bounds of fair comment and constructive criticism to the detriment of the orderly administration of justice. Free expression, after all, must not be used as a vehicle to satisfy ones irrational obsession to demean, ridicule, degrade and even destroy this Court and its magistrates. Thus, ATTY. NOEL S. SORREDA is found guilty both of contempt of court and violation of the Code of Professional Responsibility amounting to gross misconduct as an officer of the court and member of the Bar. Heirs of Herman Rey, represented by ARACELI Vda. DE ROMERO vs. Atty. Venancio Reyes, Jr. A.C. No. 6192 June 23, 2005 Facts: Atty. Venancio Reyes is counsel for Heirs of Herman Rey for which they are intervenors in a civil case involving multiple sale of a piece of land. There were three buyers however, and to settle the case, they had agreed to a Compromise Agreement. The Compromise Agreement, dated June 16, 1995, was signed in three stages, first by Elizabeth Reyes and her husband, then by complainants and their counsel, Atty. Renato Samonte Jr., and last, by Antonio Gonzales, Veronica Gonzales for and on behalf of V.R. Credit Enterprises, Inc. and by herein respondent. Later, the RTC which houses the records of the case was destroyed by fire, thus The complainants filed a motion for

94

reconstitution of the records of the case, which was granted by the RTC of Bulacan. The documents attached to the motion were the basis for the reconstituted records. Because of the circumstances of signing of the Compromise Agreement, the copy submitted to the RTC bore only the signatures of Elizabeth Reyes, her husband, complainants, and that of their counsel, Atty. Renato Samonte. After a lapse of two (2) years from the date of the Compromise Agreement, V.R. Credit Enterprises, Inc. still has not complied with its obligation toward complainants. Hence, complainants filed a motion for issuance of writ of execution against V.R. Credit Enterprises, Inc. for such failure. Atty. Reyes filed a motion for the case was premature. Later he raised the issue that the Compromise Agreement was not valid since it was not signed by Veronica Gonzales. Hence, the RTC rued that the Compromise as unenforceable. Thus, herein, complainants filed this administrative case against Atty. Venancio Reyes Jr. charging him with willful and intentional falsehood, in violation of his oath as a member of the Philippine bar. IBP investigating commissioner found him guilty of violation of his oath. Issue: Whether or not Atty. Venancio Reyes is administratively liable. Held: Lawyers are indispensable instruments of justice and peace. Upon taking their professional oath, they become guardians of truth and the rule of law. Verily, when they appear before a tribunal, they act not merely as the parties representatives but, first and foremost, as officers of the court. Thus, their duty to protect their clients interests is secondary to their obligation to assist in the speedy and efficient administration of justice. In assailing the legality of the Compromise Agreement, he claims good faith. He maintains that he should not be faulted for raising an allegedly valid defense to protect his clients interests. The records show, however, that his actions bear hallmarks of dishonesty and doublespeak. Atty. Reyes is one of negotiating panel in the compromise agreement. He impressed upon the parties and the trial judge that his clients were bound to the Compromise Agreement. Then, suddenly and conveniently, he repudiated it by falsely alleging that one of his clients had never signed it. True, lawyers are obliged to present every available remedy or defense to support the cause of their clients. However, their fidelity to their causes must always be made within the parameters of law and ethics, never at the expense of truth and justice. In Choa v. Chiongson this principle was explained thus: While a lawyer owes absolute fidelity to the cause of his client, full devotion to his genuine interest, and warm zeal in the maintenance and defense of his rights, as well as the exertion of his utmost learning and ability, he must do so only within the bounds of the law Thus, herein, Atty. Venancio Reyes, was ordered suspended for 1 year. JESUS M. FERRER vs. ATTY. JOSE ALLAN M. TEBELIN A.C. No. 6590. June 27, 2005 Facts: Ferrer obtained the services of Atty. Tebelin in a case against Global Link as a result of a vehicular accident through the falut of Global Links driver. Ferrer paid Atty. Tebelin P5, 000.00 as acceptance fee and gave him all pertinent documents. However, Ferrer filed an administrative case against Atty. Tebelin alleging that the said lawyer abandoned his case. However, Atty. Tebelin expressed his willingness to return the

95

money and denied having abandoned the case. However, during the proceedings, herein Ferrer died. Atty. Tebelin was nowhere to be found in his given address. Issue: Whether or not Atty. Tebellin may still be held liable despite the death of the complainant. Held: The court held that Atty. Tebelin may still be held liable despite the death of the complainant. The death of a complainant in an administrative case notwithstanding, the case may still proceed and be resolved. As in the case of Tudtud v. Colifores, the court ruled that The death of the complainant herein does not warrant the non-pursuance of the charges against respondent Judge. In administrative cases against public officers and employees, the complainants are, in a real sense, only witnesses. Hence, the unilateral decision of a complainant to withdraw from an administrative complaint, or even his death, as in the case at bar, does not prevent the Court from imposing sanctions upon the parties subject to its administrative supervision. This Court also finds respondent, for ignoring the notices of hearing sent to him at his address which he himself furnished, or to notify the IBP-CBD his new address if indeed he had moved out of his given address. His actuation betrays his lack of courtesy, his irresponsibility as a lawyer. This Court faults respondent too for welting on his manifestation-undertaking to return the P5,000.00, not to mention the documents bearing on the case, to complainant or his heirs. Such is reflective of his reckless disregard of the duty imposed on him by Rule 22.02 of the Code of Professional Responsibility: Rule 22.02 A lawyer who withdraws or is discharged shall, subject to a retaining lien, immediately turn over all papers and property to which the client is entitled, and shall cooperate with his successor in the orderly transfer of the matter, including all information necessary for the proper handling of the matter. Thus, the court suspended Atty. Jose Allan M. Tebelin from the practice of law for Two (2) Months and is ordered to return to complainants heirs the amount of P5, 000.00, with legal interest. JUDGES; UNDUE DELAY IN RENDERING JUDGMENT , A VIOLATION OF RULE 70 SECTION 11 OF THE RULES OF COURT DORCAS PETALLAR VS. JUDGE JAUNILLO PULLOS A.M. No. MTJ-03-1484. January 15, 2004 Facts: Complainant Dorcas Petallar averred that after the preliminary conference in a case for forcible entry, he, as plaintiff and the defendants were ordered to submit their respective position papers and evidence. Two months from the submission of their position papers, complainant personally went to the Court to verify the judgment had been rendered. He caused his lawyer to file a motion for rendition of judgment which was duly received by the court on August 6, 2001 but still no judgment was rendered on December 27, 2001 when the complaint was filed. Hence, complainant Petallar charged Judge Juanillo Pullos, former presiding judge of the MCTC of Surigao del Norte of violating Canon 1, Rule 1.02 & Canon 3, Rule 3.05 of the Code of Judicial Conduct as well as Rule 140, Section 4 & Rule 70, Section 10 & 11 of the Rules of the Court for undue delay in rendering a decision in a case for forcibly entry.

96

Issue: Whether or not respondent be held liable for undue delay in rendering judgment. Held: Respondent is guilty of undue delay in rendering judgment. The records show that the parties had filed their respective position papers as early as February 2, 2000. thus, respondent had until March 4, 2000. Had there been circumstances which presented him from handling down his decision within the prescribed period, respondent should have at least requested from the Court for an extension within which to render judgment. Failure to resolve cases submitted for decisions within the period fixed by law constitutes serious violation of Article III, section 16 of the Constitution. Judges must perform their official duties with utmost diligence if public confidence in the judiciary is to be preserved. A judge cannot by himself prolong the period for deciding cases beyond that authorized by law. Without any order of extension granted by the court, failure to decide a case within the prescribed period constitutes gross inefficiency that merits administrative sanction. COMPLAINTS FOR DISBARMENT; FORMAL INVESTIGATION MERCEDES NAVA VS. ATTY. BENJAMIN SORONGON AC No. 5442. January 26, 2004 Facts: Respondent Atty. Sorongon had been the counsel of complainant Mercedes Nava for years. The former informed her of his intention to withdraw as her counsel in two of her cases due to a stroke that paralyzed his right body but proposed to be retained in two other criminal cases with lesser paper works. He filed his withdrawal on December 4, 1996 and was granted by the court. Complainant alleged that while she continuously paid for the respondents services, the latter represented other clients with hostile interests and cases filed against her. Complainant cried that respondent assisted one Francisco Atas in filing a formal complaint for 11 counts of violation of B.P. 22 against her. She sent a letter to respondents expressing her disbelief and reminding him of his ethical and moral responsibility as a lawyer. Complainant prayed that an investigation be conducted regarding this unfortunate actuation and deplorable behavior as well as respondents double standard attitude. Thereafter, the IBP Commission on Bar Discipline issued a resolution suspending respondent from the practice of law for one year considering his clear violation of the prohibition against representing conflicting interest. Issue: Whether or not a formal investigation is mandatory in complaints for disbarment. Held: In complaints for disbarment, a formal investigation is a mandatory requirement. The court may dispense with the normal referral to the Integrated Bar of the Philippines if the records are complete and the question raised is simple. Similarly, if no further, factual determination is necessary, the court may decide the case on the basis of the extensive pleading on record. Complaints against lawyers for misconduct are normally addressed to the Court. If, at the outset, the Court finds a complaint to be clearly wanting in merit, it out rightly dismisses the case. If, however, the Court deems it necessary that further inquiry should be made, such as when the matter could not be resolved by merely evaluating the pleadings

97

submitted, a referral is made to the IBP for a formal investigation of the case during which the parties are accorded an opportunity to be heard. An ex parte investigation may only be conducted when respondent fails to appear despite reasonable notice. ABANDONMENT OF LAWFUL WIFE AND MAINTAINING ILLICIT RELATIONSHIP AS GROUND FOR DISBARMENT JOVITA BUSTAMANTE-ALEJANDRO VS. ATTY. WARFREDO TOMAS ALEJANDRO and MARICRIS VILLARIN AC No. 4256. February 13, 2004 Facts: Complainant submitted a photocopy of the marriage contract between her and respondent Atty. Alejandro in support of her charge of bigamy and concubinage against the latter and Villarin. She also submitted a photocopy of the birth certificate of a child of the respondent and also stated that they were married in May 1, 1990 in Isabela, Province. The Supreme Court directed respondents to file their comment on the complaint within 10 days but they failed to comply. Copies of the resolution, complaint and its annexes were returned to both respondents unserved with notation moved, same as when served personally. Complainant was required anew to submit the correct, present address of respondents under pain of dismissal of her administrative complaint. She disclosed respondents address at 12403 Develop Drive Houston, Texas in a handwritten letter. The Integrated Bar of the Philippines (IBP) recommended that both respondents be disbarred. The Supreme Court ordered Atty. Alejandro to be disbarred while the complaint against his co-respondent Atty. Villarin was returned to the IBP for further proceedings or it appears that a copy of the resolution requiring comment was never deemed served upon her as it was upon Atty. Alejandro. Issue: Whether or not abandonment of lawful wife and maintaining an illicit relationship with another woman are grounds for disbarment. Held: Sufficient evidence showed that respondent Atty. Alejandro, lawfully married to complainant, carried on an illicit relationship with co-respondent Atty. Villarin. Although the evidence was not sufficient to prove that he co0ntracted a subsequent bigamous marriage, that fact remains of his deplorable lack of that degree of morality required of him as member of the bar. A disbarment proceeding is warranted against a lawyer who abandons his lawful wife and maintains an illicit relationship with another woman who had borne him a child. We can do no less in this case where Atty. Alejandro even fled to another country to escape the consequences of his misconduct. Therefore, Atty. Alejandro disbarred from the practice of law while the complaint against Atty. Villarin was referred back to the IBP. VIOLATION OF THE CODE OF PROFESSIONAL RESPONSIBILITY; FAILURE OF COUNSEL TO FILE BRIEF BIOMIE SARENAS-OCHAGABIA VS. ATTY. BALMES OCAMPOS AM No. 4401. January 29, 2004

98

Facts: Complainant Biomie Sarenas-Ochagabia and her aunts engaged the services of respondent Atty. Balmes Ocampos in a civil case for recovery of possession and ownership of a parcel of land. An adverse decision was rendered against complainants. Atty. Ocampos filed a Notice of Appeal at their behest. The Court of Appeals gave them 45 days from notice to file their brief but Atty. Ocampos was granted a 90-day extension. The extended period lapsed without an appellants brief being filed, hence their appeal was dismissed. The dismissal was not challenged, but complainants filed a complaint contending that respondent violated his duty to inform them of his failure to file appellants brief and of the dismissal of the appeal. Issue: Whether or not respondent has exercised due diligence for the protection of the clients interests. Held: A lawyer engaged to represent a client in a case bears the responsibility of protecting the latters interest with utmost diligence. By failing to file appellants brief, respondent was remiss in the discharge of such responsibility. He thus violated the Code of Professional which states: Rule 12.03 A lawyer shall not, after attaining extensions of time to file pleadings, memoranda or briefs, let the period lapse without submitting the same or offering an explanation for his failure to do so. Rule 18.03 A lawyer shall not neglect a legal matter entrusted to him, and his negligence in connection therewith shall render him liable. That respondent accepted to represent complainants gratis et amore does not justify his failure to exercise due diligence in the performance of his duty. Every case deserves full attention, diligence, and competence regardless of its importance and whether he accepts it for a fee or free. Until his final release from the professional relation with a client, a counsel of record is under obligation to protect the clients interest. If a party has a counsel of record, a court does not recognize any other representation in behalf thereof unless in collaboration with such counsel of record or until a formal substitution of counsel is effected. Since respondent had not then withdrawn as counsel as he in fact filed a motion for extension of time to file brief, he was under obligation to discharge his professional responsibility. Mercantile Law NEGOTIABLE INSTRUMENTS LAW SIGNATURE OF DECEASED SHOWN; PRIMA FACIE PRESUMED TO BE A PARTY TO A CHECK FOR VALUE FELICITO SANSON, ET AL. VS. COURT OF APPEALS G.R. No. 127745. April 22, 2003 Facts: Felicito Sanson filed a special proceeding for the settlement of the estate of Juan See. Sanson claimed that the deceased was indebted to him in the amount of Php 603,

99

000.00 and to his sister Caledonia Sanson-Saquin in the amount of Php 320,000.00. also petitioner Eduardo Montinola and his mother filed separate claims against the estate alleging that the deceased owed them Php50,000 and Php 150, 000, respectively. During the trial, Caledonia and Felicito Sanson testified that they had transaction with the deceased evidenced by six checks issued by the deceased before he died and that after his death, Felicito and Caledonia presented the checks to the bank for payment but were dishonored due to the closure of the account. The same transaction happened to Eduardo and Angeles Montionola but when they presented the check to the bank, it was dishonored. Demand letters were sent to the heirs of the deceased but the checks remained unsettled. Issue: Whether or not presumption of consideration may be rebutted even if the heirs did not present any evidence to controvert it. Held: When the fact was established by a witness that it was the deceased who signed the checks and in fact who entered into the transaction, the genuineness of the deceased signature having been shown, the latter is prima facie presumed to have been a party to the check for value, following Section 24 of NIL which provides that every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value. Since the prima facie presumption was not rebutted or contradicted by the heirs, it has become conclusive. PROMISSORY NOTES; PRESCRIPTION OF ACTION QUIRINO GONZALES, ET AL. VS. COURT OF APPEALS, ET AL. G.R. No. 126568. April 30, 2003 Facts: Petitioners applied for credit accommodations with respondent bank, which the bank approved granting a credit line of Php900,000.00. Petitioners obligations were secured by a real estate mortgage on four parcels of land. Also, petitioners had made certain advances in separate transactions from the bank in connection with QGLCs exportation of logs and executed a promissory note in 1964. Due to petitioners long default in the payment of their obligations under the credit line, the bank foreclosed the mortgage and sold the properties covered to the highest bidder in the auction. Respondent bank, alleging non-payment of the balance of QGLCs obligation after the proceedings of the foreclosure sale were applied and non-payment of promissory notes despite repeated demands, filed a complaint for sum of money against petitioners. Petitioners, on the other hand, asserted that the complaint states no cause of action and assuming that it does, the same is barred by prescription or void for want of consideration. Issue: Whether or not the cause of action is barred by prescription. Held: An action upon a written contract, an obligation created by law, and a judgment

100

must be brought within 10 years from the time the right of action accrues. The finding of the trial court that more than ten years had elapsed since the right to bring an action on the Banks first to sixth causes had arisen is not disputed. The Bank contends, however, that the notices of foreclosure sale in the foreclosure proceedings of 1965 are tantamount to formal demands upon petitioners for the payment of their past due loan obligations with the Bank; hence, said notices of foreclosure sale interrupted the running of the prescriptive period. The Banks contention has no merit. Prescription of actions is interrupted when they are filed before the court, when there is a written extrajudicial demand by the creditors, and when there is any written acknowledgment of the debt by the debtor. The law specifically requires a written extrajudicial demand by the creditor which is absent in the case at bar. The contention that the notices of foreclosure are tantamount to a written extrajudicial demand cannot be appreciated, the contents of said notices not having been brought to light. But even assuming that the notices interrupted the running of the prescriptive period, the argument would still not lie for the following reasons: The Bank seeks the recovery of the deficient amount of the obligation after the foreclosure of the mortgage. Such suit is in the nature of a mortgage action because its purpose is to enforce the mortgage contract. A mortgage action prescribes after ten years from the time the right of action accrued. The law gives the mortgagee the right to claim for the deficiency resulting from the price obtained in the sale of the property at public auction and the outstanding obligation proceedings. In the present case, the Bank, as mortgagee, had the right to claim payment of the deficiency after it had foreclosed the mortgage in 1965. as it filed the complaint only on January 27, 1977, more than ten years had already elapsed, hence, the action had then prescribed. HOLDER IN DUE COURSE; PRESUMPTION OF ACQUISITION OF AN INSTRUMENT FOR A CONSIDERATION CELY YANG VS. COURT OF APPEALS, ET AL. G.R. No. 138074. August 15, 2003 Facts: Petitioner Cely Yang agreed with private respondent Prem Chandiramani to procure from Equitable Banking Corp. and Far east Bank and Trust Company (FEBTC) two cashiers checks in the amount of P2.087 million each, payable to Fernando david and FEBTC dollar draft in the amount of US$200,000.00 payable to PCIB FCDU account No. 4195-01165-2. Yang gave the checks and the draft to Danilo Ranigo to be delivered to Chandiramani. Ranigo was to meet Chandiramani to turn over the checks and the dollar draft, and the latter would in turn deliver to the former Phil. Commercial International Bank (PCIB) managers check in the sum of P4.2 million and the dollar draft in the same amount to be issued by Hang Seng Bank Ltd. of HongKong. But Chandiramani did not appear at the rendezvous and Ranigo allegedly lost the two cashiers checks and the dollar draft. The loss was then reported to the police. It transpired, however that the checks and the dollar draft were never lost, for Chandiramani was able to get hold of them without delivering the exchange consideration consisting of

101

PCIB Managers checks. Two hours after Chandiramani was able to meet Ranigo, the former delivered to David the two cashiers checks of Yang and, in exchange, got US $360,000 from David, who in turn deposited them. Chandiramani also deposited the dollar draft in PCIG FCDU No. 4194-0165-2. Meanwhile, Yang requested FEBTC and Equitable to stop payment on the instruments she believed to be lost. Both Banks complied with her request, but upon the representation of PCIB, FEBTC subsequently lifted the stop payment order on FEBTC Dollar Draft No. 4771, thus, enabling the holder PCIB FCDU Account No. 4194-0165-2 to received the amount of US $ 200, 000. Issue: (1) Whether or not David may be considered a holder in due course. (2) Whether or not the presumption that every party to an instrument acquired the same for a consideration is applicable in this case. Held: (1) Every holder of a negotiable instrument is deemed prima facie a holder in due course. However, this presumption arises only in favor of a person who is a holder as defined in Section 191 of the Negotiable Instruments Law, meaning a payee or indorsee of a bill or note, who is in possession of it, or the bearer thereof. In the present case, it is not disputed that David was the payee of the checks in question. The weight of authority sustains the view that a payee may be a holder in due course. Hence, the presumption that he is a prima facie holder in due course applies in his favor. (2) The presumption is that every party to an instrument acquired the same for a consideration. However, said presumption may be rebutted. Hence, what is vital to the resolution of this issue is whether David took possession of the checks under the conditions provided for in Section 52 of the Negotiable Instruments Law. All the requisites provided for in Section 52 must concur in Davids case, otherwise he cannot be deemed a holder in due course. Section 24 of the Negotiable Instruments Law creates a presumption that every party to an instrument acquired the same for a consideration or for value. Thus, the law itself creates a presumption in Davids favor that he gave valuable consideration for the checks in question. In alleging otherwise, the petitioner has the onus to prove that David got hold of the checks absent said consideration. However, petitioner failed to discharge her burden of proof. The petitioners averment that David did not give valuable consideration when he took possession of the checks is unsupported, devoid of any concrete proof to sustain it. Note that both the trial court and the appellate court found that David did not receive the checks gratis, but instead gave Chandiramani US$ 360,000 as consideration for the said instruments. LIABILITY OF MAKERS OF PROMISSORY NOTE ASTRO ELECTRONIC CORP. & ROXAS VS. PHIL. EXPORT &FOREIGN LOAN GUARANTEE CORP. G.R. No. 136729. September 23, 2003 Facts: Astro Electronic Corp. (Astro) was granted several loans by Phil. Trust Co. (Phil Trust) amounting to Php 3,000.00 with interest and secured by three promissory notes. In

102

each note, it appears that Roxas signed twice as president of Astro and in his personal capacity. Thereafter, Philippine Export & Foreign Guarantee Corp. (Phil Guarantee), with the consent of Astro, guaranteed in favor of Phil Trust the payment of 70% of Astros loan. Upon the latters failure to pay its loan obligation, despite demands, Phil Guarantee paid 70% of the guaranteed loan. The Phil Trust and Phil Guarantee subsequently filed against astro and Roxas a complaint for sum of money. The Regional Trial Court rendered its decision ordering Astro & Roxas to pay jointly and severally Phil Guarantee the sum of Php 3, 621, 187.52 with interest and cost. Issue: Whether or not Roxas should be jointly and severally liable with Astro for the sum awarded by the RTC. Held: By signing twice, as president of Astro and in his personal capacity, Roxas became a co-maker of the notes and cannot escape any liability arising from it. Under the NIL, persons who write their names on the face of the note as makers, promising that they will pay to the order of the payee or any holder according to its tenor will be liable as such. Roxas is primarily liable as a joint and several debtor considering that his intention to be liable is manifested by the fact that he affixed his signature twice in each of the three promissory notes which necessarily would imply that he is undertaking the obligation in two different capacities, official and personal.

NOVATION; LOANS; SOLIDARY OBLIGATIONS; PROMISSORY NOTE; ACCOMODATION PARTY ROMEO GARCIA VS. DIONISIO LLAMAS G.R. No. 154127. December 8, 2003 Facts: A complaint for sum of money was filed by respondent Dionisio Llamas against Petitioner Romeo Garcia and Eduardo de Jesus alleging that the two borrowed Php 400, 000 from him. They bound themselves jointly and severally to pay the loan on or before January 23, 1997 with a 15% interest per month. The loan remained unpaid despite repeated demands by respondent. Petitioner resisted the complaint alleging that he signed the promissory note merely as an accommodation party for de Jesus and the latter had already paid the loan by means of a check and that the issuance of the check and acceptance thereof novated or superseded the note. The trial court rendered a judgment on the pleadings in favor of the respondent and directed petitioner to pay jointly and severally respondent the amounts of Php 400, 000 representing the principal amount plus interest at 15% per month from January 23, 1997 until the same shall have been fully paid, less the amount of Php 120,000 representing interests already paid. The Court of Appeals ruled that no novation, express or implied, had taken place when respondent accepted the check from de Jesus. According to the CA, the check was issued precisely to pay for the loan that was covered by the promissory note jointly and severally undertaken by petitioner and de Jesus. Respondents acceptance of the check

103

did not serve to make de Jesus the sole debtor because first, the obligation incurred by him and petitioner was joint and several; and second, the check which had been intended to extinguish the obligation bounced upon its presentment. Issues: (1) Whether or not there was novation of the obligation (2) Whether or not the defense that petitioner was only an accommodation party had any basis. Held: For novation to take place, the following requisites must concur: (1) There must be a previous valid obligation; (2) the parties concerned must agree to a new contract; (3) the old contract must be extinguished; and (4) there must be a valid new contract. The parties did not unequivocally declare that the old obligation had been extinguished by the issuance and the acceptance of the check or that the check would take the place of the note. There is no incompatibility between the promissory note and the check. Neither could the payment of interests, which in petitioners view also constitutes novation, change the terms and conditions of the obligation. Such payment was already provided for in the promissory note and, like the check, was totally in accord with the terms thereof. Also unmeritorious is petitioners argument that the obligation was novated by the substitution of debtors. In order to change the person of the debtor, the old must be expressly released from the obligation, and the third person or new debtor must assume the formers place in the relation. Well-settled is the rule that novation is never presumed. Consequently, that which arises from a purported change in the person of the debtor must be clear and express. It is thus incumbent on petitioner to show clearly and unequivocally that novation has indeed taken place. Note also that for novation to be valid and legal, the law requires that the creditor expressly consent to the substitution of a new debtor. In a solidary obligation, the creditor is entitled to demand the satisfaction of the whole obligation from any or all of the debtors. It is up to the former to determine against whom to enforce collection. Having made himself jointly and severally liable with de Jesus, petitioner is therefore liable for the entire obligation. (2) By its terms, the note was made payable to a specific person rather than bearer to or ordera requisite for negotiability. Hence, petitioner cannot avail himself of the NILs provisions on the liabilities and defenses of an accommodation party. Besides, a nonnegotiable note is merely a simple contract in writing and evidence of such intangible rights as may have been created by the assent of the parties. The promissory note is thus covered by the general provisions of the Civil Code, not by the NIL. Even granting that the NIL was applicable, still petitioner would be liable for the note. An accommodation party is liable for the instrument to a holder for value even if, at the time of its taking, the latter knew the former to be only an accommodation party. The relation between an accommodation party and the party accommodated is, in effect, one of principal and surety. It is a settled rule that a surety is bound equally and absolutely with the principal and is deemed an original promissory debtor from the beginning. The liability is immediate and direct.

104

BOUNCING CHECKS LAW QUE VS. PEOPLE 154 SCRA 160 Facts: Vicotr Que deliberately issued checks to cover accounts but the checks were dishonored upon presentment. Que was convicted by the RTC of the crime of violating B.P. Blg. 22 on two counts which decision was affirmed by the CA. que alleged, among others, that he issued the checks in question merely to guarantee the payment of the purchases by Powerhouse Supply, Inc. of which he is the manager. Issue: Whether dishonored checks issued merely to guarantee payment constitute violation of B.P. Blg. 22. Held: It is now well-settled that B.P. Blg. 22. applies even in cases where dishonored checks are issued merely in form of deposit or a guarantee. The enactment does not make any distinction as to whether the checks within its contemplation are issued, in payment of an obligation or merely to guarantee said obligation. Consequently, what are important are the facts that the accused deliberately issued the checks to cover accounts and that the checks were dishonored upon presentment regardless of whether or not the accused merely issued the checks as a guarantee. It is the intention of the framers of B.P. Blg. 22. to make the mere act of issuing a worthless check malum prohibitum and thus punishable under such law.

INSURANCE

WHITE GOLD MARINE SERVICES, INC. VS. PIONEER INSURANCE AND SURETY CORPORATION AND THE STEAMSHIP MUTUAL UNDERWRITING ASSOCIATION (BERMUDA) LTD. G.R. No. 154514. July 28, 2005 Facts: White Gold Marine Services, Inc. procured a protection and indemnity coverage for its vessels from The Steamship Mutual Underwriting Association Limited through Pioneer Insurance and Surety Corporation. White Gold was issued a Certificate of Entry and Acceptance. Pioneer also issued receipts evidencing payments for the coverage. When White Gold failed to fully pay its accounts, Steamship Mutual refused to renew the coverage. Steamship Mutual thereafter filed a case against White Gold for collection of sum of money to recover the latters unpaid balance. White Gold on the other hand, filed a complaint before the Insurance Commission claiming that Steamship Mutual violated Sections 186 and 187, while Pioneer violated Sections 299, to 301 of the Insurance Code. The Insurance Commission dismissed the complaint. It said that there was no need for Steamship Mutual to secure a license because it was not engaged in the insurance business. It explained that Steamship Mutual was a Protection and Indemnity Club.

105

Likewise, Pioneer need not obtain another license as insurance agent and/or a broker for Steamship Mutual because Steamship Mutual was not engaged in the insurance business. Moreover, Pioneer was already licensed; hence, a separate license solely as agent/broker of Steamship Mutual was already superfluous. The Court of Appeals affirmed the decision of the Insurance Commissioner. In its decision, the appellate court distinguished between P & I Clubs vis--vis conventional insurance. The appellate court also held that Pioneer merely acted as a collection agent of Steamship Mutual. Issues: (1) Is Steamship Mutual, a P & I Club, engaged in the insurance business in the Philippines? (2) Does Pioneer need a license as an insurance agent/broker for Steamship Mutual? Held: The test to determine if a contract is an insurance contract or not, depends on the nature of the promise, the act required to be performed, and the exact nature of the agreement in the light of the occurrence, contingency, or circumstances under which the performance becomes requisite. It is not by what it is called. Basically, an insurance contract is a contract of indemnity. In it, one undertakes for a consideration to indemnify another against loss, damage or liability arising from an unknown or contingent event. In particular, a marine insurance undertakes to indemnify the assured against marine losses, such as the losses incident to a marine adventure. Section 99 of the Insurance Code enumerates the coverage of marine insurance. A P & I Club is a form of insurance against third party liability, where the third party is anyone other than the P & I Club and the members. By definition then, Steamship Mutual as a P & I Club is a mutual insurance association engaged in the marine insurance business. The records reveal Steamship Mutual is doing business in the country albeit without the requisite certificate of authority mandated by Section 187 of the Insurance Code. It maintains a resident agent in the Philippines to solicit insurance and to collect payments in its behalf. We note that Steamship Mutual even renewed its P & I Club cover until it was cancelled due to non-payment of the calls. Thus, to continue doing business here, Steamship Mutual or through its agent Pioneer, must secure a license from the Insurance Commission. Since a contract of insurance involves public interest, regulation by the State is necessary. Thus, no insurer or insurance company is allowed to engage in the insurance business without a license or a certificate of authority from the Insurance Commission. On the second issue, Pioneer is the resident agent of Steamship Mutual as evidenced by the certificate of registration issued by the Insurance Commission. It has been licensed to do or transact insurance business by virtue of the certificate of authority issued by the same agency. However, a Certification from the Commission states that Pioneer does not have a separate license to be an agent/broker of Steamship Mutual. Although Pioneer is already licensed as an insurance company, it needs a separate license to act as insurance agent for Steamship Mutual. PHILIPPINE CHARTER INSURANCE CORPORATION VS. CHEMOIL LIGHTERAGE HITE GOLD CORPORATION

106

G.R. No. 136888. June 29, 2005 Facts: Philippine Charter Insurance Corporation is a domestic corporation engaged in the business of non-life insurance. Respondent Chemoil Lighterage Corporation is also a domestic corporation engaged in the transport of goods. On 24 January 1991, Samkyung Chemical Company, Ltd., based in South Korea, shipped 62.06 metric tons of the liquid chemical DIOCTYL PHTHALATE (DOP) on board MT TACHIBANA which was valued at US$90,201.57 and another 436.70 metric tons of DOP valued at US$634,724.89 to the Philippines. The consignee was Plastic Group Phils., Inc. in Manila. PGP insured the cargo with Philippine Charter Insurance Corporation against all risks. The insurance was under Marine Policies No. MRN-30721[5] dated 06 February 1991. Marine Endorsement No. 2786[7] dated 11 May 1991 was attached and formed part of MRN-30721, amending the latters insured value to P24,667,422.03, and reduced the premium accordingly. The ocean tanker MT TACHIBANA unloaded the cargo to the tanker barge, which shall transport the same to Del Pan Bridge in Pasig River and haul it by land to PGPs storage tanks in Calamba, Laguna. Upon inspection by PGP, the samples taken from the shipment showed discoloration demonstrating that it was damaged. PGP then sent a letter where it formally made an insurance claim for the loss it sustained. Petitioner requested the GIT Insurance Adjusters, Inc. (GIT), to conduct a Quantity and Condition Survey of the shipment which issued a report stating that DOP samples taken were discolored. Inspection of cargo tanks showed manhole covers of ballast tanks ceilings loosely secured and that the rubber gaskets of the manhole covers of the ballast tanks re-acted to the chemical causing shrinkage thus, loosening the covers and cargo ingress. Petitioner paid PGP the full and final payment for the loss and issued a Subrogation Receipt. Meanwhile, PGP paid the respondent the as full payment for the latters services. On 15 July 1991, an action for damages was instituted by the petitioner-insurer against respondent-carrier before the RTC, Br.16, City of Manila. Respondent filed an answer which admitted that it undertook to transport the shipment, but alleged that before the DOP was loaded into its barge, the representative of PGP, Adjustment Standard Corporation, inspected it and found the same clean, dry, and fit for loading, thus accepted the cargo without any protest or notice. As carrier, no fault and negligence can be attributed against respondent as it exercised extraordinary diligence in handling the cargo. After due hearing, the trial court rendered a Decision in favor of plaintiff. On appeal, the Court of Appeals promulgated its Decision reversing the trial court. A petition for review on certiorar[ was filed by the petitioner with this Court. Issues: 1. Whether or not the Notice of Claim was filed within the required period. 2.Whether or not the damage to the cargo was due to the fault or negligence of the respondent. Held: Article 366 of the Code of Commerce has profound application in the case at bar, which provides that; Within twenty-four hours following the receipt of the merchandise a claim may be made against the carrier on account of damage or average found upon

107

opening the packages, provided that the indications of the damage or average giving rise to the claim cannot be ascertained from the exterior of said packages, in which case said claim shall only be admitted at the time of the receipt of the packages. After the periods mentioned have elapsed, or after the transportation charges have been paid, no claim whatsoever shall be admitted against the carrier with regard to the condition in which the goods transported were delivered. As to the first issue, the petitioner contends that the notice of contamination was given by PGP employee, to Ms. Abastillas, at the time of the delivery of the cargo, and therefore, within the required period. The respondent, however, claims that the supposed notice given by PGP over the telephone was denied by Ms. Abastillas. The Court of Appeals declared:that a telephone call made to defendant-company could constitute substantial compliance with the requirement of notice. However, it must be pointed out that compliance with the period for filing notice is an essential part of the requirement, i.e.. immediately if the damage is apparent, or otherwise within twenty-four hours from receipt of the goods, the clear import being that prompt examination of the goods must be made to ascertain damage if this is not immediately apparent. We have examined the evidence, and We are unable to find any proof of compliance with the required period, which is fatal to the accrual of the right of action against the carrier.[27] Nothing in the trial courts decision stated that the notice of claim was relayed or filed with the respondent-carrier immediately or within a period of twenty-four hours from the time the goods were received. The Court of Appeals made the same finding. Having examined the entire records of the case, we cannot find a shred of evidence that will precisely and ultimately point to the conclusion that the notice of claim was timely relayed or filed. The requirement that a notice of claim should be filed within the period stated by Article 366 of the Code of Commerce is not an empty or worthless proviso. The object sought to be attained by the requirement of the submission of claims in pursuance of this article is to compel the consignee of goods entrusted to a carrier to make prompt demand for settlement of alleged damages suffered by the goods while in transport, so that the carrier will be enabled to verify all such claims at the time of delivery or within twenty-four hours thereafter, and if necessary fix responsibility and secure evidence as to the nature and extent of the alleged damages to the goods while the matter is still fresh in the minds of the parties. The filing of a claim with the carrier within the time limitation therefore actually constitutes a condition precedent to the accrual of a right of action against a carrier for loss of, or damage to, the goods. The shipper or consignee must allege and prove the fulfillment of the condition. If it fails to do so, no right of action against the carrier can accrue in favor of the former. The aforementioned requirement is a reasonable condition precedent; it does not constitute a limitation of action.[31] We do not believe so. As discussed at length above, there is no evidence to confirm that the notice of claim was filed within the period provided for under Article 366 of the Code of Commerce. Petitioners contention proceeds from a false presupposition that the notice of claim was timely filed. Considering that we have resolved the first issue in the negative, it is therefore unnecessary to make a resolution on the second issue.

108

EXEMPTION SHOULD BE PROVEN IN ORDER TO QUALIFY UNDEREXCEPTION CLAUSE OF INSURANCE POLICY COUNTRY BANKERS INSURANCE CORP. VS. LIANGA BAY & COMMUNITY MULTI-PURPOSE COOPERATIVE, INC. G.R. No.136914, January 25, 2002 Facts: Country Bankers Insurance Corp. (CBIC) insured the building of respondent Lianga Bay and Community Multi-Purpose Corp., Inc. against fire, loss, damage, or liability during the period starting June 20, 1990 for the sum of Php.200,000.00. On July 1, 1989 at about 12:40 in the morning a fire occurred. The respondent filed the insurance claim but the petition denied the same on the ground that the building was set on fire by two NPA rebels and that such loss was an excepted risk under par.6 of the conditions of the insurance policy that the insurance does not cover any loss or damage occasioned by among others, mutiny, riot, military or any uprising. Respondent filed an action for recovery of loss, damage or liability against petitioner and the Trial Court ordered the petition to pay the full value of the insurance. Issue: Whether or not the insurance corporation is exempted to pay based on the exception clause in the insurance policy. Held: The Supreme Court held that the insurance corporation has the burden of proof to show that the loss comes within the purview of the exception or limitation set-up. But the insurance corporation cannot use a witness to prove that the fire was caused by the NPA rebels on the basis that the witness learned this from others. Such testimony is considered hearsay and may not be received as proof of the truth of what he has learned. The petitioner, failing to prove the exception, cannot rely upon on exemption or exception clause in the fire insurance policy. The petition was granted.

BREACH OF CONTRACT OF INSURANCE MALAYAN INSURANCE CO., VS. PHIL.NAILS & WIRES CORP. G.R. No.138084, April 10, 2002 Facts: Respondent Phil. Nails & Wires Corp. insured against all risk its shipment of 10,053.40 metric tons of steel billet with petitioner Malayan Insurance Co., Inc., the shipment delivered was short by 377.168 metric tons. For this shortage, respondent claimed insurance for Php.5,250,000.00. Petitioner refused to pay. On July 28, 1993, respondent filed a complaint against petitioner for the Sum of money with RTC of Pasig. Petitioner moved to dismiss for failure to state cause of action but it was denied. On November 4, 1994, respondent moved to declare petitioner in default and the trial court granted and allowed the presentation of evidence ex parte. Respondent presented its lone witness, Jeanne King. On November 11, 1993, petitioner filed its answer but was expunged from the record for late filing. The Trial Court rendered a judgment by default.

109

Issue: Whether or not there is a cause of action and whether or not King is credible witness. Held: The Supreme Court ruled that the respondents cause of action is founded on breach of insurance. To hold petitioner liable, respondent has to prove, first, its, its importation of 10,053.40 metric tons of steel billets and second, the actual steel billets delivered to and received by the respondent. Witness Jeanne King has personal knowledge of the goods imported steel billets received. Her testimony on steel billets received was hearsay because she based the summary only on the receipts prepared by the other person.

CONCEALMENT MADE IN GOOD FAITH; VALID INSURACE CONTRACT PHILAMCARE HEALTH SYSTEMS, INC. VS. CA & JULITA RAMOS G.R. No.125678, March 18, 2002 Facts: Ernani Trinos, deceased husband of Julita Ramos, applied for a health care coverage with the petitioner Philamcare. In the standard application form, he delivered no to a question asking him if he had been treated of any of the family member consulted for high blood, heart trouble, diabetes, cancer, liver disease, asthma or ulcer. The application was approved for a period of 1 year from and thus extended to June 1, 1990. During the period of coverage, Ernani suffered a heart attack and was confined for one month. Respondent Julita Ramos tried to claim saying that the health care Agreement was void as there was concealment regarding Ernanis medical history. On July 24, 1990, after Ernani died, Julita Ramos instituted an action for damages against Philam care with the RTC Manila, which ruled against the latter. Issue: Whether or not there is a valid insurance contract because of alleged concealment of material fact. Held: The Supreme Court ruled that there is a valid insurance contract, after all, all the elements for an insurance contract are contract are present and alleged concealment answers made in good faith and without intent to deceive will not avoid the policy. The insurer, in case of material fact, is not justified in relying upon such statement, but obligated to make further inquiry. PAYMENT BY INSURANCE COMPANY OF INSURABLE VALUE OF THE GOODS; INSURANCE COMPANY SUBROGATED TO THE RIGHTS OF THE ASSURED AGAINST THE COMMON CARRIER DELSAN TRANSPORT LINES, INC. VS. CA ET.AL. G.R. No.127897, November 15, 2001 Facts: Caltex Phil. entered into a contract of affreightment with the petitioner, Delsan

110

Transport Lines, Inc. for a period of one year whereby the petitioner agreed to transport Caltex industrial fuel oil from Batangas refinery to different parts of the country. On August 14, 1986, MT Maysun set sail for Zamboanga City but unfortunately the vessel in the early morning of August 16, 1986 near Panay Gulf. The shipment was insured with the private respondent, American Home Assurance Corporation. Subsequently, private respondent paid Caltex the sum of Php.5,096,635.57. Exercising its right of subrogation under Art. 2207, NCC, the private respondent demanded from the petitioner the same amount paid to Caltex. Due to its failure to collect from the petitioner, private respondent filed a complaint with the RTC of Makati City but the trial court dismissed the complaint, finding the vessel to be seaworthy and that the incident was due to a force majeure, thus exempting the petitioner from liability. However, the decision of the trial court was reversed by the CA, giving credence to the report of PAGASA that the weather was normal and that it was impossible for the vessel to sink. Issue: Whether or not the payment made by private respondent for the insured value of the lost cargo amounted to an admission that the vessel was seaworthy, thus precluding any action for recovery against the petitioner. Held: The payment by the private respondent for the insured value of the lost cargo operates as waiver of its right to enforce the term of the implied warranty against Caltex under the marine insurance policy. However, the same cannot be validly interpreted as an automatic admission of the vessels seaworthiness by the private respondent as to foreclose recourse against the petitioner for any liability under its contractual obligation as common carrier. The fact of payment grants the private respondent subrogatory right which enables it to exercise legal remedies that otherwise be available to Caltex as owner of the lost cargo against the petitioner common carrier. TRANSPORTATION LAW JAPAN AIRLINES VS. ASUNCION G.R. No. 161730. January 28, 2005 Facts: On March 27, 1992, respondents Michael and Jeanette Asuncion left Manila on board Japan Airlines (JAL) bound for Los Angeles. Their itinerary included a stop-over in Narita and an overnight stay at Hotel Nikko Narita. Upon arrival at Narita, en employee of JAL endorsed their applications for shore pass and directed them to the Japanese immigration official. A shore pass is required of a foreigner aboard a vessel or aircraft who desires to stay in the neighborhood of the port of call for not more than 72 hours. During their interview, the Japanese immigration official noted that Michael appeared shorter than his height as indicated in his passport. Because of this inconsistency, respondents were denied shore pass entries and were detained at the Narita Airport Rest House where they were billeted overnight. A JAL employee was instructed that the respondents were to be watched so as not to escape. Respondents were charged US $400.00 each for their accommodation, security, service and meals. Subsequently, respondents filed a complaint for damages claiming that JAL did not fully apprise them of their travel requirements and that they were rudely and forcibly detained

111

at the Narita Airport. The trial court rendered a decision favor of the respondents. On appeal, the CA affirmed in toto the decision of the trial court. Issue: Whether JAL is guilty of breach of contract. Held: The SC found that JAL did not breach its contract of carriage with respondents. It may be true that JAL has the duty to inspect whether its passengers have the necessary travel documents, however, such duty does not extend to checking the veracity of every entry in these documents. JAL could not vouch for the authenticity of a passport and the correctness of the entries therein. The power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by JAL. This is not within the ambit of the contract of carriage entered into by JAL and herein respondents. As such, JAL should not be faulted for the denial of respondents shore pass applications. SHIP AGENT; LIABILITIES MACONDRAY & CO., INC. VS. PROVIDENT INSURANCE CORPORATION February, 2005 Facts: CANPOTEX SHIPPING SERVICES LIMITED INC., shipped on board the vessel M/V Trade carrier certain goods in favor of ATLAS FERTILIZER CORPORATION. Subject shipments were insured with Provident Insurance Corp. against all risks. When the shipment arrived, consignee discovered that the shipment sustained losses. Provident paid for said losses. Formal claims were then filed with Trade & Transport but MACONDRAY refused and failed to settle the same. MACONDRAY denies liability over the losses, it, having no absolute relation with Trade & Transport, the alleged operator of the vessel who transported the shipment; that accordingly, MACONDRAY is the local representative of the shipper; the charterer of M/V Trade Carrier and not party to this case; that it has no control over the acts of the captain and crew of the carrier and cannot be held responsible for any damage arising from the fault or negligence of said captain and crew; that upon arrival at the port, M/V Trade Carrier discharged the full amount of shipment as shown by the draft survey. Issue: Whether or not MACONDRAY & CO. INC., as an agent, is responsible for any loss sustained by any party from the vessel owned by Trade & Transport. Held: Although petitioner is not an agent of Trade & Transport, it can still be the ship agent of the vessel M/V Trade Carrier. A ship agent is the person entrusted with provisioning or representing the vessel in the port in which it may be found. Hence, whether acting as agent of the owner of the vessel or as agent of the charterer, petitioner will be considered as the ship agent and may be held liable as such, as long as the latter is the one that provisions or represents the vessel. The trial court found that petitioner was appointed as local agent of the vessel, which duty includes arrangement for the entrance and clearance of the vessel. Further, the CA found that the evidence shows that petitioner represented the vessel. The latter prepared the Notice of Readiness, the Statement of Facts, the Completion Notice, the Sailing Notice and Customs Clearance. Petitioners employees were present at the port of destination one day before the arrival of the vessel, where they stayed until it departed. They were also present during the actual discharging of the cargo. Moreover, Mr. de la Cruz, the representative of petitioner, also prepared for the needs of the vessel. These acts all point to the conclusion that it was the entity that represented the vessel at the port of

112

destination and was the ship agent within the meaning and context of Article 586 of the Code of Commerce. EXTRAORDINARY DILIGENCE; PRESUMPTION OF FAULT OR NEGLIGENCE REBUTTABLE REPUBLIC OF THE PHIL., represented by the DEPARTMENT OF HEALTH, NATIONAL TRUCKING AND FORWARDING CORPORATION (NTFC) and COOPERATIVE FOR AMERICAN RELIEF EVERYWHERE, INC. (CARE) VS. LORENZO SHIPPING CORPORATION (LSC) G.R. No. 153563. February 7, 2005 Facts: The Philippine government entered into a contract of carriage of goods with petitioner NTFC whereby the latter shipped bags of non-fat dried milk through respondent LSC. The consignee named in the bills of lading issued by the respondent was Abdurahma Jama, petitioners branch supervisor in Zamboanga City. On reaching the port of Zamboanga City, the respondents agent unloaded the goods and delivered the same to petitioners warehouse. Before each delivery, the delivery checkers of respondents agent requested Jama to surrender the original bills of lading, but the latter merely presented certified true copies thereof. Upon completion of each delivery, the delivery checkers asked Jama to sign the delivery receipts. However, at times when Jama had to attend to other business before a delivery was completed, he instructed his subordinates to sign the delivery receipts for him. Notwithstanding the precautions taken, petitioner NTFC allegedly did not receive the good and filed a formal claim for non-delivery of the goods shipped through respondent. Respondent explained that the cargo had already been delivered to Jama. The government through the DOH, CARE and NTFC as plaintiffs filed an action for breach of contract of carriage against respondent as defendant. Issue: Whether or not respondent is presumed at fault or negligent as common carrier for the loss or deterioration of the goods. Held: Article 1733 of the Civil Code demands that a common carrier observe extraordinary diligence over the goods transported by it. Extraordinary diligence is that extreme measure of care and caution which persons of unusual prudence and circumspection use for securing and preserving their own property or rights. This exacting standard imposed on common carriers in a contract of carriage of goods is intended to tilt the scales in favor of the shipper who is at the mercy of the common carrier once the goods have been lodged for shipment. Hence, in case of loss of goods in transit, the common carrier is presumed under the law to have been at fault or negligent. However, the presumption of fault or negligence may be overturned by competent evidence showing that the common carrier has observed extraordinary diligence over the goods. The respondent has observed such extraordinary diligence in the delivery of the goods. Prior to releasing the goods to Jama, the delivery checkers required the surrender of the original bills of lading, and in their absence, the certified true copies showing that Jama was indeed the consignee of the goods. In addition, they required Jama or his designated subordinates to sign the delivery receipts upon completion of each delivery.

113

PROMPT NOTICE OF CLAIM MUST BE MADE WITHIN THE PRESCRIBED PERIOD AS STATED IN THE BILL OF LADING PROVIDENT INSURANCE CORP. (PIC) VS. COURT OF APPEALS and AZUCAR SHIPPING CORP. (ASC) G.R. No. 118030. January 15, 2004 Facts: The vessel MV Eduardo II received on board a shipment of plastic woven bags of fertilizer in good order and condition which was consigned to Atlas Fertilizer Corporation (AFC) and covered by a bill of lading. In the process of unloading at the port of destination, certain goods were found to have fallen overboard and some considered being unrecovered spillages. Petitioner PIC indemnified the consignee AFC for its damages and seeks reimbursement from respondent ASC for the value of the losses/damages to the cargo. Respondent ASC argued that the claim or demand by petitioner had been waived, abandoned, or otherwise extinguished for failure of the consignee to comply with the required claim for damages set forth in Stipulation No. 7 of the Bill of Lading. Issue: Whether or not failure to make the prompt notice of claim as required is fatal to the right of petitioner to claim indemnification for damages. Held: There can be no question about the validity and enforceability of Stipulation No. 7 in the Bill of Lading. The 24-hour requirement under said stipulation is, by agreement of the contracting parties, a sine qua non for accrual of the right of action to recover damages against the carrier. Considering that the prompt demand was necessary to foreclose the possibility of fraud or mistake in ascertaining the validity of claims, there was a need for the consignee or its agent to observe the conditions provided for in Stipulation No. 7. Hence, petitioners insistence that respondent carrier had knowledge of the damage because one of respondents officers supervised the unloading operations and signed a discharging receipt, cannot be construed as sufficient compliance with the said proviso. Moreover, a reading of the stipulation will readily show that upon the consignee or its agent rests the obligation to make the necessary claim within the prescribed period and not merely rely on the supposed knowledge of the damage by the carrier. DEFINITION: COMMON CARRIER IN GENERAL CALVO VS. UCPB GENERAL INSURANCE TERMINAL SERVICE, INC. G.R. No. 148496. March 19, 2002 Facts: A contract was entered into between Calvo and San Miguel Corporation (SMC) for the transfer of certain cargoes from the port area in Manila to the warehouse of SMC. The cargo was insured by UCPB General Insurance Co., Inc. When the shipment arrived and unloaded from the vessel, Calvo withdrew the cargo from the arrastre operator and delivered the same to SMCs warehouse. When it was inspected, it was found out that some of the goods were torn. UCPB, being the insurer, paid for the amount of the damages and as subrogee thereafter, filed a suit against Calvo. Petitioner, on the other hand, contends that it is a private carrier not required to observe

114

such extraordinary diligence in the vigilance over the goods. As customs broker, she does not indiscriminately hold her services out to the public but only to selected parties. Issue: Whether or not Calvo is a common carrier liable for the damages for failure to observe extraordinary diligence in the vigilance over the goods. Held: The law makes no distinction between a carrier offering its services to the general community or solicits business only from a narrow segment of the general population. Note that the transportation of goods holds an integral part of Calvos business, it cannot indeed be doubted that it is a common carrier. FILING OF NOTICE OF CLAIM; ONE-YEAR PRESCRIPTIVE PERIOD BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. VS. PHIL. FIRST INSURANCE CO., INC. G.R. No. 143133. June 5, 2002 Facts: On June 13, 1990, CMC Trading A.G. shipped on board the M/V Anangel Sky at Hamburg, Germany 242 coils of various Prime Cold Rolled Steel Sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation. On July 28, 1990, M/V Anangel Sky arrived at the port of Manila and within the subsequent days, discharged the subject cargo. Four coils were found to be in bad order, and the consignee declared the same as total loss. The respondent filed its Notice of Claim only on September 18, 1990. the complaint was filed by respondent on July 25, 1991. Petitioners, on the other hand, claim that pursuant to the Carriage of Goods by Sea Act (COGSA), respondent should have filed its Notice of Loss within three days from delivery. They assert that the cargo was discharged on July 31, 1990 but respondent filed its Notice of Claim only on September 18, 1990. Issue: Whether or not failure to file a Notice of Claim shall bar respondent from recovery. Held: First, COGSA provides that the notice of claim need not be given if the state of the goods, at the time of their receipt, has been the subject of a joint inspection or survey. In this case, prior to unloading the cargo, an Inspection Report as to the condition of the goods was prepared and signed by representative of both parties. Second, a failure to file a Notice of Claim within three days will not bar recovery if it is nonetheless filed within one year. The one-year prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading. The cargo was discharged on July 31, 1990, while the Complaint was filed by respondent on July 25, 1991, within the one-year prescriptive period.

FGU INSURANCE CORP. VS. G.P. SARMIENTO TRUCKING CORP. (GPS) G.R. No. 141910. August 6, 2002

115

Facts: GPS is an exclusive contractor and hauler of Concepcion Industries, Inc. One day, it was to deliver certain goods of Concepcion Industries, Inc. aboard one of its trucks. On its way, the truck collided with an unidentified truck, resulting in damage to the cargoes. FGU, insurer of the shipment paid to Concepcion Industries, Inc. the amount of the damage and filed a suit against GPS. GPS filed a motion to dismiss for failure to prove that it was a common carrier. Issue: Whether or not GPS falls under the category of a common carrier. Held: Note that GPS is an exclusive contractor and hauler of Concepcion Industries, Inc. offering its service to no other individual or entity. A common carrier is one which offers its services whether to the public in general or to a limited clientele in particular but never on an exclusive basis. Therefore, GPS does not fit the category of a common carrier although it is not freed from its liability based on culpa contractual. STIPULATION IN THE CHARTER PARTY EXEMPTING LIABILITY HOME INSURANCE CO. VS. AMERICAN STEAMSHIP AGENCIES 23 SCRA 24 Facts: A Peruvian firm shipped on board its vessel certain goods with San Miguel Brewery as its consignee and Home Insurance Co. (HIC) as its insurer. The cargo was found to have shortages when it arrived. HIC paid for said shortages and thereafter, demanded recovery of the amount from American Steamship Agencies (ASA). The trial court ordered ASA to reimburse HIC since according to the Code of Commerce, the ship agent is civilly liable for damages in favor of third persons due to the conduct of the carriers captain and that the stipulation in the charter party exempting the owner of the ship from liability is against public policy. Issue: Whether or not the stipulation in the charter party exempting the ship owner from liability for negligence of its agents is valid. Held: The stipulation in the charter party exempting the ship owner from liability for negligence of its agents is valid and not against public policy considering that the ship was totally chartered for the use of a single party, hence, the public at large is not involved and strict public policy governing common carriers cannot be applied.

FORTUITOUS EVENT: EXEMPTION FROM LIABILITY FORTUNE EXPRESS, INC. VS. COURT OF APPEALS 305 SCRA 14 Facts: A bus of Fortune Express, Inc. (FEI) figured in an accident with a jeepney which resulted in the death of several passengers including two Maranaos. It was found out that

116

a Maranao owns said jeepney and certain Maranaos were planning to take revenge by burning some of FEIs buses. The operations manager of FEI was advised to take precautionary measures but just the same, three armed Maranaos were able to seize a bus of FEI and set it on fire. Issue: Whether the seizure of the bus was a fortuitous event which Fortune Express, Inc could not be held liable. Held: A fortuitous event is an occurrence which could not be foreseen or which though foreseen, is inevitable. This factor of unforeseen-ability is lacking in this case for despite the report that the Maranaos were planning to burn FEIs buses, nothing was really done by FEI to protect the safety of the passengers. Labor Law PHILIPPINE COMMERCIAL INTERNATIONAL BANK VS. ANASTACIO D. ABAD G.R. No. 158045. February 28, 2005 Facts: Anastacio D. Abad was the senior Assistant Manager (Sales Head) of petitioner Philippine Commercial International Bank (PCI Bank now Equitable PCI Bank)], when he was dismissed from his work. Abad received a Memorandum from petitioner Bank concerning the irregular clearing of PNB-Naval Check of Sixtu Chu, the Banks valued client. Abad submitted his Answer, categorically denying that he instructed his subordinates to validate the out-of-town checks of Sixtu Chu presented for deposit or encashment as local clearing checks. During the actual investigation conducted by petitioner Bank, several transactions violative of the Banks Policies and Rules and Regulations were uncovered by the Fact-Finding Committee. Consequently, the FactFinding Officer of petitioner Bank issued another Memorandum to Abad asking the latter to explain the newly discovered irregularities. Not satisfied with the explanations of Abad, petitioner Bank served another Memorandum, terminating his employment effective immediately upon receipt of the same. Thus, Abad instituted a Complaint for Illegal Dismissal. Issue: Whether or not awarding of separation pay equivalent to one-half (1/2) months pay for every year of service to respondent is gross, the same being contrary to law and jurisprudence. Held: The award of separation pay is required for dismissals due to causes specified under Articles 283 and 284 of the Labor Code, as well as for illegal dismissals in which reinstatement is no longer feasible. On the other hand, an employee dismissed for any of the just causes enumerated under Article 282 of the Labor Code is not, as a rule, entitled to separation pay. As an exception, allowing the grant of separation pay or some other financial assistance to an employee dismissed for just causes is based on equity. The Court has granted separation pay as a measure of social justice even when an employee has been validly

117

dismissed, as long as the dismissal was not due to serious misconduct or reflective of personal integrity or morality. BERNARDINO A. CAINGAT, vs. NATIONAL LABOR RELATIONS COMMISSION, STA. LUCIA REALTY & DEVT., INC., R.S. MAINTENANCE & SERVICES, INC., and R.S. NIGHT HAWK SECURITY & INVESTIGATION AGENCY, INC G.R. No. 154308. March 10, 2005 Facts: Petitioner Benardino A. Caingat was hired by respondent Sta. Lucia Realty and Development, Inc. (SLRDI) as the General Manager of SLRDIs sister companies, R.S. Night Hawk Security and Investigation Agency, Inc., and R.S. Maintenance and Services Inc. both organized to service the malls and subdivisions owned by SLRDI. In connection with this, he was allowed to use 10% of the total payroll of respondent R.S. Maintenance to defray operating expenses. Later, the Finance Manager discovered that petitioner deposited company funds in the latters personal account and used the funds to pay his credit card purchases, utility bills, trips abroad and acquisition of a lot in Laguna. Thus, complainant received a memorandum stating that upon verification of financial records, it was found that the latter have misappropriated company funds in the sum of about P5, 000,000.00 and is hereby suspended from his duties as Manager of the stated companies. Without conducting any investigation, respondent R.S. Maintenance filed a complaint for sum of money and damages with prayer for writ of preliminary attachment. Petitioner in turn filed a complaint for illegal dismissal against the respondents. Issue: Did respondents illegally dismiss petitioner? Held: As firmly entrenched in our jurisprudence, loss of trust and confidence as a just cause for termination of employment is premised on the fact that an employee concerned holds a position where greater trust is placed by management and from whom greater fidelity to duty is correspondingly expected. This includes managerial personnel entrusted with confidence on delicate matters, such as the custody, handling, or care and protection of the employers property. The betrayal of this trust is the essence of the offense for which an employee is penalized. Managements loss of trust and confidence on petitioner was well justified. Private respondents had every right to dismiss petitioner. Petitioners long period of disappearance from the scene and departure for abroad before making a claim of illegal dismissal does not contribute to its credibility. Nonetheless, while dismissal may truly be justified by loss of confidence, the management failed to observe fully the procedural requirement of due process for the termination of petitioners employment. Two notices should be sent to the employee. The respondents only sent the first notice, gleaned from the memorandum. There was no second notice. RETRENCHMENT; NOTICE REQUIREMENT;SEPARATION PAY JAKA FOOD PROCESSING CORPORATION, vs. DARWIN PACOT, ROBERT PAROHINOG, DAVID BISNAR, MARLON DOMINGO, RHOEL LESCANO and JONATHAN CAGABCAB.

118

G.R. No. 151378. March 28, 2005 Facts: Respondents were earlier hired by petitioner JAKA Foods Processing Corporation until the latter terminated their employment because the corporation was in dire financial straits. It is not disputed, however, that the termination was effected without JAKA complying with the requirement under Article 283 of the Labor Code regarding the service of a written notice upon the employees and the Department of Labor and Employment at least one (1) month before the intended date of termination. Respondents filed complaints for illegal dismissal, underpayment of wages and nonpayment of service incentive leave and 13th month pay against JAKA. The Labor Arbiter rendered a decision declaring the termination illegal and ordering JAKA to reinstate respondents with full backwages, and separation pay if reinstatement is not possible. The Court of Appeals reversed said decision and ordered respondent JAKA to pay petitioners separation pay equivalent to one (1) month salary, the proportionate 13th month pay and, in addition, full backwages from the time their employment was terminated. Issue: What are the legal implications of a situation where an employee is dismissed for cause but such dismissal was effected without the employers compliance with the notice requirement under the Labor Code? Held: It was established that there was ground for respondents dismissal, i.e., retrenchment, which is one of the authorized causes enumerated under Article 283 of the Labor Code. Likewise, it is established that JAKA failed to comply with the notice requirement under the same Article. Considering the factual circumstances in the instant case, the Court deem it proper to fix the indemnity at P50, 000.00. The Court of Appeals have been in error when it ordered JAKA to pay respondents separation pay equivalent to one (1) month salary for every year of service. In all cases of business closure or cessation of operation or undertaking of the employer, the affected employee is entitled to separation pay. This is consistent with the state policy of treating labor as a primary social economic force, affording full protection to its rights as well as its welfare. The exception is when the closure of business or cessation of operations is due to serious business losses or financial reverses; duly proved, in which case, the right of affected employees to separation pay is lost for obvious reasons. HACIENDA BINO/HORTENCIA STARKE, INC./HORTENCIA L. STARKE VS. CANDIDO CUENCA ET AL. G.R. No. 150478. April 15, 2005 Facts: Hacienda Bino is a 236-hectare sugar plantation located at Negros Occidental, and represented in this case by Hortencia L. Starke, owner and operator of the said hacienda. The 76 individual respondents were part of the workforce of Hacienda Bino consisting of 220 workers, performing various works, such as cultivation, planting of cane points, fertilization, watering, weeding, harvesting, and loading of harvested sugarcanes to cargo trucks. During the off-milling season, petitioner Starke issued an Order or Notice which stated, that all Hacienda employees who signed in favor of CARP are expressing their

119

desire to get out of employment on their own volition. The respondents regarded such notice as a termination of their employment. As a consequence, they filed a complaint for illegal dismissal. The respondents as complainants alleged that they are regular and permanent workers of the hacienda and that they were dismissed without just and lawful cause. Issue: Whether the respondents are regular or seasonal employees. Held: The primary standard for determining regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual trade or business of the employer. There is no doubt that the respondents were performing work necessary and desirable in the usual trade or business of an employer. Hence, they can properly be classified as regular employees. For respondents to be excluded from those classified as regular employees, it is not enough that they perform work or services that are seasonal in nature. They must have been employed only for the duration of one season. While the records sufficiently show that the respondents work in the hacienda was seasonal in nature, there was, however, no proof that they were hired for the duration of one season only. ALABANG COUNTRY CLUB INC., ET AL. VS. NATIONAL LABOR RELATIONS COMMISSION, ET AL. G.R. No. 157611. August 9, 2005 Facts: Petitioner Alabang Country Club Inc. (ACCI), is a stock, non-profit corporation that operates and maintains a country club and various sports and recreational facilities for the exclusive use of its members. Sometime in 1993, Francisco Ferrer, then President of ACCI, requested its Internal Auditor, to conduct a study on the profitability of ACCIs Food and Beverage Department (F & B Department). Consequently, report showed that from 1989 to 1993, F & B Department had been incurring substantial losses. Realizing that it was no longer profitable for ACCI to maintain its own F & B Department, the management decided to cease from operating the department and to open the same to a contractor, such as a concessionaire, which would be willing to operate its own food and beverage business within the club. Thus, ACCI sent its F & B Department employees individual letters informing them that their services were being terminated and that they would be paid separation pay. The Union in turn, with the authority of individual respondents, filed a complaint for illegal dismissal. Issue: Whether or not the clubs right to terminate its employees for an authorized cause, particularly to secure its continued viability and existence is valid. Held: When petitioner decided to cease operating its F & B Department and open the same to a concessionaire, it did not reduce the number of personnel assigned thereat. It terminated the employment of all personnel assigned at the department. Petitioners failure to prove that the closure of its F & B Department was due to substantial losses notwithstanding, the Court finds that individual respondents were dismissed on the ground of closure or cessation of an undertaking not due to serious

120

business losses or financial reverses, which is allowed under Article 283 of the Labor Code. The closure of operation of an establishment or undertaking not due to serious business losses or financial reverses includes both the complete cessation of operations and the cessation of only part of a companys activities. ELEMENTS OF ILLEGAL RECRUITMENT IN LARGE SCALE PEOPLE OF THE PHILIPPINES VS. ROSE DUJUA, ET AL. G.R. Nos. 149014-16. February 5, 2004 Facts: Ramon Dujua, his mother Rose, his aunt, Editha Singh, and his uncle, Guillermo Samson were charged with illegal recruitment in large scale. Only Ramon was arrested. Four testified against Ramon Dujua. All of them were promised work abroad upon payment of fees but they were not actually deployed. Ramon pleaded not guilty and denied the allegations that he was a recruiter. Issue: Whether or not illegal recruitment in large scale was committed by Raon Dujua, et al. Held: The essential elements of the crime of illegal recruitment in large scale are: 1) The accused engages in acts of recruitment and placement of workers defined under Article 13 (b) or in any prohibited activities under Article 34 of the Labor Code; 2) the accused has not complied with the guidelines issued by the Secretary of Labor and Employment particularly with respect to the securing of a license or an authority to recruit and deploy workers either locally or overseas; and 3) the accused commits the unlawful acts against three or more persons individually or as a group. All three elements were established beyond reasonable doubt. First, the testimonies of the complaining witnesses satisfactorily proved that Dujua promised them employment and assured them of placement overseas. All of them identified Dujua as the person who recruited them for employment abroad. As against the positive and categorical testimonies of the three complainants, Dujuas mere denials cannot prevail. As long as the prosecution is able to establishthrough credible testimonial evidence that Dujua has engaged in illegal recruitment , a conviction for the offense can very well be justified. Second, Dujua did not have any license or authority to recruit persons for overseas work, as shown by the Certification issued by the POEA. Neither did his employer, World Pack Travel and Tours, possess such license or authority. Third, it has been alleged and proven that Dujua undertook the recruitment of more than three persons. CBA; REFUSAL TO RENEGOTIATE ECONOMIC PROVISIONS OF THE CBA BY THE MANAGEMENT CONSTITUTES ULP GENERAL MILLING CORPORATION VS. HON. COURT OF APPEALS G.R. No. 146728. February 11, 2004 Facts: General Milling Corporation employed 190 workers. All the employees were

121

members of a union which is a duly certified bargaining agent. The GMC and the union entered into a collective bargaining agreement which included the issue of representation that is effective for a term of three years which will expire on November 30, 1991. On November 29, 1991, a day before the expiration of the CBA, the union sent GMC a proposed CBA, with a request that a counter proposal be submitted within ten days. on October 1991, GMC received collective and individual letters from the union members stating that they have withdrawn from their union membership. On December 19, 1991, the union disclaimed any massive disaffiliation of its union members. On January 13, 1992, GMC dismissed an employee who is a union member. The union protected the employee and requested GMC to submit to the grievance procedure provided by the CBA, but GMC argued that there was no basis to negotiate with a union which is no longer existing. The union then filed a case with the Labor Arbiter but the latter ruled that there must first be a certification election to determine if the union still enjoys the support of the workers. Issue: Whether or not GMC is guilty of unfair labor practice for violating its duty to bargain collectively and/or for interfering with the right of its employees to selforganization. Held: GMC is guilty of unfair labor practice when it refused to negotiate with the union upon its request for the renegotiation of the economic terms of the CBA on November 29, 1991. the unions proposal was submitted within the prescribed 3-year period from the date of effectivity of the CBA. It was obvious that GMC had no valid reason to refuse to negotiate in good faith with the union. The refusal to send counter proposal to the union and to bargain anew on the economic terms of the CBA is tantamount to an unfair labor practice under Article 248 of the Labor Code. Under Article 252 of the Labor Code, both parties are required to perform their mutual obligation to meet and convene promptly and expeditiously in good faith for the purpose of negotiating an agreement. The union lived up to this obligation when it presented proposals for a new CBA to GMC within 3 years from the effectivity of the original CBA. But GMC failed in its duty under Article 252. What it did was to devise a flimsy excuse, by questioning the existence of the union and the status of its membership to prevent any negotiation. It bears stressing that the procedure in collective bargaining prescribed by the Code is mandatory because of the basic interest of the state in ensuring lasting industrial peace. The Court of Appeals found that the letters between February to June, 1993 by 13 union members signifying their resignation from the union clearly indicated that GMC exerted pressure on the employees. We agree with the Court of Appeals conclusion that the illtimed letters of resignation from the union members indicate that GMC interfered with the right of its employee to self-organization. UNIONS; UNFAIR LABOR PRACTICE; STRIKES; ILLEGAL DISMISSAL STAMFORD MARKETING CORP., ET AL. VS. JOSEPHINE JULIAN, ET AL. G.R. No. 145496. February 24, 2004

122

Facts: On November 2, 1994, Zoilo de la Cruz, president of the Philippine Agricultural Commercial and Industrial Workers Union (PACIWU-TUCP), sent a letter to Rosario Apacible, treasurer and general manager of Stamford Marketing Corporation, GSP Manufacturing Corporation, Giorgio Antonio Marketing Corporation, Clementine Marketing Corporation and Ultimate Concept Phils., Inc. The letter informed her that the rank-and-file employees of the said companies had formed the Apacible Enterprises Employees Union-PACIWU-TUCP and demanded that it be recognized. After such notice, the following three cases arose: In the First Case, Josephine Julian, president of PACIWU-TUCP, Jacinta Tejada and Jecina Burabod, a Board Member and a member of the said union, were dismissed. They filed a suit with the Labor Arbiter alleging that their employer had not paid them with their overtime pay, holiday pay/premiums, rest day premium, 13th month pay for the year 1994 salaries for services actually rendered, and that illegal deduction had been made without their consent from their salaries for a cash bond. Stamford alleged that the three were dismissed for not reporting for work when required to do so and for not giving notice or explanation when asked. In the Second Case, PACIWU-TUCP filed, on behalf of 50 employees allegedly dismissed illegally for union membership by the petitioners, a case for unfair labor practice against GSP which denied such averments. GSP countered that the BLR did not list Apacible Enterprises Employees Union as a local chapter of PACIWU or TUCP. Thus, the strike that said union organized after the GSP refused to negotiate with them was illegal and that they refused to return to work when asked. The Third Case was filed for claims of the 50 employees dismissed in the second case. Petitioner corporations, however, maintained that they have been paying complainants the wages/salaries mandated by law and that the complaint should be dismissed in view of the execution of quitclaims and waivers by the private respondents. The Labor Arbiter ordered the three cases consolidated as the issues were interrelated and the respondent corporations were under one management. First Case: The dismissal was illegal and Stamford was ordered to reinstate the complainants as well as pay the backwages and other benefits claimed. It was held that the reassignment and transfer of the complainants were forms of interference in the formation and membership of a union, an unfair labor practice. Stamford also failed to substantiate their claim that the said employees abandoned their employment. It also failed to prove the necessity of the cash deposit of P2,000 and failed to furnish written notice of dismissal to any complainants. Further, it failed to prove payments of the amounts being claimed. Second Case: The strike was illegal and the officers of the union have lost their employment status, thus terminating their employment with GSP. GSP is however ordered to reinstate the complainants who were members of the union without backwages, save some employees specified. It was established that the union was not registered, and thus had staged an illegal strike. The officers of the union should be liable and dismissed, but the members should not, as they acted in good faith in the belief that their actions were within legal bounds. Third Case: GSP was ordered to pay each complainant their claims, as computed by each individual. All other claims were dismissed for lack of merit. The Labor Arbiter found petitioners liable for salary differentials and other monetary claims for petitioners failure

123

to sufficiently prove that it had paid the same to complainants as required by law. It was also ordered to return the cash deposits of the complainants, citing the same reasons as in the First Case. On appeal, the NLRC affirmed the decision in the First and Third Cases, but set aside the judgment of the Second Case for further proceedings in view of the factual issues involved. On May 14, 1996, a Petition to Declare the Strike Illegal was filed which was decided in favor of Stamford, upholding the dismissal of the union officers. The officers made no prior notice to strike, no vote was taken among union members, and the issue involved was non-strikable, a demand for salary increases On elevation to the appellate court, it was ruled that the officers should be given separation pay, and that Jacina Burabod and the rest of the members should be reinstated without loss of seniority, plus backwages. It provided for the payment of the backwages despite the illegality of the strike because the dismissals were done prior to the strike. Such is considered an unfair labor practice as there was lack of due process and valid cause. Thus, the dismissed employees were still entitled to backwages and reinstatement, with exception to the union officers who may be given separation pay due to strained relations with their employers. Issues: (1) Whether or not the respondents union officers and members were validly and legally dismisses from employment considering the illegality of the strike. (2) Whether or not the respondents union officers were entitled to backwages, separation pay and reinstatement, respectively. Held: (1) The termination of the union officers was legal under Article 264 of the Labor Code as the strike conducted was illegal and that illegal acts attended the mass action. Holding a strike is a right that could be availed of by a legitimate labor organization, which the union is not. Also, the mandatory requirements of following the procedures in conducting a strike under paragraph (c) and (f) of Article 263 were not followed by the union officers. Article 264 provides for the consequences of an illegal strike, as well as the distinction between officers and members who participated therein. Knowingly participating in an illegal strike is a sufficient ground to terminate the employment of a union officer but mere participation is not sufficient ground for termination of union members. Thus, absent clear and substantial proof, rank-and-file union members may not be terminated. If he is terminated, he is entitled to reinstatement. The Court affirmed the ruling of the CA on the illegal dismissal of the union members, as there was non-observance of due process requirements and union busting by management. It also affirmed that the charge of abandonment against Julian and Tejada were without credence. It reversed the ruling that the dismissal was unfair labor practice as there was nothing on record to show that Julian and Tejada were discouraged from joining any union. The dismissal of the union officers for participation in an illegal strike was upheld. However, union officers also must be given the required notices for terminating employment, and Article 264 of the Labor Code does not authorize immediate dismissal of union officers participating in an illegal strike. No such requisite notices were given to the union officers.

124

The Court upheld the appellate courts ruling that the union members, for having participated in the strike in good faith and in believing that their actions were within the bound of the law meant only to secure economic benefits for themselves, were illegally dismissed hence entitled to reinstatement and backwages. (2) The Supreme Court declared the dismissal of the union officers as valid hence, the award of separation pay was deleted. However, as sanction for non-compliance with the notice requirements for a lawful termination, backwages were awarded to the union officers computed from the time they were dismissed until the final entry of the judgment. JURISDICTION OF THE LABOR ARBITERS AND THE NLRC EVELYN TOLOSA VS. NATIONAL LABOR RELATIONS COMMISSION G.R. No. 149578. April 10, 2003 Facts: Captain Virgilio Tolosa was master of the vessel M/V Donna owned by QuanaKaiun, and was hired through its manning agent, Asia Bulk Transport Phils., Inc. (Asia Bulk). During channeling activities upon the vessels departure from Yokohama on November 6, 1992, Capt. Tolosa was drenched with rainwater. Subsequently, he contracted fever on November 11 which was later on accompanied by loose bowel movement for the succeeding 12 days. His condition was reported to Asia Bulk and the US Coast Guard Headquarters in Hawaii on November 15. However, before he could be evacuated, he died on November 18, 1992. Evelyn Tolosa, the widow, filed a complaint before the POEA for damages against Pedro Garate, Chief Mate of the vessel, Mario Asis, Second Mate, Asia Bulk and Quana-Kaiun. The case was transferred to the NLRC. The Labor Arbiter ruled in favor of the widow, awarding actual damages plus legal interest, as well as moral and exemplary damages and attorneys fees. On appeal to the NLRC, the decision of the Labor Arbiter was vacated and the complaint was dismissed for lack of jurisdiction over the subject matter of the action pursuant to the provisions of the Labor Code, as amended. Sustaining the NLRC, the CA ruled that the labor commission had no jurisdiction over the subject matter of the action filed by petitioner. Her cause did not arise from an employer-employee relation, but from a quasi-delict or tort. Under Article 217 (a)(4) of the Labor Code which allows an award of damages incident to an employer-employee relation, the damages awarded were not proper as she is not an employee, but merely the wife of an employee. Issues: (1) Whether or not the Labor Arbiter and the NLRC had jurisdiction over petitioners action. (2) Whether or not the monetary award granted by the Labor arbiter has already reached finality. Held: (1) The Court affirmed that the claim for damages was filed not for claiming damages under the Labor Code but under the Civil Code. The Court was convinced that the allegations were based on a quasi-delict or tort. Also, she had claimed for actual damages for loss of earning capacity based on a life expectancy of 65 years, which is cognizable under the Civil Code and can be recovered in an action based on a quasi-

125

delict. Though damages under a quasi-delict may be recoverable under the jurisdiction of labor arbiters and the NLRC, the relief must be based on an action that has reasonable casual connection with the Labor Code, labor statutes or CBAs. It must be noted that a workers loss of earning capacity and backlisting are not to be equated with wages, overtime compensation or separation pay, and other labor benefits that are generally cognized in labor disputes. The loss of earning capacity is a relief or claim resulting from a quasi-delict or a similar cause within the realm of Civil Law. In the present case, Evelyn Tolosas claim for damages is not related to any other claim under Article 217, other labor statutes, or CBAs. She cannot anchor her claim for damages to Article 161 of the Labor Code, which does not grant or specify a claim or relief. This provision is only a safety and health standard under Book IV of the same Code. The enforcement of this labor standard rests with the labor secretary. It is not the NLRC but the regular courts that have jurisdiction over action for damages, in which the employer-employee relation is merely incidental, and in which the cause of action proceeds from a different source of obligation such as a tort. (2) On the finality of the award, the Court ruled that issues not raised in the court below cannot be raised for the first time on appeal. Thus, the issue being not brought to the attention of the Court of Appeals first, this cannot be considered by the Supreme Court. It would be tantamount to denial of the right to due process against the respondents to do so. ABANDONMENT OF WORK; REQUISITES SAMUEL SAMARCA VS. ARC-MEN INDUSTRIES, INC. G.R. No. 146118. September 29, 2003 Facts: Samuel Samarca was employed as a laborer by Arc-Men Industries, Inc. On September 26, 1993, petitioner filed an application for an emergency leave of absence on account of his sons hospitalization. Upon his return for work, petitioner was immediately served with a notice of respondents order suspending him for 30 days. Feeling aggrieved, petitioner filed a complaint for illegal suspension against respondent and its owner. During the pendency of the complaint, petitioners 30-day suspension ended. Consequently, respondent, in a letter, directed petitioner to report for work immediately. However, he refused, prompting respondent to send him a Notice to Terminate, directing him to submit, within 5 days, a written explanation why he should not be dismissed from the service for abandonment of work. For his part, petitioner submitted a letter-reply explaining that because of the pendency of his complaint for illegal suspension with the Labor arbiter, he could not report for work. Respondent, finding the petitioners written explanation insufficient, decided to terminate his services via a Notice of Termination. Consequently, petitioner filed an amended complaint for illegal dismissal. Issue: Whether or not petitioner abandoned his work. Held: To constitute abandonment, two elements must concur: (1) The failure to report for work or absence without valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship manifested by some overt acts. Mere absence is not

126

sufficient. It is the employer who has the burden of proof to show a deliberate and justified refusal of the employee to resume his employment without any intention of returning. The above twin essential requirements for abandonment to exist are not present in the case at bar. Petitioners absence is not without a justifiable reason. It must be recalled that upon receipt of the Notice to Terminate by reason of abandonment, petitioner sent respondent a letter explaining that he could not go back to work because of the pendency of his complaint for illegal suspension. And immediately after he was dismissed for abandonment of work, he lost no time to amend his complaint to illegal dismissal. This alone negates any intention on his part to forsake his work. It is a settled doctrine that the filing of a complaint for illegal dismissal is inconsistent with the charge of abandonment, for an employee who takes steps to protest his dismissal cannot by logic be said to have abandoned his work. ABANDONMENT OF WORK; PROCEDURE FOR TERMINATING AN EMPLOYEE; ILLEGAL DISMISSAL AGABON VS. NATIONAL LABOR RELATIONS COMMISSION G.R. No. 158693. November 17, 2004 Facts: Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and installing ornamental and construction materials. It employed petitioner Virgilio Agabon and Jenny Agabon as gypsum board and cornice installers on January 2, 1992 until February 23, 1999 when they were dismissed for abandonment of work. Petitioners then filed a complaint for illegal dismissal. The Labor Arbiter rendered a decision declaring the dismissal illegal. On appeal, the NLRC reversed the decision because it found that the petitioners had abandoned their work and were not entitled to backwages and separation pay. The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal because they had abandoned their employment. Issue: Whether or not petitioners were illegally dismissed. Held: The dismissal should be upheld because it was established that the petitioners abandoned their jobs to work for another company. Private respondent, however, did not follow the notice requirements and instead argued that sending notices to the last known addresses would have been useless because they did not reside there anymore. Unfortunately for the private respondent, this is not a valid excuse because the law mandates the twin notice requirements to the employees last known address. Thus, it should be held liable for non-compliance with the procedural requirements of due process. When the dismissal is for a just cause, the lack of statutory due process should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the employee for the violation of his statutory rights. Remedial Law

127

CIVIL PROCEDURE MIGUELITO LIMACO, ET AL. VS. SHONAN GAKUEN CHILDREN'S HOUSE PHILIPPINES, INC. G.R. No. 158245. June 30, 2005 Facts: Petitioners are the registered owners of three parcels of agricultural land. They entered into a Contract of Sale with respondent and agreed that "in the event that the parties herein are unable to effect the transfer and sale of the said properties in whole or in part in favor of the vendees, all the paid-in amounts shall be applied to another similar property also owned by the vendors in substitution of the above-described properties." Pursuant to the contract, respondent corporation paid the down payment however; it refused to remit any monthly installment due to petitioners' failure to obtain a clearance and/or approval of the sale of the subject land from the Department of Agrarian Reform (DAR). Respondent demanded that petitioners either solve the problem with the land tenants or substitute the lots with another acceptable, suitable and untenanted land, pursuant to their agreement. Petitioners informed respondent that they were ready to finalize the transaction in accordance with the legal opinion of the DAR. In a letter, respondent informed petitioners that the scheme proposed in the DAR Opinion was "far from acceptable." Respondent offered to purchase the property on a direct sale basis. Petitioners did not respond to respondent hence, the latter, through counsel, requested the return of its down payment. As petitioners did not acquiesce, respondent filed a complaint for rescission with damages with the Regional Trial Court (RTC) of Makati. As a countermove, petitioners filed the instant case for specific performance with the RTC of Laguna. Respondent filed a motion to dismiss on the ground of litis pendentia. Petitioners opposed contending that the instant complaint for specific performance was served on respondent ahead of the service of the complaint for rescission on petitioners. Later, however, respondent withdrew its motion to dismiss in view of the order of the RTC of Makati dismissing the complaint for rescission. In its Answer with Counterclaim, respondent alleged by way of affirmative defense that "specific performance is not possible because the respondent had already bought another property which is untenanted, devoid of any legal complications and now converted from agricultural to non-agricultural purpose in accordance with DAR Administrative Order. Thereafter, petitioners filed a Motion to Withdraw Complaint considering respondent's special defense that specific performance was no longer possible. They prayed that their complaint and respondent's counterclaim be ordered withdrawn or dismissed, arguing that respondent's counterclaim would have no leg to stand on as it was compulsory in nature. Issue: Whether respondent's counterclaim should be dismissed. Held: There are two ways by which an action may be dismissed upon the instance of the plaintiff. First, dismissal is a matter of right when a notice of dismissal is filed by the plaintiff before an answer or a motion for summary judgment has been served on him by the defendant. Second, dismissal is discretionary on the court when the motion for the dismissal of the action is filed by the plaintiff at any stage of the proceedings other than

128

before service of an answer or a motion for summary judgment. While the dismissal in the first mode takes effect upon the mere notice of plaintiff without need of a judicial order, the second mode requires the authority of the court before dismissal of the case may be effected. This is so because in the dismissal of an action, the effect of the dismissal upon the rights of the defendant should always be taken into consideration. In the case at bar, it is undisputed that petitioners filed a Motion to Withdraw Complaint after respondent already filed its answer with counterclaim. In fact, the reason for their motion for withdrawal was the special defense of respondent in its answer that substitution was no longer possible as it already bought another property in lieu of the subject lots under the contract. It is, therefore, inexplicable how petitioners could argue that their complaint was successfully withdrawn upon the mere filing of a Motion to Withdraw Complaint when they themselves alleged in this petition that "private respondent objected to the withdrawal and the Trial Court sustained the objection."

LUCIANO ELLO and GAUDIOSA ELLO, VS. THE COURT OF APPEALS ET AL. G.R. No. 141255. June 21, 2005 Facts: Respondent Springfield Development Corporation is the owner and actual possessor of a lot covered by Transfer Certificate of Title (TCT) No. T-92571, while respondent Constantino Jaraula is the owner and actual possessor of a covered by TCT No. T-63088, both situated at Cagayan de Oro City. The two lots adjoin each other and were originally parts of a 12-hectare lot which has been developed by respondents as the Mega Heights Subdivision. Sometime in 1996, petitioner spouses Luciano and Gaudiosa Ello and their hired personnel surreptitiously and stealthily occupied respondents lots, built a make-shift shed under the trees, and fenced the area they occupied. Respondents then demanded that petitioners and their hired personnel vacate the area but they refused. Instead, they threatened and prevented respondents from developing their lots into a subdivision. Thus, respondent Springfield Development Corporation and Constantino G. Jaraula, filed a complaint against them for forcible entry with application for preliminary mandatory injunction. Issue: Whether the Court of Appeals gravely abused its discretion when it dismissed outright petitioners petition for review on the sole technical ground that it does not contain the affidavit of service as required by Section 11 in relation to Section 13, Rule 13 of the 1997 Rules of Civil Procedure. Held: Sections 3 and 5, Rule 13 of the 1997 Rules of Civil Procedure, as amended, prescribe two modes of filing and service of pleadings, motions, notices, orders, judgments and other papers. These are: (a) by personal delivery, governed by Section 6 of the same Rule; and (b) by mail, under Section 7 thereof. However, Section 11 of Rule 13 requires that whenever practicable, the filing of pleadings and other papers in court, as well as the service of said papers on the adverse party or his counsel, must be done personally. But if such filing and service were through a different mode, the party concerned must submit a written explanation why they were not done personally. There is no question that petitioners violated Section 11 of Rule 13 by failing to append the affidavit of service to their petition for review filed with the Court of Appeals.

129

Petitioners, upon receipt of the Court of Appeals challenged Resolution dismissing outright their petition due to such omission, promptly filed a motion for reconsideration, readily acknowledging their procedural lapse and attaching therewith the required affidavit of service. Rules of procedure must be faithfully followed except only when for persuasive reasons, they may be relaxed to relieve a litigant of an injustice not commensurate with his failure to comply with the prescribed procedure.

EXECUTION OF COMPROMISE AGREEMENT; DELAY BY ONE PARTY JUSTIFIES EXECUTION MANILA INTERNATIONAL AIRPORT AUTHORITY VS. ALA INDUSTRIES CORPORATION G.R. No. 147349. February 13, 2004 Facts: The contract for the structural repair and waterproofing of the IPT and ICT building of the NAIA airport was awarded, after a public bidding, to respondent ALA. Respondent made the necessary repair and waterproofing. After submission of its progress billings to the petitioner, respondent received partial payments. Progress billing remained unpaid despite repeated demands by the respondent. Meanwhile petitioner unilaterally rescinded the contract on the ground that respondent failed to complete the project within the agreed completion date. Respondent objected to the rescission made by the petitioner and reiterated its claims. The trial court directed the parties to proceed to arbitration. Both parties executed a compromise agreement and jointly filed in court a motion for judgment based on the compromise agreement. The Court a quo rendered judgment approving the compromise agreement. For petitioners failure to pay within the period stipulated, respondent filed a motion for execution to enforce its claim. Petitioner filed a comment and attributed the delays to its being a government agency. The trial court denied the respondents motion. Reversing the trial court, the CA ordered it to issue a writ of execution to enforce respondents claim. The appellate court ratiocinated that a judgment rendered in accordance with a compromise agreement was immediately executory, and that a delay was not substantial compliance therewith. Issues: 1) Whether or not decision based on compromise agreement is final and executory. 2) Whether or not delay by one party on a compromise justifies execution. Held: 1) A compromise once approved by final orders of the court has the force of res judicata between the parties and should not be disturbed except for vices of consent or forgery. Hence, a decision on a compromise agreement is final and executory. Such agreement has the force of law and is conclusive between the parties. It transcends its identity as a mere contract binding only upon the parties thereto, as it becomes a judgment that is subject to execution in accordance with the Rules. Judges therefore have

130

the ministerial and mandatory duty to implement and enforce it. 2. The failure to pay on the date stipulated was clearly a violation of the Agreement. Thus, non-fulfillment of the terms of the compromise justified execution. It is the height of absurdity for petitioner to attribute to a fortuitous event its delayed payment. Petitioners explanation is clearly a gratuitous assertion that borders callousness. TEMPORARY RESTRAINING ORDER; ISSUANCE OF TRO EX-PARTE; PRELIMINARY INJUNCTION; DUE PROCESS; PRESUMPTION OF COLD NEUTRALITY OF A JUDGE BAILINANG MAROHOMBSAR VS. JUDGE SANTOS ADIONG G.R. No. RTJ-02-1674. January 22, 2004 Facts: Complainant Marohombsar was the defendant in the civil case for injunction. The case was filed by Yasmira Pangadapun questioning the legality of Marohombsars appointment as Provincial Social Welfare Officer of the DSWD-ARMM. Prior to his appointment, Pangadapun used to occupy said position. Upon the filing of the said complaint, respondent judge issued a TRO and set the hearing on the application for the issuance of the preliminary injunction. Summons, together with a copy of the complaint and a notice, was also served on both parties. Marohombsar filed an ex parte urgent motion to dissolve the TRO. Pangadapun was given the time to comment. Respondent judge issued an order stating that a preliminary conference had been held and that both parties had waived the raffle of the case and reset the hearing on the application for the issuance of a writ of injunction. The judge gave another time to file her comment again. During the hearing on the application for the issuance of a writ of preliminary injunction, none of the lawyers appeared. Hence, respondent judge considered it submitted for resolution and issued the preliminary injunction. Hence, this complaint for gross ignorance of law, abuse of discretion and conduct unbecoming a judge. Issues: 1) Whether or not TRO ex parte is allowed in the instant case. 2) Whether or not trial-type hearing is essential to due process. 3) Whether or not respondent judge erred in ordering the issuance of the writ of preliminary injunction. Held: 1) A TRO is generally granted without notice to the opposite party and is intended only as a restraint on him until the propriety of granting a temporary injunction can be determined. It goes no further than to preserve the status quo until that determination. Respondent judge was justified in issuing the TRO ex parte due to his assessment of the urgency of the relief sought. 2) In applications for preliminary injunction, the dual requirement of prior notice and hearing before injunction may issue has been relaxed to the point that not all petitions for preliminary injunction need undergo a trial-type hearing, it being doctrinal that a formal or trial-type hearing is not, at all times and in all instances, essential to due process. The

131

essence of due process is that a party is afforded a reasonable opportunity to be heard and to present any evidence he may have in support of his defense. It is a rule that a party cannot claim that he has been denied due process when he was given the opportunity to present his position. 3) As a matter of public policy, the acts of a judge in his official capacity are not subject to disciplinary action even though such acts are erroneous, provided he acts in good faith and without malice. Respondent judge, or any other member of the bench for that matter, is presumed to have acted regularly and in the manner that preserves the ideal of the cold neutrality of an impartial judge implicit in the guarantee of due process.

SERVICE OF SUMMONS, SUBSTITUTED SERVICE; SEVICE BY PUBLICATION; ACTIONS IN REM; ACTIONS QUASI IN REM SPOUSES PATRICK AND RAFAELA JOSE VS. SPOUSES HELEN AND ROMEO BOYON G.R. No. 147369. October 23, 2003 Facts: Petitioners lodged a complaint for specific performance against respondents to compel them to facilitate the transfer of ownership of a parcel of land subject of a controverted sale. The RTC issued a summons to respondents. As per return of the summons, substituted service was resorted to by the process server allegedly because efforts to serve personally to re respondents failed. Meanwhile, petitioners filed before the RTC an ex parte motion for leave of court to effect summons by publication and the judge issued an order granting the same. The respondents were declared in default and as a consequence of the declaration of default, petitioners were allowed to submit their evidence ex parte. Helen Boyon, who was then in United Sates, was surprised to learn from her sister of the resolution issued by the court. Respondents filed an Ad Cautelam motion questioning, among others, the validity of the service of summons effected by the court a quo. The court issued an order denying the said motion on the basis of the defaulted respondent supposed loss of standing in court. Once again, the respondents raised the issue of the jurisdiction of the trial court via a motion for reconsideration and the same was denied. The petitioners moved for the execution of the controverted judgment which the judge granted. Thereafter, respondents filed before the CA a petition for certiorari which held that the trial court had no authority to issue the questioned resolution and orders. Issue: Whether or not summons by publication can validly serve in the instant case. Held: In general, courts acquire jurisdiction over the person of the defendant by the service of summons, such service may be done personal or substituted service, where the action is in personam and the defendant is in the Philippines. However, extraterritorial service of summons or summons by publication applies only when the action is in rem or quasi in rem. That is, the action against the thing itself instead of against the defendants person if the action is in rem or an individual is named as defendant and the purpose is to

132

subject the individuals interest in a piece of property to the obligation or loan burdening it if quasi in rem. In the instant case, what was filed before the trial court was an action for specific performance directed against respondents. While the suit incidentally involved a piece of land, the ownership or possession thereof was not put in issue. Moreover, court has consistently declared that an action for specific performance is an action in personam. Hence, summons by publication cannot be validly served. JURISDICTION; RTC RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. VS. COURT OF APPEALS 386 SCRA 67. August 1, 2002 Facts: Private respondent Manuel Dulawon filed with the Regional Trial Court a complaint for breach of contract of lease with damages against petitioner Radio Communications of the Philippines, Inc. (RCPI). Petitioner filed a motion to dismiss the complaint for lack of jurisdiction contending that it is the Municipal Trial Court which has jurisdiction as the complaint is basically one for collection of unpaid rentals. Issue: Whether or not the RTC has jurisdiction over the complaint filed by private respondent. Held: RTC has jurisdiction over the complaint. The averments in the complaint reveal that the suit filed by private respondent was primarily one for specific performance as it was aimed to enforce their three-year lease contract which would incidentally entitle him to monetary awards if the court should find that the subject contract of lease was breached. As alleged therein, petitioners failure to pay rentals due for the period from January to March 1997, constituted a violation of their contract which had the effect of accelerating the payment of monthly rentals for the years 1997 and 1998. Clearly, the action for specific performance, irrespective of the amount of the rentals and damages sought to be recovered, is incapable of pecuniary estimation, hence, cognizable exclusively by the RTC.

CRIMINAL PROCEDURE PRELIMINARY INVESTIGATION SPO4 EDUARDO ALONZO VS. JUDGE CRISANTO C. CONCEPCION, Presiding Judge, Regional Trial Court of Malolos City, Branch 12, Province of Bulacan A.M. No. RTJ-04-1879. January 17, 2005 Facts: In a wedding party, SPO4 Eduardo Alonzo, Jun Rances, Zoilo Salamat and Rey Santos were drinking together at the same table. While waiting to be seated, Pedrito Alonzo was introduced by SPO4 Alonzo to Rances as his nephew and as the son of ex-

133

Captain Alonzo. SPO4 Alonzo then introduced him to Salamat. Pedrito and his companions took their seats and started drinking at the table across SPO4 Alonzos table. After some time, Pedrito stood up to urinate at the back of the house. Santos passed a bag to Salamat, and they followed Pedrito. Rances likewise followed them. A shot rang out. Salamat was seen placing a gun inside the bag as he hurriedly left. The wedding guests ran after Salamat. They saw him and Rances board a vehicle being driven by Santos. Pedritos uncle, Jose Alonzo, sought the help of SPO4 Alonzo to chase the culprits. He refused and even disavowed any knowledge as to their identity. Jose Alonzo filed a complaint for murder against Salamat, Rances, Santos, SPO4 Alonzo and a certain Isidro Atienza. A preliminary investigation1 was conducted by the Assistant Provincial Prosecutor where Jose Alonzo and his four witnesses testified. Upon review of the records of the case by the 3rd Assistant Provincial Prosecutor, it was recommended that Salamat be charged with murder as principal, and Santos and Rances as accessories. With regard to SPO4 Alonzo and Isidro Atienza, the prosecutor found that no sufficient evidence was adduced to establish their conspiracy with Salamat. Judge Concepcion of the RTC issued an Order directing the Office of the Provincial Prosecutor to amend the information, so as to include all the aforenamed persons as accused in this case, all as principals. Issue: Whether or not the court has authority to review and reverse the resolution of the Office of the Provincial Prosecutor or to find probable cause against a respondent for the purpose of amending the Information. Held: The function of a preliminary investigation is to determine whether there is sufficient ground to engender a well-founded belief that a crime has been committed and the respondent is probably guilty thereof, and should be held for trial. It is through the conduct of a preliminary investigation that the prosecutor determines the existence of a prima facie case that would warrant the prosecution of a case. As a rule, courts cannot interfere with the prosecutor's discretion and control of the criminal prosecution. The reason for placing the criminal prosecution under the direction and control of the fiscal is to prevent malicious or unfounded prosecution by private persons. However, while prosecuting officers have the authority to prosecute persons shown to be guilty of a crime they have equally the legal duty not to prosecute when after an investigation, the evidence adduced is not sufficient to establish a prima facie case. In a clash of views between the judge who did not investigate and the prosecutor who did, or between the fiscal and the offended party or the accused, that of the prosecutor's should normally prevail. MELBA QUINTO VS. DANTE ANDRES and RANDYVER PACHECO G.R. No. 155791. March 16, 2005 Facts: An Information was filed with the Regional Trial Court that the accused Dante Andres and Randyver Pacheco, conspiring, confederating, and helping one another, did then and there willfully, unlawfully, and feloniously attack, assault, and maul Wilson Quinto inside a culvert where the three were fishing, causing Wilson Quinto to drown and die. The respondents filed a demurer to evidence which the trial court granted on the

134

ground of insufficiency of evidence. It also held that it could not hold the respondents liable for damages because of the absence of preponderant evidence to prove their liability for Wilsons death. The petitioner appealed the order to the Court of Appeals insofar as the civil aspect of the case was concerned. The CA ruled that the acquittal in this case is not merely based on reasonable doubt but rather on a finding that the accusedappellees did not commit the criminal acts complained of. Thus, pursuant to the above rule and settled jurisprudence, any civil action ex delicto cannot prosper. Acquittal in a criminal action bars the civil action arising therefrom where the judgment of acquittal holds that the accused did not commit the criminal acts imputed to them. Issue: Whether or not the extinction of respondents criminal liability carries with it the extinction of their civil liability. Held: When a criminal action is instituted, the civil action for the recovery of civil liability arising from the offense charged shall be deemed instituted with the criminal action unless the offended party waives the civil action, reserves the right to institute it separately or institutes the civil action prior to the criminal action. The prime purpose of the criminal action is to punish the offender in order to deter him and others from committing the same or similar offense, to isolate him from society, to reform and rehabilitate him or, in general, to maintain social order. The sole purpose of the civil action is the restitution, reparation or indemnification of the private offended party for the damage or injury he sustained by reason of the delictual or felonious act of the accused. The extinction of the penal action does not carry with it the extinction of the civil action. However, the civil action based on delict shall be deemed extinguished if there is a finding in a final judgment in the criminal action that the act or omission from where the civil liability may arise does not exist. In this case, the petitioner failed to adduce proof of any ill-motive on the part of either respondent to kill the deceased and as held by the the trial court and the CA, the prosecution failed to adduce preponderant evidence to prove the facts on which the civil liability of the respondents rest, i.e., that the petitioner has a cause of action against the respondents for damages. SEARCH WARRANT; PROBABLE CAUSE; WAIVER OF RIGHT TO QUESTION LEGALITY OF SEARCH; EVIDENCE IN ILLEGAL SEARCH PEOPLE VS. BENHUR MAMARIL G.R. No. 147607. January 22, 2004 Facts: SPO2 Chito Esmenda applied before the RTC for a search warrant authorizing the search for marijuana at the family residence of appellant Benhur. During the search operation, the searching team confiscated sachets of suspected marijuana leaves. Police officers took pictures of the confiscated items and prepared a receipt of the property seized and certified that the house was properly searched which was signed by the appellant and the barangay officials who witnessed the search. After the search, the police officers brought appellant and the confiscated articles to the PNP station. After weighing the specimens and testing the same, the PNP Crime

135

Laboratory issued a report finding the specimens to be positive to the test for the presence of marijuana. Moreover, the person who conducted the examination on the urine sample of appellant affirmed that it was positive for the same. Appellant denied that he was residing at his parents house since he has been residing at a rented house and declared that it was his brother and the latters family who were residing with his mother, but on said search operation, his brother and family were out. He testified that he was at his parents house because he visited his mother, that he saw the Receipt of Property Seized for the first time during the trial and admitted that the signature on the certification that the house was properly search was his. Issues: 1) Whether or not the trial court erred in issuing a search warrant. 2) Whether or not the accused-appellant waived his right to question the legality of the search. 3) Whether or not evidence seized pursuant to an illegal search be used as evidence against the accused. Held: 1) The issuance of a search warrant is justified only upon a finding of probable cause. Probable cause for a search has been defined as such facts and circumstances which would lead a reasonably discreet and prudent man to believe that an offense has been committed and that the objects sought in connection with the offense are in the place sought to be searched. In determining the existence of probable cause, it is required that: 1) The judge must examine the complaint and his witnesses personally; 2) the examination must be under oath; 3) the examination must be reduced in writing in the form of searching questions and answers. The prosecution failed to prove that the judge who issued the warrant put into writing his examination of the applicant and his witnesses on the form of searching questions and answers before issuance of the search warrant. Mere affidavits of the complainant and his witnesses are not sufficient. Such written examination is necessary in order that the judge may be able to properly determine the existence and non-existence of probable cause. Therefore, the search warrant is tainted with illegality by failure of the judge to conform with the essential requisites of taking the examination in writing and attaching to the record, rendering the search warrant invalid. 2) At that time the police officers presented the search warrant, appellant could not determine if the search warrant was issued in accordance with law. It was only during the trial that appellant, through his counsel, had reason to believe that the search warrant was illegally issued. Moreover, appellant seasonably objected on constitutional grounds to the admissibility of the evidence seized pursuant to said warrant during the trial, after the prosecution formally offered its evidence. Under the circumstances, no intent to waive his rights can reasonably be inferred from his conduct before or during the trial. 3) No matter how incriminating the articles taken from the appellant may be, their seizure cannot validate an invalid warrant. The requirement mandated by the law that the examination of the complaint and his witnesses must be under oath and reduced to writing in the form of searching questions and answers was not complied with, rendering the search warrant invalid. Consequently, the evidence seized pursuant to illegal search warrant cannot be used in evidence against appellant in accordance with Section 3 (2)

136

Article III of the Constitution. JURISDICTION OVER THE PERSON; MOTION TO QUASH; ARREST WITHOUT WARRANT PEOPLE VS. CRISPIN BILLABER G.R. No. 114967-68. January 26, 2004 Facts: Private complainant Elizabeth Genteroy was introduced to accused Crispin Billaber by her friends. The accused told Genteroy that he could help her acquire the necessary papers and find her a job abroad. Genteroy introduced the accused to Raul Durano. The accused offered Durano a job as his personal driver in the U.S. Durano and Genteroy paid the accused and asked for receipt, but the accused said that it was not necessary since they will leave together. Meanwhile, Genteroy introduced the accused to Tersina Onza and offered a job abroad. Thereafter, the accused instructed the three private complainants, Genteroy, Durano and Onza to meet him at the airport on the agreed date, however, the accused failed to show up. Durano chanced upon the accused at the canteen. A commotion ensued when Durano tried to stop the accused from leaving. A police officer brought both Durano and the accused to the PNP station. The prosecution offered in evidence a certificate from the POEA stating that the accused was not licensed or authorized to recruit workers for employment abroad. The accused denied receiving money from private complainants and interposed a defense of frame-up and extortion against Durano. Issues: 1) Whether or not the trial court erred in not considering that the accused arrested without warrant. 2) Whether or not the court acquired jurisdiction over the person of the accused. Held: 1) It appears that accused-appellant was brought to the police station, together with the complainant Durano, not because of the present charges but because of the commotion that ensued between the two at the canteen. At the police station, Durano and the other complainants then executed statements charging appellant with illegal recruitment and estafa. As to whether there was an actual arrest or whether, in the commotion, the appellant committed, was actually committing, or was attempting to commit an offense, have been rendered moot. 2) Appellant did not allege any irregularity in a motion to quash before entering his plea, and is therefore deemed to have waived any question of the trial courts jurisdiction over his person.

UNREASONABLE SEARCHES AND SEIZURES PEOPLE VS. NOEL TUDTUD AND DINDO BOLONG G.R. No. 144037, Sept.ember 26, 2003

137

Facts: Solier informed the police that Tudtud would come back with new stocks of marijuana. Policemen saw two men alighted from the bus, helping each other carry a carton/ box, one of them fitted the description of Tudtud. They approached the two and Tudtud denied that he carried any drugs. The latter opened the box, beneath dried fish where two bundles, one wrapped in a plastic bag and another in newspapers. Policemen asked Tudtud to unwrap the packages and contained what seemed to the police as marijuana leaves. The two did not resist the arrest. Charged with illegal possession of prohibited drugs, they pleaded not guilty and interposed the defense that they were framed up. The trial court convicted them with the crime charged and sentenced them to suffer the penalty of reclusion perpetua. Issue: Whether or not searches and seizures without warrant may be validly obtained. Held: The rule is that a search and seizure must be carried out through or with a judicial warrant; otherwise such search and seizure becomes reasonable within the meaning of the constitutional provision, and any evidence secured thereby will be inadmissible in evidence for any purpose in any proceeding. Except with the following instances even in the absence of a warrant: 1) Warrantless search incidental to a lawful arrest, 2) Search in evidence in plain view, 3) Search of a moving vehicle, 4) Consented warrantless search, 5) Customs search, 6) Stop and frisk and 7) Exigent and emergency circumstances. The long standing rule in this jurisdiction, applied with a degree of consistency, is that, a reliable information alone is not sufficient to justify a warrantless arrest. Hence, the items seized were held inadmissible, having been obtained in violation of the accuseds constitutional rights against unreasonable searches and seizures. CIVIL ACTION ARISING FROM DELICT; EFFECT OF ACQUITTAL ON THE CIVIL ASPECT; EFFECT OF GRANT OF DEMURRER ON THE CIVIL ASPECT OF THE CASE ANAMER SALAZAR VS. PEOPLE AND J.Y. BROTHERS MARKETING CORP. G.R. No. 151931, September 23, 2003 Facts: Petitioner Anamer Salazar purchased 300 cavans of rice from J.Y. Brothers Marketing. As payment for these, she gave a check drawn against the Prudential Bank by one Nena Timario. J.Y. accepted the check upon the petitioners assurance that it was good check. Upon presentment, the check was dishonored because it was drawn under a closed account. Upon being informed of such dishonor, petitioner replaced the check drawn against the Solid Bank, which, however, was returned with the word DAUD (Drawn against uncollected deposit). After the prosecution rested its case, the petitioner filed a Demurrer to Evidence with Leave of Court. The trial court rendered judgment acquitting the petitioner of the crime charged but ordering her to pay, as payment of her purchase. The petitioner filed a motion for reconsideration on the civil aspect of the decision with a plea that she be allowed to present evidence pursuant to Rule 33 of the Rules of Court, but the court denied the motion.

138

Issues: 1) Does the acquittal of the accused in the criminal offense prevent a judgment against her on the civil aspect of the case? 2) Was the denial of the motion for reconsideration proper? Held: 1) The rule on the Criminal Procedure provides that the extension of the penal action does not carry with it the extension of the civil action. Hence, the acquittal of the accused does not prevent a judgment against him on the civil aspect of the case where a) the acquittal is based on reasonable doubt as only preponderance of evidence is required; b) where the court declared that the liability of the accused is only civil; c) where the civil liability of the accused does not arise from or is not based upon the crime of which the accused was acquitted. 2) No, because after an acquittal or grant of the demurrer, the trial shall proceed for the presentation of evidence on the civil aspect of the case. This is so because when the accused files a demurrer to evidence, the accused has not yet adduced evidence both on the criminal and civil aspect of the case. The only evidence on record is the evidence for the prosecution. What the trial court should do is to set the case for continuation of the trail for the petitioner to adduce evidence on the civil aspect and for the private offended party adduce evidence by way of rebuttal as provided for in Sec.11, Rule 119 of the Revised Rules on Criminal Procedure. Otherwise, it would be a nullity for the reason that the constitutional right of the accused to due process is thereby violated. AMENDED RULES ON DEATH PENALTY CASES REVIEW PEOPLE OF THE PHILIPPINES VS. MATEO G.R. No. 147678-87, July 7, 2004 Facts: Appellant Efren Mateo was charged with ten counts of rape by his step-daughter Imelda Mateo. During the trial, Imeldas testimonies regarding the rape incident were inconsistent. She said in one occasion that incident of rape happened inside her bedroom, but other times, she told the court that it happened in their sala. She also told the court that the appellant would cover her mouth but when asked again, she said that he did not. Despite the irreconcilable testimony of the victim, the trial court found the accused guilty of the crime of rape and sentenced him the penalty of reclusion perpetua. The Solicitor General assails the factual findings of the trial and recommends an acquittal of the appellant. Issue: Whether or not this case is directly appeallable to the Supreme Court. Held: While the Fundamental Law requires a mandatory review by the Supreme Court of cases where the penalty imposed is reclusion perpetua, life imprisonment, or death, nowhere, however, has it proscribed an intermediate review. If only to ensure utmost circumspection before the penalty of death, reclusion perpetua or life imprisonment is imposed, the Court now deems it wise and compelling to provide in these cases a review by the Court of Appeals before the case is elevated to the Supreme Court. Where life and liberty are at stake, all possible avenues to determine his guilt or innocence must be accorded an accused, and no case in the evaluation of the facts can ever be overdone. A prior determination by the Court of Appeals on, particularly, the factual issues, would minimize the possibility of an error of judgment. If the Court of Appeals should affirm

139

the penalty of death, reclusion perpetua or life imprisonment, it could then render judgment imposing the corresponding penalty as the circumstances so warrant, refrain from entering judgment and elevate the entire records of the case to the Supreme Court for its final disposition. Under the Constitution, the power to amend rules of procedure is constitutionally vested in the Supreme Court Article VIII, Section 5. The Supreme Court shall have the following powers: (5) Promulgate rules concerning the protection and enforcement of constitutional rights, pleading, practice, and procedure in all courts. Procedural matters, first and foremost, fall more squarely within the rule-making prerogative of the Supreme Court than the law-making power of Congress. The rule here announced additionally allowing an intermediate review by the Court of Appeals, a subordinate appellate court, before the case is elevated to the Supreme Court on automatic review is such a procedural matter. Pertinent provisions of the Revised Rules on Criminal Procedure, more particularly Section 3 and Section 10 of Rule 122, Section 13 of Rule 124, Section of Rule 125, and any other rule insofar as they provide for direct appeals from the Regional Trial Courts to the Supreme Court in cases where the penalty imposed is death reclusion perpetua or life imprisonment, as well as the resolution of the Supreme Court en banc, dated 19 September 1995, in Internal Rules of the Supreme Court in cases similarly involving the death penalty, are to be deemed modified accordingly. A.M. No. 00-5-03-SC RE: AMENDMENTS TO THE REVISED RULES OF CRIMINAL PROCEDURE TO GOVERN DEATH PENALTY CASES RESOLUTION Acting on the recommendation of the Committee on Revision of the Rules of Court submitting for this Courts consideration and approval the Proposed Amendments to the Revised Rules of Criminal Procedure to Govern Death Penalty Cases, the Court Resolved to APPROVE the same. The amendment shall take effect on October 15, 2004 following its publication in a newspaper of general circulation not later than September 30, 2004 September 28, 2004 _____________________________________ AMENDED RULES TO GOVERN REVIEW OF DEATH PENALTY CASES Rule 122, Sections 3 and 10, and Rule 124, Sections 12 and 13, of the Revised Rules of Criminal Procedure, are amended as follows: RULE 122 Sec. 3. How appeal taken (a) The appeal to the Regional Trial Court, or to the Court of Appeals in cases decided by the Regional Trial Court in the exercise of its original jurisdiction, shall be by notice of appeal filed with the court which rendered the judgment or final order appealed from and by serving a copy thereof upon the adverse party. (b) The appeal to the Court of Appeals in cases decided by the Regional Trial Court in

140

the exercise of its appellate jurisdiction shall be by petition for review under Rule 42. (c) The appeal in cases whereby the penalty imposed by the Regional Trial Court is reclusion perpetua, life imprisonment or where a lesser penalty is imposed for offenses committed on the same occasion on the or which arose out of the same occurrence that gave rise to the more serious offense for which the penalty of death, reclusion perpetua, or life imprisonment is imposed, shall be by notice of appeal to the Court of Appeals in accordance with paragraph (a) of this Rule. (d) No notice of appeal is necessary in cases where the Regional Trial Court imposed the death penalty. The Court of Appeals shall automatically review the judgment as provided in Section 10 of this Rule. (3a) xxx RULE 124 Sec. 12. Power to receive evidence. The Court of Appeals shall have the power to try cases and conduct hearings, receive evidence and perform all acts necessary to resolve the factual issues raised in cases falling within its original and appellate jurisdiction, including the power to grant and conduct new trials or further proceedings. Trials or hearing in the Court of Appeals must be continuous and must be completed within three months, unless extended by the Chief Justice. (12a) Sec. 13. Certification or appeal of case to the Supreme Court. (a) Whenever the Court of Appeals finds that the penalty of death should be imposed, the court shall render judgment but refrain from making an entry of judgment and forthwith certify the case and elevate its entire record to the Supreme Court for review. (b) Where the judgment also imposes a lesser penalty for offenses committed on the same occasion or which arose out of the same occurrence that gave rise to the more severe offense for which the penalty is imposed, and the accused appeals, the appeal shall be included in the case certified for review to the Supreme Court. (c) In cases where the Court of Appeals imposes reclusion perpetua, life imprisonment or a lesser penalty, it shall render and enter judgment imposing such penalty. The judgment may be appealed to the Supreme Court by notice of appeal file with the Court of Appeals. (13a)

EVIDENCE INOCELIA S. AUTENCIO VS. CITY ADMINISTRATOR, RODEL M. MAARA ET AL. G.R. No. 152752. January 19, 2005 Facts: City Administrator Rodel M. Maara lodged a complaint against petitioner Inocelia S. Autencio with the Office of the City Mayor for dishonesty and misconduct in office. The complaint alleged that Riza Bravo, an employee of the City Assessors Office charged with the preparation of the payroll of casual employees, changed the September 1996 payroll prepared by her upon the order of petitioner. After hearing, the Office for Legal Services issued a resolution/decision, declaring the petitioner guilty of misconduct in office for allowing irregularities to happen which led to illegal payment of salaries to

141

casuals. However, as regards to the charge of dishonesty, the same was found wanting due to insufficiency of evidence. A penalty of forced resignation with forfeiture of retirement benefits except for earned leave accumulated before the filing of the complaint was imposed. In return, petitioner alleged that she had waived her right to present her evidence at a formal hearing and agreed to submit the case for resolution, only because of the manifestation of the complainant and the hearing officer that she could be held liable only for the lesser offense of simple negligence. Issue: Was the petitioner deprived of substantial due process? Held: Petitioner was afforded due process. On the formal charge against her, she had received sufficient information which, in fact, enabled her to prepare her defense. She filed her Answer controverting the charges against her and submitted Affidavits of personnel in the Assessors Office to support her claim of innocence. A pre-hearing conference was conducted by the legal officer, during which she -- assisted by her counsel -- had participated. Finally, she was able to appeal the ruling of City Mayor Badoy to the CSC, and then to the CA. Finally, settled is the rule in our jurisdiction that the findings of fact of an administrative agency must be respected, so long as they are supported by substantial evidence. It is not the task of this Court to weigh once more the evidence submitted before the administrative body and to substitute its own judgment for that of the latter in respect of the sufficiency of evidence. In any event, the Decisions of the CSC and the Court of Appeals finding petitioner guilty of the administrative charge prepared against her are supported by substantial evidence. TURADIO C. DOMINGO VS. JOSE C. DOMINGO ET AL. G.R. No. 150897. April 11, 2005 Facts: Petitioner Turadio Domingo is the oldest of the five children of the late Bruno B. Domingo, formerly the registered owner of the properties subject of this dispute. Private respondents Leonora Domingo-Castro, Nuncia Domingo-Balabis, Abella Domingo, and Jose Domingo are petitioners siblings. A family quarrel arose over the validity of the purported sale of the house and lot by their father to private respondents. Sometime in 1981 petitioner, who by then was residing on the disputed property, received a notice, declaring him a squatter. Petitioner learned of the existence of the assailed Deed of Absolute Sale when an ejectment suit was filed against him. Subsequently, he had the then Philippine Constabulary-Integrated National Police (PC-INP, now Philippine National Police or PNP) Crime Laboratory compare the signature of Bruno on the said deed against specimen signatures of his father. As a result, the police issued him Questioned Document Report to the effect that the questioned signature and the standard signatures were written by two different persons Thus; petitioner filed a complaint for forgery, falsification by notary public, and falsification by private individuals against his siblings. But after it conducted an examination of the questioned documents, the National Bureau of Investigation (NBI) came up with the conclusion that the questioned signature and the specimen signatures were written by one and the same person, Bruno B. Domingo. Consequently, petitioner instituted a case for the declaration of the nullity of

142

the Deed of Sale, reconveyance of the disputed property, and cancellation of TCT. Issue: Whether or not the court errs when it held that the trial court correctly applied the rules of evidence in disregarding the conflicting PC-INP and NBI questioned document reports. Held: Petitioner has shown no reason why the ruling made by the trial court on the credibility of the respondents witnesses below should be disturbed. Findings by the trial court as to the credibility of witnesses are accorded the greatest respect, and even finality by appellate courts, since the former is in a better position to observe their demeanor as well as their deportment and manner of testifying during the trial. Finally, the questioned Deed of Absolute Sale in the present case is a notarized document. Being a public document, it is prima facie evidence of the facts therein expressed. It has the presumption of regularity in its favor and to contradict all these, evidence must be clear, convincing, and more than merely preponderant. Petitioner has failed to show that such contradictory evidence exists in this case. Tax Law PERIOD TO ASSESS AND COLLECT TAX DEFICIENCY ESTATE OF THE LATE JULIANA DIEZ VDA. DE GABRIEL vs. COMMISSIONER OF INTERNAL REVENUE GR. No. 155541. January 27, 2004 Facts: During the lifetime of the decedent Juliana vda. De Gabriel, her business affairs were managed by the Philippine Trust Company (PhilTrust). The decedent died on April 3, 1979 but two days after her death, PhilTrust filed her income tax return for 1978 not indicating that the decedent had died. The BIR conducted an administrative investigation of the decedents tax liability and found a deficiency income tax for the year 1997 in the amount of P318,233.93. Thus, in November 18, 1982, the BIR sent by registered mail a demand letter and assessment notice addressed to the decedent c/o PhilTrust, Sta. Cruz, Manila, which was the address stated in her 1978 income tax return. On June 18, 1984, respondent Commissioner of Internal Revenue issued warrants of distraint and levy to enforce the collection of decedents deficiency income tax liability and serve the same upon her heir, Francisco Gabriel. On November 22, 1984, Commissioner filed a motion to allow his claim with probate court for the deficiency tax. The Court denied BIRs claim against the estate on the ground that no proper notice of the tax assessment was made on the proper party. On appeal, the CA held that BIRs service on PhilTrust of the notice of assessment was binding on the estate as PhilTrust failed in its legal duty to inform the respondent of antecedents death. Consequently, as the estate failed to question the assessment within the statutory period of thirty days, the assessment became final, executory, and incontestable. Issue: (1) Whether or not the CA erred in holding that the service of deficiency tax

143

assessment on Juliana through PhilTrust was a valid service as to bind the estate. (2) Whether or not the CA erred in holding that the tax assessment had become final, executory, and incontestable. Held: (1) Since the relationship between PhilTrust and the decedent was automatically severed the moment of the taxpayers death, none of the PhilTrusts acts or omissions could bind the estate of the taxpayer. Although the administrator of the estate may have been remiss in his legal obligation to inform respondent of the decedents death, the consequence thereof merely refer to the imposition of certain penal sanction on the administrator. These do not include the indefinite tolling of the prescriptive period for making deficiency tax assessment or waiver of the notice requirement for such assessment. (2) The assessment was served not even on an heir or the estate but on a completely disinterested party. This improper service was clearly not binding on the petitioner. The most crucial point to be remembered is that PhilTust had absolutely no legal relationship with the deceased or to her Estate. There was therefore no assessment served on the estate as to the alleged underpayment of tax. Absent this assessment, no proceeding could be initiated in court for collection of said tax; therefore, it could not have become final, executory and incontestable. Respondents claim for collection filed with the court only on November 22, 1984 was barred for having been made beyond the five-year prescriptive period set by law. TAX EXEMPTION; WITHDRAWAL OF TAX PRIVILEGES OF ELECTRIC COOPERATIVES BY THE LOCAL GOVERNMENT CODE PHILIPPINE RURAL ELECTRIC COOPERATIVES ASSOCIATION, INC., et al. vs. THE SECRETARY OF DEPARTMENT OF INTERIOR AND LOCAL GOVERNMENT GR. No. 143076. June 10, 2003 Facts: On May 23, 2003, a class suit was filed by petitioners in their own behalf and in behalf of other electric cooperatives organized and existing under PD 269 which are members of petitioner Philippine Rural Electric Cooperatives Association, Inc. (PHILRECA). The other petitioners, electric cooperatives of Agusan del Norte (ANECO), Iloilo 1 (ILECO 1) and Isabela 1 (ISELCO 1) are non-stock, non-profit electric cooperatives organized and existing under PD 269, as amended, and registered with the National Electrification Administration (NEA). Under Sec. 39 of PD 269 electric cooperatives shall be exempt from the payment of all National Government, local government, and municipal taxes and fee, including franchise, fling recordation, license or permit fees or taxes and any fees, charges, or costs involved in any court or administrative proceedings in which it may be party. From 1971to 1978, in order to finance the electrification projects envisioned by PD 269, as amended, the Philippine Government, acting through the National Economic council (now National Economic Development Authority) and the NEA, entered into six loan agreements with the government of the United States of America, through the United States Agency for International Development (USAID) with electric cooperatives as

144

beneficiaries. The loan agreements contain similarly worded provisions on the tax application of the loan and any property or commodity acquired through the proceeds of the loan. Petitioners allege that with the passage of the Local Government Code their tax exemptions have been validly withdrawn. Particularly, petitioners assail the validity of Sec. 193 and 234 of the said code. Sec. 193 provides for the withdrawal of tax exemption privileges granted to all persons, whether natural or juridical, except cooperatives duly registered under RA 6938, while Sec. 234 exempts the same cooperatives from payment of real property tax. Issue: (1) Does the Local Government Code (under Sec. 193 and 234) violate the equal protection clause since the provisions unduly discriminate against petitioners who are duly registered cooperatives under PD 269, as amended, and no under RA 6938 or the Cooperatives Code of the Philippines? (2) Is there an impairment of the obligations of contract under the loan entered into between the Philippine and the US Governments? Held: (1) No. The guaranty of the equal protection clause is not violated by a law based on a reasonable classification. Classification, to be reasonable must (a) rest on substantial classifications; (b) germane to the purpose of the law; (c) not limited to the existing conditions only; and (d) apply equally to all members of the same class. We hold that there is reasonable classification under the Local Government Code to justify the different tax treatment between electric cooperatives covered by PD 269 and electric cooperatives under RA 6938. First, substantial distinctions exist between cooperatives under PD 269 and those under RA 6938. In the former, the government is the one that funds those so-called electric cooperatives, while in the latter, the members make equitable contribution as source of funds. a. Capital Contributions by Members Nowhere in PD 269 doe sit require cooperatives to make equitable contributions to capital. Petitioners themselves admit that to qualify as a member of an electric cooperative under PD 269, only the payment of a P5.00 membership fee is required which is even refundable the moment the member is no longer interested in getting electric service from the cooperative or will transfer to another place outside the area covered by the cooperative. However, under the Cooperative Code, the articles of cooperation of a cooperative applying for registration must be accompanied with the bonds of the accountable officers and a sworn statement of the treasurer elected by the subscribers showing that at least 25% of the authorized share capital has been subscribed and at least 25% of the total subscription has been paid and in no case shall the paid-up share capital be less than P2,000.00. b. Extent of Government Control over Cooperatives The extent of government control over electric cooperatives covered by PD 269 is largely a function of the role of the NEA as a primary source of funds of these electric cooperatives. It is crystal clear that NEA incurred loans from various sources to finance the development and operations of these electric cooperatives. Consequently, amendments were primarily geared to expand the powers of NEA over the electric cooperatives o ensure that loans granted to them would be repaid to the government. In contrast, cooperatives under RA 6938 are envisioned to

145

be self-sufficient and independent organizations with minimal government intervention or regulation. Second, the classification of tax-exempt entities in the Local Government Code is germane to the purpose of the law. The Constitutional mandate that every local government unit shall enjoy local autonomy, does not mean that the exercise of the power by the local governments is beyond the regulation of Congress. Sec. 193 of the LGC is indicative of the legislative intent to vet broad taxing powers upon the local government units and to limit exemptions from local taxation to entities specifically provided therein. Finally, Sec. 193 and 234 of the LGC permit reasonable classification as these exemptions are not limited to existing conditions and apply equally to all members of the same class. (2) No. It is ingrained in jurisprudence that the constitutional prohibition on the impairment of the obligations of contracts does not prohibit every change in existing laws. To fall within the prohibition, the change must not only impair the obligation of the existing contract, but the impairment must be substantial. Moreover, to constitute impairment, the law must affect a change in the rights of the parties with reference to each other and not with respect to non-parties. The quoted provision under the loan agreement does not purport to grant any tax exemption in favor of any party to the contract, including the beneficiaries thereof. The provisions simply shift the tax burden, if any, on the transactions under the loan agreements to the borrower and/or beneficiary of the loan. Thus, the withdrawal by the Local Government Code under Sec. 193 and 234 of the tax exemptions previously enjoyed by petitioners does not impair the obligation of the borrower, the lender or the beneficiary under the loan agreements as, in fact, no tax exemption is granted therein. TARIFF AND CUSTOMS LAWS; PRIMARY JURISDICTION OVER SEIZURE AND FORFEITURE CASES Chief State Prosecutor JOVENCITO R. ZUO, ATTY. CLEMENTE P. HERALDO, Chief of the Internal Inquiry and Prosecution Division-customs Intelligence and Investigation Service (IIPD-CIIS), and LEONITO A. SANTIAGO, Special Investigator of the IIPD-CIIS vs. JUDGE ARNULFO G. CABREDO, Regional Trial Court, Branch 15, Tabaco City, Albay AM. No. RTJ-03-1779, April 30, 2003 Facts: Atty. Winston Florin, the Deputy Collector of Customs of the Sub-Port of Tabaco, Albay, issued on September 3, 2001 Warrant of Seizure and Detention (WSD) No. 062001against a shipment of 35, 000 bags of rice aboard the vessel M/V Criston for violation of Sec. 2530 of the Tariff and Customs Code of the Philippines (TCCP). A few days, after the issuance of the warrant of seizure and detention, Antonio Chua, Jr. and Carlos Carillo, claiming to be consignees of the subject goods, filed before the Regional Trial Court of Tabaco City, Albay a Petition with Prayer for the Issuance of Preliminary Injunction and Temporary Restraining Order (TRO). The said petition sought to enjoin the Bureau of Customs and its officials from detaining the subject shipment.

146

By virtue of said TRO, the 35,000 bags of rice were released from customs to Antonio Chua, Jr. and Carlos Carillo. In his complaint, Chief State Prosecutor Zuo alleged that respondent Judge violated Administrative Circular No. 7-99, which cautions trial court judges in their issuance of TROs and writs of preliminary injunctions. Said circular reminds judges of the principle, enunciated in Mison vs. Natividad, that the Collector of Customs has exclusive jurisdiction over seizure and forfeiture proceedings, and regular courts cannot interfere with his exercise thereof or stifle or put it to naught. Issue: Whether or not the issuance of the TRO was illegal and beyond the jurisdiction of the RTC. Held: The collection of duties and taxes due on the seized goods is not the only reason why trial courts are enjoined from issuing orders releasing imported articles under seizure and forfeiture proceedings by the Bureau of Customs. Administrative Circular No. 7-99 takes into account the fact that the issuance of TROs and the granting of writs of preliminary injunction in seizure and forfeiture proceedings before the Bureau of Customs may arouse suspicion that the issuance or grant was fro considerations other than the strict merits of the case. Furthermore, respondent Judges actuation goes against settled jurisprudence that the Collector of Customs has exclusive jurisdiction over seizure and forfeiture proceedings, and regular courts cannot interfere with his exercise thereof or stifle and put it to naught. Respondent Judge cannot claim that he issued the questioned TRO because he honestly believed tat the Bureau of Customs was effectively divested of its jurisdiction over the seized shipment. Even if it be assumed that in the exercise of the Collector of Customs of its exclusive jurisdiction over seizure and forfeiture cases, a taint of illegality is correctly imputed, the most that can be said is that under these circumstance, grave abuse of discretion may oust it of its jurisdiction. This does mean, however, that the trial court is vested with competence to acquire jurisdiction over these seizure and forfeiture cases. The proceedings before the Collector of Customs are not final. An appeal lies to the Commissioner of Customs and, thereafter, to the Court of Tax Appeals. It may even reach this Court through an appropriate petition for review. Certainly, the RTC is not included therein. Hence, it is devoid of jurisdiction. Clearly, therefore, respondent Judge had no jurisdiction to take cognizance of the petition and issue the questioned TRO. It is a basic principle that the Collector of Customs has exclusive jurisdiction over seizure and forfeiture proceedings of dutiable goods. A studious and conscientious judge can easily be conversant with such an elementary rule. NATURE OF FRANCHISE TAX; TAX EXEMPTION; WITHDRAWAL OF TAX PRIVILEGES BY THE LOCAL GOVERNMENT CODE NATIONAL POWER CORPORATION vs. CITY OF CABANATUAN GR. No. 149110, April 9, 2003

147

Facts: NAPOCOR, the petitioner, is a government-owed and controlled corporation created under Commonwealth Act 120. It is tasked to undertake the development of hydroelectric generations of power and the production of electricity from nuclear, geothermal, and other sources, as well as, the transmission of electric power on a nationwide basis. For many years now, NAPOCOR sells electric power to the resident Cabanatuan City, posting a gross income of P107,814,187.96 in 1992. Pursuant to Sec. 37 of Ordinance No. 165-92, the respondent assessed the petitioner a franchise tax amounting to P808,606.41, representing 75% of 1% of the formers gross receipts for the preceding year. Petitioner, whose capital stock was subscribed and wholly paid by the Philippine Government, refused to pay the tax assessment. It argued that the respondent has no authority to impose tax on government entities. Petitioner also contend that as a nonprofit organization, it is exempted from the payment of all forms of taxes, charges, duties or fees in accordance with Sec. 13 of RA 6395, as amended. The respondent filed a collection suit in the RTC of Cabanatuan City, demanding that petitioner pay the assessed tax, plus surcharge equivalent to 25% of the amount of tax and 2% monthly interest. Respondent alleged that petitioners exemption from local taxes has been repealed by Sec. 193 of RA 7160 (Local Government Code). The trial court issued an order dismissing the case. On appeal, the Court of Appeals reversed the decision of the RTC and ordered the petitioner to pay the city government the tax assessment. Issues: (1) Is the NAPOCOR excluded from the coverage of the franchise tax simply because its stocks are wholly owned by the National Government and its charter characterized is as a non-profit organization? (2) Is the NAPOCORs exemption from all forms of taxes repealed by the provisions of the Local Government Code (LGC)? Held: (1) NO. To stress, a franchise tax is imposed based not on the ownership but on the exercise by the corporation of a privilege to do business. The taxable entity is the corporation which exercises the franchise, and not the individual stockholders. By virtue of its charter, petitioner was created as a separate and distinct entity from the National Government. It can sue and be sued under its own name, and can exercise all the powers of a corporation under the Corporation Code. To be sure, the ownership by the National Government of its entire capital stock does not necessarily imply that petitioner is no engage din business. (2) YES. One of the most significant provisions of the LGC is the removal of the blanket exclusion of instrumentalities and agencies of the National Government from the coverage of local taxation. Although as a general rule, LGUs cannot impose taxes, fees, or charges of any kind on the National Government, its agencies and instrumentalities, this rule now admits an exception, i.e. when specific provisions of the LGC authorize the LGUs to impose taxes, fees, or charges on the aforementioned entities. The legislative purpose to withdraw tax privileges enjoyed under existing laws or charter is clearly manifested by the language used on Sec. 137 and 193 categorically withdrawing such exemption subject only to the exceptions enumerated. Since it would be tedious and impractical to attempt to enumerate all the existing statutes providing for special tax

148

exemptions or privileges, the LGC provided for an express, albeit general, withdrawal of such exemptions or privileges. No more unequivocal language could have been used. TAX EXEMPTIONS vs. TAX EXCLUSION; IN LIEU OF ALL TAXES PROVISION PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC. (PLDT) vs. CITY OF DAVAO and ADELAIDA B. BARCELONA, in her capacity as City Treasurer of Davao GR. No. 143867, March 25, 2003 Facts: PLDT paid a franchise tax equal to three percent (3%) of its gross receipts. The franchise tax was paid in lieu of all taxes on this franchise or earnings thereof pursuant to RA 7082. The exemption from all taxes on this franchise or earnings thereof was subsequently withdrawn by RA 7160 (LGC), which at the same time gave local government units the power to tax businesses enjoying a franchise on the basis of income received or earned by them within their territorial jurisdiction. The LGC took effect on January 1, 1992. The City of Davao enacted Ordinance No. 519, Series of 1992, which in pertinent part provides: Notwithstanding any exemption granted by law or other special laws, there is hereby imposed a tax on businesses enjoying a franchise, a rate of seventy-five percent (75%) of one percent (1%) of the gross annual receipts for the preceding calendar year based on the income receipts realized within the territorial jurisdiction of Davao City. Subsequently, Congress granted in favor of Globe Mackay Cable and Radio Corporation (Globe) and Smart Information Technologies, Inc. (Smart) franchises which contained in leiu of all taxes provisos. In 1995, it enacted RA 7925, or the Public Telecommunication Policy of the Philippines, Sec. 23 of which provides that any advantage, favor, privilege, exemption, or immunity granted under existing franchises, or may hereafter be granted, shall ipso facto become part of previously granted telecommunications franchises and shall be accorded immediately and unconditionally to the grantees of such franchises. The law took effect on March 16, 1995. In January 1999, when PLDT applied for a mayors permit to operate its Davao Metro exchange, it was required to pay the local franchise tax which then had amounted to P3,681,985.72. PLDT challenged the power of the city government to collect the local franchise tax and demanded a refund of what had been paid as a local franchise tax for the year 1997 and for the first to the third quarters of 1998. Issue: Whether or not by virtue of RA 7925, Sec. 23, PLDT is again entitled to the exemption from payment of the local franchise tax in view of the grant of tax exemption to Globe and Smart. Held: Petitioner contends that because their existing franchises contain in lieu of all taxes clauses, the same grant of tax exemption must be deemed to have become ipso facto part of its previously granted telecommunications franchise. But the rule is that tax exemptions should be granted only by a clear and unequivocal provision of law

149

expressed in a language too plain to be mistaken and assuming for the nonce that the charters of Globe and of Smart grant tax exemptions, then this runabout way of granting tax exemption to PLDT is not a direct, clear and unequivocal way of communicating the legislative intent. Nor does the term exemption in Sec. 23 of RA 7925 mean tax exemption. The term refers to exemption from regulations and requirements imposed by the National Telecommunications Commission (NTC). For instance, RA 7925, Sec. 17 provides: The Commission shall exempt any specific telecommunications service from its rate or tariff regulations if the service has sufficient competition to ensure fair and reasonable rates of tariffs. Another exemption granted by the law in line with its policy of deregulation is the exemption from the requirement of securing permits from the NTC every time a telecommunications company imports equipment. Tax exemptions should be granted only by clear and unequivocal provision of law on the basis of language too plain to be mistaken. REMEDIES OF A TAXPAYER UNDER THE NIRC; POWER OF THE CTA TO REVIEW RULINGS OR OPINIONS OF COMMISSIONER COMMISSIONER OF INTERNAL REVENUE vs. LEAL GR. No. 113459, November 18, 2002 Facts: Pursuant to Sec. 116 of the Tax Code which imposes percentage tax on dealers in securities and lending investors, the Commissioner of Internal Revenue issued Memorandum Order (RMO) No. 15-91 dated March 11, 1991, imposing five percent (5%) lending investors tax on pawnshops based on their gross income and requiring all investigating units of the Bureau to investigate and assess the lending investors tax due from them. The issuance of RMO No. 15-91 was an offshoot of petitioners evaluation that the nature of pawnshop business is akin to that of lending investors. Subsequently, petitioner issued Revenue Memorandum Circular No. 43-91 dated May 27, 1992, subjecting the pawn ticket to the documentary stamp tax as prescribed in Title VII of the Tax Code. Adversely affected by those revenue orders, herein respondent Josefina Leal, owner and operator of Josefina Pawnshop in San Mateo, Rizal, asked for a reconsideration of both RMO No. 15-91 and RMC No. 43-91 but the same was denied with finality by petitioner in October 30, 1991. Consequently, on March 18, 1992, respondent filed with the RTC a petition for prohibition seeking to prohibit petitioner from implementing the revenue orders. Petitioner, through the Office of the Solicitor-General, filed a motion to dismiss the petition on the ground that the RTC has no jurisdiction to review the questioned revenue orders and to enjoin their implementation. Petitioner contends that the subject revenue orders were issued pursuant to his power to make rulings or opinions in connection with the Implementation of the provisions of internal revenue laws. Thus, the case falls within the exclusive appellate jurisdiction of the Court of Tax Appeals, citing Sec. 7(1) of RA 1125. The RTC issued an order denying the motion to dismiss holding that the revenue orders are not assessments to implement a Tax Code provision, but are in effect new taxes

150

(against pawnshops) which are not provided for under the Code, and which only Congress is empowered to impose. The Court of Appeals affirmed the order issued by the RTC. Issue: Whether or not the Court of Tax Appeals has jurisdiction to review rulings of the Commissioner implementing the Tax Code. Held: The jurisdiction to review rulings of the Commissioner pertains to the Court of Tax Appeals and NOT to the RTC. The questioned RMO and RMC are actually rulings or opinions of the Commissioner implementing the Tax Code on the taxability of the Pawnshops. Under RA 1125, An Act Creating the Court of Tax Appeals, such rulings of the Commissioner of Internal Revenue are appealable to that court: Sec. 7 Jurisdiction The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein provided 1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Revenue Code or other laws or part of law administered by the Bureau of Internal Revenue. xxxxxx tax remedies; section 220; who should institute appeal in tax cases COMMISSIONER OF INTERNAL REVENUE vs. LA SUERTE CIGAR AND CIGARETTE FACTORY GR. No. 144942, July 4, 2002 Facts: In its resolution, dated 15 November 2000, the Supreme Court denied the Petition for Review on Certiorari submitted by the Commissioner of Internal Revenue for noncompliance with the procedural requirement of verification explicit in Sec. 4, Rule 7 of the 1997 Rules of Civil Procedure and, furthermore, because the appeal was not pursued by the Solicitor-General. When the motion for reconsideration filed by the petitioner was likewise denied, petitioner filed the instant motion seeking an elucidation on the supposed discrepancy between the pronouncement of this Court, on the one hand that would require the participation of the Office of the Solicitor-General and pertinent provisions of the Tax Code, on the other hand, that allow legal officers of the Bureau of Internal Revenue (BIR) to institute and conduct judicial action in behalf of the Government under Sec, 220 of the Tax Reform Act of 1997. Issue: Are the legal officer of the BIR authorized to institute appeal proceedings (as distinguished from commencement of proceeding) without the participation of the Solicitor-General? Held: NO. The institution or commencement before a proper court of civil and criminal actions and proceedings arising under the Tax Reform Act which shall be conducted y legal officers of the Bureau of Internal Revenue is not in dispute. An appeal from such

151

court, however, is not a matter of right. Sec. 220 of the Tax Reform Act must not be understood as overturning the long-established procedure before this Court in requiring the Solicitor-General to represent the interest of the Republic. This court continues to maintain that it is the Solicitor-General who has the primary responsibility to appear for the government in appellate proceedings. This pronouncement finds justification in the various laws defining the Office of the Solicitor-General, beginning with Act No. 135, which took effect on 16 June 1901, up to the present Administrative Code of 1987. Sec. 35, Chapter 12, Title III, Book IV of the said code outlines the powers and functions of the Office of the Solicitor General which includes, but not limited to, its duty to 1. Represent the Government in the Supreme Court and the Court of Appeals in all criminal proceedings; represent the Government and its officers in the Supreme Court, the Court of Appeals, and all other courts or tribunals in all civil actions and special proceedings in which the Government or any officer thereof in his official capacity is a party. 2. Appear in any court in any action involving the validity of any treaty, law, executive order, or proclamation, rule or regulation when in his judgment his intervention is necessary or when requested by the Court. TAX EXEMPTIONS; EXECUTIVE LEGISLATION COCONUT OIL REFINERS ASSOCIATION, INC. et al vs. RUBEN TORRES, as Executive Secretary, et al G.R. No. 132527. July 29, 2005 Facts: On March 13, 1992, RA No. 7227 was enacted, providing for, among other things, the sound and balanced conversion of the Clark and Subic military reservations and their extensions into alternative productive uses in the form of special economic zones in order to promote the economic and social development of Central Luzon in particular and the country in general. The law contains provisions on tax exemptions for importations of raw materials, capital and equipment. After which the President issued several Executive Orders as mandated by the law for the implementation of RA 7227. Herein petitioners contend the validity of the tax exemption provided for in the law. Issue: Whether or not the Executive Orders issued by President for the implementation of the tax exemptions constitutes executive legislation. Held: To limit the tax-free importation privilege of enterprises located inside the special economic zone only to raw materials, capital and equipment clearly runs counter to the intention of the Legislature to create a free port where the free flow of goods or capital within, into, and out of the zones is insured. The phrase tax and duty-free importations of raw materials, capital and equipment was merely cited as an example of incentives that may be given to entities operating within the zone. Public respondent SBMA correctly argued that the maxim expressio unius est exclusio alterius, on which petitioners impliedly rely to support their restrictive interpretation, does not apply when words are mentioned by way of example. It is obvious from the wording of RA No. 7227, particularly the use of the phrase such as,

152

that the enumeration only meant to illustrate incentives that the SSEZ is authorized to grant, in line with its being a free port zone. The Court finds that the setting up of such commercial establishments which are the only ones duly authorized to sell consumer items tax and duty-free is still well within the policy enunciated in Section 12 of RA No. 7227 that . . .the Subic Special Economic Zone shall be developed into a self-sustaining, industrial, commercial, financial and investment center to generate employment opportunities in and around the zone and to attract and promote productive foreign investments. However, the Court reiterates that the second sentences of paragraphs 1.2 and 1.3 of Executive Order No. 97-A, allowing tax and duty-free removal of goods to certain individuals, even in a limited amount, from the Secured Area of the SSEZ, are null and void for being contrary to Section 12 of RA No. 7227. Said Section clearly provides that exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of the Philippines. TAX EXEMPTIONS; NULLITY OF TAX DECLARATIONS AND TAX ASSESSMENTS RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI), vs. PROVINCIAL ASSESOR OF SOUTH COTABATO, et al. G.R. No. 144486. April 13, 2005 Facts: RCPI was granted a franchise under RA 2036, the law provides tax exemption for several properties of the company. Section 14 of RA 2036 reads: In consideration of the franchise and rights hereby granted and any provision of law to the contrary notwithstanding, the grantee shall pay the same taxes as are now or may hereafter be required by law from other individuals, co partnerships, private, public or quasi-public associations, corporations or joint stock companies, on real estate, buildings and other personal property except radio equipment, machinery and spare parts needed in connection with the business of the grantee, which shall be exempt from customs duties, tariffs and other taxes, as well as those properties declared exempt in this section. In consideration of the franchise, a tax equal to one and one-half per centum of all gross receipts from the business transacted under this franchise by the grantee shall be paid to the Treasurer of the Philippines each year, within ten days after the audit and approval of the accounts as prescribed in this Act. Said tax shall be in lieu of any and all taxes of any kind, nature or description levied, established or collected by any authority whatsoever, municipal, provincial or national, from which taxes the grantee is hereby expressly exempted. Thereafter, the municipal treasurer of Tupi, South Cotabato assessed RCPI real property taxes from 1981 to 1985. The municipal treasurer demanded that RCPI pay P166,810 as real property tax on its radio station building in Barangay Kablon, as well as on its machinery shed, radio relay station tower and its accessories, and generating sets. The Local Board of Assessment Appeals affirmed the assessment of the municipal treasurer. When the case reach the C A, it ruled that, petitioner is exempt from paying the real property taxes assessed upon its machinery and radio equipment mounted as accessories to its relay tower. However, the decision assessing taxes upon petitioners

153

radio station building, machinery shed, and relay station tower is valid. Issue: (1) Whether or not appellate court erred when it excluded RCPIs tower, relay station building and machinery shed from tax exemption. (2) Whether or not appellate court erred when it did not resolve the issue of nullity of the tax declarations and assessments due to non-inclusion of depreciation allowance. Held: (1) RCPIs radio relay station tower, radio station building, and machinery shed are real properties and are thus subject to the real property tax. Section 14 of RA 2036, as amended by RA 4054, states that in consideration of the franchise and rights hereby granted and any provision of law to the contrary notwithstanding, the grantee shall pay the same taxes as are now or may hereafter be required by law from other individuals, co partnerships, private, public or quasi-public associations, corporations or joint stock companies, on real estate, buildings and other personal property. The clear language of Section 14 states that RCPI shall pay the real estate tax. (2) The court held the assessment valid. The court ruled that, records of the case shows that RCPI raised before the LBAA and the CBAA the nullity of the assessments due to the non-inclusion of depreciation allowance. Therefore, RCPI did not raise this issue for the first time. However, even if we consider this issue, under the Real Property Tax Code depreciation allowance applies only to machinery and not to real property. SECRETARY OF FINANCE CANNOT PROMULGATE REGULATIONS FIXING A RATE OF PENALTY ON DELINQUENT TAXES The Honorable Secretary of Finance vs. THE HONORABLE RICARDO M. ILARDE, Presiding Judge, Regional Trial Court, 6th Judicial Region, Branch 26, Iloilo City, and CIPRIANO P. CABALUNA, JR G.R. No. 121782. May 9, 2005 Facts: Cabaluna with his wife owns several real property located in Iloilo City. Cabaluana is the Regional Director of Regional Office No. VI of the Department of Finance in Iloilo City. After his retirement, there are tax delinquencies on his properties; he paid the amount under protest contending that the penalties imposed to him are in excess than that provided by law. After exhausting all administrative remedies, he filed a suit before the RTC which found that Section 4(c) of Joint Assessment Regulation No. 1-85 and Local Treasury Regulation No. 2-85 issued on August 1, 1985 by respondent Secretary (formerly Minister) of Finance is null and void; (2) declaring that the penalty that should be imposed for delinquency in the payment of real property taxes should be two per centum on the amount of the delinquent tax for each month of delinquency or fraction thereof, until the delinquent tax is fully paid but in no case shall the total penalty exceed twenty-four per centum of the delinquent tax as provided for in Section 66 of P.D. 464 otherwise known as the Real Property Tax Code. Issue: Whether or not the then Ministry of Finance could legally promulgate Regulations prescribing a rate of penalty on delinquent taxes other than that provided for under Presidential Decree (P.D.) No. 464, also known as the Real Property Tax Code.

154

Held: The Ministry of Finance now Secretary of Finance cannot promulgate regulations prescribing a rate of penalty on delinquent taxes. The Court ruled that despite the promulgation of E.O. No. 73, P.D. No. 464 in general and Section 66 in particular, remained to be good law. To accept the Secretarys premise that E.O. No. 73 had accorded the Ministry of Finance the authority to alter, increase, or modify the tax structure would be tantamount to saying that E.O. No. 73 has repealed or amended P.D. No. 464. Repeal of laws should be made clear and expressed. Repeals by implication are not favored as laws are presumed to be passed with deliberation and full knowledge of all laws existing on the subject. Such repeals are not favored for a law cannot be deemed repealed unless it is clearly manifest that the legislature so intended it. Assuming argumenti that E.O. No. 73 has authorized the petitioner to issue the objected Regulations, such conferment of powers is void for being repugnant to the well-encrusted doctrine in political law that the power of taxation is generally vested with the legislature. Thus, for purposes of computation of the real property taxes due from private respondent for the years 1986 to 1991, including the penalties and interests, is still Section 66 of the Real Property Tax Code of 1974 or P.D. No. 464. The penalty that ought to be imposed for delinquency in the payment of real property taxes should, therefore, be that provided for in Section 66 of P.D. No. 464, i.e., two per centum on the amount of the delinquent tax for each month of delinquency or fraction thereof but in no case shall the total penalty exceed twenty-four per centum of the delinquent tax. EVIDENCE IN TAX ASSESSMENTS; MACHINE COPIES OF RECORDS/ DOCUMENTS HAVE NO PROBATIVE VALUE COMMISSION OF INTERNAL REVENUE vs. HANTEX TRADING CO., INC G.R. No. 136975. March 31, 2005 Facts: Hantex Trading Co is a company organized under the Philippines. It is engaged in the sale of plastic products, it imports synthetic resin and other chemicals for the manufacture of its products. For this purpose, it is required to file an Import Entry and Internal Revenue Declaration (Consumption Entry) with the Bureau of Customs under Section 1301 of the Tariff and Customs Code. Sometime in October 1989, Lt. Vicente Amoto, Acting Chief of Counter-Intelligence Division of the Economic Intelligence and Investigation Bureau (EIIB), received confidential information that the respondent had imported synthetic resin amounting to P115,599,018.00 but only declared P45,538,694.57. Thus, Hentex receive a subpoena to present its books of account which it failed to do. The bureau cannot find any original copies of the products Hentex imported since the originals were eaten by termites. Thus, the Bureau relied on the certified copies of the respondents Profit and Loss Statement for 1987 and 1988 on file with the SEC, the machine copies of the Consumption Entries, Series of 1987, submitted by the informer, as well as excerpts from the entries certified by Tomas and Danganan. The case was submitted to the CTA which ruled that Hentex have tax deficiency and is ordered to pay, per investigation of the Bureau. The CA ruled that the income and sales tax deficiency assessments issued by the petitioner were unlawful and baseless since the copies of the import entries relied upon in computing the deficiency tax of the respondent

155

were not duly authenticated by the public officer charged with their custody, nor verified under oath by the EIIB and the BIR investigators. Issue: Whether or not the final assessment of the petitioner against the respondent for deficiency income tax and sales tax for the latters 1987 importation of resins and calcium bicarbonate is based on competent evidence and the law. Held: Central to the second issue is Section 16 of the NIRC of 1977, as amended which provides that the Commissioner of Internal Revenue has the power to make assessments and prescribe additional requirements for tax administration and enforcement. Among such powers are those provided in paragraph (b), which provides that Failure to submit required returns, statements, reports and other documents. When a report required by law as a basis for the assessment of any national internal revenue tax shall not be forthcoming within the time fixed by law or regulation or when there is reason to believe that any such report is false, incomplete or erroneous, the Commissioner shall assess the proper tax on the best evidence obtainable. This provision applies when the Commissioner of Internal Revenue undertakes to perform her administrative duty of assessing the proper tax against a taxpayer, to make a return in case of a taxpayers failure to file one, or to amend a return already filed in the BIR. The best evidence envisaged in Section 16 of the 1977 NIRC, as amended, includes the corporate and accounting records of the taxpayer who is the subject of the assessment process, the accounting records of other taxpayers engaged in the same line of business, including their gross profit and net profit sales. Such evidence also includes data, record, paper, document or any evidence gathered by internal revenue officers from other taxpayers who had personal transactions or from whom the subject taxpayer received any income; and record, data, document and information secured from government offices or agencies, such as the SEC, the Central Bank of the Philippines, the Bureau of Customs, and the Tariff and Customs Commission. However, the best evidence obtainable under Section 16 of the 1977 NIRC, as amended, does not include mere photocopies of records/documents. The petitioner, in making a preliminary and final tax deficiency assessment against a taxpayer, cannot anchor the said assessment on mere machine copies of records/documents. Mere photocopies of the Consumption Entries have no probative weight if offered as proof of the contents thereof. The reason for this is that such copies are mere scraps of paper and are of no probative value as basis for any deficiency income or business taxes against a taxpayer. Companies exempt from zero-rate tax COMMISSIONER OF INTERNAL REVENUE vs. AMERICAN EXPRESS INTERNATIONAL, INC. (PHILIPPINE BRANCH), G.R.No. 152609. June 29, 2005 Facts: American Express international is a foreign corporation operating in the Philippines, it is a registered taxpayer. On April 13, 1999, [respondent] filed with the BIR a letter-request for the refund of its 1997 excess input taxes in the amount of

156

P3,751,067.04, which amount was arrived at after deducting from its total input VAT paid of P3,763,060.43 its applied output VAT liabilities only for the third and fourth quarters of 1997 amounting to P5,193.66 and P6,799.43, respectively. The CTA ruled in favor of the herein respondent holding that its services are subject to zero-rate pursuant to Section 108(b) of the Tax Reform Act of 1997 and Section 4.102-2 (b)(2) of Revenue Regulations 5-96. The CA affirmed the decision of the CTA. Issue: Whether or not the company is subject to zero-rate tax pursuant to the Tax Reform Act of 1997. Held: Services performed by VAT-registered persons in the Philippines (other than the processing, manufacturing or repacking of goods for persons doing business outside the Philippines), when paid in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP, are zero-rated. Respondent is a VAT-registered person that facilitates the collection and payment of receivables belonging to its nonresident foreign client, for which it gets paid in acceptable foreign currency inwardly remitted and accounted for in conformity with BSP rules and regulations. Certainly, the service it renders in the Philippines is not in the same category as processing, manufacturing or repacking of goods and should, therefore, be zero-rated. In reply to a query of respondent, the BIR opined in VAT Ruling No. 080-89 that the income respondent earned from its parent companys regional operating centers (ROCs) was automatically zero-rated effective January 1, 1988. Service has been defined as the art of doing something useful for a person or company for a fee or useful labor or work rendered or to be rendered by one person to another. For facilitating in the Philippines the collection and payment of receivables belonging to its Hong Kong-based foreign client, and getting paid for it in duly accounted acceptable foreign currency, respondent renders service falling under the category of zero rating. Pursuant to the Tax Code, a VAT of zero percent should, therefore, be levied upon the supply of that service. As a general rule, the VAT system uses the destination principle as a basis for the jurisdictional reach of the tax. Goods and services are taxed only in the country where they are consumed. Thus, exports are zero-rated, while imports are taxed. VAT rate for services that are performed in the Philippines, paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP. Thus, for the supply of service to be zero-rated as an exception, the law merely requires that first, the service be performed in the Philippines; second, the service fall under any of the However, the law clearly provides for an exception to the destination principle; that is, for a zero percent categories in Section 102(b) of the Tax Code; and, third, it be paid in acceptable foreign currency accounted for in accordance with BSP rules and regulations. Indeed, these three requirements for exemption from the destination principle are met by respondent. Its facilitation service is performed in the Philippines. It falls under the second category found in Section 102(b) of the Tax Code, because it is a service other than processing, manufacturing or repacking of goods as mentioned in the provision. Undisputed is the fact that such service meets the statutory condition that it be paid in acceptable foreign currency duly accounted for in accordance with BSP rules. Thus, it should be zero-rated.

157