I.

PERSONS AND FAMILY RELATIONS

Art. 26, NCC
The philosophy behind Art. 26, NCC underscores the necessity for its
inclusion in our Civil Law.

The Code Commission stressed in no uncertain

terms that the human personality be exalted.

Thus, under this article, the

rights of a person are amply protected, and damages are provided for violations
of a persons dignity, personality, privacy and peace of mind.

Further, the

violations mentioned in this codal provision are not exclusive but merely
examples and do not preclude other similar or analogous acts such as the one
involved in this case. (CONCEPCION vs. COURT OF APPEALS, G.R. No.
120706, January 31, 2000)
Prejudicial Question
A prejudicial question is one that arises in a case the resolution of which
is a logical antecedent of the issue involved therein, and the cognizance of
which pertains to another tribunal. The prejudicial question must be
determinative of the case before the court but the jurisdiction to try and resolve
the question must be lodged in another court or tribunal.
More simply, for the court to appreciate the pendency of a prejudicial
question, the law requires the concurrence of two essential requisites, to wit:
a) The civil action involves an issue similar or intimately related
to the issue raised in the criminal action; and
b)
The resolution of such issue determines whether or not the
criminal action may proceed. (CHING vs. COURT OF APPEALS,
G.R. No. 110844, April 27, 2000)
Pendency of a civil action for nullity of marriage does not pose a
prejudicial question in a criminal case for concubinage. The rationale behind
the principle of prejudicial question is to avoid two conflicting decisions. For a
civil case to be considered prejudicial to a criminal action as to cause the
suspension of the latter pending the final determination of the civil case, it
must appear not only that the said civil case involves the same facts upon
which the criminal prosecution would be based, but also that in the resolution

of the issue or issues raised in the aforesaid civil action, the guilt or innocence
of the accused would necessarily be determined. (BELTRAN vs. PEOPLE, G.R.
No. 137567, June 20, 2000)

Property Regime of Unions Without Marriage (Art. 148, FC); Support;

Retroactive Application of the Family Code
Actual contribution is required by Art. 148 of the Family Code, in
contrast to Art. 147 which states that efforts in the care and maintenance of
the family and household are regarded as contributions to the acquisition of
common property by one who has no salary or income or work or industry.
The care given by one party [to] the home, children, and household, or spiritual
or moral inspiration provided to the other, is not included in Art.148. Hence, if
actual contribution of the party is not proved, there will be no co-ownership
and no presumption of equal shares
The right to support (for shelter) of illegitimate children does not prevail
over the right of the spouses to eject them. Article 203 of the Family Code
expressly provides that the obligation to give support shall be demandable from
the time the person who has the right to receive the same needs it for
maintenance, but it shall not be paid except from the date of the judicial or
extra-judicial demand. (TUMLOS vs. FERNANDEZ, G.R. No. 137650, April 12,
2000)
Judicial Declaration of Presumptive Death of a Spouse
Since the marriage was contracted in 1958, the applicable provision is
Art. 83, NCC which provides that a subsequent marriage contracted during the
lifetime of the first spouse is illegal and void ab initio unless the prior marriage
is first annulled or dissolved, except when the first spouse (1) has been absent
for seven consecutive years at the time of the second marriage without the
spouse present having news of the absentee being alive, or (2) if absent for less
than seven years, is generally considered as dead and believed to be so by the
spouse present at the time of contracting such subsequent marriage, or (3) is

presumed dead according to Articles 390 and 391 of the Civil Code. For the
exception to apply, the subsequent marriage must have been made in good
faith. A judicial declaration of absence of the absentee spouse is not necessary
as long as the prescribed period of absence is met. The marriage under these
exceptional cases is deemed to be valid until declared null and void by a
competent court. In contrast, under the 1988 Family Code, in order that a
subsequent bigamous marriage may exceptionally be considered valid, the
following conditions must concur: (a) the prior spouse of the contracting party
must have been absent for four consecutive years, or two years where the
danger of death under the circumstances in Article 391 of the Civil Code at the
time of disappearance; (b) the spouse present has a well-founded belief that the
absent spouse is already dead; and (c) there is, unlike the old rule, a judicial
declaration of presumptive death of the absentee for which purpose the spouse
present can institute a summary proceeding in court to ask for that
declaration. (ARMAS vs. CALISTERIO, G. R. No. 136467, April 6, 2000)

Validity of Marriage; Marriage License Required

A marriage license is a formal requirement; its absence renders the
marriage void ab initio.

Absence any claim of an exceptional character, the

purported marriage between the parties could not be classified among those
exempt from the marriage license requirement. (SY vs. COURT OF APPEALS ,
G.R. No. 127263, April 12, 2000)

Exemption from Marriage License; Declaration of Nullity of a Void Marriage

The five-year period provided by law in order to exempt the future

spouses from securing a marriage license should be computed on the basis of a
cohabitation as "husband and wife" where the only missing factor is the special
contract of marriage to validate the union. In other words, the five-year
common-law cohabitation period, which is counted back from the date of
celebration of marriage, should be a period of legal union had it not been for

the absence of the marriage. This 5-year period should be the years
immediately before the day of the marriage and it should be a period of
cohabitation characterized by exclusivity meaning no third party was
involved at any time within the 5 years and continuity that is unbroken.
Otherwise, if that continuous 5-year cohabitation is computed without any
distinction as to whether the parties were capacitated to marry each other
during the entire five years, then the law would be sanctioning immorality and
encouraging parties to have common law relationships and placing them on the
same footing with those who lived faithfully with their spouse.
The Family Code is silent as to who can file a petition to declare the nullity of a
marriage. A void marriage can be attacked collaterally and can be questioned
even after the death of either party. That is why the action or defense for nullity
is imprescriptible. Any proper interested party may attack a void marriage.
(NIAL vs. BAYADOG, G.R. No. 133778, March 14, 2000)

Property Relations of Unions Without Marriage

The co-ownership in Article 144 of the Civil Code requires that the man and
woman living together as husband and wife without the benefit of marriage
must not in any way be incapacitated to marry. If the property is acquired
during the time when the other party to the cohabitation has a subsisting
marriage, such property is presumed to be conjugal unless it be proved that it
pertains exclusively to the husband or to the wife.
APPEALS, G.R. No. 124118, March 27, 2000)

II. PROPERTY
Property of Public Dominion

(ADRIANO vs. COURT OF

Like public street, public parks are beyond the commerce of man and,
thus, could not be the subject of a lease contract. (LANSANG vs. COURT OF
APPEALS, G.R. No. 102667, February 23, 2000)

Builder in Good Faith

Both Article 448 and Article 546, NCC which allow full reimbursement of
useful improvements and retention of the premises until reimbursement is
made, apply only to a possessor in good faith, i.e., one who builds on land with
the belief that he is the owner thereof. Verily, persons whose occupation of a
realty is by sheer tolerance of its owners are not possessors in good faith.
Neither did the promise of the alleged owners that they were going to donate
the premises to petitioners convert them into builders in good faith for at the
time the improvements were built on the premises, such promise was not yet
fulfilled, i.e., it was a mere expectancy of ownership that may or may not be
realized.

(VERONA PADA-KILARIO vs. COURT OF APPEALS, G.R. No. 134329,

January 19, 2000)

Quieting of Title; Termination of Co-ownership by Prescription
An action to quiet title, under Art. 476, NCC, is a common-law remedy
for the removal of any cloud or doubt or uncertainty on the title to real
property. It is essential for the plaintiff or complainant to have a legal or an
equitable title to or interest in the real property which is the subject matter of
the action.

Also, the deed, claim, encumbrance or proceeding that is being

alleged as a cloud on plaintiff's title must be shown to be in fact invalid or

inoperative despite its prima facie appearance of validity or legal efficacy.
It is a fundamental principle that a co-owner cannot acquire by
prescription the share of the other co-owners, absent any clear repudiation of
the co-ownership. In order that the title may prescribe in favor of a co-owner,
the following requisites must concur: (1) the co-owner has performed
unequivocal acts of repudiation amounting to an ouster of the other co-owners;
(2) such positive acts of repudiation have been made known to the other coowners; and (3) the evidence thereof is clear and convincing. (ROBLES vs.
COURT OF APPEALS, G.R. No. 123509, March 14, 2000)

Quieting of Title; Laches; Freedom to Enter into Contracts; Waiver of Rights

Persons having legal as well as equitable title to or interest in a real
property may bring an action for quieting of title and "title" here does not
necessarily denote a certificate of title issued in favor of the person filing the
suit.
Moreover, if the plaintiff in an action for quieting of title is in possession
of the property being litigated, such action is imprescriptible. One who is in
actual possession of a land, claiming to be the owner thereof may wait until his
possession is disturbed or his title is attacked before taking steps to vindicate
his right because his undisturbed possession gives him a continuing right to
seek the aid of the courts to ascertain the nature of the adverse claim and its
effects on his title.

Although prescription and laches are distinct concepts,

nonetheless in some instances, the doctrine of laches is inapplicable where the

action was filed within the prescriptive period provided by law. Moreover, since
laches is a creation of equity, acts or conduct alleged to constitute the same
must be intentional and unequivocal so as to avoid injustice. Laches operates
not really to penalize neglect or sleeping on one's rights, but rather to avoid
recognizing a right when to do so would result in a clearly inequitable
situation.
The act of registration of a voluntary instrument is the operative act
which conveys or affects registered land insofar as third persons are concerned.
Hence, even without registration, the contract (oral partition) is still valid as
between the parties. Neither a Transfer Certificate of Title nor a subdivision
plan is essential to the validity of an oral partition.
Quitclaims are valid contracts of waiver of property rights. The freedom
to enter into contracts, such as the quitclaims, is protected by law and the
courts are not quick to interfere with such freedom unless the contract is
contrary to law, morals, good customs, public policy or public order.
Quitclaims, being contracts of waiver, involve the relinquishment of rights, with
knowledge of their existence and intent to relinquish them. The intent to waive
rights must be clearly and convincingly shown. Moreover, when the only proof

of intent is the act of a party, such act should be manifestly consistent and
indicative of an intent to voluntarily relinquish a particular right such that no
other reasonable explanation of his conduct is possible.

( MAESTRADO vs.

COURT OF APPEALS, G.R. No. 133345 & 133324, March 9, 2000)

Preference of Possession; Ownership

Between the claimants, ownership shall be vested to the one who has
proven acquisitive prescription. Tax receipts and declarations of ownership for
taxation, when coupled with proof of actual possession of the property, can be
the basis of a claim for ownership through prescription.
It is settled that ownership cannot be acquired by mere occupation.
Unless it is hostile, occupation and use, however long, will not confer title by
prescription or adverse possession. The tax declarations and receipts are only
prima facie, not conclusive, evidence of ownership in the absence of actual
public and adverse possession. (CEQUENA vs. BOLANTE, G. R. No. 137944,
April 6, 2000)

Donation Inter Vivos; Repudiation Of Inheritance; Escheat

There are 3 essential elements of a donation: (a) the reduction of the
patrimony of the donor; (b) the increase in the patrimony of the donee; and (c)
the intent to do an act of liberality or animus donandi.

When applied to a

donation of an immovable property, the law further requires that the donation
be made in a public document and that there should be an acceptance thereof
made in the same deed of donation or in a separate public document. In cases
where the acceptance is made in a separate instrument, it is mandated that
the donor should be notified thereof in an authentic form, to be noted in both
instruments.
The inexistence of a donation does not render the repudiation of the
inheritance valid.

There is no valid repudiation of inheritance as there was

already an acceptance and where there is no showing that such acceptance

was made thru any of the causes which vitiate consent or there is no proof of
the existence of an unknown will. Art. 1056 of the Civil Code provides The
acceptance or repudiation of an inheritance is irrevocable and cannot be
impugned except when it was made thru any of the causes that vitiate consent
or when and unknown will appears.
Nevertheless, the nullity of the repudiation does not ipso facto operate to convert
the parcels of land into res nullius to be escheated in favor of the Government. The
repudiation, being of no effect whatsoever, the parcels of land should revert to their
private owner, who although being an American citizen is qualified by hereditary
succession to own the property subject of the litigation. (REPUBLIC vs. GUZMAN,
G.R. No.132964, Feb. 18,2000)

Donation Inter Vivos

A donation as a mode of acquiring ownership results in an effective transfer of title

over the property from the donor to the donee and the donation is perfected from
the moment the donor knows of the acceptance by the donee. And once a donation
is accepted, the donee becomes the absolute owner of the property donated.
(VELASQUEZ vs. COURT OF APPEALS, G.R. No. 126996, February 15,2000)

PRESCRIPTION

Real actions over immovables prescribe after thirty years. Good faith consists in the
reasonable belief that the person from whom the possessor received the thing was
its owner but could not transmit the ownership thereof. (SERASPI vs. COURT OF
APPEALS, G.R. No. 135602, April 28, 2000)

Prescription in Action for Reconveyance

Prescription cannot be invoked in an action for reconveyance when the claimant is

in possession of the land to be reconveyed. (MILLENA vs. COURT OF APPEALS, G.R.
No. 127797, January 31, 2000)

Ownership Through Acquisitive Presciption

Together with actual possession of the land, tax declarations constitute strong
evidence of ownership of the land occupied by a person. Uninterrupted adverse
possession of the land for more than 30 years could only ripen into ownership of the
land through acquisitive prescription which is a mode of acquiring ownership and
other real rights over immovable property. Prescription requires public, peaceful,
uninterrupted and adverse possession of the property in the concept of an owner for
ten (10) years, in case the possession is in good faith and with a just title. (DBP vs.
COURT OF APPEALS, G.R. No. 129471. April 28, 2000.)

III. SUCCESSION

Successional Rights; Transmission of; Scope

It is a general rule under the law on succession that successional rights are
transmitted from the moment of death of the decedent and compulsory heirs are
called to succeed by operation of law. Under Article 776 NCC, inheritance includes
all the property, rights and obligations of a person, not extinguished by his death.
In a modal institution, the testator states (1) the object of the institution, (2) the
purpose or application of the property left by the testator, or (3) the charge imposed
by the testator upon the heir. A "mode" imposes an obligation upon the heir or
legatee but it does not affect the efficacy of his rights to the succession. On the
other hand, in a conditional testamentary disposition, the condition must happen or
be fulfilled in order for the heir to be entitled to succeed the testator. The condition

suspends but does not obligate; and the mode obligates but does not suspend. To
some extent, it is similar to a resolutory condition.
Substitution is the designation by the testator of a person or persons to take the
place of the heir or heirs first instituted. Under substitutions in general, the testator
may either (1) provide for the designation of another heir to whom the property
shall pass in case the original heir should die before him/her, renounce the
inheritance or be incapacitated to inherit, as in a simple substitution, or (2) leave
his/her property to one person with the express charge that it be transmitted
subsequently to another or others, as in a fideicommissary substitution.
A Will is a personal, solemn, revocable and free act by which a person disposes of
his property, to take effect after his death. Since the Will expresses the manner in
which a person intends how his properties be disposed, the wishes and desires of
the testator must be strictly followed. Thus, a Will cannot be the subject of a
compromise agreement which would thereby defeat the very purpose of making a
Will. (RABADILLA vs. COURT OF APPEALS, G.R. No. 129471. April 28, 2000.)
Partition; Preterition

Every act intended to put an end to indivision among co-heirs and legatees or
devisees would be a partition although it would purport to be a sale, an exchange, a
compromise, a donation or an extrajudicial settlement. The deed of donation and
deed of extra-judicial settlement consolidated the title solely to one of the heirs and
ceased the co-ownership.
The exclusion of one of the children of the decedent from the deed of extrajudicial
settlement has the effect of preterition. This kind of preterition, in the absence of
proof and bad faith, does not justify a collateral attack on the new TCT. The relief
instead rests on Art.1104, NCC to the effect that where the preterition is not
attended by bad faith and fraud, the partition shall not be rescinded but the
preterited heir shall be paid the value pertaining to her. (VIADO NON vs. COURT OF
APPEALS, G.R. No. 137287, February 15, 2000)

Formal Requirements of a Valid Partition

The intrinsic validity of partition not executed in a public instrument is not

undermined when no creditors are involved. The partition of inherited property need
not be embodied in a public document so as to be effective as regards the heirs that

participated therein. The requirement of Article 1358 of the Civil Code that acts
which have for their object the creation, transmission, modification or
extinguishment of real rights over immovable property, must appear in a public
instrument, is only for convenience, non-compliance with which does not affect the
validity or enforceability of the acts of the parties as among themselves. And
neither does the Statute of Frauds under Article 1403 of the New Civil Code apply
because partition among heirs is not legally deemed a conveyance of real property,
considering that it involves not a transfer of property from one to the other but
rather, a confirmation or ratification of title or right of property that an heir is
renouncing in favor of another heir who accepts and receives the inheritance.
(VERONA PADA-KILARIO vs. COURT OF APPEALS, G.R. No. 134329, January 19,
2000)

IV. OBLIGATIONS AND CONTRACTS

Novation

Novation is never presumed; it must be proven as a fact either by express

stipulation of the parties or by implication derived from an irreconcilable
incompatibility between old and new obligations or contracts. Otherwise, the
original contract remains in force. (ESPINA vs. COURT OF APPEALS, G.R. No. 116805
June 22, 2000)

Relativity of Contracts

The general rule under Article 1311, NCC is that heirs are bound by contracts
entered into by their predecessors-in-interest except when the rights and
obligations arising therefrom are not transmissible by (1) their nature, (2) stipulation
or (3) provision of law.

A good measure for determining whether a contract terminates upon the death
of one of the parties is whether it is of such character that it may be performed by
the promissors personal representative. Furthermore, the subject matter of the
contract is a lease, which is a property right. The death of a party does not excuse
nonperformance of a contract which involves a property right, and the rights and
obligations thereunder pass to the personal representatives of the deceased.
Similarly, nonperformance is not excused by the death of the party when the other
party has a property interest in the subject matter of the contract. (DKC HOLDINGS
CORP. vs. COURT OF APPEALS, G. R. No. 118248, April 5, 2000)

Onerous Contract

The fact that no renewal was granted removed the basis for the continued
payment of the monthly royalty fee. It is the essence of a royalty fee that it is paid
in consideration of an existing right. In its ordinary acceptation, royalties refer to
payments made to the owner for permitting another to use his property. Royalties
are similar to the rents payable for the use or right to use an invention and after the
right to use it has terminated there is no obligation to make further royalty
payments.
The MOA is an onerous contract, wherein the contracting parties are obliged to
render reciprocal prestations. Entitlement to the royalty fee is wholly dependent
upon the existence and subsistence of the right for which the royalty was granted. If
the reason which gave rise to the contract has ceased to exist, the result is that the
obligation too, has ceased to exist. (GOLDEN DIAMOND vs. COURT OF APPEALS, G.R.
No. 131436, May 31, 2000)

Power to Rescind in Reciprocal Obligations

The power to rescind or resolve is given to the injured party. More, the
rescission of the contracts requires the parties to restore to each other what they
have received by reason of the contracts. The rescission has the effect of
abrogating the contracts in all parts. (RELIANCE COMMODITIES INC. vs.
INTERMEDIATE APPELLATE COURT, G.R. No. 74729, May 31, 2000)

The right to rescind a contract involving reciprocal obligations is provided for in

Article 1191 of the Civil Code. The law speaks of the right of the "injured party" to
choose between rescission or fulfillment of the obligation, with the payment of
damages in either case. The parties should not be allowed to rescind the contract
where they themselves did not perform their essential obligation thereunder. It
should be emphasized that a contract of sale involves reciprocity between the
parties. (CENTRAL BANK OF THE PHILIPPINES vs. BICHARA, G.R. No. 131074, March
27, 2000)

Contract to Sell; Rescission

Article 1191,NCC on rescission, speaks of obligations already existing. In a contract

to sell, the full payment of the purchase price is a positive suspensive condition, the
failure of which is not considered a breach, casual or serious, but simply an event
which prevented the obligation of the vendor to convey title from acquiring any
obligatory force. There can be no rescission of an obligation that is non-existent,
considering that the suspensive condition therefor has not yet happened. (PADILLA
vs. PAREDES, G.R. No. 124874, March 17, 2000)

Interpretation of Contracts; Rescission

The various stipulations in a contract should be interpreted together. Ambiguous

ones should be so construed as to conform to the sense that would result if all the
provisions are comprehended jointly.
The act of treating a contract as cancelled or rescinded on account of infractions by
the other contracting party is always provisional; that is, contestable and subject to
judicial determination. When one party resolved or rescinded the Agreement
without previous court action, it proceeded at its own risk. Only the final judgment
of a court will conclusively and finally settle whether such recourse was correct in
law.
If breach is insubstantial, rescission is not justified. (PHIL. NATIONAL CONSTRUCTION
CORP. vs. MARS CONSTRUCTION ENT., G.R. No.133909, February 15, 2000)

Badges of Fraud

Under Article 1381(3) of the Civil Code, contracts which are undertaken in fraud of
creditors when the latter cannot in any manner collect the claims due them, are
rescissible. The existence of fraud with intent to defraud creditor may either be
presumed in accordance with Article 1387, NCC or duly proved in accordance with
the ordinary rules of evidence. Hence, the law presumes that there is fraud of
creditors when: a)
There is alienation of property by gratuitous title by the
debtor who has not reserved sufficient property to pay his debts contracted before
such alienation; or b) There is alienation of property by onerous title made by a
debtor against whom some judgment has been rendered in any instance or some
writ of attachment has been issued. The decision or attachment need not refer to
the property alienated and need not have been obtained by the party seeking
rescission.
In determining whether or not a certain conveyance is fraudulent, the question in
every case is whether the conveyance was a bona fide transaction or a trick and
contrivance to defeat creditors or whether it conserves to the creditor to the debtor
or a special right. It is not sufficient that it is founded on good considerations or is
made with bona fide intent. It must have both elements. If defective in either of
these, although good between the parties, it is voidable as to creditors. The
question as to whether or not the conveyance is fraudulent is: does it prejudice the
rights of the creditors? The mere fact that the conveyance was founded on valuable
consideration does not necessarily negate the presumption of fraud under Art.
1387, NCC. There has to be a valuable consideration and the transaction must have
been made bona fide. (China Banking Corp. vs. Court of Appeals, G.R. No. 129644,
March 7, 2000)

Void and Voidable Contracts

Under Art. 1409 (2),NCC, one type of contract which can be declared void and
inexistent is that which is absolutely simulated or fictitious, as when there are
several badges of simulation proving that the sale between the parties was not
intended to have any legal effect between them..
Nonetheless, a sale of the entire property by a co-heir is unenforceable having
been entered into in behalf of the co-heirs who gave no authority or legal

representation. However, such a contract is susceptible of ratification. Where there

is a ratification, then the sale is considered valid and binding. (SEN PO EK
MARKETING CORP. vs. MARTINEZ, G.R. No. 134117, February 9, 2000)

Capacity to Enter into Contract

A person is not incapacitated to contract merely because of advanced years of AGE

or by reason of physical infirmities. Only when such age or infirmities impair his
mental faculties to such extent as to prevent him from properly, intelligently, and
fairly protecting his property rights is he considered incapacitated. (LOYOLA vs.
COURT OF APPEALS, G.R. No. 115734, February 23, 2000)

Unenforceable Contract

Article 1529 of the old Civil Code, which was the prevailing law in 1948 and thus
governed the questioned Deed of Sale, clearly provided that a contract is
unenforceable when there is an absence of authority on the part of one of the
contracting parties. The mere lapse of time cannot give efficacy to such a contract.
The defect is such that it cannot be cured except by the subsequent ratification of
the unenforceable contract by the person in whose name the contract was
executed. (VILLANUEVA-MIJARES vs. COURT OF APPEALS, G.R. No. 108921, April 12,
2000)

Simulation of Contracts

Simulation is the declaration of a fictitious will deliberately made by agreement of

the parties, in order to produce, for the purposes of deception, the appearances of a
juridical act which does not exist or is different what that which does not exist or is
different what that which was really executed. Characteristic of simulation is that
the apparent contract is not really desired or intended to produce legal effect or in
any way alter the judicial situation of the parties. The requisites for simulation are:
(a) an outward declaration of will different from the will of the parties; (b) the false

appearance must have been intended by mutual agreement; and (c) the purpose is
to deceive third persons. (LOYOLA vs. COURT OF APPEALS, G.R. No. 115734,
February 23, 2000)

Laches; Prescription

While a review of the decree of registration is no longer available after the

expiration of the one-year period from entry thereof pursuant to the doctrine of res
judicata, an equitable remedy is still available. Those wrongfully deprived of their
property may initiate an action for reconveyance of the property. (VILLANUEVAMIJARES vs. COURT OF APPEALS, G.R. No. 108921, April 12, 2000)

The essence of laches is 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 the 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 or declined to assert it. (GASTON vs. COURT OF APPEALS,
G.R. No. 116340 June 29, 2000)

TRUST

Express Trust

Trust is the right to the beneficial enjoyment of property, the legal title to which is
vested in another. It is a fiduciary relationship that obliges the trustee to deal with
the property for the benefit of the beneficiary. Trust relations between parties may
either be express or implied. An express trust is created by the intention of the
trustor or of the parties. An implied trust comes into being by operation of law.

Under Art. 1444, NCC no particular words are required for the creation of an
express trust, it being sufficient that a trust is clearly intended.
While no time limit is imposed for the enforcement of rights under express trusts,
prescription may, however, bar a beneficiarys action for recovery, if a repudiation
of the trust is proven by clear and convincing evidence and made known to the
beneficiary. (SECUYA vs. VDA. DE SELMA, G.R. No. 136021, February 22, 2000)

SALES AND LEASE

Elements of a Contract of Sale

Since the lot subsequently sold is said to adjoin the "previously paid lot" on three
sides thereof, the subject lot is capable of being determined without the need of any
new contract. The fact that the exact area of these adjoining residential lots is
subject to the result of a survey does not detract from the fact that they are
determinate or determinable. Concomitantly, the object of the sale is certain and
determinate. Under Article 1460,NCC, a thing sold is determinate if at the time the
contract is entered into, the thing is capable of being determined without necessity
of a new or further agreement between the parties.
There is also no reservation of ownership nor a stipulation providing for a unilateral
rescission by either party. The stipulation that the "payment of the full
consideration based on a survey shall be due and payable in five (5) years from the
execution of a formal deed of sale" is not a condition which affects the efficacy of
the contract of sale. It merely provides the manner by which the full consideration is
to be computed and the time within which the same is to be paid. But it does not
affect in any manner the effectivity of the contract. (SAN ANDRES vs. RODRIGUEZ,
G.R. No. 137287, February 15, 2000)

Option Money vs. Earnest Money

An option contract is a preparatory contract in which one party grants to the other,
for a fixed period and under specified conditions, the power to decide, whether or
not to enter into a principal contract, it binds the party who has given the option not
to enter into the principal contract with any other person during the period
designated, and within that period, to enter into such contract with the one to
whom the option was granted, if the latter should decide to use the option. It is a
separate agreement distinct from the contract to which the parties may enter upon
the consummation of the option. An option contract is therefore a contract separate
from and preparatory to a contract of sale which, if perfected, does not result in the
perfection or consummation of the sale.
IN THIS CASE, AFTER THE PAYMENT OF THE 10% OPTION MONEY, THE OFFER TO
PURCHASE PROVIDES FOR THE PAYMENT ONLY OF THE BALANCE OF THE PURCHASE
PRICE, IMPLYING THAT THE "OPTION MONEY" FORMS PART OF THE PURCHASE PRICE.
THIS IS PRECISELY THE RESULT OF PAYING EARNEST MONEY UNDER ART. 1482 OF
THE CIVIL CODE. IT IS CLEAR THEN THAT THE PARTIES IN THIS CASE ACTUALLY
ENTERED INTO A CONTRACT OF SALE, PARTIALLY CONSUMMATED AS TO THE
PAYMENT OF THE PRICE. (CAVITE DEVELOPMENT BANK VS. CYRUS LIM, G.R. NO.
131679, FEBRUARY 1, 2000)

Delivery in Contract of Sale

For while a contract of sale is perfected by the meeting of minds upon the thing
which is the object of the contract and upon the price, the ownership of the thing
sold is not transferred to the vendee until actual or constructive delivery of the
property. Hence, the maxim non nudis pactis, sed traditione dominia dominica
rerum transferuntur (not mere agreements but tradition transfers the ownership of
things). (SERASPI vs. COURT OF APPEALS, G.R. No. 135602, April 28, 2000)

Under Article 1497, NCC, a thing sold shall be understood as delivered when it is
placed in the control or possession of the vendee. Delivery is generally evidenced
by a written acknowledgment of a person that he or she has actually received the
thing or the goods, as in delivery receipts. A bill of lading cannot substitute for a
delivery receipt. This is because it is a written acknowledgment of the receipt of the
goods by the carrier and an agreement to transport and deliver them at a specific

place to a person named or upon his order. It does not evidence receipt of the goods
by the consignee or the person named in the bill of lading; rather, it is evidence of
receipt by the carrier of the goods from the shipper for transportation and delivery.
Likewise, a factory consignment invoice is not evidence of actual delivery of the
goods. An invoice is nothing more than a detailed statement of the nature, quantity
and cost of the thing sold. It is not proof that the thing or goods were actually
delivered to the vendee or the consignee. (LAO vs. COURT OF APPEALS, G.R. No.
47013, 60647 & 60958-59, February 17, 2000)

Sale with Right of Repurchase

The mere fact that the price is inadequate does not prove support the conclusion
that the contract was a loan or that the property was not at all sold. The price fixed
in the sale with a right to repurchase is not necessarily the true value of the land
sold. The rationale is that the vendor has the right to fix a relatively reduced price,
although not a grossly inadequate one, in order to afford the vendor a retro every
facility to redeem the land. Thus, inadequacy of the price is not sufficient to set
aside a sale unless it is grossly inadequate or purely shocking to the conscience.
(ABAPO vs. COURT OF APPEALS, GR No. 128677, March 2, 2000)

Consolidation of Title in Pacto de Retro Sale

Art. 1607, NCC requiring a judicial order for the consolidation of the ownership in
the vendee a retro to be recorded in the Registry of Property is intended to minimize
the evils which the pacto de retro sale has caused in the hands of usurers. A judicial
order is necessary in order to determine the true nature of the transaction and to
prevent the interposition of buyers in good faith while the determination is being
made. Notwithstanding Art. 1607, the recording in the Registry of Property of the
consolidation of ownership of the vendee is not a condition sine qua non to the
transfer of ownership. The essence of the pacto de retro sale is that title and
ownership of the property sold are immediately vested in the vendee a retro,
subject to the resolutory condition of repurchase by the vendor a retro within the
stipulated period. Failure thus of the vendor a retro to perform said resolutory
condition vests upon the vendee by operation of law absolute title and ownership
over the property sold. As title is already vested in the vendee a retro, his failure to

consolidate his title under Article 1607, NCC does not impair such title or ownership
for the method prescribed thereunder is merely for the purpose of registering the
consolidated title. (CRUZ vs. LEIS, G.R. No. 125233, March 9, 2000)

DOUBLE SALE

The prior registration of the disputed property by the second buyer does not by
itself confer ownership or a better right over the property. Article 1544,NCC requires
that such registration must be coupled with good faith. Primus tempore, potior jure
(first in time, stronger in right). Knowledge gained by the first buyer of the second
sale cannot defeat the first buyer's rights except where the second buyer registers
in good faith the second sale ahead of the first. Such knowledge of the first buyer
does not bar him from availing of his rights under the law, among them, to register
first his purchase as against the second buyer. But in converso, knowledge gained
by the second buyer of the first sale defeats his rights even if he is first to register
the second sale, since such knowledge taints his prior registration with bad faith.
This is the price exacted by Art. 1544 for the second buyer being able to displace
the first buyer; that before the second buyer can obtain priority over the first, he
must show that he acted in good faith throughout (i.e. in ignorance of the first sale
and of the first buyer's rights) from the time of acquisition until the title is
transferred to him by registration or failing registration, by delivery of possession.
The second buyer must show continuing good faith and innocence or lack of
knowledge of the first sale until his contract ripens into full ownership through prior
registration as provided by law. To merit protection under Art. 1544, the second
buyer must act in good faith from the time of the sale until the registration of the
same. (BARICUATRO, JR. vs. COURT OF APPEALS, G.R. No. 105902, February 9,
2000)

Under Article 1544 of the Civil Code before the second buyer can obtain priority
over the first, he must show that he acted in good faith throughout (i.e., in
ignorance of the first sale and of the first buyer's rights) from the time of
acquisition until title is transferred to him by registration or failing registration, by
delivery of possession. Knowledge gained by the second buyer of the first sale
defeats his rights even if he is first to register the second sale, since such
knowledge taints his prior registration with bad faith. (ANGEL BAUTISTA vs. COURT
OF APPEALS,

G.R. No. 123655, January 19, 2000)

Legal Redemption

A letter given by the vendee notifying the co-owner of the sale of the co-owned
property cannot be considered compliance with the notice requirement of Art.
1623, NCC for purposes of legal redemption. Art. 1623 of the Civil Code is clear in
requiring that the written notification should come from the vendor or prospective
vendor, not from any other person. In the second place, it makes sense to require
that the notice required in Art. 1623 be given by the vendor and by nobody else.
The vendor of an undivided interest is in the best position to know who are his coowners who under the law must be notified of the sale. It is the notification from the
seller, not from anyone else, which can remove all doubts as to the fact of the sale,
its perfection, and its validity, for in a contract of sale, the seller is in the best
position to confirm whether consent to the essential obligation of selling the
property and transferring ownership thereof to the vendee has been given.
(FRANCISCO vs. BOISER, G.R. No. 137677, May 31, 2000)

Validity of Stipulations in a Lease Contract

Jurisprudence supports the view that when parties to a contract expressly reserve
an option to terminate or rescind a contract upon the violation of a resolutory
condition, notice of resolution must be given to the other party when such right is
exercised. In Zulueta vs. Mariano, the SC ruled that resort to courts may be
necessary when the right involves the retaking of property which is not voluntarily
surrendered by the other party. The rationale for such ruling is based on the thesis
that no one should take the law into his own hands. In this sense, the stipulation is
legally vulnerable. Permitting the use of unqualified force to repossess the property
and without condition of notice upon the lessee is fraught with dangerous
possibilities. Such a broad stipulation cannot be sanctioned for the reason that it
would allow the lessor/owner to take the law into his own hands, and undermine the
philosophy behind the remedy of forcible entry which is to prevent breach of the
peace and criminal disorder and to compel the party out of possession to respect
and resort to the law alone to obtain what he claims to be his. (CAMPO ASSETS
CORP. vs. CLUB X. O. COMPANY, G.R. No. 134986, March 17, 2000)

Nature of Lease of Chattels

In the lease of chattels, the lessor loses complete control over the chattel leased
although the lessee cannot be reckless in the use thereof, otherwise, he would be
responsible for the damages to the lessor. In the case of jeepney owners/operators
and jeepney drivers, the former exercise supervision and control over the latter.
The management of the business is in the owners hands. The owner as holder of
the certificate of public convenience must see to it that the driver follows the route
prescribed by the franchising authority and the rules promulgated as regards its
operations. This relationship may be applied by analogy to taxi owners/operators
and taxi drivers. (JARDIN vs. NLRC, G.R. No. 119268, February 23, 2000)

Right of First Refusal of a Lessee

Art. 1622, NCC which only deals with small urban lands that are bought for
speculation where only adjoining lot owners can exercise the right of pre-emption or
redemption is not available to one who is not an adjoining lot owner, but a lessee
trying to buy the land that it was leasing. Indeed the right of first refusal may be
provided for in a lease contract. However, such grant of the right of first refusal
must be clearly embodied in a written contract. (SEN PO EK MARKETING CORP. vs.
MARTINEZ, G.R. No. 134117, February 9, 2000)

Renewal of Term of Lease

Pursuant to Art. 1196, NCC, the period of the lease contract is deemed to have
been set for the benefit of both parties. Renewal of the contract may be had only
upon their mutual agreement or at the will of both of them. It is the owner-lessors

prerogative to terminate the lease at its expiration. The continuance, effectivity and
fulfillment of a contract of lease cannot be made to depend exclusively upon the
free and uncontrolled choice of the lessee between continuing the payment of the
rentals or not, completely depriving the owner of any say in the matter. Mutuality
does not obtain in such a contract of lease and no equality exists between the
lessor and the lessee since the life of the contract would be dictated solely by the
lessee. (BUCE vs. COURT OF APPEALS, G.R. No. 136913, May 12, 2000)

Extension of Lease

The provisions of a contract should not be read in isolation from the rest of the
instrument but, on the contrary, interpreted in the light of the other related
provisions in order to fix the meaning of any of its parts. Furthermore, in a
reciprocal contract like a lease, the period of the lease must be deemed to have
been agreed upon for the benefit of both parties, absent language showing that the
term was deliberately set for the benefit of the lessee or lessor alone. (UNIVERSITY
PHYSICIANS SERVICES, INC. vs. CA, G.R. No. 115045, January 31, 2000)

Concept of Implied New Lease

The prescriptive period for an action of reformation should be counted from the
date of execution of the lease contract and not from the date of extension of the
same. First, Art. 1670 speaks of an implied new lease (tacita reconduccion) where
at the end of the contract, the lessee continues to enjoy the thing leased "with the
acquiescence of the lessor", so that the duration of the lease is "not for the period
of the original contract, but for the time established in Article 1682 and 1687."
Hence, if the extended period of lease was expressly agreed upon by the parties,
then the term should be exactly what the parties stipulated, not more, not less.
Second, even if the supposed 4-year extended lease be considered as an implied
new lease under Art. 1670, "the other terms of the original contract" contemplated
in said provision are only those terms which are germane to the lessees right of
continued enjoyment of the property leased. The prescriptive period of 10 years
provided for in Art. 1144 for reformation of an instrument applies by operation of
law, not by the will of the parties. (ROSELLO-BENTIR vs. LEANDA, G.R. No. 128991,
April 12, 2000)

V. TORTS AND DAMAGES

Damages

In seeking recovery for actual damages it is necessary that the claimant produce
competent proof or the best evidence obtainable such as receipts to justify an
award therefor. Actual or compensatory damages cannot be presumed but must be
proved with reasonable degree of certainty. Only substantiated and proven
expenses or those which appear to have been genuinely incurred in connection with
the death, wake or burial of the victim will be recognized by the court.
Civil indemnity (ex delicto) requires no proof other than the fact of death of the
victim and assailants responsibility therefor.
Compensation for lost income is in the nature of damages and as such requires due
proof of the damages suffered; there must be unbiased proof of the deceaseds
average income. (PEOPLE vs. EREO, G.R. 1224706, Feb. 22, 2000)

The award authorized by criminal law as civil indemnity (ex delicto) for the offended
party is mandatory upon the finding of the fact of rape; it is distinct from and
should not be denominated as moral damages which are based on different jural
foundation and assessed by the court in the exercise of sound discretion. (PEOPLE
vs. MENDIONA, G.R. No. 129056, Feb. 21, 2000)

As a general rule, moral damages are not recoverable in actions for damages
predicated on a breach of contract for it is not one of the items enumerated under
Art. 2219 of the Civil Code. As an exception, such damages are recoverable: (1) in
cases in which the mishap results in the death of a passenger, as provided in Art.
1764, in relation to Art. 2206(3) of the Civil Code; and (2) in the cases in which the
carrier is guilty of fraud or bad faith, as provided in Art. 2220. (CALALAS vs. COURT
OF APPEALS, G.R. No. 122039, May 31, 2000)

Indemnity for death is presently fixed at P50,000.00. As to actual damages. Art.

2199,NCC provides that "except as provided by law or by stipulation, one is entitled
to an adequate compensation only for such pecuniary loss suffered by him as he
has duly proved."
The civil liability of accused for indemnity for death and actual and moral damages
is solidary
Under Art. 2230,NCC, "exemplary damages as a part of the civil liability may be
imposed when the crime was committed with one or more aggravating
circumstances." (PEOPLE vs. BAUTISTA, G.R. No. 131840, April 27, 2000)

As to the matter of moral damages, the law clearly states that one may only recover
moral damages if they are the proximate result of the other partys wrongful act or
omission. Two elements are required. First, the act or omission must be the
proximate result of the physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation and
similar injury. Second, the act must be wrongful. The rule has always been that
moral damages cannot be recovered from a person who has filed a complaint
against another in good faith.
Where a party is not entitled to actual or moral damages, an award of exemplary
damages is likewise baseless.
No premium should be placed on the right to litigate and not every winning party is
entitled to an automatic grant of attorneys fees. The party must show that he falls
under one of the instances enumerated in Article 2208 of the Civil Code. Where the
award of moral and exemplary damages is eliminated, so must the award for
attorneys fees be deleted. (OROSA vs. COURT OF APPEALS, G. R. No. 111080, April
5, 2000)

The amount of indemnity for loss of earning capacity is based on the income at the
time of death and the probable life expectancy of the victim. It should be stressed
that the amount recoverable is not the entire earnings, but only that portion which
the beneficiaries would have received. Thus, indemnity for lost income refers to the
victim's total earnings minus the necessary living expenses. (PEOPLE vs. CABANDE,
G.R. No. 132747, February 8, 2000)

Any person who seeks to be awarded actual or compensatory damages due to acts
of another has the burden of proving said damages as well as the amount thereof.
Actual damages cannot be allowed unless supported by evidence on the record.

The court cannot rely on speculation, conjectures or guesswork as to the fact and
amount of damages. To justify a grant of actual or compensatory damages, it is
necessary to prove with a reasonable degree of certainty, the actual amount of loss.
Moral damages may be recovered in cases involving acts referred to in Art. 21, NCC.
As a rule, a public official may not recover damages for charges of falsehood related
to his official conduct unless he proves that the statement was made with actual
malice. (BAAS, JR. vs. COURT OF APPEALS, G.R. No. 102967, February 10, 2000)

The Court can only grant such amount for expenses if they are supported by
receipts. In the absence thereof, no award for actual damages can be granted.
(PEOPLE vs. ALAGON, G.R. Nos. 126536-37, February 10, 2000)

The heirs are also entitled to receive a compensation for the loss of earning capacity
of the victim. The formula for computing the same as established in decided cases
is as follows:
Gross

Necessary

Net Earning =
Capacity

Life x

Expectancy

Annual -

Living
Income

Expenses.

(PEOPLE vs. DANDO, G.R. No. 120646, February 14, 2000)

Attorney's fees may be awarded if one who claims it is compelled to litigate with
third persons or to incur expenses to protect one's interests by reason of an
unjustified act or omission on the part of the party from whom it is sought.
(INDUSTRIAL INSURANCE COMPANY vs. BONDAD, G.R. No. 136722, April 12, 2000)

The requisites for an action for damages based on malicious prosecution are: (1) the
fact of the prosecution and the further fact that the defendant was himself the
prosecutor, and that the action was finally terminated with an acquittal; (2) that in
bringing the action, the prosecutor acted without probable cause; and (3) the
prosecutor was actuated or impelled by legal malice. (BAYANI vs. PANAY ELECTRIC
CO., G.R. No. 139680, April 12, 2000)

The adverse result of an action does not make the prosecution thereof wrongful
neither does it subject the action to payment of damages. The law does not impose

a penalty to the right to litigate. Resort to judicial processes, by itself, is not an

evidence of ill will. As the mere act of filing criminal complaint does not make the
complainant liable for malicious prosecution. There must be proof that the suit was
performed by legal malice, an inexcusable intent to oppress, vex, annoy or
humiliate. A contrary rule would discourage peaceful resources to the court and
unjustly penalize the exercise of a citizens right to litigate. Where the action is filed
in good faith, no penalty should be imposed thereon. (VILLANUEVA vs. UNITED
COCONUT PLANTERS BANK, G.R. No. 138291, March 7, 2000)

Recovery of Damages in Negligent Acts

In quasi-delict, the negligence or fault should be clearly established because it is the

basis of the action, whereas in breach of contract, the action can be prosecuted
merely by proving the existence of the contract and the fact that the obligor, in this
case the common carrier, failed to transport his passenger safely to his destination.
(CALALAS vs. COURT OF APPEALS, G.R. No. 122039, May 31, 2000)

Negligence; Easement

Even if the heavy rains constituted an act of God, one may still be held liable for
damages to the other. The event was not occasioned exclusively by an act of God
or force majeure; a human factor negligence or imprudence had intervened. The
effect then of the force majeure in question may be deemed to have, even if only
partly, resulted from the participation of man. Thus, the whole occurrence was
thereby humanized, as it were, and removed from the rules applicable to acts of
God.
Article 637, NCC provides that lower estates are imposed the obligation to
receive the waters which naturally and without the intervention of man descend
from higher estates. However, where the waters which flow from a higher state are
those which are artificially collected in man-made lagoons, any damage occasioned
thereby entitles the owner of the lower or servient estate to compensation.
(REMMAN ENTERPRISES vs. COURT OF APPEALS, G. R. No. 125018, April 6, 2000)

Rule Against Double Recovery in Negligence Cases

In negligence cases, the aggrieved party has the choice between (1) an action to
enforce civil liability arising from crime under Article 100 of the Revised Penal Code;
and (2) a separate action for quasi delict under Article 2176 of the Civil Code. Once
the choice is made, the injured party can not avail himself of any other remedy
because he may not recover damages twice for the same negligent act or omission
of the accused. This is the rule against double recovery. In other words, the same
act or omission can create two kinds of liability on the part of the offender, that is,
civil liability ex delicto, and civil liability quasi delicto, either of which may be
enforced against the culprit, subject to the caveat under Article 2177 of the Civil
Code that the offended party can not recover damages under both types of liability.
(RAFAEL REYES TRUCKING CORPORATION vs. PEOPLE, G.R. No. 129029, April 3,
2000)

Liability of an Educational Institution

It is the contractual obligation of the school to timely inform and furnish

sufficient notice and information to each and every student as to whether he or she
had already complied with all the requirements for the conferment of a degree or
whether they would be included among those who will graduate. The negligent act
of professor who fails to observe the rules of the school, for instance by not
promptly submitted a students grade, is not only imputable to the professor but is
an act of the school, being his employer. Educational institutions are duty-bound to
inform the student of their academic status and not wait for the latter to inquire
from the former. The conscious indifference of a person to the rights or welfare of
the person/persons who may be affected by his act or omission can support a claim
for damages. Want of care to the conscious disregard of civil obligation coupled with
a conscious knowledge the cause naturally calculated to produce them would make
the erring party liable. (UNIVERSITY OF THE EAST vs. JADER, G.R. NO. 132344,
February 17, 2000)

VI. CREDIT TRANSACTIONS

Escalation Clause; Interest

Pursuant to P.D. No. 1684 which became effective March 1980 wherein to be
valid, escalation clauses should provide: 1) that there can be an increase in interest
if increased by law or by the Monetary Board; and 2) in order for such stipulation to
be valid, it must include a provision for the reduction of the stipulated interest in the
event that the maximum rate of interest is reduced by law or by the Monetary
Board. Despite the validity of the escalation clause, the contracting party may not,
however, increase the stipulated interest pursuant to the Central Bank Circular 494
from 12% to 17%. CB Circular 494, although it has the force and effect of law, is
not a law and is not the law contemplated by the parties. (BANCO FILIPINO SAVINGS
& MORTGAGE BANK vs. COURT OF APPEALS, G.R. No. 129227, May 30, 2000)

Real Estate Mortgage

In a real estate mortgage contract, it is essential that the mortgagor be the absolute
owner of the property to be mortgaged; otherwise, the mortgage is void. Buyers of
unregistered real property, especially banks, must exert due diligence in
ascertaining the titles of mortgagors and sellers, lest some innocent parties be
prejudiced. Failure to observe such diligence may amount to bad faith and may
result in the nullity of the mortgage, as well as of the subsequent foreclosure and/or
auction sale. (ROBLES vs. COURT OF APPEALS, G.R. No. 123509, March 14, 2000)

Rights of a Mortgagee

A mortgage is a contract entered into in order to secure the fulfillment of a principal

obligation. It is constituted by recording the document in which it appears with the
proper Registry of Property, although, even if it is not recorded, the mortgage is
nevertheless binding between the parties. Thus, the only right granted by law in
favor of the mortgagee is to demand the execution and the recording of the
document in which the mortgage is formalized. As a general rule, the mortgagor
retains possession of the mortgaged property since a mortgage is merely a lien and
title to the property does not pass to the mortgagee. However, even though a
mortgagee does not have possession of the property, there is no impairment of his
security since the mortgage directly and immediately subjects the property upon
which it is imposed, whoever the possessor may be, to the fulfillment of the
obligation for whose security it was constituted. If the debtor is unable to pay his
debt, the mortgage creditor may institute an action to foreclose the mortgage,
whether judicially or extrajudicially, whereby the mortgaged property will then be
sold at a public auction and the proceeds therefrom given to the creditor to the
extent necessary to discharge the mortgage loan. Regardless of its possessor, the
mortgaged property may still be sold, with the prescribed formalities, in the event of
the debtor's default in the payment of his loan obligation. (ISAGUIRRE vs. DE LARA,
G.R. No. 138053, May 31, 2000)

Legal Redemption; Mortgage

Under RA No. 3844, Section 12, "In case the landholding is sold to a third person
without the knowledge of the agricultural lessee, the latter shall have the right to
redeem the same at a reasonable price and consideration. Provided, that the entire
landholding sold must be redeemed. Provided further, that where there are two or
more agricultural lessees, each shall be entitled to said right of redemption only to
the extent of the area actually cultivated by him. The right of redemption under this
section may be exercised within two (2) years from the registration of the sale and
shall have priority over any other right of legal redemption." (PHILBANCOR FINANCE
vs. COURT OF APPEALS, G.R. No. 129572, June 26, 2000)

Concurrence and Preference of Credit

Art. 2242, NCC provides that the claims of contractors engaged in the construction,
reconstruction or repair of buildings or other works shall be preferred with respect to
the specific building or other immovable property constructed. However, this
provision only finds application when there is a concurrence of credits, i.e. when the
same specific property of the debtor is subjected to the claims of several creditors
and the value of such property of the debtor is insufficient to pay in full all the
creditors. In such a situation, the question of preference will arise, that is, there will
be a need to determine which of the creditors will be paid ahead of the others. This
statutory lien should only be enforced in the context of some kind of a procedure
where the claims of all preferred creditors may be bindingly adjudicated, such as in
insolvency proceedings. (J.L. BERNARDO CONSTRUCTION vs. COURT OF APPEALS,
G.R. No. 105827, January 31, 2000)

VII. LAND TITLES AND DEEDS/AGRICULTURAL TENANCY LAWS

Registration of Land Under the Torrens System

Registration has never been a mode of acquiring ownership over an immovable

property. The purpose of the Land Registration Act is not to create or vest title but
to confirm and register already created and already vested. (DBP vs. COURT OF
APPEALS, G.R. No. 129471, April 28, 2000)

Proof required in Land Registration Proceedings

The burden of proof in land registration cases is incumbent on the applicant who
must show that he is the real and absolute owner in fee simple of the land applied
for. On him also rests the burden to overcome the presumption that the land sought
to be registered forms part of the public domain considering that the inclusion in a
title of a part of the public domain nullifies the title.
The declaration by the applicant that the land applied for has been in the
possession of her predecessor-in-interest for a certain period, does not constitute
the "well-nigh incontrovertible" and "conclusive" evidence required in land
registration. Further, it should be noted that tax declaration, by itself, is not
considered conclusive evidence of ownership in land registration cases. Rosario
should have substantiated her claim with clear and convincing evidence specifically
showing the nature of her claim. The applicant must likewise prove the identity of
the land. It must be borne in mind that what defines a piece of land is not the size
or area mentioned in its description, but the boundaries therein laid down, as
enclosing the land and indicating its limits.
Considering that the writ of possession was sought by Rosario against persons who
were in "actual possession under claim of ownership," the latter's possession raises
a disputable presumption of ownership. This unrebutted presumption militates
against the claim of Rosario, especially considering the evidentiary rule under
Article 434 of the Civil Code that a claimant of a parcel of land, such as Rosario,
must rely on the strength of his title and not on the weakness of the defendant's
claim. (MARIANO TURQUESA, ET AL. vs. ROSARIO VALERA, G.R. No. 76371, January
20, 2000)

Evidence of Ownership

A Torrens Certificate of Title covers only the land described therein together with
improvements existing thereon, if any, nothing more.
True, tax declarations do not prove ownership. However, tax declarations can be
strong evidence of ownership when accompanied by possession for a period
sufficient for prescription. (SANTIAGO vs. COURT OF APPEALS, G.R. No. 109111,
June 28, 2000)

Grant of Title/Confirmation of Imperfect Title on Lands

Under the Regalian doctrine, all lands of the public domain belong to the State, and
that the State is the source of any asserted right to ownership in land and charged
with conservation of such patrimony. This same doctrine also states all lands not
otherwise appearing to be clearly within private ownership are presumed to belong
to the State. Hence, the burden of proof in overcoming the presumption of State
ownership of lands of the public domain is on the person applying for registration.
The applicant must also show that the land subject of the application is alienable or
disposable. The adverse possession which may be the basis of a grant of title or
confirmation of an imperfect title refers only to alienable or disposable portions of
the public domain. (BRACEWELL vs. COURT OF APPEALS, G.R. No. 107427, January
25, 2000)

Remedies Available to Aggrieved Party in Registration Proceedings

In land registration proceedings, the rule is that whoever first acquires title to a
piece of land shall prevail. This rule refers to the date of the certificate of title and
not to the date of filing of the application for registration of title. Hence, even
though an applicant precedes another, he may not be deemed to have priority of
right to register title. As such, while his application is being processed, an applicant
is duty-bound to observe vigilance and to take care that his right or interest is duly
protected.
An applicant for registration has but a one-year period from the issuance of the
decree of registration in favor of another applicant, within which to question the
validity of the certificate of title issued pursuant to such decree. Once the one-year
period has lapsed, the title to the land becomes indefeasible. However the
aggrieved party is without a remedy at law. If the property has not yet passed to an
innocent purchaser for value, an action for reconveyance is still available. If the
property has passed into the hands of an innocent purchaser for value, the remedy
is an action for damages against those who employed the fraud, and if the latter are
insolvent, an action against the Treasurer of the Philippines for recovery against the
Assurance Fund. Recognizing the futility of these actions, aggrieved applicants
sought protection under the provisions of the Rules of Court by an action for revival
and execution of judgment. However, the provisions of the Rules are merely
suppletory to special laws governing land registration proceedings and hence,
cannot prevail over the latter. (HEIRS OF PEDRO LOPEZ vs. DE CASTRO, G.R. No.
112905, February 3, 2000)

Grant/Transfer of Friar Lands

In case the holder of the certificate shall have sold his interest in the land before
having complied with all the conditions thereof, the purchaser from the holder of the
certificate shall be entitled to all the rights of the holder of the certificate upon
presenting his assignment to the Chief of the Bureau of Public Lands for registration.
In order that a transfer of the rights of a holder of a certificate of sale of friar lands
may be legally effective, it is necessary that a formal certificate of transfer be
drawn up and submitted to the Chief of the Bureau of Public Lands for his approval
and registration. The law authorizes no other way of transferring the rights of a
holder of a certificate of sale of friar lands. (DELA TORRE vs. COURT OF APPEALS,
G.R. No. 113095, February 8, 2000)

Free Patent

In the light of their open, continuous and notorious possession and occupation of
the land, petitioners are deemed to have acquired by operation of law, a right to a
grant, a government grant without a necessity of a certificate of title being issued.
The land was segregated from the public domain. Accordingly, the Director of
Lands had no authority to issue a free patent thereto in favor of another person.
Verily, jurisprudence holds that free patent covering private land is void. (ROBLES
vs. COURT OF APPEALS, G.R. No. 123509, March 14, 2000)

Presumptive Conclusiveness of Torrens Title

If a property covered by Torrens title is involved, the presumptive conclusiveness of

such title should be given due weight, and in the absence of strong compelling
evidence to the contrary, the holder thereof should be considered as the owner of
the property in controversy until his title is nullified or modified in an appropriate
ordinary action, particularly, when possession of the property itself is in the persons

named in the title. (LIM vs. COURT OF APPEALS, G.R. No. 124715, January 24,
2000)

Tenancy

The requisites of a tenancy relationship are: (1) the parties are the landowner and
the tenant; (2) the subject is agricultural land; (3) there is consent by the
landowner; (4) there is personal cultivation; and (5) there is sharing of harvest.
Tenancy relationship can only be created with the consent of the true and lawful
landholder who is either the owner, lessee, usufructuary or legal possessor of the
land, and not thru the acts of the supposed landholder who has no right to the land
subject of the tenancy. (BAUTISTA vs. ARANETA, G.R. No. 135829, February 22,
2000)

A tenant is defined under Section 5 (a) of Republic Act No. 1199 as a person who
himself and with the aid available from within his immediate farm household
cultivates the land belonging to or possessed by another, with the latter's consent,
for purposes of production, sharing the produce with the landholder under the share
tenancy system, or paying to the landholder a price certain or ascertainable in
produce or in money or both under the leasehold tenancy system. Briefly stated, for
this relationship to exist, it is necessary that:
1.

The parties are the landowner and the tenant;

2.

The subject is agricultural land;

3.

There is consent;

4.

The purpose is agricultural production;

5.

There is personal cultivation; and

6.

There is sharing of harvests.

Upon proof of the existence of the tenancy relationship, a tenant could avail of the
right of redemption under RA 3844. This right of redemption is validly exercised
upon compliance with the following requirements: a) the redemptioner must be an
agricultural lessee or share tenant; b) the land must have been sold by the owner to
a third party without prior written notice of the sale given to the lessee or lessees
and the DAR in accordance with Sec. 11, RA 3844, as amended; c) only the area

cultivated by the agricultural lessee may be redeemed; d) the right of redemption

must be exercised within 180 days from notice; and e) there must be an actual
tender or valid consignation of the entire amount which is the reasonable price of
the land sought to be redeemed. (RUPA, SR. vs. COURT OF APPEALS, G.R. No. 80129,
January 25, 2000)

The right of tenancy attaches to the landholding by operation of law. The leasehold
relation is not extinguished by the alienation or transfer of the legal possession of
the landholding. (PHILBANCOR FINANCE vs. COURT OF APPEALS, G.R. No. 129572,
June 26, 2000)

RA 3844 allows only one heir to succeed to the tenancy of the deceased tenant in
the order of preference prescribed by Section 9 of the said law. However, where
the land is not cultivated by one tenant alone (predecessor of the present
claimants) but with other tenants who are likewise qualified and who are related to
him, this provision does not apply. Thus, it can be said that the entitlement of the
other possessors is not by virtue of succession to the rights of a predecessor-ininterest, but in their individual capacity as tenants therein simultaneously with an
ascendant.
Under Section 22 of RA 6657, the Comprehensive Agrarian Reform Law, those
entitled to the award of the land are: Section 22. Qualified Beneficiaries the
lands covered by the CARP shall be distributed as much as possible to landless
residents of the same barangay or in the absence thereof, landless residents of the
same municipality in the following order of priority:
a.)

agricultural lessees and share tenants

b.)

regular farm workers

c.)

seasonal farmworkers

d.)

other farmworkers

e.)

actual tillers or occupants of public lands

f.) collective or cooperatives of the above beneficiaries

g.)

others directly working on the land.

(GREENFIELD REALTY CORP. vs. CARDAMA, G.R. No. 129246, January 25, 2000)

Preferential Rights of Tenants under P.D. 1517

Sale to one tenant alone, among the many tenants, is sufficient compliance with
P.D. 1517 where the landowner had offered his tenants the chance to buy the land
which they respectively occupied. (DEE v. COURT OF APPEALS, G.R. No.108205,
February 15, 2000)

Jurisdictional Requirements for Reconstitution of Title

The requirements for reconstitution of title, under R.A. 26, Secs. 12 and 13, are the
following: That the petition must state (1) the nature and description of the
buildings and improvements, if any, which do not belong to the owner of the land,
and the names and addresses of the owners of such building and improvements, (2)
the names and addresses of the occupants of the adjoining properties and of all
persons who may have any interest in the property, and (3) that no deeds or other
instrument affecting the property may have been presented for registration; and
That there should be notice and publication of said petition. The failure to comply
with the requirements of publication and posting of notices prescribed in RA 26 Sec.
12 & 13 is fatal to the jurisdiction of the court. Hence, non-compliance with the
jurisdictional requirements renders its decision approving the reconstitution and all
proceedings therein utterly null and void. (HEIRS OF EULALIO RAGUA vs. COURT OF
APPEALS, G.R. 88521-22 & 89366-67, January 31, 2000)

CASE DIGESTS

I. PERSONS AND FAMILY RELATIONS

ART. 26, NCC

CONCEPCION vs. COURT OF APPEALS

G.R. No. 120706, January 31, 2000

Facts:
Spouses Nestor and Allem Nicolas reside in an apartment leased to them
by Florence Concepcion. The spouses engage in a joint venture by supplying
government agencies with office supplies and equipment. Sometime in July 1985,
petitioner Rodrigo, brother of the deceased husband of Florence accosted Nestor
and accused him of conducting an adulterous relationship with Florence. As a result
of the incident, Nestor felt extreme embarrassment and shame that he could no
longer face his neighbors. Consequently, Nestor demanded public apology and
payment of damages. Rodrigo ignored the demand for which reason, the Spouses
Nicolas filed a civil suit. The RTC ordered Rodrigo to pay for moral and exemplary
damages. CA affirmed the award.

Issue:

Is there a legal basis for the award of damages?

Held:
Yes. The incident charged of Rodrigo was no less than an invasion on the
right of Nestor as a person. The philosophy behind Art. 26, NCC underscores the
necessity for its inclusion in our Civil Law. The Code Commission stressed in no
uncertain terms that the human personality be exalted. Thus, under this article, the
rights of a person are amply protected, and damages are provided for violations of a
persons dignity, personality, privacy and peace of mind. Further, the violations
mentioned in this codal provision are not exclusive but merely examples and do not
preclude other similar or analogous acts such as the one involved in this case.

Prejudicial Question

CHING vs. COURT OF APPEALS

G.R. No. 110844, April 27, 2000

Facts:
On 04 February 1992, petitioner Ching was charged before the RTC of
Makati with four counts of estafa punishable under Article 315 par. 1(b) of the
Revised Penal Code, in relation to Presidential Decree 115, otherwise known as the
"Trust Receipts Law". On 05 March 1992, Ching, together with Philippine Blooming
Mills Co. Inc., filed a case before the RTC of Manila for declaration of nullity of
documents and for damages docketed as Civil Case No. 92-60600, entitled
"Philippine Blooming Mills, Inc. et. al. vs. Allied Banking Corporation."
On 07 August 1992, Ching filed a petition before the RTC-Makati, for the suspension
of the criminal proceedings on the ground of prejudicial question in a civil action.
Said court denied the petition to suspend.

Issue:
Does the pendency of a civil action for damages and declaration of nullity
of documents constitute a prejudicial question as to warrant the suspension of
criminal proceedings?

Held:
NO. As defined, a prejudicial question is one that arises in a case the
resolution of which is a logical antecedent of the issue involved therein, and the
cognizance of which pertains to another tribunal. The prejudicial question must be
determinative of the case before the court but the jurisdiction to try and resolve the
question must be lodged in another court or tribunal. It is a question based on a
fact distinct and separate from the crime but so intimately connected with it that it
determines the guilt or innocence of the accused, and for it to suspend the criminal
action, it must appear not only that said case involves facts intimately related to
those upon which the criminal prosecution would be based but also that in the
resolution of the issue or issues raised in the civil case, the guilt or innocence of the
accused would necessarily be determined. It comes into play generally in a
situation where a civil action and a criminal action are both pending and there exists
in the former an issue which must be preemptively resolved before the criminal
action may proceed, because howsoever the issue raised in the civil action is
resolved would be determinative juris et de jure of the guilt or innocence of the
accused in the criminal case.
More simply, for the court to appreciate the pendency of a prejudicial question,
the law requires the concurrence of two essential requisites, to wit:
a) The civil action involves an issue similar or intimately related to the issue raised
in the criminal action; and
b) The resolution of such issue determines whether or not the criminal action may
proceed.
Verily, under the prevailing circumstances, the alleged prejudicial question in the
civil case for declaration of nullity of documents and for damages, does not juris et
de jure determine the guilt or innocence of the accused in the criminal action for
estafa. Assuming arguendo that the court hearing the civil aspect of the case
adjudicates that the transaction entered into between the parties was not a trust
receipt agreement, nonetheless the guilt of the accused could still be established
and his culpability under penal laws determined by other evidence. To put it
differently, even on the assumption that the documents are declared null, it does
not ipso facto follow that such declaration of nullity shall exonerate the accused
from criminal prosecution and liability.

Therefore, the civil action for declaration of nullity of documents and for damages
does not constitute a prejudicial question to the criminal cases for estafa filed
against petitioner.

BELTRAN vs. PEOPLE

G.R. No. 137567, June 20, 2000

Facts:
Petitioner Meynardo Beltran sought a declaration of nullity of his marriage
on the ground of psychological incapacity before the RTC of QC. His wife,
Charmaine Felix alleged that it was petitioner who abandoned the conjugal home
and lived with a certain woman named Milagros Salting. Later on, upon complaint of
Charmaine, a criminal case for concubinage was instituted before the Metropolitan
TC of Mkti. City against petitioner and his paramour. Petitioner moved to defer the
proceedings arguing that the pendency of the civil case for declaration of nullity of
his marriage posed a prejudicial question to the determination of the criminal case.

Issue:
Does a pending petition for declaration of nullity of marriage constitute a
prejudicial question that should merit the suspension of the criminal case for
concubinage?

Held:
NO. Pendency of a civil action for nullity of marriage does not pose a
prejudicial question in a criminal case for concubinage.
The rationale behind the principle of prejudicial question is to avoid two conflicting
decisions. It has two essential elements: (a) the civil action involves an issue similar
or intimately related to the issue raised in the criminal action; and (b) the resolution
of such issue determines whether or not the criminal action may proceed. For a civil
case to be considered prejudicial to a criminal action as to cause the suspension of
the latter pending the final determination of the civil case, it must appear not only
that the said civil case involves the same facts upon which the criminal prosecution
would be based, but also that in the resolution of the issue or issues raised in the
aforesaid civil action, the guilt or innocence of the accused would necessarily be
determined.

In a case for concubinage, the accused, like the herein petitioner need not present a
final judgment declaring his marriage void for he can adduce evidence in the
criminal case of the nullity of his marriage other than proof of a final judgment
declaring his marriage void. Article 40 of the Family Code provides:
"The absolute nullity of a previous marriage may be invoked for purposes of
remarriage on the basis solely of a final judgment declaring such previous marriage
void."
In Domingo vs. CA, this Court ruled that the import of said provision is that for
purposes of remarriage, the only legally acceptable basis for declaring a previous
marriage an absolute nullity is a final judgment declaring such previous marriage
void, whereas, for purposes of other than remarriage, other evidence is acceptable.
With regard to petitioner's argument that he could be acquitted of the charge of
concubinage should his marriage be declared null and void, suffice it to state that
even a subsequent pronouncement that his marriage is void from the beginning is
not a defense. Parties to the marriage should not be permitted to judge for
themselves its nullity, for the same must be submitted to the judgment of the
competent courts and only when the nullity of the marriage is so declared can it be
held as void, and so long as there is no such declaration the presumption is that the
marriage exists for all intents and purposes. Therefore, he who cohabits with a
woman not his wife before the judicial declaration of nullity of the marriage
assumes the risk of being prosecuted for concubinage.

Property Regime of Unions Without Marriage (Art. 148, FC); Support; Retroactive
Application of the Family Code

TUMLOS vs. FERNANDEZ

G.R. No. 137650, April 12, 2000

Facts:
Respondent-spouses Mario and Lourdes Fernandez filed an action for
ejectment against petitioner Guillerma Tumlos and her two children. In her Answer,
Guillerma averred that the Fernandez spouses had no cause of action against her,
since she is a co-owner of the subject premises as evidenced by a Contract to Sell

wherein it was stated that she is a co-vendee of the property in question together
with Mario. The MTC ruled for the spouses Fernandez. Upon appeal to the RTC,
Guillerma alleged that Mario and Guillerma had an amorous relationship, and that
they acquired the property in question as their love nest, that they lived together in
the apartment building subject of the ejectment suit with their 2 children for around
10 years, and that Guillerma administered the property by collecting rentals from
the lessees of the other apartments, until she discovered that Mario deceived her as
to the annulment of his marriage. The RTC ruled that Guillerma and Mario acquired
the property during their cohabitation as husband and wife, although without the
benefit of marriage, it concluded that Guillerma Tumlos was a co-owner of the
subject property and could not be ejected therefrom.

Issues:
1. Did Guillerma have the right of co-ownership over the property in
question?
2. Does the right to support (for shelter) of illegitimate children prevail over the
right of the spouses to eject them?

Held:
1. NO. There was no proof of actual contribution by Guillerma in the
purchase of the subject property. Her only evidence was her being named in the
Contract to Sell as the wife of Mario. Since she failed to prove that she contributed
money to the purchase price of the subject apartment building, there is no basis to
justify her co-ownership with Mario. The said property is thus presumed to belong to
the conjugal partnership property of Mario and Lourdes Fernandez, it being acquired
during the subsistence of their marriage and no other proof to the contrary. It is
clear that actual contribution is required by Art. 148 of the Family Code, in contrast
to Art. 147 . which states that efforts in the care and maintenance of the family and
household are regarded as contributions to the acquisition of common property by
one who has no salary or income or work or industry. The care given by one party
[to] the home, children, and household, or spiritual or moral inspiration provided to
the other, is not included in Art.148. Hence, if actual contribution of the party is not
proved, there will be no co-ownership and no presumption of equal shares

2. NO. Article 203 of the Family Code expressly provides that the obligation to give
support shall be demandable from the time the person who has the right to receive
the same needs it for maintenance, but it shall not be paid except from the date of
the judicial or extra-judicial demand. Thus, it cannot be presumed. No demand was
made by Guillerma to make the obligation to give support for dwelling demandable.

Judicial Declaration of Presumptive Death of a Spouse

ARMAS vs. CALISTERIO

G. R. No. 136467,

April 6, 2000

Facts:
On April 24, 1992, Teodorico Calisterio died intestate, leaving parcels of
land. He was survived by his wife, respondent Marietta Calisterio. Teodorico was
the second husband of Marietta who had previously been married to James William
Bounds on January 13, 1946. James disappeared without a trace on February 11,
1947. Eleven years after, Marietta found a new romance in the loving arms of
Teodorico when the two got married on May 8, 1958, without Marietta having priorly
secured a court declaration that James was presumptively dead.
On October 9, 1992, herein petitioner Antonia, a surviving sister of Teodorico,
filed with the RTC of Quezon City a petition for the granting of letters of
administration, claiming herself to be the sole surviving heir of Teodorico, the
marriage between the latter and respondent Marietta being allegedly bigamous and
thereby null and void. The trial court rendered a judgment declaring Antonia as the
sole heir of the estate of Teodorico.

Issue:
Was the subsequent marriage between Teodorico and Marietta invalid due
to Mariettas failure to secure the judicial declaration of the presumptive death of
James?

Held:
NO. The subsequent marriage was valid. When the marriage between
Teodorico and Marietta was solemnized on May 8, 1958, the law in force at that time
was the Civil Code, not the Family Code which took effect only on August 3, 1988.
Article 256 of the Family Code itself limited its retroactive application only to cases
where it thereby would not prejudice or impair vested or acquired rights in
accordance with the Civil Code or other laws.
Hence, the applicable provision is Art. 83, NCC which provides that a
subsequent marriage contracted during the lifetime of the first spouse is illegal and

void ab initio unless the prior marriage is first annulled or dissolved, except when
the first spouse (1) has been absent for seven consecutive years at the time of the
second marriage without the spouse present having news of the absentee being
alive, or (2) if absent for less than seven years, is generally considered as dead and
believed to be so by the spouse present at the time of contracting such subsequent
marriage, or (3) is presumed dead according to Articles 390 and 391of the Civil
Code. For the exception to apply, the subsequent marriage must have been made
in good faith. A judicial declaration of absence of the absentee spouse is not
necessary as long as the prescribed period of absence is met. The marriage under
these exceptional cases is deemed to be valid until declared null and void by a
competent court. In contrast, under the 1988 Family Code, in order that a
subsequent bigamous marriage may exceptionally be considered valid, the
following conditions must concur: (a) the prior spouse of the contracting party must
have been absent for four consecutive years, or two years where the danger of
death under the circumstances in Article 391 of the Civil Code at the time of
disappearance; (b) the spouse present has a well founded belief that the absent
spouse is already dead; and (c) there is, unlike the old rule, a judicial declaration of
presumptive death of the absentee for which purpose the spouse present can
institute a summary proceeding in court to ask for that declaration.
In the case at bar, Mariettas first husband, James Bounds, has been absent or
had disappeared for more than eleven years before she entered into a second
marriage with Teodorico. This second marriage, having been contracted during the
regime of the Civil Code, should thus be deemed valid notwithstanding the absence
of a judicial declaration of presumptive death of James Bound. Moreover, there is
no finding that the said second marriage was contracted in bad faith.

Validity of Marriage; Marriage License Required

SY vs. COURT OF APPEALS

G.R. No. 127263, April 12, 2000

Facts:
Filipina Sy filed a petition for the declaration of absolute nullity of her
marriage to Fernando Sy on the ground of psychological incapacity. To show the
manifestations of her husbands psychological incapacity, she presented the
following proofs: 1) final judgment rendered in her favor, in her previous petitions

for separation of property and legal separation; 2) Fernando's infliction of physical

violence on her which led to the previous conviction of her husband for slight
physical injuries; 3) habitual alcoholism; 4) refusal to live with her without fault on
her part, choosing to live with his mistress instead; and 5) refusal to have sex with
her, performing the marital act only to satisfy himself. The petition was denied.
Hence the present petition whereby Filipina raises for the first time the nullity of
their marriage on the ground of the lack of marriage license at the time of the
celebration of the marriage.

Issue:
Is the marriage between Filipina and Fernando void from the beginning
for lack of a marriage license at the time of the ceremony?

Held:
The documents (marriage certificate, photocopies of birth certificates of
their children, marriage license) and pleadings submitted by Filipina show the
incongruity between the date of the actual celebration of their marriage (November
15, 1973) and the date of the issuance of their marriage license (September 17,
1974). The ineluctable conclusion is that the marriage was indeed contracted
without a marriage license. A marriage license is a formal requirement, its absence
renders the marriage void ab initio.
There being no claim of an exceptional character, the purported marriage between
Filipina and Fernando could not be classified among those exempt from the
marriage license requirement.

Exemption from Marriage License; Declaration of Nullity of a Void Marriage

Nial vs. Bayadog

G.R. No. 133778, March 14, 2000

Facts:
Pepito Nial was married to Teodulfa Bellones on September 26, 1974. Out
of their marriage were born herein petitioners. Teodulfa was shot by Pepito resulting

in her death on April 24, 1985. One year and eight months thereafter Pepito and
Norma Badayog got married without any marriage license. In line thereof, Pepito
and Norma executed an affidavit stating that they have lived together at least five
years and more thus exempt for securing a marriage license. Pepito died in a car
accident. After their fathers death, petitioners filed a petition for declaration of
nullity of the marriage of Pepito and Norma alleging that said marriage was void for
lack of marriage license. Norma filed a motion to dismiss on the ground that the
petitioners have no cause of action since they are not among the persons who can
file action for annulment of marriage under Article 47 of the Family Code.

Issues:
1. What nature of cohabitation is contemplated by law to warrant the
counting of the five-year period in order to exempt the future spouses from securing
a marriage license?
2. Do the petitioners have the personality to file a petition to declare their
fathers marriage void ab initio after his death?

Held:
The 5-year period should be computed on the basis of a cohabitation as
husband and wife where the only missing factor is the special contract of
marriage to validate the union.
The two marriages involved herein having been solemnized prior to the effectivity of
the Family Code (FC), the applicable law to determine their validity is the Civil Code
which was the law in effect at the time of their celebration. A valid marriage license
is a requisite of marriage under Art. 53 of the Civil Code, the absence of which
renders the marriage void ab initio. However there are several instances recognized
by the Civil Code wherein a marriage license is dispensed with, one of which is that
provided in Art. 76, referring to the marriage of a man and a woman who have lived
together and exclusively with each other as husband and wife for a continuous and
unbroken period of at least five years before the marriage. There is no dispute that
the marriage of petitioners' father to respondent Norma was celebrated without any
marriage license. In lieu thereof, they executed an affidavit stating that "they have
attained the age of majority, and, being unmarried, have lived together as husband
and wife for at least five years, and that we now desire to marry each other."
Working on the assumption that Pepito and Norma have lived together as husband
and wife for five years without the benefit of marriage, that five-year period should
be computed on the basis of a cohabitation as "husband and wife" where the only
missing factor is the special contract of marriage to validate the union. In other
words, the five-year common-law cohabitation period, which is counted back from
the date of celebration of marriage, should be a period of legal union had it not
been for the absence of the marriage. This 5-year period should be the years
immediately before the day of the marriage and it should be a period of

cohabitation characterized by exclusivity meaning no third party was involved at

any time within the 5 years and continuity that is unbroken. Otherwise, if that
continuous 5-year cohabitation is computed without any distinction as to whether
the parties were capacitated to marry each other during the entire five years, then
the law would be sanctioning immorality and encouraging parties to have common
law relationships and placing them on the same footing with those who lived
faithfully with their spouse.

2. YES. Petitioners have the personality to file the petition. Having determined
that the second marriage involved in this case is not covered by the exception to
the requirement of a marriage license, it is void ab initio because of the absence of
such element. The Family Code is silent as to who can file a petition to declare the
nullity of a marriage. A void marriage can be attacked collaterally and can be
questioned even after the death of either party. That is why the action or defense
for nullity is imprescriptible. Any proper interested party may attack a void
marriage. Contrary to the trial court's ruling, the death of petitioner's father
extinguished the alleged marital bond between him and respondent. The conclusion
is erroneous and proceeds from a wrong premise that there was a marriage bond
that was dissolved between the two. It should be noted that their marriage was void
hence it is deemed as if it never existed at all and the death of either extinguished
nothing.

Property Relations of Unions Without Marriage

ADRIANO vs. COURT OF APPEALS

G.R. No. 124118, March 27, 2000.

Facts:
The testator Lucio Adriano, married Gliceria Dorado in 1933 and they had 3
children, herein private respondents. Sometime in 1942 or prior thereto, Lucio
cohabited with Vicenta Villa, with whom he had 8 children. All his children by
Vicenta are the named petitioners in the instant case, with the exception of Jose
Vergel, who died before the inception of the proceedings.

After the death of Gliceria in 1968, Lucio married Vicenta. In 1980, Lucio executed a
will disposing of all his properties to his second wife Vicenta and all his children by
his first and second marriages. While estate settlement proceedings were pending
before the RTC, petitioners instituted an action for annulment of Lucios will. In the
complaint, petitioners alleged that before the marriage of Lucio and their mother,
Vicenta, the two lived together as husband and wife and as such, acquired
properties which became the subject of inventory and administration in the petition
for probate of the will. Petitioners claimed that the properties bequeathed in Lucio's
will are undivided "civil partnership and/or conjugal properties of Lucio and Vicenta
", and thus, the will sought to be probated should be declared void and ineffective
insofar as it disposes of the rightful share or properties of Vicenta.
The trial court favored the evidence of private respondents, which indicated that the
purchase money for the contested properties came from the earnings of Lucio
during the subsistence of his marriage to Gliceria.

Issue: Is Vicenta a co-owner with respect to of the properties in question or does

the entire property belong to the conjugal partnership of Lucio and Gliceria?

Held:
NO. Petitioners' insistence that a co-ownership of properties existed
between Lucio and Vicenta during their period of cohabitation before their marriage
in 1968 is without lawful basis considering that Lucio's marriage with Gliceria was
then subsisting. The co-ownership in Article 144 of the Civil Code requires that the
man and woman living together as husband and wife without the benefit of
marriage must not in any way be incapacitated to marry. Considering that the
property was acquired in 1964, or while Lucio's marriage with Gliceria subsisted,
such property is presumed to be conjugal unless it be proved that it pertains
exclusively to the husband or to the wife.
In Belcodero vs. CA, the SC held that property acquired by a man while living with a
common-law wife during the subsistence of his marriage is conjugal property, even
when the property was titled in the name of the common-law wife. In such cases, a
constructive trust is deemed to have been created by operation of Article 1456 of
the Civil Code over the property which lawfully pertains to the conjugal partnership
of the subsisting marriage.
In Vicenta's case, it is clear that her designation as a co-owner of the property in the
TCT is a mistake which needs to be rectified by the application of the foregoing
provisions of Article 1456 and the ruling in Belcodero. The principle that a trustee
who takes a Torrens title in his or her name cannot repudiate the trust by relying on
the registration, is a well-known exception to the principle of conclusiveness of a
certificate of title.

PROPERTY

Property of Public Dominion

LANSANG vs. COURT OF APPEALS

G.R. No. 102667, February 23, 2000

Facts:
Private respondents General Assembly of the Blind, Inc. (GABI) and Jose
Iglesias were allegedly given office and library space as well as kiosks area for sale
of food and drinks in Rizal Park through an alleged verbal contract of lease
awarded in 1970 by the National Parks Development Committee (NPDC).
To clean up Rizal Park, the new chairman of the NPDC sent a written notice to
GABI and Iglesias of the termination of the so-called verbal agreement and the
demand for the latter to vacate the premises and the kiosks.

Issue:
Did petitioner Amado Lansang abuse his authority in ordering the
ejectment of private respondents GABI and Iglesias?

Held:

NO. There is no evidence of abuse of authority on the part of the petitioner.

Like public street, public parks are beyond the commerce of man and, thus,
could not be the subject of a lease contract. Admittedly, there was no written
contract. That private respondents were allowed to occupy office and kiosk spaces
in the park was only a matter of accommodation by the previous administrator. This
being so, petitioner may validly discontinue the accommodation to private
respondents, who may be ejected from the park when necessary. Private
respondents cannot and does not claim a vested right to continue to occupy Rizal
Park.

Builder in Good Faith

VERONA PADA-KILARIO vs. COURT OF APPEALS

G.R. No. 134329, January 19, 2000.

Facts:
One Jacinto Pada died intestate leaving 6 children. His estate included a
parcel of land located at Poblacion, Matalom, Leyte.
During the lifetime of Jacinto Pada, his half-brother, Feliciano Pada, obtained
permission from him to build a house on the northern portion of subject land. When
Feliciano died, his son, Pastor, continued living in the house together with his 8
children. Petitioner Verona Pada-Kilario, one of Pastor's children, has been living in
that house since 1960.
In 1993, private respondent Silverio Pada bought the co-ownership right over the
subject land of one of the heirs of Jacinto. Thereafter, he demanded that petitioner
spouses vacate the northern portion of the subject land so his family can utilize the
said area. They went through a series of meetings with the barangay officials
concerned for the purpose of amicable settlement, but all earnest efforts toward
that end, failed. Consequently, Silverio instituted a complaint for ejectment with
prayer for damages against petitioner spouses. The petitioner spouses were
eventually ordered to remove their house at their expense unless Silverio exercises
the option of acquiring the same.

Issue:
Are the petitioner spouses Pada-Kilario builders in good faith as to be
entitled to reimbursement for improvements made on the property?

Held:
No. Petitioner spouses explicitly admitted in their Answer that they had
been occupying the subject property since 1960 without ever paying any rental as
they only relied on the liberality and tolerance of the Pada family. Considering that
they were in possession of the subject property by sheer tolerance of its owners,
they knew that their occupation of the premises may be terminated any time. Thus,
they cannot be considered possessors nor builders in good faith. It is well-settled
that both Article 448 and Article 546, NCC which allow full reimbursement of useful
improvements and retention of the premises until reimbursement is made, apply
only to a possessor in good faith, i.e., one who builds on land with the belief that he
is the owner thereof. Verily, persons whose occupation of a realty is by sheer
tolerance of its owners are not possessors in good faith. Neither did the promise of
the alleged owners that they were going to donate the premises to petitioners
convert them into builders in good faith for at the time the improvements were built
on the premises, such promise was not yet fulfilled, i.e., it was a mere expectancy of
ownership that may or may not be realized. As such, petitioner spouses cannot be
said to be entitled to the value of the improvements that they built on the said lot.

Builder in Bad Faith

ISAGUIRRE vs. DE LARA

G.R. No. 138053, May 31, 2000

Facts:
Petitioner Isaguirre and respondent De Lara were parties in a case
involving a parcel of land wherein there was dispute as to its ownership as well as
the nature of the transaction they entered into regarding the disputed land. The
case was resolved by the Supreme Court which declared that De Lara was the lawful
owner of the land and held that the contract they entered into was an equitable
mortgage and not a sale.

On the basis of the Courts decision, De Lara filed a motion for execution with
the trial court for the delivery of possession of the land. Isaguirre opposed the
motion, asserting that, as mortgagee, he had the right of retention over the
property until payment of the value of the improvements, arguing that he is builder
in good faith with respect to the said improvements he made before the transaction
was declared to be an equitable mortgage.

Issue:

Can Isaguirre be considered a builder in good faith?

HELD:
NO. ISAGUIRRE IS NOT A BUILDER IN GOOD FAITH. HE IS A POSSESSOR IN
BAD FAITH. IT IS EVIDENT THAT PETITIONER KNEW FROM THE VERY BEGINNING
THAT THERE WAS REALLY NO SALE AND THAT HE HELD RESPONDENT'S PROPERTY
AS MERE SECURITY FOR THE PAYMENT OF THE LOAN OBLIGATION THEREFORE,
PETITIONER MAY CLAIM REIMBURSEMENT ONLY FOR NECESSARY EXPENSES;
HOWEVER, HE IS NOT ENTITLED TO REIMBURSEMENT FOR ANY USEFUL EXPENSES
WHICH HE MAY HAVE INCURRED.

Quieting of Title; Termination of Co-ownership by Prescription

ROBLES vs. COURT OF APPEALS

G.R. No. 123509, March 14, 2000

Facts:
The property subject of this case is originally owned by Leon Robles. When
he died, it passed to his son Silvino who declared the property in his name and paid
the taxes thereon. Upon the latters death, his widow and children inherited the
property. Petitioners Lucio Robles, et al. were the children of Silvino, and Hilario
Robles is their half-brother. The task of cultivating was assigned to Lucio while the
payment of the land taxes was entrusted to Hilario. For unknown reason, the tax
declaration of the parcel of land in the name of Silvino was cancelled and
transferred to Exequiel Ballena. Ballena secured a loan from Antipolo Rural Bank
using the tax declaration as security. Somehow the tax declaration was transferred

to the name of Antipolo Rural Bank and later was transferred to the name of
respondent- spouses Hilario and Andrea Robles. Andrea secured a loan from
Cardona Rural Bank using the tax declaration as security. For failure to pay the
mortgage debt, the property was foreclosed with Cardona Rural Bank emerging as
the highest bidder. The bank sold the property to spouses Vergel and Ruth Santos.
In Sept. 1987, petitioners discovered the mortgage and attempted to redeem the
property but was unsuccessful. In 1988, the spouses Santos took possession of the
propertry and was able to secure a Free Patent. Petitioners then filed an action for
quieting of title. Respondents questioned their standing to sue for quieting of title,
contending that petitioners no longer have any interest to the property in question
due to the mortgage effected by Hilario and the consequent foreclosure thereof by
the Bank. Respondents argued that Hilario had become the absolute owner of the
property at the time he mortgaged the same. The CA ruled that the several
transfers of the tax declaration of the property in question from Silvino until to the
spouses Santos had the effect of divesting petitioners of their title by prescription to
Hilario.

Issues:
1. Do the petitioners have appropriate title that will entitle them to the
remedy of the quieting of title?
2. Did Hilario acquire the share of his co-owners in the disputed property by
prescription?

Held:
1. YES. An action to quiet title, under Art. 476, NCC, is a common-law
remedy for the removal of any cloud or doubt or uncertainty on the title to real
property. It is essential for the plaintiff or complainant to have a legal or an
equitable title to or interest in the real property which is the subject matter of the
action. Also, the deed, claim, encumbrance or proceeding that is being alleged as a
cloud on plaintiff's title must be shown to be in fact invalid or inoperative despite its
prima facie appearance of validity or legal efficacy. That there is an instrument or a
document which, on its face, is valid and efficacious is clear in the present case.
Petitioners allege that their title as owners and possessors of the disputed property
is clouded by the tax declaration and, subsequently, the free patent thereto granted
to Spouses Santos. Petitioners anchor their claim on their open and continuous
possession as owners. Spouses Santos, on the other hand, trace their claims to
Exequiel, and then to Hilario who mortgaged the same to the Bank as absolute
owner. It was from Exequiel that Hilarios claim is rooted. However, in this case,
there is a failure to show Exequiels title to the property in question. When Hilario,
therefore, mortgaged the property, he did so in his capacity as mere co-owner
thereof. Consequently, the said transaction did not divest the petitioner of the title
to the property at the time of the institution of the complaint for quieting of title.

2. NO. Hilario effected no clear and evident repudiation of the co-ownership. It is a

fundamental principle that a co-owner cannot acquire by prescription the share of
the other co-owners, absent any clear repudiation of the co-ownership. In order that
the title may prescribe in favor of a co-owner, the following requisites must concur:
(1) the co-owner has performed unequivocal acts of repudiation amounting to an
ouster of the other co-owners; (2) such positive acts of repudiation have been made
known to the other co-owners; and (3) the evidence thereof is clear and convincing.
In the present case, Hilario did not have possession of the subject property; neither
did he exclude the petitioners from the use and the enjoyment thereof, as they had
indisputably shared in its fruits. Likewise, his act of entering into a mortgage
contract with the bank cannot be construed to be a repudiation of the co-ownership.
As absolute owner of his undivided interest in the land, he had the right to alienate
his share, as he in fact did. Neither should his payment of land taxes in his name,
as agreed upon by the co-owners, be construed as a repudiation of the coownership. The assertion that the declaration of ownership was tantamount to
repudiation was belied by the continued occupation and possession of the disputed
property by the petitioners as owners.

Quieting of Title; Laches; Freedom to Enter into Contracts; Waiver of Rights

MAESTRADO vs. COURT OF APPEALS

G.R. No. 133345 & 133324, March 9, 2000.

Facts:
The spouses Ramon and Rosario Chaves died intestate leaving several
properties. They were survived by their six children who later entered into a project
of partition which was approved by the court. Accordingly, the estate was divided
and distributed to the heirs. Lot 5872, for some reason however, was not included
in the project of partition, nor in the inventory. During the actual partition in 1956,
Lot 5872 was delivered to petitioners Josefa Maestrado and her children, one of the
heirs. The non-inclusion of said lot was discovered only in 1976. In an effort to set
things right, petitioners prepared a quitclaim in their favor to confirm to the alleged
oral agreement, which notarized quitclaim was signed by the other heirs. Six years

after the execution of said quitclaim, or in 1983, respondents, children of the other
heirs, discovered that Lot 5872 is still in the name of the deceased spouses Chaves.
They requested that the property be divided and distributed to the heirs. In
response, petitioners filed an action for quieting of title. Respondents argued,
among others, that petitioners have no standing to sue for the quieting of title and
that their action is barred by laches. They likewise assailed the validity and due
execution of the quitclaim. The trial court declared that Lot 5872 is still common
property and ordered its division among the heirs.

Issues:
1. Do the petitioners have the legal standing to sue for quieting of title?
If so, is such action barred by laches?
2. Is Lot No. 5872 still a common property?

Held:
1. YES. Petitioners are proper parties to bring an action for quieting of title.
Persons having legal as well as equitable title to or interest in a real property may
bring such action and "title" here does not necessarily denote a certificate of title
issued in favor of the person filing the suit. Moreover, if the plaintiff in an action for
quieting of title is in possession of the property being litigated, such action is
imprescriptible. One who is in actual possession of a land, claiming to be the owner
thereof may wait until his possession is disturbed or his title is attacked before
taking steps to vindicate his right because his undisturbed possession gives him a
continuing right to seek the aid of the courts to ascertain the nature of the adverse
claim and its effects on his title. Although prescription and laches are distinct
concepts, nonetheless in some instances, the doctrine of laches is inapplicable
where the action was filed within the prescriptive period provided by law. Thus,
laches does not apply in this case because petitioners' possession of the subject lot
has rendered their right to bring an action for quieting of title imprescriptible and,
hence, not barred by laches. Moreover, since laches is a creation of equity, acts or
conduct alleged to constitute the same must be intentional and unequivocal so as
to avoid injustice. Laches operates not really to penalize neglect or sleeping on
one's rights, but rather to avoid recognizing a right when to do so would result in a
clearly inequitable situation. In the case at bench, the cloud on petitioners' title to
the subject property came about only on December 1, 1983 when Angel Chaves
transmitted respondents' letters to petitioners, while petitioners' action was filed on
December 22, 1983. Clearly, no laches could set in under the circumstances since
petitioners were prompt and vigilant in protecting their rights.

2. NO. Lot No. 5872 is no longer common property of the heirs of the deceased
spouses Chaves. Petitioners' ownership over said lot was acquired by reason of the

oral partition agreed upon by the deceased spouses' heirs sometime before 1956.
That oral agreement was confirmed by the notarized quitclaims executed by the
said heirs. Nevertheless, respondent court was convinced that Lot No. 5872 is still
common property of the heirs of the spouses Chaves because the TCT covering the
said property is still registered in the name of the said spouses. Unfortunately,
respondent court was oblivious to the doctrine that the act of registration of a
voluntary instrument is the operative act which conveys or affects registered land
insofar as third persons are concerned. Hence, even without registration, the
contract is still valid as between the parties. Neither a Transfer Certificate of Title
nor a subdivision plan is essential to the validity of an oral partition. Since the oral
partition has been duly established, the notarized quitclaims confirmed such prior
oral agreement as well as the petitioners' title of ownership over the subject Lot No.
5872. More importantly, independent of such oral partition, the quitclaims in the
instant case are valid contracts of waiver of property rights. The freedom to enter
into contracts, such as the quitclaims, is protected by law and the courts are not
quick to interfere with such freedom unless the contract is contrary to law, morals,
good customs, public policy or public order. Quitclaims, being contracts of waiver,
involve the relinquishment of rights, with knowledge of their existence and intent to
relinquish them. The intent to waive rights must be clearly and convincingly shown.
Moreover, when the only proof of intent is the act of a party, such act should be
manifestly consistent and indicative of an intent to voluntarily relinquish a particular
right such that no other reasonable explanation of his conduct is possible. In the
instant case, the terms of the subject quitclaims are clear; and the heirs' signatures
thereon have no other significance but their conformity thereto resulting in a valid
waiver of property rights.

Preference of Possession; Ownership

CEQUENA vs. BOLANTE

G. R. No. 137944, April 6, 2000

Facts:
Since 1926, a parcel of land was declared in the name of Sinforoso
Mendoza, father of respondent Bolante. When Sinforoso died in 1930, his brother
Margarito Mendoza, father of petitioners Cequena and Lirio, took possession of the
land and cultivated it with his son Miguel (brother of petitioners). At the same time,
respondent and her mother continued residing in the lot. When respondent came of
age in 1948, she paid realty taxes for the years 1932-1948, and thereafter. On the
basis of an affidavit allegedly signed by respondent and her mother, the tax
declaration in the name of Sinforoso of the contested lot was cancelled and
subsequently declared in the name of Margarito in 1953 who paid its realty taxes
beginning 1952. When Margarito died, Miguel continued cultivating the land until
1985 when he was physically ousted by the respondent.
Based on the foregoing, the trial court resolved the issue of lawful ownership
and possession favor of petitioners.

Issue:
As between the claimants, who is the preferred possessor and the lawful
owner of the subject parcel of land?

Held:
Respondent is the preferred possessor and lawful owner of the disputed
land. Despite their dispossession in 1985, the petitioners did not lose legal
possession because possession cannot be acquired through force or violence. A
possessor, even if physically ousted, is still deemed the legal possessor. However,
possession by the petitioners does not prevail over that of the respondent. Their
possession before 1985 was not exclusive, as the latter also acquired it before 1985.
Petitioners father and brother, as well as the respondent and her mother were
simultaneously in adverse possession of the land. Based on Article 538 of the Civil
Code, respondent is the preferred possessor because, benefiting from her fathers
tax declaration of the subject lot since 1926, respondent has been in possession
thereof for a longer period. On the other hand, petitioners father acquired joint
possession only in 1952.
As to the issue of ownership, respondent argues that she was legally presumed to
possess the subject land with a just title since she possessed it in the concept of
owner. Under Article 541 of the Civil Code, she could not be obliged to show or
prove such title. This is untenable since the presumption in Article 541 is merely
disputable. Article 538 settles only the question of possession, and possession is
different from ownership. Ownership in this case should be established in one of
the ways provided by law.
Between the claimants, ownership shall be vested to the one who has proven
acquisitive prescription. Respondents possession was not disturbed until 1953
when petitioners father claimed the land. But by then, her possession, which was

in the concept of owner public, peaceful, and uninterrupted had already ripened
into ownership. Furthermore she herself declared and paid realty taxes for the
disputed land. Tax receipts and declarations of ownership for taxation, when
coupled with proof of actual possession of the property, can be the basis of a claim
for ownership through prescription. In contrast, petitioners did not acquire
ownership despite 32 years (1953-1985) of farming the subject land. It is settled
that ownership cannot be acquired by mere occupation. Unless it is hostile,
occupation and use, however long, will not confer title by prescription or adverse
possession. Moreover, the petitioners cannot claim that their possession was
public, peaceful and uninterrupted. Although their father and brother arguably
acquired ownership through extraordinary prescription because of their adverse
possession of 32 years, this supposed ownership can not extend to the entire
disputed lot, but must be limited to the portion that they actually farmed. The tax
declarations and receipts of petitioners are only prima facie, not conclusive,
evidence of ownership in the absence of actual public and adverse possession.

Donation Inter Vivos; Repudiation Of Inheritance; Escheat

REPUBLIC vs. GUZMAN

G.R. No.132964, Feb. 18, 2000

Facts:
Respondent David Rey Guzman, a natural born American citizen is the son
of spouses Simeon Guzman , naturalized American citizen and Helen Meyers
Guzman, American citizen. In 1968, Simeon died living to his sole heirs Helen and
David an estate consisting of several parcels of land located in Bulacan. Thereafter,
Helen and David executed a Deed of Extrajudicial settlement dividing and
adjudicating to themselves the property belonging to the estate of Simeon. The
document was registered in the Register of Deeds and the parcels of land were
accordingly registered in the name of Helen and David in undivided equal shares. In
1981, Helen executed a Quitclaim Deed conveying to David her undivided
interest on said lands. On Aug. 9, 1989, she executed another Deed of Quitclaim
confirming the earlier quitclaim in 1981 as well as modifying the document to
encompass all her other property in the Philippines. More than a week later, David
executed a Special Power of Attorney (SPA) where he acknowledged that he

became the owner of the parcels of land subject of the Aug. 9, 1989 Deed of
Quitclaim and empowering Atty. Abella to sell or otherwise dispose of the lot. On
Feb. 1, 1990, Atty. Abella, upon instruction of Helen, paid donors taxes to facilitate
the registry of the parcels of land in the name of David.
In 1994, upon information furnished by a certain Atty. Batongbacal, showing that
Davids ownership of of Simeons estate was defective, the Government filed
before the RTC of Bulacan a petition for escheat praying that of Davids interest in
each of the subject parcels of land be forfeited in its favor. Petitioner anchors its
argument on Art. XII, Secs. 7 & 8 of the Constitution, which sets the rule that only
Filipino citizen can acquire private lands in the Philippines. The exceptions are in
the case of hereditary succession and if he was formerly a natural-born Filipino
citizen who lost his Filipino citizenship. Since Davids acquisition of said lands does
not fall under any of these exceptions, David could not validly acquire interest in
each of the subject parcels of land in dispute by way of the two Deed of Quitclaims
as they are in reality donation inter vivos. David maintains, on the other hand, that
he acquired the property by right of accretion and not by way of donation.

Issue:
Should respondents interest of the disputed parcels of land be
escheated in favor of the government?

Held:

NO. Escheat is not proper under the circumstances.

In the first place, there is no valid donation. There are 3 essential elements of a
donation: (a) the reduction of the patrimony of the donor; (b) the increase in the
patrimony of the donee; and (c) the intent to do an act of liberality or animus
donandi. When applied to a donation of an immovable property, the law further
requires that the donation be made in a public document and that there should be
an acceptance thereof made in the same deed of donation or in a separate public
document. In cases where the acceptance is made in a separate instrument, it is
mandated that the donor should be notified thereof in an authentic form, to be
noted in both instruments. Not all the elements of a donation of an immovable
property are present in the instant case. The transfer of the property by virtue of
the Deed of Quitclaim executed by Helen resulted in the reduction of her patrimony
as donor and the consequent increase in the patrimony of David as donee.
However, Helens intention to perform an act of liberality in favor of David was not
sufficiently established. A perusal of the Deeds of Quitclaim reveals that Helen
intended to convey to her son David certain parcels of land located in the
Philippines, and to re-affirm the quitclaim she executed in 1981 which likewise
declared a waiver and renunciation of her rights over the parcels of land . The
language of the Deed is clear that Helen merely contemplated a waiver of her
rights, title and interest over the land in favor of David, and not a donation. The

element of animus donandi, therefore, was missing. Likewise the two Deeds of
Quitclaim may have been in the nature of a public document but they lacked the
essential element of acceptance in the proper form required by law to make the
donation valid. The SPA does not qualify as an implied acceptance by David of the
alleged donation but merely acknowledges that David owns the property referred to
and that he authorizes Atty. Abella to sell the same in his name. There is no
intimation, expressly or impliedly, that Davids acquisition of the parcels of land is
by virtue of Helens possible donation to him and we cannot look beyond the
language of the document to make a contrary construction. Moreover, it is
mandated that if an acceptance is made in a separate public writing the notice of
acceptance must be noted not only in the document containing the acceptance but
also in the Deed of Donation. These requisites have not been complied with and no
proof of compliance appears in the record. .The 2 Quitclaims set out the
conveyance of the parcels of land by Helen in favor of David but its acceptance by
David does not appear in the Deeds, nor in the SPA.
However, the inexistence of a donation does not render the repudiation made by
Helen in favor of David valid. There is no valid repudiation of inheritance as Helen
had already accepted her share of the inheritance when she together with David
executed a Deed of Extrajudicial Settlement of the Estate of Simeon. By virtue of
such extrajudicial settlement, the parcels of land were registered in her and her
sons name in undivided equal share and for 11 years they possessed the lands in
the concept of owner. Art. 1056 of the Civil Code provides The acceptance or
repudiation of an inheritance is irrevocable and cannot be impugned except when it
was made thru any of the causes that vitiate consent or when and unknown will
appears. Nothing on record shows that Helens acceptance of her inheritance from
Simeon was made thru any of the causes which vitiated her consent nor is there
any proof of the existence of an unknown will executed by Simeon. Thus, Helen
cannot belatedly execute an instrument which has the effect of revoking or
impugning her previous acceptance of her share. Hence, the 2 Quitclaims which
she executed 11 years after her acceptance have no legal force and effect.
Nevertheless, the nullity of the repudiation does not ipso facto operate to convert
the parcels of land into res nullius to be escheated in favor of the Government. The
repudiation, being of no effect whatsoever, the parcels of land should revert to their
private owner, Helen, who although being an American citizen is qualified by
hereditary succession to own the property subject of the litigation.

Donation Inter Vivos

VELASQUEZ vs. COURT OF APPEALS

G.R. No. 126996, February 15, 2000

Facts:
The spouses Cornelio Aquino and Leoncia de Guzman acquired six pieces of
real properties during their marriage. They were childless and died intestate.
Leoncia de Guzman was survived by her sisters Anatalia and Tranquilina. The heirs
of Anatalia filed a complaint for partition of the six properties against the heirs of
Cesario Velasquez (son of Tranquilina). In their answer, the heirs of Cesario were
able to adduce uncontroverted
documentary evidences showing that during the lifetime of the spouses Aquino,
they had already disposed of four of the six properties in favor of their
predecessors-in-interest through donation or conveyance.

Issue:
Did the heirs of Cesario acquire absolute ownership over the property in
dispute as to bar an action for partition?

Held:
YES. The heirs of Cesario have acquired absolute and exclusive ownership
over the property in question. A donation as a mode of acquiring ownership results
in an effective transfer of title over the property from the donor to the donee and
the donation is perfected from the moment the donor knows of the acceptance by
the donee. And once a donation is accepted, the donee becomes the absolute
owner of the property donated. The donation of the first parcel made by the Aquino
spouses to petitioners Jose and Anastacia Velasquez who were then minors was
accepted through their father Cesario Velasquez, and the acceptance was
incorporated in the body of the same deed of donation and made part of it, and was
signed by the donor and the acceptor. Legally speaking there was delivery and
acceptance of the deed, and the donation existed perfectly and irrevocably. The
donation inter vivos may be revoked only for the reasons provided in Articles 760,
764 and 765 of the Civil Code. The donation propter nuptias in favor of Cesario
Velasquez and Camila de Guzman over the third and sixth parcels including a
portion of the second parcel became the properties of the spouses Velasquez since
1919. The deed of donation propter nuptias can be revoked by the non-performance
of the marriage and the other causes mentioned in article 86 of the Family Code.
The alleged reason for the repudiation of the deed, i.e., that the Aquino spouses did
not intend to give away all their properties since Anatalia (Leoncia's sister) had

several children to support is not one of the grounds for revocation of donation
either inter vivos or propter nuptias, although the donation might be inofficious.

PRESCRIPTION

SERASPI vs. COURT OF APPEALS

G.R. No. 135602, April 28, 2000

Facts:
Marcelino Recasa was the owner of two parcels of land. During his lifetime,
Marcelino contracted 3 marriages. At the time of his death in 1943, he had 15
children from his three marriages. In 1948, his intestate estate was partitioned into
three parts by his heirs, each part corresponding to the share of the heirs in each
marriage. The heirs of the first marriage, sold their share to Dominador Recasa, an
heir of the second marriage. Dominador, representing the heirs of the second
marriage, in turn sold the share of the heirs to Quirico and Purificacion Seraspi
whose heirs are the present petitioners. In 1958, the Seraspis obtained a loan from
the Kalibo Rural Bank, Inc. (KRBI) on the security of the lands in question to finance
improvements on the lands. However, they failed to pay the loan for which reason
the mortgage was foreclosed and the lands were sold to KRBI as the highest bidder.
Subsequently, the lands were sold by KRBI to Manuel Rata, brother-in-law of Quirico
Seraspi. It appears that Rata, as owner of the property, allowed Quirico Seraspi to
administer the property.
In 1974, private respondent Simeon Recasa, Marcelinos child by his third wife,
taking advantage of the illness of Quirico Seraspi, forcibly entered the lands in
question and took possession thereof. In 1983, the Seraspis purchased the lands
from Manuel Rata and afterwards filed a complaint against Simeon Recasa for
recovery of possession of the lands.

Issues:
1. Is the action for recovery of possession ( accion publiciana) barred by
extinctive prescription?
2. Has Simeon acquired the ownership of the land by prescription?

Held:
1. NO. Art. 1141 NCC provides that real actions over immovables prescribe
after thirty years. From 1974 to April 12, 1987 when the action was filed, only
thirteen years has elapsed.

2. NO. Simeon has no just title or not in good faith to acquire the land by acquisitive
prescription. Private respondent could not have acquired ownership over the
property through occupation since, under Art. 714 of the Civil Code, the ownership
of a piece of land cannot be acquired by occupation. Nor can he base his ownership
on succession for the property was not part of those distributed to the heirs of the
third marriage, to which private respondent belongs. It must be remembered that in
the partition of the intestate estate of Marcelino Recasa, the properties were divided
into three parts, each part being reserved for each group of heirs belonging to one
of the three marriages Marcelino entered into. Since the contested parcels of land
were adjudicated to the heirs of the first and second marriages, it follows that
private respondent, as heir of the third marriage, has no right over the parcels of
land. While, as heir to the intestate estate of his father, private respondent was coowner of all of his fathers properties, such co-ownership rights were effectively
dissolved by the partition agreed upon by the heirs of Marcelino Recasa. Neither
can private respondent claim good faith in his favor. Good faith consists in the
reasonable belief that the person from whom the possessor received the thing was
its owner but could not transmit the ownership thereof. Private respondent entered
the property without the consent of the previous owner. For all intents and
purposes, he is a mere usurper.

Prescription in Action for Reconveyance

MILLENA vs. COURT OF APPEALS

G.R. NO. 127797, JANUARY 31, 2000

Facts:
In 1926, a parcel of land in Daraga, Albay (Lot 1874) was divided between
Gregoria Listana and Potenciana Maramba: was given to Gregoria and to

Potenciana. The portion owned by Gregoria was sold to Gaudencia Jacob who
entered the same and started harvesting the coconuts found therein. In 1966, the
land was passed on to Gaudencias daughter, Felisa Jacob by virtue of an
extrajudicial settlement. Sometime in 1981, Felisa discovered that Potencianas son
(Florencio) was able to acquire a free patent over the entire lot including the portion
adjudicated to her. Notwithstanding Felisas protest filed before the Bureau of
Lands, the heirs of Florencio sold the entire lot to Alejandro Millena. In 1992, Felisa
filed a complaint against Alejandro for annulment of title and reconveyance of the
portion owned by the former. RTC ordered the reconveyance of the portion of the
land. CA affirmed the TC.

Issue:

Is the action for reconveyance barred by prescription?

Held:
NO. Prescription cannot be invoked in an action for reconveyance when the
claimant is in possession of the land to be reconveyed. Apparently, Felisa Jacob met
the requisite elements of possession. She exercised control over the parcel of land
in litigation through her caretaker. Moreover, her declaration that the land was her
property and the payment of real property taxes manifested clearly that she was in
possession of the land. Consequently, Alejandro may not validly invoke prescription
as defense against Felisa.

Ownership Through Acquisitive Presciption

DBP vs. COURT OF APPEALS

G.R. No. 129471. April 28, 2000.

Facts:
The land in dispute consisting of 19.4 hectares was originally owned by
Ulipiano Mumar, whose ownership since 1917 was evidenced by Tax Declaration
No. 3840. In 1950, Mumar sold the land to respondent Cajes who was issued Tax
Declaration No. R-1475 that same year. Cajes occupied and cultivated the said land.

In 1969, unknown to Cajes, Jose Alvarez succeeded in obtaining the registration of a

parcel of land with an area of 1,512, 468.00 square meters, in his name for which he
was issued OCT No. 546 on June 16, 1969. The parcel of land included the 19.4
hectares occupied by respondent. Alvarez never occupied nor introduced
improvements on said land.
In 1972, Alvarez sold the land to the spouses Gaudencio and Rosario Beduya to
whom TCT No. 10101 was issued. That same year, the spouses Beduya obtained a
loan from petitioner DBP for P526,000.00 and, as security, mortgaged the land
covered by TCT No. 10101 to the bank. In 1978, the SAAD Investment Corp., and
the SAAD Agro-Industries, Inc., represented by Gaudencio Beduya, and the spouses
Beduya personally executed another mortgage over the land in favor of DBP to
secure a loan of P1,430,000.00. The spouses Beduya later failed to pay their loans,
as a result of which, the mortgage on the property was foreclosed and sold to DBP
as the highest bidder. As the spouses Beduya failed to redeem the property, DBP
consolidated its ownership. It appears that Cajes had also applied for a loan from
DBP in 1978, offering his 19.4 hectare property under Tax Declaration No. D-2247 as
security for the loan. Cajes loan application was later approved. However, it was
found that the land mortgaged by Cajes was included in the land covered by TCT
No. 10101 in the name of the spouses Beduya. DBP, therefore, cancelled the loan
and demanded immediate payment of the amount. Cajes paid the loan to DBP for
which the former was issued a Cancellation of Mortgage releasing the property in
question from encumbrance. DBP asked Cajes to vacate the property. As the latter
refused to do so, DBP filed a complaint for recovery of possession with damages
against him. The RTC of Tagbilaran City declared DBP the lawful owner of the entire
land covered by TCT No. 10101 on the ground that the decree of registration was
binding upon the land.

Issue:

Who has better right to the land in dispute, DBP or Cajes?

Held:
Cajes has better right. In the present case, Cajes has been in actual, open,
peaceful and continuous possession of the property since 1950. His claim based on
actual occupation of the land is bolstered by the Tax Declarations issued in his
name. Together with his actual possession of the land, these tax declarations
constitute strong evidence of ownership of the land occupied by him. More
importantly, it was established that respondent, having been in possession of the
land since 1950, was the owner of the property when it was registered by Jose
Alvarez in 1969, his possession tacked to that of his predecessor-in-interest, Mumar,
which dates back to 1917. Clearly, more than 30 year had elapsed before a decree
of registration was issued in favor of Alvarez. This uninterrupted adverse possession
of the land for more than 30 years could only ripen into ownership of the land

through acquisitive prescription which is a mode of acquiring ownership and other

real rights over immovable property. Prescription requires public, peaceful,
uninterrupted and adverse possession of the property in the concept of an owner for
ten (10) years, in case the possession is in good faith and with a just title.
Accordingly, the land in question must be reconveyed in favor of Cajes, the true and
actual owner thereof, reconveyance being clearly the proper remedy in this case.

II. SUCCESSION

Successional Rights; Transmission of; Scope

RABADILLA vs. COURT OF APPEALS

G.R. No. 113725, June 29, 2000

Facts:
In a Codicil appended to the will of testatrix Aleja Belleza, Dr. Jorge
Rabadilla was instituted as a devisee of a parcel of land in Bacolod City with the
obligation to deliver 100 piculs of sugar yearly to private respondent Marlena
Belleza. Such obligation is likewise imposed upon the heirs of Dr. Rabadilla and their
buyer, lessee, or mortgagee should they sell, lease, mortgage or otherwise
negotiate the property involved. The Codicil further provides that in case of failure
to comply with such obligation, private respondent shall seize the subject property
and shall turn it over to the near descendants of the testatrix. The Codicil allows
the alienation of the property but only to the testatrixs near descendants and
sister.
The lot was transferred to Dr. Rabadilla, who died in 1983 and was survived by his
wife and children, one of which is petitioner herein. In 1989, private respondent
sought before the RTC of Bacolod City, the reconveyance of the property to the
surviving heirs of the testatrix. During pre-trial, parties admitted that in 1998, the
private respondent and a certain Alan Azurin, a lessee of the property, arrived at an
amicable settlement and assumed the obligation to deliver one hundred piculs of
sugar. There was no compliance with the agreement.

In 1991, the RTC dismissed the complaint for lack of cause action. On appeal, the
CA reversed the decision of the TC. The CA ordered reconveyance of the lot to the
estate of Aleja Belleza on the ground of non-compliance of petitioner, as heirs of the
modal heir Rabadilla, of the obligation under the codicil, since 1985. Hence this
petition.

Issue:
Does the private respondent have a cause of action to institute the present
case for reconveyance of the land in controversy against petititoner?

Held:
YES. Private respondent has a cause of action against petitioner. It is a
general rule under the law on succession that successional rights are transmitted
from the moment of death of the decedent and compulsory heirs are called to
succeed by operation of law. The petitioner, his mother and sisters, as compulsory
heirs of the instituted heir, Dr. Rabadilla, succeeded the latter by operation of law,
without need of further proceedings, and the successional rights were transmitted
to them from the moment of death of the decedent. Under Article 776 NCC,
inheritance includes all the property, rights and obligations of a person, not
extinguished by his death. Conformably, whatever rights and obligations Dr.
Rabadilla had by virtue of subject Codicil were transmitted to his forced heirs, at the
time of his death. Such obligation of the instituted heir reciprocally corresponds to
the right of private respondent over the usufruct, the fulfillment or performance of
which is now being demanded by the latter through the institution of the case at
bar.

Modal Institution vs. Conditional institution; Substitution

Issue:

Is the testamentary institution of Dr. Rabadilla a modal institution?

Held:
YES. The institution of Dr. Rabadilla under subject Codicil is in the nature of
a modal institution.
In a modal institution, the testator states (1) the object of the institution, (2) the
purpose or application of the property left by the testator, or (3) the charge imposed
by the testator upon the heir. A "mode" imposes an obligation upon the heir or

legatee but it does not affect the efficacy of his rights to the succession. On the
other hand, in a conditional testamentary disposition, the condition must happen or
be fulfilled in order for the heir to be entitled to succeed the testator. The condition
suspends but does not obligate; and the mode obligates but does not suspend. To
some extent, it is similar to a resolutory condition. The manner of institution of Dr.
Rabadilla under subject Codicil is evidently modal in nature because it imposes a
charge upon the instituted heir without, however, affecting the efficacy of such
institution. Further, since testamentary dispositions are generally acts of liberality,
an obligation imposed upon the heir should not be considered a condition unless it
clearly appears from the Will itself that such was the intention of the testator. In
case of doubt, the institution should be considered as modal and not conditional.

The Codicil sued upon does not contemplate a substitution. Substitution is the
designation by the testator of a person or persons to take the place of the heir or
heirs first instituted. Under substitutions in general, the testator may either (1)
provide for the designation of another heir to whom the property shall pass in case
the original heir should die before him/her, renounce the inheritance or be
incapacitated to inherit, as in a simple substitution, or (2) leave his/her property to
one person with the express charge that it be transmitted subsequently to another
or others, as in a fideicommissary substitution. The provisions of subject Codicil do
not provide that should Dr. Rabadilla default due to predecease, incapacity or
renunciation, the testatrix's near descendants would substitute him. What the
Codicil provides is that, should Dr. Rabadilla or his heirs not fulfill the conditions
imposed in the Codicil, the property referred to shall be seized and turned over to
the testatrix's near descendants. Neither is there a fideicommissary substitution. In
a fideicommissary substitution, the first heir is strictly mandated to preserve the
property and to transmit the same later to the second heir. In this case, the
instituted heir is in fact allowed under the Codicil to alienate the property provided
the negotiation is with the near descendants or the sister of the testatrix. Also, the
near descendants' right to inherit from the testatrix is not definite. The property will
only pass to them should Dr. Rabadilla or his heirs not fulfill the obligation to deliver
part of the usufruct to private respondent. Under Article 863, the second heir or the
fideicommissary to whom the property is transmitted must not be beyond one
degree from the first heir or the fiduciary. In this case, the near descendants are not
at all related to the instituted heir, Dr. Rabadilla.

Wills

Issue:
Can the provisions of a Codicil be a valid subject of an amicable settlement
subsequently entered into between the private respondent and the lessee of the
subject land which effectively relieves the petitioner from the obligation?

Held:
NO. The amicable settlement whereby the lessee assumed the obligation in
the codicil, cannot be deemed to be a substantial and constructive compliance of
petitioners obligation therein as to effectively release the latter from his obligation.
A Will is a personal, solemn, revocable and free act by which a person disposes of
his property, to take effect after his death. Since the Will expresses the manner in
which a person intends how his properties be disposed, the wishes and desires of
the testator must be strictly followed. Thus, a Will cannot be the subject of a
compromise agreement which would thereby defeat the very purpose of making a
Will.

Partition; Preterition

VIADO NON VS. COURT OF APPEALS

G.R. No. 137287, February 15, 2000

Facts:
During their lifetime, spouses Julian and Virginia Viado owned a house and
lot in Quezon City. Virginia died in 1982, while Julian died in 1985. Surviving them
were their four children Nilo, Leah, Rebecca, and Delia. Nilo and Leah both died in
1987. The property was occupied and shared by Rebecca, Delia and the heirs of
Nilo. In 1988, petitioners Rebecca and Delia filed a case for partition against the
heirs of Nilo. The latter claimed absolute ownership based on two documents, (1) a
deed of donation executed by Julian covering his one-half conjugal share of the
property in favor of Nilo and (2) a deed of extrajudicial settlement in which Julian,
Leah and Rebecca waived in favor of Nilo their rights and interests over their share
of the property inherited from Virginia, which documents were the basis of the
cancellation of OCT and the issuance of a TCT in the their name. Petitioners
attacked the validity of the foregoing instruments, contending that Nilo employed

forgery and undue influence to coerce Julian to execute the deed of donation.
Rebecca averred that Nilo employed fraud to procure her signature to the deed of
extrajudicial settlement. She added that the exclusion of her retardate sister, Delia,
in the extrajudicial settlement, resulted in the latter's preterition that should
warrant its annulment.

Issues:
1. Did the heirs of Nilo acquire absolute ownership over the property in
question?
2. What is the effect of the exclusion of Delia in the extrajudicial settlement?

Held:
1. When Virginia died intestate in 1982, her part of the conjugal property
was transmitted to her heirs her husband Julian and their children. The
inheritance, which vested from the moment of death of the decedent, remained
under a co-ownership regime among the heirs until partition. Every act intended to
put an end to indivision among co-heirs and legatees or devisees would be a
partition although it would purport to be a sale, an exchange, a compromise, a
donation or an extrajudicial settlement. The deed of donation and deed of extrajudicial settlement consolidated the title solely to Nilo and ceased the co-ownership.

2. The exclusion of Delia Viado from the deed of extrajudicial settlement has the
effect of preterition. This kind of preterition, in the absence of proof and bad faith,
does not justify a collateral attack on the new TCT. The relief instead rests on
Art.1104, NCC to the effect that where the preterition is not attended by bad faith
and fraud, the partition shall not be rescinded but the preterited heir shall be paid
the value pertaining to her. Therefore, the value of the property must be
ascertained to determine the amount due to Delia.

Formal requirements of a valid partition

VERONA PADA-KILARIO vs. COURT OF APPEALS

G.R. No. 134329, January 19, 2000.

Facts:
Sometime in May, 1951, the heirs of Jacinto Pada entered into an extrajudicial partition of his estate which includes a parcel of land in Leyte. The partition
was not registered as it was written in a private document. The land was allocated
to 2 of the heirs, Ananias and Marciano. Meanwhile, petitioner spouses occupied
the northern portion of the subject land with the consent of the heirs of Jacinto.
In 1993, Maria Pada sold the co-ownership right of her father, Marciano to private
respondent, Silverio Pada. Thereafter, Silverio demanded that petitioner spouses
vacate the northern portion of the subject land so his family can utilize the said
area. When conciliation proceedings failed, Silverio filed in the MCTC of Matalom,
Leyte, a complaint for ejectment against petitioner spouses.
The MCTC sustained the possession of petitioner spouses and held that the extrajudicial partition was not valid since it was executed in a private document and was
never registered. On appeal, the RTC reversed the decision of the lower court
holding that Maria Pada was the legal owner of the property sold. The CA affirmed
the decision of the RTC holding that the 1951 extrajudicial partition being legal and
effective as among Jacintos heirs, Maria Pada validly transferred her ownership
rights over the subject land to Silverio.

Issue: Is it necessary for the validity of the extrajudicial partition that the same be
embodied in a public instrument?

Held:
No. The intrinsic validity of partition not executed in a public instrument is
not undermined when no creditors are involved. The partition of inherited property
need not be embodied in a public document so as to be effective as regards the
heirs that participated therein. The requirement of Article 1358 of the Civil Code
that acts which have for their object the creation, transmission, modification or
extinguishment of real rights over immovable property, must appear in a public
instrument, is only for convenience, non-compliance with which does not affect the
validity or enforceability of the acts of the parties as among themselves. And
neither does the Statute of Frauds under Article 1403 of the New Civil Code apply
because partition among heirs is not legally deemed a conveyance of real property,
considering that it involves not a transfer of property from one to the other but
rather, a confirmation or ratification of title or right of property that an heir is
renouncing in favor of another heir who accepts and receives the inheritance.

III. OBLIGATIONS AND CONTRACTS

Novation

ESPINA vs. COURT OF APPEALS

G.R. No. 116805, June 22, 2000

Facts:
Petitioner Mario Espina is the registered owner of a Condominium Unit in
Antipolo, Rizal. In 1987, the condominium unit in question was leased to
respondent Rene Diaz. In 1991 while Diaz occupied the premises as lessee, Mario
executed a Provisional Deed of Sale whereby he agreed to sell the condominium
unit to respondent for the initial downpayment of P100,000.00 to be paid upon the
execution of the contract and the balance to be paid in 6 installments through PCI
Bank postdated checks. Diazs checks all bounced and were dishonored upon
presentment for the reason that the bank account was closed. Consequently, on July
26, 1992, Mario terminated the provisional deed of sale by a notarial notice of
cancellation. Nonetheless, Diaz continued to occupy the premises, as lessee, but
failed to pay the rentals due. On October 28, 1992, Diaz made a payment of
P100,000.00 which was accepted by Mario. On February 24, 1993, Mario filed with
the MTC-Antipolo Rizal, an action for unlawful detainer against Diaz. The TC ordered
Diaz to vacate the premises and to pay back & current rentals, attorneys fees and
costs. On appeal to the RTC, the latter court affirmed the decision of the MTC. Diaz
filed with the CA a petition for review. The CA reversed the appealed decision and
dismissed the complaint for unlawful detainer. MFR filed by Mario was denied.
Hence, this appeal via petition for review on certiorari.

Issue:

Did the provisional deed of sale novate the existing lease contract?

Held:
NO. The provisional deed of sale that was subsequently executed by the
parties did not novate the original existing contract of lease.
Novation is never presumed; it must be proven as a fact either by express
stipulation of the parties or by implication derived from an irreconcilable
incompatibility between old and new obligations or contracts. Otherwise, the
original contract remains in force.

Relativity of Contracts

DKC HOLDINGS CORP. vs. COURT OF APPEALS

G. R. No. 118248, April 5, 2000

Facts:
On March 16, 1988, petitioner corporation entered into a Contract of Lease
with Option to Buy with Encarnacion Bartolome, whereby petitioner was given the
option to lease or lease with purchase the subject land.
Petitioner regularly paid
the monthly P3,000.00 reservation fee until the death of Encarnation in January
1990. Thereafter, petitioner coursed its payment to private respondent Victor
Bartolome, the sole heir of Encarnacion. Victor, however, refused to accept. On
March 14, 1990, petitioner served upon Victor a written notice that it was exercising
its option to lease the property. Again, Victor refused to accept the rental fee and to
surrender possession of the property to petitioner. Petitioner thus opened a savings
account with a bank in the name of Victor Bartolome and deposited therein the

aforesaid rental fee as well as P6,000.00 reservation fees. Petitioner then filed a
Complaint for specific performance and damages against Victor.
The trial court dismissed the complaint, holding that the subject contract was
terminated upon the death of Encarnacion Bartolome and did not bind Victor
because he was not a party thereto.

Issue:
Was the Contract of Lease with Option to Buy entered into by Encarnacion
with petitioner terminated upon her death, hence not binding upon Victor?

Held:
NO. The contract was not terminated upon Encarnacions death. It remains
binding upon Victor. The general rule under Article 1311, NCC is that heirs are
bound by contracts entered into by their predecessors-in-interest except when the
rights and obligations arising therefrom are not transmissible by (1) their nature, (2)
stipulation or (3) provision of law. In the case at bar, there is neither contractual
stipulation nor legal provision making the rights and obligations under the contract
intansmissible. In fact, the nature of the rights and obligations therein are, by their
nature, transmissible.
A good measure for determining whether a contract terminates upon the death
of one of the parties is whether it is of such character that it may be performed by
the promissors personal representative. In the case at bar, there is no personal act
required from the late Encarnacion Bartolome. Rather, the obligation of
Encarnaction in the contract to deliver the possession of the subject property to
petitioner upon the exercise by the latter of its option to lease the same may very
well be performed by her heir Victor. There exists a privity of interest between
Victor and his deceased mother. Victor cannot escape the legal consequence of a
transaction entered into by his predecessor-in-interest because he has inherited the
property subject to the liability affecting the latter.
Furthermore, the subject matter of the contract is a lease, which is a property
right. The death of a party does not excuse nonperformance of a contract which
involves a property right, and the rights and obligations thereunder pass to the
personal representatives of the deceased. Similarly, nonperformance is not
excused by the death of the party when the other party has a property interest in
the subject matter of the contract.

Onerous Contract

GOLDEN DIAMOND vs. COURT OF APPEALS

G.R. No. 131436, May 31, 2000

Facts:
Petitioner Golden Diamond, Inc. (GDI) entered into a Dealer Agreement
with International Family Food Services, Inc. (IFFSI), the exclusive licensee in the
Philippines of Shakey's U.S.A., for the operation of Shakey's pizza parlors in
Caloocan City for a period of ten years, from February 1981 to February 1991
renewable for another ten years. GDI subsequently entered into a Memorandum of
Agreement (MOA) with private respondent Cheng, whereby GDI assigned to the
latter, its rights, interests and obligations under its agreement with IFFSI over the
Shakey's outlet at Gotesco Grand Central, in exchange for the payment of a monthly
royalty fee of five per cent (5%) of the gross dealer sales for a period of five (5)
years, from August 1988 to August 1993.
On February 1991, Cheng stopped payment of the royalty fees on the ground that
the contract between GDI and IFFSI had expired. Cheng insisted that his payment of
the royalty fees is conditioned on the existence of the agreement between
petitioner GDI and IFFSI.

Issue:
Is Cheng obliged to pay the royalty fee to GDI even after the expiration of
GDIs area franchise?

Held:
NO. Cheng is no longer obliged to pay the royalty fee. The fact that no
renewal was granted removed the basis for the continued payment of the monthly
royalty fee. It is the essence of a royalty fee that it is paid in consideration of an
existing right. In its ordinary acceptation, royalties refer to payments made to the
owner for permitting another to use his property. Royalties are similar to the rents
payable for the use or right to use an invention and after the right to use it has
terminated there is no obligation to make further royalty payments.
The MOA is an onerous contract, wherein the contracting parties are obliged to
render reciprocal prestations. GDI is entitled to receive the royalty fee in return for
Chengs use of its (GDI) exclusive right to the Shakey's outlet at the Gotesco Grand

Central. Indelibly, the very reason which impelled Cheng to assume the obligation to
pay the royalty fee was that of GDIs representation that it has the exclusive right to
operate the outlet. To expect Cheng to continue paying the royalty fee after
February 1991, or until August 1993, when what GDI assigned no longer exists is
legally untenable. GDIs entitlement to the royalty fee is wholly dependent upon
the existence and subsistence of the right for which the royalty was granted. If the
reason which gave rise to the contract has ceased to exist, the result is that the
obligation too, has ceased to exist.

Power to Rescind in Reciprocal Obligations

RELIANCE COMMODITIES INC. vs. INTERMEDIATE APPELLATE COURT

G.R. No. 74729, May 31, 2000

Facts:
Respondent Marvin Paez entered into contract with Reliance Commodities,
Inc. (RCI) whereby the latter agreed to provide the former with funds and equipment
for the operation of a manganese mining claim. Subsequently, Paez and his wife
executed a deed of first real estate mortgage (REM) on their property in favor of RCI
as security for more cash advances needed to sustain the mining operation. RCI
then made cash advances to Paez until subsequently, a difference arose between
Paez and RCI concerning these cash advances. Later, for failure to repay, RCI
foreclosed extrajudicially the mortgage executed by Paez in its favor.
The spouses Paez thereafter filed an action to annul the Deed of First Real Estate
Mortgage, and for damages. The trial court ordered Paez to pay RCI the cash
advances they received and lifted the TRO as to the foreclosure, allowing RCI to
proceed with the extrajudicial foreclosure of the mortgage should Paez fails to pay.
The CA however, declared the REM and the contract between the parties void,
finding that it is RCI which gave cause for the rescission of the contract, and that
restitution is not available in rescission. RCI now claims that the violation of the
contracts came from the Paez spouses because they failed to deliver at all the
manganese ores stipulated in the contract according to the schedule outlined.
Hence, they were not entitled to rescind the contracts or recover damages and by
reason of which RCI was entitled to foreclose on the security constituted.

Issue:
Does RCI have the power to rescind the contract? If so, is restitution
available?

Held:
YES. RCI has the power to rescind the contract, it having been established
that Paez failed to comply with his obligation under the contract. Under the
agreement of RCI with Paez, the former was to pay Paez P70.00 for every ton of
manganese ores delivered. On the other hand, Paez failed to make even a single
delivery of manganese ores to the stockpile yard at Gabaldon. In fact, there was no
mining operation at all.
Consequently, RCI rescinded the contracts. The power to rescind or resolve is given
to the injured party. More, the rescission of the contracts requires the parties to
restore to each other what they have received by reason of the contracts. The
rescission has the effect of abrogating the contracts in all parts.

CENTRAL BANK OF THE PHILIPPINES vs. BICHARA

G.R. No. 131074, March 27, 2000

Facts:
On July 19, 1983, respondents Spouses Alfonso and Anacleta Bichara sold 2
lots in Legazpi City, with an aggregate area of 811 sq. m. to petitioner CENTRAL
BANK OF THE PHILIPPINES (CBP). The deed of sale contained the following pertinent
stipulations: that the purchase price shall be paid only after the Deed of Sale has
been duly registered and a clean title issued in the name of the vendee and; that
the vendors shall undertake to fill the parcels of land with an escombro free from
waste materials compacted to the street level upon the signing of the Deed to suit
the ground for the construction of the regional office of CBP.
Title over the property was issued in CBP's name on September 6, 1983. Despite
the issuance of the title, CBP failed to pay the spouses. The latter did not fill up the
lot with escombro despite several demands made by the former. CBP was thus
constrained to undertake the filling up of the said lots, by contracting the services of
BGV Construction. The filling up of the lots cost CBP P45,000.00, which amount was
deducted from the purchase price payable to the spouses.

CBP, however, still did not pay the spouses. Consequently, on September 7, 1992,
the spouses filed an action for rescission or specific performance with damages,
against CBP before the RTC of Legazpi City, alleging that CBP failed to pay the
purchase price despite demand.

Issues:
Is rescission of the contract of sale a proper remedy available to the
Spouses?

Held:
No. The right to rescind a contract involving reciprocal obligations is
provided for in Article 1191 of the Civil Code. The law speaks of the right of the
"injured party" to choose between rescission or fulfillment of the obligation, with the
payment of damages in either case. Here, the spouses claim to be the injured party
and they aver that they are entitled to cancel the obligation altogether in view of
CBP's failure to pay the purchase price when the same became due. CBP disputes
the spouses stand, claiming that it was entitled to withhold payment of the
purchase price because of the latters failure to comply with their contractual
obligations.
By law, "[t]he vendee is bound to accept the delivery and to pay the price of the
thing sold at the time and place stipulated in the contract." In the case at bench,
CBP's obligation to pay arose as soon as the deed of sale was registered and a clean
title was issued. CBP justifies non-payment on the spouses' breach of several
stipulations in the contract, such as: non-payment of tax and the occupation by
squatters of the premises. However, CBPs obligation to pay was not subject to the
foregoing "conditions," only that its demandability is suspended until the opportune
time. That arrived upon the registration of the deed of sale and the issuance of a
clean title in its favor.
The Spouses should not be allowed to rescind the contract where they themselves
did not perform their essential obligation thereunder. Evidently, the spouses were
guilty of non-performance of an essential contractual obligation. The deed of sale
expressly stipulated that the vendors were to undertake, at their expense, the filling
up of the lots with escombro free from waste material compacted to the street level.
This was required in order to make the site suitable for the construction of a
substantial edifice which will house the regional office of CBP. This was to be
accomplished upon the signing of the contract and insofar as CBP was concerned,
the spouses obligation was demandable at once.
It should be emphasized that a contract of sale involves reciprocity between the
parties. Since the spouses were in bad faith, they may not seek the rescission of the
agreement they themselves breached.

Contract to Sell; Rescission

PADILLA vs. PAREDES

G.R. No. 124874, March 17, 2000

Facts:
Petitioner Albert Padilla and private respondents Floresco and Adelina
Paredes entered into a contract to sell a parcel of land in San Juan, La Union. The
land was untitled although the Spouses Paredes were paying taxes thereon. Under
the contract, Padilla undertook to secure title to the property in Spouses Paredes
names. Of the P312,840.00 purchase price, petitioner was to pay a downpayment of
P50,000.00 upon signing of the contract, and the balance was to be paid within 10
days from the issuance of a court order directing issuance of a decree of registration
for the property. Padilla failed to pay the balance of the purchase price within the
period set. Later Spouses Paredes offered to sell to Padilla of the property for all
the payments the latter had made, subject to the condition that if Padilla will not
agree, they would enforce the automatic rescission of the contract. Padilla did not
accept the proposal. Instead, he offered to pay the balance in full for the entire
property, plus interest and attorney's fees, which the spouses refused. Padilla then
instituted an action for specific performance against the spouses, alleging that he
had already substantially complied with his obligation under the contract to sell.

Issue:
Are the Spouses Paredes entitled to rescind their "contract to sell" the land
to Padilla?

Held: YES. The spouses may validly cancel the contract to sell their land to
Padilla. However, the reason for this is not that the spouses have the power to
rescind such contract, but because their obligation thereunder did not arise. Article
1191 of the Civil Code, on rescission, speaks of obligations already existing. In a
contract to sell, the full payment of the purchase price is a positive suspensive
condition, the failure of which is not considered a breach, casual or serious, but
simply an event which prevented the obligation of the vendor to convey title from
acquiring any obligatory force. There can be no rescission of an obligation that is
non-existent, considering that the suspensive condition therefor has not yet
happened. Because of Padilla's failure to fully pay the purchase price, the obligation
of the spouses to convey title to the property did not arise. Thus, they are under no
obligation, and may not be compelled, to convey title to Padilla and receive the full
purchase price.

Interpretation of Contracts; Rescission

PHIL. NATIONAL CONSTRUCTION CORP. vs. MARS CONSTRUCTION ENT.

G.R. No.133909, February 15, 2000

Facts:
Mars Construction Enterprises, Inc. (Mars) entered into a contract with the
Phil. National Construction Corp. (PNCC) for the supply of approximately 70,000
cubic meters of aggregates but with out specification as to the volume of each of
the items mentioned therein. The two parties subsequently amended the contract
by specifying the volume for three of the items, totaling the originally agreed
70,000 cubic meters of aggregate, except the fourth item, the volume of which was
not specified.
Because the delivery of aggregates was delayed for 8 months, PNCC was
constrained to obtain necessary materials from other sources, incurring additional
costs representing the difference between the agreed price in the contract and the

pricing of outside sources, which was reimbursed by Mars in accordance with the
default clause under the contract. When Mars delivered 17,000 cubic meters of
washed gravel, PNCC refused to accept, on the following grounds:
1. Mars has already delivered aggregates 45% over and above the required volume
in the amended contract and PNCC had no more need for the same;
2. PNCC has already informed Mars in a letter of the final quantities of concrete
aggregates to be delivered and that it would not accept any further deliveries from
Mars;
3. Mars has defaulted on its contractual obligations.

Issue:
May PNCC be compelled to accept the delivery of the 17,000 cu. m. of
washed gravel?

Held:

YES. PNCC may be compelled to accept.

(1) The amendment made the agreement ambiguous because the quantity of subbase 2 minus crusher run was not specified. If said aggregate were included
however, the total would definitely be in excess of 70,000 cu. m. PNCC had ordered
from Mars more than what was specified in the agreement. This act signified that
the maximum limit of 70,000 cu. m. was disregarded because of PNCC's needs.
What then would be the significance of the quantities stated in the amendment? We
interpret that these are the minimum quantities that must be delivered by Mars.
Both parties are bound by these figures. In this way, both parties would know
exactly how much to demand from each other to be able to comply with their
respective obligations. The various stipulations in a contract should be interpreted
together. Ambiguous ones should be so construed as to conform to the sense that
would result if all the provisions are comprehended jointly.
(2) By saying that the quantity specified in the letter was its last order, PNCC
unilaterally amended its Contract with the Mars. The act of treating a contract as
cancelled or rescinded on account of infractions by the other contracting party is
always provisional; that is, contestable and subject to judicial determination. When
PNCC resolved or rescinded the Agreement without previous court action, it
proceeded at its own risk. Only the final judgment of a court will conclusively and
finally settle whether such recourse was correct in law.
3) The default was an insubstantial breach. The contract specifically provided that if
Mars failed to deliver the required aggregates, PNCC could procure them from other
sources so as not to jeopardize the entire construction project. Since PNCC was
already compensated for Mars defaults, such defaults cannot be considered as a

substantial breach that justified the rescission of the Contract and the refusal to
accept the questioned delivery. Furthermore, when PNCC exercised its options in
case of delay or default on the part of Mars, the former waived its right to rescind
and was thus estopped from rescinding the Contract by reason of such short
delivery.

Badges of Fraud

China Banking Corp. vs. Court of Appeals

G.R. No. 129644, March 7, 2000

Facts:
In connection with a civil case filed by Metropolitan Bank against Alfonso
Roxas Chua , a notice of levy affecting the residential land of Alfonso and his wife
was issued. Meanwile, in 1985, the trial court rendered another decision in favor of
China Banking Corporation against Alfonso in a collection case. A certificate of sale
covering of the undivided portion of the property was executed in favor of Metro
Bank. In 1988, Alfonso executed Assignment of Right to Redeem to his son Paulino
who redeemed the said property on the same day. On the other hand, another levy
on execution in favor of China Bank was issued on the same property. Thereafter, a
certificate of sale on execution was issued to China Bank in 1992. Paulino instituted
a civil case arguing that he has a better right over the title of China Bank, the
property having been redeemed by him in 1988 while China Bank acquired its right
in 1991. The trial court ruled that the assignment was made for a valuable
consideration and was executed two years before China Bank levied the conjugal
share of Chua. China Bank argued that the assignment of right of redemption made
by Alfonso to Paulino was done in fraud of creditors and may be rescinded under
Article 1387, NCC.

Issue:
Was the assignment by Alfonso to Paulino of the right of redemption done
to defraud his creditors and may be rescinded under Art. 1387, NCC?

Held:
YES. The assignment was done in fraud of creditors. China Bank is,
therefore entitled to rescind the same. Under Article 1381(3) of the Civil Code,
contracts which are undertaken in fraud of creditors when the latter cannot in any
manner collect the claims due them, are rescissible. The existence of fraud with
intent to defraud creditor may either be presumed in accordance with Article
1387,NCC or duly proved in accordance with the ordinary rules of evidence. Hence,
the law presumes that there is fraud of creditors when:
a) There is alienation of property by gratuitous title by the debtor who has not
reserved sufficient property to pay his debts contracted before such alienation; or
b) There is alienation of property by onerous title made by a debtor against whom
some judgment has been rendered in any instance or some writ of attachment has
been issued. The decision or attachment need not refer to the property alienated
and need not have been obtained by the party seeking rescission.
Inasmuch as the judgment of the trial court in favor of China Bank against Alfonso
was rendered as early as 1985, there is a presumption that the 1988 sale of his
property, in this case the right of redemption, is fraudulent under Article 1387 of the
Civil Code. The fact that private respondent Paulino redeemed the property and
caused its annotation on the TCT more than two years ahead of petitioner China
Bank is of no moment. The Court of Appeals maintained that although the transfer
was made between father and son, the conveyance was not fraudulent since
Paulino has indeed paid the redemption fee of P1,463,375.39 to Metrobank and the
sum of P100,000 to his father. In determining whether or not a certain conveyance
is fraudulent, the question in every case is whether the conveyance was a bona fide
transaction or a trick and contrivance to defeat creditors or whether it conserves to
the creditor to the debtor or a special right. It is not sufficient that it is founded on
good considerations or is made with bona fide intent. It must have both elements. If
defective in either of these, although good between the parties, it is voidable as to
creditors. The question as to whether or not the conveyance is fraudulent is: does
it prejudice the rights of the creditors? The mere fact that the conveyance was
founded on valuable consideration does not necessarily negate the presumption of
fraud under Art. 1387, NCC. There has to be a valuable consideration and the
transaction must have been made bona fide. In the case at bar, the presumption
that the conveyance is fraudulent has not been overcome. At the time a judgment
was rendered in favor of China Bank against Alfonso, Paulino was still living with his
parents in the subject property. Paulino himself admitted that he knew his father
was heavily indebted and could not afford to pay his debts. The transfer was
undoubtedly made between father and son at the the time when the father was

insolvent and had no other property to pay his creditors. Hence, it is of no

consequence whether or not Paulino had given valuable consideration for the
conveyance.

Void and Voidable Contracts

SEN PO EK MARKETING CORP. vs. MARTINEZ

G.R. No. 134117, February 9, 2000

Facts:
Sofia Martinez was the registered owner of 2 parcels of land who leased the
lots to Yu Siong, father of the president and stockholders of petitioner Sen Po Ek for
a period of 10 years. When the lease expired it was later renewed several times,
the last renewal being on March 1982 which is to expire on Jan. 1987. In the
meantime, Sofia sold the lots and the building to her daughter, respondent Teodora
Martinez. After the lease contract expired in Jan. 1987, it was no longer renewed by
the parties. Sen Po Ek, however, continued to possess and occupy the leased
properties, and regularly paid the monthly rentals to Sofia until her death, and then
to her heirs through Teodora. On November 11, 1989, Teodora sent a letter to
petitioner Sen Po Ek informing it of her intention to sell the leased premises and
authorizing a broker to negotiate the sale "with any and all interested parties." Sen
Po Ek offered to purchase the poperty. Another buyer, Tiu Uyping, was also
interested. Sen Po Ek then filed a complaint for the annulment of the sale executed
by Sofia in favor of Teodora. Days later, the property was sold to Tiu Uyping. Sen
Po Ek amended its complaint, praying for the nullity of the second sale transaction.

Issue:

Were the two disputed sale transactions valid?

Held:
The first sale is void. The second sale, however, is valid and binding. The
first sale between Sofia and Teodora was void for being fictitious. Under Art. 1409
(2),NCC, one type of contract which can be declared void and inexistent is that
which is absolutely simulated or fictitious, and this was established by several

badges of simulation proving that the sale between Sofia and Teodora was not
intended to have any legal effect between them.The combination of all of these
events leads one to the inescapable conclusion that the first sale transaction was
absolutely simulated, hence void.
Nonetheless, the sale between Teodora and the Tiu Uyping, is valid. Teodora, as
only one of the co-heirs of Sofia, had no authority to sell the entire lot to the Tiu
Uyping. She can only sell her undivided portion of the property. Thus, when she sold
the leased premises to Tiu Uyping, the sale is unenforceable having been entered
into by Teodora in behalf of her co-heirs who, however, gave no authority or legal
representation. However, such a contract is susceptible of ratification. In this case,
the ratification came in the form of "Confirmation of Sale of Land and
Improvements" executed by the other heirs of Sofia. Since the sale by Teodora of
the leased premises to Tiu Uyping was ratified by her co-heirs, then the sale is
considered valid and binding

Capacity to Enter into Contract

LOYOLA vs. COURT OF APPEALS

G.R. No. 115734, February 23, 2000

Facts: Three years before her death, Gaudencia Zarraga sold to private
respondents, the children of one her siblings, her share in Lot 115-A-1 for
P34,000.00. The sale was evidenced by a notarized document denominated as
Bilihang Tuluyan ng Kalahati ng isang Lagay na Lupa. Her other siblings assail the
validity of the execution of the deed of the absolute sale suggesting that the deed
of sale is not valid because Gaudencia was old and senile and incapable of
independent and clear judgment.

Issue: Is the deed of absolute sale invalid on the ground of Gaudencias incapacity?

Held: NO. A person is not incapacitated to contract merely because of advanced

years of by reason of physical infirmities. Only when such age or infirmities impair
his mental faculties to such extent as to prevent him from properly, intelligently,
and fairly protecting his property rights is he considered incapacitated. Petitioners
show no proof that Gaudencia had lost control of her mental faculties at the time of
the sale. The notary public who interviewed her, testified that when he talked to
Gaudencia before preparing the deed of sale, she answered correctly and he was
convinced that Gaudencia was mentally fit and knew what she was doing.

Unenforceable Contract

VILLANUEVA-MIJARES vs. COURT OF APPEALS

G.R. No. 108921, April 12, 2000

Facts:
Petitioners are the legitimate children of the late Leon Villanueva. Leon was
one of eight children of Felipe Villanueva, predecessor-in-interest of the parties in
the present case. During his lifetime, Felipe, owned real property situated in Kalibo,
Aklan. Upon Felipes death, ownership of the land was passed on to his children.
Pedro, one of the children of Felipe got his share equivalent to one-sixth (1/6) of the
property and had it declared under his name. The remaining undivided portion of
the land was held in trust by Leon for his co-heirs. During Leons lifetime, his coheirs made several seasonable and lawful demands upon him to subdivide and
partition the property, but for one reason or another, no subdivision took place.
After the death of Leon in August 1972, private respondents discovered that the
shares of four of the heirs of Felipe were purchased by Leon as evidenced by a Deed
of Sale executed on August 25, 1946 but registered only in 1971. It also came to
light that Leon had, sometime in July 1970, executed a sale and partition of the
property in favor of his own children, herein petitioners.

Issue:
Are the petitioners the legal owners of the property in question in
accordance with the individual titles issued to them?

Held:
No. The Deed of Sale of August 25, 1946 was "unenforceable and thus did
not make the petitioners the legal owners of the property in question in accordance
with the individual titles issued to them.
Article 1529 of the old Civil Code, which was the prevailing law in 1948 and
thus governed the questioned Deed of Sale, clearly provided that a contract is
unenforceable when there is an absence of authority on the part of one of the
contracting parties. The mere lapse of time cannot give efficacy to such a contract.
The defect is such that it cannot be cured except by the subsequent ratification of
the unenforceable contract by the person in whose name the contract was
executed. In the instant case, there is no showing of any express or implied
ratification of the assailed Deed of Sale by the private respondents.

Simulation of Contracts

LOYOLA vs. COURT OF APPEALS

G.R. No. 115734, February 23, 2000

Facts: Three years before her death, Gaudencia Zarraga sold to private
respondents, the children of one her siblings, her share in Lot 115-A-1 for
P34,000.00. The sale was evidenced by a notarized document denominated as
Bilihang Tuluyan ng Kalahati ng isang Lagay na Lupa. Her other siblings assail the
validity of the execution of the deed of the absolute sale suggesting that the deed
of sale is simulated.

Issue: Is the deed of absolute sale simulated?

Held: NO. Simulation is the declaration of a fictitious will deliberately made by

agreement of the parties, in order to produce, for the purposes of deception, the
appearances of a juridical act which does not exist or is different what that which

does not exist or is different what that which was really executed. Characteristic of
simulation is that the apparent contract is not really desired or intended to produce
legal effect or in in any way alter the judicial situation of the parties. Perusal of the
questioned deed will show that the sale of the property would convert the coowners to vendors and vendees, a clear alteration of the judicial relationships. This
is contrary to the requisite of simulation that the apparent contract was not really
meant to produce any legal effect. Also in a simulated contract, the parties have no
intention to be bound by the contract. But in this case, the parties clearly intended
to be bound by the contract of sale, an intention they do not deny. The requisites
for simulation are: (a) an outward declaration of will different from the will of the
parties; (b) the false appearance must have been intended by mutual agreement;
and (c) the purpose is to deceive third persons. None of these are present in the
assailed transaction.

Laches; Prescription

VILLANUEVA-MIJARES vs. COURT OF APPEALS

G.R. No. 108921, April 12, 2000

Facts:
Petitioners are the legitimate children of the late Leon Villanueva. Leon was
one of eight children of Felipe Villanueva, predecessor-in-interest of the parties in
the present case. During his lifetime, Felipe, owned real property situated in Kalibo,
Aklan. Upon Felipes death, ownership of the land was passed on to his children.
Pedro, one of the children of Felipe got his share equivalent to one-sixth (1/6) of the
property and had it declared under his name. The remaining undivided portion of
the land was held in trust by Leon for his co-heirs. During Leons lifetime, his coheirs made several seasonable and lawful demands upon him to subdivide and
partition the property, but for one reason or another, no subdivision took place.

After the death of Leon in August 1972, private respondents discovered that the
shares of four of the heirs of Felipe were purchased by Leon as evidenced by a Deed
of Sale executed on August 25, 1946 but registered only in 1971. It also came to
light that Leon had, sometime in July 1970, executed a sale and partition of the
property in favor of his own children, herein petitioners.

Issue:
Is the claim by private respondents to recover the property in question
barred by laches, estoppel, prescription and res judicata?

Held:
NO. At the time of signing of the Deed of Sale of August 26, 1948, private
respondents Procerfina, Prosperidad, Ramon and Rosa were minors. Even if the case
was brought more than 29 years later, they could not be faulted for their failure to
file a case to recover their inheritance from their uncle Leon, since up to the age of
majority, they believed and considered Leon their co-heir and administrator. Upon
learning of their uncles actions, they filed an action for recovery. Hence, the
doctrine of stale demands formulated in Tijam vs. Sibonghanoy cannot be applied
here. They did not sleep on their rights, contrary to petitioners assertion.
Moreover, there is no impled ratification in the instant case because no benefit
accrued to the children of Maria Baltazar, thus the action is not barred by
prescription.
While a review of the decree of registration is no longer available after the
expiration of the one-year period from entry thereof pursuant to the doctrine of res
judicata, an equitable remedy is still available. Those wrongfully deprived of their
property may initiate an action for reconveyance of the property.

GASTON vs. COURT OF APPEALS

G.R. No. 116340, June 29, 2000.

Facts:
In 1972, private respondent Gertrudes Medel filed a complaint before the
RTC of Silay City, against petitioner Cecilia Gaston's mother Sofia de Oca vda. De
Gaston and other defendants for recovery of her share over certain parcels of land
of Talisay Cadastre, claiming that, as her mother is the daughter of Mariano de Oca
by his first marriage, she (Gertrudes) is entitled to the properties left by Mariano de

Oca. RTC dismissed the same. On appeal, the CA reversed the TCs decision. The
CA ordered the defendants, Sofia Gaston, et. al, to partition the properties involved
to include the share of private respondent Medel within 60 days from the finality of
the said decision. As the said defendants had not complied with the said CAs
order, despite the lapse of the period indicated therein and inspite of
representations made by Medel to the defendants to submit the project of partition,
the private respondent filed with the respondent RTC on November 27, 1991, a
motion to require the defendants to submit a project of partition. Acting on the said
motion, the respondent court in its order of December 3, 1991, required the
defendants' counsel to comment thereon within 5 days from receipt thereof, with
warning 'otherwise the court will partition'. The defendants also ignored the said
order of the respondent court. Thus, the respondent court, in its order dated January
17, 1992, acted on the ex-parte motion of the private respondent to partition the
properties.

Issue:
Is the petition for nullification of the questioned order dated Jan. 17, 1992
time-barred?

Held:

YES.

The questioned order of the respondent court is dated January 17, 1992 but the
petition was filed only on December 29, 1992 or almost a year after the issuance of
the questioned order. The yardstick to measure the timeliness of a petition for
certiorari is the reasonableness of the length of time that had expired from the
commission of the actuation complained of up to the institution of the proceeding to
amend the same. Failure to file the certiorari petition within a reasonable time
renders the petitioner susceptible to the adverse legal consequences of laches.
The essence of laches is 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 the 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 or declined to assert it. This Court has ruled that an
interval of seven (7) months after rendition of the last order sought to be set aside
is definitely barred by laches. A petition brought after 99 days is also barred by
laches. The special civil action for certiorari under Rule 65 of the Rules of Court
must be filed within a reasonable period of only 3 months.

TRUSTS

Express Trust

SECUYA vs. VDA. DE SELMA

G.R. No. 136021, February 22, 2000

Facts:
The present petition is rooted in an action for quieting of title filed before
the RTC by petitioners, all surnamed Secuya against Gerarda De Selma.
The parcel of land subject of this case is a portion of Lot 5679 of the TalisayMinglanilla Friar Lands Estate. The lot was originally sold to Maxima Caballero Vda.
De Carino. During the lifetime of the latter, she entered into an Agreement of
Partition dated January 5, 1938 with Paciencia Sabellona, whereby Maxima bound
herself to part with 1/3 of Lot 5679 in favor of Paciencia upon the approval of her
application for patent. Paciencia took possession and occupation of said portion
adjudicated to her. Later she sold the 3,000 sq. m. portion thereof to Dalmacio
Secuya on October 20,1953. After said purchase, Dalmacio and his siblings took
physical possession of the land and cultivated the same. The petitioners herein are
the heirs of Dalmacio. In 1975, Gerarda bought a bulk of Lot 5679, which
embraced and included the land bought by Dalmacio.

Issue:
Do petitioners have the requisite title that would enable them to avail
themselves of the remedy of quieting of title?

Held:
NO. Petitioners do not have the requisite title to pursue an action for
quieting of title. Petitioners anchor their claim of ownership on the Agreement of
Partition. Notwithstanding its nomenclature, the Agreement is not one of partition,
because there was no property to partition and the parties were not co-owners.
Rather, it is in the nature of a trust agreement. Trust is the right to the beneficial
enjoyment of property, the legal title to which is vested in another. It is a fiduciary
relationship that obliges the trustee to deal with the property for the benefit of the
beneficiary. Trust relations between parties may either be express or implied. An
express trust is created by the intention of the trustor or of the parties. An implied
trust comes into being by operation of law.

The present Agreement involves an express trust. Under Art. 1444 of the Civil
Code, no particular words are required for the creation of an express trust, it being
sufficient that a trust is clearly intended.
While no time limit is imposed for the enforcement of rights under express
trusts, prescription may, however, bar a beneficiarys action for recovery, if a
repudiation of the trust is proven by clear and convincing evidence and made
known to the beneficiary. There was a repudiation of the express trust when the
heirs of Maxima failed to deliver or transfer the property to Paciencia, and instead
sold the same to a 3rd person not privy to the Agreement. The Agreement was not
registered, thus, it could not bind 3rd persons. Consequently, the subsequent sales
transactions involving the land in dispute, which ultimately led to its purchase by
Gerarda, and the titles covering it must be upheld, in the absence of proof that the
said transactions were fraudulent and irregular.

SALES AND LEASE

Elements of a Contract of Sale

SAN ANDRES vs. RODRIGUEZ

G.R. No. 135634, May 31, 2000

Facts:
Juan San Andres sold a parcel of land with an area of 345 square meters to
respondent Vicente Rodriguez. The sale is evidenced by a Deed of Sale. When San
Andres died, the judicial administrator of the decedent's estate undertook a survey
of the entire land owned by the decedent including the land sold to Rodriguez. It

was found that respondent had enlarged the area which he purchased from San
Andres by 509 square meters. Accordingly, the judicial administrator demanded
that Rodriguez vacate the portion allegedly encroached by him. When Rodriguez
refused to leave, the judicial administrator thereafter brought an action for the
recovery of possession of the 509-square meter lot
Rodriguez claims the disputed portion was also subsequently the subject of an
absolute sale to him as shown by a receipt signed by the late San Andres, which
reads in full as follows: Received from Vicente Rodriguez the sum of Five Hundred
(P500.00) Pesos representing an advance payment for a residential lot adjoining his
previously paid lot on three sides excepting on the frontage with the agreed price of
Fifteen (15.00) Pesos per square meter and the payment of the full consideration
based on a survey shall be due and payable in five (5) years period from the
execution of the formal deed of sale.

Issue:
Was there a perfected contract of absolute sale for the portion of the
disputed 509 sq.m.-land?

Held:
YES. There was a perfected contract of sale. Since the lot subsequently
sold to Rodriguez is said to adjoin the "previously paid lot" on three sides thereof,
the subject lot is capable of being determined without the need of any new contract.
The fact that the exact area of these adjoining residential lots is subject to the result
of a survey does not detract from the fact that they are determinate or
determinable. Concomitantly, the object of the sale is certain and determinate.
Under Article 1460,NCC, a thing sold is determinate if at the time the contract is
entered into, the thing is capable of being determined without necessity of a new or
further agreement between the parties. Here, this definition finds realization. Thus,
all of the essential elements of a contract of sale are present, i.e., that there was a
meeting of the minds between the parties, by virtue of which San Andres undertook
to transfer ownership of and to deliver a determinate thing for a price certain in
money. Without any doubt, the receipt profoundly speaks of a meeting of the mind
between San Andres and Rodriguez for the sale of the property adjoining portion
previously sold to Rodriguez. The price is certain, which is P15.00 per square meter.
Evidently, this is a perfected contract of sale on a deferred payment of the purchase
price. All the pre-requisite elements for a valid purchase transaction are present.
There is also no reservation of ownership nor a stipulation providing for a unilateral
rescission by either party. The stipulation that the "payment of the full
consideration based on a survey shall be due and payable in five (5) years from the
execution of a formal deed of sale" is not a condition which affects the efficacy of
the contract of sale. It merely provides the manner by which the full consideration is

to be computed and the time within which the same is to be paid. But it does not
affect in any manner the effectivity of the contract.

Option Money vs. Earnest Money

CAVITE DEVELOPMENT BANK VS. CYRUS LIM

G.R. No. 131679, February 1, 2000

Facts: A certain Rodolfo Guansing obtained a loan from Cavite Development Bank
(CDB), to secure which he mortgaged a parcel of land. As Rodolfo defaulted in the
payment of his loan, CDB foreclosed the mortgage. At the foreclosure sale held on
March 15, 1984, the mortgaged property was sold to CDB as the highest bidder and
later title to the property was issued in its name. On June 16, 1988, private
respondent Lolita Chan Lim offered to purchase the property from CDB. Pursuant to
the terms of the offer, Lim paid CDB P30,000.00 as Option Money. However, after
some time following up the sale, Lim discovered that the title of subject property
was originally registered in the name of Perfecto Guansing, father of mortgagor
Rodolfo, and that title of Rodolfo was cancelled on March 23, 1984 by the RTC of Q.C
as it was fraudulently secured by the latter. This decision has since become final
and executory. Lim filed an action for specific performance and damages against
CDB and its mother company FEBTC for the latters alleged misrepresentation on
their ability to sell the property.
CDB deny that a contract of sale was ever perfected between them and Lolita Chan
Lim. They contend that Lim's letter-offer clearly states that the sum of P30,000.00
was given as option money, not as earnest money. They thus conclude that the
contract between CDB and Lim was merely an option contract, not a contract of
sale. The trial court ruled in favor of Lim.

Issue:

Is there a perfected contract of sale between Lim and CDB?

Held:
Yes. The sum of P30,000.00, although denominated in the offer to
purchase as "option money," is actually in the nature of earnest money or down

payment when considered with the other terms of the offer. In determining the
nature of a contract, the courts are not bound by the name or title given to it by the
contracting parties. In Carceler v. CA, the SC has explained the nature of an option
contract:
An option contract is a preparatory contract in which one party grants to the other,
for a fixed period and under specified conditions, the power to decide, whether or
not to enter into a principal contract, it binds the party who has given the option not
to enter into the principal contract with any other person during the period
designated, and within that period, to enter into such contract with the one to
whom the option was granted, if the latter should decide to use the option. It is a
separate agreement distinct from the contract to which the parties may enter upon
the consummation of the option. An option contract is therefore a contract separate
from and preparatory to a contract of sale which, if perfected, does not result in the
perfection or consummation of the sale.
In this case, after the payment of the 10% option money, the Offer to Purchase
provides for the payment only of the balance of the purchase price, implying that
the "option money" forms part of the purchase price. This is precisely the result of
paying earnest money under Art. 1482 of the Civil Code. It is clear then that the
parties in this case actually entered into a contract of sale, partially consummated
as to the payment of the price.

Delivery in Contract of Sale

SERASPI vs. COURT OF APPEALS

G.R. No. 135602, April 28, 2000

Facts:
Marcelino Recasa was the owner of two parcels of land. During his lifetime,
Marcelino contracted 3 marriages. At the time of his death in 1943, he had 15
children from his three marriages. In 1948, his intestate estate was partitioned into
three parts by his heirs, each part corresponding to the share of the heirs in each
marriage. The heirs of the first marriage, sold their share to Dominador Recasa, an
heir of the second marriage. Dominador, representing the heirs of the second
marriage, in turn sold the share of the heirs to Quirico and Purificacion Seraspi

whose heirs are the present petitioners. In 1958, the Seraspis obtained a loan from
the Kalibo Rural Bank, Inc. (KRBI) on the security of the lands in question to finance
improvements on the lands. However, they failed to pay the loan for which reason
the mortgage was foreclosed and the lands were sold to KRBI as the highest bidder.
Subsequently, the lands were sold by KRBI to Manuel Rata, brother-in-law of Quirico
Seraspi. It appears that Rata, as owner of the property, allowed Quirico Seraspi to
administer the property.
In 1974, private respondent Simeon Recasa, Marcelinos child by his third wife,
taking advantage of the illness of Quirico Seraspi, forcibly entered the lands in
question and took possession thereof. In 1983, the Seraspis purchased the lands
from Manuel Rata and afterwards filed a complaint against Simeon Recasa for
recovery of possession of the lands.

Issue:

Did the petitioners acquire ownership over the property in question?

Held:
NO. For while a contract of sale is perfected by the meeting of minds upon
the thing which is the object of the contract and upon the price, the ownership of
the thing sold is not transferred to the vendee until actual or constructive delivery
of the property. Hence, the maxim non nudis pactis, sed traditione dominia
dominica rerum transferuntur (not mere agreements but tradition transfers the
ownership of things). Consequently, petitioners are not the owners of the property
since it has not been delivered to them. At the time they bought the property from
Rata in 1983, the property was in the possession of private respondent.

LAO vs. COURT OF APPEALS

G.R. No. 47013, 60647 & 60958-59, February 17, 2000

Facts: The Associated Anglo-American Tobacco Corporation (Associated) entered

into a Contract of Sales Agent with petitioner Andres Lao where Lao would sell
cigarettes manufactured and delivered by Associated. Lao would in turn remit the
sale proceeds to the corporation. During the effectivity of the contract, Lao failed to
accomplish his monthly sales report despite a demand letter sent by Associated.
Associated stopped its shipments to Lao.

Lao filed a complaint for accounting and damages against Associated. The CFI ruled
in favor of Lao and ordered both parties to undergo a court supervised accounting of
their respective account with the view of establishing the true and correct
accountability of Lao to Associated. The Audit Committee submitted its report to the
court. The committee excluded shipments by Associated covered by bill of lading
and factory invoices but without the corresponding delivery receipts.

Issue: Was the committee correct in excluding the shipments not supported by
delivery receipts although covered by bills of lading and factory consignment
invoices?

Held: YES. Under Article 1497, NCC, a thing sold shall be understood as delivered
when it is placed in the control or possession of the vendee. The Audit Committee
was correct when it adopted as guideline that accountability over the goods shipped
was transferred from the corporation to Andres Lao only upon actual delivery of the
goods to him. For it is only when the goods were actually delivered to and received
by Lao, did Lao have control and possession over subject goods, and only when he
had control and possession over said goods could he sell the same.
Delivery is generally evidenced by a written acknowledgment of a person that he or
she has actually received the thing or the goods, as in delivery receipts. A bill of
lading cannot substitute for a delivery receipt. This is because it is a written
acknowledgment of the receipt of the goods by the carrier and an agreement to
transport and deliver them at a specific place to a person named or upon his order.
It does not evidence receipt of the goods by the consignee or the person named in
the bill of lading; rather, it is evidence of receipt by the carrier of the goods from the
shipper for transportation and delivery. Likewise, a factory consignment invoice is
not evidence of actual delivery of the goods. An invoice is nothing more than a
detailed statement of the nature, quantity and cost of the thing sold. It is not proof
that the thing or goods were actually delivered to the vendee or the consignee.
However, as to shipments covered only by bills of lading and factory consignment
invoices but were reported in Laos sales reports, the Audit Committee correctly
considered them in Lao's account. The fact that Lao included them in his sales
reports is an implied admission that subject goods were actually delivered to him,
and that he received the said goods for resale.

Sale with Right of Repurchase

ABAPO vs. COURT OF APPEALS

GR No. 128677, March 2, 2000

Facts:
Crispula Abapo and Santiago Abapo executed in favor of Teodulfo Quimada
a contract denominated as Deed of Sale under Pacto de Retro. Under the contract,
the land was sold for P500.00 with right of repurchase within five (5) years, failing
which the conveyance would become absolute and irrevocable without the
necessity of drawing up a new deed. No redemption was made. More than seven
years later, Teodulfo Quimada sold the property to Crispula and husband Pedro
Bacalao for P500.00 . Upon the death of the spouses Bacalao, the land was alloted
to their heirs in equal individual shares and succeeded the possessions and
enjoyment of the land and paid each real estate taxes thereon to the exclusion of
Santiago Abapo.
In 1990, Santiago instituted a petition for reconstitution of original certificate of
title over the property. The petition was granted. Upon the discovery of the said
reconstitution of title, the private respondents interposed a petition to surrender
owners copy of the reconstituted title in the hands of Santiago. The trial court
dismissed the petition without prejudice to the filing of the appropriate action.
Private respondents instituted the complaint for Quieting of Title with damages. In
his answer, Santiago assailed the due execution of both the deed of sale under
Pacto de Retro and the Deed of Absolute Sale. Santiago argues that what he entered
in 1967 may be considered only as an equitable mortgage in view of the unusually
inadequate consideration of P500 which was the same consideration in the Deed of
Absolute Sale in favor of spouse Bacalao executed in 1975.

Issue:
Should the Deed of Absolute Sale under Pacto de Retro be considered an
equitable mortgage due to the alleged inadequacy of price?

Held:
NO. The price of P500 is not unusually inadequate. The record reveals that
the assessed value of the land in dispute in 1970 was only P400. Thus, at the time
of sale in 1967, the price of P500 is inadequately over and above the assessed
value of P400. Besides, the mere fact that the price is inadequate does not prove
support the conclusion that the contract was a loan or that the property was not at

all sold to Teodulfo Quimada. The price fixed in the sale with a right to repurchase is
not necessarily the true value of the land sold. The rationale is that the vendor has
the right to fix a relatively reduced price, although not a grossly inadequate one, in
order to afford the vendor a retro every facility to redeem the land. Thus,
inadequacy of the price is not sufficient to set aside a sale unless it is grossly
inadequate or purely shocking to the conscience.

Consolidation of Title in Pacto de Retro Sale

CRUZ vs. LEIS

G.R. No. 125233, March 9, 2000

Facts:
Gertrudes Isidro, mother or respondents Leis, et al. obtained a loan from
the petitioner-spouses Alexander and Adelaida Cruz. The loan was secured by a
mortgage over the property covered by TCT No. 43100. Unable to pay her
outstanding obligation after the debt became due and payable, Gertrudes executed
two contracts in favor of Alexander. The first is denominated as Kasunduan which
the parties concede is a Pacto de Retro sale granting Gertrudes one year to
repurchase the property. The second is a Kasunduan ng Tuwirang Bilihan, a Deed
of Absolute Sale covering the same property per the price of P39,083.00, the same

amount stipulated in the Kasunduan. For failure of Gertrudes to repurchase the

property, ownership was therefore consolidated in the name of Alexander in whose
name a new TCT was issued. Gertrudes died. Thereafter, her heirs received
demands to vacate the premises from spouses Cruz, the new owners of the
property. The private respondents responded by filing a complaint for the
nullification of sale. The trial court court ruled that the "Kasunduan," providing for a
sale con pacto de retro, had superseded the "Kasunduan ng Tuwirang Bilihan," the
deed of absolute sale. It was likewise found that Gertrudes as well as private
respondents failed to repurchase the property within the period stipulated and has
lost all their rights to it. Nonetheless, the trial court and the CA found for private
respondents. It rationalized that spouses Cruz failed to comply with the provisions of
Article 1607 of the Civil Code requiring a judicial order for the consolidation of the
ownership in the vendee a retro to be recorded in the Registry of Property.

Issue:
Is the recording in the Registry of Property of the consolidation of
ownership of the vendee a condition sine qua non to the transfer of ownership?

Held:
NO. Art. 1607, NCC requiring a judicial order for the consolidation of the
ownership in the vendee a retro to be recorded in the Registry of Property is
intended to minimize the evils which the pacto de retro sale has caused in the
hands of usurers. A judicial order is necessary in order to determine the true nature
of the transaction and to prevent the interposition of buyers in good faith while the
determination is being made. Notwithstanding Art. 1607, the recording in the
Registry of Property of the consolidation of ownership of the vendee is not a
condition sine qua non to the transfer of ownership. Petitioners are the owners of
the subject property since neither Gertrudes nor the co-owners redeemed the same
within one year stipulated in the Kasunduan. The essence of the pacto de retro
sale is that title and ownership of the property sold are immediately vested in the
vendee a retro, subject to the resolutory condition of repurchase by the vendor a
retro within the stipulated period. Failure thus of the vendor a retro to perform said
resolutory condition vests upon the vendee by operation of law absolute title and
ownership over the property sold. As title is already vested in the vendee a retro, his
failure to consolidate his title under Article 1607, NCC does not impair such title or
ownership for the method prescribed thereunder is merely for the purpose of
registering the consolidated title.

DOUBLE SALE

BARICUATRO, JR. vs. COURT OF APPEALS

G.R. No. 105902, February 9, 2000

Facts: On October 16, 1968, petitioner Severino Baricuatro, Jr., bought 2 lots on an
installment basis from respondent Constantino Galeos. Baricuatro, however, was
unable to pay the full amount to Galeos. At the time the original action for quieting
of title was filed in the trial court, Baricuatro had an unpaid balance of P4,000.00.
The titles to the said lots remained in the name of Galeos. The contract of sale
involving Lot No. 10 expressly provided that "the parties both agree that a final
deed of sale shall be executed, in favor of the buyer upon full and complete
payment of the total purchase price agreed upon." After the sale, Baricuatro
introduced certain improvements on the said lots and started to reside therein in
1970. Since then he has been in actual and physical possession of the 2 lots.
However, on December 7, 1968, Galeos sold the entire subdivision, including the 2
lots, to Eugenio Amores. Subsequently, Baricuatro was informed by Galeos about
the sale to Amores and was advised to pay the balance of the purchase price of the
2 lots directly to Amores. After the sale of the entire subdivision to Amores, he
allegedly took possession thereof and developed the same for residential purposes
and registered the deed of sale.
Thereafter, Amores sold the 2 lots to the spouses Mariano and Felisa Nemenio.
Prior to the sale, however, Baricuatro was informed through a letter by Amores
about the impending sale of the lots but the former failed to respond. The spouses
Nemenio caused the transfer of the titles to the said lots and the issuance of tax
declarations in their names. Thereafter, the spouses Nemenio demanded from
Baricuatro to vacate the said lots but the latter refused to do so.

Issue:

Who has better right over the lots in dispute?

Held:
Petitioner Baricuatro as the first buyer has better right over the disputed
lots. Although Amores as the second buyer had caused the registration of the Deed
of Sale, the prior registration of the disputed property by the second buyer does not
by itself confer ownership or a better right over the property. Article 1544,NCC
requires that such registration must be coupled with good faith. Primus tempore,

potior jure (first in time, stronger in right). Knowledge gained by the first buyer of
the second sale cannot defeat the first buyer's rights except where the second
buyer registers in good faith the second sale ahead of the first. Such knowledge of
the first buyer does not bar him from availing of his rights under the law, among
them, to register first his purchase as against the second buyer. But in converso,
knowledge gained by the second buyer of the first sale defeats his rights even if he
is first to register the second sale, since such knowledge taints his prior registration
with bad faith. This is the price exacted by Art. 1544 for the second buyer being
able to displace the first buyer; that before the second buyer can obtain priority
over the first, he must show that he acted in good faith throughout (i.e. in ignorance
of the first sale and of the first buyer's rights) from the time of acquisition until
the title is transferred to him by registration or failing registration, by delivery of
possession. The second buyer must show continuing good faith and innocence or
lack of knowledge of the first sale until his contract ripens into full ownership
through prior registration as provided by law. It does not appear that Amores was in
good faith when he registered the sale.
Assuming arguendo that Amores was in good faith, there is no showing in the
assailed decision that he continued to act in good faith as required by Art. 1544. A
careful and thorough scrutiny of the records of this case reveals that Amores did
not act in good faith when he registered his title. Moreover, the preponderance of
evidence supports the finding that he already had knowledge of the previous sale of
the disputed lots to Baricuatro. Such knowledge tainted his registration with bad
faith. To merit protection under Art. 1544, the second buyer must act in good faith
from the time of the sale until the registration of the same.

DOUBLE SALE; INTERPRETATION OF CONTRACT

ANGEL BAUTISTA vs. COURT OF APPEALS

G.R. No. 123655, January 19, 2000

Facts:
On April 13, 1977, respondents Atienzas sold to petitioner Angel Bautista a
parcel of land in Tagaytay City, for P1.5M. At the time of the sale, the lot was still

registered in the names of the deceased parents of the Atienzas. The sale is subject
to the following terms and conditions, to wit:
a. P10,000.00 upon signing of the contract;
b. P90,000.00 upon the Atienzas presentation to Bautista of a new certificate of
title of the property subject of the sale, registered in their name. However, the
buyer may advance the necessary amount to the sellers for payment of their taxes
which might be required by the Register of Deeds of Tagaytay City before the TCT
from the registered owners to the sellers can be effected but not exceeding
P90,000.00. Any and all cash advances made by the buyer to the sellers shall be
deducted from the second payment of P90,000.00. Bautista made the initial
payment of P10,000.00.
In July 1977, the Atienzas wrote a letter to Bautista, asking P50,000.00 for the
inheritance and realty taxes due on the subject property and other incidental
expenses to facilitate the transfer of the title of the subject property in their names.
Bautista refused to give the additional money arguing that advance payment would
be discretionary on his part. Hence, the Atienzas cancelled the contract to sell the
subject land.
Meanwhile, Bautista discussed with the Chairman of the Board of Realty Baron
Corporation (RBC) the possible sale of the subject property in favor of RBC which
however, did not push through.
In October, 1978 the Atienzas were able to secure title over subject land.
Thereafter, they sold a portion of the land to RBC. TCT was issued in the name of
RBC.

Issues:
1. Do the Atienzas have the right to rescind the contract of sale because
of Bautista's refusal to advance the payment intended to pay for taxes and other
fees?
2. Is the sale of a portion of the land by the Atienzas to RBC valid?

Held:

1. No. The Atienzas have no right to rescind the contract.

The rule is that where the language of a contract is plain and unambiguous, its
meaning should be determined without reference to extrinsic facts or aids. The
intention of the parties must be gathered from that language, and from that
language alone unless some good reason can be assigned to show that the words
used should be understood in a different sense. In the case at bar, the provision of

the Contract of Sale is plain and unambiguous that Bautista as buyer MAY advance
to the Atienzas as sellers the necessary amount (not exceeding P90,000.00) for the
payment of such taxes as may be required before the TCT in favor of the sellers can
be effected. The use of the word MAY meant that Bautista has the discretion
whether or not to advance the P90,000.00. He has no duty to do it. It is purely
optional on his part. Thus, Bautista did not violate the contract when he refused to
pay the advance money.

2. No. Under Article 1544 of the Civil Code before the second buyer can obtain
priority over the first, he must show that he acted in good faith throughout (i.e., in
ignorance of the first sale and of the first buyer's rights) from the time of
acquisition until title is transferred to him by registration or failing registration, by
delivery of possession. RBC cannot pretend to be a buyer in good faith. In Uraca vs.
Court of Appeals, the SC held that " . . . knowledge gained by the second buyer of
the first sale defeats his rights even if he is first to register the second sale, since
such knowledge taints his prior registration with bad faith. There is no dispute that
RBC knew that Bautista was the first buyer of the subject lot. Its initial plan was to
buy the whole lot from Bautista. It changed its plan only when it found squatters on
the hilly portion of the property. Thus, it cannot claim the right of an innocent
purchaser for value.
"One who purchases real estate with knowledge of a defect or lack of title in his
vendor cannot claim good faith as well as one who has knowledge of facts which
should have put him upon such inquiry or investigation as might be necessary to
acquaint him with the defects in the title of his vendor. . . His mere refusal to believe
that such defect exists, or his willful closing of his eyes to the possibility of
existence of a defect in the vendor's title, will not make him an innocent purchaser
for value if it afterwards develop that title was in fact defective and it appears that
he had such notice of defect as would have led to its discovery had he acted with
that measure of precaution which may reasonably be required of a prudent man in a
like situation."

VOID CONTRACT OF SALE AND ITS EFFECTS

CAVITE DEVELOPMENT BANK VS. CYRUS LIM

G.R. No. 131679, February 1, 2000

Facts: A certain Rodolfo Guansing obtained a loan from Cavite Development Bank
(CDB), to secure which he mortgaged a parcel of land. Upon default of Rodolfo in
the payment of his loan, the mortgaged property was sold to CDB in a foreclosure
sale held in March, 1984. In June, 1988, private respondent Lolita Chan Lim offered
to purchase the property from CDB. Pursuant to the terms of the offer, Lim paid CDB
P30,000.00 as Option Money. However, after some time following up the sale, Lim
discovered that the title of subject property was originally registered in the name of
Perfecto Guansing, father of mortgagor Rodolfo, and that title of Rodolfo was
cancelled on March 23, 1984 by the RTC of Q.C as it was fraudulently secured by the
latter. This decision has since become final and executory. Spouses Lim filed an
action for specific performance and damages against CDB and its mother company
FEBTC for the latters alleged misrepresentation on their ability to sell the property.
The trial court rendered a decision in favor of spouses Lim. It held CDB and FEBTC
liable for damages (P250,000.00 as moral damages; P50,000.00 as exemplary and
P30,000.00 as attoryneys fees) arising from the impossibility of the performance of
their obligation under the perfected contract of sale.

Issue: Is the contract of sale between petitioners CDB and FEBTC and respondents
Lim valid? If not, what is the effect of the nullity of the contract?

Held: No. CDB does not have a valid title over the property sold. Under Art. 1459
NCC, at the time of delivery or consummation stage of the sale, it is required that
the seller be the owner of the thing sold. Otherwise, he will not be able to comply
with his obligation to transfer ownership to the buyer.
The foreclosure sale from which CDB derived its title over the property cannot be
given effect: 1) Rodolfo, the mortgagor did not have a valid title over the property
sold. Being a sale, the rule that the seller must be the owner of the thing sold also
applies in a foreclosure sale. This is the reason Art. 2085 NCC, requires, among
other things, that the mortgagor or pledgor be the absolute owner of the thing

pledged or mortgaged, in anticipation of a possible foreclosure sale should the

mortgagor default in the payment of the loan; and 2) Neither can the foreclosure
sale be given effect based on the doctrine of the mortgagee in good faith which
provides the rule that all persons dealing with property covered by a Torrens
Certificate of Title, as buyers or mortgagees, are not required to go beyond what
appears on the face of the title. CDB cannot be considered a mortgagee in good
faith because it failed to observe its duty of diligence in ascertaining the validity of
Rodolfos title, as is required of banking institutions. It appears that Rodolfo
obtained his fraudulent title by executing an Extra-Judicial Settlement of the Estate
With Waiver where he made it appear that he and Perfecto were the only surviving
heirs entitled to the property, and that Perfecto had waived all his rights thereto.
This self-executed deed should have placed CDB on guard against any possible
defect in or question as to the mortgagor's title. Indeed, CDB and FEBTC admit that
they are aware that the subject land was being occupied by persons other than
Rodolfo and that said persons, who are the heirs of Perfecto, contest the title of
Rodolfo.
Pursuant to Article 1412(2) of the Civil Code, spouses Lim, being the non-guilty
parties, are entitled to recover the P30.000.00 option money paid by them with
interest at the legal rate to be computed from the date of the filing of the complaint.
However, under this provision, prior demand is necessary in order that the
obligation to return what was given becomes legally demandable. The filing of the
action for damages against CDB and FEBTC amounted to a demand by respondents
Lim for the return of their money. Considering CDB's negligence, the latter is liable
to pay moral damages on the basis of Arts. 21 and 2219 of the Civil Code and the
SCs ruling in Tan v. CA that moral damages may be recovered even if a bank's
negligence is not attended with malice and bad faith. However, the sum of
P250,000.00 awarded by the trial court is excessive. Moral damages are only
intended to alleviate the moral suffering undergone by respondents Lim, not to
enrich them at the expense of CDB and FEBTC. Accordingly, the award of moral
damages must be reduced to P50,000.00. Likewise, the award of P50,000.00 as
exemplary damages and P30,000 as attorneys fees, although justified under the
Civil Code is reduced for being excessive.

Legal Redemption

FRANCISCO vs. BOISER

G.R. No. 137677, May 31, 2000

Facts:
Petitioner Adalia Francisco, three of her sisters, and their mother Adela
Blas, were co-owners of land on which stands a commercial building. On August
1986, without the knowledge of the other co-owners, Adela Blas sold her 1/5 share
to respondent Zenaida Boiser.
On August 5, 1992, Francisco received summons concerning a complaint filed by
Boiser demanding her share in the rentals from the tenants of the building.
Francisco then informed Boiser that she was exercising her right of redemption. On
August 12, 1992, she deposited the redemption price with the Court.
On September 14, 1995, Francisco filed a case in court for legal redemption alleging
that the 30-day period for redemption under Art. 1623, NCC had not yet expired
since the vendor, Blas, never informed her and the other owners about the sale to
respondent. Boiser, however, claims that Francisco had knowledge of the sale as
early as May 30, 1992 when she sent Francisco a letter with a copy of the deed of
sale between her (Boiser) and Blas attached, informing petitioner of the sale and
demanding that rentals corresponding to her 1/5 share of the property be remitted
to her. The trial court dismissed the complaint for legal redemption holding that Art.
1623 does not prescribe any form of notifying co-owners about a sale of co-owned
property to enable them to exercise legal redemption. The court considered the May
30,1992 letter with the copy of the deed of sale as substantial compliance with the
required notice under Art. 1623. Consequently, the 30-day period of redemption
should be counted not from August 5, 1992, when petitioner received the summons,
but at the latest from June 8, 1992, the date petitioner wrote the tenants of the
building advising them to continue paying rentals in full to her.

Issue: Can the May 30, 1992 letter by Boiser to Francisco notifying her of the sale of
be considered compliance with the notice requirement of Art. 1623 for the purposes
of legal redemption?

Held: NO. Art. 1623 of the Civil Code is clear in requiring that the written
notification should come from the vendor or prospective vendor, not from any other
person. There is, therefore, no room for construction. Indeed, the principal
difference between Art. 1524 of the former Civil Code and Art. 1623 of the present
one is that the former did not specify who must give the notice, whereas the
present one expressly says the notice must be given by the vendor. Effect must be
given to this change in statutory language. In the second place, it makes sense to

require that the notice required in Art. 1623 be given by the vendor and by nobody
else. The vendor of an undivided interest is in the best position to know who are his
co-owners who under the law must be notified of the sale. It is the notification from
the seller, not from anyone else, which can remove all doubts as to the fact of the
sale, its perfection, and its validity, for in a contract of sale, the seller is in the best
position to confirm whether consent to the essential obligation of selling the
property and transferring ownership thereof to the vendee has been given.
Now, it is clear that by not immediately notifying the co-owner, the vendor can
effectively prevent the exercise of right of redemption. In the present case, the sale
took place in 1986 but kept secret until 1992. It is, therefore, unjust when the
subject sale has already been established before both lower courts and now, before
this Court, to further delay petitioner's exercise of her right of legal redemption by
requiring that notice be given by the vendor before petitioner can exercise her right.
For this reason, we rule that the receipt by petitioner of summons on August 5,
1992 constitutes actual knowledge on the basis of which petitioner may now
exercise her right of redemption within 30 days from finality of this decision.

Validity of Stipulations in a Lease Contract

CAMPO ASSETS CORP. vs. CLUB X. O. COMPANY

G.R. NO. 134986, MARCH 17, 2000

Facts:
Alma Arambulo (Arambulo) used to operate a food and entertainment
business establishment in Pasay City pursuant to a Memorandum of Agreement
(MOA) executed in 1991 between her husband and Campo Assets which had a
contract of lease with the owner of the subject premises. The MOA was renewed in
1993. It appears that sometime in June, 1994, Arambulo and Chan York Gui (Allan)
entered into a partnership registered as Club X.O. Company, for the operation of
the business. Club X. O. operated the business and introduced improvements
thereon. In 1996, Campo Assets took possession of the club's premises, claiming
that Arambulo had abandoned the premises and that the re-taking was pursuant to
Paragraph VI of the MOA between Arambulo and Campo Assets, which reads:

"VI. In case the premises shall be deserted or vacated before the expiration of this
Agreement, the FIRST PARTY shall have the right to enter the same as the agent of
the SECOND PARTY either by force or otherwise, without being liable to any
prosecution thereof, and the FIRST PARTY shall furthermore have the option to
retake and operate the business itself or relet the same as agent of the SECOND
PARTY xxx.
Consequently, Club X. O. represented by Allan filed a complaint for forcible entry to
recover possession of the premises and damages.
The case was dismissed for lack of merit. The court held that the act of Campo
Assets in taking possession is pursuant to Par. VI of the MOA, which stipulation is
valid, being in the nature of a resolutory condition which is not proscribed by law.

Issue:
Is the stipulation in Par. VI of the lease contract void for being contrary to
public order and public policy?

Held:
YES. The stipulation is void. Although Par. VI of the MOA employs the
prefatory words "in case the premises shall be deserted or vacated before the
expiration of the Agreement", which would restrict the operation of the clause to
situations wherein the premises are in fact vacated already, and would therefore
imply that the re-entry with the use of force if at all, is against property only, the
stipulation would not proscribe re-taking by use of force against persons despite the
fact that the premises are still in the actual possession of another, albeit under a
questioned right. Moreover, there is no requirement of notice before re-entry.
Jurisprudence supports the view that when parties to a contract expressly reserve
an option to terminate or rescind a contract upon the violation of a resolutory
condition, notice of resolution must be given to the other party when such right is
exercised. In Zulueta vs. Mariano, the SC ruled that resort to courts may be
necessary when the right involves the retaking of property which is not voluntarily
surrendered by the other party. The rationale for such ruling is based on the thesis
that no one should take the law into his own hands. In this sense, the stipulation is
legally vulnerable. Permitting the use of unqualified force to repossess the property
and without condition of notice upon the lessee is fraught with dangerous
possibilities. Such a broad stipulation cannot be sanctioned for the reason that it
would allow the lessor/owner to take the law into his own hands, and undermine the
philosophy behind the remedy of forcible entry which is to prevent breach of the
peace and criminal disorder and to compel the party out of possession to respect
and resort to the law alone to obtain what he claims to be his.

Nature of Lease of Chattels

JARDIN vs. NLRC

G.R. No. 119268, February 23, 2000

Facts:
Petitioners were drivers of private respondent, Philjama International, Inc.
(PII), a domestic corporation engaged in the operation of Goodman Taxi.
Petitioners used to drive PIIs taxicabs every other day on a 24-hr. work schedule
under the boundary system. Under this arrangement, the petitioners earned an
average of P400 daily. Nevertheless, PII deducts from said daily earnings P30.00 for
the washing of the taxi units. Believing that the deduction is illegal, petitioners
decided to form a labor union to protect their rights, however their plans were cut
short by their dismissal. Petitioners filed a complaint for unfair labor practice and
illegal dismissal with the labor arbiter, who dismissed said complaint. On appeal,
the NLRC dismissed the case on the ground of lack of jurisdiction over the case as
petitioners and private respondent have no employer-employee relationship but
rather a leasehold agreement which is covered under the Civil Code.

Issue:

Is there a lessor-lessee relationship between petitioners and PII?

Held:
NO. In the lease of chattels, the lessor loses complete control over the
chattel leased although the lessee cannot be reckless in the use thereof, otherwise,
he would be responsible for the damages to the lessor. In the case of jeepney
owners/operators and jeepney drivers, the former exercise supervision and control
over the latter. The management of the business is in the owners hands. The
owner as holder of the certificate of public convenience must see to it that the
driver follows the route prescribed by the franchising authority and the rules
promulgated as regards its operations. This relationship may be applied by analogy
to taxi owners/operators and taxi drivers.

Right of First Refusal of a Lessee

SEN PO EK MARKETING CORP. vs. MARTINEZ

G.R. No. 134117, February 9, 2000

Facts:
Sofia Martinez was the registered owner of 2 parcels of land who leased the
lots to Yu Siong, father of the president and stockholders of petitioner Sen Po Ek for
a period of 10 years. When the lease expired it was later renewed several times,
the last renewal being on March 1982 which is to expire on Jan. 1987. In the
meantime, Sofia sold the lots and the building to her daughter, respondent Teodora
Martinez. After the lease contract expired in Jan. 1987, it was no longer renewed by
the parties. Sen Po Ek, however, continued to possess and occupy the leased
properties, and regularly paid the monthly rentals to Sofia until her death, and then
to her heirs through Teodora. In 1989, Teodora sent a letter to petitioner Sen Po Ek
informing it of her intention to sell the leased premises and authorizing a broker to
negotiate the sale "with any and all interested parties." Sen Po Ek offered to
purchase the poperty. Another buyer, Tiu Uyping, was also interested. Sen Po Ek
then filed a complaint for the annulment of the sale executed by Sofia in favor of
Teodora, invoking its alleged right of first refusal or preferential right to buy the
leased premises Days later, the property was sold to Tiu Uyping. Sen Po Ek
amended its complaint, praying for the nullity of the second sale transaction.

Issue:

Does petitioner Sen Po Ek have a right of first refusal?

Held: NO. Sen Po Ek does not have a right of first refusal to assert against private
respondents. Neither any law nor any contract grants it preference in the purchase
of the leased premises. Petitioner cites P.D. No. 1517, R.A. No. 1162 and Art.
1622,NCC but they are not applicable to the case at bar. P.D. No. 1517(The Urban
Land Reform Act) pertains to areas proclaimed as urban land reform zones. The lots
in dispute are located in Tacloban City, which has not been declared as an urban
land reform zone. R.A. No. 1162, on the other hand, only deals with expropriation of
parcels of land located in the City of Manila, which the leased premises are not.
Finally, Art. 1622, NCC only deals with small urban lands that are bought for
speculation where only adjoining lot owners can exercise the right of pre-emption or
redemption. Sen Po Ek is not an adjoining lot owner, but a lessee trying to buy the
land that it was leasing. Indeed the right of first refusal may be provided for in a
lease contract. However in this case, such right was never stipulated in any of the
several lease contracts between Sen Po Ek and Sofia. Sen Po Ek claims that it was
Teodora herself who assured them that they can have the first priority to buy the
subject parcels of land, but there is absolutely no proof of this. Such grant of the
right of first refusal must be clearly embodied in a written contract, but there is
none in the present case.

Renewal of Term of Lease

BUCE vs. COURT OF APPEALS

G.R. No. 136913, May 12, 2000

Facts:
Petitioner entered into a lease contract over a parcel of land with private
respondents Tiongcos for a period of 15 years to commence on June 1979 and to
end on June 1994 "subject to renewal for another 10 years, under the same terms
and conditions." Petitioner then constructed a building and paid the required
monthly rentals. When private respondents later demanded an increase in the rent,
petitioner offered to pay the previous lower rental which the former refused to
accept.

On August 1993, petitioner filed with the RTC a complaint for specific
performance praying that private respondents be ordered to accept the rentals she
tendered and to respect the lease of fifteen years, which was renewable for another
ten years.

Issue:
Can it be reasonably inferred that the parties intended an automatic
renewal of the lease contract when they stipulated that the lease shall be for a
period of 15 years "subject to renewal for another 10 years"?

Held:
NO. There is nothing in the stipulations in the contract and the parties
actuation that shows that the parties intended an automatic renewal or extension of
the term of the contract. The fact that the lessee was allowed to introduce
improvements on the property is not indicative of the intention of the lessors to
automatically extend the contract. Neither the filing of the complaint a year before
the expiration of the 15-year term has any bearing on the intention of the parties
regarding renewal. In the case at bar, it was not specifically indicated who may
exercise the option to renew, neither was it stated that the option was given for the
benefit of herein petitioner. Thus, pursuant to Art. 1196, NCC, the period of the
lease contract is deemed to have been set for the benefit of both parties. Renewal
of the contract may be had only upon their mutual agreement or at the will of both
of them. It is the owner-lessors prerogative to terminate the lease at its expiration.
The continuance, effectivity and fulfillment of a contract of lease cannot be made to
depend exclusively upon the free and uncontrolled choice of the lessee between
continuing the payment of the rentals or not, completely depriving the owner of any
say in the matter. Mutuality does not obtain in such a contract of lease and no
equality exists between the lessor and the lessee since the life of the contract would
be dictated solely by the lessee.

Extension of Lease

UNIVERSITY PHYSICIANS SERVICES, INC. vs. COURT OF APPEALS

G.R. No. 115045, January 31, 2000

Facts:
Spouses Lourdes and Fausto Mabanta and University Physicians Services,
Inc. (UPSI) entered into a lease agreement, commencing on June 1, 1973 and ending
on May 31, 1983, with a provision that the period of this lease may be extended for
another period of 5 years subject only to re-negotiation of rentals, which renegotiations should start not less than 6 months prior to the termination of the
original period of this lease.
On May 12, 1983, UPSI informed the spouses that it is exercising its option to
extend the lease for another period of 5 years and that it is willing to negotiate the
rentals. The spouses, through their lawyers, answered that since there was no
renegotiation on the rentals which should have started not less than 6 months prior
to the termination of the original period, there are no rights which have arisen
thereunder. UPSI insisted on its right to extend the lease.
Meanwhile, the lease was terminated upon the filing of the unlawful detainer
case by the spouses, which was ultimately resolved against UPSI in the IAC.
On November 21, 1985, Spouses Mabanta filed a complaint for Compensation
and Damages against UPSI before the RTC of Pasig claiming that despite the lapse
of the original period of the lease, the latter continuously occupied and used the
leased premises without paying the necessary rent. The trial court granted the
claim of the spouses. On appeal, the CA affirmed the decision of the trial court with
some modifications. Hence, this appeal.

Issue:
Does UPSI have the right to extend the duration of the lease under the
terms of the lease agreement?

Held:
NO. The provisions of a contract should not be read in isolation from the
rest of the instrument but, on the contrary, interpreted in the light of the other
related provisions in order to fix the meaning of any of its parts. A careful reading

of the renewal clause yields no basis for recognizing an exclusive unilateral right on
the part of the lessee to extend the term of the lease for another 5 years. The word
extended was qualified by the word may be which connotes possibility; it does
not connote certainty. The extension clearly was premised on the act of both
parties, i.e., renegotiation of rentals, which should start not less than 6 months prior
to the termination of the original period of the lease. Furthermore, in a reciprocal
contract like a lease, the period of the lease must be deemed to have been agreed
upon for the benefit of both parties, absent language showing that the term was
deliberately set for the benefit of the lessee or lessor alone.
UPSI failed to
comply with the 6 month period, hence, no extension of the lease in its favor has
arisen.

Concept of Implied New Lease

ROSELLO-BENTIR vs. LEANDA

G.R. No. 128991, April 12, 2000

Facts:
Respondent Leyte Gulf Traders, Inc. (LGTI) entered into a contract of lease
of a parcel of land with Bentir for a period of 20 years starting May 5, 1968, which
was extended for another 4 years or until May 31, 1992. In 1989, Bentir sold the
leased premises to spouses Pormada. LGTI questioned the sale alleging that it had a
right of first refusal. On May 15, 1992, LGTI filed a complaint for reformation of the
expired contract of lease to incorporate therein, the verbal agreement between the
parties that in the event Bentir leases or sells the lot after the expiration of the
lease, LGTI has the right of first refusal or the right to equal the highest offer. The
complaint was dismissed on the ground of prescription. On LGTIs motion for
reconsideration, respondent judge reversed the order of dismissal on the ground
that the action for reformation had not yet prescribed.
Bentir and Spouses Pormada filed a petition for certiorari to the CA seeking the
annulment of the order of respondent court. In holding that the action for
reformation has not prescribed, the CA upheld the ruling of the trial court that the
10-year prescriptive period should be reckoned not from the execution of the
contract of lease in 1968, but from the date of the alleged 4-year extension of the

lease contract after it expired in 1988. Consequently, when the action for
reformation of instrument was filed in 1992 it was within 10 years from the
extended period of the lease. LGTI theorized, and the CA agreed, that the extended
period of lease was an "implied new lease" within the contemplation of Article 1670
of the Civil Code, under which provision, the other terms of the original contract
were deemed revived in the implied new lease.

Issue:
Has the complaint for reformation of instrument filed by respondent Leyte
Gulf Traders, Inc. prescribed?

Held:
YES. The prescriptive period should be counted from the date of execution
of the lease contract and not from the date of extension of the same. First, Art.
1670 speaks of an implied new lease (tacita reconduccion) where at the end of the
contract, the lessee continues to enjoy the thing leased "with the acquiescence of
the lessor", so that the duration of the lease is "not for the period of the original
contract, but for the time established in Article 1682 and 1687." Hence, if the
extended period of lease was expressly agreed upon by the parties, as in the
present case, then the term should be exactly what the parties stipulated, not more,
not less. Second, even if the supposed 4-year extended lease be considered as an
implied new lease under Art. 1670, "the other terms of the original contract"
contemplated in said provision are only those terms which are germane to the
lessees right of continued enjoyment of the property leased. The prescriptive
period of 10 years provided for in Art. 1144 for reformation of an instrument applies
by operation of law, not by the will of the parties. Therefore, the right of action for
reformation accrued from the date of execution of the contract of lease in 1968. As
the action was filed only in 1992 or 24 years after the cause of action accrued, the
same has become stale, hence, time-barred.

CREDIT TRANSACTIONS

Escalation Clause; Interest

BANCO FILIPINO SAVINGS & MORTGAGE BANK vs. COURT OF APPEALS

G.R. No. 129227, May 30, 2000

Facts:
Respondent-spouses Arcilla obtained loans secured by real estate mortages
from the petitioner Banco Filipino Savings and Mortgage Bank (BANK) where the
BANK may increase the rate of interest on said loans, within the limits allowed by
law, as its Board of Directors may prescribe for its borrowers. At that time, under the
Usury Law, as amended, the maximum rate of interest for loans secured by real
estate mortgages was 12% per annum.
On January 1976, the Central Bank of the Philippines issued CB Circular No. 494,
increasing the maximum interest rate at 19% per annum. On October 1978,
spouses Arcilla received from the BANK their "Statement of Account" on their loan
accounts with interest computed computed at 17% per annum. It turned out that
the BANK unilaterally increased the rate of interest on the loan account from 12%
as provided in their REM agreement to 17% based on the authority of the
aforequoted CB Circular. Upon failure of the spouses Arcilla to pay the
amortizations due, the bank then filed a petition for extrajudicial foreclosure, where
at the auction, the bank purchased the property.
On September 1985, the spouses Arcilla filed a complaint for the annulment of the
loan contracts and foreclosure sale. They contend, among others, that the loan
contracts and mortgages between the parties were null and void because: (a) the
rate of interests charged by the BANK were usurious; (b) that they are entitled to
the refund inasmuch as the escalation clause incorporated in the loan contracts do
not have a corresponding de-escalation clause and is therefore illegal.

Issue:
Is the unilateral increase in interest rate made by petitioner based on an
escalation clause in their contract valid?

Held:
NO. The unilateral increase in interest is not valid. The loan contracts with
real estate mortgage entered into by and between the petitioner and respondents
stated that the petitioner may increase the interest on said loans, within the limits

allowed by law, as petitioner's Board of Directors may prescribe for its borrowers. At
the time the contracts were entered into, said escalation clause was valid. It was
only pursuant to P.D. No. 1684 which became effective March 1980 wherein to be
valid, escalation clauses should provide: 1) that there can be an increase in interest
if increased by law or by the Monetary Board; and 2) in order for such stipulation to
be valid, it must include a provision for the reduction of the stipulated interest in the
event that the maximum rate of interest is reduced by law or by the Monetary
Board. Despite the validity of the escalation clause, the petitioner may not,
however, increase the stipulated interest pursuant to the Central Bank Circular 494
from 12% to 17%. CB Circular 494, although it has the force and effect of law, is
not a law and is not the law contemplated by the parties which authorizes the
petitioner to unilaterally raise the interest rate of the loan. Consequently, the
reliance by the petitioner on Central Bank Circular 494 to unilaterally raise the
interest rates on the loan in question was without any legal basis.

Real Estate Mortgage

ROBLES vs. COURT OF APPEALS

G.R. No. 123509, March 14, 2000

Facts:
The property subject of this case is originally owned by Leon Robles. When
he died, it passed to his son Silvino who declared the property in his name and paid
the taxes thereon. Upon the latters death, his widow and children inherited the
property. Petitioners Lucio Robles, et al. were the children of Silvino, and Hilario
Robles is their half-brother. The task of cultivating was assigned to Lucio while the
payment of the land taxes was entrusted to Hilario. For unknown reason, the tax
declaration of the parcel of land in the name of Silvino was cancelled and
transferred to Exequiel Ballena. Ballena secured a loan from Antipolo Rural Bank
using the tax declaration as security. Somehow the tax declaration was transferred

to the name of Antipolo Rural Bank and later was transferred to the name of
respondent- spouses Hilario and Andrea Robles. Andrea secured a loan from
Cardona Rural Bank using the tax declaration as security. For failure to pay the
mortgage debt, the property was foreclosed with Cardona Rural Bank emerging as
the highest bidder. The bank sold the property to spouses Vergel and Ruth Santos.
In Sept. 1987, petitioners discovered the mortgage and attempted to redeem the
property but was unsuccessful. In 1988, the spouses Santos took possession of the
propertry and was able to secure a Free Patent. Petitioners then filed an action for
quieting of title. Respondents questioned their standing to sue for quieting of title,
contending that petitioners no longer have any interest to the property in question
due to the mortgage effected by Hilario and the consequent foreclosure thereof by
the Bank. Respondents argued that Hilario had become the absolute owner of the
property at the time he mortgaged the same.

Issue:

Is the real estate mortgage constituted by Hilario valid?

Held:
NO. In a real estate mortgage contract, it is essential that the mortgagor
be the absolute owner of the property to be mortgaged; otherwise, the mortgage is
void. In the present case, it is apparent that Hilario was not the absolute owner of
the entire subject property; and that the Rural Bank of Cardona, Inc., in not fully
ascertaining his title thereto, failed to observe due diligence and, as such, was a
mortgagee in bad faith. Buyers of unregistered real property, especially banks, must
exert due diligence in ascertaining the titles of mortgagors and sellers, lest some
innocent parties be prejudiced. Failure to observe such diligence may amount to
bad faith and may result in the nullity of the mortgage, as well as of the subsequent
foreclosure and/or auction sale. Considering that Hilario can be deemed to have
mortgaged the disputed property not as absolute owner but only as a co-owner, he
can be adjudged to have disposed to the Rural Bank of Cardona, Inc., only his
undivided share therein. The said bank, being the immediate predecessor of the
Santos spouses, was a mortgagee in bad faith. Thus, justice and equity mandate the
entitlement of the Santos spouses, who merely stepped into the shoes of the bank,
only to what legally pertains to the latter Hilario's share in the disputed property.

Rights of a Mortgagee

ISAGUIRRE vs. DE LARA

G.R. No. 138053, May 31, 2000

Facts:
Petitioner Isaguirre and respondent De Lara were parties in a case
involving a parcel of land wherein there was dispute as to its ownership as well as
the nature of the transaction they entered into regarding the disputed land. The
case was resolved by the Supreme Court which declared that De Lara was the lawful
owner of the land and held that the contract they entered into was an equitable
mortgage and not a sale.
On the basis of the Courts decision, De Lara filed a motion for execution with
the trial court for the delivery of possession of the land. Isaguirre opposed the
motion, asserting that, as mortgagee, he had the right of retention over the
property pending actual payment of the loan by De Lara.

Issue:
Is Isaguirre, as mortgagee, entitled to retain possession of the subject
property until payment of the loan?

HELD:
NO. A MORTGAGE IS A CONTRACT ENTERED INTO IN ORDER TO SECURE
THE FULFILLMENT OF A PRINCIPAL OBLIGATION. IT IS CONSTITUTED BY RECORDING
THE DOCUMENT IN WHICH IT APPEARS WITH THE PROPER REGISTRY OF PROPERTY,
ALTHOUGH, EVEN IF IT IS NOT RECORDED, THE MORTGAGE IS NEVERTHELESS
BINDING BETWEEN THE PARTIES. THUS, THE ONLY RIGHT GRANTED BY LAW IN
FAVOR OF THE MORTGAGEE IS TO DEMAND THE EXECUTION AND THE RECORDING
OF THE DOCUMENT IN WHICH THE MORTGAGE IS FORMALIZED. AS A GENERAL
RULE, THE MORTGAGOR RETAINS POSSESSION OF THE MORTGAGED PROPERTY
SINCE A MORTGAGE IS MERELY A LIEN AND TITLE TO THE PROPERTY DOES NOT PASS
TO THE MORTGAGEE. HOWEVER, EVEN THOUGH A MORTGAGEE DOES NOT HAVE
POSSESSION OF THE PROPERTY, THERE IS NO IMPAIRMENT OF HIS SECURITY SINCE
THE MORTGAGE DIRECTLY AND IMMEDIATELY SUBJECTS THE PROPERTY UPON
WHICH IT IS IMPOSED, WHOEVER THE POSSESSOR MAY BE, TO THE FULFILLMENT OF
THE OBLIGATION FOR WHOSE SECURITY IT WAS CONSTITUTED. IF THE DEBTOR IS
UNABLE TO PAY HIS DEBT, THE MORTGAGE CREDITOR MAY INSTITUTE AN ACTION TO
FORECLOSE THE MORTGAGE, WHETHER JUDICIALLY OR EXTRAJUDICIALLY, WHEREBY

THE MORTGAGED PROPERTY WILL THEN BE SOLD AT A PUBLIC AUCTION AND THE
PROCEEDS THEREFROM GIVEN TO THE CREDITOR TO THE EXTENT NECESSARY TO
DISCHARGE THE MORTGAGE LOAN. REGARDLESS OF ITS POSSESSOR, THE
MORTGAGED PROPERTY MAY STILL BE SOLD, WITH THE PRESCRIBED FORMALITIES,
IN THE EVENT OF THE DEBTOR'S DEFAULT IN THE PAYMENT OF HIS LOAN
OBLIGATION.

Legal Redemption; Mortgage

PHILBANCOR FINANCE vs. COURT OF APPEALS

G.R. No. 129572, June 26, 2000

Facts:
Petitioner Vicente Hizon, Jr. is the owner of agricultural lands located in
Balite, San Fernando, Pampanga and the private respondents Alfredo Pare, Pablo
Galang and Amado Vie are the legitimate and bona fide tenants thereof. The said
lands were mortgaged by Hizon to petitioner Philbancor which were later on
extrajudicially foreclosed upon default of Hizon in the payment of his obligations.
Subsequently, the lands were sold at public auction to petitioner Philbancor. Seven
years after the registration of the sale with the Register of Deeds, private
respondents filed with the Provincial Agrarian Reform Adjudication Board (PARAB) a
complaint for maintenance of possession with redemption and tenancy right of preemption against petitioners Philbancor and Hizon. Petitioner Philbancor alleged,
among others, that it has no tenancy or agricultural relationship with private
respondents considering that it acquired ownership over the disputed lots by virtue
of an extrajudicial foreclosure sale & that private respondents right to redeem the
lots in question, if there is any, has already expired in accordance with Section 12 of
R. A. 3844. PARAB allowed legal redemption of the subject lands in favor of private
respondents. This decision was affirmed by the Department of Agrarian Reform
Adjudication Board (DARAB). Petitioners appealed to the CA. The appeal was
dismissed as well as the MFR which was subsequently filed. Hence, this appeal.

Issue:
Can the private respondents still exercise their legal right of redemption
over the subject lands considering that they invoked their right to redeem only on

July 14, 1992, seven years after the date of registration of the certificate of sale with
the Register of Deeds?

Held:

NO. Private respondents can no longer redeem the subject lands.

RA No. 3844, Section 12, provides as follows: "In case the landholding is sold to a
third person without the knowledge of the agricultural lessee, the latter shall have
the right to redeem the same at a reasonable price and consideration. Provided,
that the entire landholding sold must be redeemed. Provided further, that where
there are two or more agricultural lessees, each shall be entitled to said right of
redemption only to the extent of the area actually cultivated by him. The right of
redemption under this section may be exercised within two (2) years from the
registration of the sale and shall have priority over any other right of legal
redemption."

Concurrence and Preference of Credit

J.L. BERNARDO CONSTRUCTION vs. COURT OF APPEALS

G.R. No. 105827, January 31, 2000

Facts:
The municipal government of San Antonio, Nueva Ecija, awarded to J.L.
Bernardo Construction (BC), the construction of the San Antonio Public Market. The
municipality agreed to assume the expenses for the demolition, clearing and site
filling of the construction site. These expenses were advanced by BC. The
municipality refused to pay the same despite repeated demands and that the public
market was almost complete. Thus, BC filed a complaint for specific performance
with prayer for preliminary attachment and enforcement of contractors lien.
The lower court issued the writ of preliminary attachment and it also granted
the right to maintain possession of the public market and to operate the same. It
held that since BC has not been reimbursed, it stands in the position of an unpaid
contractor and as such is entitled pursuant to Art. 2242 & 2243 NCC to a lien upon
the public market which it constructed.

Issue:

May the contractors lien be enforced?

Held:
NO. Art. 2242, NCC provides that the claims of contractors engaged in the
construction, reconstruction or repair of buildings or other works shall be preferred
with respect to the specific building or other immovable property constructed.
However, this provision only finds application when there is a concurrence of
credits, i.e. when the same specific property of the debtor is subjected to the claims
of several creditors and the value of such property of the debtor is insufficient to
pay in full all the creditors. In such a situation, the question of preference will arise,
that is, there will be a need to determine which of the creditors will be paid ahead of
the others. This statutory lien should only be enforced in the context of some kind
of a procedure where the claims of all preferred creditors may be bindingly
adjudicated, such as in insolvency proceedings.
The action filed by petitioner does not partake of the nature of an insolvency
proceeding, but is basically for specific performance and damages. Thus, even if it
is finally adjudicated that BC is entitled to invoke the contractors lien, such lien
cannot be enforced in the present action for there is no way of determining whether
or not there exist other preferred creditors with claims over the public market.

IV. TORTS AND DAMAGES

Damages

PEOPLE vs. TOREJOS

G.R. No. 132217, Feb. 18, 2000

Facts:
On April 25, 1997, accused Bonifacio Torejos was convicted for raping Mary
Cris Cerna and was meted the supreme penalty of death. The victim was, at the
time of the commission of the crime, only 3 years old and nine days. The judgment
of the RTC of Davao City, finding him guilty beyond reasonable doubt of the crime of
rape, and ordering him to pay the parents of Mary Cris Cerna, Luciano and Rosalie
Cerna, the amount of P30,000.00 as civil indemnity pursuant to Art. 100 in relation
to Art. 104,RPC, is now before the Supreme Court on automatic review.

Issue:
How much and to whom should the civil indemnity and moral damages be
awarded?

Held:
Considering that the crime was committed under circumstances which
justify the imposition of death penalty, i.e., the victim is a child below 7 years old,
the amount of civil indemnity is increased to P75,000.00. Moreover, accused
Torejos is also ordered to pay moral damages in the amount P50,000.00. Finally,
the civil indemnity and moral damages should be awarded to Mary Cris as the
offended party.

PEOPLE vs. GONZALO PENASO

G.R. No. 121980, February 23, 2000

Facts:
Gonzalo Penaso was found guilty by the RTC of Tagbilaran of the crime of
rape and sentenced to suffer an imprisonment of reclusion perpetua and to pay the
victim indemnity and moral damages in the amount of P50,000.00 The victim was
15 years old at the time the offense was committed.

Issue:

Is the award of damages proper?

Held: NO. Pursuant to current jurisprudence, the award of P50,000.00 as civil

indemnity is mandatory upon the finding of the fact of rape. In addition, moral
damages amounting to P50,000.00 at the least should be imposed in rape cases

involving young and immature girls between the ages of 13 and 14, without need of
further proof. Hence, the amount of damages awarded should be P100,000.00.

PEOPLE vs. EREO

G.R. 1224706, Feb. 22, 2000

Facts:
On the night of June 21, 1995, an altercation over a flashlight led to the
untimely death of Rosanna Honrubia. The victim died by reason of the stab wounds
she sustained at the back and at the chest. An eyewitness sufficiently identified the
assailant as the accused Carlito Ereo. The mother of Rosanna claimed she spent
P24,000.00 in connection with her death and burial. She was also claiming
P187,200.00 by way of lost income which Rosanna could have earned had she not
been untimely killed. There was also a claim for moral damages brought by the
pain and sorrow caused by Rosannas demise.
The trial court found accused guilty of murder and ordered him to pay to the heirs of
Rosanna P24,000.00 for expenses incurred in connection with her death and burial;
P50,000.00 for loss of the victims life and P50,000.00 by way of moral damages.
The claim for loss income was however denied.

Issue:
Is the award of damages and the denial of the award for loss of income
proper and correct under the circumstances?

Held:
As to actual damages, NO. In seeking recovery for actual damages it is
necessary that the claimant produce competent proof or the best evidence
obtainable such as receipts to justify an award therefor. Actual or compensatory
damages cannot be presumed but must be proved with reasonable degree of
certainty. Only substantiated and proven expenses or those which appear to have
been genuinely incurred in connection with the death, wake or burial of the victim
will be recognized by the court. The list of expenses incurred for the wake, funeral
and burial of the victim amounting to P24, 700.00 submitted by the victims mother
is self-serving and not substantiated. The Supreme Court cannot, therefore, affirm
the trial courts award of P24,000.00 as actual expenses.

As to the civil indemnity, YES. In line with current jurisprudence the award of
P50,000.00 as civil indemnity (ex delicto) is sustained, which requires no proof other
than the fact of death of the victim and assailants responsibility therefor.
As to the moral damages, YES. The award of P50,000.00 by way of moral damages
for the pain and sorrow suffered by the victims family in connection with
Rosannas death is sustained. Such award is adequate reasonable and with
sufficient basis taking into consideration the pain and mental anguish suffered by
the victims family.
As to denial of the award for loss of income, YES. The court a quo correctly denied
for lack of factual basis the claim of the victims mother for an award for loss of
income or earning capacity of the deceased estimated by her at P600 per day or
P15,600.00 a month or P187,200.00 a year. This handwritten estimate of the
deceaseds daily income as a self- employed fish vendor during the past eight years
prior to her death submitted by the victims mother in the course of her testimony
in court is not supported by competent evidence like income tax returns or receipts.
It bears stress that compensation for lost income is in the nature of damages and as
such requires due proof of the damages suffered; there must be unbiased proof of
the deceaseds average income. In the instant case the victims mother gave only a
self-serving hence unreliable statement of her deceased daughters income.
Moreover, the award for lost income refers to the net income of the deceased, that
is, her total income less her average expenses. No proof of the victims average
expenses was presented. Hence, there can be no reliable estimate of the
deceaseds lost income.

N.B.

The SC held the accused guilty only of the crime of homicide.

PEOPLE vs. DE GUZMAN

G.R. No.118670, Feb. 22, 2000

Facts:
Accused Renato de Guzman, et al. were found guilty by the RTC of Baguio
City of the crime of robbery with homicide committed against the person of Dr.
Amadeo Belmonte and the house helper Teresa Hape. On the civil aspect, they
were ordered to restore or pay the value of the stolen properties, to indemnify
P50,000.00 each victim in accordance with Art. 2206, NCC; P46,200,000.00

representing the lost earnings of Dr. Belmonte for 25 years since he was only 35
years old when killed and the life expectancy of an average Filipino is 60 years old,
P274,809 representing actual and compensatory damages, P1,000,000 as moral
damages and P100,000.00 as exemplary damages to the heirs of Dr. Belmonte; and
P100,000.00 exemplary damages to the heirs of Hape.

Issue:

Is the award of damages proper and correct under the circumstances?

Held:
The award given by the trial court for loss of earnings is erroneous. As
established, Dr. Belmonte was earning an average of P150,000.00 as practicing
physician; P20,000 as professor of medicine per month or P2,088,000 per year. It
was likewise established that Dr. Belmonte was only 35 years old at the time of his
death. Loss of earning capacity is computed on the following formula:

Net

Life expectancy

Earning = [(2/3) (80-35)]

Capacity

Gross
x

at death

annual
income (GAI )

=[(2/3) (80-35)]

=[(2/3) (45)]

Living

P2,088,000.00

expenses

( 50% of GAI)

P1,044.000.00

P1,044,000.00

= 30 x P1,044,000.00
=P31,320,000.00

Thus the award for loss of earning is reduced to P31,320,000.00.

As regards the award for actual damages the same is reduced from P274,809 to
P113,709.75 since this is the amount that was proved and duly receipted.
The award for moral damages to the legal heirs of Dr. Belmonte is likewise reduced
to P50,000.00 in line with prevailing jurisprudence. The lower court should have
awarded moral damages for the killing of Teresa Hape considering its finding that
aggravating circumstances attended the robbery-killing, in accordance with Art.
2230 of the Civil Code. Thus, the award of P50,000.00 as moral damages is
warranted under the circumstances. Likewise the award for exemplary damages is
reduced to P20,000.00 each for the heirs of Dr. Belmonte and Teresa Hape.

PEOPLE vs. MENDIONA

G.R. No. 129056, Feb. 21, 2000

Facts:
Accused Liberato Mendiona was convicted of the crime of rape, and
sentenced to suffer the supreme penalty of death. He was also ordered to pay the
offended party, Maricel Capongcol, the amount of P50,000.00 as moral damages.

Issue:
Should the P50,000.00 awarded to the offended party be classified as
moral damages?

Held:
NO. We correct the trial courts erroneous classification of the award of
P50,000.00 as moral damages. The award authorized by criminal law as civil
indemnity (ex delicto) for the offended party is mandatory upon the finding of the
fact of rape; it is distinct from and should not be denominated as moral damages
which are based on different jural foundation and assessed by the court in the
exercise of sound discretion. Further, our more recent rulings hold that the
indemnification for the victim shall be in the increased amount of P75,000.00 if the
crime of rape is committed or effectively qualified by any of the circumstances
under which the death penalty is authorized by law. Applying the foregoing ruling,
the civil indemnity to be awarded to the complainant is P75,000.00.

CALALAS vs. COURT OF APPEALS

G.R. No. 122039, May 31, 2000

Facts:
On the way to Poblacion Sibulan, Negros Occidental, petitioner Vicente
Calalas passenger jeepney was bumped by an Isuzu truck. Private respondent
Eliza Sunga, a passenger in the jeepney sustained injuries. Eliza filed a complaint

for damages against Vicente based on breach of contract of carriage by the latter
in failing to exercise the diligence required of him as a common carrier. Vicente was
adjudged liable for damages to Eliza, including P50,000 as moral damages.

Issue:

Is the award of moral damages proper?

Held:
NO. As a general rule, moral damages are not recoverable in actions for
damages predicated on a breach of contract for it is not one of the items
enumerated under Art. 2219 of the Civil Code. As an exception, such damages are
recoverable: (1) in cases in which the mishap results in the death of a passenger, as
provided in Art. 1764, in relation to Art. 2206(3) of the Civil Code; and (2) in the
cases in which the carrier is guilty of fraud or bad faith, as provided in Art. 2220.
In this case, there is no legal basis for awarding moral damages since there was no
factual finding by the appellate court that petitioner acted in bad faith in the
performance of the contract of carriage.

PEOPLE vs. MAGAT

G.R. No. 130026, May 31, 2000

Facts:
Before this court for automatic review is the joint decision of the RTC of QC,
in 2 criminal cases, finding accused Antonio Magat guilty of raping his daughter,
Ann Fideli Magat, on two occasions and sentencing him to suffer the extreme
penalty of death for each case, and to pay the sum of P50,000.00 as compensatory
damages, P200,000.00 as moral damages and, P500,000 00 as exemplary and
corrective damages.

Issue:

Is the award of damages proper?

Held:
The sum awarded as compensatory damages should be increased from
P50,000.00 to P75,000.00. The SC has previously held that if the crime of rape is
committed or effectively qualified by any of the circumstances under which the

death penalty is authorized by the present amended law, the indemnity of the
victim shall be in the increased amount of not less than P75,000.00. In the 2nd
criminal case however, while appellant was sentenced to reclusion perpetua, as the
crime of rape was committed when the victim is already above 18 years old, the
compensatory damage should be the same (P75,000.00). The trauma, ignominy,
pain and shame suffered by the complainant can not be treated or regarded any
lesser.
In crimes of rape, moral damages may additionally be awarded to the victim in the
criminal proceeding, in such amount as the Court deems just, without the need for
pleading or proof of the basis thereof. The fact that complainant has suffered the
trauma of mental, physical and psychological sufferings which constitute the bases
for moral damages are too obvious to still require the recital thereof at the trial by
the victim, since the Court itself even assumes and acknowledges such agony on
her part as a gauge of her credibility. Nevertheless, the award of P200,000.00 as
moral damages is excessive. An award of P50,000.00 for each count of rape is more
reasonable.
The award of exemplary or corrective damages is deleted in the absence of any
legal basis therefor.

PEOPLE vs. BAUTISTA

G.R. No. 131840, April 27, 2000

Facts: The RTC of Rizal found Henry and Nilo Bautista guilty of murder and
sentenced them to suffer the penalty of reclusion perpetua and to pay jointly the
amounts of P24,839.00 as actual damages and P30,000.00 as civil indemnity to the
heirs of the victim, Igmidio Grajo. The prosecution witness Richard Grajo, son of the
victim, testified on the commission of the crime by the accused. Purita Grajo
testified on the amount of damages: funeral expenses, earning capacity, hospital
bill amounting to P24,839.00.

Issue:
What are the nature and the amount of damages that may be awarded by
the court?

Held:
Every person criminally liable for a felony is also civilly liable. The amount
and nature of damages to be awarded are:
1. Indemnity for Death. Art. 2206,NCC provides for the payment of indemnity for
death caused by a crime. Initially fixed in Art. 2206 at P3,000.00, the amount of
indemnity for death has, through the years, been gradually increased in view of the
declining value of the peso. It is presently fixed at P50,000.00. Hence, the trial
court correctly awarded indemnity for death to the heirs of Igmidio in this amount.
2. Actual Damages. Art. 2199,NCC provides that "except as provided by law or by
stipulation, one is entitled to an adequate compensation only for such pecuniary
loss suffered by him as he has duly proved." The prosecution submitted receipts and
presented the testimony of Purita, the widow of Igmidio, showing that his family
incurred expenses in the total amount of P24,839.00 for his wake and burial. Hence,
the trial court likewise correctly awarded actual damages to the heirs of Igmidio in
this amount.
The civil liability of accused for indemnity for death and actual and moral damages,
however, is solidary and not joint as ruled by the trial court.
3. Moral Damages. Under Art. 2206,NCC, the spouse, legitimate and illegitimate
descendants and ascendants of the deceased are entitled to moral damages "for
mental anguish by reason of the death of the deceased." Purita testified that she
suffered pain from the death of her husband. Thus, in accordance with recent
decisions of this Court, accused should be liable to pay the additional amount of
P50,000.00 as moral damages.
4. Exemplary Damages. Under Art. 2230,NCC, "exemplary damages as a part of the
civil liability may be imposed when the crime was committed with one or more
aggravating circumstances." In this case, the aggravating circumstance of abuse of
superior strength should be appreciated against Nilo. Thus, accused Nilo Bautista
should be ordered to pay the heirs of Igmidio the additional sum of P30,000.00 as
exemplary damages.

N.B. Accused were found guilty of homicide not murder.

PEOPLE VS. PASCUAL

G.R. No. 127761, April 28, 2000

Facts: The accused, Pedro R. Pascual, and a certain John Doe were charged with
the crime of murder. Pascual was found guilty of killing Dr. Picio by testimony of
prosecution witness Marissa Robles. Rosalinda S.Picio, wife of the late Dr.Picio,
testified on the civil aspect of the case. She stated she spent around P300,000 for
the wake and funeral service. She also declared that her husband used to receive a
monthly salary of P13,000 as municipal health officer in addition to the P240,000
annual income he used to earn in farming and grains business.

Issue:

What are the nature and the amount of damages that may be awarded?

Held:
In view of the death of the victim, Dr. Maximino Picio, Jr., his forced heirs are
entitled to P50,000.00 representing civil indemnity ex delicto. They are also entitled
to P50,000.00 by way of moral damages inasmuch as the widow of the victim,
Rosalinda Picio, testified on how she felt over the loss of her husband. Additionally,
the accused is liable to pay to the heirs of the victim damages for loss of earning
capacity of the deceased. However, actual damages may not be awarded in view of
the absence of competent evidence to support the same.
It appears that Dr. Picio was 64 years old at the time of his death on March 14,
1995. Her widow testified that he used to receive a monthly salary of P13,000.00 as
Municipal Health Officer of San Manuel, Isabela. In accordance with the American
Expectancy Table of Mortality which was adopted by the Court, the loss of earning
capacity shall be computed as follows:
Net Earning Capacity (X) = Life Expectancy x (Gross Annual Income Living
Expenses e.g. 50% of annual gross income)
=

2 (80-64)

x (156,000.00-78,000.00)

3
=

10.667 x 78,000.00

P832,026.00

OROSA vs. COURT OF APPEALS

G. R. No. 111080, April 5, 2000

Facts:
Petitioner Jose Orosa purchased a Ford Sedan on installment from Fiesta
Motor Sales Corporation (FMSC), executing and delivering to the latter a promissory
note payable in monthly installments. To secure payment, he executed a chattel
mortgage over the subject motor vehicle in favor of FMSC which in turn assigned
the promissory note and chattel mortgage to private respondent FCP Credit
Corporation. Orosa failed to pay part of an installment as well as three (3) other
consecutive installments. Consequently, FCP Credit Corporation demanded from
him payment of the entire outstanding balance of the obligation with accrued
interest and to surrender the vehicle which petitioner was allegedly detaining. As
Orosa failed to do so, FMSC filed a complaint for replevin and damages in the RTC of
Manila against the former. It was able to provisionally secure the writ.
The trial court ruled that FMSC is not entitled to the writ of replevin since Orosa
already made payments on the installments, albeit late and irregular. It ordered the
return of the subject vehicle, or its equivalent, to petitioner. It likewise granted
petitioners counterclaim for moral damages, exemplary damages, and attorneys
fees.

Issue:
fees?

Is Orosa entitled to moral damages, exemplary damages, and attorneys

Held:
NO. Orosas claim must be denied. As to the matter of moral damages, the
law clearly states that one may only recover moral damages if they are the
proximate result of the other partys wrongful act or omission. Two elements are
required. First, the act or omission must be the proximate result of the physical
suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation and similar injury. Second, the act must be
wrongful.
According to Orosa, the car subject of this case was being used by his daughter,
married to Jose Concepcion III, a scion of a prominent family. He maintains that
when the complaint was filed against him, he suffered untold embarrassment as he
had to explain the suit to his daughters in-laws. However, that could have been
avoided had he not assigned the car to his daughter and had he been faithful and
prompt in paying the installments required. Orosa brought the situation upon
himself and cannot now complain that FMSC is liable for the mental anguish and
humiliation he suffered. Further, FMSC brought the complaint only to exercise a

legal right, believing that it had a meritorious cause of action clearly borne out by a
mere perusal of the promissory note and chattel mortgage. The rule has always
been that moral damages cannot be recovered from a person who has filed a
complaint against another in good faith.
Anent the award of exemplary damages, jurisprudence provides that where a
party is not entitled to actual or moral damages, an award of exemplary damages is
likewise baseless.
In the matter of attorneys fees, it should likewise be denied. No premium should
be placed on the right to litigate and not every winning party is entitled to an
automatic grant of attorneys fees. The party must show that he falls under one of
the instances enumerated in Article 2208 of the Civil Code. This, Orosa failed to do.
Furthermore, where the award of moral and exemplary damages is eliminated, so
must the award for attorneys fees be deleted.

PEOPLE vs. CABANDE

G.R. No. 132747, February 8, 2000

Facts:
Vicente Trinidad and Victor Trinidad and accused Cabande, had serious
misunderstanding over Lot No. 1990 of the Buenavista Estate in Bulacan. In
convicting Cabande, the trial court relied on the eyewitness account of Christopher
Trinidad, son of Victor, who was five years old when the crime was committed and
who was then riding the jeepney together with the two victims. The court a quo also
noted that there was a feud between accused and the victims over the ownership of
a parcel of land. It concluded that the killing was qualified by treachery, because the
victims "were totally defenseless and had no opportunity to defend themselves or
retaliate when shot." The trial court likewise ordered the accused to pay P50,000.00
as civil indemnity, P100,000.00 for the wake and burial expenses, moral damages
and exemplary damages each to the heirs of the victims, as well as indemnity for
loss of income in the amount of P1.5 million to the heirs of Victor and P337,000.00
to the heirs of Vicente.

Issue: Is the award of damages and civil indemnity proper and correct under the
circumstances?

Held:
In line with current jurisprudence, we affirm the award of indemnity ex
delicto to the heirs of each victim in the sum of P50,000 or a total of P100,000. This
may be awarded without need of proof other than the commission of the crime.
Likewise, we sustain the award of P100,000.00 to the heirs of each victim for the
wake and burial expenses, for these were duly proven. Although the records show
that they were entitled to moral damages, we hold that the award should be
reduced to P100,000 or P50,000 for each set of heirs of the victims.
We cannot sustain, however, the award of exemplary damages, which are awarded
only in the presence of one or more aggravating circumstances. None was
established in this case.
Likewise, we hold that the trial court erred in awarding the amount of P1.5 million
and P337,000. as loss of income. The amount of indemnity for loss of earning
capacity is based on the income at the time of death and the probable life
expectancy of the victim. It should be stressed that the amount recoverable is not
the entire earnings, but only that portion which the beneficiaries would have
received. Thus, indemnity for lost income refers to the victim's total earnings minus
the necessary living expenses. In the case of Victor, his wife testified that the
annual income from their piggery business was P300,000. Considering that the two
of them operated and managed the business, the profits should be divided equally
between them. Accordingly, the annual income of Victor, who was 39 years old at
the time of his death, was P150,000. Considering that his living expenses have not
been proven, the Court exercises the discretion to ascertain and fix the same. Under
the circumstances, we-find the amount of P50,000 as reasonable living expenses.

BAAS, JR. vs. COURT OF APPEALS

G.R. No. 102967, February 10, 2000

Facts:
A sale of land and nonpayment of income tax thereon resulted to the filing
by BIR Regional Director Aquilino Larin of a criminal complaint for tax evasion
against petitioner Banas. Such filing of the case against him was publicized in
several newspapers. Reacting to the complaint for tax evasion and the news
reports, Banas filed with the RTC of Manila an action for damages against
respondents Larin, et al. for extortion and malicious publication of the BIR's tax
audit report. He claimed that the filing of criminal complaints against him for
violation of tax laws were improper because he had already availed of the tax
amnesty laws.

The trial court decided in favor of the respondents and awarded Larin P200,000.00
as actual damages.

Issue:

Is the award of damages to Larin proper?

Held:
NO. Any person who seeks to be awarded actual or compensatory damages
due to acts of another has the burden of proving said damages as well as the
amount thereof. Larin says the extortion cases filed against him hampered his
immediate promotion, caused him strong anxiety and social humiliation. The trial
court awarded him actual damages. However, the appellate court stated that,
despite pendency of this case, Larin was given a promotion at the BIR. Said
respondent court found nothing on record, to show that he suffered loss of seniority
that allegedly barred his promotion. In fact, he was promoted to his present position
despite the pendency of the instant case Moreover, the records of the case contain
no statement whatsoever of the amount of the actual damages sustained by the
respondents. Actual damages cannot be allowed unless supported by evidence on
the record. The court cannot rely on speculation, conjectures or guesswork as to
the fact and amount of damages. To justify a grant of actual or compensatory
damages, it is necessary to prove with a reasonable degree of certainty, the actual
amount of loss. Since we have no basis with which to assess, with certainty, the
actual or compensatory damages counter-claimed by Larin, the award of such
damages should be deleted.
Moral damages may be recovered in cases involving acts referred to in Art. 21, NCC.
As a rule, a public official may not recover damages for charges of falsehood related
to his official conduct unless he proves that the statement was made with actual
malice.

PEOPLE vs. ALAGON

G.R. Nos. 126536-37, February 10, 2000

Facts:
The RTC of Pasig City found accused Alagon and Rafael guilty of two counts
of murder for the death of Magno and Barcelona and ordered them to pay actual,
moral and exemplary damages, as well as indemnity for the deaths to the heirs of
the two victims.

Issue:
Is the award of damages and indemnity proper and correct under the
circumstances?

Held:
As to actual damages, NO. We cannot sustain the award of actual damages
in favor of the heirs of Magno for failure to substantiate the bare assertion of the
widow with other corroborative evidence. The Court can only grant such amount for
expenses if they are supported by receipts. In the absence thereof, no award for
actual damages can be granted. For the same reason, the award of actual damages
to the heirs of Isidro Barcelona should be reduced as the amount duly supported by
documentary evidence.
As to the award of P50,000.00 each to the heirs of the victims as indemnity for the
deaths of Magno and Barcelona, YES. We affirm such award as this is in accord with
prevailing jurisprudence.
As to moral and exemplary damages, NO. The trial court erred in awarding to the
heirs of the two victims lump sums of P100,000.00 each for moral and exemplary
damages. These are separate in nature and require separate determination.
Considering that the heirs of the victims asked for it and testified that they
experienced moral suffering, moral damages in the amount of P50,000.00 is
awarded to the heirs of the victims to compensate them for the injuries to their
feelings. The award for exemplary damages must be deleted, considering the crime
was committed without any other aggravating circumstances.
Finally, we must also add the award for loss of earning capacity. The sister of the
deceased Barcelona testified that the victim was earning P145.00 a day or
P4,350.00 per month and the records reveal that he was 27 years old at the time of
his death. On the other hand, it was established that Magno was 31 years old at the
time of his death and earning P4,500.00 per month.

PEOPLE vs. DANDO

G.R. No. 120646, February 14, 2000.

Facts:
The RTC of Laguna found accused PO3 Apolinar Dando guilty of murder for
the killing of Cesar Castro and awarded to the heirs of the victims civil indemnity for

the death of Castro, reimbursement for actual expenses incurred for the wake and
burial, as well as indemnity for loss of earning capacity in the amount of
P1,620,000.00.

Issue:
Is the award of damages and indemnity proper and correct under the
circumstances?

Held:
As to the amount of P50,000 as indemnity for the death for Castro, YES.
Said amount is awarded, without need of further proof other than the death of the
victim. In addition, the heirs are also entitled to receive a compensation for the loss
of earning capacity of the victim. The formula for computing the same as
established in decided cases is as follows:
Gross

Necessary

Net Earning =
Capacity

Life x

Expectancy

Annual -

Living
Income

Expenses

The life expectancy is equivalent to two thirds (2/3) multiplied by the difference of
80 and the age of the deceased. Since Castro was 47 years old at the time of his
death, his life expectancy was 22 more years. Celso, Castros son, testified that his
father earned P3,000.00 monthly or P36,000.00 annually from the sash factory. In
addition, the victim's annual income from farming as found by the trial court was
P53,000.00. The gross annual income of the deceased was P89,000.00. Allowing for
necessary living expenses of fifty percent (50%) of his gross earnings, his total net
earning capacity amounts to P979,000.00. 39
As to the expenses actually incurred by the family of the victim for the wake and
burial, Celso was able to prove during trial that they incurred the sum of
P39,974.00. The amount of P35,974.00 awarded by the trial court as reimbursement
of funeral expenses is, accordingly, increased to P39,974.00.

Attorneys Fees in the Concept of Damages

INDUSTRIAL INSURANCE COMPANY vs. BONDAD

G.R. No. 136722, April 12, 2000

Facts:
The present Petition finds its roots in an incident which involved three
vehicles: a Galant Sigma car driven by Grace Morales, a packed passenger jeepney
originally driven by Ligorio Bondad, and a DM Transit Bus driven by Eduardo
Mendoza. The respondents asserted that their vehicle was on full stop because of a
flat tire and it was the bus which hit Morales' car. Moreover, they contended that
petitioner had acted in bad faith in impleading them and that, contrary to its
allegation, no prior demand had been made upon them.
The trial court exculpated the Bondads and ordered petitioner to pay them actual,
moral and exemplary damages, as well as attorney's fees.

Issue:
May attorneys fees and other litigation expenses be awarded if one who
claims it is compelled to litigate with third persons?

Held:
YES. Attorney's fees may be awarded if one who claims it is compelled to
litigate with third persons or to incur expenses to protect one's interests by reason
of an unjustified act or omission on the part of the party from whom it is sought. In
justifying the award of attorney's fees and other litigation expenses, the court held
that respondents were compelled to litigate an unfounded suit because of
petitioner's negligence and lack of prudence in not verifying the facts before filing
this action. The facts of this case clearly show that petitioner was motivated by bad
faith in impleading respondents. Indeed, a person's right to litigate, as a rule, should
not be penalized. This right, however, must be exercised in good faith. Absence of
good faith in the present case is shown by the fact that petitioner clearly has no
cause of action against respondents but it recklessly filed suit anyway and wantonly
pursued pointless appeals, thereby causing the latter to spend valuable time,
money and effort in unnecessarily defending themselves, incurring damages in the
process. In this case, the records show that petitioner's suit against respondents
was manifestly unjustified.

LIABILITY FOR DAMAGES IN ACTION BASED ON MALICIOUS PROSECUTION

BAYANI vs. PANAY ELECTRIC CO.

G.R. No. 139680, April 12, 2000

Facts:
In March 1996, Panay Electric Company, Inc. (PECO) discontinued supplying
electrical services to two pension houses owned by petitioner. Alleging that it had
discovered theft of electricity in petitioner's business establishments, PECO filed two
complaints for violation of R.A. No. 7832 against petitioner with the City Prosecutor
of Iloilo City. The City Prosecutor dismissed the complaints on August 8, 1996 and
August 19, 1996, respectively. PECO appealed the dismissal to the Secretary of
Justice.
On October 10, 1996, petitioner filed with the RTC of Iloilo City an action for
injunction and damages arising from malicious prosecution, then amended his
complaint to add a prayer for writ of preliminary prohibitory injunction to make
PECO desist from making "false imputations that plaintiff allegedly continued to
commit violations" of R.A. No. 7832. PECO filed a motion to dismiss the amended
complaint, but said motion was denied. On September 2, 1997, the trial court
granted petitioner's request for the issuance of a writ of preliminary mandatory
injunction. On November 17, 1997, PECO filed a petition for certiorari and
prohibition with the Court of Appeals, praying that the appellate court declare the
orders of the trial court denying the motion to dismiss and grant of writ of PMI null
and void and likewise sought the dismissal of herein petitioner's complaint in the
lower court.
The Secretary of Justice upheld the dismissal of the complaints for violations of R.A.
No. 7832 on March 4, 1998. The CA dismissed the complaint for injunction and
damages filed by Bayani.

Issue:

Is the action for malicious prosecution premature?

Held:
YES. The requisites for an action for damages based on malicious
prosecution are: (1) the fact of the prosecution and the further fact that the
defendant was himself the prosecutor, and that the action was finally terminated
with an acquittal; (2) that in bringing the action, the prosecutor acted without
probable cause; and (3) the prosecutor was actuated or impelled by legal malice.
Considering the facts in this case, we agree with the appellate court that one of the

elements for an action based on malicious prosecution, the element of final

termination of the action resulting in an acquittal, was absent at the time petitioner
filed civil case. The records show that petitioner's action for injunction and damages
was filed on October 10, 1996, whereas the Secretary of Justice dismissed with
finality PECO's criminal complaints against herein petitioner only on March 4, 1998.
Hence, the civil case for malicious prosecution was prematurely filed.

VILLANUEVA vs. UNITED COCONUT PLANTERS BANK

G.R. No. 138291, March 7, 2000

Facts:
Herminigildo Villanueva, father of the petitioner, applied for and was
granted a loan by UCPB which at the time was managed by Bobby Caf. In the
course of the bank audit, certain fraud, anomalies and irregularities were discovered
in the application, processing and quantity of said amount which prompted UCPB to
conduct investigation on the matter. UCPB filed criminal complaints which resulted
to the acquittal of the defendants. In view of the acquittal, Hector Villanueva filed an
action for damages on the ground of alleged malicious prosecution with RTC. In its
answer, UCPB denied the allegation in the complaint and asserted that there is no
cause of action since the filling of the criminal complaint was not tainted with
malice.

Issue:

Is UCPB liable for damages?

Held:
NO. The adverse result of an action does not make the prosecution thereof
wrongful neither does it subject the action to payment of damages. The law does
not impose a penalty to the right to litigate. Resort to judicial processes, by itself, is
not an evidence of ill will. As the mere act of filing criminal complaint does not make
the complainant liable for malicious prosecution. These must be proof that the suit
was performed by legal malice. An inexcusable intent to oppress, vex, annoy or
humiliate. A contrary rule would discourage peaceful resources to the court and
unjustly penalize the exercise of a citizens right to litigate. Where the action is filed
in good faith, no penalty should be imposed thereon.

Recovery of Damages in Negligent Acts

CALALAS vs. COURT OF APPEALS

G.R. No. 122039, May 31, 2000

Facts:
On the way to Poblacion Sibulan, Negros Occidental, Petitioner Vicente
Calalas passenger jeepney was bumped by an Isuzu truck owned by Francisco
Salva. Private respondent Eliza Sunga, a passenger in the jeepney sustained
injuries. Eliza filed a complaint for damages against Vicente based on breach of
contract of carriage by the latter in failing to exercise the diligence required of him
as a common carrier. Vicente, on the other hand, filed a 3rd party complaint againt
Francisco.
The lower court rendered judgment, against Francisco and absolved Vicente of
liability. It took cognizance of another case (Civil Case No. 3490) filed by Vicente
against Francisco and his driver Verena, for quasi-delict, in which the latter were
held jointly liable to Vicente for the damage to his jeepney.
On appeal to the CA, the ruling of the lower court was reversed on the ground that
Elizas cause of action was based on a contract of carriage, not quasi-delict, and
that the common carrier failed to exercise the diligence required under the Civil
Code. The appellate court dismissed the third-party complaint against Francisco and
adjudged Vicente liable for damages to Eliza.

Issue:
Is Eliza bound by the ruling in the earlier case (Civil Case No. 3490) finding
the driver and the owner of the truck liable for quasi-delict?

Held:
NO. The issue in the former case (Civil Case No. 3490) is not the same as
those in the present. The issue in Civil Case No. 3490 was whether Salva and his
driver Verena were liable for quasi-delict for the damage caused to petitioner's
jeepney. On the other hand, the issue in this case is whether petitioner is liable on
his contract of carriage. The first, quasi-delict, also known as culpa aquiliana or
culpa extra contractual, has as its source the negligence of the tortfeasor. The
second, breach of contract or culpa contractual, is premised upon the negligence in
the performance of a contractual obligation.
Consequently, in quasi-delict, the negligence or fault should be clearly established
because it is the basis of the action, whereas in breach of contract, the action can
be prosecuted merely by proving the existence of the contract and the fact that the
obligor, in this case the common carrier, failed to transport his passenger safely to
his destination.

Negligence; Easement

REMMAN ENTERPRISES vs. COURT OF APPEALS

G. R. No. 125018,

April 6, 2000

Facts:
Petitioner REMMAN Enterprises, Inc. (REMMAN) and private respondent
Crispin Lat are owners of adjoining lots. Lats land is agricultural and planted mostly
with fruit tress, while REMMAN devotes its land to its piggery business. REMMANs
land is 1 meters higher in elevation than that of respondent Lat. Sometime in July
1984, Lat noticed that REMMANs waste disposal lagoon was already overflowing
and inundating his plantation. He made several representations with REMMAN but
the latter fell on deaf ears. On March 14, 1985, after almost one hectare of Lats
plantation was already inundated with ankle-deep water containing pig manure, as
a result of which trees growing on the flooded portion started to wither and die, Lat
filed a complaint for damages with preliminary mandatory injunction against
REMMAN. REMMAN denied the allegations and argued that additional measures
such as the construction of additional lagoons were already adopted to contain the
waste water coming from its piggery to prevent any damage to the adjoining
estates.

The trial court held REMMAN liable for damages. In this petition, REMMAN
contends that its negligence and liability for damages were not sufficiently
established. It also raises the defense of fortuitous event (heavy rains) which
caused the inundation of Lats plantation, and the supposed natural easement
imposed upon Lats property.

Issue:

Is REMMAN negligent and should be held liable for damages?

Held:
YES. REMMANs negligence was clearly established. Lats property was
practically made a catch basin of polluted water and other noxious substances
emptying from REMMANs piggery which could have been prevented had it not been
for the negligence of appellant arising from its: (a) failure to monitor the increases
in the level of water in the lagoons before, during and after the heavy downpours;
(b) failure to augment the existing lagoons prior to the incident, notwithstanding the
fact that at the time of the flooding, the piggery had grown to a capacity of 11,000
heads, and considering that it was reasonably foreseeable that the existing waste
disposal facilities were no longer adequate to accommodate the increasing volume
of waste matters; and (c) the repeated failure to comply with its promise to private
respondent.
REMMANs assertion that the damages, if any, were due to a fortuitous event is
not well taken. Even if the heavy rains constituted an act of God, REMMAN was still
guilty of negligence. The event was not occasioned exclusively by an act of God or
force majeure; a human factor negligence or imprudence had intervened. The
effect then of the force majeure in question may be deemed to have, even if only
partly, resulted from the participation of man. Thus, the whole occurrence was
thereby humanized, as it were, and removed from the rules applicable to acts of
God.
As regards the contended natural easement imposed upon Lats property,
Article 637 provides that lower estates are imposed the obligation to receive the
waters which naturally and without the intervention of man descend from higher
estates. However, where the waters which flow from a higher state are those which
are artificially collected in man-made lagoons, any damage occasioned thereby
entitles the owner of the lower or servient estate to compensation.

Rule Against Double Recovery in Negligence Cases

RAFAEL REYES TRUCKING CORPORATION vs. PEOPLE

G.R. No. 129029, April 3, 2000

Facts:
Petitioner Rafael Reyes Trucking Corporation is a domestic corporation
engaged in the business of transporting beer products for San Miguel Corporation.
Among its fleet of vehicles is a truck driven by the accused Romeo Dunca who met
an accident in Isabela with a Nissan Pick-up. Duncas vehicle rammed the Nissan,
causing severe damages to it and the instant death to its driver, Balcita, and
passenger, Dy.
An Information was filed in the RTC of Isabela against Romeo Dunca for reckless
imprudence resulting in double homicide and damage to property. Offended
parties, heirs of the two deceased, made a reservation to file a separate civil action
against the accused arising from the offense charged. Thereafter, they actually
filed with the RTC of Isabela a complaint against petitioner Corporation, as employer
of Romeo Dunca, based on quasi delict. Petitioner settled the claim of heirs of
Balcita. The heirs of Dy opted to continue with the criminal and civil actions. Later,
they withdrew their reservation to file a separate civil action ex delicto against the
accused and manifested their intention to prosecute the same in the criminal
action. They did not, however, withdraw the separate civil action based on quasi
delict against petitioner. Upon agreement of the parties, both criminal and civil
cases were consolidated.
The trial court found Dunca guilty and ordered him to indemnify private
respondents with damages. Petitioner corporation was ordered to pay private
respondents actual damages. Private respondents moved for amendment of the
dispositive portion to hold petitioner subsidiarily liable for all the damages ex delicto
awarded to them in the event of insolvency of the accused.

Issue:
May petitioner be held subsidiarily liable for the damages awarded to the
offended parties in the criminal action against the accused despite the filing of a
separate civil action against said petitioner?

Held:
NO. Petitioner cannot be held subsidiarily liable. In negligence cases, the
aggrieved party has the choice between (1) an action to enforce civil liability arising

from crime under Article 100 of the Revised Penal Code; and (2) a separate action
for quasi delict under Article 2176 of the Civil Code. Once the choice is made, the
injured party can not avail himself of any other remedy because he may not recover
damages twice for the same negligent act or omission of the accused. This is the
rule against double recovery. In other words, the same act or omission can create
two kinds of liability on the part of the offender, that is, civil liability ex delicto, and
civil liability quasi delicto, either of which may be enforced against the culprit,
subject to the caveat under Article 2177 of the Civil Code that the offended party
can not recover damages under both types of liability.
In the instant case, the offended parties elected to file a separate civil action
for damages against petitioner under Article 2176,NCC to hold him vicariously liable
for the fault or negligence of the accused-employee, based on quasi delict. Having
made such choice, private respondents cannot now recover their claim in a civil
action for damages ex delicto primarily against the accused, and subsidiarily
against petitioner.
Based on the foregoing, and on Rule 111, Sec. 1, par. 3 of the 1985 Rules on
Criminal Procedure which provides that the reservation to file or the filing of a
separate civil action results in a waiver of other available civil actions arising from
the same act or omission of the accused, the trial court grievously erred in holding,
and the court of Appeals in affirming, that petitioner is subsidiarily liable for
damages arising from crime (ex delicto) in the criminal action. There would be no
occasion to rule on the accuseds ex delicto civil liability, and petitioners subsidiary
liability, because of the aforesaid waiver and proscription against double recovery.

Liability of an Educational Institution

UNIVERSITY OF THE EAST V. JADER

G.R. NO. 132344, February 17, 2000

Facts:
Respondent was enrolled in the plaintiffs College of Law. In the first
semester of his senior year, he failed to take the regular final examination in
Practice Court I for which he was given an incomplete grade. He enrolled for the
second semester as senior student and on February 1, 1988 he filed an application

for the removal of the incomplete grade given by Professor Carlos Ortega which was
approved by Dean Tiongson after payment of the required fee. He took the
examination on March 28, 1988. On May 30, 1988, Professor Ortega flunked the
respondent.

The respondents name appeared in the Tentative List of Candidates for

graduation. The respondent attended the investiture ceremonies.

Respondent thereafter prepared himself for the bar examination. He took a

leave of absence without pay from his job and enrolled at the pre-bar review class in
Far Eastern University. Having learned of his deficiency he dropped his review class
and was not able to take the bar examinations.

Issues: 1. May an educational institution be held liable for damages for misleading
a student into believing that the latter had satisfied all the requirements for
graduation?
2. May he be awarded moral damages?

Held: 1. Yes. It is the contractual obligation of the school to timely inform and
furnish sufficient notice and information to each and every student as to whether he
or she had already complied with all the requirements for the conferment of a
degree or whether they would be included among those who will graduate. Although
commencement exercises are but a formal ceremony, it nonetheless is not an
ordinary occasion, since such ceremony is the educational institutions way of
announcing to the whole world that the students included in the list of those who
will be conferred a degree during the ceremony have satisfied all the requirements
for such degree.
The negligent act of professor who fails to observe the rules of the school, for
instance by not promptly submitted a students grade, is not only imputable to the
professor but is an act of the school, being his employer. Educational institutions are
duty-bound to inform the student of their academic status and not wait for the latter
to inquire from the former. The conscious indifference of a person to the rights or
welfare of the person/persons who may be affected by his act or omission can
support a claim for damages. Want of care to the conscious disregard of civil
obligation coupled with a conscious knowledge the cause naturally calculated to
produce them would make the erring party liable.

2. NO. While petitioner was guilty of negligence and thus liable for respondent
for actual damages, we hold that respondent should not be awarded moral
damages. It behooves upon respondent to verify for himself whether he has
completed all necessary requirements to be eligible for the bar examinations. As a
senior law student, respondent should have been responsible enough to ensure that
all his affairs, specifically those pertaining to his academic achievement, are in
order.

VI. LAND TITLES AND DEEDS/AGRICULTURAL TENANCY LAWS

Registration of Land Under the Torrens System

DBP vs. COURT OF APPEALS

G.R. No. 129471, April 28, 2000

Facts:
The land in dispute consisting of 19.4 hectares was originally owned by
Ulpiano Mumar, whose ownership since 1917 was evidenced by Tax Declaration No.
3840. In 1950, Mumar sold the land to respondent Cajes who was issued Tax
Declaration No. R-1475 that same year. Cajes occupied and cultivated the said land.
In 1969, unknown to Cajes, Jose Alvarez succeeded in obtaining the registration of a
parcel of land with an area of 1,512, 468.00 square meters, in his name for which he
was issued OCT No. 546 on June 16, 1969. The parcel of land included the 19.4
hectares occupied by respondent. Alvarez never occupied nor introduced
improvements on said land.
In 1972, Alvarez sold the land to the spouses Gaudencio and Rosario Beduya to
whom TCT No. 10101 was issued. That same year, the spouses Beduya obtained a
loan from petitioner DBP for P526,000.00 and, as security, mortgaged the land
covered by TCT No. 10101 to the bank. In 1978, the SAAD Investment Corp., and
the SAAD Agro-Industries, Inc., represented by Gaudencio Beduya, and the spouses

Beduya personally executed another mortgage over the land in favor of DBP to
secure a loan of P1,430,000.00. The spouses Beduya later failed to pay their loans,
as a result of which, the mortgage on the property was foreclosed and sold to DBP
as the highest bidder. As the spouses Beduya failed to redeem the property, DBP
consolidated its ownership. It appears that Cajes had also applied for a loan from
DBP in 1978, offering his 19.4 hectare property under Tax Declaration No. D-2247 as
security for the loan. Cajes loan application was later approved. However, it was
found that the land mortgaged by Cajes was included in the land covered by TCT
No. 10101 in the name of the spouses Beduya. DBP, therefore, cancelled the loan
and demanded immediate payment of the amount. Cajes paid the loan to DBP for
which the former was issued a Cancellation of Mortgage releasing the property in
question from encumbrance. DBP asked Cajes to vacate the property. As the latter
refused to do so, DBP filed a complaint for recovery of possession with damages
against him. The RTC of Tagbilaran City declared DBP the lawful owner of the entire
land covered by TCT No. 10101 on the ground that the decree of registration was
binding upon the land.

Issue:
Is registration of land under the Torrens System a mode of acquiring
ownership over an immovable?

Held:
NO. Registration has never been a mode of acquiring ownership over an
immovable property. The purpose of the Land Registration Act is not to create or
vest title but to confirm and register already created and already vested.

Proof required in land registration proceedings

MARIANO TURQUESA, ET AL. vs. ROSARIO VALERA

G.R. No. 76371 January 20, 2000

Facts:
More than half a century ago, private respondent Rosario Valera applied for
the registration of 2 parcels of land located in Barrio Pulot, Laguyan, Abra. Lot 1 has

an area of 210,767 sq. m. and Lot 2 has an area of 22,141 sq. m. In support of her
application, private respondent presented documents showing that she bought Lot 1
during the years 1929-1932 from Cristeta Trangued and the heirs of Juan Valera
Rufino who were allegedly in possession thereof since the Spanish regime in the
concept of owners and who declared it in their name for taxation purposes. From
1929, she continued possession of said land in the concept of owner and continued
to pay the tax thereon in her name. The Director of Lands together with petitioners
and other persons opposed the application of Rosario.
Rosario was adjudged to have a registrable title over the 2 lots. The Director of
Lands' opposition was denied for failure to substantiate his claim that the subject
lands were part of the public domain. After this decision became final and
executory, Rosario filed with the trial court a motion for the issuance of writ of
possession over the lots. Portions of Lot 1 were respectively claimed by Santiago
Partolan (not an oppositor in the land registration case) and Crispin Baltar (one of
the oppositors). The Motion was denied. On appeal, the then IAC issued the writ.

Issue:
Is private respondent Rosario Valera properly entitled to a writ of
possession of portions of Lot 1 occupied by Partolan and Baltar?

Held: No. Rosario failed to show evidence of her rightful claim whether possessory
or proprietary over the subject areas. The burden of proof in land registration cases
is incumbent on the applicant who must show that he is the real and absolute owner
in fee simple of the land applied for. On him also rests the burden to overcome the
presumption that the land sought to be registered forms part of the public domain
considering that the inclusion in a title of a part of the public domain nullifies the
title.
The declaration by the applicant that the land applied for has been in the
possession of her predecessor-in-interest for a certain period, does not constitute
the "well-nigh incontrovertible" and "conclusive" evidence required in land
registration. Further, it should be noted that tax declaration, by itself, is not
considered conclusive evidence of ownership in land registration cases. Rosario
should have substantiated her claim with clear and convincing evidence specifically
showing the nature of her claim. The applicant must likewise prove the identity of
the land. It must be borne in mind that what defines a piece of land is not the size
or area mentioned in its description, but the boundaries therein laid down, as
enclosing the land and indicating its limits.
Considering that the writ of possession was sought by Rosario against persons who
were in "actual possession under claim of ownership," the latter's possession raises
a disputable presumption of ownership. This unrebutted presumption militates

against the claim of Rosario, especially considering the evidentiary rule under
Article 434 of the Civil Code that a claimant of a parcel of land, such as Rosario,
must rely on the strength of his title and not on the weakness of the defendant's
claim.

Evidence of Ownership

SANTIAGO vs. COURT OF APPEALS

G.R. No. 109111, June 28, 2000

Facts:
In 1980, the MWSS filed with the RTC of Rizal an application for registration
of title of eleven (11) parcels of land, situated in San Mateo, Rizal. An aqueduct
pipeline belonging to MWSS was buried under the subject lands long before World
War II. MWSS further alleged ownership of the subject properties since 1945.
Petitioners opposed claiming ownership over certain portions of the properties and
supported their respective claims by presenting certificates of title. TC decided in
favor of petitioners, relying mainly on the certificates of title presented. MWSS
appealed to the CA which ruled differently. Reasoning: 1) the property covered by
the certificates of title presented by petitioners merely adjoins and are adjacent to
the property claimed by MWSS. Such is shown by the technical descriptions in the
certificates of title presented. The parcels of land covered by the certificates of title
do not overlap or encroach on the property claimed by MWSS. 2) the aqueducts
were installed and buried long before WW II, under untitled land, giving rise to the
presumption that such land was "public land". 3) MWSS acquired ownership by
prescription. It is a matter of public knowledge and judicial notice that the pipes
existed and were buried under the land before WW II and its existence was
indicated above the ground by " pilapils".

Issue: Is the MWSS the owner of the lands in controversy?

Held:

YES.

The titles presented by petitioners, while showing ownership, is not of the land
claimed, but over the adjoining parcels of land. The technical descriptions in the
titles presented by petitioners betray them as adjacent and adjoining owners of the
land claimed by MWSS for registration. A torrens certificate of title covers only the
land described therein together with improvements existing thereon, if any, nothing
more.
MWSS presented tax declarations to buttress its ownership of the land. True, tax
declarations do not prove ownership. However, tax declarations can be strong
evidence of ownership when accompanied by possession for a period sufficient for
prescription. Since MWSS possessed the land in the concept of owner for more than
thirty (30) years preceding the application, MWSS acquired ownership by
prescription. By placing the pipelines under the land, there was material occupation
of the land by MWSS, subjecting the land to its will and control. Petitioners cannot
argue that MWSS' possession was not "open". The existence of the pipes was
indicated above the ground by " pilapils". Even assuming arguendo that the pipes
were "hidden" from sight, petitioner cannot claim ignorance of the existence of the
pipes. The possession must be public in order to be the basis for prescription.
Petitioners also cannot claim that MWSS abandoned its possession. There is no
showing that by discontinuing the use of the pipes, MWSS voluntarily renounced its
claim over the land. Petitioners did not prove that the spes recuperendi was gone
and the animus revertendi was given up.

Grant of Title/Confirmation of Imperfect Title on Lands

BRACEWELL vs. COURT OF APPEALS

G.R. No. 107427, January 25, 2000

Facts:
In 1908, Maria Cailles acquired certain parcels of land in Las Pinas, Metro
Manila. In 1961, Cailles sold the same to her son, petitioner James Bracewell, Jr. In
1963, Bracewell filed before the CFI an action for confirmation of imperfect title
under Sec 48(b) of CA No. 141. The Solicitor General opposed petitioners
application on the grounds that neither he nor his predecessors-in-interest

possessed sufficient title to the subject land nor have they been in open,
continuous, exclusive and notorious possession and occupation of the same for at
least thirty (30) years prior to the application, and that the subject parcels of land
were only classified as alienable or disposable on March 27, 1972.

Issue:
Are the lands in question alienable or disposable at the time of the
application for confirmation of imperfect title?

Held:
NO. Under the Regalian doctrine, all lands of the public domain belong to
the State, and that the State is the source of any asserted right to ownership in land
and charged with conservation of such patrimony. This same doctrine also states all
lands not otherwise appearing to be clearly within private ownership are presumed
to belong to the State. Hence, the burden of proof in overcoming the presumption
of State ownership of lands of the public domain is on the person applying for
registration. The applicant must also show that the land subject of the application
is alienable or disposable. This Bracewell failed to do. On the contrary, it was
conclusively shown by the government that the same were only classified as
alienable or disposable on March 27, 1972. Thus, even granting that Bracewell and
his predecessors-in-interest had occupied the same since 1908, he still cannot
claim title thereto by virtue of such possession since the subject parcels of land
were not yet alienable land at that time nor capable of private appropriation. The
adverse possession which may be the basis of a grant of title or confirmation of an
imperfect title refers only to alienable or disposable portions of the public domain.

Remedies Available to Aggrieved Party in Registration Proceedings

HEIRS OF PEDRO LOPEZ vs. DE CASTRO

G.R. No. 112905, February 3, 2000

Facts:
Two applications for registration of the same parcel of land were filed 12
years apart in different branches of the same CFI, but a certificate of title was

issued in one case while the other is still pending appeal. The first application was
filed in 1956 by Pedro Lopez, et. al. with Branch III of the CFI of Cavite. An order for
the issuance of decree for registration was promulgated which became final in
1980. The second application was filed by private respondents Honesto de Castro,
et. al. in 1967 before Branch IV of the same CFI in Tagaytay City. In 1981, the
certificate of title in favor of the De Castros were discovered in the course of the
examination of the records for the purpose of the issuance of the decree of
registration in favor of Lopez, et. al. Consequently, the trial court declared that it
has lost jurisdiction over the registration proceedings in view of the title issued by
the Tagaytay Branch in favor of the De Castros over the same land.
Seven (7) years later, or in 1988, the heirs of Pedro Lopez, et al. filed a complaint
for execution of judgment and cancellation of land titles of De Castro, et. al. before
the RTC of Cavite at Tagaytay City. They alleged that the Tagaytay Branch could not
have acquired jurisdiction over the registration proceeding as the res is already
within the jurisdiction of the Cavite Branch. De Castro, et. al. interposed the
defenses of prescription, laches and/or estoppel and failure to state a cause of
action. The complaint was denied. On appeal, the CA stressing the indefeasibility
of title under the Torrens System of land registration, echoed the lower court's ruling
that the decree of registration in favor of respondents cannot be reopened or set
aside in a "collateral proceeding such as the one in the case at bar which has for its
objective the execution of a judgment which apparently has become dormant."

Issue:
Should the Torrens Certificate of Title issued in favor of De Castro be
nullified?

Held:
NO. First, the Court is not persuaded that the registration proceedings
instituted by De Castro, et. al. should be nullified by reason of the fact that the
Cavite City branch of the same court was already proceeding with another
registration case for the same piece of land. In land registration proceedings, the
rule is that whoever first acquires title to a piece of land shall prevail. This rule
refers to the date of the certificate of title and not to the date of filing of the
application for registration of title. Hence, even though an applicant precedes
another, he may not be deemed to have priority of right to register title. As such,
while his application is being processed, an applicant is duty-bound to observe
vigilance and to take care that his right or interest is duly protected.
Second, Lopez, et. al. failed to exercise the due diligence required of them as
applicants for land registration. They let almost 7 years to pass from discovery of
the registration of the land in favor of De Castro, et. al. before they acted to revive
what already was a dormant judgment. They were guilty of laches as they neglected
or omitted to assert a right within a reasonable time. An applicant for registration

has but a one-year period from the issuance of the decree of registration in favor of
another applicant, within which to question the validity of the certificate of title
issued pursuant to such decree. Once the one-year period has lapsed, the title to
the land becomes indefeasible. However the aggrieved party is without a remedy
at law. If the property has not yet passed to an innocent purchaser for value, an
action for reconveyance is still available. If the property has passed into the hands
of an innocent purchaser for value, the remedy is an action for damages against
those who employed the fraud, and if the latter are insolvent, an action against the
Treasurer of the Philippines for recovery against the Assurance Fund. Recognizing
the futility of these actions, aggrieved applicants sought protection under the
provisions of the Rules of Court by an action for revival and execution of judgment.
However, the provisions of the Rules are merely suppletory to special laws
governing land registration proceedings and hence, cannot prevail over the latter.

GRANT/TRANSFER OF FRIAR LANDS

DELA TORRE vs. COURT OF APPEALS

G.R. No. 113095, February 8, 2000

Facts:
This case involves a tract of friar land titled in the name of the government
which was bought by Mamerto dela Torre for P110.00 payable in installments.
Mamerto then occupied the subject land until his death. Meanwhile, respondent
Isabelo dela Torre obtained from the Director of Lands a Deed of Conveyance
executed in his favor covering the subject property, on the strength of a Joint
Affidavit, executed by his father, Feliciano, and then minor nephew, petitioner Eliseo
dela Torre, certifying that he bought the subject parcel of land from Mamerto for
P400. Thus, a TCT was issued in Isabelos name.

Issue: Was there a valid grant of the disputed friar lands in favor of Isabelo?

Held:
NO. The grant made by the government of the subject property in favor of
Isabelo was invalid. In case the holder of the certificate shall have sold his interest
in the land before having complied with all the conditions thereof, the purchaser
from the holder of the certificate shall be entitled to all the rights of the holder of
the certificate upon presenting his assignment to the Chief of the Bureau of Public
Lands for registration. In order that a transfer of the rights of a holder of a
certificate of sale of friar lands may be legally effective, it is necessary that a formal
certificate of transfer be drawn up and submitted to the Chief of the Bureau of
Public Lands for his approval and registration. The law authorizes no other way of
transferring the rights of a holder of a certificate of sale of friar lands. In the case at
bar, no such assignment or formal certificate of transfer was submitted to the
Bureau of Public Lands for its approval and registration.

Free Patent

ROBLES vs. COURT OF APPEALS

G.R. No. 123509, March 14, 2000

Facts:
The property subject of this case is originally owned by Leon Robles. When
he died, it passed to his son Silvino who declared the property in his name and paid
the taxes thereon. Upon the latters death, his widow and children inherited the
property. Petitioners Lucio Robles, et al. were the children of Silvino, and Hilario
Robles is their half-brother. The task of cultivating was assigned to Lucio while the
payment of the land taxes was entrusted to Hilario. For unknown reason, the tax

declaration of the parcel of land in the name of Silvino was cancelled and
transferred to Exequiel Ballena. Ballena secured a loan from Antipolo Rural Bank
using the tax declaration as security. Somehow the tax declaration was transferred
to the name of Antipolo Rural Bank and later was transferred to the name of
respondent- spouses Hilario and Andrea Robles. Andrea secured a loan from
Cardona Rural Bank using the tax declaration as security. For failure to pay the
mortgage debt, the property was foreclosed with Cardona Rural Bank emerging as
the highest bidder. The bank sold the property to spouses Vergel and Ruth Santos.
In 1988, the spouses Santos took possession of the property and was able to secure
a Free Patent. Petitioners then filed an action for quieting of title.

Issue:

Is the free patent issued to the spouses Santos valid?

Held: NO. The free patent issued is not valid. In the light of their open,
continuous and notorious possession and occupation of the land, petitioners are
deemed to have acquired by operation of law, a right to a grant, a government
grant without a necessity of a certificate of title being issued. The land was
segregated from the public domain. Accordingly, the Director of Lands had no
authority to issue a free patent thereto in favor of another person. Verily,
jurisprudence holds that free patent covering private land is void.

Presumptive Conclusiveness of Torrens Title

LIM vs. COURT OF APPEALS

G.R. No. 124715, January 24, 2000

Facts:
Petitioner Rufina Lim is the surviving spouse of the late Pastor Lim whose
estate is the subject of estate proceedings. Private respondents Auto Truck Corp.,
et al. are domestic corporations which owned real properties covered under the
Torrens system. These properties were included in the inventory of the estate of
Pastor. Respondent corporations filed a motion for the lifting of the lis pendens and

the exclusion of said properties from the estate of the decedent. Rufina, on the
other hand, argued that said properties must be included because the assets,
capital, and equity of respondent corporations are personally owned by Pastor.

Issue:
Should the properties in question be included in the inventory of the estate
of Pastor?

Held:
NO. If a property covered by Torrens title is involved, the presumptive
conclusiveness of such title should be given due weight, and in the absence of
strong compelling evidence to the contrary, the holder thereof should be considered
as the owner of the property in controversy until his title is nullified or modified in
an appropriate ordinary action, particularly, when possession of the property itself is
in the persons named in the title. A perusal of the records would reveal that no
strong compelling evidence was ever presented by petitioner to bolster her bare
assertions as to the title of the deceased Pastor Lim over the properties. Even so,
P.D. 1529 (The Property Registration Decree) proscribes collateral attack on Torrens
Title. It provides that 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.
Inasmuch as the real properties included in the inventory of the estate of Pastor are
in the possession of and are registered in the name of private respondent
corporations, which under the law possess a personality separate and distinct from
their stockholders, and in the absence of any cogency to shred the veil of corporate
fiction, the presumption of conclusiveness of said titles in favor of private
respondents should stand undisturbed. Therefore, the properties in question should
not be included from the inventory of the property of the estate.

Tenancy

BAUTISTA vs. ARANETA

G.R. No. 135829, February 22, 2000

Facts:
In 1978, petitioner Bayani Bautista allegedly entered into an oral tenancy
agreement with Gregorio Araneta II and had since then, cultivated and possessed
the land in an open, peaceful and continuous manner. Bayanis possession however
was disturbed when in 1991, a group of armed men sent by respondent, Patricia
Araneta, successor of GA II, ordered Bayani to vacate the land. Bayani filed a
complaint praying for injunctive relief and for recognition of his right as tenant.
Patricia, on the other hand, filed a counterclaim to dismiss the complaint and eject
Bayani.
The Provincial Adjudicator decided in favor of Bayani. The CA reversed the
same. It held that Bayani has not been constituted as a tenant by the landowner.

Issue:
Is respondent Patricia Araneta bound by the alleged oral leasehold
agreement between Bayani and Gregorio Araneta II?

Held:
NO. The requisites of a tenancy relationship are: (1) the parties are the
landowner and the tenant; (2) the subject is agricultural land; (3) there is consent
by the landowner; (4) there is personal cultivation; and (5) there is sharing of
harvest. Bayani is not a tenant of the disputed land. Bayani admitted in his own
testimony that he does not even know the landowner as he was not introduced to
the same. Further, Bayani did not establish that Gregorio, whom he has known and
believed as the owner of the land, became or was ever, the landowner. Since he
hinges his right on his alleged agreement with Gregorio, it follows that his position is
untenable since it was never shown that Gregorio has a right on the landholding. In
Lastimosa vs. Blanco, the SC has ruled that tenancy relationship can only be
created with the consent of the true and lawful landholder who is either the owner,
lessee, usufructuary or legal possessor of the land, and not thru the acts of the
supposed landholder who has no right to the land subject of the tenancy.

RUPA, SR. vs. COURT OF APPEALS

G.R. No. 80129, January 25, 2000

Facts:
Claiming that he was the agricultural share tenant and overseer of parcels
of coconut lands, petitioner Gerardo Rupa commenced an action for redemption on
March 26, 1981 against private respondent Magin Salipot, the vendee in the sale
made by spouses Vicente and Patrocinia Lim in January 1981 without any prior
written or verbal notice required by law. Rupa came to know about the sale when
he was informed in writing by the former landowner on February 16, 1981.
Both the RTC and CA shared the view that Rupa is not a share tenant and
accordingly dismissed the complaint for redemption.

Issue:

Is Rupa a share tenant so as to be entitled to the right of redemption?

Held:
YES. A tenant is defined under Section 5 (a) of Republic Act No. 1199 as a
person who himself and with the aid available from within his immediate farm
household cultivates the land belonging to or possessed by another, with the
latter's consent, for purposes of production, sharing the produce with the landholder
under the share tenancy system, or paying to the landholder a price certain or
ascertainable in produce or in money or both under the leasehold tenancy system.
Briefly stated, for this relationship to exist, it is necessary that:
1.

The parties are the landowner and the tenant;

2.

The subject is agricultural land;

3.

There is consent;

4.

The purpose is agricultural production;

5.

There is personal cultivation; and

6.

There is sharing of harvests.

Upon proof of the existence of the tenancy relationship, Rupa could avail of the right
of redemption under RA 3844. This right of redemption is validly exercised upon
compliance with the following requirements: a) the redemptioner must be an
agricultural lessee or share tenant; b) the land must have been sold by the owner to
a third party without prior written notice of the sale given to the lessee or lessees
and the DAR in accordance with Sec. 11, RA 3844, as amended; c) only the area
cultivated by the agricultural lessee may be redeemed; d) the right of redemption
must be exercised within 180 days from notice; and e) there must be an actual
tender or valid consignation of the entire amount which is the reasonable price of
the land sought to be redeemed.

The statements of Rupa in the criminal case that he is an administrator of the

landowners are not sufficient basis to overcome the rights of the petitioner as
provided in the Constitution and Agrarian statutes. The essence of agricultural
tenancy lies in the establishment of owner-cultivatorship and the economic familysize farm as the basis of Philippine agriculture, and as a consequence, divert
landlord capital in agriculture to industrial development. Rupas evidence to prove
the tenancy relationship consisted of his own testimony and those of his witnesses
from whose declarations it appears that the petitioner has physically possessed the
landholding continuously until he was ejected from it. Rupa lives on the landholding
and he has built a house next to the copra kiln. It has also been established that
Rupa has cultivated the land from the time he has taken possession thereof,
although there may have already been existing coconut trees in the landholding.
The fact that Rupa has been planting coconut seedlings and minor crops in the
vacant portions of the subject land as well as cleaning and gathering coconuts to
process them into copra is borne out by the records. Further indicating the tenancy
relationship between the landlord and Rupa is their agreement to share 50/50. The
sharing arrangement taken together with other factors characteristic of tenancy
shown to be present in the case at bar, strengthens the claim of Rupa that indeed,
he is a tenant.

PHILBANCOR FINANCE vs. COURT OF APPEALS

G.R. No. 129572, June 26, 2000

Facts:
Petitioner Vicente Hizon, Jr. is the owner of agricultural lands located in
Balite, San Fernando, Pampanga and the private respondents Alfredo Pare, Pablo
Galang and Amado Vie are the legitimate and bona fide tenants thereof. The said
lands were mortgaged by Hizon to petitioner Philbancor which were later on
extrajudicially foreclosed upon default of Hizon in the payment of his obligations.
Subsequently, the lands were sold at public auction to petitioner Philbancor. Seven
years after the registration of the sale with the Register of Deeds, private
respondents filed with the Provincial Agrarian Reform Adjudication Board (PARAB) a
complaint for maintenance of possession with redemption and tenancy right of preemption against petitioners Philbancor and Hizon.

Issue:
lands?

Can the private respondents maintain their possession of the subject

Held:
YES. Private respondents may continue in possession and enjoyment of the
land in question as legitimate tenants because the right of tenancy attaches to the
landholding by operation of law. The leasehold relation is not extinguished by the
alienation or transfer of the legal possession of the landholding.

GREENFIELD REALTY CORP. vs. CARDAMA

G.R. No. 129246, January 25, 2000

Facts:
Private respondents Loreto Cardama, et al. claim to have succeeded their
father Hermogenes Cardama who died in 1989 in the latters tenancy rights, and
should be declared as leasehold tenants and actual tillers of the subject irrigated
rice land. It is alleged that the leasehold tenancy began in 1978 through a verbal
agreement entered into by and between Independent Realty Corp. (IRC) and the late
Hermogenes wherein the former had designated the latter to take over the
maintenance of said landholding which was then undeveloped and uncultivated but
with the aid of the immediate members of their respective families became
productive as irrigated rice land. To prove their contention, the Cardamas
submitted their up-to-date payment of the lease rentals as evidenced by the
receipts issued by IRC and petitioner Greenfield Realty Corp. (GRC).

Issue:
land?

Are the private respondents bona fide tenants of the subject irrigated rice

Held:
YES. The DARAB ruled that Loreto, et al. cannot simultaneously claim the
right to succeed since RA 3844 allows only one heir to succeed to the tenancy of the
deceased tenant in the order of preference prescribed by Section 9 of the said law.
In this case however, the land is not cultivated by Hermogenes alone but with other
tenants who are likewise qualified and who are related to him. Thus, it can be said
that the entitlement of the other possessors is not by virtue of succession to the
rights of a predecessor-in-interest, but in their individual capacity as tenants therein
simultaneously with an ascendant. It is to be noted that the land herein involved is
more than 10 hectares which cannot be personally cultivated by Hermogenes alone.

Under Section 22 of RA 6657, the Comprehensive Agrarian Reform Law, those

entitled to the award of the land are: Section 22. Qualified Beneficiaries the
lands covered by the CARP shall be distributed as much as possible to landless
residents of the same barangay or in the absence thereof, landless residents of the
same municipality in the following order of priority:
h.)

agricultural lessees and share tenants

i.) regular farm workers

j.) seasonal farmworkers
k.)

other farmworkers

l.) actual tillers or occupants of public lands

m.)

collective or cooperatives of the above beneficiaries

n.)

others directly working on the land

Being the agricultural lessees on the land, Loreto et al. are qualified beneficiaries
absent any showing that they have been validly ejected or removed therefrom.

Preferential Rights of Tenants under P.D. 1517

DEE v. COURT OF APPEALS

G.R. No.108205, February 15, 2000

Facts:
Petitioners are occupants of the lands that belonged to Alejandro Castro.
Upon Castros death, his wife and son sold the lands for P500 per square meter to
Cesar Gatdula, a tenant of the land. Pending the transfer of the titles, Gatdula
offered to sell the disputed lots at P3,000 per square meter to each of the
petitioners who were occupants of the lands.. Petitioners did not buy at the price
offered. They filed a complaint against Gatdula for the exercise of their preferential
right to purchase the lands under Sec.6 of P.D. 1517, which grants pre-emptive
rights to (1) legitimate tenants who have resided on the land for ten years or more

who have built their homes on the land and (2) residents who have legally occupied
the land by contract, continuously for the last ten years.

Issue:
Was the sale to Gatdula alone, among the many tenants sufficient
compliance with P.D. 1517?

Held:
YES. The Castro heirs offered petitioners the chance to buy the land which
they respectively occupied. Gatdula, a tenant, expressed his intention to buy the
land provided he be given time to raise the funds. Petitioners stopped paying rent
after the death of Alejandro Castro, and they offered no proof that they did pay.
They also failed to show that they have resided on the land for ten years or more.
Nor have they shown that they are residents who have legally occupied the land by
contract, continuously for the last ten years and were entitled to benefit from the
provisions of P.D. 1517. With their failure to establish entitlement thereto, the offer
and sale of the land to Gatdula could not be said to be outside the pale of the
Decree.

Jurisdictional Requirements for Reconstitution of Title

HEIRS OF EULALIO RAGUA vs. COURT OF APPEALS

G.R. 88521-22 & 89366-67, January 31, 2000

Facts:
A petition for reconstitution of title was filed by Eulalio Ragua in 1964
covering 439 hectares of land situated in QC. He averred that the owners duplicate
of the OCT was lost and destroyed in 1945 when his personal effects and papers
were eaten by termites. The petition was opposed by several parties contending
that there was failure to comply with the jurisdictional requirements for judicial
reconstitution under RA 26 Sec. 12 & 13. The lower court ordered the Register of
Deeds to reconstitute in the name of Eulalio. However, the CA reversed the
decision, holding that the TC had no jurisdiction because of Eulalios failure to

comply with the requirements of the said law and that the latters action is also
barred by laches.

Issue:
Did the trial court acquire jurisdiction over the proceedings for
reconstitution of title?

Held:
Petitioners admittedly did not comply with the requirements of Sec. 12 (d),
(e) and (g), namely: The petition did not state (1) the nature and description of the
buildings and improvements, if any, which do not belong to the owner of the land,
and the names and addresses of the owners of such building and improvements, (2)
the names and addresses of the occupants of the adjoining properties and of all
persons who may have any interest in the property, and (3) that no deeds or other
instrument affecting the property may have been presented for registration.
Neither do this data appear in the notice of hearing. Besides, petitioners also did
not comply with the notice and publication under Sec. 13 because the order
directed that the notice be posted at the Caloocan City Hall, not in QC, where the
land is situated.
We have ruled that the failure to comply with the requirements of publication
and posting of notices prescribed in RA 26 Sec. 12 & 13 is fatal to the jurisdiction of
the court. Hence, non-compliance with the jurisdictional requirements renders its
decision approving the reconstitution and all proceedings therein utterly null and
void.
Moreover, petitioners filed the petition for reconstitution 19 years after the title
was allegedly lost or destroyed. Hence, petitioners are guilty of laches.