JURISPRUDENCE ON CIVIL LAWS

Gener
al
Princip
les

Effect & Application of Laws; Foreign Law; DOCTRINE OF

PROCESSUAL PRESUMPTION: In Phil. Jurisdiction, there is no judicial
notice of any foreign law. A foreign law must be pleaded and proved as a
fact. Even assuming that a foreign law on the matter were properly pleaded
and proved, it would not be applied if it is contrary to a sound and
established public policy of the forum.
*** Bank of America NT and SA v. American Realty Corp., GR 133876, Dec.
29, 1999.
Conflict of Law; The divorce, subsequent marriage, execution of will and
death of a Filipino who became an American long before and at the time of
the foregoing incidents, are governed by foreign law.
*** Llorete v. CA, GR 124371, Nov. 23, 2000.

Huma
n
Relatio
ns

Foreign Laws; Philippine courts cannot take judicial notice of foreign laws
w/c, like any other fact, must be alleged and proved either by: (1) an official
publication thereof; (2) a copy attested by the officer having the legal
custody of the record, or by his deputy, and accompanied by a certification
from the secretary of the Phil. Embassy or legation in such country or by
the Phil. Consul general, consul, vice-consul, or consular agent stationed in
such country, or by any other authorized officer in the Phil. foreign service
assigned to said country that such officer has custody.

Garcia
v.
Recio,
GR
13832
2, Oct.
2,
2001.

ABUSE OF RIGHT; Art. 19, NCC; Where a person exercises his rights but
does so arbitrarily or unjustly or performs his duties in a manner that is not
in keeping w/ honesty and good faith, he opens himself to civil liability. The
elements of abuse of ones rights are: (1) there is a legal right or duty; (2)
w/c is exercised in bad faith; (3) for the sole intent of prejudicing or injuring
another. Bad faith does not simply connote bad judgment or negligence; it
imputes a dishonest purpose or some moral obliquity and conscious doing
of a wrong; a breach of sworn duty through some motive or intent or ill will;
it partakes of the nature of fraud. In this case, the declaration of petitioner
as excess teacher was not an abuse of right.

Andra
de v.
CA,
GR
12793
2,
Dec.
7,
2001.

Same; Same; There was no abuse of right in this case of foreclosure of

mortgage. Under Article 19 of the Civil Code, "Every person must, in the
exercise of his rights and in the performance of his duties, act with justice,
give everyone his due, and observe honesty and good faith." The appellate
court, however, did not point to any fact evidencing bad faith on the part of
the Marinduque Mining and its transferees.

DBP v.
CA,
GR
12620
0,
Aug.
16,
2001.

Same ; Same ; There was no abuse of right in the implementation of an

order of demolition before it became final and executory, thus depriving
respondents of the right to appeal from an adverse ruling of the Office of
the Building Official. That the order of demolition was later affirmed by the
DPWH was of no moment.
*** Relosa v. Pellosix, GR 138964, Aug. 9, 2001.
Same; Art. 20, NCC; said specific provision does not require that the act
be directed at a specific person. It suffices that a person suffers damage as
a consequence of a wrongful act of another in order that indemnity could
be demanded from the wrongdoer. In terminating the hauling contract,
petitioner might not have deliberately intended to injure the respondentdrivers. But as a consequence of the willful act of petitioner directed
against Dr. Cruz, respondent-drivers lost their jobs and consequently
suffered loss of income.

Page 1 of 87

Civil Laws

Petrop
hil
Corp.
v. CA,
GR
12279
6,
Dec.
10,
2001.

UNJUST ENRICHMENT; Art. 22 of the Civil Code provides that "[e]very

person who through an act or performance by another, or by any other
means, acquires or comes into possession of something at the expense of
the latter without just or legal ground, shall return the same to him." Two
conditions must generally concur before the rule on unjust enrichment can
apply, namely: (a) a person is unjustly benefited, and (b) such benefit is
derived at another's expense or damage.

Indepe
n-dent
and
Separa
te Civil
Action
s

Civil Action for Damages Entirely Separate from the Criminal

Action; Art. 33, NCC; Defamation, Fraud, Physical Injuries;
Contemplates an action against the employee in his primary civil liability
not against the employer to enforce its subsidiary liability. Any action
brought against the employer based on its subsidiary liability before the
conviction of its employee (the accused) is premature.
*** Intl. Flavors and Fragrances (Phil.) v. Argo, GR 130326, Sept. 10, 2001.

Citizen
ship

Election; Such election must be done within a REASONABLE TIME

after reaching the age of majority. (Reasonable time would be not
more than 3 years after reaching age of majority accdording to Sec. of
Justice Opinion.)
*** RE: Application for Admission to the Phil. Bar by Vicente Chind, Bar
Matter No. 914, Oct. 1, 1999.

Person
s

CIVIL PERSONALITY; Legal Capacity; Advanced age; A person is not

incompetent to contract merely because of advanced years or by reason of
physical infirmities. However, when such age or infirmities have impaired
the mental faculties so as to prevent the person from properly, intelligently
and firmly protecting her property rights then she is undeniably
incapacitated.
*** Domingo v. CA, GR 127540, Oct. 17, 2001; Mendezona v. Ozamiz, GR
143370, Feb. 6, 2002.

Marria
ge

MARRIAGE LICENSE; Certificate of Legal Capacity (Art. 21, FC); Legal

capacity to contract marriage is determined by the national law of the party
concerned.
*** Garcia v. Recio, 2001.

MC
Engg.
v. CA,
GR
10404
7,
April
3,
2002.

SOLEMNIZING OFFICER; Under the Judiciary Reorganization Act of 1980,

or B.P. 129, the authority of the regional trial court judges and judges of
inferior courts to solemnize marriages is confined to their territorial
jurisdiction as defined by the Supreme Court. A marriage w/c preceded the
issuance of the marriage license is void, and that the subsequent issuance
of such license cannot render valid or even add an iota of validity to the
marriage. Except in cases provided by law, it is the marriage license that
gives the solemnizing officer the authority to solemnize a marriage.
*** Araes v. Judge Occiano, A.M. No. MTJ-02-1390, April 11, 2002.
PSYCHOLOGICAL INCAPACITY; As Ground for Annulment: Habitual
alcoholism, sexual infidelity or perversion, and abandonment do not
by themselves constitute grounds for psychological incapacity w/in the
contemplation of the Family Code.
***Hernandez v. CA, GR 126010, Dec. 8, 1999.
Same; Annulment due to Psychological Incapacity; In Republic v. CA
and Molina (268 SCRA 198, February 13, 1997), the GUIDELINES governing
the application and the interpretation of psychological incapacity referred
to in Article 36 of the Family Code were laid down by this Court as follows:
Page 2 of 87

Civil Laws

Marco
s v.
Marco
s, GR

1)
The burden of proof to show the nullity of the marriage belongs to
the plaintiff. Any doubt should be resolved in favor of the existence and
continuation of the marriage and against its dissolution and nullity.
2)
The root cause of the psychological incapacity must be: (a) medically
or clinically identified, (b) alleged in the complaint, (c) sufficiently proven
by experts and (d) clearly explained in the decision. Article 36 of the Family
Code requires that the incapacity must be psychological not physical,
although its manifestations and/or symptoms may be physical. Expert
evidence may be given by qualified psychiatrists and clinical psychologists.
3)
The incapacity must be proven to be existing at 'the time of the
celebration' of the marriage. The evidence must show that the illness
existed when the parties exchanged their 'I do's.' The manifestation of the
illness need not be perceivable at such time, but the illness itself must have
attached at such moment, or prior thereto.
4)
Such incapacity must also be shown to be medically or clinically
permanent or incurable. Such incurability may be absolute or even relative
only in regard to the other spouse, not necessarily absolutely against
everyone of the same sex. Furthermore, such incapacity must be relevant
to the assumption of marriage obligations, not necessarily to those not
related to marriage.
5.
Such illness must be grave enough to bring about the disability of
the party to assume the essential obligations of marriage. The illness must
be shown as downright incapacity or inability, not a refusal, neglect or
difficulty, much less ill will.
6)
The essential marital obligations must be those embraced by Articles
68 up to 71 of the FC as regards the husband and wife as well as Articles
220, 221 and 225 of the same Code in regard to parents and their children.
Such non-complied marital obligation(s) must also be stated in the petition,
proven by evidence and included in the text of the decision.
7)
Interpretations given by the National Appellate Matrimonial Tribunal
of the Catholic Church in the Philippines, while not controlling or decisive,
should be given great respect by our courts.
(8)
The trial court must order the prosecuting attorney or fiscal and the
Solicitor General to appear as counsel for the state. No decision shall be
handed down unless the Solicitor General issues a certification, which will
be quoted in the decision, briefly stating therein his reasons for his
agreement or opposition, as the case may be, to the petition. The Solicitor
General, along with the prosecuting attorney, shall submit to the court such
certification within fifteen (15) days from the date the case is deemed
submitted for resolution of the court.
The guidelines incorporate the three basic requirements earlier mandated
by the Court in Santos v. CA (240 SCRA 20, 34, January 4, 1995):
"psychological incapacity must be characterized by (a) gravity (b)
juridical antecedence, and (c) incurability." The foregoing guidelines do
not require that a physician examine the person to be declared
psychologically incapacitated. In fact, the root cause may be "medically or
clinically identified." What is important is the presence of evidence that can
adequately establish the party's psychological condition. For indeed, if the
totality of evidence presented is enough to sustain a finding of
psychological incapacity, then actual medical examination of the person
concerned need not be resorted to. Defects like Failure of respondent to
provide material support to, and his resort to physical abuse and
abandonment of, his family are not sufficient to establish psychological
incapacity on his part. In sum, this Court cannot declare the dissolution of
the marriage for failure of petitioner to show that the alleged psychological
incapacity is characterized by gravity, juridical antecedence and
incurability; and for her failure to observe the guidelines in outlined in
Molina.

13649
0, Oct.
19,
2000.

Divorce obtained abroad cannot dissolve a marriage between Filipinos.

*** Garcia v. Recio, 2001.
MARRIAGE; Subsequent Marriages; Distinction between the Civil
Code and Family Code; Under Art. 83 of the Civil Code provides that a
subsequent marriage contracted during the lifetime of the first spouse is
Page 3 of 87

Civil Laws

Caliste
rio v.
Caliste

illegal and void ab initio. The exceptions to this rule are found in paragraph
2 of said article. It further provides that in order for the subsequent
marriage to be valid, the spouse present so contracting the later marriage
must have done so in good faith. A judicial declaration is not necessary as
long as the prescribed period is met. These exceptional cases are explicit to
be deemed valid until declared null and void by a competent court. In
contrast, under the 1988 Family Code, in order that a subsequent bigamous
marriage to be valid, the ff. conditions must concur: (1) the prior spouse of
the contracting party must have been absent for 4 consecutive years, or 2
years where there is danger of death under the circumstances stated in Art.
391 of the Civil Code at the time of disappearance; (2) the spouse present
has a well-founded belief that the absent spouse is already dead; and (3)
there is, unlike the old rule, a judicial declaration of presumptive death of
the absentee for w/c the spouse present can institute a summary
proceeding in court.

rio, GR
13646
7,
April
6,
2000.

Same; Need for Declaration of Nullity: The 1st and 2nd marriage of
private respondent, contracted in 1977 and 1979, respectively, are
governed by the provisions of the Civil Code. Under the Civil Code, there is
no express provision that requires judicial declaration of nullity. In Mendoza
(1954) and Aragon (1957) the Court held that no judicial declaration is
necessary for the nullity of marriage. The provisions of the FC could not be
retroactively applied to those marriages governed under the Civil Code, for
to do so would prejudice the VESTED RIGHTS of petitioner and of her
children.

Ty, v.
CA,
GR
12740
6,
Nov.
27,
2000.

Same; Precedents; Where accused contracted a second marriage during

the subsistence of his first marriage. After the death of his 1 st wife, accused
contracted a 3rd marriage during the subsistence of the 2 nd marriage. The
2nd wife initiated a complaint for bigamy. The Court acquitted the accused
on the ground that the 2nd marriage is void, having been contracted during
the existence of the 1st marriage. Since the 2nd marriage is void, and the 1st
one terminated by death of his wife, there are no two subsisting valid
marriages to sustain conviction for bigamy.

PP v.
Mendo
za,
1954;
PP v.
Arago
n,
1957

Same; Same; In another case involving bigamy, where the bigamous

marriage was contracted during the effectivity of the FC, it was held that a
judicial declaration of nullity of a void marriage is necessary before one can
contract a second marriage. One who enters into a subsequent marriage
w/o first obtaining such judicial declaration is guilty of bigamy.
*** Mercado v. Tan, GR 137110, Aug. 1, 2000.
Same; Same; However, in these cases, the Court recognizes the right of
the 2nd wife who entered into the marriage in good faith, to share in their
acquired estate and in the proceeds of the retirement insurance of the
husband. The Court observed that although the 2 nd marriage can be
presumed void ab initio as it was celebrated while the 1 st marriage was still
subsisting, still there was a need for judicial declaration of such nullity of
the 2nd marriage. And since the death of the husband supervened before
such declaration, the Court upheld the right of the 2 nd wife to share in the
estate they acquired, on the grounds of justice and equity.
Same; Same; But the Court adverted and affirmed to Aragon and Mendoza
as precedents declaring that no judicial decree is necessary to establish the
invalidity of void marriages.
*** Odayat v. Amante, 1977; Tolentino v. Paras, 1983.
Same; Same; Yet again, the Court held that there is a need for a judicial
declaration of nullity of a void marriage.
*** Wiegel v. Sempio Dy, 1986.
Same; Same; The Court then again reverted to the Odayat, Mendoza and
Aragon rulings.
Page 4 of 87

Civil Laws

Gome
z
v.
Lipana
,
1970;
Consu
egra
v.
GSIS,
1971.

*** Yap v. CA, 1986.

Same; Same; The confusion under the Civil Code was put to rest under
the Family Code (FC). The Court rulings in Gomez, Consuegra and Wiegel
were embodied in Art. 40 of the FC w/c requires a judicial declaration of
nullity of marriage.
*** Terre v. Terre, 1992; Domingo v. CA, 1993
Same; Same; The Court, applying Odayat, Mendoza and Aragon, on the
issue of the nullity of the 1st marriage, held that since the 2 nd marriage took
place and all the children thereunder were born before the promulgation of
the Wiegel and the effectivity of the FC, there is no need for a judicial
declaration of nullity of the 1st marriage pursuant to the prevailing
jurisprudence at that time.

Apiag
v.
Canter
o,
1997.

ANNULMENT OF MARRIAGE; There being no marriage license during the

celebration of marriage as evidence only shows that marriage license was
only issued a year after the celebration of marriage; and there being no
claim of exceptional character, the purported marriage is void from the
very beginning.

Sy v.
CA,
GR
12726
3,
April
12,
2000.

Same; Damages in Action for Annulment; There can be no action for

damages between the husband and wife merely because of breach of a
marital obligation.
*** Ty v. CA, GR 127406, Nov. 27, 2000.
Proper
ty
Relatio
ns

CONJUGAL PROPERTY; Art. 1001 of the Civil Code provides, "Should

brothers and sisters or their children survive with the widow or widower,
the latter shall be entitled to one half of the inheritance and the brothers
and sisters or their children to the other half."
Generosa was the widow of Dr. Jose Fernandez and as provided in the
above-quoted Art. 1001, she is entitled to the of the inheritance and the
respondents to the other . In effect, pro indiviso is the share of
Generosa as the surviving spouse, i.e., as her share of the conjugal
property estate and of the remaining as share as heir from her
husband's estate. Thus, we find well taken the petitioners' assertion that
the annulment of the extra-judicial partition between Generosa and
petitioner Rodolfo does not necessarily result in respondents' having
exclusive right to the conjugal property, as erroneously found by the
respondent court. Generosa, during her lifetime, had the right to enjoy and
dispose of her property without other limitations than those established by
law, w/c right she exercised by executing a deed of sale in favor of
petitioner Eddie Fernandez.

Ferna
ndez
v.
Ferna
ndez,
GR
14325
6,
Aug.
28,
2001

CONJUGAL PARTNERSHIP; Death of either spouse terminates the

partnership; the conjugal property is liable of the outstanding obligations
of the partnership.
*** Ventura v. Hon. Militante, GR 63145, Oct. 5, 1999.
Same; Claim for the indebtedness of the deceased spouse should
be filed in the testate or intestate proceedings of the decedent.
Where a complaint is brought against the surviving spouse for the recovery
of indebtedness chargeable against the conjugal property, any judgment
obtained thereby is void.
*** Ventura v. Hon. Militante, GR 63145, Oct. 5, 1999.
Same; Liability of Conjugal Partnership; The loan in this case is a
liability of the conjugal partnership pursuant to Art. 121 of the FC. While
respondent did not and refused to sign the acknowledgment executed and
signed by his wife, undoubtedly, the loan REDOUNDED TO THE BENEFIT OF
Page 5 of 87

Civil Laws

Carlos
v.
Abelar
do, GR

THE FAMILY because it was used to purchase the house and lot w/c became
the conjugal home of respondent and his family. Hence, notwithstanding
the alleged lack of consent of respondent, under Art. 21 of the FC, he shall
be solidarily liable for such loan together w/ his wife.

14650
4,
April
9,
2002.

Conjugal Partnership Property; As a general rule, all property acquired

by the spouses during the marriage, regardless of in whose name the same
is registered, is presumed to belong to the conjugal partnership of gains,
UNLESS it is proved that it pertains exclusively to the husband or the wife.
Fishpond lease right granted solely in the name of the wife but during the
lawful existence of her marriage was held to be not her paraphernal
property.

Dianci
n
v.
CA,
GR
11999
1,
Nov.
20,
2000.

Same; Similarly, land acquired through the Sales Patent under CA 141 by
the wife whose application was approved and whose payments of the
purchase price was made during her marriage, was declared to be conjugal
property.
*** Isabela College, Inc. v. Heirs of Tolentino-Rivera, GR 132677, Oct. 20,
2000.
Same; Under the FC, the disposition of conjugal property by the husband
as administrator in appropriate cases requires the WRITTEN CONSENT of
the wife; otherwise, the disposition is VOID. Court authorization under Art.
124 of the FC is only resorted to in cases where the spouse who does not
give consent is incapacitated. In this case, the petitioner failed to alleged
and prove that respondent wife was incapacitated to give her consent to
the contracts.
*** Jader-Manalo v. Camaisa, GR 147978, Jan. 28, 2002.
Administration of Conjugal Partnership; Art. 124 of the FC
contemplates a situation where the spouse is absent or separated in fact or
has abandoned the other, or whose consent is withheld or cannot be
obtained, Proceedings thereunder are governed by the rules on summary
judicial proceedings. But said rule does not apply to cases where the nonconsenting spouse is incapacitated or incompetent to give consent, as
where the subject spouse is in a comatose or semi-comatose condition. In
such case, the proper remedy is a judicial guardianship proceedings under
Rule 93 of the Rules of Court.

Uy v.
CA,
GR
10955
7,
Nov.
29,
2000.

Dissolution of Conjugal Partnership; After the death of either spouse,

no complaint for collection of indebtedness chargeable against the conjugal
partnership can be brought against the surviving spouse. Instead, the claim
must be made in the proceedings for liquidation and settlement of the
conjugal property.
*** Alipio v. CA, GR 134100, Sept. 29, 2000.
PROPERTY RELATIONS OF COUPLES W/O THE BENEFIT OF
MARRIAGE; Under Art. 148 of the FC, a man and a woman who are not
legally capacitated to marry each other, but who nonetheless lives together
conjugally, may be deemed co-owners of property acquired during their
cohabitation upon proof that each made an actual contribution to its
acquisition.
*** Tumlos v. Sps. Fernandez, GR 137650, April 12, 2000.
Parents as Guardians of their Minor Children. Since the late Benito
Villanueva, son of Felipe Villanueva, died before the effectivity of RA 386,
otherwise known as the New Civil Code of the Philippines, the old Civil Code
governs the distribution and disposition of his intestate estate. Thereunder,
the legitime of the children and descendants consisted of two-thirds (2/3) of
the hereditary estate of the father and of the mother (first paragraph,
Article 808); and the widower or widow, as the case may be, who, at the
Page 6 of 87

Civil Laws

Mijare
s
v.
CA,
GR
10892
1,
April

time of death of his or her spouse, was not divorced or if divorced, due to
the fault of the deceased spouse, was entitled to a portion in usufruct equal
to that which pertains as legitime to each of the legitimate children or
descendants not bettered (Article 834, 1st paragraph.) In addition, under
the jurisprudence prevailing at the time of Benitos death, the rule was that
while parents may be the guardians of their minor children, such
guardianship did not extend to the property of their minor children. Parents
then had no power to dispose of the property of their minor children
without court authorization. W/o authority from a court, no person could
make a valid contract for or on behalf of a minor or convey any interest of a
minor in land.

12,
2000.

The proper action of the non-selling co-owner is not to annul the

sale nor to recover possession of the property from a third person,
but to PARTITION the entire property if it remains in the possession of
the co-owners who possessioned and administered it. The action for
partition is imprescriptible under Art. 494 of NCC.
*** Tomas Claudio Memorial College v. CA, GR 124262, Oct. 12, 1999.
Paterni
ty and
Filiatio
n

LEGITIMATE CHILDREN; PRESUMPTION OF LEGITIMACY; Under the

New Civil Code, a child born and conceived during a valid marriage is
PRESUMED to be legitimate. The presumption, however, is not conclusive
and may be overthrown by evidence to the contrary.
*** Liyao v. Tanhoti-Liyao, GR 138961, March 7, 2002.
Same; Impugnation of Legitimacy; The fact that Corazon had been
living from her husband at the time petitioner was conceived and born is of
no moment. While physical impossibility for the husband to have sexual
intercourse w/ his wife is one of the grounds for impugning the legitimacy
of a child, the grounds for impugning the legitimacy of a child in Art. 255,
NCC may only be invoked by the husband or, in proper cases, his heirs
under the conditions set forth under Art. 262, NCC. Impugning the
legitimacy of the child is a STRICTLY PERSONAL RIGHT of the husband or, in
exceptional cases, his heirs for the simple reason that he is the one directly
confronted w/ the scandal and ridicule w/c the infidelity of his wife produces
and he should be the one to decide whether to conceal that infidelity or
expose it in view of the moral and economic interest involved. Outside of
these cases, none can impugn the legitimacy of a child. Hence, the acts of
the undisputed children of Corazon w/ her husband in testifying for herein
petitioner did not amount to impugnation of the legitimacy of the latter.
There is nothing on the records to indicate that the husband had already
passed away at the time of the birth of the petitioner or at the time the
initiation of this proceeding. Notably, the case at bar was initiated by
petitioner by himself through his mother, Corazon, and not through the
aforementioned. It is settled that the legitimacy of the child can be
impugned only in a DIRECT ACTION brought for that purpose, by the proper
parties and w/in the period limited by law.

Liyao
v.
Tanhot
iLiyao,
GR
13896
1,
March
7,
2002.

Legitimacy; ACTION TO IMPUGN; In an attempt to establish their

illegitimate filiation to the late Juan G. Dizon, petitioners, in effect, would
impugn their legitimate status as being children of Danilo de Jesus and
Carolina Aves de Jesus. This step cannot be aptly done because the law
itself establishes the legitimacy of children conceived or born during the
marriage of the parents. The presumption of legitimacy fixes a civil status
for the child born in wedlock, and only the father, or in exceptional
instances the latter's heirs, can contest in an appropriate action the
legitimacy of a child born to his wife. Thus, it is only when the legitimacy of
a child has been successfully impugned that the paternity of the husband
can be rejected.

De
Jesus
v.
Estate
of
Dizon,
GR
14287
7, Oct.
2,
2001.

Same; COMPULSORY RECOGNITION; The present petition initiated by

Corazon, mother and guardian ad litem of petitioner (then minor), to
compel recognition of petitioner by respondents (heirs of the late William,

Liyao
v.
Tanhot

Page 7 of 87

Civil Laws

allegedly the paramour of Corazon) as the illegitimate son of the late

William cannot prosper. A child born w/in a valid marriage is presumed
legitimate even though the mother may have declared against its
legitimacy or may have been sentenced as an adulteress. Petitioner cannot
be allowed to maintain his present petition and subvert the clear mandate
of the law that only the husband or, in exceptional circumstances, his heirs,
could impugn the legitimacy of a child born in a valid and subsisting
marriage. The child himself cannot choose his own filiation. If the husband
(presumed to be the father) does not impugn the legitimacy of the child,
then the status of the child is fixed, and the latter cannot choose to be the
child of his mothers alleged paramour. On the other hand, If the
presumption of legitimacy is overthrown, The child cannot elect the
paternity of the husband who successfully defeated the presumption.

iLiyao,
GR
13896
1,
March
7,
2002.

Same; Same; Period for Filing the Action; Art. 285, NCC provides that
the action for the recognition may be brought only during the lifetime of the
presumed parents(s), subject to two (2) exceptions provided therein. One of
these exceptions is if the father or mother died during the minority of the
child, in w/c case the latter may file the action before the expiration of 4
years from attainment of his majority (at least upon reaching 22 years
old). The two exceptions above have been omitted by Arts. 172, 173, and
175 of the FC. Under the new law, an action for the recognition of an
illegitimate child must be brought w/in the lifetime of the alleged parent.
Nonetheless, the FC provides caveat that rights that have already vested
prior to its enactment should not be prejudiced or impaired. Hence,
Illegitimate children who were still minors at the time the FC took effect (03
Aug. 1988) and whose putative parent died during their minority are given
the right to seek recognition for a period of up to 4 years from attaining
majority age.

Berna
be v.
Alejo,
GR
14050
0, Jan.
21,
2002.

Same; Natural Children in Art. 285 of the Civil Code; It has been
clarified to include minors even if their parents were disqualified from
marrying each other; and spurious children.

id.

Same; Art. 263, NCC, Art. 171, FC and other related Articles on
Paternity and Filiation; Contemplates situations where a doubt exists
that a child is indeed a mans child by his wife, and the husband (or, in
proper cases, his heirs) denies the child filiation. Not where a child is
alleged not to be the child at all of a particular couple.
***Labagala v. Santiago, GR 132305, Dec. 4, 2001; Lee v. CA, GR 118387,
Oct. 11, 2001; Fernandez v. Fernandez, supra.
PROOF OF FILIATION; Illegitimate Children; Like legitimate children, is
established by: (1) the record of birth appearing in the civil register or a
final judgment; or (2) an admission of filiation in a public document or a
private handwritten instrument and signed by the parent concerned. In the
absence of the foregoing, filiation shall be proved by: (3) the open and
continuous possession of the status of a legitimate child; or (4) any other
means allowed by the rules of court and special laws. The due recognition
of an illegitimate child in a record of birth, a will, a statement before a court
of record, or in any authentic writing is, in itself, a consummated act of
acknowledgment of the child, and no further court action is required.
However, a claim for recognition predicated on evidence other than the
foregoing will require judicial action w/in the applicable statute of
limitations.
*** De Jesus v. Estate of Dizon, supra; Go Kim Huy v. Go Kim Huy, GR
137674, Sept. 20, 2001.
Same: The filiation of illegitimate children may be proved by any of the
forms of recognition of natural children, viz: (1) Voluntarily, which must be
express such as that in a record of birth, a will, a statement before a court
of record, or in an authentic writing; (2) legally, i.e., when a natural child is
recognized, such recognition extends to his or her brothers and sisters of
the full blood; and (3) judicially or compulsory, which may be demanded
Page 8 of 87

Civil Laws

Cenid
o
v.
Apacio
nado,
GR
13247

by the illegitimate child of his parent. The action for compulsory recognition
of the illegitimate child must be brought during the lifetime of the
presumed parent. After the parents death, the child cannot bring such
action, except in only two cases: one is when the supposed parent died
during the minority of the child or the case for recognition is pending, and
the other is when after the death of a parent, a document is discovered in
which the parent recognized the child as his. The action must be brought
within 4 years from attainment of majority in the first case, and from the
discovery of the document in the second case.

4,
Nov.
19,
1999.

Same; Voluntary Recognition; Meaning of a statement before a

court of record: Under the law, the statement in a court of record
must be made personally by the parent himself, not by any brother, sister
or relative.
*** Cenido v. Apacionado, GR 132474, Nov. 19, 1999.
Same; Baptismal Certificate is a private document and is not
conclusive proof of filiation.
*** Labagala v. Santiago, supra.
Same; Photographs; Respondents photograph w/ his mother near the
coffin of the decedent cannot and will not constitute proof of filiation.
*** Locsin v. Locsin, GR 146737, Dec. 10, 2001.
Birth Certificate, Fictitious; Annulment of; Under Art. 171 of the FC,
the childs filiation may only be impugned by the father, or, in special
circumstances, his heirs. This provision presupposes that the child is the
undisputed offspring of the mother. It does not apply to those cases where
the child is not at all the offspring of its alleged mother and the action is for
the cancellation of Birth Certificate. Thus, such action does not prescribe.
*** Babiera v. Catotal, GR 138493, June, 15, 2000.
Parent
al
Author
ity

CUSTODY; Minor Child; The burden is upon respondent to prove that

petitioner is not worthy to have custody of her children. We find that the
evidence presented by the respondent was not sufficient to establish her
unfitness according to Muslim law or the Family Code. What determines the
fitness of any parent is the ability to see to the physical, educational, social
and moral welfare of the children, and the ability to give them a healthy
environment as well as physical and financial support taking into
consideration the respective resources and social and moral situations of
the parents. The welfare of the minors is the controlling consideration on
the issue. In ascertaining the welfare and best interest of the children,
courts are mandated by the Family Code to take into account all relevant
considerations.

Bonda
gjy v.
Bonda
gjy,
GR
14081
7,
Dec.
7,
2001.

Same; Temporary Custody; The paramount criterion is the WELFARE

AND WELL-BEING OF THE CHILD in arriving at the decision as to whom
custody of the minor should be given. In the case at bar, the appellate
court did not err in allowing the father to have temporary custody of her
daughter who, pending the termination of proceedings for guardianship,
should not be wrenched off from her familiar surroundings and thrust into a
strange environment away from the people and places to w/c she had
apparently formed an attachment. In this case, it appears that the child was
in the custody of her father and paternal grandparents when temporary
custody issue was raised in court.

Tonog
v. CA,
GR
12290
6,
Feb.
7,
2002.

SPECIAL PARENTAL AUTHORITY; Under Art. 218 of the FC, the ff. shall
have special parental authority over a minor child while under their
supervision, instruction or custody: [1] the school, its administrators and
teachers; or [2] the individual, entity or institution engaged in child care.
This special parental authority and responsibility applies to all authorized
activities, whether inside or outside the premises of the school, entity or
institution such as field trips, excursions and other affairs of the pupils

St.
Marys
Acade
my v.
Carpit
anos,
GR

Page 9 of 87

Civil Laws

and students outside the school premises, whenever authorized by the

school or its teachers. Under Art. 219 of the FC, if the person under custody
is a minor, those exercising special parental authority are principally and
silidarily liable for damages caused by the acts or omissions of the
unemancipated minor while under their supervision, instruction, or custody.
In this case, however, petitioner school was not held liable for death
indemnity, moral damages and attorneys fees as the proximate cause of
the accident was not attributable to the minor in its custody.

14336
3,
Feb.
6,
2002.

CANCELLATION OR CORRECTION OF ENTRIES; All entries in the civil

register (referred to in Arts 407 and 408, NCC) may be changed or
corrected under Art. 412, NCC. This puts an end to the confusion sown by
earlier pronouncements that are premised on the interpretation that Art.
412 pertain only to clerical errors of a harmless or innocuous nature.

Lee v.
CA,
GR
11838
7, Oct.
11,
2001.

ACT 3753, an Act establishing the Civil Register; Certificate of Live

Birth. A Certificate of Live Birth duly recorded in the Local Civil Registry, a
copy of which is transmitted to the Civil Registry General pursuant to the
Civil Registry Law, is prima facie evidence of the facts therein stated.
However, if there are material discrepancies between them, the one
entered in the Civil Registry General prevails.

Locsin
v.
Locsin
,
2001.

Usufru
c-tuary

USUFRUCT; The owner may validly mortgage the property in favor

of a third person and the law provides that, in such case, the
usufructuary shall not be obligated to pay the debt of the mortgagor, and
should the immovable be attached or sold judicially for the payment of
debt, the owner shall be liable to the usufructuary for whatever the latter
may lose by reason thereof.

Heme
des v.
CA,
GR
10713
2, Oct.
8,
1999.

Proper
ty,
Ownershi
p and
its
Modific
ations

CLASSIFICATION OF PROPERTY; Real or Personal; Machineries and

Equipment; Intention of parties material. Assuming arguendo that the
properties in question are immovable by nature, nothing detracts the
parties from treating it as chattels to secure an obligation under the
principle of estoppel.
*** Tsai v. CA, GR 120098, Oct. 2, 2001.

Civil
Registr
y

POSSESSION; The legal presumption in Art. 541 of the Civil Code is merely
a disputable presumption. In the absence of actual, public and adverse
possession, the declaration of land for tax purposes does not prove
ownership.
*** Cequena v. Bolante, GR 137944, April 6, 2000.
Occupation; Under Art. 714 of the Civil Code, ownership of a piece of land
cannot be acquired by occupation.
*** Heirs of Seraspi v. CA, GR 135602, April, 28, 2000.
Possessor/Builder in Good Faith; W/ regard to rented land, lessees and
sub lessees are neither possessors nor builder s in good faith. They know
that their occupancy of the premises continues only during the life of the
lease and, they cannot as a matter of right neither recover the value of
their improvements from the lessor nor retain the premises until they are
reimbursed. Their rights are governed by Art. 1678 of the Civil Code w/c
allows reimbursement to lessees of up to of the value of their
improvements, if the lessor so elects.
*** Sps. Virgilio v. Patricia, GR 134651, Sept. 18, 2000.
Page 10 of 87

Civil Laws

Possessor in bad faith; It may claim reimbursement only for necessary

expenses and not for useful expenses.
*** Isaguirre v. De Lara, GR 138053, May 31, 2000.
OWNERSHIP; Recovery of Property; To maintain such action, the person
who claims that he has a better right to the property must prove not only
his ownership of the property claimed but also the identity thereof, by
location, area and boundaries.
*** Fabela v. CA, GR 142546, Aug. 9, 2001.
Same; Same; Under Art. 433, NCC, the true owner must resort to judicial
process for the recovery of property. The term judicial process could
mean no less than an ejectment suit or reinvidicatory action in w/c the
ownership claims of the contending parties may be properly heard and
adjudicated.

PNB v.
CA,
GR
13521
9, Jan.
17,
2002.

Same; Same; The owners of a property have no authority to use force and
violence to eject alleged usurpers who were in prior physical possession of
it. They must file the appropriate action in court and should not take the
law into their own hands.
*** Heirs of Laurora v. Sterling TechnoPark III, GR 146815, April 9, 2003.
CO-OWNERSHIP; Concept; Before a property owned in common is
actually partitioned, all that the co-owner has is an IDEAL OR ABSTRACT
QUOTA OR PROPORTIONATE SHARE IN THE ENTIRE PROPERTY. A co-owner
has no right to demand a concrete, specific or determinate part of the thing
owned in common because until division is effected his right over the thing
is represented only by an ideal portion. As such, the only effect of an action
brought by a co-owner against a co-owner will be to obtain recognition of
the co-ownership; the defendant cannot be excluded from a specific portion
of the property because as a co-owner he has a right to possess and the
plaintiff cannot recover any material or determinate part of the property.

Engre
so v.
De la
Cruz,
GR
14872
7,
April
9,
2003.

Same; Prescription between Co-owners; Article 494 of the Civil Code

which states that, "prescription does not run in favor of a co-owner or coheir against his co-owners or his co-heirs so long as he expressly or
impliedly recognizes the co-ownership." In Adile vs. CA[157 SCRA 455
(1988)] it was held: ". . . Prescription, as a mode of terminating a relation of
co-ownership, must have been preceded by repudiation (of the coownership). The act of repudiation, in turn, is subject to certain conditions:
(1) a co-owner repudiates the co-ownership; (2) such an act of repudiation
is clearly made known to the other co-owners; (3) the evidence thereon is
clear and conclusive; and (4) he has been in possession through open,
continuous, exclusive, and notorious possession of the property for the
period required by law."

Santos
v.
Santos
,
GR
13952
4, Oct.
12,
2000.

Same; Right of Pre-emption; After the physical division of the lot among
the brothers, the community ownership terminated; and the right of preemption or redemption for each brother was no longer available.
*** Sps. Si v. CA, GR 122047, Oct. 12, 2000.
Same; Right of Redemption; The notice required in Art. 1623 of the Civil
Code must be given by the vendor or prospective vendor and not by any
other person.
*** Francisco v. Boiser, GR 137677, May 31, 2000.
Same; Generosa sold not only her undivided shares in the building
also the share of the respondents. Such a sale w/o the consent of
respondents is not null and void as it conveys the rights of the seller
owner thereby making the buyer a co-owner to that extent together w/
respondents who owned the share therein.
Page 11 of 87

Civil Laws

but
the
cothe

Ferna
ndez
v.
Ferna
ndez,
2001.

PARTITION; An action to demand partition is imprescriptible or cannot be

barred by laches. Each co-owner may demand at any time the partition of
the common property.
*** Santos v. Santos, supra.
Accion Reinvindicatoria; Action to recover the right of possession and to
be declared the owner of the subject land. It is settled that the remedies of
accion publiciana or accion reivindicatoria must be availed of within 10
years from dispossession. Under Art. 555(4) of the Civil Code, the real right
of possession is lost after the lapse of 10 years.
*** Cutanda v. Heirs of Cutanda, GR 109215, July 11, 2000.
Tax Declaration; A mere tax declaration does not vest ownership of the
property upon the declarant.
*** Santos v. Santos, GR 139524, Oct. 12, 2000.
Restrictive Covenants in Subdivisions; The restrictive covenant subject
matter of this case is not intended for the benefit of adjacent homeowners
but to prescribe the uses of the building, i.e., to insure, among others
things, that the structures built on the subdivision project would prevent
overcrowding and promote privacy among subdivision dwellers. Petitioners
argument that their immediate neighbors did oppose the construction
work; and that the expansion is necessary to accommodate the individual
families of their children must fail. Neither can petitioners claim good faith
as the restrictive covenants are explicitly written in the contract to sell and
annotated at the back of the TCT. Since the expansion constructed exceeds
the floor area limits of the restrictive covenants, petitioners can be reqd to
demolish the structure to the extent that it exceeds the prescribed floor
plan. The ruling in Ayala Corp. v. Ray Burton Dev. Corp. (294 SCRA 48), w/c
merely adjudged the payment of damages in lieu of demolition does not
apply to this case.
Easem
ents

LEGAL EASEMENT; Right of Way; It must be at the point least prejudicial

to the servient estate.
*** Sabio v. Intl. Corporate Bank, GR 132709, Sept. 4, 2001.
RIGHT OF WAY; The easement in the instant case is both (1) as easement
by grant or voluntary easement; and (2) an easement by necessity or legal
easement. A Legal Easement is one mandated by law, constituted for public
use or for private interest, and becomes a continuing property right. As a
compulsory easement, it is inseparable from the estate to w/c it belongs, as
provided for in Art. 617, NCC. The essential requisites for easement to be
compulsory are [1] the dominant estate is surrounded by other immovables
and has no adequate outlet to a public highway; [2] proper indemnity has
been paid; [3] the isolation was not due to acts of the proprietor of the
dominant estate; [4] the right of way claimed is at a point least prejudicial
to the servient estate; and [5] to the extent consistent w/ the foregoing
rule, the distance from the dominant estate to a public highway may be the
shortest. It is settled that the needs of the dominant estate determine the
width of the easement. Conformably then, petitioner ought to demolish
whatever edifice obstructs the easement in view of the needs of private
respondents estate.

Succes
sion

Fajard
o
v.
Freed
om to
Build,
Inc.,
GR
13469
2,
Aug.
1,
2000.

Villanu
eva v.
Velasc
o, GR
13084
5,
Nov.
27,
2000.

WILLS; The wishes and desire of the testator must be strictly followed. A
will cannot be the subject of a compromise w/c would thereby defeat the
very purpose of making a will.
*** Rabadilla v. CA, GR 113725, June 29, 2000.
Same; The clear intent of the decedent to bequeath his property to his
second wife and children by her is glaringly shown in the will he executed.
Since the decedent was a foreigner, Philippine law on family rights and

Page 12 of 87

Civil Laws

Lloren
te
v.
CA,

duties, status, condition and legal capacity did not govern. Whether the will
is intrinsically valid and who shall inherit from the decedent are issues best
proved by foreign law w/c must be pleaded and proved. As a guide,
however, the trial court should note that whatever public policy or good
customs may be involved in our system of legitimes, Congress did not
intend to extend the same to the succession of foreign nationals.

GR
12437
1,
Nov.
23,
2000.

Partition Inter Vivos; It may be done for as long as legitimes are not
prejudiced. The legitime of compulsory heirs is determined after collation,
as provided for in Art. 1061, NCC.
*** Zaragosa v. CA, GR 106401, Sept. 29, 2000.
INSTITUTION OF HEIRS; Modal institution distinguished from
fideicommisary substitution; further distinguished from conditional
testamentary disposition: The institution of an heir in the manner
prescribed in Art. 882 is what is known in the law of succession as an
institucion sub modo or 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;
while In a fideicommissary substitution, the first heir is strictly mandated to
preserve the property and to transmit the same later to the second heir.
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. A fideicommissary substitution is therefore, void if the first
heir is not related by first degree to the-second heir. And 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. 20 To
some extent, it is similar to a resolutory condition.

Rabad
illa v.
CA,
GR
11372
5,
June
29,
2000.

Same; 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. In
simple substitutions, the second heir takes the inheritance in default of the
first heir by reason of incapacity, predecease or renunciation.

Rabad
illa v.
CA,
GR
11372
5,
June
29,
2000.

Same; Meaning of one degree in fideicommisary substitution.

The term "one degree" has been the subject of varied interpretation. One
view is to the effect that the term means one transfer, citing the Supreme
Tribunal of Spain and as advocated by eminent civilists as Justices J.B.L.
Reyes, R. Puno, E. Caguioa, and D. Jurado. In Ramirez vs. Ramirez, decided
on 15 February 1982, the Court, however, adopted the literal view that "one
decree" means relationship or generation as so advanced by equally
eminent writers Dr. A. Padilla, Justice E. Paras and Dr. A. Tolentino. In the
subsequent case of the Testate Estate case of Fr. Aranas, however, the
Court upheld the usufructuary right of the Roman Catholic Church under a
legacy that now renders doubtful the continued validity of the Ramirez
doctrine.
*** Rabadilla v. CA, GR 113725, June 29, 2000. (Separate Opinion of Justice
Vitug.)
RULE ON PROXIMITY; Right of Representation; The rule on proximity
is a concept that favors the relatives nearest in degree to the decedent and
excludes the more distant ones EXCEPT when and to the extent that the
right of representation can apply.
*** Bagunu v. Piedad, GR 140975, Dec. 8, 2000.
Page 13 of 87

Civil Laws

COLLATION; There being an implied trust, the lots in question are

therefore subject to collation in accordance with Art. 1061 which states that
every compulsory heir, who succeeds with other compulsory heirs, must
bring into the mass of the estate any property or right which he may have
received from the decedent, during the lifetime of the latter, by way of
donation, or any other gratuitous title, in order that it may be computed in
the determination of the legitime of each heir, and in the account of the
partition.

Nazar
eno v.
CA,
GR
13884
2, Oct.
18,
2000.

Transmissible Obligations; The general rule is that heirs are bound by

contracts entered into by their predecessors-ininterest, 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, the
contract of lease w/ option to buy, is by nature, transmissible.
*** DKC Holdings Corp. v. CA, GR 118248, April 5, 2000.

Donati
on

Donation Mortis Causa; Characteristics: [1] It conveys no title or

ownership to the transferee before the death of the transferor; or what
amounts to the same thing, that the transferor should retain the ownership
(full or naked) and control of the property while alive; [2] Before the
transferors death, the transfer should be revocable by the transferor at
will, ad nutum; but revocability may be provided for indirectly by means of
a reserved power in the donor to dispose of the properties conveyed; and
[3] The transfer should be void if the transferor should survive the
transferee. In the present case, the donations are mortis causa as: they do
not contain any clear provision that intends to pass proprietary rights to
petitioners prior to the donors death. That the donations were made in
consideration of the love and affection of the donor does not qualify the
donations as inter vivos because transfers mortis causa may also be made
for the same reason. Donations mortis causa partake of the nature of
testamentary provisions and must be executed in accordance w/ the
requisites on solemnities of wills and testaments under Arts. 805 and 806
of the Civil Code.

Magla
sang
v.
Heirs
of
Cabati
ngan,
GR
13195
3,
June
5,
2002.

Arts. 712, 725, 744,750 and 1544 of NCC explained; Distinction

between validity of donation and sale in case of double donation or
sale by the donor/seller:: In donation once perfected would deny the
valid execution of a subsequent inconsistent donation (unless the prior
donation has provided a suspensive condition which still suspends when
the latter donation is made). In Sales, it is only at the consummation stage
of the sale (i.e. delivery of the thing sold), that ownership would be deemed
transmitted to the buyer. Thus, a subsequent sale to another of the same
thing by the same seller can still be legally possible. Hence, the rule on
double sales finds no relevance in an ordinary donation, because in
ordinary donation, unlike in sale, the law requires the donor to have
ownership of the things or the real right he donates at the time of its
perfection.

Heme
des v.
CA,
GR
10713
2, Oct.
8,
1999.
(Justic
e
Vitug,
concur
ring)

DONATION INTER VIVOS or DONATION MORTIS CAUSA; Crucial in

resolving whether the donation is inter vivos or mortis causa is the
INTENTION OF THE DONOR to transfer ownership of the property upon the
execution of the deed. The donation in this case was inter vivos in the light
of the ff: [1] the donation was made out of the donors love and affection
for the donee; [2] the reservation of lifetime usufruct w/c indicated that the
donor intended to transfer the naked ownership over the properties, as
there was no need for such reservation if the donor and his spouse
remained the owners thereof; [3] the donor reserves sufficient properties
for his maintenance in accordance w/ his standing in society, indicating that
he intended to part ownership of the properties donated; and [4] the donee
accepted the the donation. Donation mortis causa, being in the form of a
will, are not reqd to be accepted by the donee during the donors lifetime. A
valid donation, once accepted, becomes irrevocable, except on account of
inofficiousness, failure by the donee to comply w/ the charge imposed by

Sps.
Gesto
pa v.
CA,
GR
11190
4, Oct.
5,
2000.

Page 14 of 87

Civil Laws

the donation, or ingratitude.

Donation Inter Vivos; Property donated inter vivos is subject to collation
after the donors death, whether the donation was made to a compulsory
heir or a stranger, unless there is an express prohibition if that had been
the donors intention.
*** Quilala v. Alcantara, GR 132681, Dec. 3, 2001.
Same; Irrevocable Character; The express irrevocability of the donation
in this case is the distinctive standard that identifies that the document is a
donation inter vivos. The other provisions therein w/c seemingly make the
donation mortis causa do not go against the irrevocable character of the
subject donation. The provisions w/c states that the donation will only take
effect upon the death of the donor and that there is a prohibition to
alienate, encumber, dispose of or sell the donated property, should be
harmonized w/ its express irrevocability. Said statements have been
construed only to mean that after the donors death, the donation will take
effect as to make the donees the absolute owners of the donated property,
free from all liens and encumbrances. Another indication that the donation
in inter vivos is the acceptance clause. Acceptance is a requirement for
donations inter vivos.

Austri
aMagat
v. CA,
GR
10675
5,
Feb.
1,
2002.

Same; Formalities; Below the terms and stipulations of the donation, the
donor, donee and their witnesses affixed their signatures. However, the
acknowledgment appearing on the second page mentioned only the donor.
Thus, the trial court ruled that for the donnees failure to acknowledge her
acceptance before the notary public, the same was set forth merely on a
private instrument, i.e., the first page of the instrument and was not valid.
The Court held that lack of an acknowledgment by the donee before the
notary public does not render the donation null and void. The instrument
should be treated in its entirety. The fact that it was acknowledged by the
donor before a notary public converts the deed of donation in its entirety to
a public instrument. That the donee was not mentioned by the notary
public in the acknowledgment is of no moment.

id.

Donations w/ Resolutory Conditions; Rules on onerous donation are

applicable to donations w/ a resolutory condition.
*** Vda. De Delgado v. CA, GR 125728, Aug. 28, 2001.
REVOCATION OF DONATION; Judicial Action; The act of selling the
subject property to the petitioner herein cannot be considered as a valid
act of revocation of the deed of donation for the reason that an action to
revoke the donation must be filed pursuant to Art. 764, NCC. The rule that
there can be automatic revocation w/o court action does not apply to the
case at bar as there is no provision in the subject deed of donation for
automatic revocation in the event of non-compliance w/ any of the
conditions set forth therein.

Obligati
ons

Nature and Effect of Obligations; Failure to return the owners duplicate

certificate of title after the mortgage was released upon payment of the
loan secured by it is breach of contract (Art.1170, NCC) and not quasi-delict
(Art. 2176, NCC).
*** GSIS v. SPs. Gonzalo, GR 135644, Sept. 17, 2001.
KINDS OF OBLIGATION; Solidary Obligation; Surety; Although the
contract of a surety is in essence secondary only to a valid principal
obligation, the suretys liability to the creditor is direct, primary and
absolute; and becomes liable for the debt and duty of another although he
possesses no direct or personal interest over the obligations and does not
receive any benefit therefrom.
*** Molino v. Security Diners Intl. Corp., GR 136780, Aug. 16, 2001.

Page 15 of 87

Civil Laws

Austri
aMagat
v. CA,
GR
10675
5,
Feb.
1,
2002.

Same; Surety; A suretyship agreement can secure future loans even if the
amount is not yet known.
*** South City Homes, Ba Finance Corp., GR 135462, Dec. 7, 2001.
Same; Same; However, the obligation of a surety cannot be extended by
implication beyond its specified limits. When a surety executes a bond, it
does not guarantee that the plaintiffs cause of action is meritorious, and
that it will be responsible for all the costs that may be adjudicated against
its principal in case the action fails. The extent of a suretys liability is
determined only by the contract of suretyship.
*** Visaya Surety & Insurance Corp. v. CA, GR 127261, Sept. 7, 2001.
Same; Same; Suretys liability re: CREDIT CARD; While the Court
commiserates in the financial predicament petitioner now faces, the liability
she incurred is only the legitimate consequence of an undertaking that she
freely and intelligently obliged to. Prospective sureties to credit card
applicants would be well-advised to study carefully the terms of the
agreements prepared by the credit card companies before giving their
consent, and pay heed to stipulations that could lead to onerous effects,
likein the present case where the credit applied for was limitless.

Molino
v.
Securi
ty
Diners
Intl.
Corp.,
supra.

Same; Same; Same; In another case, the liability for extension or

supplemental credit card was not established.
*** BPI Express Card Corp. v. Olalia, GR 131086, Dec. 14, 2001.
Same; Same; Suretys Liability re: LETTERS OF CREDIT. In this case,
petitioners admit that they signed the letters of credit and related
documents pertaining to the transactions with Metrobank. However,
petitioners claimed that they signed the forms in blank. The documents
show that the petitioners agreed to jointly and severally undertake
payment of the obligations and also consented to each and all of the
stipulated conditions on the documents. "An experienced businessman who
signs important legal papers cannot disclaim the consequent liabilities
therefore after being a signatory thereon.
*** Blade Intl. Marketing Corp. v. CA, GR 131013, Dec. 14, 2001.
Solidary Obligation distinguished from Joint Obligation; A solidary or
joint and several obligation is one in w/c each debtor is liable for the entire
obligation, and each creditor is entitled to demand the whole obligation. In
a joint obligation, each obligor answers only for a part of the whole liability
and to each obligee belongs only a part of the correlative rights. Solidary
obligations cannot lightly be inferred. There is solidary liability only when
the obligation expressly so states, when the law so provides, or when the
nature of the obligation so requires.
*** Industrial Management Intl. Dev. Corp. v. NLRC, GR 101723, May 11,
2000.
Joint Obligation; When it is not provided in a judgment that the
defendants are liable to pay and severally a certain sum of money, none of
them may be compelled to satisfy in full the judgment.
*** Industrial Management Intl. Dev. Corp. v. NLRC, GR 101723, May 11,
2000.
Reciprocal Obligation; In the case at bar, the correlative obligation of the
Tius to let the Ongs have and exercise the functions of the positions of
President and Secretary is the obligation of the Ongs to let the Tius have
and exercise the functions of Vice-President and Treasurer. It cannot be
denied that the Pre-Subscription Agreement contains reciprocal obligations
owing to the fact that the parties thereto agreed to maintain parity not only
in their shareholdings in FLADC but also with regard to their standing in
FLADC. In fine, each party. has the obligation to remain equal with the
other on every matter pertaining to FLADC.
Page 16 of 87

Civil Laws

Ong
Yong
v. Tiu,
GR
14447
6,
Feb.
1,
2002.

RESCISSION (Art. 1191, NCC); No third Persons Involved; The object

of the Pre-Subscription Agreement one million shares of stock subscribed
to by the Ong Group, the additional 549,800 shares subscribed to by the
Tius, and the corporate positions mentioned above are not in the
possession of third persons, but are in the possession of the parties to the
Pre-Subscription Agreement. In any case, FLADC is not a third person in
relation to the Pre-Subscription Agreement though not named as a party.
FLADC is deemed a party to the agreement by virtue of stipulations pour
autrie clearly and deliberately conferring on it a favor or benefit which it
subsequently accepted. (Art. 1311, Civil Code) 12 Such benefit was in the
form of the payments made by the parties for their subscription to shares
of stock in FLADC, which FLADC accepted.

Ong
Yong
v. Tiu,
GR
14447
6,
Feb.
1,
2002.

Same; Material and Substantial Breach; What makes a stockholder an

officer of a corporation is not simply the fact of his election but, more
important, his ability to perform the powers and functions of that office. The
Ongs indeed prevented the Tius from exercising the powers and functions
of their office. We rule, therefore, that such breach of the agreement on the
part of the Ongs is substantial and fundamental.

Ong
Yong
v. Tiu,
GR
14447
6,
Feb.
1,
2002.

Same; Restoration of the Parties to Status Quo Ante; The transfer to

the Tiu Group whatever remains of the assets of FLADC and the
management thereof, the same is but an inevitable consequence of the
rescission of the Pre-Subscription Agreement. Restoration of the parties to
status quo ante dictates that the building constructed on the two (2)
existing lots of FLADC, the remaining asset of FLADC, be transferred to the
Tiu Group. The status quo ante immediately prior to the execution of the
Pre-Subscription Agreement was that the Tius, then wholly owning FLADC,
had control and custody over this remaining asset.

Ong
Yong
v. Tiu,
GR
14447
6,
Feb.
1,
2002.

FORTUITUOUS EVENT; A caso fortuito is an event which could not be

foreseen, or which, though foreseen, was inevitable. This requires that the
following requirements be present: (a) the cause of the breach is
independent of the debtor's will; (b) the event is unforeseeable or
unavoidable; (c) the event is such as to render it impossible for the debtor
to fulfill his obligation in a normal manner, and (d) the debtor did not take
part in causing the injury to the creditor.

Calala
s
v.
CA,
GR
12203
9, May
31,
2000.

Same; It is that which cannot be foreseen, or when, even if foreseen, is

inevitable. Exemption from liability for breach of an obligation due to an
act of God, the following requisites must concur: (1) the cause of the
unforeseen and unexpected occurrence or of the failure to comply the
obligation (breach of the obligation) must be independent of the will of the
debtor; (2) the event must be either unforeseeable or unavoidable; (3) the
event must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner; and (4) the debtor must be free from any
participation in, or aggravation of, the injury to the creditor.
*** Huibonhoa v. CA, GR 95897, Dec. 14, 1999; Mindex Resources Dev. V.
Morillo, GR 138123, March 12, 2002; Phil. American Gen. Insurance Co. v.
Mgg Marine Services, GR 135645, March 8, 2002.
Same; Art. 1174, NCC states that no person shall be responsible for a
fortuitous event that could not be foreseen or, though foreseen, was
inevitable.
*** Mindex Resources Dev. V. Morillo, GR 138123, March 12, 2002; Phil.
American Gen. Insurance Co. v. Mgg Marine Services, GR 135645, March 8,
2002.
EXTRAORDINARY INFLATION; It exist when there is a decrease or
increase in the purchasing power of the Phil. Currency w/c is unusual or
Page 17 of 87

Civil Laws

Singso
n
v.

Exting
uishment
of
Obligati
ons

beyond the common fluctuation in the value of said currency, and such
increase or decrease could not be reasonably foreseen or was manifestly
beyond the contemplation of the parties at the time of the establishment of
the obligation. The supervening event of extraordinary inflation is never
assumed. While there was decline in the purchasing power of the Phil.
Currency from the period 1966 to 1986, such cannot be considered as
extraordinary; rather, it was a normal erosion of the value of the Phil. Pesos
w/c is characteristics of most currencies. The effect of extraordinary
inflation is not to be applied w/o an official declaration thereof by
competent authorities.

Caltex
,
Phils.,
GR
13779
8, Oct.
4,
2000.

PENALTY CLAUSE; A penalty clause, expressly recognized by law, is an

accessory undertaking to assume greater liability on the part of an obligor
in case of breach of an obligation. It functions to strengthen the coercive
force of the obligation and to provide, in effect, for what could be the
liquidated damages resulting from such a breach. The obligor would then
be bound to pay the stipulated indemnity without the necessity of proof on
the existence and on the measure of damages caused by the breach.
Although a court may not at liberty ignore the freedom of the parties to
agree on such terms and conditions as they see fit that contravene neither
law nor morals, good customs, public order or public policy, a stipulated
penalty, nevertheless, may be equitably reduced by the courts if it is
iniquitous or unconscionable or if the principal obligation has been partly or
irregularly complied with. The question of whether a penalty is reasonable
or iniquitous can be partly subjective and partly objective. Its resolution
would depend on such factors as, but not necessarily confined to, the type,
extent and purpose of the penalty, the nature of the obligation, the mode of
breach and its consequences, the supervening realities, the standing and
relationship of the parties, and the like, the application of which, by and
large, is addressed to the sound discretion of the court. The stipulated
penalty might likewise be reduced when a partial or irregular performance
is made by the debtor. 15 The stipulated penalty might even be deleted
such as when there has been substantial performance in good faith by the
obligor, 16 when the penalty clause itself suffers from fatal infirmity, or
when exceptional circumstances so exist as to warrant it.

Liguta
n
v.
CA,
GR
13867
7,
Feb.
12,
2002.

Same; Interests; The essence or rationale for the payment of interest,

quite often referred to as cost of money, is not exactly the same as that of
a surcharge or a penalty. A penalty stipulation is not necessarily preclusive
of interest, if there is an agreement to that effect, the two being distinct
concepts which may separately be demanded. What may justify a court in
not allowing the creditor to impose full surcharges and penalties, despite an
express stipulation therefor in a valid agreement, may not equally justify
the nonpayment or reduction of interest. Indeed, the interest prescribed in
loan financing arrangements is a fundamental part of the banking business
and the core of a bank's existence.

id.

Same; Attorneys Fees; The award of 10% of the total amount of

indebtedness by way of attorney's fees is not grossly excessive, exorbitant
and unconscionable and find to be reasonable, vis-a-vis the time spent and
the extent of services rendered by counsel for the bank and the nature of
the case. Bearing in mind that the rate of attorney's fees has been agreed
to by the parties and intended to answer not only for litigation expenses
but also for collection efforts as well.

id.

PAYMENT; The right to specify w/c/ among his various obligations to the
same creditor is to be applied first rest w/ the debtor. Under the law, if the
debtor does not declare at the time he makes payment w/c among his
debts w/ his creditor the payment is to be applied, no payment is to be
made to a debt that is not yet due and the payment has to be applied first
to the debt most onerous to the debtor. The lease over the Fairview Wet
Market property is the most onerous among all the obligations of petitioner
to respondent in this case. Hence, ejectment case based on alleged failure
to pay rentals (as the payment of the debtor was applied to obligations

Faculd
o
v.
Ragal
ado,
GR
12385
5,
Nov.
20,

Page 18 of 87

Civil Laws

other than the rental then due) was w/o basis and should have been
dismissed.

2000.

Same; Tender of Payment; Though a check is not legal tender, a creditor

may validly refuse to accept it if tendered as payment, one who in fact
accepted a fully funded check after the debtors manifestation that it had
been given to settle an obligation is estopped from later on denouncing the
efficacy of such tender of payment.
*** Far East Bank & Trust Co. v. Diaz Realty, GR 138588, Aug. 23, 2001.
Same; Consignation; Act of depositing the thing due w/ the court or
judicial authorities whenever the creditor cannot accept or refuses to
accept payment and it generally requires a prior tender of payment. Where
no debt is due and owing, consignation is not proper. *** Bacus v. CA, GR
127695, Dec. 3, 2001.
Same; Requisites of Consignation. Consignation to be valid and
effective must comply with the following requisites, namely:
(a)
Tender of payment and refusal to accept without reason;
(b)
Previous notice of consignation to the persons interested in its
fulfillment;
(c)
After the deposit or consignation has been made, the persons
interested shall be notified thereof.
*** Segovia Dev. Corp. v. J.L. Dumatol Realty and Dev. Corp., GR 141283,
Aug. 30, 2001.
Same; Substantial compliance with the procedural requirements of
the law by reason of equity.
*** De Mesa v. CA, GR 106467-68, Oct. 19, 1999.
COMPENSATION; Debt distinguished from mere Claim; For
compensation to take place, a distinction must be made between a debt
and a mere claim. A debt is a claim which has been formally passed upon
by the highest authority to which it call in law be submitted and has been
declared to be a debt. A claim, on the other hand, is a debt in embryo. It is
mere evidence of a debt and must pass through the process prescribed by
law before it develops into what is properly called a debt." There being no
two debts for which either part may be said as principally bound to each
other, again, there can be no set-off. Only liquidated debts are enforceable
in court, there being no apparent defenses inherent in them.

Repub
lic v.
Sandi
ganba
yan,
GR
12860
6,
Dec.
4,
2000.

Same; Conventional compensation; It takes place when the parties

agree to compensate their mutual obligations even in the absence of some
of the requisites for legal compensation.
*** PNB Madecor v. Uy, GR 129598, Aug. 15, 2001.
PRESCRIPTION; Extinctive under Art. 1141 of the Civil Code. Acquisitive
prescription of dominion and other real rights may be ordinary or
extraordinary, depending on whether the property is possessed in good
faith and with just title for the time fixed by law. Art. 1129 provides: For the
purposes of prescription, there is just title when the adverse claimant came
into possession of the property through one of the modes recognized by
law for the acquisition of ownership or other real rights, but the grantor was
not the owner or could not transmit any right. And 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.
Same; Under Art. 1150 of the Civil Code, the time for prescription of all
kinds of actions, when there is no special provision w/c ordains otherwise, is
counted from the day they may be brought. It is reckoned only from the
date the cause of action accrued.
*** Banco Filipino Savings and Mortgage Bank v. CA, GR 129227, May 30,
Page 19 of 87

Civil Laws

Heirs
of
Seras
pi
v.
CA,
GR
13560
2,
April
28,
2000.

2000.
LACHES; There is no absolute rule on what constitutes laches. It is a
creation of equity and applied not really to penalize neglect or sleeping
upon ones rights but rather to avoid recognizing a right when to do so
would result in a clearly inequitable situation. The question of laches is
addressed to the sound discretion of the court and each case must be
declared according to its particular circumstances.

Villanu
evaMijare
s
v.
CA,
GR
10892
1,
April
12,
2000.

NOVATION; Novation is never presumed: The parties to a contract

must expressly agree that they are abrogating their old contract in favor of
a new one.

Huibo
nhoa
v. CA,
GR
95897
, Dec.
14,
1999.

Same; For novation to take place, the ff. requisites must concur: [1] there
must be a valid obligation; [2] there must be an agreement of the parties
concerned to a new contract; [3] there must be the extinguishment of the
old contract; and [4] there must be the validity of the new contract. In the
case at bar, the 3rd requisite is not present. The parties did agree that the
amount loaned would be converted into respondents contribution to the
partnership, but this conversion did not extinguish the loan obligation.
Significantly, novation is never presumed. It must appear by express
agreement of the parties, or by their acts that are too clear and
unequivocal to be mistaken for anything else. An old obligation to pay a
sum of money is not novated in a new instrument wherein the old is
ratified by changing
only the terms of payment and adding other
obligations not incompatible w/ the old one, or wherein the old contract is
merely supplemented by the new one.

Sps.
Reyes
v. CA,
GR
14775
8,
June
26,
2002.

Same; Money Market transaction; Payment in Check: Where the

lender accepts the check of the borrower instead of requiring payment in
money and when the former presented the check to the drawee for
encashment but was dishonored. The holder, after the notice of dishonor
has an immediate recourse against the drawer and can immediately file an
action for recovery of the check.

Cebu
Intl.
Financ
e
Corp.
v. CA,
GR
12303
1, Oct.
12,
1999.

Same; Same; Same; No discharge or payment of the check where

amount was deducted on drawers account by drawee bank but did not
deliver the funds to the payee of the check.

Cebu
Intl.
Financ
e
Corp.
v. CA,
GR
12303
1, Oct.
12,
1999.

Same; it takes place if the parties expressly so provide; otherwise, the

original contract remains in force. In other words, the parties to a contract

Espina
v. CA,

Page 20 of 87

Civil Laws

Prescri
p-tion
of
Action
s

must expressly agree that they are abrogating their old contract in favor of
a new one. Where there is no clear agreement to create a new contract in
place of the existing one, novation cannot be presumed to take place,
unless the terms of the new contract are fully incompatible w/ the former
agreement on every point.

GR
11680
5,
June
22,
2000.

Same; Incompatibilities between the old and the new obligations included
variance in the principal amount of the obligation; and positive as well as
negative covenants found in one contract and not in the other. Since the
earlier loan obligation was extinguished by novation, the Indemnity
Agreement, an accessory obligation, was necessarily extinguished also,
pursuant to Art. 1296 of the Civil Code.

Securi
ty
Bank
v.
Cuenc
a, GR
13854
4, Oct.
3,
2000.

Same; Loan obligation is not extinguished by a subsequent execution of a

mortgage to secure its payment. The subsequent execution of the real
estate mortgage contract does not contain any express stipulation by the
parties intending it to supersede the existing loan agreement between the
petitioners and the bank and that the mortgage is but an accessory
contract to secure the loan in the promissory note.

Liguta
n
v.
CA,
GR
13867
7,
Feb.
12,
2002.

Same; Subrogation; The transfer of all the rights of the creditor to a third
person, who substitutes him in all his rights. It may either be legal or
conventional. Conventional Subrogation requires an agreement among the
3 parties concerned the orig. creditor, the debtor, and the new creditor. In
this case, the MOA expressly requires the consent of Anglo-Asean to the
subrogation. The absence of such conformity prevents the agreement from
becoming effective and a source of any cause of action for the signatories
thereto.

Licaro
s
v.
Gatma
itan,
GR
14283
8,
Aug.
9,
2001.

Same; Assignment of Credit; The process of transferring the right of the

assignor to the assignee who would then have the right to proceed against
the debtor. The assignment may be done gratuitously or onerously, in w/c/
case, the assignment has an effect similar to that of a sale. A creditor may
validly assign his credit and its accessories w/o the debtors consent. What
the law requires is merely NOTICE to the debtor as the assignment takes
effect only from the time he has knowledge thereof.

id.

RESCISSION; Damages to be claimed in case of rescission is

absolutely distinct from those kinds of damages in case of specific
performance. Compensatory damages would have been proper in
resorting to the remedy of specific performance, not rescission.

Asunci
on v.
Evang
elista,
GR
13349
1, Oct.
13,
1999.

Prescription of Action; The ff. actions must be brought w/in 10 years

from the time the right of action accrues: (1) Action based on WRITTEN
CONTRACT; (2) Action upon a final and executory JUDGEMENT.

Vda
de
Delga
do v.
CA,
supra;
Barrer

Page 21 of 87

Civil Laws

a
v.
CA,
GR
12393
5,
Dec.
14,
2001.
Oral Contract; An action to enforce an oral contract prescribes in 6 years.
The right to demand an accounting for a partners interest as against the
person continuing the business accrues at the date of dissolution, in the
absence of any contrary agreement.

Sunga
-Chan
v.
Chua,
GR
14334
0,
Aug.
15,
2001.

Forcible Entry; it must be filed w/in 1 year from the date of actual entry
on the land. After the lapse of the 1-year period, the remedies of the party
dispossessed is to file either an accion publiciana w/c is a plenary action to
recover the right of possession or an accion reinvindicatoria w/c is an action
to recover ownership as well as possession.

Gener
v. De
Leon,
GR
13073
0, Oct.
19,
2001.

Special Proceeding for Cancellation or Correction of Entries in the

Civil Registry (Rule 108, 1998 Rules of Civil Procedure in relation to
Art. 412, NCC); Such action must be brought w/in 5 years from the time
the right of action accrues (Art. 1149, NCC). The 5-year prescriptive period
should not be reckoned from the date of the registration of the last birth
among the petitioners-siblings in 1960 but, rather, from the date private
respondents discovered the false entries in petitioners birth records in
1989.

Lee v.
CA,
2001.

Nullity of Void Contracts; Action for Reconveyance; complaint for

reconveyance of property since the deed of sale were simulated and
fictitious amounts to a declaration of nullity of a void contract, w/c is
imprescriptible.

Santos
v.
Santos
,
GR
13389
5, Oct.
2,
2001

Same; In actions for reconveyance of property predicated on the fact that

the conveyance complained of was null and void ab initio, a claim of
prescription of action would be unavailing. Neither could laches be invoked
in the case at bar. Laches is a doctrine in equity and our courts are basically
courts of law and not courts of equity. Equity, w/c has been aptly described
as justice outside legality should be applied only in the absence of, and
never against, statutory law. Certainly, laches cannot be set up to resist the
enforcement of an imprescriptible legal right, and petitioners can validly
vindicate their inheritance despite the lapse of time.

Ingjug
tiro v.
Casals
,
GR
13471
8,
Aug.
20,
2001.

Laches; Concept; Application; The failure or neglect, for an

unreasonable and unexplained length of time, to do that w/c by exercising
due diligence could or should have done earlier; it is negligence or omission
to assert a right w/in a reasonable time, warranting a presumption that the
party entitled to assert it has either abandoned it or declined to assert it. In
the instant suit, notwithstanding the invalidity of the sale, they allowed the
vendee to enter, occupy and possess the property in the concept of an

Biona
v. CA,
GR
10564
7, July
31,
2001.

Page 22 of 87

Civil Laws

owner w/o demurrer and molestation for a long period of time, never
claiming the land as their own until 1985 when the property has greatly
appreciated in value.

Contra
cts

Same; The concept of laches is not concerned w/ the lapse of time but only
w/ the effect of unreasonable lapse. In this case, the alleged 16 years of
inaction has no adverse effect to make one guilty of lapses.

Santos
v.
Santos
,
GR
13389
5, Oct.
2,
2001.

Same; The doctrine of stale demands would apply only where by reason of
the lapse of time, it would be inequitable to allow a party to enforce his
legal rights. Moreover, except for every strong reasons, the Court is not
disposed to apply the doctrine of laches to prejudice or defeat the rights of
an owner.

Tsai v.
CA,
GR
12009
8, Oct.
2,
2001.

Essential Requisites; CONSENT OF THE CONTRACTING PARTIES;

Fraud in execution of contracts; Fraud is never presumed but must be
established by clear and convincing evidence. There is no evidence that
petitioner misled, deceived or coerced respondent Gerent's president into
signing the Affidavit. A mere preponderance of evidence is not even
adequate to prove fraud. In the case of Maestrado vs. CA, 327 SCRA 678
(2000),"The deceit employed must be serious. It must be sufficient to
impress or lead an ordinarily prudent person into error, taking into account
the circumstances of each case. Silence or concealment, by itself, does not
constitute fraud, unless there is a special duty to disclose certain facts.
Moreover, the bare existence of confidential relation between the parties,
standing alone, does not raise the presumption of fraud." In the instant
case, the Affidavit is indisputably intended to document the fact that
petitioner had fully paid respondent Gerent for the subcontract work.
Roque's signature thereon attests to the truth of the contents of the
Affidavit. The execution of the Affidavit by Roque, president of respondent
Gerent, finally puts to rest all the claims of Gerent against petitioner under
the subcontract. The very purpose of the Affidavit, just like a quitclaim, is
precisely to finally settle all the claims of respondent Gerent, regardless of
the merits of the claims. The Affidavit can be annulled only if it was
procured through fraud. There is no convincing evidence to establish that
fraud vitiated the Affidavit. The fact that petitioner received a windfall
because of the price increase is not a reason to annul the Affidavit.

MC
Engg.
v. CA,
GR
10404
7,
April
3,
2002.

Same; Same; PU could not validly given consent to the contract of sale, as
he was not even conceived yet at the time of its alleged perfection. LC
could not have acted as representative of JPU. In the first place, she did not
have the right to represent JPU for lack of legal authority to do so. W/o
authority from the court, no person can make a valid contract in behalf of a
minor.

Pua v.
CA,
GR
13499
2,
Nov.
20,
2000.

Same; Same; When one of the parties is unable to read, or if the contract
is in a language not understood by him, and mistake or fraud is alleged, the
person enforcing the contract must show that the terms thereof have been
fully explained to the former.

Unica
ne
Food
Produ
cts
Manuf
acturi
ng v.
CA,
GR

Page 23 of 87

Civil Laws

12549
7,
Nov.
20,
2000.
FREEDOM OF CONTRACT; The owner is not obligated to sell simply
because the other party is in actual possession of the property, absent any
prior agreement vesting in them as occupants, the right of first priority to
buy.

Gabel
o
v.
CA,
GR
11174
3, Oct.
8,
1999.

Same; Contracting parties may establish such stipulations, clauses, terms

and conditions as they may deem convenient, however, such stipulations
should not be contrary to law.

Hanil
Dev.
Co. v.
CA,
GR
11317
6, July
30,
2001.

Same; 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. . . . Quitclaims being duly notarized and acknowledged
before a notary public, deserve full credence and are valid and enforceable
in the absence of overwhelming evidence to the contrary.

Maest
rado
vs.
CA,
327
SCRA
678
(2000)
.

PRIVITY OF CONTRACT: Contracts only take effect between the parties.

Villalo
n
v.
CA,
GR
11699
6,
Dec.
1999

RELATIVITY OF CONTRACT; A contract can only bind the parties who

entered into it, and it cannot favor or prejudice a third person even if he is
aware of such contract and has acted w/ knowledge thereof.

Integr
ated
Packa
ging
Corp.
v. CA,
GR
11511
7,
June
8,
2000.

Same; Assuming for the sake of argument that an oral consultancy

agreement has been perfected between the parties, respondent Lirag could
not still claim fees on the project that has not been awarded to Marubeni. If
respondent's contentions were to be taken as truth, he would be entitled to
6% consulting fee based on the total cost of the projects obtained, or on
success basis. However, even respondent admitted that the Bureau of Post
project was not awarded to Marubeni, but to Sanritsu. Marubeni did not

Marub
eni
Corp.
v.
Lirag,
GR
13099

Page 24 of 87

Civil Laws

even join the bidding for the Bureau of Post project.

8,
Aug.
10,
2001;
Davao
Light
&
Power
Co. v.
CA,
GR
11168
5,
Aug.
20,
2001.

CONSIDERATION; The presumption that a contract has sufficient

consideration cannot be overcome by a mere assertion that it has no
consideration. Under Art. 1354, NCC, consideration is presumed unless the
contrary is proven.

Ferna
ndez
v.
Ferna
ndez,
GR
14325
6,
Aug.
28,
2001.

OBLIGATORY FORCE OF CONTRACTS; The very terms and conditions of

the same contracts become the law between the parties, unless they are
contrary to law, morals, good customs, public order or public policy. When
the CA ruled that only P3,060,406.25 should be awarded to petitioner
RCBC, it disregarded the parties stipulations in their contracts of loan.

Rizal
Comm
.
Banki
ng
Corp
v. Alfa
RTW
Manuf
acturi
ng
Corp.,
GR
13387
7,
Nov.
14,
2001.

Same: Contracts bind the parties not only to what has been expressly
stipulated but also to all necessary consequences of their acts.

Torres
v. CA,
GR
13455
9,
Dec.
9,
1999.

Same: A party to a contract cannot just evade compliance with his

contractual obligation by the simple expedient of denying the execution of
such contract. for the validity and fulfillment of contracts cannot be left to
the will of one of the contracting parties.

Heme
des v.
CA,
GR
10713
2, Oct.
8,

Page 25 of 87

Civil Laws

1999.
PERFECTION OF CONTRACT; Offer and Acceptance; The letter of
petitioner to respondent constituted acceptance of respondents offer as
contemplated by law. While the same letter enumerated certain basic
terms and conditions, these were imposed on the performance of the
obligation rather than on the perfection of the contract. While failure to
comply w/ conditions imposed on the perfection of a contract results in
failure of a contract. Failure to comply w/ conditions imposed merely on the
performance of an obligation merely gives the other party options/ or
remedies to protect his interest.

Jardin
e
Davis
v. CA,
GR
12806
6
&
12806
9,
June
19,
2000.

FORM OF CONTRACTS; Contracts are obligatory in whatever form

they may have been entered into, provided all essential requisites
are present. Non-appearance of the parties before the notary public who
notarized the deed does not necessarily nullify or render the parties
transaction void ab initio. The provision of Art. 1358, NCC, on the necessity
of a public document is only for convenience, not for validity or
enforceability. Where a contract is not in the form prescribed by law, each
party can compel the other to observe the form reqd by law.

Pealo
sa v.
Santos
,
2001.

Same; The Civil Code upholds the spirit over the form, and an agreement
will be deemed to exist, provided the essential requisites are present, viz.:
proof of consent, subject matter and cause. It is generally obligatory in
whatever form it may have been entered into.

Cordia
l
v.
Miran
da, GR
13549
5,
Dec.
14,
2000.

Same; A private document is valid and binding between the

parties. The requirement of a public document in Art. 1358 is not for the
validity of the instrument but for its efficacy. The party bound may be
compelled to execute the proper document.

Cenid
o
v.
Apacio
nado,
GR
13247
4,
Nov.
19,
1999.

Same ; Even w/ a duly executed written document purporting to be a

contract of sale, the Court cannot rule that the subject contracts of sale are
valid, when the evidence presented in the courts below show that there had
been no meeting of minds bet. The supposed seller and corresponding
buyers of the parcels of land in this case. Due execution of documents
representing a contract is one thing, but perfection of the contract is
another.

Santos
v.
Heirs
of
Maria
no, GR
14332
5, Oct.
24,
2000.

Same; The counter offer was denied twice by GSIS and therefore there was
clearly no meeting of the minds and no perfected contract.

Urban
o
v.
GSIS,
GR
13790
4, Oct.
19,
2001.

Page 26 of 87

Civil Laws

REFORMATION OF INSTRUMENT; This remedy is grounded on the

principle of equity where, in order to express the true intention of the
contracting parties, an instrument already executed is allowed by law to be
reformed. The right of reformation is necessarily a limitation on the parol
evidence rule since, when a writing is reformed, the result is that an oral
agreement is by court decree made legally effective. Consequently, the
courts, as agencies authorized by law to exercise the power to reform an
instrument, must necessarily exercise that power sparingly and w/ great
caution and zealous care. Moreover, the remedy, being an extraordinary
one, must be subject to limitations as may be provided by law. Our law and
jurisprudence set such limitations, among w/c is laches. A suit for
reformation of instrument may be barred by lapse of time. The prescriptive
period for actions based upon written contract and reformation of an
instrument is 10 years under Art. 1144 of the NCC.
Same; Mistake as to Description of Lot Subject of Sale; Reformation
is that remedy in equity by means of which a written instrument is made or
construed so as to express or conform to the REAL INTENTION of the
parties, as provided in Art. 1359 of the Civil Code. An action for reformation
of instrument under this provision of law may prosper only upon the
concurrence of the ff. requisites: [1] there must have been a meeting of
minds of the parties to the contract; [2] the instrument does not express
the true intention of the parties; and [3] the failure of the instrument to
express the true intention of the parties is due to MISTAKE, FRAUD,
INEQUITABLE CONDUCT or ACCIDENT.

Sarmi
ng v.
Dy, GR
13364
3,
June
6,
2002.

Same; While intentions involve a state of mind w/c may sometimes be

difficult to decipher, subsequent and contemporaneous acts of the parties
as well as the evidentiary facts as proved and admitted can be reflective of
ones intention. The TOTALITY OF THE EVIDENCE clearly indicates that what
was intended to be sold to Alejandra was Lot 4163 and not Lot 5734. The
designation of the lot in the deed of sale as Lot 5734, covered by OCT
4918-A, was a mistake in the preparation of the document. Thus,
reformation of the instrument is proper.

id.

Same; Oversight in drafting the contract by counsel cannot be

considered a valid reason for the reformation of the contract. An
action for reformation of instrument under Art. 1359 of NCC may prosper
only upon the concurrence of the following requisites: (1) there must be a
meeting of the minds of the parties to a contract; (2) the instrument does
not express the true intention of the parties; and (3) the failure of the
instrument to express the true intention of the parties is due to mistake,
fraud, inequitable conduct or accident.

Huibo
nhoa
v. CA,
GR
95897
, Dec.
14,
1999.

Same; Void Contracts and Stipulations; In line with our ruling in

Delgado vs. Alonzo Duque Valgona,[No. 19826, 44 Phil. 739 (1923]), in said
case, the trial court found usurious payment for parcels of land secured by
a deed of mortgage and declared the mortgage deed void. Thus,
conformably to Delgado, since the mortgage contract is void, the
foreclosure of the property provided for in said deed is ineffectual as well.
Contracts and stipulations, under any cloak or device whatever, intended to
circumvent the laws against usury shall be void. The parties then must
restore what each had received from the other.

Sps.
Puerto
v. CA,
GR
13821
0,
June
6,
2002.

Same; Worldwide increase in price does not constitute a sufficient

cause of action for modification of an instrument. It is only when an
extraordinary inflation supervenes that the law affords the parties a valid
reason a relief in contractual obligations.

Huibo
nhoa
v. CA,
GR
95897
, Dec.
14,
1999.

Page 27 of 87

Civil Laws

RESCISSION; The power to rescind or resolve is given to the injured party.

The rescission of the contracts requires the parties to restore to each other
what they have received by reason of the contract.

Relian
ce
Comm
odities
v. IAC,
GR
74729
, May
31,
2000.

Same; Non-Fulfillment of Obligation due to Fortuitous Event; Proper

remedy is rescission under Arts. 1266 and 1267 and not for reformation of
contract, in order that the court could release the obligor from performing
his obligation.

Huibo
nhoa
v. CA,
GR
95897
, Dec.
14,
1999.

Same; Automatic, Extrajudicial; Stipulation for the automatic

cancellation of the vendees rights in the event of his breach of agreement,
w/o the necessity of prior notice or judicial declaration upheld. Such kind
of stipulation was upheld by this Court in the Adelfa case where we
categorically declared that Article 1592 of the Civil Code, which requires
rescission either by judicial action, or notarial act, does not apply to a
contract to sell. Moreover, judicial action for rescission of a contract is not
necessary where the contract provides for automatic rescission in case of
breach, as in the contract involved in the present controversy. Applying
Article 1306 of the Civil Code, w/c is the fundamental principle known as
the autonomy of contracts.

Gome
z
v.
CA,
GR
12074
7,
Sept.
21.
2000.

Same; Same; A stipulation authorizing a party to extra-judicially rescind a

contract and to recover possession of the property (in the nature of a
resolutory condition) in case of contractual breach is lawful. BUT when a
valid objection is raised, a judicial determination of the issue is still
necessary before a takeover may be allowed. In other words, the rescission
was "provisional" and subject to scrutiny and review by the proper court.
Thus, if the other party denies that rescission is justified, it is free to resort
to judicial action in its own behalf, and bring the matter to court. It
observed that the "practical effect of the stipulation [was] to transfer to
the defaulter the initiative of instituting suit, instead of the rescinder. In the
present case, it is clear that the subject stipulation is allowed by law.
Moreover, a party is free to enforce it by rescinding the contract and
recovering possession of the property even without court intervention.
Where it is objected to, however, a judicial determination of the issue is still
necessary. Force or bloodshed cannot be justified in the enforcement of the
stipulation. Where the lessees offer physical resistance, the lessors may
apply for a writ of preliminary mandatory injunction, to which they have a
clear and unmistakable right. Indeed, courts are the final arbiters.

SBMA
v.
Univer
sal
Intl.
Group
of
Taiwa
n, GR
13168
0,
Sept.
14,
2000.

Same; RESCISSION DISTINGUISHED FROM RESOLUTION; The remedy

of rescission in the case of rescissible contracts under Art. 1381 is not to be
confused w/ the remedy of rescission, or more properly termed resolution,
of reciprocal obligations under Art. 1191, NCC. While both remedies
presuppose the existence of a juridical relation that, once rescinded, would
require mutual restitution, it is basically, however, in this aspect alone
when the two concepts coincide. Resolution under Art. 1191 would
totally release each obligor from compliance w/ their respective covenants.
The Court has referred to rescission as being likened to contracts w/c are
deemed void at inception. The obvious reason is that when parties are
reciprocally bound, the refusal or failure of one of them to comply w/ his
part of the bargain should allow the other party to resolve their juridical
relationship rather than to leave the matter in a state of continuing

Justice
Vitug,
dissen
ting in
Equito
rial
Realty
Dev.
Inc. v.
Mayfai
r
Theat
er, GR

Page 28 of 87

Civil Laws

uncertainty. The result of the resolution, when decreed, renders the

reciprocal obligations inoperative at inception. Upon the other hand, the
rescission of rescissible contract under Art. 1381, taken in
conjunction w/ Art. 1385, is a relief w/c the law grants for the protection of
a contracting party or a third person from injury and damage that the
contract may cause, or to protect some incompatible and preferred right
created by the contract. Rescissible contracts are not void ab initio. Until
set aside in an appropriate action, rescissible contracts are respected as
being legally valid, binding and in force. The agreement between petitioner
and Carmelo being efficacious until rescinded, validly transferred ownership
over the property to petitioner from the time the deed of sale was executed
in a public instrument in July 1978 up to the time that the decision in GR
106063 become final in March 1997. It was only from the latter date that
the contract had ceased to be efficacious.

13387
9,
Nov.
21,
2001.

Same; Same; In Arts. 1191 and 1592, rescission is a principal action w/c
seeks the resolution or cancellation of a contract; while in Art. 1381, the
action is a subsidiary one limited to cases of rescission for lesion as
enumerated in said article.
Same; Same; Rescission under Art. 1191 involves only those who are
parties to the contract. On the contrary, rescission under Art. 1381, the
legal effects are not restricted to the contracting parties only but also to
third person or a stranger to the contract. Once rescinded, the contract is
non-existent or void from its inception.

Equito
rial
Realty
Dev.,
Inc. v.
MayFa
ir
Theat
er, GR
13387
9,
Nov.
21,
2001.

Same; Restitution; Contract of Sale was not voidable but rescissible.

Under Article 1380 to 1381 (3) of the Civil Code, a contract otherwise valid
may nonetheless be subsequently rescinded by reason of injury to third
persons, like creditors. The status of creditors could be validly accorded the
Bonnevies for they had substantial interests that were prejudiced by the
sale of the property to the petitioner without recognizing their right of first
priority under the Contract of Lease. According to Tolentino, rescission is a
remedy granted by law to the contracting parties and even to third
persons, to secure reparations for damages caused to them by a contract,
even if this should be valid, by means of the restoration of things to their
condition at the moment prior to the celebration of said contract.

Concul
ada v.
CA,
GR
13056
2, Oct.
11,
2001;
Pealo
sa v.
Santos
,
supra;
Ferna
ndez
v.
Ferna
ndez,
supra.

VERBAL AGREEMENT; Statute of Frauds; It covers verbal agreements

that by its terms is not to be performed w/in a year from the making
thereof. In the case at bar, since neither of the parties has fully performed
their obligations within the one-year period.

Viewm
aster
Constr
uction
Corp.
v.
Roxas,
GR
13357

Page 29 of 87

Civil Laws

6, July
13,
2000.

Kinds
of
Contra
cts

Same; Same; When a verbal contract has already been completed,

executed or partially consummated, its enforceability will not be barred by
the Statute of Frauds, which applies only to an EXECUTORY agreement.
Thus, where one party has performed one's obligation, oral evidence will be
admitted to prove the agreement. In the present case, it has clearly been
established that petitioner had delivered the rattan poles to respondent on
November 3, 1992. Because the contract was partially executed, the
Statute of Frauds does not apply.

Cordia
l
v.
Miran
da, GR
13549
5,
Dec.
14,
2000.

RESCISSION OF CONTRACTS IN FRAUD OF CREDITORS (Accion

Pauliana); It is a subsidiary remedy that requires exhaustion of all
legal means to obtain satisfaction. The ff. requisites must be present:
(1) the plaintiff asking for rescission has a credit prior to the alienation,
although demandable later; (2) the debtor has made a subsequent contract
conveying a patrimonial benefit to a third person; (3) the creditor has no
other legal remedy to satisfy his claim; (4) the act being impugned is
fraudulent; (5) the third person who received the property conveyed, if it is
by onerous title, has been an accomplice in the fraud. Under Art. 1384, only
the creditor who brought the action for rescission can benefit from it; those
who are strangers to the action cannot benefit from its effect.

Sigua
n
v.
Lim,
GR
13468
5,
Nov.
19,
1999.

Same; Procedure: The ff. successive measures to be taken by a creditor

in bringing an action for rescission of an allegedly fraudulent sale: (1)
exhaust the properties of the debtor through levying by attachment and
execution upon all his properties, except those exempt by law from
execution; (2) exercise all the rights and actions of the debtor, save those
personal to him (accion subrogatoria); and (3) seek rescission of the
contracts executed by the debtor in fraud of the creditors rights (accion
pauliana).

Adora
ble v.
CA,
GR
11946
6,
Nov.
25,
1999.

RESCISSIBLE CONTRACT; Alienation in Fraud of Creditors (Art.

1387, NCC). Article 1387 of the Civil Code provides that alienations made
by a debtor by gratuitous title are presumed fraudulent when the donor did
not reserve sufficient property to pay his outstanding debts. Likewise,
alienations by onerous title are presumed fraudulent when made by
persons against whom some judgment has been rendered or some writ of
attachment has been issued. These, however, are mere presumptions
which are in no way conclusive. The presumption of fraud can be
overthrown by evidence showing that the conveyance was made in good
faith and for a sufficient and valuable consideration. In the case at bar,
private respondents sufficiently established that the conveyance was made
in good faith and for valuable consideration.

China
Banki
ng
Corp.
v. CA,
GR
12964
4,
Sept.
7,
2001.

VOID CONTRACTS; Those whose cause, object or purpose is

contrary to public policy; such as a contract entered into because of the
actual or supposed influence w/c a party has and engaging him to influence
executive officials in the discharge of their duties.

Marub
eni
Corp.
v.
Lirag,
2001.

Void or Inexistent Contracts; In an inexistent contract, the in pari

delicto doctrine under Art. 1411 and 1412 of the NCC, is inapplicable.

Modin
a
v.
CA,
GR
10935
5, Oct.
29,
1999.

Page 30 of 87

Civil Laws

Same; PARI DELICTO; When the parties are equally at fault, the law
leaves them as they are and denies recovery by either one of them.

Guan
v.
Ong,
GR
14473
5, Oct.
18,
2001.

Same; SIMULATED CONTRACT; It may be Absolute or Relative: In

absolute simulation the parties do not intend to be bound at all; while in
relative simulation, the parties only conceal their true agreement. The
former is void; while the latter, when it does not prejudice a third person
and is not intended for any purpose contrary to law, morals, good customs,
public order or public policy , binds the parties to their real agreement.

Blanco
v.
Quash
a, GR
13314
8,
Nov.
17,
1999.

Same; Same; The execution of the three documents on the same day and
other relevant facts in this case sustain the allegation that the contract of
sale was simulated and that private respondents received no consideration
for it. The said documents were executed by the parties for the sole
purpose of obtaining a bank loan and to present the subject lot as
collateral, free from any prior liens.

Sps.
Bartim
eo v.
CA,
GR
13685
7,
Nov.
22,
2000.

Same; Same; Where the parties agreed that the title would revert back to
Felisa Manese once her daughters Lutgarda and Ciceron Manese were
financially capable. The sale was arranged without any pecuniary benefit
for Felisa. It was done so that the property may be used as collateral for a
P500,000.00 loan from Planters Development Bank. Not a single centavo
was given to Felisa Manese, how then can this be considered a sale when
there was no consideration received by the seller?

Unica
ne
Food
Produ
cts
Manuf
acturi
ng v.
CA,
GR
12549
7,
Nov.
20,
2000.

Same; Same; Absolutely Simulated Contract; The basic characteristic

of an absolutely simulated or fictitious contract is that the apparent
contract is not really desired or intended to produce legal effects or alter
the juridical situation of the parties. However, in this case, the parties
already undertook certain acts w/c were directed towards fulfillment of their
respective covenants under the second deed, indicating that they intended
to give effect to their agreement.

Pealo
sa v.
Santos
,
GR
13374
9,
Aug.
23,
2001.
;
Labag
ala v.
Santia
go, GR
13230
5,
Dece

Page 31 of 87

Civil Laws

mder
4,
2001.
Same; Same; Same; An Absolutely simulated contract of sale is void ab
initio and transfers no right of ownership.

Cruz
v.
Banco
m
Financ
e
Corp.,
GR
14778
8,
March
19,
2002.

Same; Same; Same; As to the consideration stated in the contract of sale

and the payment thereof to the seller.

Domin
go v.
CA,
GR
12754
0, Oct.
17,
2001;
Guan
v.
Ong,
GR
14473
5, Oct.
18,
2001.

Same; Same; Same; As where the Deed of Sale was executed merely to
facilitate the transfer of the property to petitioner pursuant to an
agreement between the parties to enable them to construct a commercial
building and to sell the property to their children. Being merely a
subterfuge, that agreement cannot be taken as the consideration for the
sale.

id.

Same; Same; Same; Where the extrajudicial settlement and confirmation

of sale was allegedly executed in 1967 by one party who died in 1963 and
by another party who was not an heir of the decedent.

Ingjug
tiro v.
Casals
,
GR
13471
8,
Aug.
20,
2001.

Same; Same; Same; Sale of real property by parties who have not been
authorized by the owner to sell.

AF
Realty
& Dev.
V.
Diesel
man
Freigh
t
Servic
es, GR
11144
8, Jan.

Page 32 of 87

Civil Laws

16,
2002.
Same; Same; Burden of Proof; Burden of proving alleged simulation of a
contract falls on those who impugn its regularity and validity. A failure to
discharge this duty will result in upholding of the contract.

Ramo
s
v.
Heirs
of
ramos
,
GR
14084
8,
April
25,
2002.

VOIDABLE CONTRACTS; Under Arts. 1330 and 1390, NCC, the ff.
contracts are voidable: [1] those where one of the parties is incapable of
giving CONSENT to a contract; [2] those where the consent is VITIATED by
mistake, violence, intimidation, undue influence or fraud.

Katipu
nan v.
Katipu
nan,
GR
13241
5, Jan.
30,
2002.

Same; Undue Influence; It appears in this case that respondent signed

the deed w/o the remotest idea of what it was and that undue influence
was exerted on him. Said respondent was illiterate and had a mental age of
a six-year old child. The documents he purportedly signed were all in
English and there is no showing that the said contracts were read and/or
explained nor translated in a language he understood.

Katipu
nan v.
Katipu
nan,
GR
13241
5, Jan.
30,
2002.

Same; Fraud; There is fraud when the sale of the subject house is not
safely habitable.

Jumalo
n
v.
CA,
GR
12776
7, Jan.
30,
2002.

UNENFORCEABLE CONTRACTS; The nullity of an unenforceable contract

is of a permanent nature and it will exist as long the unenforceable contract
is not duly ratified. 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.

Villanu
evaMijare
s
v.
CA,
supra.

INTEREST; Computed from the time of judicial demand, the date the
complaint was filed.

Bayer
Phils.
v. CA,
GR
10926
9,
Sept.
15,
2000.

Same; No interest shall be due unless expressly stipulated in writing.

Pilipin
as
Hino

Page 33 of 87

Civil Laws

v. CA,
GR
12657
0,
Aug.
18,
2000.

Estopp
el

INTERPRETATION OF CONTRACTS; Bilateral contracts embodied in 2 or

more writings should be read and interpreted together in such a way to
eliminate seeming inconsistencies and render the parties intention
effectual.

Acosta
v. CA,
GR
13208
8,
June
28,
2000.

Same; It is only when a party puts in issue in the pleadings the failure of
the written agreement to express the true intent of the parties thereto that
said party may present evidence to modify, explain or add to the terms of
the written agreement. The fact that the terms of the MOA are explicit and
leave no doubt as to the intention of the parties, coupled w/ petitioners
failure to contest the contract for failing to express the true intention of the
parties, behooves the courts not to read into the MOA any other intention
that would contradict its apparent import, such that the literal meaning of
its stipulations must control. There is no factual nor legal basis for
petitioners claim that the respondents are obligated to rid the subject
property of squatters and unauthorized structures. The existence of
squatters and unauthorized structures in the subject property is not
covered by the phrase liens and encumbrances.

Sabio
v. Intl.
Corpor
ate
Bank,
GR
13270
9,
Sept.
4,
2001.

Same; In Proper Order; Even if measured under existing usage or

custom, Valdes-Choy had all her papers in proper order. Art. 1376 of the
Civil Code provides that: The usage or custom of the place shall be borne
in mind in the interpretation of the ambiguities of a contract, and shall fill
the omission of stipulations w/c are ordinarily established. Customarily, in
the absence of a contrary agreement, the submission by an individual seller
to the buyer of the ff. papers would complete a sale of real estate: [i]
owners duplicate copy of the Torrens title; [ii] signed deed of sale; [iii] tax
declaration; and [iv] latest realty tax receipt. The buyer can retain the
amount for the capital gains tax and pay it upon authority of the seller, or
the seller can pay the tax, depending on the agreement of the parties

Chua
v. CA,
GR
11925
5,
April
9,
2003.

A person who acts as an agent w/o authority or w/o a principal is himself

regarded as the principal.

Lim v.
Phil.
Fishin
g Gear
,
GR
13644
8,
Nov.
3,
1999.

A bank is estopped from refusing to discharge the mortgaged property

upon payment of the amount by the buyer of the real estate property on
the basis of the statement of account they issued regarding the full
indebtedness secured by a mortgage of real estate property subject to sale,
by claiming that said property still secures other unliquidated past due
loans.

Metro
bank
v. CA,
GR
12289
9,
June
8,
2000.

Page 34 of 87

Civil Laws

Sales

PERFECTION OF SALE; From the time a party accepts the other partys
offer to sell w/in the stipulated period, a contract of sale is deemed
perfected. Under the law, the meeting of the minds between the parties
gives rise to a binding contract although they have not affixed their
signatures to a written form.

Gabel
o
v.
CA,
GR
11174
3, Oct.
8,
1999.

CONTRACT OF SALE; Essential Elements: (1) consent or meeting of the

minds, that is consent to transfer ownership in exchange fort he price; (2)
determinate subject matter; and (3) Price certain in money or its
equivalent.

Roble
v.
Arbas
a, GR
13070
7, July
31,
2001.;
Biona
v. CA,
GR
10564
7, July
31,
2001.

Same; Object of Contract; Subject lot is capable of being determined w/o

the need of any new contract. The fact that the exact area of the adjoining
lots is subject to the result of a survey does not make such lot not
determinate or determinable.

Heirs
of San
Andre
s
v.
Rodrig
uez,
GR
13563
4, May
31,
2000.

Same; STAGES OF A CONTRACT OF SALE: [1] Negotiation, covering the

period from the time the prospective contracting parties indicate their
interest in the contract to the time the contract is perfected; [2] Perfection,
w/c takes place upon the concurrence of the essential elements of the sale
w/c are the meeting of the minds of the parties as to the object of the
contract and upon the price; and [3] Consummation, w/c begins when the
parties perform their respective undertakings under the contract,
culminating in the extinguishment thereof. In this case, the parties never
got passed the negotiation stage. The alleged indubitable evidence of a
perfected sale cited by the appellate court was nothing more than offers
and counter-offers w/c did not amount to any final arrangement having the
essential elements of a contract of sale. The parties failed to agree on the
terms of payment, an essential element before a valid and binding contract
of sale can exist. Although the Civil Code does not expressly state that the
parties must also agree on the terms or manner of payment of the price,
the same is needed, otherwise there is no sale; ans a disagreement on the
manner of payment is tantamount to a failure to agree on the price.

San
Miguel
Proper
ties v.
Sps.
Huang
,
GR
13729
0, July
31,
2000.

Same; Non-payment of the purchase price is not among the instances

where the law declares a contract to be null and void. At most, the nonpayment of the contract price merely results in breach of contract for nonperformance and warrants an action fro rescission or specific performance
under Art. 1191, NCC.

Pealo
sa v.
Santos
,
supra.

Same; The preponderance of evidence shows that NDC sold to PUP the
whole NDC compound, including the leased premises, w/o the knowledge
much less consent of the lessee w/c had a valid and existing right of first

PUP v.
CA,
GR

Page 35 of 87

Civil Laws

refusal. Interpretations that there was a mere transfer, and not a sale, apart
from being specious sophistry and a mere play of words, is too strained and
hairsplitting.

14351
3,
Nov.
14,
2001.

CONDITIONAL SALE; In a conditional sale, the intention of the parties is to

reserve the ownership of the land in the seller until the buyer has paid the
total purchase price.

Leao
v. CA,
GR
12901
8,
Nov.
15,
2001.

Same; CONTRACT TO SELL REAL PROPERTY ON INSTALLMENTS; The

full payment of the purchase price is a positive suspensive condition, the
failure of w/c is NOT considered a breach, casual or serious, but simply an
event that prevents the obligation of the vendor to convey title from
acquiring any obligatory force.

Tuazo
n
v.
Garila
o, GR
14367
3,
aug.
10,
2001.

Same; Same; Art. 1592, NCC is not applicable to the case at bar. However,
any attempt to cancel the contract to sell would have to comply w/ the
provisions of RA 6652 (Realty Installment Buyer Protection Act), w/c
recognizes in conditional sales of all kinds of real estate (industrial,
commercial, residential) the right of the seller to cancel the contract upon
non-payment of installments by the buyer, w/c is simply an event that
prevents the obligation of the vendor to convey title from acquiring binding
force.. The law also provides for the rights of the buyer in case of
cancellation.

Leao
v. CA,
GR
12901
8,
Nov.
15,
2001.

Same; The stipulation that the payment of the full consideration based on
a survey shall be due and payable in 5 years from the execution of a formal
deed of sale is not a condition w/c affects the efficacy of the contract of
sale. It merely provides for the manner by w/c the full consideration is to be
computed and the time w/in w/c the same is to be paid.

Heirs
of San
Andre
s
v.
Rodrig
uez,
GR
13563
4, May
31,
2000.

CONTRACT TO SELL; The parties to a contract to sell are not prohibited

from stipulating other lawful conditions, aside from full payment of the
purchase price, upon w/c transfer of ownership depends.

Gome
z
v.
CA,
supra.

Same; The foregoing provisions of the MOA negate the existence of a

perfected contract of sale. The MOA is merely a contract to sell since the
parties therein specifically undertook to enter into a contract of sale if the
stipulated conditions are met and the representation and warranties given
by Young prove to be true. The obligation of petitioner Insular Life to
purchase, as well as the concomitant obligation of Young to convey to it the
shares, are subject to the fulfillment of the conditions contained in the
MOA. Once the conditions, representation and warranties are satisfied, then
it is incumbent upon the parties to perform their respective obligations
under the contract. Conversely, in the event that these conditions are not
met or complied with, no obligation on the part of either party arises. This
is in accord with Art. 1181 of the Civil Code w/c provides that "in conditional

Insular
Life
Assura
nce
Co. V.
Young,
GR
14096
4, Jan.
16,
2002.

Page 36 of 87

Civil Laws

obligations, the acquisition of rights, as well as the extinguishment or loss

of those already acquired, shall depend upon the happening of the event
which constitutes the condition." And when the obligation assumed by a
party to a contract is expressly subjected to a condition, the obligation
cannot be enforced against him unless the condition is complied with.
Same; The true agreement between the parties was a contract to sell for
the ff. reasons: [a] ownership over the property was retained by ValdesChoy and was not to pass to Chua UNTIL FULL PAYMENT OF THE PURCHASE
PRICE. The receipt provides that the earnest money shall be forfeited in
case the buyer fails to pay the balance of the purchase price on or before
15 July 1989. In such event, Valdes-Choy can sell the property to other
interested parties. There is in effect a right to reserved in favor of ValdesChoy not to push through w/ the sale upon Chuas failure to remit the
balance of the purchase price before the deadline. This is in the nature of a
stipulation reserving ownership in the seller until full payment of the
purchase price. This is also similar to giving the seller the right to rescind
unilaterally the contract the moment the buyer fails to pay w/in a fixed
period. [b] The agreement between Chua and Valdes-Choy was embodied in
a receipt rather than in a deed of sale, ownership not having passed
between them. The absence of a formal deed of conveyance is a strong
indication that the parties did not intend immediate transfer of ownership,
but only a transfer after full payment of the purchase price. [c] Valdes-Choy
retained possession of the Cert. of Title and all other documents relative to
the sale. When Chua refused to pay Valdes-Choy the balance of the
purchase price, Valdes-Choy also refused to turn-over to Chua these
documents. These are additional proof that the agreement did not transfer
to Chua, either by actual or constructive delivery, ownership of the
property.

Chua
v. CA,
GR
11925
5,
April
9,
2003.

Same; Distinguished from Contract to Sale; The distinction between a

contract of sale and contract to sell is well-settled: In a contract of sale, the
title to the property passes to the vendee upon the delivery of the thing
sold; in a contract to sell, ownership is, by agreement, reserved in the
vendor and is not to pass to the vendee until full payment of the purchase
price. Otherwise stated, in a contract of sale, the vendor loses ownership
over the property and cannot recover it until and unless the contract is
resolved or rescinded; whereas, in a contract to sell, title is retained by the
vendor until full payment of the price. In the latter contract, payment of the
price is a positive suspensive condition, failure of w/c is not a breach but an
event that prevents the obligation of the vendor to convey title from
becoming effective. A perusal of the Receipt shows that the true agreement
between the parties was a contract to sell. Ownership over the Property
was retained by Valdes-Choy and was not to pass to Chua until full payment
of the purchase price. Since the agreement between Valdes-Choy and Chua
is a mere contract to sell, the full payment of the purchase price partakes
of a suspensive condition. The non-fulfillment of the condition prevents the
obligation to sell from arising and ownership is retained by the seller
without further remedies by the buyer. Art. 1592 of the Civil Code permits
the buyer to pay, even after the expiration of the period, as long as no
demand for rescission of the contract has been made upon him either
judicially or by notarial act. However, Art. 1592 does not apply to a contract
to sell where the seller reserves the ownership until full payment of the
price. Prior to the existence of the contract of sale, the seller is not
obligated to transfer ownership to the buyer, even if there is a contract to
sell between them. It is also upon the existence of the contract of sale that
the buyer is obligated to pay the purchase price to the seller. Since the
transfer of ownership is in exchange for the purchase price, these
obligations must be simultaneously fulfilled at the time of the execution of
the contract of sale, in the absence of a contrary stipulation. In a contract
of sale, the obligations of the seller are specified in Article 1495 of the Civil
Code. The obligation of the seller is to transfer to the buyer ownership of
the thing sold. In the sale of real property, the seller is not obligated to
transfer in the name of the buyer a new certificate of title, but rather to
transfer ownership of the real property. There is a difference between

id.

Page 37 of 87

Civil Laws

transfer of the certificate of title in the name of the buyer, and transfer of
ownership to the buyer. The buyer may become the owner of the real
property even if the certificate of title is still registered in the name of the
seller. As between the seller and buyer, ownership is transferred not by the
issuance of a new certificate of title in the name of the buyer but by the
execution of the instrument of sale in a public document. In a contract of
sale of real property, delivery is effected when the instrument of sale is
executed in a public document. When the deed of absolute sale is signed
by the parties and notarized, then delivery of the real property is deemed
made by the seller to the buyer (Art. 1498 of the Civil Code). Similarly, in a
contract to sell real property, once the seller is ready, able and willing to
sign the deed of absolute sale before a notary public, the seller is in a
position to transfer ownership of the real property to the buyer. At this
point, the seller complies with his undertaking to sell the real property in
accordance with the contract to sell, and to assume all the obligations of a
vendor under a contract of sale pursuant to the relevant articles of the Civil
Code. In a contract to sell, the seller is not obligated to transfer ownership
to the buyer. Neither is the seller obligated to cause the issuance of a new
certificate of title in the name of the buyer. However, the seller must put all
his papers in proper order to the point that he is in a position to transfer
ownership of the real property to the buyer upon the signing of the contract
of sale.
Contract of Sale Distinguished from Contract to Sell or Conditional
Sale; Option Contract; Earnest Money; Conditions imposed upon
the perfection of the contract distinguished from conditions
imposed on the performance of an obligation; Whenever earnest
money is given in a contract of sale, it is considered as part of the
purchased price and proof of the perfection of the contract. Although the
MOA is also denominated as a Contract to Sell, it was held that the
parties contemplated a contract of sale. A deed of sale is absolute in nature
although denominated a conditional sale in the absence of a stipulation
reserving title in the owner until full payment of the purchase price. In such
case, ownership of the thing sold passes to the vendee upon actual or
constructive delivery thereof. The mere fact that the obligation to pay the
balance of the purchase price was made subject to the condition to first
deliver the reconstituted title of the house and lot does not make the
contract a contract to sell for such condition is not inconsistent w/ a
contract of sale.
EARNEST MONEY; Respondents did not give the P1M as earnest money
contemplated in Art. 1842 of the Civil Code. Said amount was merely a
deposit of what would eventually become an earnest money or
downpayment, should a contract of sale be made by them. The amount
was thus given not as a part of the purchase price and as proof of the
perfection of the contract of sale but only as a guarantee that respondents
would not back out of the sale. Respondents in fact described the amount
as an "earnest-deposit." The P1M "earnest-deposit" could not have been
given as earnest money as contemplated in Art. 1482 because, at the time
when petitioner accepted the terms of respondents' offer of March 29,
1994, their contract had not yet been perfected. This is evident from the
following conditions attached by respondents to their letter, to wit: (1) that
they be given the exclusive option to purchase the property within 30 days
from acceptance of the offer; (2) that during the option period, the parties
would negotiate the terms and conditions of the purchase; and (3)
petitioner would secure the necessary approvals while respondents would
handle the documentation. Thus, it is not the giving of earnest money, but
the proof of the concurrence of all the essential elements of the contract of
sale which establishes the existence of a perfected sale.

San
Miguel
Proper
ties v.
Sps.
Huang
,
GR
13729
0, July
31,
2000.

Same; It is true that Article 1482 of the Civil Code provides that
"[W]henever earnest money is given in a contract of sale, it shall be
considered as part of the price and proof of the perfection of the contract."
However, this article speaks of earnest money given in a contract of sale. In

Chua
v. CA,
GR
11925

Page 38 of 87

Civil Laws

this case, the earnest money was given in a contract to sell. The Receipt
evidencing the contract to sell stipulates that the earnest money is a
forfeitable deposit, to be forfeited if the sale is not consummated should
Chua fail to pay the balance of the purchase price. The earnest money
forms part of the consideration only if the sale is consummated upon full
payment of the purchase price. If there is a contract of sale, Valdes-Choy
should have the right to compel Chua to pay the balance of the purchase
price. Chua, however, has the right to walk away from the transaction, w/
no obligation to pay the balance, although he will forfeit the earnest money.
Clearly, there is no contract of sale. The earnest money was given in a
contract to sell, and thus Article 1482, w/ch speaks of a contract of sale, is
not applicable.

5,
April
9,
2003.

OPTION TO BUY; Obligations under an option to buy are reciprocal

obligations. The payment of the purchase price by the creditor is contingent
upon the execution and delivery of a deed of sale by the debtor. When
private respondents opted to buy the property, their obligation was to
advise petitioners of their decision and their readiness to pay the price.
They were not yet obliged to make actual payment. Only upon petitioners
actual execution and delivery of the deed of sale were they reqd to pay.

Bacus
v. CA,
GR
12769
5,
Dec.
3,
2001.

RIGHT OF FIRST REFUSAL; The concept and interpretation of the right of

first refusal and the consequences of a breach thereof evolved in Philippine
juristic sphere only w/in the last decade. It all started in 1992 w/ Guzman,
Bocaling & Co. v. Bonnevie, 206 SCRA 668 [1992], where the Court
held that a lease w/ a proviso granting the lessee the right of first priority
"all things and conditions being equal" meant that there should be identity
of the terms and conditions to be offered to the lessee and all other
prospective buyers, with the lessee to enjoy the right of first priority. A deed
of sale executed in favor of a third party who cannot be deemed a
purchaser in good faith, and w/c is in violation of a right of first refusal
granted to the lessee is not voidable under the Statute of Frauds but
rescissible under Articles 1380 to 1381 (3) of the New Civil Code.
Subsequently in 1994, in the case of Ang Yu Asuncion v. CA, 238 SCRA
602 [1994], the Court en banc departed from the doctrine laid down in
Guzman, Bocaling & Co. v. Bonnevie and refused to rescind a contract of
sale w/c violated the right of first refusal. The Court held that the so-called
"right of first refusal" cannot be deemed a perfected contract of sale under
Article 1458 of the New Civil Code and, as such, a breach thereof decreed
under a final judgment does not entitle the aggrieved party to a writ of
execution of the judgment but to an action for damages in a proper forum
for the purpose. In the 1996 case of Equatorial Realty Development,
Inc. v. Mayfair Theater, Inc., 264 SCRA 483 [1996], the Court en banc
reverted back to the doctrine in Guzman Bocaling & Co. v. Bonnevie stating
that rescission is a relief allowed for the protection of one of the contracting
parties and even third persons from all injury and damage the contract may
cause or to protect some incompatible and preferred right by the contract.
Thereafter in 1997, in Paraaque Kings Enterprises, Inc. v. Court of
Appeals, 268 SCRA 727 [1997], the Court affirmed the nature of and the
concomitant rights and obligations of parties under a right of first refusal.
The Court, summarizing the rulings in Guzman, Bocaling & Co. v. Bonnevie
and Equatorial Realty Development, Inc. v. Mayfair Theater, Inc., held that
in order to have full compliance with the contractual right granting
petitioner the [1] first option to purchase, the sale of the properties for the
price for w/c they were finally sold to a third person should have likewise
been first offered to the former. Further, [2] there should be identity of
terms and conditions to be offered to the buyer holding a right of first
refusal if such right is not to be rendered illusory. Lastly, [3] the basis of the
right of first refusal must be the current offer to sell of the seller or offer to
purchase of any prospective buyer. Thus, the prevailing doctrine is that a
right of first refusal means identity of terms and conditions to be offered to
the lessee and all other prospective buyers and a contract of sale entered
into in violation of a right of first refusal of another person, while valid, is
rescissible.

Rivier
a
Filipin
a, Inc.
v. CA,
GR
11735
5,
April
5,
2002.

Page 39 of 87

Civil Laws

Same; However, we must remember that general propositions do not

decide specific cases. Rather, laws are interpreted in the context of the
peculiar factual situation of each proceeding. Each case has its own flesh
and blood and cannot be ruled upon on the basis of isolated clinical
classroom principles. Analysis and construction should not be limited to the
words used in the contract, as they may not accurately reflect the parties'
true intent. The court must read a contract as the average person would
read it and should not give it a strained or forced construction. In the case
at bar, the Court finds relevant and significant the cardinal rule in the
interpretation of contracts that the intention of the parties shall be
accorded primordial consideration and in case of doubt, their
contemporaneous and subsequent acts shall be principally considered.
Where the parties to a contract have given it a practical construction by
their conduct as by acts in partial performance, such construction may be
considered by the court in construing the contract, determining its meaning
and ascertaining the mutual intention of the parties at the time for
contracting. The parties' practical construction of their contract has been
characterized as a clue or index to, or as evidence of, their intention or
meaning and as an important, significant, convincing, persuasive, or
influential factor in determining the proper construction of the contract. An
examination of the attendant particulars of the case do not persuade us to
uphold Riviera's view. As clearly shown by the records and transcripts of the
case, the actions of the parties to the contract of lease, Reyes and Riviera,
shaped their understanding and interpretation of the lease provision "right
of first refusal" to mean simply that should the lessor Reyes decide to sell
the leased property during the term of the lease, such sale should first be
offered to the lessee Riviera. And that is what exactly ensued between
Reyes and Riviera, a series of negotiations on the price per square meter of
the subject property with neither party, especially Riviera, unwilling to
budge from his offer, as evidenced by the exchange of letters between the
two contenders. It would be rewriting the contract of Reyes and Riviera
under the guise of construction were we to interpret the right of first refusal
as Riviera propounds it, despite a contrary construction as exhibited by its
actions. A court, even the Supreme Court, has no right to make new
contracts for the parties or ignore those already made by them, simply to
avoid seeming hardships. Neither abstract justice nor the rule of liberal
construction justifies the creation of a contract for the parties which they
did not make themselves or the imposition upon one party to a contract of
an obligation not assumed.

id.

Same; Sale made in violation of a partys contractual right of first

refusal is rescissible. However, Justice Vitug dissented on this point. He
explained that the right of first refusal is not a perfected contract, nor does
it qualify as an option contract (Art. 1479, [2]), nor an offer under Art. 1319.

Litonju
a
v.
L&R
Corp.,
GR
13072
2,
Dec.
9,
1999.

Same; PD 1517 (Urban Land Reform Act) pertains to areas proclaimed

as Urban Land Reform Zones (ULRZ). To be able to qualify and avail oneself
of the rights and privileges granted by the said decree, one must be: (1) a
legitimate tenant of the land for ten (10) years or more; (2) must have built
his home on the land by contract; and, (3) has resided continuously for the
last ten (10) years. Obviously, those who do not fall within the said
category cannot be considered "legitimate tenants" and, therefore, not
entitled to the right of first refusal to purchase the property should the
owner of the land decide to sell the same at a reasonable price w/in a
reasonable time.

Alcant
ara v.
Reta,
GR
13699
6,
Dec.
14,
2001.

Same; A party to a contract cannot unilaterally withdraw a right of first

PUP v.

Page 40 of 87

Civil Laws

refusal that stands upon valuable consideration. In the instant case, the
right of first refusal is an integral and indivisible part of the contract of
lease. The consideration for the right is built into the reciprocal obligations
of the parties. When a lease contract contains a right of first refusal, the
lessor is under a legal duty to the lessee not to sell to anybody at any price
until after he has made an offer to sell to the latter at a certain price and
the lessee has failed to accept it. The option in this case was incorporated
in the contracts of lease for the benefit of the lessee w/c, in view of the
total amount of its investments in the property, wanted to be assured that
it would be given the first opportunity to buy the property at a price for w/c
it would be offered for sale.

CA,
GR
14351
3,
Nov.
14,
2001.

EXECUTION OF SALE; Not established. Notwithstanding the execution and

registration of the alleged deed of sale, the alleged vendor continued in
possession of the property w/c were included in a will subsequently
executed by the vendor; and the price allegedly paid by private
respondents for 9 parcels, including the 3 parcels in dispute, a house and a
warehouse, was only P850.

Domin
go v.
CA,
GR
12754
0, Oct.
17,
2001.

DELIVERY; Necessary to Transfer Ownership of Thing Sold; Nowhere

in the Civil Code does it provide that execution of a deed of sale is a
conclusive presumption of delivery of possession. The Code merely said
that the execution shall be equivalent to delivery. Presumptive delivery
can be negated by the failure of the vendee to take actual possession of
the land sold. If, notwithstanding the execution of the instrument, the
purchaser cannot have the enjoyment and material tenancy nor make use
of it himself or through another in his name, then delivery has not been
effected. The critical factor in the different modes of effecting delivery, w/c
gives legal effect to the act is the actual intention of the vendor to deliver,
and its acceptance by the vendee. W/o that intention, there is no tradition.

Santos
v.
Santos
,
GR
13389
5, Oct.
2,
2001.

Same; Symbolic Delivery; Notwithstanding the presence of illegal

occupants on the subject property, transfer of ownership by symbolic
delivery under Art. 1498, NCC can still be effected through the execution of
the deed of conveyance. The key word is CONTROL, NOT POSSESSION, of
the subject property.

Sabio
v. Intl.
Corpor
ate
Bank,
GR
13270
9,
Sept.
4,
2001.

Same; Ownership of the thing sold is not acquired by mere agreement, but
by tradition or delivery. In this case, delivery was not had because it was
effectively prevented by a legal impediment. The sale to Equitorial may
have been valid from inception, but it was judicially rescinded before it
could be consummated. Petitioner never acquired ownership, not because
the sale was void, as erroneously claimed by the trial court, but because
the sale was not consummated by a legally effective delivery of the
property sold. Not having been the owner, petitioner cannot be entitled to
the civil fruits like rentals of the property sold. Furthermore, petitioners bad
faith bars the grant of such benefits.

Equito
rial
Realty
Dev.,
Inc. v.
Mayfai
r
Theat
er, GR
13387
9,
Nov.
21,
2001.
(Justic
e Melo
concur
ring.)

Page 41 of 87

Civil Laws

Same; Ownership is transferred to the vendee by means of delivery, actual

or constructive. Under Art. 1498, NCC, when the sale is made through a
public instrument, the execution thereof shall be equivalent to the delivery
of the thing w/c is the object of the contract, if from the deed the contrary
does not appear or cannot clearly be inferred. Contrary to the majority
opinion, the facts and circumstances of the instant case clearly indicate
that there was indeed actual and constructive delivery of the disputed
property from Carmelo to Equitorial. Granting arguendo that there was
indeed no actual delivery, Mayfairs alleged timely objection to the sale
and continued actual possession of the property did not constitute an
impediment that may prevent the passing of the property from Carmelo
to Equitorial. The fact that Mayfair has remained in actual possession of
the property, after the perfection of the contract of sale between Carmelo
and Equitorial up to the finality of the Courts Decision in GR 106063 (and
even up to the present), could not prevent the consummation of such
contract. Mayfairs possession is not under a claim of ownership but only
possession as a lessee w/ the prior right to purchase the property. It cannot
in any way clash w/ the ownership accruing to Equitorial by virtue of the
sale. The principle has always been that the one who possesses as a mere
holder acknowledges in another a superior right or right of ownership. IN
GR 106063, Mayfairs main concern in its action for specific performance
was the recognition of its right of first refusal. Hence, the most that Mayfair
could secure from the institution of its suit was to be allowed to exercise its
right to buy the property upon rescission of the contract of sale. Not until
Mayfair actually exercised what it was allowed to do by this Court in GR
106063, specifically to buy the disputed property for P11,300,000 would it
have any right of ownership. How then, at thet early stage, could Mayfairs
action be an impediment in the consummation of the contract between
Carmelo and Equitorial?

Justice
Sando
val,
dissen
ting in
Equito
rial
Realty
Dev.,
Inc. v.
Mayfai
r
Theat
er, GR
13387
9,
Nov.
21,
2001.

Same; Delivery of Real Property; Under the law, the vendor is bound to
transfer ownership of and deliver the thing object of the sale to the vendee.
In the present case, although the sale was made through a public
document and hence equivalent to delivery of the thing sold, petitioner
Hermogena vehemently denied the fact of the sale and interposed her
objection to private respondents enjoyment of the property. As such fiction
must yield to reality and petitioners obligation to deliver the sold portion of
lot to private respondent remains.

Engre
so v.
De la
Cruz,
GR
14872
7,
April
9,
2002.

BUYER IN GOOD FAITH; The contract to sell on installment between

petitioner and Perrin was not registered and annotated on Transfer
Certificate of Title No. 28785 of the Register of Deeds of Cavite.
Consequently, the respondents were purchasers in good faith and for value
and petitioner has no cause of action against them.

Aron
v. CA,
GR
12692
6,
Aug.
16,
2001.

BUYER IN BAD FAITH; The contract of sale between Equitorial and

Carmelo is characterized by bad faith, since it was knowingly entered into
in violation of the rights and to the prejudice of Mayfair. Because of bad
faith, neither may Carmelo nor Equitorial avail themselves of considerations
based on equity w/c maight warrant the grant of interests and, in this case,
unconscionably increased rentals. Considering the judgments in the 3
earlier decisions of the Court, Mayfair is under no obligation to pay any
interests, whether based on law or equity, to Carmelo or Equitorial. Mayfair
is is the wronged entity, the one w/c has suffered injury since 1978 or for
the 23 years it was deprived of the property. During said period, Equitorial
received rentals and other benefits w/c would otherwise have accrued to
Mayfair had the latters rights not been violated. There is no obligation on
the part of respondent Mayfair to pay increased, additional, back or future
rentals or interests of any kind to petitioner Equitorial under the

Equito
rial
Realty
Dev.,
Inc. v.
Mayfai
r
Theat
er, GR
13387
9,
Nov.
21,
2001.

Page 42 of 87

Civil Laws

circumstances of this case.

(Justic
e Melo
concur
ring.)

Same; Despite knowledge of respondents claim, petitioner proceeded to

buy the contested units of machinery. The RTC did not err in finding that
she was not a purchaser in good faith.

Tsai v.
CA,
GR
12009
8, Oct.
2,
2001.

SALE OF REAL ESTATE FOR A LUMP SUM (Art. 1542, NCC); Pursuant
to Article 1542, Civil Code of the Philippines, in the sale of real estate,
made for a lump sum and not at the rate of a certain sum for a unit of
measure or number, there shall be no increase or decrease of the price
although there be a greater or lesser area or number than that stated in the
contract. Thus, the obligation of the vendor is to deliver everything within
the boundaries, inasmuch as it is the entirety thereof that distinguishes the
determinate object. However, this rule admits of an exception. A vendee of
land, when sold in gross or with the description "more or less" with
reference to its area, does not thereby ipso facto take all risk of quantity in
the land. The use of "more or less" or similar words in designating quantity
covers only a reasonable excess or deficiency. In the case at bar, the
parties to the agreement described the land subject of the sale in this wise:
"This is a whole parcel of residential land, xxx xxx having an approximate
area of 240 square meters more or less, with all improvements thereon.
An area of "644 square meters more" is not reasonable excess or
deficiency, to be deemed included in the deed of sale of January 2, 1976.
When the terms of an agreement had been reduced to writing, it is
considered as containing all the terms agreed upon and there can be,
between the parties and their successor-in-interest, no evidence of such
terms other than the contents of the written agreement.

Roble
v.
Arbas
a, GR
13070
7, July
31,
2001.

RIGHTS AND OBLIGATIONS OF SELLER AND BUYER; Suspension of

deliveries for failure to pay on time is legally justified under Art. 1583 (2) of
the Civil Code.

Integr
ated
Packa
ging
Corp.
v. CA,
supra.

Same; Rescission of Sale of Immovable Property; It is specifically

governed by Art. 1592 of the Civil Code w/c requires, among others, a
judicial or notarial demand. A seller cannot unilaterally and extrajudicially
rescind a contract of sale where there is no express stipulation authorizing
him to extrajudicially rescind.

Lafort
eza v.
Machu
ca,
supra.

RESCISSION OF SALE; A judicial or notarial act is necessary before a valid

rescission can take place, whether or not automatic rescission has been
stipulated. Even if Art. 1191 were applicable; petitioner would still not be
entitled to automatic rescission. That right must be invoked judicially.

Iringa
n
v.
CA,
GR
12910
7,
Sept.
26,
2001.

Same; RIGHT TO REPURCHASE; Not a matter of right in this case. P.D.

1146 as amended by P.D. 198 grants the GSIS Board of Trustees (the
"Board") the power, nay, the responsibility, to exercise discretion in
"determining the terms and conditions of financial accommodations to its
members" with the dual purpose of making the GSIS "more responsive to

Urban
o
v.
GSIS,
GR
13790

Page 43 of 87

Civil Laws

the needs of the members of the GSIS" and assuring "the actuarial solvency
of the Fund administered by the GSIS." As mandated by P.D. 1146, this
discretion may be exercised in acquiring, utilizing or disposing of, in any
manner recognized by law, "real or personal properties in the Philippines or
elsewhere necessary to carry out the purposes of this Act.

4, Oct.
19,
2001.

Same; Express Warranty of Seller re full payment of taxes and

duties on movables sold; Under Art. 1599 of the Civil Code, once an
express warranty is breached, the buyer can accept or keep the goods and
maintain an action against the seller for damages.

Harris
on
Motor
s
Corp.
v.
Navarr
o, GR
13226
9,
April
27,
2000.

Same; Manufacturers Warranty in Sale of Motor Vehicle; Where

there is an express warranty in the contract, the prescriptive period is the
one specified in the express warranty.

Isidro
v.
Nissan
Motoo
r, Gr.
13650
0, dec.
3,
1999.

Same; ASSIGNMENT OF CREDITS; The sale of a chattel subject of a

mortgage w/ assumption of the loan secured thereby is tantamount to a
substitution of debtor. Consent of, and not just notice to, the creditor is
required. On the other hand, assignment of credit does not require the
debtors consent for the validity thereof and so as to render the debtor
liable to the assignee.

Servic
ewide
Specia
lists v.
CA,
GR
11636
3,
Dec.
10,
1999.

DACION EN PAGO; Art. 1245 of the Civil Code provides that the law on
sales shall govern an agreement of dacion en pago. A contract of sale is
perfected at the moment there is a meeting of the minds of the parties
thereto upon the thing which is the object of the contract and upon the
price. In dacion en pago, property is alienated to the creditor in satisfaction
of a debt in money. It is "the delivery and transmission of ownership of a
thing by the debtor to the creditor as an accepted equivalent of the
performance of the obligation." It "extinguishes the obligation to the extent
of the value of the thing delivered, either as agreed upon by the parties or
as may be proved, unless the parties by agreement, express or implied, or
by their silence, consider the thing as equivalent to the obligation, in which
case the obligation is totally extinguished. The undertaking really partakes
in one sense of the nature of sale, that is, the creditor is really buying the
thing or property of the debtor, payment for which is to be charged against
the debtor's debt. As such, the essential elements of a contract of sale,
namely, consent, object certain, and cause or consideration must be
present. In its modern concept, what actually takes place in dacion en pago
is an objective novation of the obligation where the thing offered as an
accepted equivalent of the performance of an obligation is considered as
the object of the contract of sale, while the debt is considered as the
purchase price. In this case, there was no meeting of the minds between
the parties on whether the loan of the petitioners would be extinguished by

Phil.
Lawin
Bus
Co. v.
CA,
GR
13097
2, Jan.
23,
2002.

Page 44 of 87

Civil Laws

dacion en pago.
PACTO DE RETRO SALE; Right to Repurchase; Art. 1606, 3rd
Paragraph; The application of the third paragraph of Article 1606 (The
right to repurchase in a pacto de retro sale) is predicated upon the bona
fides of the vendor a retro. It must appear that there was a belief on his
part, founded on facts attendant upon the execution of the sale with pacto
de retro, honestly and sincerely entertained, that the agreement was in
reality a mortgage, one not intended to affect the title to the property
ostensibly sold, but merely to give it as security for a loan or other
obligation. In that event, if the matter of the real nature of the contract is
submitted for judicial resolution, the application of the rule is meet and
proper; that the vendor a retro be allowed to repurchase the property sold
within 30 days from rendition of final judgment declaring the contract to be
a true sale w/ right to repurchase. Conversely, if it should appear that the
parties' agreement was really one of sale transferring ownership to the
vendee, but accompanied by a reservation to the vendor of the right to
repurchase the property and there are no circumstances that may
reasonably be accepted as generating some honest doubt as to the parties'
intention, the proviso is inapplicable. The reason is quite obvious. If the rule
were otherwise, it would be within the power of every vendor a retro to set
at naught a pacto de retro, or resurrect an expired right of repurchase, by
simply instituting an action to reform the contract known to him to be in
truth a sale with pacto de retro into an equitable mortgage. As
postulated by the petitioner, "to allow herein private respondents to
repurchase the property by applying said paragraph . . . to the case at bar
despite the fact that the stipulated redemption period had already long
expired when they instituted the present action, would in effect alter or
modify the stipulation in the contract as to the definite and specific
limitation of the period for repurchase (2 years from date of sale or only
until June 25, 1958) thereby not simply increasing but in reality
resuscitating the expired right to repurchase . . . and likewise the already
terminated and extinguished obligation to resell by herein petitioner." The
rule would thus be made a tool to spawn, protect and even reward fraud
and bad faith, a situation surely never contemplated or intended by the law.
This Court has already had occasion to rule on the proper interpretation of
the provision in question. In Adorable v. Inacala, where the proofs
established that there could be no honest doubt as to the parties' intention,
that the transaction was clearly and definitely a sale with pacto de retro,
the Court adjudged the vendor a retro not to be entitled to the benefit of
the third paragraph of Art. 1606. In the case at bar, both the trial court and
the CA were of the view that the subject transaction was truly a pacto de
retro sale; and that none of the circumstances under Art. 1602 of the Civil
Code exists to warrant a conclusion that the transaction subject of the
"Deed of Sale" and "Option to Buy" was an equitable mortgage. The CA
correctly noted that if respondents really believed that the transaction was
indeed an equitable mortgage, as a sign of good faith, they should have, at
the very least, consigned with the trial court the amount of P896,000.00,
representing their alleged loan, on or before the expiration of the right to
repurchase on August 21, 1983. Clearly, therefore, the declaration of the
transaction as a pacto de retro sale will not, under the circumstances,
entitle respondents to the right of repurchase set forth under the third
paragraph of Article 1606 of the Civil Code.

Abilla
v.
Gobon
seng,
GR
14665
1, Jan.
17,
2002.

DAMAGES; In Lieu of Specific Performance and/or Rescisssion; The

remedies of specific performance and/or rescission prayed for by petitioner
no longer being feasible. In accordance with the peculiar circumstances of
the case at bar, the development charges would certainly be a fair measure
of compensatory damages to petitioner Ayala. Exemplary damages in the
sum of P2.5M as prayed for by petitioner are also in order inasmuch as
respondent Rosa-Diana was in evident bad faith Petitioner Ayala is likewise
entitled to an award of attorney's fees in the sum of P250,000.00.

Ayala
Corp
v.
RosaDiana
Realty
and
Dev.
Corp.,
GR
13428

Page 45 of 87

Civil Laws

4,
Dec.
1,
2000.

Lease

DOUBLE SALES; To merit protection under Art. 1544 (2) of the Civil Code,
the second buyer must act in GOOD FAITH in registering the deed. He must
have no knowledge of any defect in the title of the property sold.

Bayoc
a
v.
Nogal
es, GR
13820
1,
Sept.
12,
2000.

Capacity to Buy; The prohibition against agents purchasing property in

their hands for sale or management does not apply if the principal consents
to the sale of the property.

Distaj
o
v.
CA,
GR
11295
4,
Aug.
25,
2000.

Exclusive Distributorship Agreement; Petitioner committed a breach of

the exclusive distributorship agreement by directly dealing w/ private
respondents customer thereby entitles the latter of damages.

Bayer
Phils.
v. CA,
GR
10926
9,
Sept.
15,
2000.

THE RENT CONTROL LAW (BP 877 as amended by RA 6828);

Residential units includes not only buildings, parts, or units thereof
used solely as dwelling places, but also those used for home industries,
rented rooms and bed spaces offered for rent; and those used for home
industries if the owner thereof and his family actually live therein and used
it principally for dwelling purposes.

T & C
Dev.
Corp.
v. CA,
GR
11838
1, Oct.
26,
1999.

Oral Contract of Lease; For the lease of real property for a period longer
than 1 year unenforceable.

R & M
Gen.
Merch
andise
v. CA,
supra.

TERM OF LEASE; Extension; A Stipulation in a lease contract stating that

its 5-year term is subject to an option to renew shall be interpreted to be
reciprocal in character. Unless the language shows an intent to allow the
lessee to exercise it unilaterally, such option shall be deemed to benefit
BOTH the lessor and the lessee who must both consent to the extension or
renewal, as well as to its specific terms and conditions. In the instant case,
there was nothing in the aforesaid stipulation or in the actuation of the
parties that showed that they intended an automatic renewal or extension
of the term of the contract.

LL and
Comp
any
Devm
t. and
AgroIndust
rial
Corp.
v.
Huang
,
GR

Page 46 of 87

Civil Laws

14237
8,
March
7,
2002.
Same; Same; The extension of a lease contract must be made before its
term expires not after. Upon the lapse of the stipulated period, courts
cannot belatedly extend or make a new lease for the parties, even on the
basis of equity.

id.

RENTAL; Increase; While petitioner objected to the unilateral increase in

rental rate, it should not have completely stopped paying rent but should
have DEPOSITED the original rent w/ the judicial authorities or a bank in the
name of, and w/ notice to, respondent.

Tala
Realty
Servic
es
Corp.
v.
Banco
Filipin
o
Saving
s and
Mortg
age
Bank,
GR
13798
0,
June
20,
2000.

Same; Same; SUSPENSION OF PAYMENT; In this case, petitioner could

not unilaterally increase the rental. Hence, upon refusal of petitioner to
accept rentals from the respondents at the old rate, the respondents should
have DEPOSITED such rentals w/ a bank or the judicial authorities. But they
failed. Art. 1658, NCC provides only two instances in w/c the lessee may
suspend payment of rent: [1] the lessor fails to make the NECESSARY
REPAIRS; or [2] the lessor fails to maintain the lessee in PEACEFUL AND
ADEQUATE ENJOYMENT of the property leased. None of these is present in
the case at bar.

LL and
Comp
any
Devm
t. and
AgroIndust
rial
Corp.
v.
Huang
,
GR
14237
8,
March
7,
2002.

Same; Courts may Fix the Rate of Rentals; Claim that the rental
demanded for the sublease is unconscionable or exorbitant, not
established; The trial court has the authority to fix the reasonable value for
the continued use and occupancy of the leased premises after the
termination of the lease contract, and it is not bound by the stipulated
rental in the contract of lease since upon termination or expiration of the
contract of lease, the rental stipulation therein may no longer be the
reasonable value for the use and occupation of the premises as a result or
by reason of the change or rise in values. Moreover, the trial court can take
judicial notice of the general increase in rentals of real estate especially of
business establishments.

Golde
n
Horizo
n
Realty
Corp.
v. Sy
Chuan
,
GR
14541
6,
Sept.
21,
2001.

Page 47 of 87

Civil Laws

EXPIRATION OF LEASE; it justifies the ejectment of tenant pursuant to Art

1673 (1), NCC.

R & M
Gen.
Merch
andise
v. CA,
GR
14418
9, Oct.
5,
2001.

RENEWAL OF LEASE; Contractual provisions for renewal of lease, such as

this lease shall be for a period of xxxxx, subject to renewal for another 10
years, under the same terms and conditions. interpreted as NOT
providing for an automatic renewal or extension of the term of the contract.
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 one party.
Thus, pursuant to the Fernandez ruling and Art. 1196 of the Civil Code, 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.

Buce
v. CA,
GR
13691
3, May
12,
2000.

Same; IMPLIED NEW LEASE; In Ledesma vs. Javellana, 121 SCRA 794,
798 (1983), the Court ruled that a covenant to renew a lease, which makes
no provision on its terms, implies an extension or renewal subject to the
same terms in the original lease contract. Since the parties did not make a
new one, the terms and conditions of the original except the provision on
the rate and period of lease are deemed extended. Corollarily, Art. 1678 of
the Civil Code did not apply.

Lhuilli
er
v.
CA,
GR
12805
8,
Dec.
19,
2000;
Unica
ne
Food
Produ
cts v.
CA,
supra.

IMPROVEMENTS by Lessee; The parties agreed that all improvements

introduced by the lessee would accrue to the benefit of the owner at the
end of the lease, w/o reimbursement. This stipulation, not being contrary to
law, morals, public order or public policy, binds the parties and is the law
between them.

Lhuilli
er
v.
CA, id.

SUBLEASE; As mere sub-lessees, petitioners derive their right from the

sub-lessor whose termination of contract w/ the lessor necessarily ended
the sublease contract. Hence, aster the termination of the contract of lease,
the continued stay of the sub-lessee (herein petitioners) in the premises
was merely BY TOLERANCE of the respondents (lessors) and it became
unlawful after they ignored the lessors demand to leave.

Sps.
Virgili
o
v.
Patrici
a, GR
13465
1,
Sept.
18,
2000.

Same; Even after the expiration of petitioner's lease contract with National
Development Company, petitioner continued to pay rent to National
Development Company and the latter continued to accept such rent
payments while the case between them was pending. This situation
obtained even during the period in which private respondent occupied the
subleased premises and after demand had been made upon him to vacate
the same. Under such circumstances, it is but fair that private respondent

Golde
n
Horizo
n
Realty
Corp.
v. Sy

Page 48 of 87

Civil Laws

also continue to pay rentals to petitioner. Otherwise, private respondent

would unjustly enrich himself if he would not comply with his obligations as
sublessee, while petitioner faithfully performs its obligations as lessee to
National Development Company.

Chuan
,
GR
14541
6,
Sept.
21,
2001.

Obligations of the Lessee; Art. 1667 and 1665, NCC provides that the
lessee is responsible for the deterioration or loss of the thing leased, unless
he proves that it took place w/o his fault.

Minde
x
Resou
rces
Dev.
V.
Morillo
,
GR
13812
3,
March
12,
2002.

SECURITY DEPOSIT; Security deposit properly applied to unpaid rentals.

Tala
Realty
Servic
es
Corp.
v.
Banco
Filipin
o
Saving
s and
Mortg
age
Bank,
GR
13798
0,
Nov.
15,
2000.

EJECTMENT; Arrears in Payment of Rent; No proper payment of arrears

where the lessor deposited the amount in the bank on his account. The
amounts should be deposited with the judicial authorities or in a bank in
the name of, and notice to, lessee.

T & C
Dev.
Corp.
v. CA,
GR
11838
1, Oct.
26,
1999.

Same; GROUNDS FOR JUDICIAL EJECTMENT; Under the Rental Reform

Act of 2002 and Art. 1673, NCC, the grounds are: [1] NONPAYMENT OF
RENT. Non-payment of rent may be justified if the lessor refused to accept
their payments. However, Art. 1256, NCC provides that if the creditor to
whom tender of payment has been made refuses w/o just cause to accept
it, the debtor shall be released from responsibility by the CONSIGNATION of
the thing or sum; [2] MERE SUBSEQUENT PAYMENT OF RENTALS by the
lessee and the receipt thereof by the lessor DOES NOT, absent any other
circumstance that may dictate a contrary conclusion, LEGITIMIZE THE
UNLAWFUL CHARACTER OF THE POSSESSION. The lessor may still pursue
the demand for ejectment; [3] EXPIRATION OF THE TERM OF THE LEASE

LL and
Comp
any
Devm
t. and
AgroIndust
rial
Corp.
v.
Huang

Page 49 of 87

Civil Laws

Work
and
Labor

notwithstanding the introduction of substantial improvements w/c they did

so w/ the knowledge of the risk and that the contract had plaintly provided
for a 5-year lease period.

,
GR
14237
8,
March
7,
2002.

Damages in Illegal Detainer; It refers to RENTS or the reasonable

compensation for the use and occupation of the premises, or FAIR RENTAL
VALUE OF THE PROPERTY. Temperate, actual, moral and exemplary
damages are not recoverable in such cases.

Herrer
a
v.
Bollos,
GR
13825
8, Jan.
18,
2002.

CONTRACT FOR A PIECE WORK; BREACH OF CONTRACT; Video

Taping; Award of Damages; Video Taping; The award of damages to
the petitioners cannot be lumped together as was done by the trial court. It
is basic that the claim for actual, moral and exemplary damages as well as
attorney's fees must each be independently identified and justified. In this
connection, For Actual Damages, Art. 1170, NCC provides that "those who
in the performance of their obligations are guilty of fraud, negligence or
delay, and those who in any manner contravene the tenor thereof, are
liable for damages." For failure of PVE to comply with its obligation under
the video tape coverage contract, petitioners are entitled to actual
damages at least in the amount of P1,423.00 representing their
downpayment in that contract. Ordinarily, Moral Damages cannot be
recovered in an action for breach of contract because such an action is not
among those expressly mentioned in Art. 2219, NCC. However, moral
damages are recoverable for breach of contract where the breach was
wanton, reckless, malicious or in bad faith, oppressive or abusive. The
wanton and reckless failure and neglect to timely check and remedy the
video tape recorder by the PVE crew indicates a malicious breach of
contract and gross negligence on the part of said respondent in the
discharge of its contractual obligations. Consequently, the petitioners who
suffered mental anguish and tortured feelings thereby, are entitled to an
award of One Hundred Thousand Pesos (P100,000.00) as moral damages.
Likewise, in one case the Court had awarded moral damages on account of
a malicious breach of contract Considering the sentimental value of the
tapes and the fact that the event therein recorded a wedding which in
our culture is a significant milestone to be cherished and remembered
could no longer be reenacted and was lost forever. The award of Exemplary
Damages which is hereby fixed in the amount of P40,000.00 is justified,
under the premises, to serve as a warning to all entities engaged in the
same business to observe good faith and due diligence in the fulfillment of
their contractual obligations. Additionally, the award of Attorney's Fees in
the amount of P10,000.00 is also proper in accordance with Art. 2208, NCC.

Herbo
sa v.
CA,
GR
11908
6, Jan.
25,
2002.

Same; Same; Defense of Exercise of due Care in the Selection and

Supervision of Employees; This defense, as provided in the last
paragraph of Art. 2180, NCC (Exemption from vicarious liability), may be
availed of only where the liability arises from culpa aquilana and not from
culpa contractual such as in the case at bar.

id.

COMMON CARRIERS; Definition; The New Civil Code (Art. 1732)

definition of common carriers makes NO DISTINCTION between: [1] one
whose principal BUSINESS ACTIVITY is the carrying of persons or goods or
both, and one who does such carrying only as an ancillary activity; [2]
person or enterprise offering transportation on a regular or scheduled
BASIS and one offering on an occasional, episodic or unscheduled basis; [3]
a carrier OFFERING its services to the general public, i.e. the general
community or population, and one who offers services or solicits business
only from a narrow segment of the general population.

Calvo
v.
UCPB
Gen.
Insura
nce
Co.,
GR
14849

Page 50 of 87

Civil Laws

6,
March
19,
2002.
Same; Extraordinary Diligence; From the nature of their business and
for reasons of public policy, common carriers are bound to observe extra
ordinary diligence and vigilance w/ respect to the safety of the goods and
the passengers they transport. The extraordinary responsibility lasts from
the time the goods are unconditionally placed in the possession of and
received for transportation by the carrier until they are delivered, actually
or constructively, to the consignee or to the person who has a right to
receive them.

Belgia
n
Overs
eas
Charte
ring
and
Shippi
ng
N.V. v.
Phil.
First
Insura
nce,
GR
14313
3,
June
5,
2002.

Same; Same; Common Carriers, from the nature of their business and for
reason of public policy, are mandated to observe extraordinary diligence in
the vigilance over the goods and for the safety of the passengers
transported by them. As a GENERAL RULE, common carriers are PRESUMED
to have been at fault or negligent if the goods transported by them are lost,
destroyed, or if the same deteriorated.

The
Phil.
Ameri
can
Gener
al
Insura
nce
Co. V.
Mgg
Marin
e
Servic
es, GR
13564
5,
March
8,
2002;
Herbo
sa v.
CA,
2002.

Same; Presumption of Fault or Negligence; Owing to the high degree

of diligence required of them, common carriers, as a general rule, are
presumed to have been at fault or negligent if the goods they transported
deteriorated or got lost or destroyed. In order to avoid responsibility for any
loss or damage, they have the burden of proving that they observed such
diligence. Mere proof of delivery of the goods in good order to the common
carrier and their arrival in bad order at their destination constitute prima
facie case of fault or negligence against the carrier. If no adequate
explanation is given as to how the deterioration, loss or destruction of the
goods happened, the transporter shall be held responsible.

Belgia
n
Overs
eas
Charte
ring
and
Shippi
ng
N.V. v.
Phil.
First
Insura
nce,

Page 51 of 87

Civil Laws

GR
14313
3,
June
5,
2002.
Same; Same; In this case, petitioner accepted the cargo w/o exception
despite the apparent defects in some of the container vans. Hence, for
failure of petitioner to prove that she exercised extraordinary diligence in
the carriage of the goods in this case or that she is exempt from liability,
the presumption of negligence as provided in Art. 1735 holds.

Calvo
v.
UCPB
Gen.
Insura
nce
Co,
GR
14849
6,
March
19,
2002.

Same; Exemption to Presumption of Fault or Negligence; However,

this presumption of fault or negligence does not arise in cases enumerated
under Art. 1734, NCC such as: [i] acts of God; [ii] act of public enemy in
war; [iii] act or omission of shipper or owner of goods; [iv] the character of
the goods or defects in the packing or in the container; or [v] order or act
of competent public authority.

Minde
x
Resou
rces
Dev.
V.
Morillo
,
GR
13812
3,
March
12,
2002;
PhilAm
Gen.
Insura
nce v.
Mgg
Marin
e
Servic
es, GR
13564
5,
March
8,
2002.

Same; Same; Fortuitous Event; The presumption of fault or negligence

will not arise if the loss is due to any of the ff. causes: [1] flood, storm,
earthquake, lightning, or other natural disaster or calamity; [2] an act of
public enemy in war, whether international or civil; [3] an act or omission of
the shipper or owner of the goods; [4] the character of the goods or defects
in the packing or the container; or [5] an order or act of competent public
authority. This is a close list. If the cause of destruction, loss or destruction
is other than the enumerated circumstances, then the carrier is liable
therefore.

Belgia
n
Overs
eas
Charte
ring
and
Shippi
ng
N.V. v.
Phil.
First
Insura
nce,

Page 52 of 87

Civil Laws

GR
14313
3,
June
5,
2002.
Partner Essential Requisites: (1) mutual contribution to a common stock; and (2)
-ship
a joint interest in the profits. The registration of partnership w/ a capital of
P3,000 or more under Art. 1772, NCC, is not mandatory.

Sunga
-Chan
v.
Chua,
GR
14334
0,
Aug,
15,
2001.

Partnership Established; A partnership may be deemed to exist among

the parties who agree to borrow money to pursue a business and to divided
the profits or losses that may arise therefrom, even if it is shown that thay
have not contributed any capital of their own to a common fund.

Lim v.
Phil.
Fishin
g Gear
Ind.,
GR
13644
8,
Nov.
3,
1999.

Partnership Not Established; With no participation in the profits,

petitioner cannot be deemed a partner.

Tocao
v. CA,
GR
12740
5,
Sept.
20,
2001.

Real Contract; It is perfected only upon delivery of the object of the

contract.

BPI
Invest
ment
v. CA,
GR
13363
2,
Feb.
15,
2002.

USURIOUS TRANSACTION; Void under Art. 1957, NCC. In usurious loans,

the entire obligation does not become void; the unpaid principal debt still
stands and remains valid but the stipulation as to the usurious interest is
void, consequently, the debt is to be considered w/o stipulation as to
interest.

First
Mtro
Invest
ment
Corp.
v. Este
del Sol
Mount
ain
Reser
ve, GR
14181
1,
Nov.

Loan

Page 53 of 87

Civil Laws

15,
2001.

Mortga
ge

Usury Law; Central Bank Circular No. 905 neither repealed nor amends,
but merely suspended the effectivity of, the Usury Law. The illegality of
usury is wholly the creature of legislation. A Central Bank Circular cannot
repeal a law. Only a law can repeal another law. Thus, retroactive
application of a Central Bank Circular cannot, and should not, be presumed.

id.

LOAN WITH USURIOUS INTEREST; [A] contract of loan with usurious

interest consists of principal and accessory stipulations; the principal one is
to pay the debt; the accessory stipulation is to pay interest thereon. And
said two stipulations are divisible in the sense that the former can still
stand without the latter. . . In a simple loan with a stipulation of usurious
interest, the prestation of the debtor to pay the principal debt, w/c is the
cause of the contract, is not illegal. The illegality lies only in the stipulated
interest. Being separable, only the latter should be deemed void. To
discourage stipulations on usurious interest, said stipulations are treated as
wholly void, so that the loan becomes one w/o a stipulation as to payment
of interest. It should not, however, be interpreted to mean forfeiture even
of the principal, for this would unjustly enrich the borrower at the expense
of the lender.

Brione
s vs.
Camm
ayo,
No. L23559
,
41
SCRA
404,
411
(1971)
.

Same; In a simple loan w/ a stipulation of usurious interest, the prestation

of the debtor to pay the principal debt, w/c is the cause of the contract, is
not illegal. The illegality lies only in the stipulated interest. Being separable,
only the latter should be deemed void. To discourage stipulations on
usurious interest, said stipulations are treated as wholly void, so that the
loan becomes one w/o a stipulation as to payment of interest. It should not,
however, be interpreted to mean forfeiture even of the principal, for this
would unjustly enrich the borrower at the expense of the lender.

Sps.
Puerto
v. CA,
GR
13821
0,
June
6,
2002.

INTEREST PAYMENT; An agreement to pay interest must be in

writing; otherwise, it cannot be valid, although there was actual payment
of interest being deducted in advance from the principal of the loan.

Pache
co v.
CA,
GR
12667
0,
Dec.
2,
1999.

ESSENTIAL REQUISITES; Under Art. 2085 of the Civil Code, the following
requisites are essential to the contracts of pledge and mortgage:
(1)
That they be constituted to secure the fulfillment of a principal
obligation;
(2)
That the pledgor or mortgagor be the absolute owner of the thing
pledged or mortgaged;
(3)
That the persons constituting the pledge or mortgage have the free
disposal of their property, and in the absence thereof, that they be legally
authorized for that purpose.
"Third persons who are not parties to the principal obligation may secure
the latter by pledging or mortgaging their own property." Thus, only the
absolute owner of the property can constitute a valid mortgage on it.

Cruz
v.
Banco
m
Financ
e
Corp,
GR
14778
8,
March
19,
2002.

Mortgage of Non-Owner; DOCTRINE OF COMPARATIVE NEGLIGENCE;

"When a mortgagee relies upon a Torrens title and lends money in all good
faith on the basis of the title standing in the name of the mortgagor, only to
discover one defendant to be an alleged forger and the other defendant to
have by his negligence or acquiescence made it possible for fraud to
transpire, as between two innocent persons, the mortgagee and one of the
mortgagors, the latter who made the fraud possible by his act of confidence

Adrian
o
v.
Pangili
nan,
GR
13747
1, Jan.

Page 54 of 87

Civil Laws

must bear the loss." In the present case, the mortgagor (who is engaged in
the business of lending money secured by real estate mortgage), could
have easily avoided the loss by simply exercising due diligence to ascertain
the identity of the impostor who claimed to be the registered owner of the
property mortgaged.

16,
2002.

MORTGAGE IN GOOD FAITH; Petitioner was already aware that a person

other than the registered owner was in actual possession of the land when
it bought the same at the foreclosure sale. A person who deliberately
ignores a significant fact w/c would create suspicion in an otherwise
reasonable man is not an innocent purchaser for value.

DBP v.
CA,
GR
12947
1,
April
28,
2000.

Same; RIGHTS OF MORTGAGEE; A simple mortgage does not give the

mortgagee the right to the possession of the property unless the deed of
mortgage has a provision to that effect.

Isaguir
re
v.
De
Lara,
supra.

Mortgagee; Not Innocent Mortgagee for Value; we hold that petitioner

is not an innocent mortgagee for value, because he failed to observe due
diligence in the grant of the loan and in the execution of the real estate
mortgage. He was engaged in the real estate business, including the grant
of loans secured by real property mortgages. Thus, he is expected to
ascertain the status and condition of the properties offered to him as
collaterals, as well as to verify the identities of the persons he transacts
business with. Specifically, he cannot simply rely on a hasty examination of
the property offered to him as security and the documents backing them
up. He should also verify the identity of the person who claims to be the
registered property owner.

Adrian
o
v.
Pangili
nan,
GR
13747
1, Jan.
16,
2002.

Mortgage Lien inseparable from Property Mortgaged; The mortgage

subsists notwithstanding changes of ownership of the property mortgaged;
and all subsequent purchasers of said property must respect the mortgage,
whether or not the transfer to them was with the consent of the mortgagee.
Thus, a recorded mortgage is a lien inseparable from the property
mortgaged, and until discharge, it follows the property.

Asunci
on v.
Evang
elista,
GR
13349
1, Oct.
13,
1999.

Prohibition against Sale of Mortgaged Property by the mortgagor

without the consent of the Mortgagee violates Art. 2130 of NCC;
Being contrary to law, such stipulation is not binding upon the parties.

Litonju
a
v.
L&R
Corp.,
GR
13072
2,
Dec.
9,
1999.

UNPAID GOODS Included in the Mortgage; The mortgagee bank is not

liable to pay for goods and merchandise included in the mortgaged
property subject of foreclosure, w/c had remained unpaid, as they were
supplied to the mortgagor by way of sale on credit. The unpaid supplier of
the goods and merchandise has no cause of action against the mortgagee
bank. The obligation to pay remains w/ the mortgagor.

PNB v.
CA,
GR
12271
0, Oct.
12,
2001.

VALIDITY OF MORTGAGE; The right to attack the validity of a mortgage

may be lost by a WAIVER of defects and objections, such as alleged fraud

San
Juan v.

Page 55 of 87

Civil Laws

and misrepresentation.

CA,
GR
11005
5,
Aug.
20,
2001.

REMEDIES OF MORTGAGE CREDITOR: Personal Action for debt or a

Real Action to Foreclose the Mortgage. The remedies are alternative
and not commulative. An election of one remedy operates as a waiver of
the other.

Bank
of
Ameri
ca NT
and
SA v.
Ameri
can
Realty
Corp.,
GR GR
13387
6,
Dec.
29,
1999.

EQUITABLE MORTGAGE; In determining whether a deed absolute in form

is a mortgage, the court is not limited to the written memorials of the
transaction. The decisive factor is the INTENTION OF THE PARTIES, as
shown not necessarily by the terminology used in the contract but by all
surrounding circumstances, such as the relative situation of the parties at
the time, their attitude, acts, conduct, declarations, the negotiation bet.
them leading to the deed and generally, all pertinent facts having a
tendency to fix and determine the real nature of their design and
understanding. Art. 1602 of the Civil Code enumerates the instances when
a contract, regardless of its nomenclature, may be presumed to be an
equitable mortgage. The existence of any one of said circumstances, not
the concurrence nor an overwhelming number of such circumstances, is
sufficient for a contract of sale to be presumed an equitable mortgage. The
provision also applies even to a contract purporting to be an absolute sale,
as in this case, if indeed the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any
other obligation.

Sps.
Reyes
v. CA,
GR
13416
6,
Aug.
25,
2000.

Same; Not a Sale w/ Pacto de Retro; The Deed of Sale w/ Right to

Repurchase contains a stipulation, That I reserved for myself, my heirs,
successors and assigns to repurchase the foregoing parcel of land after the
period of one year to be counted from the date of this instrument, to be
counted from the date of this instrument, by returning and paying back
unto the said Gilbert Blancia, his heirs, successors and assigns, the sum of
P2, 216.00, deemed to be an equitable mortage.

Magda
lena
Balnci
a
v.
Vda.
De
Caluor
,
GR
13825
1, Jan.
29,
2002.

FORECLOSURE; USURIOUS MORTGAGE CONTRACT; Where it find that

usurious payment for parcels of land secured by a deed of mortgage and
thus, declared the mortgage deed void. Since the mortgage contract is
void, the foreclosure of the property provided for in said deed is ineffectual
as well.

Sps.
Puerto
v. CA,
GR
13821
0,
June
6,

Page 56 of 87

Civil Laws

2002.
Same; EXTRA-JUDICIAL FORECLOSURE; Notice and publication
Reqmts.; Venue of Proceedings; The requirement in Act No. 3135, as
amended, that said notice shall be posted in at least three [3] public places.
At any rate, even if the Notice of Sale was not posted in three public places
as required, this would not invalidate the foreclosure conducted. As
explained in Olizon vs. CA, 238 SCRA 148,155-156 that the lack of notice
in 3 public places and not the publication thereof in a newspaper of general
circulation does not fail the object of a notice of sale w/c is to inform the
public of the nature and condition of the property to be sold, and of the
time, place and terms of the sale. Notices are given for the purpose of
securing bidders and to prevent a sacrifice of the property. If these objects
are attained, immaterial errors and mistakes will not affect the sufficiency
of the notice; but if mistakes or omissions occur in the notices of sale which
are calculated to deter or mislead bidders, to depreciate the value of the
property, or to prevent it from bringing a fair price, such mistakes or
omissions will be fatal to the validity of the notice, and also to the sale
made pursuant thereto. The Court take judicial notice of the fact that
newspaper publications have more far-reaching effects than posting on
bulletin boards in public places. There is a greater probability that an
announcement or notice published in a newspaper of general circulation
which is distributed nationwide, shall have a readership of more people
than that posted in a public bulletin board, no matter how strategic its
location may be, which caters only to a limited few. Hence the publication
of the notice of sale in the newspaper of general circulation alone is more
than sufficient compliance with the notice-posting requirement of the law.
By such publication, a reasonably wide publicity had been effected such
that those interested might attend the public sale, and the purpose of the
law had been thereby subserved.

Langk
aan
Realty
Dev.
V.
UCPB,
GR
13943
7,
Dec.
8,
2000.

Same; Same; ACT 3135 gives the right to redeem not only to the
mortgagor-debtor but also to his successor-in-interest.

Litonju
a
v.
L&R
Corp.,
GR
13072
2,
Dec.
9,
1999.

Same; Same; Proceedings for the extrajudicial foreclosure of real estate

mortgages are governed by Act 3135, as amended, entitled An Act to
Regulate the Sale of Property under Special Powers Inserted in or Annexed
to Real Estate Mortgages. As the title itself suggests and as provided in
Sec. 1 of the Act, extrajudicial foreclosure sales are proper only when so
provided in the real estate mortgage contract.

Casan
o
v.
Magat
, A.M.
No. P021539,
Jan.
24,
2002.

Same; Writ of Possession; A writ of execution employed to enforce a

judgment to recover the possession of land. It commands the sheriff to
enter the land and give its possession to the person entitled under the
judgment. Among the instances when a writ of possession may be issued is
in extrajudicial foreclosure of mortgage under Sec. 7 of Act 3135, as
amended by Act 4148: (1) w/in the 1 year redemption period, upon the
filing of a bond; or (2) after the lapse of the redemption period, w/o need of
a bond. The issuance of a writ of possession is a ministerial function. The
order for a writ of possession issues as a matter of course upon the filing of
the proper motion and the approval of the corresponding bond. The judge
issuing the order ff. the express provisions of law cannot be charged w/

Sps.
Ong v.
CA,
GR
12149
4,
June
8,
2000.

Page 57 of 87

Civil Laws

having acted w/o jurisdiction or w/ grave abuse of discretion. As a rule, any

question regarding the validity of the mortgage or its foreclosure cannot be
a legal ground for refusing the issuance of a writ of possession. Regardless
of whether or not there is a pending suit for annulment of the mortgage or
the foreclosure itself, the purchaser is entitled to a writ of possession, w/o
prejudice, of course, to the eventual outcome of said case. Hence, an
injunction to prohibit the issuance of a writ of possession is entirely out of
place.
RIGHT OF REDEMPTION. The certificate of sale in favor of Metrobank was
registered on December 22, 1987. Under the 1964 Rules of Court which
were in effect at that time, the judgment debtor or redemptioner had the
right to redeem the property from Metrobank within twelve months from
the date of registration of the certificate of sale. Chinabank was a
redemptioner, being then a creditor with a lien by judgment on the property
sold, subsequent to the judgment under which the property was sold. Upon
the expiration of the twelve-month period of redemption and no such
redemption is made, the purchaser shall be entitled to the final deed of sale
over the property sold on execution. On the other had, Paulino, as the son
and compulsory heir of Alfonso, could still redeem his father's share in
the property from Metrobank. Under Rule 39, Section 29 (a) of the 1964
Rules of Court, the judgment debtor or his successor in interest may
redeem real property sold on execution. Paulino is included within the term
"successor in interest." The "successor-in-interest" contemplated by the
above provisions includes a person to whom the judgment debtor has
transferred his right of redemption, or one to whom he has conveyed his
interests in the property for purposes of redemption, or one who succeeds
to his property by operation of law, or a person with a joint interest in the
property, or his spouse or heirs. A compulsory heir to the judgment debtor
qualifies as a successor-in-interest who can redeem property sold on
execution. Thus, the acquisition by Chinabank, or Metrobank for that
matter, of the said portion will create an absurd co-ownership between a
bank, on the one hand, and a family, on the other hand, of the latter's
family home. The rigid and technical application of the Rules may be
relaxed in order to avoid an absurd result. After all, the Rules of Court
mandates that a liberal construction of the Rules be adopted in order to
promote their object and to assist the parties in obtaining just, speedy and
inexpensive determination of every action and proceeding. This rule of
construction is especially useful in the present case where adherence to the
letter of the law would result in absurdity and manifest injustice.

China
Banki
ng
Corp.
v. CA,
GR
12964
4,
Sept.
7,
2001.

Same; Esperanza validly redeemed the property from the bank.

Consequently, the bank had no right to be issued a final deed of sale by the
Provincial Sheriff, mush less to sell the property to Tandos.

Tando
v. CA,
GR
12798
4,
Dec.
14,
2001.

Same; PERIOD OF REDEMPTION; The 1997 Rules of Civil Procedure has

changed the period of redemption from 12 months to I year. The right
of redemption should be exercised w/in the period prescribed by law.
Moreover, the tender of payment must be for the full amount of the
purchase price.

Estani
slao v.
CA,
GR
14368
7, July
31,
2001.

Same; REDEMPTION PRICE; [i] Interest on the auction price should be

computed not from the date of the sale but from the registration thereof.
Since the period of redemption begins only from the date of the registration
of the certificate of sale in the Registry of Deeds, the computation of the
interest on the purchase price should also be made to commence from that

id.

Page 58 of 87

Civil Laws

date ; [ii] Taxes. The redemptioner must also pay the assessment or taxes
paid by the purchaser. However, the latter must give notice to the officer
who conducted the sale of the assessment or taxes paid by him and file the
same w/ the Registry of Deeds.
RIGHT OF REDEMPTION DISTINGUISHED FROM EQUITY OF
REDEMPTION; The right of redemption exists only in the case of extrajudicial foreclosure. Act 3135 grants the mortgagor the right of redemption
w/in one (1) year from the registration of the sheriffs certificate of
foreclosure sale. No such right is recognized in judicial foreclosure, except
only where the mortgagee is the PNB or a bank or banking institution. In
the event of judicial foreclosure, if the mortgagee is not PNB or a bank or
banking institution, the foreclosure sale, when confirmed by an order of the
court, shall operate to divest the rights of all the parties to the action and
vest their rights in the purchaser.. There exists only what is known as the
EQUITY OF REDEMPTION w/c is simply the right of the defendant mortgagor
to extinguish the mortgage and retain ownership of the property by paying
the secured debt w/in 90-DAY PERIOD after the judgment becomes final, or
even after the foreclosure sale but prior to its confirmation.

Huert
a Alba
Resort
v. CA,
GR
12856
7,
Sept.
1,
2000.

No legal requirement that Mortgagee act as Surety of the secured

obligation; Neither law nor jurisprudence supports that a third person who
secure others obligation be solidarily bound with the principal obligor. The
latter remains to be principally liable; while the third person is subsidiarily
liable in case of default by the principal debtor to pay by foreclosing the
mortgaged property.

Bank
of
Ameri
ca NT
and
SA v.
Ameri
can
Realty
Corp.,
GR GR
13387
6,
Dec.
29,
1999.

PACTUM COMMISORIUM; A void stipulation. The "Deed of Pacto de

Retro Sale provides that "if the Vendor A-Retro, Candido C. Amil, fails to
exercise his right to redeem or repurchase as herein granted within the
period stipulated upon, then this conveyance shall be deemed to be an
absolute and irrevocable sale, without the necessity of executing any
further deed or instituting judicial action to consolidate the ownership in
the name of the Vendees A-Retro." This stipulation is void for being a
pactum commissorium.

Amil v.
CA,
GR
12527
2, Oct.
7,
1911;
Busta
mante
v.
Rosel,
GR
12680
0,
Nov.
29,
1999.

PACTO DE NON ALIENDO; Art. 2130 of the Civil Code renders viod any
stipulation forbidding the owner from alienating the immovable mortgaged
property. A mortgage does not extinguish the title of the debtor.
Chatte
l
Mortga
ge

AUCTION SALE; Application of Proceeds. Under the Chattel Mortgage

Law, the sheriff conducting the auction sale must receive the winning bid in
cash and apply such proceeds "to the payment, first, of the costs and
expenses of keeping and sale, and then to the payment of the demand or
obligation secured by such mortgage, and the residue shall be paid to the

Page 59 of 87

Civil Laws

Neela
nd v.
Villanu
eva,
AM P-

Pledge

Guara
nty

mortgagor or person holding under him on demand.

991316,
Oct.
29,
1999.

Machineries and Equipments; Chattell Mortgage Law, Sec. 7 provides a

chattel mortgage shall be deemed to cover only the property described
therein and not like or substituted property thereafter acquired by the
mortgagor and placed in the same depository as the property originally
mortgaged, anything in the mortgage to the contrary notwithstanding.
Since the disputed machineries were acquired in 1981 and could not have
been involved in the 1975 or 1979 chattel mortgages, it was error on the
part of the sheriff to include subject machineries in the properties
enumerated in said chattel mortgages. As the auction sale of the subject
properties to PBCom is void, no valid title passed in its favor. Consequently,
the sale thereof to Tsai is also a nullity under the elementary principle of
nemo dat quod non habet, one cannot give what one does not have.

Tsai v.
CA,
GR
12009
8, Oct
2,
2001.

Mechanics Lien; Under Art. 1731 of NCC, one can legally retain, by way
of pledge, the movable upon which it executed its work.

Lima
v.
Trans
way
Sales
Corp.,
GR
10677
0, Oct.
22,
1999.

Notice of Auction Sale; Art. 212, NCC does not prohibit the sending of a
single notice of sale to the debtor and pledgor informing of the scheduled
public auction sale and a second public auction sale on the following day, in
the event that the pledge shares are not sold on the first auction.

Insular
Life
Assura
nce
Comp
any v.
Young,
GR
14096
4, Jan.
16,
2002.

Surety; Novation; The GENERAL RULE is that in a surety agreement is

strictly construed against the creditor, and every doubt is resolved in favor
of the solidary debtor. The creditor must get the consent of the surety to
any material alteration in the loan agreement covered by the suretyship.
Hence, petitioner bank cannot hold herein respondent liable for loans
obtained in excess of the amount or beyond the period stipulated in the
original agreement, absent any clear stipulation that respondent waived his
right to be notified thereof, or to give consent thereto. This is equally true
where, as in this case, respondent was no longer the principal officer or
major stockholder of the corporate debtor at the time the amended
obligations were incurred. Respondents obligation as a surety should be
deemed extinguished, pursuant to Art. 2079 of the Civil Code, w/c
specifically states that an extension granted to the debtor by the creditor
w/o the consent of the guarantor extinguishes the guarranty.

Securi
ty
Bank
v.
Cuenc
a, GR
13854
4, Oct.
3,
2000.

Same; Exception to the Rule: The stipulation binding the surety not only
to the specified term of the loan, but to any extension thereafter made, w/o
notice to the surety, who waived the right to be notified of any renewal or
extension of the bond w/c may be granted under this indemnity agreement.
The Indemnity agreement is a CONTINUING SURETY does not authorize the

Philam
gen v.
Mutuc

Page 60 of 87

Civil Laws

bank to extend the scope of the principal obligation inordinately.

Same; Same; Where the surety agreement contained an unequivocal
stipulation that in case of any extension or renewal of the bond, we
equally bind ourselves to the Company under the same terms and
conditions as herein provided w/o the necessity of executing another
indemnity agreement for the purpose and that we hereby equally waived
our right to be notified of any renewal or extension of the bond w/c may be
granted under this indemnity agreement. Moreover, it likewise specifically
provide that each surety is a continuing one w/c shall remain in full force
and effect until this bank is notifed of its revocation.

Dino
v. CA

Same; Tan Chong Lin, the President of Great Asian, is being sued in his
personal capacity based on the Surety Agreements he signed wherein he
solidarily held himself liable with Great Asian for the payment of its debts to
Bancasia. Indisputably, Tan Chong Lin explicitly and unconditionally bound
himself to pay Bancasia, solidarily w/ Great Asian, if the drawers of the
checks fail to pay on due date. The condition on w/c Tan Chong Lin's
obligation hinged had happened. As surety, Tan Chong Lin automatically
became liable for the entire obligation to the same extent as Great Asian.
Tan Chong Lin, however, contends that the following warranties in the
Deeds of Assignment enlarge or increase his risks under the Surety
Agreements. He maintains that these warranties in the Deeds of
Assignment materially altered his obligations under the Surety Agreements,
and therefore he is released from any liability to Bancasia. Under Art. 1215
of the Civil Code, what releases a solidary debtor is a "novation,
compensation, confusion or remission of the debt" made by the creditor w/
any of the solidary debtors. These warranties, however, are the usual
warranties made by one who discounts receivables w/ a financing company
or bank. The Surety Agreements, written on the letter head of "Bancasia
Finance & Investment Corporation," uniformly state that "Great Asian Sales
Center . . . has obtained and/or desires to obtain loans, overdrafts,
discounts and/or other forms of credits from" Bancasia. Tan Chong Lin was
clearly on notice that he was holding himself as surety of Great Asian w/c
was discounting postdated checks issued by its buyers of goods and
merchandise. Moreover, Tan Chong Lin, as President of Great Asian, cannot
feign ignorance of Great Asian's business activities or discounting
transactions with Bancasia. Thus, the warranties do not increase or enlarge
the risks of Tan Chong Lin under the Surety Agreements. There is,
moreover, no novation of the debt of Great Asian that would warrant
release of the surety. In any event, the provisions of the Surety Agreements
are broad enough to include the obligations of Great Asian to Bancasia
under the warranties. Art. 1207 of the Civil Code provides, ". . . There is a
solidary liability only when the obligation expressly so states, or when the
law or nature of the obligation requires solidarity." The stipulations in the
Surety Agreements undeniably mandate the solidary liability of Tan Chong
Lin w/ Great Asian. Moreover, the stipulations in the Surety Agreements are
sufficiently broad, expressly encompassing "all the notes, drafts, bills of
exchange, overdraft and other obligations of every kind w/c the PRINCIPAL
may now or may hereafter owe the Creditor". Consequently, Tan Chong Lin
must be held solidarily liable w/. Great Asian for the nonpayment of the
fifteen dishonored checks, including penalty and attorney's fees in
accordance w/ the Deeds of Assignment.

Asian
Sales
Center
Corp.
v. CA,
GR
10577
4,
April
25,
2002.

CONTINUING SURETY; The EXTENSIONS of the terms for paying the loans
did not release the surety. The "continuing guarantee" executed by the
petitioner provided that the he consents and agrees that the bank may, at
any time or from time to time extend or change the time of payments
and/or the manner, place or terms of payment of all such instruments,
loans, advances, credits or other obligations guaranteed by the surety.
Hence, the extensions of the loans did not release the surety.

Taed
o
v.
Allied
Banki
ng
Corp.,
GR
13660
3, Jan.
18,

Page 61 of 87

Civil Laws

2002;
Lee v.
CA,
GR
11791
3,
Feb.
1,
2002.
Agenc
y

CONTRACT OF AGENCY; It is clear from Article 1868 that the basis of

agency is representation. On the part of the principal, there must be an
actual intention to appoint or an intention naturally inferable from his words
or actions; and on the part of the agent, there must be an intention to
accept the appointment and act on it, and in the absence of such intent,
there is generally no agency. One factor which most clearly distinguishes
agency from other legal concepts is control; one person the agent
agrees to act under the control or direction of another the principal.
Indeed, the very word "agency" has come to connote control by the
principal. The CONTROL FACTOR, more than any other, has caused the
courts to put contracts between principal and agent in a separate category.
In the instant case, it appears plain to us that private respondent CSC was
a buyer of the SLDFR form, and not an agent of STM. Private respondent
CSC was not subject to STM's control. The question of whether a contract is
one of sale or agency depends on the intention of the parties as gathered
from the whole scope and effect of the language employed. That the
authorization given to CSC contained the phrase "for and in our (STM's)
behalf" did not establish an agency. Ultimately, what is decisive is the
intention of the parties. That no agency was meant to be established by the
CSC and STM is clearly shown by CSC's communication to petitioner that
SLDR No. 1214M had been "sold and endorsed" to it. The use of the words
"sold and endorsed" means that STM and CSC intended a contract of sale,
and not an agency.

Agenc
y

GENERAL AGENCY; A general power permits the agent to do all acts for
w/c the law does not require a special power. (ACTS OF ADMINISTRATION)

Domin
ion
Insura
nce
Corp.
v. CA,
GR
12991
9,
Feb.
6,
2002.

SPECIAL POWER OF ATTORNEY; Art. 1878, NCC enumerates the

instances when a special power of attorney is required, such as: [1] TO
MAKE such Payments as are not usually considered as acts of
administration; xxx [15] any OTHER ACT OF STRICT DOMINION. The
payment or settlement of insurance claims is not an act of administration.

Domin
ion
Insura
nce
Corp.
v. CA,
GR
12991
9,
Feb.
6,
2002.

Same; [7] TO LOAN OR BORROW MONEY, unless the latter act be urgent
and indispensable for the preservation of the things w/c are under
Administration; xxx [12] TO CREATE or CONVEY REAL RIGHTS over
immovable property; xxx

Adrian
o
v.
Pangili
nan,

Page 62 of 87

Civil Laws

GR
13747
1, Jan.
16,
2002.

Trusts

Same; A special power of attorney is essential in a sale of a parcel of land

or any interest therein made through an agent.

Pineda
v. CA,
GR
12709
4,
Feb.
6,
2002.

Same; In this case, Cruz had no authority from the Board of Directors of
respondent corporation to sell or negotiate the sale of the subject lot, much
less to appoint other persons for the same purpose. Such lack of authority
precludes from conferring any authority to Politan involving the subject
realty. Necessarily, neither could Politan authorize Felicisima. Clearly, the
collective acts of Criz, Politan and Felicisima cannot bind respondent
corporation in the purported contract of sale.

AF
Raelty
&
Devel
opme
nt
v.
Diesel
man
Freigh
t
Servic
es, GR
11144
8, Jan.
16,
2002.

Violation of Principals Instruction by Agent; Beneficial to the

Principal; Respondent deviated from the instructions of his principal by
apying and settling insurance claims w/c were not w.in his authority.
Nonetheless, he was allowed to be reimbursed of what he paid to the
extent that it benefited his principal, in light of Arts. 1918 and 1236, NCC.

Domin
ion
Insura
nce
Corp.
v. CA,
GR
12991
9,
Feb.
6,
2002.

AGENCY COUPLED WITH AN INTEREST; It cannot be revoked by the

principal at her whim and pleasure. The fiduciary relationship inherent in
ordinary contracts of agency is replaced by material consideration w/c, in
the type of agency herein established, bars the removal or dismissal of
petitioner Tong as Bacalings attorney-in-fact on the ground of alleged loss
of trust and confidence. While Bacaling alleges fraud in the performance of
the contract of agency to justify revocation, it is significant to note that
allegations are not proof, and that proof requires the intervention of the
courts where both petitioners Tong and Bacaling are heard. Bacaling cannot
vest in herself just like in ordinary courts the unilateral authority of
determining the existence and gravity of grounds to justify the rescission of
the irrevocable special power of attorney.

Bacali
ng v.
Muya,
GR
14840
4-05,
April
11,
2002.

IMPLIED TRUST; For the provision of Art. 1448 of the Civil Code to apply,
the price must be paid by another for the purpose of having a beneficial
interest of the property.

Viewm
aster
Constr
uction
v.
Roxas,

Page 63 of 87

Civil Laws

supra.

Compr
o-mise

Same; The Genguyons trusted Mateo and then Josue being officers of the
association formed by the tenants (including the Genguyons) of a building,
to negotiate, among others, the acquisition of the subject apartment unit in
their behalf. Instead Mateo surreptitiously purchased the subject apartment
unit from the original owners and resold the same to Josue who was aware
of the questionable circumstances attending Mateos acquisition. Both
Mateo and Josue denied that a constructive trust was created as defined
under Art. 1456, NCC, because they (petitioner) did not acquire the subject
property through mistake or fraud. but the SC held that constructive trust
does not only arise out of fraud or duress, it may also from abuse of
confidence, in order to satisfy the demands of justice.

Arlegu
i
V.
CA,
GR
12643
7,
March
6,
2002.

Same; RECONVEYANCE; An action for reconveyance of registered land on

an implied trust prescribes in ten (10) years even if the decree of
registration is no longer open to review. The 10-year prescription period
applies only "when the plaintiff or the person enforcing the trust is not in
possession of the property; if a person claiming to be the owner thereof is
in actual possession of the property the right to seek reconveyance, which
in effect seeks to quiet title to the property, does not prescribe. In this case,
the Genguyons filed the action for reconveyance, they were at that time in
possession of the subject property.

Arlegu
i
V.
CA,
GR
12643
7,
March
6,
2002.

Same; Same; Award of Damages; The party prejudiced on constructive

trust may be awarded compensatory or nominal Damages inclusive of
Attorneys Fees based on Arts. 19, 21, 23, 2221 and 2222 of the New Civil
Code.

id.

The General Rule: That a compromise has upon the parties the effect and
authority of res judicata, with respect to the matter definitively stated
therein, or w/c by implication from its terms should be deemed to have
been included therein. This holds true even if the agreement has not been
judicially approved. Moreover, a compromise agreement cannot bind a
party who did not sign to it nor availed of its benefits.

Cebu
Intl.
Financ
e
Corp.
v. CA,
GR
12303
1, Oct.
12,
1999.

Exception: This agreement entered into by a person not duly authorized to

do so by the principal is void and has no legal effect. The same is true as
regards the judgment based on said agreement. A void contract does not
become valid and enforceable merely because it is based on a judgment
upon a compromise and the same can be impugned in any proceeding.

Anacle
to
v.
Van
Twest,
GR
13141
1,
Aug.
29,
2000.

COMPROMISE AGREEMENT; Once approved by final order of the court,

ahs the force of res judicata between the parties and should not be
disturbed except for vices of consent or forgery. It was error for the trial
court to grant the writ of execution in favor of private respondents because
it effectively compelled petitioners to accept delivery of the 3 titles in
exchange for the release of the land covered by TCT NO. RT- 6652 even
after the lapse of the period agreed upon by the parties.

San
Antoni
o
v.
CA,
GR
12181
0,
Dec.
7,
2001.

QUITCLAIM; The quitclaim is embodied in the Affidavit executed on

MC

Page 64 of 87

Civil Laws

January 2, 1985 by respondent Gerent's president, Narciso Roque. The

Affidavit is not the usual quitclaim w/c expressly discharges and releases a
party from any and all liabilities. The Affidavit does not contain such
express language. However, the Affidavit expressly acknowledges receipt
by Gerent of "full payment" of the subcontract price from petitioner. The
effect, nevertheless, is the same because a creditor who receives and
acknowledges full payment from his debtor causes the extinguishment of
his claim against the debtor. Roque, however, now claims that had
petitioner informed him of the price increase granted by Sucodeco on
December 3, 1984, he would not have signed the Affidavit of January 2,
1985. The inescapable conclusion is that the Affidavit was meant to be a
total quitclaim by respondent Gerent, fully discharging petitioner from
whatever amounts it may have owed Gerent under the subcontract. There
is nothing in the Affidavit that reserves respondent Gerent's right to collect
a portion of any price increase in the main contract. On the other hand, the
Affidavit is clear, unequivocal and absolute that respondent Gerent had
received "full payment" under the subcontract. Respondent Gerent is now
estopped from impugning the validity of the Affidavit simply because
petitioner secured a higher price for the main contract. The execution of
the Affidavit by Roque, president of respondent Gerent, finally puts to rest
all the claims of Gerent against petitioner under the subcontract. The very
purpose of the Affidavit, just like a quitclaim, is precisely to finally settle all
the claims of respondent Gerent, regardless of the merits of the claims. The
Affidavit can be annulled only if it was procured through fraud. There is no
convincing evidence to establish that fraud vitiated the Affidavit. The fact
that petitioner received a windfall because of the price increase is not a
reason to annul the Affidavit. Consequently, the Affidavit renders moot and
academic all the other issues raised in this petition. Nevertheless, the Court
will still painstakingly discuss and resolve the remaining issues raised by
petitioner.

Engg.
v. CA,
GR
10404
7,
April
3,
2002.

WAIVERS AND QUITCLAIM; Upon receipt of the amount of P512,524.15

from respondent as retirement benefit pursuant to its retirement scheme,
petitioner signed and delivered to respondent a Release and Undertaking
wherein he waives all actions, causes of actions, debts, dues, monies and
accounts in connection w/ his employment w/ respondent. This quitclaim
releases respondent from any other obligation in favor of petitioner. While
quitclaims executed by employees are commonly frowned upon as contrary
to public policy, there are legitimate waivers that represent a voluntary and
reasonable settlement of the laborers claims w/c should be respected by
the courts as the law between the parties. Settle is the rule that not all
quitclaims are per se invalid or against public policy, EXCEPT: [1] where
there is clear proof that the waiver was wangled from an unsuspecting or
gullible person; and [2] where the terms of settlement are unconscionable
on their face. Nothing from the record would suggest that petitioner was
coerced, intimidated or deceived into signing the Release and Undertaking.
Neither is the consideration for the quitclaim unconscionable, because it is
actually the full amount of the retirement benefit provided for in the
companys retirement plan.

Gamo
gamo
v.
PNOC
Shippi
ng
and
Transp
ort
Corp.,
GR
14170
7, May
7,
2002.

Escrow

ESCROW AGREEMENT; A written instrument w/c by its terms imports a

legal obligation and w/c is deposited by the grantor, promisor, or obligor, or
his agent w/ a stranger or third party, to be kept by the depositary until the
performance of a condition or the happening of a certain event, and then to
be delivered over to the grantee, promise, or oblige.

The
Prov.
Of
Bataa
n
v.
Villafu
erte,
GR
12999
5, Oct.
19,
2001.

Extra-

Action for Breach of Contract of Carriage distinguished from Quasi-

Calala

Page 65 of 87

Civil Laws

Contra
c-tual
Obligati
ons

Delict; 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 common carrier failed to transport its passenger
safely to his destination. It is immaterial that the proximate cause of the
collision between the jeepney and the truck was the negligence of the truck
driver. The doctrine of proximate cause is applicable only in actions for
quasi-delict, not in actions involving breach of contract.

s
v.
CA,
GR
12203
9, May
31,
2000.

QUASI-CONTRACTS; Equitable Principles; Art. 2142 of the Civil Code

provides: Certain lawful, voluntary and unilateral acts give rise to the
juridical relation of quasi-contract to the end that no one shall be unjustly
enriched or benefited at the expense of another. Generally, it may be said
that a quasi-contract is based on the presumed will or intent of the obligor
dictated by equity and by the principles of absolute justice. Examples of
these principles are: (1) it is presumed that a person agrees to that w/c will
benefit him; (2) nobody wants to enrich himself unjustly at the expense of
another; or (3) one must do unto others what he would want others to do
unto him under the same circumstances.

PADC
OM
Condo
miniu
m
Corp.
v.
Ortiga
s
Center
Assn.,
GR
14680
7, May
9,
2002.

QUASI-DELICT (TORTS); The Principle of Res Ipsa Loquitur; Res ipsa

loquitur is a Latin phrase w/c literally means "the thing or the transaction
speaks for itself." The phrase "res ipsa loquitur" is a maxim for the rule that
the fact of the occurrence of an injury, taken w/ the surrounding
circumstances, may permit an inference or raise a presumption of
negligence, or make out a plaintiff's prima facie case, and present a
question of fact for defendant to meet w/ an explanation. Where the thing
w/c caused the injury complained of is shown to be under the management
of the defendant or his servants and the accident is such as in ordinary
course of things does not happen if those who have its management or
control use proper care, it affords reasonable evidence, in the absence of
explanation by the defendant, that the accident arose from or was caused
by the defendant's want of care. The doctrine of res ipsa loquitur is simply a
recognition of the postulate that, as a matter of common knowledge and
experience, the very nature of certain types of occurrences may justify an
inference of negligence on the part of the person who controls the
instrumentality causing the injury in the absence of some explanation by
the defendant who is charged w/ negligence. It is grounded in the superior
logic of ordinary human experience and on the basis of such experience or
common knowledge; negligence may be deduced from the mere
occurrence of the accident itself. Hence, res ipsa loquitur is applied in
conjunction with the doctrine of common knowledge. However, much has
been said the res ipsa loquitur is not a ruled of substantive law and, as
such, does not create or constitute an independent or separate ground of
liability. Instead, it is considered as merely evidentiary or in the nature of a
procedural rule. It is regarded as a mode of proof, of a mere procedural
convenience since it furnishes a substitute for, and relieves a plaintiff of ,
the burden of producing specific proof of negligence. In other words, mere
invocation and application of the doctrine does not dispense w/ the
requirement of proof of negligence. It is simply a step in the process of such
proof, permitting the plaintiff to present along w/ the proof of the accident,
enough of the attending circumstances to invoke the doctrine, creating an
inference or presumption of negligence, and to thereby place on the
defendant the burden of going forward w/ the proof. Still, before resort to
the doctrine may be allowed, THE FOLLOWING REQUISITES must be
satisfactorily shown:
1.
The accident is of a kind w/c ordinarily does not occur in the absence
of someone's negligence;
2.
It is caused by an instrumentality w/in the exclusive control of the

Ramo
s
v.
CA,
GR
12435
4,
April
11,
2002.

Page 66 of 87

Civil Laws

defendant or defendants; and

3.
The possibility of contributing conduct w/c would make the plaintiff
responsible is eliminated.
In the above requisites, the fundamental element is the "control of the
instrumentality" w/c caused the damage. Such element of control must be
shown to be w/in the dominion of the defendant. In order to have the
benefit of the rule, a plaintiff, in addition to proving injury or damage; must
show a situation where it is applicable, and must establish that the
essential elements of the doctrine were present in a particular incident.
Same; Same; Presumption; res ipsa loquitor applies and makes out a
presumption where the thing w/c caused the injury complained of is shown
to be under the management of the defendant or his servants and the
accident is such as in the ordinary course of things does not happen if
those who have its management or control use proper care.

Ramo
s v. CA
,
GR
12435
4,
Dec.
29,
1999.

Same; Same; Medical Malpractice; Medical malpractice cases do not

escape the application of this doctrine. Thus, res ipsa loquitur has been
applied when the circumstances attendant upon the harm are themselves
of such a character as to justify an inference of negligence as the cause of
that harm. The application of res ipsa loquitur in medical negligence cases
presents a question of law since it is a judicial function to determine
whether a certain set of circumstances does, as a matter of law, permit a
given inference. Although generally, expert medical testimony is relied
upon in malpractice suits to prove that a physician has done a negligent act
or that he has deviated from the standard medical procedure, when the
doctrine of res ipsa loquitur is availed by the plaintiff, the need for expert
medical testimony is dispensed w/ because the injury itself provides the
proof of negligence. The reason is that the general rule on the necessity of
expert testimony applies only to such matters clearly w/in the domain of
medical science, and not to matters that are w/in the common knowledge
of mankind w/c may be testified to by anyone familiar w/ the facts.
Ordinarily, only physicians and surgeons of skill and experience are
competent to testify as to whether a patient has been treated or operated
upon w/ a reasonable degree of skill and care. However, testimony as to the
statements and acts of physicians and surgeons, external appearances, and
manifest conditions w/c are observable by any one may be given by nonexpert witnesses. Hence, in cases where the res ipsa loquitur is applicable,
the court is permitted to find a physician negligent upon proper proof of
injury to the patient, w/o the aid of expert testimony, where the court from
its fund of common knowledge can determine the proper standard of care.
Where common knowledge and experience teach that a resulting injury
would not have occurred to the patient if due care had been exercised, an
inference of negligence may be drawn giving rise to an application of the
doctrine of res ipsa loquitur w/o medical evidence, w/c is ordinarily required
to show not only what occurred but how and why it occurred. When the
doctrine is appropriate, all that the patient must do is prove a nexus
between the particular act or omission complained of and the injury
sustained while under the custody and management of the defendant w/o
need to produce expert medical testimony to establish the standard of
care. Resort to res ipsa loquitur is allowed because there is no other way,
under usual and ordinary conditions, by w/c the patient can obtain redress
for injury suffered by him. Thus, courts of other jurisdictions have applied
the doctrine in the following situations: [a] leaving of a foreign object in the
body of the patient after an operation, [b] injuries sustained on a healthy
part of the body w/c was not under, or in the area, of treatment, [c]
removal of the wrong part of the body when another part was intended, [d]
knocking out a tooth while a patient's jaw was under anesthetic for the
removal of his tonsils, and [d] loss of an eye while the patient plaintiff was
under the influence of anesthetic, during or following an operation for
appendicitis, among others. Nevertheless, despite the fact that the scope of
res ipsa loquitur has been measurably enlarged, it does not automatically

Ramo
s
v.
CA,
GR
12435
4,
April
11,
2002.

Page 67 of 87

Civil Laws

apply to all cases of medical negligence as to mechanically shift the burden

of proof to the defendant to show that he is not guilty of the ascribed
negligence. Res ipsa loquitur is not a rigid or ordinary doctrine to be
perfunctorily used but a rule to be cautiously applied, depending upon the
circumstances of each case. It is generally restricted to situations in
malpractice cases where a layman is able to say, as a matter of common
knowledge and observation, that the consequences of professional care
were not as such as would ordinarily have followed if due care had been
exercised. A distinction must be made between the failure to secure results,
and the occurrence of something more unusual and not ordinarily found if
the service or treatment rendered followed the usual procedure of those
skilled in that particular practice. It must be conceded that the doctrine of
res ipsa loquitur can have no application in a suit against a physician or
surgeon w/c involves the merits of a diagnosis or of a scientific treatment.
The physician or surgeon is not required at his peril to explain why any
particular diagnosis was not correct, or why any particular scientific
treatment did not produce the desired result. Thus, res ipsa loquitur is not
available in a malpractice suit if the only showing is that the desired result
of an operation or treatment was not accomplished. The real question,
therefore, is whether or not in the process of the operation any
extraordinary incident or unusual event outside of the routine performance
occurred w/c is beyond the regular scope of customary professional activity
in such operations, w/c, if unexplained would themselves reasonably speak
to the average man as the negligent cause or causes of the untoward
consequence. If there was such extraneous interventions, the doctrine or
res ipsa loquitur may be utilized and the defendant is called upon to explain
the matter, by evidence of exculpation, if he could.
Same; Same; A form of negligence w/c consists in the failure of a
physician or surgeon to apply to his practice of medicine that degree of
care and skill w/c is ordinarily employed by the profession generally, under
similar conditions, and in like surrounding circumstances. In order to
successfully pursue such a claim, a patient must prove that the physician or
surgeon either failed to do something would have done, or that he or she
did something that a reasonable prudent physician or surgeon would not
have done, and that the failure or action caused injury to the patient. There
are thus four elements involved in medical negligence cases, namely: (1)
duty; (2) breach; (3) injury; and (4) proximate causation. It is the breach of
duty w/c constitutes actionable malpractice. Inasmuch as the causes of the
injuries involved in malpractice actions are determined only in the light of
scientific knowledge, it has been recognized that expert testimony is
usually necessary to support the conclusion as to causation. However,
under the doctrine of RES IPSA LOQUITOR, expert testimony may be
dispensed w/, as when the ff. requisites are present: [1] the accident was of
a kind w/c does not ordinarily occurs unless someone is negligent; [2] the
instrumentality or agency w/c caused the injury was under the exclusive
control of the person in charge; and [3] the injury suffered must not have
been due to any voluntary action or contribution of the person injured. In
this case, while the patient died just a few hours after professional medical
assistance was rendered, there is really nothing unusual or extraordinary
about his death. Prior to his admission, the patient already had recurring
fevers and chills for five days unrelieved by the analgesic, antipyretic, and
antibiotics give him by his wife. This shows that he had been suffering from
a serious illness and professional medical help came too late for him.

Reyes
v.
Sisters
of
Mercy
Hospit
al, GR
13054
7, Oct.
3,
2000.

Same; PROXIMATE CAUSE; Proximate cause has been defined as that

w/c, in natural and continuous sequence, unbroken by any efficient
intervening cause, produces injury, and w/o w/c the result would not have
occurred. An injury or damage is proximately caused by an act or a failure
to act, whenever it appears from the evidence in the case, that the act or
omission played a substantial part in bringing about or actually causing the
injury or damage; and that the injury or damage was either a direct result
or a reasonably probable consequence of the act or omission. It is the
dominant, moving or producing cause.

Ramo
s
v.
CA,
GR
12435
4,
April
11,
2002.

Page 68 of 87

Civil Laws

Same; Joint and Solidary Liability; Hospital and Doctors; The unique
practice (among private hospitals) of filling up specialist staff w/ attending
and visiting "consultants," who are allegedly not hospital employees,
presents problems in apportioning responsibility for negligence in medical
malpractice cases. However, the difficulty is only more apparent than real.
In the first place, hospitals exercise significant control in the hiring and
firing of consultants and in the conduct of their work w/in the hospital
premises. Doctors who apply for "consultant" slots, visiting or attending,
are required to submit proof of completion of residency, their educational
qualifications; generally, evidence of accreditation by the appropriate board
(diplomate), evidence of fellowship in most cases, and references. These
requirements are carefully scrutinized by members of the hospital
administration or by a review committee set up by the hospital who either
accept or reject the application. This is particularly true w/ respondent
hospital. After a physician is accepted, either as a visiting or attending
consultant, he is normally required to attend clinico-pathological
conferences, conduct bedside rounds for clerks, interns and residents,
moderate grand rounds and patient audits and perform other tasks and
responsibilities, for the privilege of being able to maintain a clinic in the
hospital, and/or for the privilege of admitting patients into the hospital. In
addition to these, the physician's performance as a specialist is generally
evaluated by a peer review committee on the basis of mortality and
morbidity statistics, and feedback from patients, nurses, interns and
residents. A consultant remiss in his duties, or a consultant who regularly
falls short of the minimum standards acceptable to the hospital or its peer
review committee, is normally politely terminated. In other words, private
hospitals, hire, fire and exercise real control over their attending and
visiting "consultant" staff. While "consultants" are not, technically
employees, a point w/c respondent hospital asserts in denying all
responsibility for the patient's condition, the control exercised, the hiring,
and the right to terminate consultants all fulfill the important hallmarks of
an employer-employee relationship, w/ the exception of the payment of
wages. In assessing whether such a relationship in fact exists, the control
test is determining. Accordingly, on the basis of the foregoing, we rule that
for the purpose of allocating responsibility in medical negligence cases, an
employer-employee relationship in effect exists between hospitals and their
attending and visiting physicians. This being the case, the question now
arises as to whether or not respondent hospital is solidarily liable with
respondent doctors for petitioner's condition. The basis for holding an
employer solidarily responsible for the negligence of its employee is found
in Art. 2180 of the Civil Code w/c considers a person accountable not only
for his own acts but also for those of others based on the former's
responsibility under a relationship of patria potestas. Such responsibility
ceases when the persons or entity concerned prove that they have
observed the diligence of a good father of the family to prevent damage. In
other words, while the burden of proving negligence rests on the plaintiffs,
once negligence is shown, the burden shifts to the respondents (parent,
guardian, teacher or employer) who should prove that they observed the
diligence of a good father of a family to prevent damage. In the instant
case, respondent hospital, apart from a general denial of its responsibility
over respondent physicians, failed to adduce evidence showing that it
exercised the diligence of a good father of a family in the hiring and
supervision of the latter. It failed to adduce evidence w/ regard to the
degree of supervision w/c it exercised over its physicians. In neglecting to
offer such proof, or proof of a similar nature, respondent hospital thereby
failed to discharge its burden under the last paragraph of Art. 2180. Having
failed to do this, respondent hospital is consequently solidarily responsible
w/ its physicians for Erlinda's condition.

Ramo
s
v.
CA,
GR
12435
4,
April
11,
2002.

Same; ELEMENTS OF QUASI-DELICT: (a) damages suffered by the

plaintiff, (b) fault or negligence of the defendant, and (c) the connection of
cause and effect between the fault or negligence of the defendant and the
damages inflicted on the plaintiff. All these elements were established in
this case. Knowing fully well that it was carrying dangerous chemicals,

Smith
Bell
Dodw
ell
Shippi

Page 69 of 87

Civil Laws

petitioner was negligent in not taking all the necessary precautions in

transporting the cargo. Hence, the owner or the person in possession and
control of a vessel and the vessel are liable for all natural and proximate
damage caused to persons and property by reason of negligent
management or navigation.

ng
Agenc
y
Corp.
v.
Borja,
GR
14300
8,
June
10,
2002.

Same; NEGLIGENCE; Negligence is conduct that creates undue risk of

harm to another. It is the failure to observe that degree of care, precaution
and vigilance that the circumstances justly demand, whereby that other
person suffers injury. Petitioner's vessel was carrying chemical cargo
alkyl benzene and methyl methacrylate monomer. While knowing that their
vessel was carrying dangerous inflammable chemicals, its officers and crew
failed to take all the necessary precautions to prevent an accident.
Petitioner was, therefore, negligent.

Smith
Bell
Dodw
ell
Shippi
ng
Agenc
y
Corp.
v.
Borja,
GR
14300
8,
June
10,
2002.

Same; Negligence Cases; The driver of the oncoming Nissan Pathfinder

was liable and the driver of the u-turning taxicab was also guilty of
contributory negligence. Malfunction or loss of brake is not a fortuitous
event. Even assuming arguendo that loss of brakes is an act of God, by
reason of negligence, the fortuitous event became humanized, rendering
the Nissan driver liable for the ensuing damages.

Therm
ochem
v.
Naval,
GR
13154
1, Oct.
20,
2000.

Same; Same; The owner or the person in possession and control of a

vessel is liable for all natural and proximate damages caused to persons
and property by reason of negligence in its management or navigation. The
liability for the loss of the earning capacity of the deceased is fixed by
taking into account the net income of the victim at the time of death of
the incident in this case and that person's probable life expectancy.

Smith
Bell
Dodw
ell
Shippi
ng
Agenc
y
Corp.
v.
Borja,
GR
14300
8,
June
10,
2002.

Same; Same; Injuries to a child while in a Commercial

Establishment; A child under 9 years old is incapable of
contributory negligence. An accident pertains to an unforeseen event in
which no fault or negligence attaches to the defendant. It is "a fortuitous
circumstance, event or happening; an event happening without any human

Jarco
Marke
ting
Corp.
v. CA,

Page 70 of 87

Civil Laws

agency, or if happening wholly or partly through human agency, an event

which under the circumstances is unusual or unexpected by the person to
whom it happens." On the other hand, negligence is the omission to do
something which a reasonable man, guided by those considerations which
ordinarily regulate the conduct of human affairs, would do, or the doing of
something which a prudent and reasonable man would not do. Negligence
is "the failure to observe, for the protection of the interest of another
person, that degree of care, precaution and vigilance which the
circumstances justly demand, whereby such other person suffers injury."
Accident and negligence are intrinsically contradictory; one cannot exist
with the other. Accident occurs when the person concerned is exercising
ordinary care, which is not caused by fault of any person and which could
not have been prevented by any means suggested by common prudence.
The test in determining the existence of negligence is enunciated in the
landmark case of Picart v. Smith, thus: Did the defendant in doing the
alleged negligent act use that reasonable care and caution which an
ordinary prudent person would have used in the same situation? If not, then
he is guilty of negligence.

GR
12979
2,
Dec.
21,
1999.

Same; VICARIOUS LIABILITY of Employer under Par. 4 and 5 of Art.

2180 of NCC; A distinction must be made between the two provisions to
determine what is applicable. Both provisions apply to employers: the
fourth paragraph, to owners and managers of an establishment or
enterprise; and the fifth paragraph, to employers in general, whether or not
engaged in any business or industry. The fourth paragraph covers negligent
acts of employees committed either in the service of the branches or on
the occasion of their functions, while the fifth paragraph encompasses
negligent acts of employees acting within the scope of their assigned task.
The latter is an expansion of the former in both employer coverage and
acts included. Negligent acts of employees, whether or not the employer is
engaged in a business or industry, are covered so long as they were acting
within the scope of their assigned task, even though committed neither in
the service of the branches nor on the occasion of their functions. For,
admittedly, employees oftentimes wear different hats. They perform
functions which are beyond their office, title or designation but which,
nevertheless, are still within the call of duty.

Castile
x
Indust
rial
Corp.
v.
Vasqu
ez, GR
13226
6,
Dec.
21,
1999.

Same; Vicarious Liability of Employer; At the time of the accident, D

was an employee of the respondent. Likewise, D acted w/in the scope of the
authority given him. Once a driver is proven negligent in causing damages,
the law presumes the vehicle owner equally negligent and imposes upon
the latter the burden of proving proper selection of employee as a defense.

Cartes
iano v.
Nuval,
GR
13805
4,
Sept.
28,
2000.

Principles on Employers liability for injuries inflicted by the

negligence of an employee using an employers motor vehicle. The
mere fact that ABAD was using a service vehicle at the time of the injurious
incident is not of itself sufficient to charge petitioner with liability for the
negligent operation of said vehicle unless it appears that he was operating
the vehicle within the course or scope of his employment.
The following are principles in American Jurisprudence on the employer's
liability for the injuries inflicted by the negligence of an employee in the
use of an employer's motor vehicle:
I.
Operation of Employer's Motor Vehicle in Going to or from Meals
It has been held that an employee who uses his employer's vehicle in going
from his work to a place where he intends to eat or in returning to work
from a meal is not ordinarily acting within the scope of his employment in
the absence of evidence of some special business benefit to the employer.
Evidence that by using the employer's vehicle to go to and from meals, an
employee is enabled to reduce his time-off and so devote more time to the
performance of his duties supports the findings that an employee is acting

Castile
x
Indust
rial
Corp.
v.
Vasqu
ez, GR
13226
6,
Dec.
21,
1999.

Page 71 of 87

Civil Laws

within the scope of his employment while so driving the vehicle.

II.
Operation of Employer's Vehicle in Going to or from Work
In the same vein, traveling to and from the place of work is ordinarily a
personal problem or concern of the employee, and not a part of his services
to his employer. Hence, in the absence of some special benefit to the
employer other than the mere performance of the services available at the
place where he is needed, the employee is not acting within the scope of
his employment even though he uses his employer's motor vehicle. The
employer may, however, be liable where he derives some special benefit
from having the employee drive home in the employer's vehicle as when
the employer benefits from having the employee at work earlier and,
presumably, spending more time at his actual duties. Where the
employee's duties require him to circulate in a general area with no fixed
place or hours of work, or to go to and from his home to various outside
places of work, and his employer furnishes him with a vehicle to use in his
work, the courts have frequently applied what has been called the "special
errand" or "roving commission" rule, under which it can be found that the
employee continues in the service of his employer until he actually reaches
home. However, even if the employee be deemed to be acting within the
scope of his employment in going to or from work in his employer's vehicle,
the employer is not liable for his negligence where at the time of the
accident, the employee has left the direct route to his work or back home
and is pursuing a personal errand of his own.
III.
Use of Employer's Vehicle Outside Regular Working Hours
An employer who loans his motor vehicle to an employee for the latter's
personal use outside of regular working hours is generally not liable for the
employee's negligent operation of the vehicle during the period of
permissive use, even where the employer contemplates that a regularly
assigned motor vehicle will be used by the employee for personal as well as
business purposes and there is some incidental benefit to the employer.
Even where the employee's personal purpose in using the vehicle has been
accomplished and he has started the return trip to his house where the
vehicle is normally kept, it has been held that he has not resumed his
employment, and the employer is not liable for the employee's negligent
operation of the vehicle during the return trip.
The foregoing principles and jurisprudence are applicable in our jurisdiction
albeit based on the doctrine of respondeat superior, not on the principle of
bonus pater familias as in ours. Whether the fault or negligence of the
employee is conclusive on his employer as in American law or
jurisprudence, or merely gives rise to the presumption juris tantum of
negligence on the part of the employer as in ours, it is indispensable that
the employee was acting in his employer's business or within the scope of
his assigned task.
Since there is paucity of evidence that ABAD was acting within the scope of
the functions entrusted to him, petitioner CASTILEX had no duty to show
that it exercised the diligence of a good father of a family in providing ABAD
with a service vehicle. Thus, justice and equity require that petitioner be
relieved of vicarious liability for the consequences of the negligence of
ABAD in driving its vehicle.
Dama
ges

ACTUAL or COMPENSATORY; Such award may exceed that as prayed for

in the complaint. Notwithstanding the fact that the award of actual and
compensatory damages by the lower court exceeded that prayed for in the
complaint, the same is nonetheless valid, subject to certain qualifications.
In the instant case, in as much as the petitioner was afforded the
opportunity to refute and object to the evidence, both documentary and
testimonial, formally offered by private respondent, the rudiments of fair
play are deemed satisfied.

Page 72 of 87

Civil Laws

Bank
of
Ameri
ca NT
and
SA v.
Ameri
can
Realty
Corp.,
GR GR
13387
6,
Dec.
29,

1999.
Same; In awarding damages for the tortuous injury, it becomes the sole
design of the courts to provide for adequate compensation by putting the
plaintiff in the same financial position he was in prior to the tort. It is
fundamental principle in the law on damages that a defendant cannot be
held liable in damages for more than actual loss which he has inflicted and
that a plaintiff is entitled to no more than the just and adequate
compensation for the injury suffered. His recovery is, in the absence of
circumstances giving rise to an allowance of punitive damages, limited to a
fair compensation for the harm done. The law will not put him in a position
better than where he should be in had not the wrong happened. In the
present case, petitioners insist that as the passenger jeepney was
purchased in 1982 for only P30,000.00 to award damages considerably
greater than this amount would be improper and unjustified. Petitioners are
at best reminded that indemnification for damages comprehends not only
the value of the loss suffered but also that of the profits which the obligee
failed to obtain. In other words, indemnification for damages is not limited
to damnum emergens or actual loss but extends to lucrum cessans or the
amount of profit lost.

Lim v.
CA,
GR
12581
7, Jan.
16,
2002.

Same; We have observed that private respondent left his passenger

jeepney by the roadside at the mercy of the elements. Art. 2203 of the Civil
Code exhorts parties suffering from loss or injury to exercise the diligence
of a good father of a family to minimize the damages resulting from the act
or omission in question. One who is injured then by the wrongful or
negligent act of another should exercise reasonable care and diligence to
minimize the resulting damage. Anyway, he can recover from the
wrongdoer money lost in reasonable efforts to preserve the property injured
and for injuries incurred in attempting to prevent damage to it.

id.

Same; Requires Evidence; It is necessary for a party seeking the award

of actual damages to produce competent proof or the best evidence
obtainable to justify such award.

PP v.
Rios,
GR
13263
2,
June
19,
2000;
Integr
ated
Packa
ging
Corp
v. CA,
supra.

Same; Same; For actual and compensatory damages to be awarded there

must be competent proof constituting evidence of the amount thereof, such
as receipts showing the expenses incurred on account of the incident.

PP v.
Gopio,
GR
13392
5,
Nov.
29,
2000.

Same; Same; There must be a competent proof of the actual amount of

loss, duly supported by receipts. Considering that the actual damages
claimed by private respondent were based only on job estimate and a
photo showing the damage of the truck, there is absence of competent
proof on the specific amounts of actual damages suffered.

Viron
Transp
ortatio
n
v.
De los
Santos
,
GR
13829

Page 73 of 87

Civil Laws

6,
Nov.
22,
2000.
Same; Same; While the testimony of private respondent that he had made
promotions of the product in some provinces was not rebutted by
petitioner, no receipts covering such expenditures were adduced in
evidence and private respondents testimony thereon was not
corroborated. Actual damages cannot be presumed, but must be duly
proved w/ reasonable degree of certainty.

Bayer
Phils.
v. CA,
GR
10926
9,
Sept.
15,
2000;
Countr
y
Banke
rs
v.
Lianga
Bay
Coop.,
GR
13691
4, Jan.
25,
2002;
Herbo
sa v.
CA,
2002;
Mindr
ex
Resou
rces v.
Morillo
,
2002.

Same; Same; Petitioners claim for actual damages was premised only
upon Lornas bare testimony. She has not shown how she arrived at the
amount of P50,000, resulting from the improper disconnection of electric
power. While respondent does not rebut his testimony on the expenses
incurred by the spouses in moving the dinner out of their residence due to
the disconnection, no receipts covering such expenditures have been
adduced in evidence. Neither is the testimony corroborated. Actual or
compensatory damages cannot be presumed, but must be duly proved w/ a
reasonable degree of certainty. It is dependent upon competent proof of
damages that petitioners have suffered and of the actual amount thereof.
The award must be based on the evidence presented not on the personal
knowledge of the court; and certainly not on flimsy, remote, speculative
and unsubstantial proof.

Sps.
Quisu
mbing
v/
Manila
Electri
c Co.,
GR
14294
3,
April
3,
2002;
Sarmi
ng v.
Dy, GR
13364
3,
June
6,
2002.

Same; Same; Exception; However, where it was clearly established that

the claimants were members of indigenous communities, the Court,
cognizant of the informal market system prevailing in said communities,
allowed reasonable claims for expenses incurred in relation to traditional

PP v.
Bangc
ado,
GR

Page 74 of 87

Civil Laws

burial practices and damages for loss of earning capacity of the deceased,
even though the prosecution did not present documentary evidence to
support its claim for damages.

13233
0,
Nov.
28,
2000.

Same; In Addition, Moral, Exemplary and attorneys Fees are

awarded; Respondents refusal to answer adequately for damages forced
petitioners to litigate and incur expenses. Compensatory, moral and
exemplary damages as well as attorneys fees were allowed in this case.

Cartes
iano v.
Nuval,
GR
13805
4,
Sept.
28,
2000.

Same; LOSS OF EARNING CAPACITY; Formula for computing damages

for loss of earning capacity.
Net Earning Capacity = Life Expectancy x Gross Annual Income Necessary Living Expenses.
Reduced to simpler form:

Bengu
et
Elect.
Coop.
v. CA,
GR
12732
6

Net Earning =
Life
Capacity
Expectancy

x Gross Annual - Necessary

Income Living Expenses

Same; Same; Factors to consider; The amount of loss of earning

capacity is based mainly on two factors. These are (1) the number of years
of which the damages shall be computed; and (2) the rate at which the
losses sustained by the respondent should be fixed.
[a] Factor number one in this ruling shall be computed by using the formula
based on the American Expectancy Table of Mortality or 2/3 x [80 age of the victim at the time of death] = life expectancy in terms
of years. Applying this formula.
[b] Factor number two is arrived at by multiplying the life expectancy by
the earning of the deceased. As has been settled in the case of Villa Rey
Transit, Inc. v. Court of Appeals, and a long list of cases the computation of
the rate of loss of earnings should be based on the net earnings.

PP v.
Arella
no, GR
12247
7,
June
30,
2000;
PP v.
Reanz
ares,
GR
13065
6,
June
29,
2000.

Same; Same; Same; Based mainly on the number of years remaining in

the persons expected life span. In turn, this number is the basis of the
damages that shall be computed and the rate at w/c the loss sustained by
the heirs shall be fixed.

Dodw
ell
Shippi
ng
Agenc
y
Corp.
v.
Borja,
GR
14300
8,
June
10,
2002.

Same; Same; Net income; It is net income (or gross income less living
expenses) w/c is to be used in the computation of the award for loss of
income. In fixing the amount of the said damages, the necessary expenses
of the deceased should be deducted from his earnings. When there is no
showing that the living expenses constituted a smaller percentage of the

Dodw
ell
Shippi
ng
Agenc

Page 75 of 87

Civil Laws

gross income, the living expenses are fixed at half of the gross income
(50% gross income). To hold that one would have used only a small part of
the income, w/ the larger part going to the support of ones children, would
be conjectural and unreasonable. Life expectancy should not be based on
the retirement age of government employees, w/c is pegged at 65. In
calculating the life expectancy of an individual for the purpose of
determining loss of earning capacity under Art. 2206 (1) of the Civil Code, it
is assumed that the deceased would have earned income even after
retirement from a particular job.

y
Corp.
v.
Borja,
GR
14300
8,
June
10,
2002.

Same; Same; Life Expectancy; Petitioner avers that respondent Borja

died nine years after the incident and, hence, his life expectancy of 80
years should yield to the reality that he was only 59 when he actually died.
The
Court
did
not
agree.
What
applies
is
the
American
Experience/Expectancy Table of Mortality or the Actuarial or Combined
Experience Table of Mortality, w/c consistently pegs the life span of the
average Filipino at 80 years, from w/c it extrapolates the estimated income
to be earned by the deceased had he or she not been killed. Respondent
Borjas demise earlier that the estimated life span is of no moment. For
purpose of determining loss of earning capacity, life expectancy remains at
80. Otherwise, the computation of loss of earning capacity will never
become final, being always subject to the eventuality of the victims death.
The computation should not change even if Borja lived beyond 80 years.

Dodw
ell
Shippi
ng
Agenc
y
Corp.
v.
Borja,
GR
14300
8,
June
10,
2002.

Same; Damages arising from Contracts. It is well-settled that actual or

compensatory damages must be duly proved and proved with reasonable
degree of certainty. It is the fundamental principle of the law on damages
that while one injured by a breach of contract shall be awarded fair and just
compensation commensurate with the loss sustained as a consequence of
the defendant's acts or omission, a party is entitled only to such
compensation for the pecuniary loss that he has duly proven. Actual
damages cannot be presumed and cannot be based on just flimsy, remote,
speculative and nonsubstantial proof.

Sabio
v. Intl.
Corpor
ate
Bank,
GR
13270
9,
Sept.
4,
2001.

Same; Same; A party is entitled to an adequate compensation for such

pecuniary loss actually suffered by him as he has duly proven. Such
damages, to be recoverable, must not only be capable of proof, but must
actually be proved w/ a reasonable degree of certainty. Courts cannot
simply rely on speculation, conjecture or guesswork in determining the fact
and amount of damages.

Ferna
ndez
v.
Ferna
ndez,
supra

Same; Same; Under Arts. 2199 and 2200, NCC, actual or compensatory
damages are those awarded in satisfaction of, or in recompense for, loss or
injury sustained. There are two kinds of these damages: (1) loss of what a
person already possess; and (2) failure to receive as a benefit that w/c
would have pertained to him. In the latter instance, the familiar rule is that
damages consisting of unrealized profits, frequently referred to as
ganacias frustadas or lucrum cessans, are not to be granted on the
basis of mere speculation, conjecture, or surmise, but rather by reference
to some reasonably definite standard, such as market value, or established,
experienced, or direct inference from known circumstances. In the case at
bar, actual damages in the form of unrealized profits were awarded on the
basis of the sole testimony of private respondent that he lost an average
income of P18,000 per month. Private respondents could have presented
such evidence as reports on the average actual profits earned by their
gasoline business, their financial statements, and other evidence of
profitability w/c could aid the court in arriving w/ reasonable certainty at
the amount of profits w/c private respondents failed to earn.

Produ
cers
Bank
of the
Phils.
v. CA,
GR
11158
4,
Sept.
17,
2001.

Page 76 of 87

Civil Laws

Same; Computation of Interest; The rate of interest, as well as the

accrual thereof, is imposed, as follows: (1) When the obligation is
breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that w/c may have been
stipulated in writing. Furthermore, the interest due shall itself earn legal
interest from the time it is judicially demanded. In the absence of
stipulation, the rate of interest shall be 12 % per annum to be computed
from default, i.e., from judicial or extrajudicial demand under and subject to
the provisions of Art. 1169, NCC; (2) When an obligation, not consisting a
loan or forbearance of money, is breach, an interest on the amount of
damages awarded may be imposed at the discretion of the court, at the
rate of 6 % per annum. No interest, however, shall be adjudged on
unliquidated claims or damages, except when or until the demand can be
established w/ reasonable certainty. Accordingly, where the demand is
established w/ reasonable certainty, the interest shall begin to run from the
time the claim is made judicially or extrajudicially (Art. 1169, NCC; but
when such certainty cannot be so reasonably established at the time the
demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at w/c time the quantification of damages
may be deemed to have been reasonably ascertained). The actual base for
the computation of legal interest shall, in any case, be on the amount
finally adjudged; (3) When the judgment of the court awarding a sum of
money becomes final and executory, the rate of legal interest, whether the
case falls under par. (1) or (2) above, shall be 12 % per annum from such
finality until its satisfaction, this interim period being deemed to be by then
an equivalent to a forbearance of credit.

Far
East
Bank
&
Trust
Co. v.
Diaz
Realty
,
GR
13858
8,
Aug.
28,
2001;
Rizal
Comm
ercial
Banki
ng
Corp.
v. Alfa
RTW
Manuf
acturi
ng
Corp.,
GR
13387
7,
Nov.
14,
2001.

Same; Penalty; Interest on Penalty; Where the promissory note

provides for the imposition of both interest and penalties in case of default
in the payment of the restructured loan. The stipulated 14 % per annum
interest charge until full payment of the loan constitutes the monetary
interest on the note and is allowed under Art. 1956, NCC. On the other
hand, the stipulated 2 % per month penalty is in the form of a penalty
charge w/c is separate and distinct from, and in addition to, the monetary
interest on the principal of the loan. The penalty charge is also called
penalty or compensatory interest. Art. 2212, NCC provides that interest
due shall earn legal interest from the time it is judicially demanded,
although the obligation may be silent upon this point. In the instant case,
interest likewise begun to run on the penalty interest upon the filing of the
complaint in court. Hence, the courts a quo did not err in ruling that
petitioner is bound to pay the interest on the total amount of the principal,
the monetary interest and the penalty interest. Equity cannot be
considered inasmuch as there is a contractual stipulation in the promissory
note.

Tan v.
CA,
GR
11628
5, Oct.
19,
2001.

Same; Same; Reduction of Penalty Charges; pursuant to Art. 1229,

NCC, when there has been partial performance.

id.

Same; Same; Same; Even if there has been no performance, if the

penalty is iniquitous or unconscionable.

First
Metro
Invest
ment
Corp.
v. Este
del Sol
Mount
ain
Reser

Page 77 of 87

Civil Laws

Same; Same; Same; 3 % penalty per month on unpaid installment on the

purchase price of condominium units is patently iniquitous and
unconscionable as to warrant the Court, in the exercise of its discretion, to
reduce the penalty interest to 12 % per annum.

ve,
supra.
Segovi
a Dev.
Corp.
v. J.L.
Dumat
ol
Realty
and
Dev.
Corp.,
GR
14128
3,
Aug.
30,
2001.

Same; Damages arising from Negligence; Maintaining the level of

Waste Water in Lagoons. Even assuming that the heavy rains constituted
an act of God, by reason of their negligence, the fortuitous event became
humanized, rendering appellants liable for the ensuing damages. Arts. 637
& 50 of the NCC impose a natural easement upon the lower estate to
receive the waters which naturally and without the intervention of man
descend from higher states. 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. On the basis thereof, it is crystal clear that
REMMAN is directly accountable to Lat for the damages sustained by him.

Remm
an v.
CA,
GR
12501
8,
April
6,
2000.

MORAL DAMAGES; To sustain this award, it must be shown that (1) the
claimant suffered injury, and (2) such injury sprung from any of the cases
listed in Articles 2219 and 2220 of the Civil Code. It is not enough that the
claimant alleges mental anguish, serious anxiety, wounded feelings, social
humiliation, and the like as a result of the acts of the other party. It is
necessary that such acts be shown to have been tainted with bad faith or ill
motive.

Indust
rial
Insura
nce
Co. v.
Bonda
d, GR
13672
2,
April
12,
2000.

Same; Art. 2219 of the Civil Code lists the instances when moral damages
may be recovered. One such case is when the rights of individuals,
including the right against deprivation of property w/o due process of law,
are violated. Moral damages include physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded feelings, moral
shock, social humiliation, and similar injury. Although incapable of
pecuniary computation, such damages may be recovered if they are the
PROXIMATE RESULTS of the defendants wrongful act or omission. Case Law
establishes the ff. REQUISITES FOR THE AWARD OF MORAL DAMAGES: [1]
there is an injury whether physical, mental or psychological clearly
sustained by the claimant; [2] there is a culpable act or omission factually
established; [3] the wrongful act or omission of the defendant is the
proximate cause of the injury sustained by the claimant; and [4] the award
of damages is predicated on any of the cases stated in Art. 2219 of the Civil
Code.

Sps.
Quisu
mbing
v.
MERA
LCO,
GR
14294
3,
April
3,
2002.

Same; W/ respect to Corporations; As a Rule, can not be granted in

favor of a corporation.

NPC v.
Philipp
Bros.
Ocean

Page 78 of 87

Civil Laws

ic, GR
12620
4,
Nov.
20,
2001.
Same; Same; Exception; The corporation has sufficiently shown that its
REPUTATION was tarnished after it immediately ordered equipment from its
suppliers on account of the urgency of the project, only to be cancelled
later.

Jardin
e
Davis
v. CA,
supra.

Same; Awarded in Breach of Contract; if the defendant is shown to

have fraudulently or w/ malice or bad faith.

BPI
Invest
ment
Corp.
v. D.G.
Carreo
n
Comm
.
Corp.,
GR
12652
4,
Nov.
29,
2001;
GSIS
v. Sps.
Gonza
lo,
supra.

Same; In actions for Breach of Contract of Carriage. 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.

Calala
s
v.
CA,
supra.

Same; In awarding such damages, the court shall take into account the
circumstances obtaining in the case and assess damages according to its
discretion. In this case, private respondents are engaged in several
businesses, such as rice and corn trading, cement dealership, and gasoline
proprietorship. The dishonor of private respondents checks and the
foreclosure initiated by petitioner adversely affected the credit standing as
well as the business dealings of private respondents as their suppliers
discontinued credit lines resulting in the collapse of their businesses. The
banks wrongful act caused serious anxiety, embarrassment, and
humiliation to private respondents for w/c they are entitled to recover
moral damages in the amount of P300T w/c the Court deemed it
reasonable.

Produ
cers
Bank
of the
Phils.
v. CA,
2001.

Same; The person claiming moral damages must prove the existence of
BAD FAITH by clear and convincing evidence, for the law always presumes
good faith. It is not enough that one merely suffered sleepless nights,
mental anguish, and serious anxiety as a result of the actuations of the
other party. Invariably, such action must be shown to have been willfully
done in bad faith or w/ ill motive.

Ace
Hauler
s
v.
CA,
GR
12793
4,

Page 79 of 87

Civil Laws

Aug.
23,
2000.
Same; No basis to Award; Burden of Proof; The law presumed good
faith, and any person who seeks an award of damages due to acts of
another has the burden of proving that the latter acted in bad faith or w/ ill
motive. It is not enough that one says he suffered mental anguish, serious
anxiety, social humiliation, wounded feelings, and the like as a result of the
actuations of the other party. Proof of moral suffering must be introduced;
otherwise, the award for moral damages is not proper.

Estani
slao v.
CA,
2001.

Same; That complainant suffered economic hardship or worries and mental

anxiety is not enough.

Padilla
v. CA,
GR
11970
7,
Nov.
29,
2001

Same; The negligence of the appellant is not so gross as to warrant moral

and temperate damages. The filing alone of the foreclosure application
should not be a ground for an award of moral damages in the same way
that a clearly unfounded civil action is not among the grounds for moral
damages where it acted only on the belief that it was acting in the
legitimate exercise of its right.

BPI
Invest
ment
Corp
v. CA,
GR
13363
2,
Feb.
15,
2002;
AF
Realty
&
Devel
opme
nt
v.
Diesel
man
Freigh
t
Servic
es,
2002;
Insular
Life
Assura
nce
Co. v.
Young,
2002.

Same; It may be awarded w/o proof of pecuniary loss.

Produ
cers
Bank
of the
Phils.
v. CA,
2001.

Same; Amount of Damages; It is left largely to the sound discretion of

the courts, should be granted in REASONABLE AMOUNTS, considering the
attendant facts and circumstances. Moral damages, though incapable of

SPs.
Quisu
mbing

Page 80 of 87

Civil Laws

pecuniary estimation, are designed to compensate the claimant for actual

injury suffered and not to impose a penalty. They are not intended to enrich
at the expense of the defendant. They are awarded only to obtain a means,
a diversion or an amusement that will serve to alleviate the moral suffering
the injured party has undergone by reason of the defendants culpable
action. They must be proportionate to the suffering inflicted. In this case,
MERALCO was able to restore the electric supply of petitioners on the same
day. Verily, the inconvenience and anxiety they suffered as a result of the
disconnection was thereafter corrected. Thus, amount of moral damages
awarded by the RTC was reduced to the more equitable amount of
P100,000.00.

v.
MERA
LCO,
GR
14294
3,
April
3,
2002.

Same; Awarded in the following cases: [i] In view of verbal and written
THREATS directed against petitioner by respondent (Carlos v. Abelardo, GR
146504, April 9, 2002); [ii] The airlines personnel who examined
respondents attache case were rude, brusque, arrogant and domineering
and the manager who attended to him answered his querries in a
reprehensible manner, thus causing him humiliation as the other
passengers were already looking at him. The implementation of SECURITY
MEASURES IN THE AIRLINE BUSINESS must be attended by basic courtesies
(NORTWEST Airlines v. Laya, GR 145956, May 29, 2002). However, the
award of P10T moral damages in this case was improper, absent a specific
finding and pronouncement from the trial court that petitioners acted in
bad faith or w/ malice (Sarming v. Dy, GR 133643, June 6, 2002); [iii]
Improper DISCONNECTION OF ELECTRIC POWER by MERALCO (Sps.
Quisumbing v. MERALCO, supra.).
TEMPERATE DAMAGES; Awarded when the court is convinced that there
has been pecuniary loss but definite proof thereof cannot be offered.

GSIS
v. Sps.
Gonza
lo,
supra.

NOMINAL DAMAGES; BPIIC was negligent in relying merely on the entries

found in the deed of mortgage, without checking and correspondingly
adjusting its records on the amount actually released to private
respondents and the date when it was released. Such negligence resulted
in damage to private respondents, for which an award of nominal damages
should be given in recognition of their rights which were violated by BPIIC.
For this purpose, the amount of P25,000 is sufficient.

BPI
Invest
ment
Corp.
v. CA,
GR
13363
2,
Feb.
15,
2002.

EXEMPLARY DAMAGES; Awarded when the act or omission which caused

the injury is attended by gross negligence characterized by the want of
even the slight care, acting or omitting to act in a situation where there is a
duty to act, not inadvertently but willfully and intentionally, with a
conscious indifference to consequences in so far as other persons may be
affected.

Bank
of
Ameri
ca NT
and
SA v.
Ameri
can
Realty
Corp.,
GR GR
13387
6,
Dec.
29,
1999.

Same; Imposed by way of example or correction for the public good, in

addition to moral, temperate, liquidated or compensatory damages. It is

Sps.
Quisu

Page 81 of 87

Civil Laws

not given to enrich one party and impoverish another, but to serve as a
deterrent against or as a negative incentive to socially deleterious actions.
In this case, to serve an example that before a disconnection of electric
supply can be effected by a public utility like MERALCO, the requisites of
law must be faithfully complied w/ - the amount of P50T was awarded to
the petitioners.

mbing
v.
MERA
LCO,
GR
14294
3,
April
3,
2002;
Carlos
v.
Abelar
do, GR
14650
4,
April
3,
2002;
North
West
Airline
s
v.
Laya,
GR
14595
6, May
29,
2002;
Sarmi
ng v.
Dy, GR
13364
3,
June
6,
2002.

Same; May be awarded in CONTRACTS and QUASI-CONTRACTS, if the

defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent
manner (Art. 2232, NCC). Tsais act of purchasing the controverted
properties despite her knowledge of EVERTEXs claim was oppressive and
subjected the already insolvent respondent to gross disadvantage. PBComs
act of taking all the properties found in the factory of the financially
handicapped respondent, including those not covered by or included in the
mortgages, is equally oppressive and tainted w/ bad faith.

Tsai v.
CA,
supra.

Same; May be awarded in UNFOUNDED LITIGATION. Exemplary damages

are imposed by way of example or correction for the public good, in
addition to moral, temperate, liquidated or compensatory damages. Thus,
where petitioner's conduct needlessly dragged innocent bystanders into an
unfounded litigation, he is liable for exemplary damages.

Indust
rial
Insura
nce
Co. v.
Bonda
d, GR
13672
2,
April
12,
2000.

Same; Awarded in view of the malicious and unwarranted application for

extrajudicial foreclosure by petitioner that was obviously done to harass,
embarrass, annoy, or ridicule private respondents. Moreover, in its
application fro extrajudicial foreclosure, petitioner included the other loans

Produ
cers
Bank
of the

Page 82 of 87

Civil Laws

of private respondents w/c were not covered by the mortgage. Petitioner

unjustifiably refused to give private respondents copies of their account
ledgers w/c would show the deposits made by them. Also, petitioner banks
failure to credit the deposits in the account of private respondents
constituted gross negligence in the performance of its contractual
obligation w/c amounts to evident bad faith.

Phils.
v. CA,
GR
11158
4,
Sept.
17,
2001.

ATTORNEYS FEES; Award of Attorneys Fees is the exception rather than

the rule and counsels fees are not to be awarded every time a party wins a
suit. It cannot be granted simply because one was compelled to sue to
protect and enforce ones right. The power of the court to award attorneys
fees under Art. 2208, NCC demands factual, legal, and equitable
justification w/c must be explicitly stated in the body of the decision and
not only in the dispositive portion thereof. In the absence of stipulation, a
winning party may be awarded attorneys fees only in case the plaintiffs
action or defendants stand is so untenable as to amount to gross and
evident bad faith. The grant must be proven by facts; it cannot depend on
mere speculation or conjecture.

Minde
x
Resou
rces v.
Morillo
,
GR
13812
3,
March
12,
2002;
BPI
Invest
ment
Corp
v. CA,
GR
13363
2,
Feb.
15,
2002;
AF
Realty
v.
Diesel
men
Freigh
t
Servic
es, GR
11144
8, Jan.
16,
2002;
Insular
Life v.
Young,
2002;
Quirin
o
v.
Diaz,
GR
13730
5, Jan.
17,
2002.

Same; It may be claimed if one who claims it is compelled to litigate w/

third persons or to incur expenses to protect ones interest by reason of an
unjustified act or omission on the part of the party from whom it is sought.

Indust
rial
Insura
nce
Co. v.
Bonda
d,
supra.

Page 83 of 87

Civil Laws

Same; The award of attorney's fees for P2,000 is justified under Article
2208(2) of the Civil Code, 29 in view of the trial court's finding that the
unjustified refusal of petitioners to reform or to correct the document of
sale compelled respondents to litigate to protect their interest.

Sarmi
ng v.
Dy, GR
13364
3,
June
6,
2002.

Same; Rate of Attorneys Fees based on Agreement; As part of

Litigation Expenses and Collection Efforts; 10 % of the total amount of
indebtedness, is reasonable.

Liguta
n
v.
CA,
GR
13867
7,
Feb.
12,
2002.

Same; Same; Same; The Deeds of Assignment stipulate that in case of

suit Great Asian shall pay attorney's fees equivalent to 25% of the
outstanding debt. The award of attorney's fees in the instant case is
justified, not only because of such stipulation, but also because Great Asian
and Tan Chong Lin acted in gross and evident bad faith in refusing to pay
Bancasia's plainly valid, just and demandable claim. We deem it just and
equitable that the stipulated attorney's fee should be awarded to Bancasia.

Great
Asian
Sales
Center
Corp.
v. CA,
GR
10577
4,
April
25,
2002.

Same; Attorneys Fees as an Item of Damages; It may be awarded to a

party when he is compelled to litigate or to incur expenses to protect his
interest by reason of an unjustified act of the other party, as in this case,
where the banks act of not crediting private respondents deposit of
P960,000.00 and the premature filing of extrajudicial foreclosure by the
bank compelled private respondents to institute an action for injunction and
damages in order to protect their rights and interests.

Produ
cers
Bank
of the
Phils.
v. CA,
GR
11158
4,
Sept.
17,
2001.

Same; Same; Generally, it is not recoverable. They are not to be awarded

every time a party wins a suit. An award of attorneys fees demands
factual, legal and equitable justification.

GSIS
v. Sps.
Gonza
lo, GR
13564
4,
Sept.
17,
2001.

Same; Same; It may be recovered when exemplary damages are awarded.

id.

Same; Same; W/ the award of exemplary damages, the award of

attorneys fees is likewise granted. It is readily apparent that petitioners
needed the services of a lawyer to argue their cause even to the extent of
elevating the matter to this Court; thus, an award of P50T is considered
sufficient.

Sps.
Quisu
mbing
v.
MERA
LCO,

Page 84 of 87

Civil Laws

GR
14294
3,
April
3,
2002.
Same; Same; No premium should be placed on the right to litigate. No
penalty should be imposed on those who exercise such right in good faith,
even though erroneously. The fact that private respondents incurred
expenses to protect their rights does not necessarily imply that the action
w/c they were opposing was instituted in bad faith. The award of attorneys
fees must be deleted where the award of moral and exemplary damages
are eliminated.

Estani
slao v.
CA,
GR
14368
7, July
31,
2001.

Same; Same; Award of attorneys fees increased from P50T to P150T, as

the initial complaint had generated several incidents during almost 20
years that the case was under litigation.

Hanil
Dev.
Corp.
v. CA,
GR
11317
6, July
30,
2001.

Same; Same; it may also be reduced from 25 % to 5 % of total amount

due.

Tan v.
CA,
GR
11628
5, Oct.
19,
2001.

ATTORNEYS FEES AND LITIGATION EXPENSES; The award of litigation

expenses and attorney's fees, Article 2208 of the New Civil Code
enumerates the instances where such may be awarded and, in all cases, it
must be reasonable, just and equitable if the same were to be granted.

Countr
y
Banke
rs
Insura
nce
Corp
v.
Lianga
Bay
and
Comm
.
MultiPurpo
se
Coop.,
GR
13691
4, Jan.
25,
2002.

COSTS OF SUIT; Costs are certain allowances authorized by statute to

reimburse the successful party for expenses incurred in prosecuting or
defending an action or special proceedings." These costs have their own
legal meaning and import, for, as it was said, costs are in the nature of
incidental damages allowed to the successful party to indemnify him
against the expense of asserting his rights in court, when the necessity of
so doing was caused by other's breach of legal duty.'" In this jurisdiction,

GSIS
v.
Bengs
on
Comm
ercial
Buildi

Page 85 of 87

Civil Laws

the only "costs" that a winning party may recover are those prescribed in
Rule 142, Revised Rules of Court (1964 Revision). Any pecuniary award
granted to a party in the form of "costs of suit" referred exclusively to the
costs specified in Rule 142. These provisions bind all lower courts, including
the CA, the Sandiganbayan, the CTA, the RTCs, and MTCs. No court may
award costs in excess of the sums specified therein. The afore-cited rule
limits the recovery of "costs of suit" to the items enumerated therein. Thus,
the prevailing party may recover only the costs fixed therein "and no
other." Consequently, the trial court's award to respondent Bengson of
thirty-one million pesos as "costs of suit" cannot be justified by any stretch
of the imagination, unless the total amount claimed runs to billions of pesos
for which the filing fees would amount to such sum.

ngs,
GR
13744
8, Jan.
31,
2002.

Same; Taxation of Costs; What is more, the trial court conducted a

"hearing to receive evidence" on the "costs of suit." This is a manifest error.
The rules prescribe the procedure for taxation of costs (Rule 142, Section
8). Clearly, the rule does not provide that the trial court shall conduct a
hearing to determine the amount of the "costs of suit." All that must be
done is for the prevailing party to give five (5) days written notice to the
adverse party of the items of costs claimed by the prevailing party, verified
by his oath or that of his attorney. As heretofore stated, the items of costs
and the specified amounts thereof are fixed in the rule, "and no other."
Within the five-day period, the adverse party may object, specifying the
items objected to. The clerk of the court shall then tax the "costs." Even if
there be no objection to the items of costs, the clerk of the court cannot tax
costs in amounts more than that specified in the items prescribed in Rule
142. Either party may appeal to the court from the clerk's taxation. It is at
this stage that the court takes part in the taxation of costs, not otherwise.

id.

Same; Expenses for taking depositions; The expenses of taking

depositions are allowable as costs only if it appears to the court: (1) that
they were reasonably necessary; (2) the burden of so demonstrating is
upon the party claiming such expenses as costs; (3) whether that burden is
met is w/in the sound discretion of the trial court; and (4) its ruling thereon
is presumed to be correct and will not be disturbed unless it is so
unreasonable as to manifest a clear abuse of discretion." Whether the
taking of a deposition was reasonably necessary to the protection of the
party's interests as to entitle it to reimbursement of expenses is a question
primarily for the lower court to decide based on all the facts and
circumstances of the case. On this score, the Court of Appeals (w/c heard
the Application for Damages) disallowed Hanil's claim since the deposition
"was merely corroborative in nature and, therefore, superfluous."

Hanil
Dev.
Corp.
v. CA,
supra.

INTERESTS; Rates; The application of the proper interest rates, the

following guidelines were:
I.
When an obligation, regardless of its source, i.e., law, contracts,
quasi-contracts, delicts or quasi-delicts, is breached, the contravenor can
be held liable for damages. The provisions under Title XVIII on "Damages"
of the Civil Code govern in determining the measure of recoverable
damages.
II.
With regard particularly to an award of interest in the concept of
actual and compensatory damages, the rate of interest, as well as the
accrual thereof, is imposed, as follows:
1.
When the obligation is breached, and it consists in the payment of a
sum of money, i.e., a loan or forbearance of money, the interest due should
be that which may have been stipulated in writing. Furthermore, the
interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12%
per annum to be computed from default, i.e., from judicial or extrajudicial
demand under and subject to the provisions of Article 1169 of the Civil
Code.
2.
When an obligation, not constituting a loan or forbearance of money,
is breached, an interest on the amount of damages awarded may be
imposed at the discretion of the court at the rate of 6% per annum. No

Easter
n
Shippi
ng
Lines,
Inc. v.
Court
of
Appea
ls and
Merca
ntile
Insura
nce
Co.,
Inc.,
234
SCRA
78,
95-97
[1994]

Page 86 of 87

Civil Laws

interest, however, shall be adjudged on unliquidated claims or damages

except when or until the demand can be established with reasonable
certainty. Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty
cannot be so reasonably established at the time the demand is made, the
interest shall begin to run only from the date the judgment of the court is
made (at which time the quantification of damages may be deemed to
have been reasonably ascertained). The actual base for the computation of
legal interest shall, in any case, be on the amount finally adjudged.
cdasia2005
3.
When the judgment of the court awarding a sum of money becomes
final and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to be by then
an equivalent to a forbearance of credit.

Concurr
en-ce
and
Prefere
nce of

Credits

Same; Meaning of Forbearance of Money; A "forbearance" in the

context of the usury law is a contractual obligation of lender or creditor to
refrain, during a given period of time, from requiring the borrower or debtor
to repay a loan or debt then due and payable.

id.

Moral, Exemplary Damages and Attorneys Fees; Moral damages as a

rule must be alleged and proved as a fact; Exemplary damages may only
be awarded if the claimant is entitled to moral, temperate, liquidated, or
compensatory damages; And the award of Attorneys Fees is the exception
rather than the rule. Counsels fees are not awarded every time a party
wins a suit. Pursuant to Art. 2208 of NCC, such award demands factual,
legal and equitable justification and cannot be left to speculation or
conjecture.

Heme
des v.
CA,
GR
10713
2, Oct.
8,
1999.

Action for Damages based on Malicious Prosecution; There is

malicious prosecution when a person directly insinuates or imputes to an
innocent person the commission of a crime and the maliciously accused is
compelled to defend himself in court. While generally associated with
unfounded criminal actions, "the term has been expanded to include
unfounded civil suits instituted just to vex and humiliate the defendant
despite the absence of a cause of action or probable cause." The basis for a
civil action for damages arising from malicious prosecution is found in
Articles 19, 21, 29, 13 35, 14 of the Civil Code. 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, 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
No. 23276.

Bayan
i
v.
Panay
Electri
c Co.,
GR
13968
0,
April
12,
2000.

PREFERRED CREDIT; Taxes; A preferred creditors third-party claim to the

proceeds of a foreclosure sale is not the proceeding contemplated by law
for the enforcement of preference under Art. 2242, NCC, unless the
claimant were enforcing a credit for taxes that enjoy absolute priority. If
none of the claims is for taxes, a dispute between two creditors will not
enable the Court to ascertain the pro rata dividend corresponding to each,
because the rights of the other creditors likewise enjoying preference under
Art. 2242 can not be ascertained.

DBP v.
CA,
GR
12620
0,
Aug.
16,
2001.

Page 87 of 87

Civil Laws