CIVIL LAW

MARCH 2013

RENO R. GONZALES, ET. AL. v. CAMARINES SUR II ELECTRIC COOPERATIVE, INC., AS

REPRESENTED BY ANTONIO BORJA, ET. AL.
G.R. No. 181096, March 6, 2013
CJ. Sereno

Article 2224 of the Civil Code provides that temperate damages may be recovered
when the court finds that some pecuniary loss has been suffered but its amount cannot,
from the nature of the case, be provided with certainty. Notwithstanding the wording of the
Civil Code cited above, we have already settled in jurisprudence that even if the pecuniary
loss suffered by the claimant is capable of proof, an award of temperate damages is not
precluded. The grant of temperate damages is drawn from equity to provide relief to those
definitely injured. Therefore, it may be allowed so long as the court is convinced that the
aggrieved party suffered some pecuniary loss.

On the other hand, in order to obtain exemplary damages under Article 2232 of the
Civil Code, the claimant must prove that the assailed actions of the defendant are not just
wrongful, but also wanton, fraudulent, reckless, oppressive or malevolent. The award of
exemplary damages, including attorneys fees is proper with the finding of bad faith in
CASURECO's betrayal of the compromise agreement.

FACTS:

Reno Gonzales and Lourdes Gonzales owned an apartment for rent at Naga City, Unit
No. 11-A of which was rented out to Mr. and Mrs. Samuel Samson (Samsons). When the
lessees reneged on their obligation to pay their electric bills, respondent Camarines Sur II
Electric Cooperative, Inc. (CASURECO) disconnected the power supply. It was only restored
when the Samsons executed a Promissory Note in favor of CASURECO. Spouses Gonzales
then protested the restoration of the power supply to the unit, given the accumulating unpaid
electric bills of their lessees. Acting belatedly on the protest, CASURECO terminated the power
supply of the unit at the time that the Samsons vacated it. The spouses and CASURECO then
reached a compromise agreement, whereby CASURECO would restore power supply to the
unit and remove its old accountabilities, provided that petitioners would deposit the equivalent of
two monthly electric bills of the Samsons.

Later on, the spouses' son, petitioner Rey R. Gonzales (Rey), together with his
family, occupied the unit without any interruption of electric supply. However, in some electric
bills issued by CASURECO, the company required the payment of both the current
consumption and the past electric bills. Petitioners then filed a Complaint against
respondents before the RTC in order to permanently remove the old accountability left by
the Samsons in the electric bill and to prevent respondents from disconnecting the unit's
power supply. They also consigned to the trial court the charges for their current electric
consumption amounting to P1,148.17.

The RTC accepted the consignation of petitioners and adjudged that they were not
liable for the past unpaid electric bills of the Samsons. The CA affirmed but deleted the
award of actual damages because petitioners failed to submit receipts or any other proof to
substantiate the pecuniary loss they had incurred. It also removed the grant of exemplary
damages based on the finding that CASURECO's actions did not evince bad faith. The CA
deleted the grant of attorneys fees claiming that none of the instances of granting that
award as enumerated in Article 2208 of the Civil Code existed in the case. Moreover, it
ruled that the RTC's award of moral damages to petitioners was excessive.

ISSUE:

Whether petitioners are entitled to receive the folowing damages: (1) actual damages or, in
the alternative, temperate damages; (2) exemplary damages; (3) attorney's fees; and (4) an
increase in the award of moral damages

RULING:

Despite the enumeration of expenditures, the claim of petitioners for actual damages
cannot be granted. In People v. Buenavidez, this Court stressed that only expenses
supported by receipts, and not merely a list thereof, shall be allowed as bases for the award
of actual damages. As admitted by petitioners themselves, none of these expenses, which
were incurred over a span of seven years, was backed up by documentary proof such as a
receipt or an invoice. In the alternative, petitioners contend anew in their Rule 45 Petition
that they are entitled to temperate damages. They argue that they definitely suffered
pecuniary losses, as they had to keep going back to CASURECO's office to complain about
the old accountabilities of the Samsons.

Article 2224 of the Civil Code provides that temperate damages may be recovered
when the court finds that some pecuniary loss has been suffered but its amount cannot,
from the nature of the case, be provided with certainty. Notwithstanding the wording of the
Civil Code cited above, we have already settled in jurisprudence that even if the pecuniary
loss suffered by the claimant is capable of proof, an award of temperate damages is not
precluded. The grant of temperate damages is drawn from equity to provide relief to those
definitely injured. Therefore, it may be allowed so long as the court is convinced that the
aggrieved party suffered some pecuniary loss.

Here, the RTC acknowledged that petitioners suffered some form of pecuniary loss
when it accepted as fact that they went back and forth to the office of CASURECO at Del
Rosario, Naga City, to settle the account of the Samsons. Although the CA did not review
this factual finding, we find that the RTC's pronouncement on this matter was nonetheless
substantiated by the evidence on record given the attached letters with postages,
documents, and testimonies that signified an ongoing transaction between the parties to
settle the electric charges. Indeed, they were at least able to prove that they incurred undue
costs in pursuing their rights against CASURECO.Hence, the award of temperate damages
to petitioners is in order.

In order to obtain exemplary damages under Article 2232 of the Civil Code, the
claimant must prove that the assailed actions of the defendant are not just wrongful, but also
wanton, fraudulent, reckless, oppressive or malevolent.

Clearly, with the finding of bad faith in CASURECO's betrayal of the compromise
agreement, and given that the award of exemplary damages is proper, this Court finds basis
for restoring the grant of attorney's fees. We thus reinstate the award of attorney's fees to
petitioners.

The petitioners are entitled to moral damages, since they adduced proof of moral
suffering, mental anguish, fright and the like. In view, however, of the severe sufferings
inflicted on petitioners by CASURECO, we affirm the RTC's award of P50,000 as moral
damages. This amount is appropriate considering that respondents irresponsibly failed to
update its records from 1992 until 1999, despite the execution of the compromise
agreement and the constant reminder by petitioners to make the appropriate rectifications.
We further note that CASURECO offered no valid explanation for such flagrant omission.
Hence, this Court maintains the original grant in order to exact better service from utility
companies.

REPUBLIC OF THE PHILIPPINES v. MARTIN T. NG

G.R. No. 182449, March 6, 2013
CJ. Sereno
 In a judicial confirmation of title under original registration proceedings, applicants
may obtain the registration of title to land upon a showing that they or their predecessors-in-
interest have been in (1) open, continuous, exclusive, and notorious possession and
occupation of (2) agricultural lands of the public domain, (3) under a bona fide claim of
acquisition or ownership, (4) for at least 30 years immediately preceding the filing of the
application for confirmation of title, except when prevented by war or force majeure. The
burden of proof in land registration cases rests on applicants who must show clear, positive
and convincing evidence that their alleged possession and occupation were of the nature
and duration required by law.

In this case, the OSG inaccurately portrayed respondent as merely making general
submissions in proving his claims. Respondent in this case, sufficiently established his
claims that he and his predecessors-in-interest owned and possessed the subject lots
openly, continuously, exclusively, and notoriously, as required by our registration laws.

FACTS:

Respondent filed an application for the original registration of title over the parcels of
land in question. He claimed ownership of these five parcels of land based on his purchase
thereof from the vendors, who had possessed the realties for more than thirty (30) years.
Respondent furnished the several pieces of documentary evidence to establish his purchase
of the lots. The regularity and due execution of these contracts, Tax Declarations and realty
payments were never assailed by petitioner. In support of his claims, he further presented
the testimony of the 77-year-old Josefa N. Fat (Fat), who lived near the subject lots and who
asserted with certainty that the ownership and possession by respondent and his
predecessors-in-interest were public, peaceful, open, continuous, and in the concept of an
owner. The MTC ruled in favor of respondent, which was then affirmed by the Court of
Appeals.

ISSUE:

Whether the respondents claim of ownership is one that has been established by virtue of
an open, continuous, exclusive and notorious possession of the subject lots

RULING:
 In a judicial confirmation of title under original registration proceedings, applicants
may obtain the registration of title to land upon a showing that they or their predecessors-in-
interest have been in (1) open, continuous, exclusive, and notorious possession and
occupation of (2) agricultural lands of the public domain, (3) under a bona fide claim of
acquisition or ownership, (4) for at least 30 years immediately preceding the filing of the
application for confirmation of title, except when prevented by war or force majeure. The
burden of proof in land registration cases rests on applicants who must show clear, positive
and convincing evidence that their alleged possession and occupation were of the nature
and duration required by law.

Possession is acquired in any of the following ways: (1) by the material occupation of
the thing; (2) by the exercise of a right; (3) by the fact that the property is subject to the
action of our will; and (4) by the proper acts and legal formalities established for acquiring
the right. In Director of Lands v. IAC, we explained the nature of the possession required to
confirm ones title as follows:

Possession is open when it is patent, visible, apparent, notorious and not

clandestine. It is continuous when uninterrupted, unbroken and not intermittent or
occasional; exclusive when the adverse possessor can show exclusive dominion over
the land and an appropriation of it to his own use and benefit; and notorious when it is so
conspicuous that it is generally known and talked of by the public or the people in the
neighborhood.

In perusing the evidence submitted by respondent, petitioner claims that the former
merely presented (1) a witness testimony full of motherhood statements, and (2) Tax
Declarations and realty payments that do not conclusively prove ownership. Thus, the
Republic claims that the evidence of possession is insufficient. While tax declarations and
realty tax payments on property are not conclusive evidence of ownership, they are
nevertheless good indicia of possession in the concept of owner, for no one in the right
frame of mind would be paying taxes for a property that is not in ones actual or at least
constructive possession.

The voluntary declaration of a piece of property for taxation purposes is an

announcement of ones claim against the State and all other interested parties. In fact, these
documents already constitute prima facie evidence of possession. Moreover, if the holders of
the land present a deed of conveyance in their favor from its former owner to support their
claim of ownership, the declaration of ownership and tax receipts relative to the property
may be used to prove their good faith in occupying and possessing it. Additionally, when
considered with actual possession of the property, tax receipts constitute evidence of great
value in support of the claim of title of ownership by prescription.
 Therefore, given these pieces of documentary evidence consisting of muniments of
title, tax declarations and realty payments which were not disputed by petitioner; and the
testimony as regards the actual possession for more than 30 years by respondents
predecessors-in-interest the OSG inaccurately portrayed respondent as merely making
general submissions in proving his claims. Rather, as found by the courts a quo, he amply
established that he and his predecessors-in-interest owned and possessed the subject lots
openly, continuously, exclusively, and notoriously, as required by our registration laws.

MERCY VDA. DE ROXAS, REPRESENTED BY ARLENE C. ROXAS-CRUZ, IN HER

CAPACITY AS SUBSTITUTE APPELLANT-PETITIONER v. OUR LADYS FOUNDATION,
INC.
G.R. No. 182378, March 6, 2013
CJ. Sereno

Under Article 448 pertaining to encroachments in good faith, as well as Article 450
referring to encroachments in bad faith, the owner of the land encroached upon petitioner
herein has the option to require respondent builder to pay the price of the land. According
to jurisprudence, the price must be fixed at the prevailing market value, reckoned at the time
that the landowner elected the choice, and not at the time that the property was purchased.
It follows herein, that the CA incorrectly pegged the reimbursable amount at the old market
value of the subject property P40 per square meter as reflected in the Deed of Absolute
Sale between the parties. On the other hand, the RTC properly considered the value of the
lot at P1,800 per square meter, the current fair price as determined in the Amended Sheriffs
Bill.

FACTS:

Salve Dealca Latosa filed before the RTC a Complaint for the recovery of ownership
of a portion of her residential land. According to her, Atty. Henry Amado Roxas (Roxas),
represented by petitioner herein, encroached on a quarter of her property by arbitrarily
extending his concrete fence beyond the correct limits.

Roxas imputed the blame to respondent Our Ladys Village Foundation, Inc., now
Our Ladys Foundation, Inc. (OLFI). He then filed a Third-Party Complaint against
respondent and claimed that he only occupied the adjoining portion in order to get the
equivalent area of what he had lost when OLFI trimmed his property for the subdivision
road. The RTC ordered OLFI to reimburse Roxas for the value of the 92-square-meter
property plus legal interest. In interpreting this directive, both the trial and the appellate
courts differed in interpreting the amount of reimbursement payable by respondent to
petitioner. The RTC pegged the reimbursable amount at P1,800 per square meter to reflect
the current value of the property, while the CA maintained the original amount of the lot at
P40 per square meter.

ISSUE:

Whether the amount rendered by the RTC is the correct amount to be reimbursed by OLFI
to Roxas

RULING:

To settle the contention, this Court resorts to the provisions of the Civil Code
governing encroachment on property. Under Article 448 pertaining to encroachments in
good faith, as well as Article 450 referring to encroachments in bad faith, the owner of the
land encroached upon petitioner herein has the option to require respondent builder to
pay the price of the land.

Although these provisions of the Civil Code do not explicitly state the reckoning
period for valuing the property, Ballatan v. Court of Appeals already specifies that in the
event that the seller elects to sell the lot, "the price must be fixed at the prevailing market
value at the time of payment." More recently, Tuatis v. Spouses Escol illustrates that the
present or current fair value of the land is to be reckoned at the time that the landowner
elected the choice, and not at the time that the property was purchased. From these cases,
it follows that the CA incorrectly pegged the reimbursable amount at the old market value of
the subject property P40 per square meter as reflected in the Deed of Absolute Sale
between the parties. On the other hand, the RTC properly considered the value of the lot at
P1,800 per square meter, the current fair price as determined in the Amended Sheriffs Bill.
Thus, we reverse the ruling of the CA and reinstate the 2 December 2004 Order of the RTC
directing OLFI to reimburse petitioner at P1,800 per square meter.

STAR TWO (SPV-AMC), INC. v. PAPER CITY CORPORATION OF THE PHILIPPINES

G.R. No. 169211, March 6, 2013
J. Perez
 By contracts, all uncontested in this case, machineries and equipment are included
in the mortgage in favor of RCBC, in the foreclosure of the mortgage and in the consequent
sale on foreclosure also in favor of petitioner. The parties stipulated that the properties
mortgaged by Paper City to RCBC are various parcels of land including the buildings and
existing improvements thereon as well as the machineries and equipment, which, as stated
in the granting clause of the original mortgage, are listed as real and personal properties of
Paper City. The real estate mortgage over the machineries and equipment is even in full
accord with the classification of such properties by the Civil Code of the Philippines as
immovable property.

FACTS:

Paper City Corporation applied for and was granted loans and credit
accommodations by RCBC, which were secured by four (4) Deeds of Continuing Chattel
Mortgages on its machineries and equipment found inside its paper plants. RCBC,
Metrobank and Union Bank entered into a Mortgage Trust Indenture (MTI) with Paper City.
In the said MTI, Paper City acquired an additional loan, secured by the same five (5) Deeds
of Real Estate Mortgage and additional real and personal properties. Upon failure to settle
Paper Citys obligations, RCBC filed a Petition for Extrajudicial Foreclosure against the Real
Estate Mortgage. Thereafter, Paper City averred that the extra-judicial sale was null and void
due to lack of prior notice and attendance of gross and evident bad faith on the part of the
creditor banks.

In the meantime, Paper City and Union Bank entered into a Compromise Agreement.
Pending the negotiations between the other creditor banks and Paper City, the latter filed a
Manifestation with Motion to Remove and/or Dispose Machinery. It posited that the
machineries were not included in the foreclosure of the real estate mortgage. The trial court
denied the prayer and ruled that the machineries and equipment were included. In a motion
for reconsideration, the court reversed and stated that the disputed machineries and
equipment are chattels by agreement of the parties through their inclusion in the Deeds of
Chattel Mortgage. The CA affirmed.

ISSUE:

Whether the machineries and equipment are included in the mortgage in favor of RCBC, in
the foreclosure of the mortgage and in the consequent sale on foreclosure also in favor of
petitioner
RULING:

The petition is granted.

By contracts, all uncontested in this case, machineries and equipment are included
in the mortgage in favor of RCBC, in the foreclosure of the mortgage and in the consequent
sale on foreclosure also in favor of petitioner.

The parties stipulated that the properties mortgaged by Paper City to RCBC are
various parcels of land including the buildings and existing improvements thereon as well as
the machineries and equipment, which as stated in the granting clause of the original
mortgage, are "more particularly described and listed that is to say, the real and personal
properties listed in Annexes A and B x x x of which the Paper City is the lawful and
registered owner."

The plain language and literal interpretation of the MTIs must be applied. The
petitioner, other creditor banks and Paper City intended from the very first execution of the
indentures that the machineries and equipment enumerated in Annexes "A" and "B" are
included. Obviously, with the continued increase in the amount of the loan, totaling hundreds
of millions of pesos, Paper City had to offer all valuable properties acceptable to the creditor
banks.

The plain and obvious inclusion in the mortgage of the machineries and equipment
of Paper City escaped the attention of the CA which, instead, turned to another "plain
language of the MTI" that "described the same as personal properties." It was error for the
CA to deduce from the "description" exclusion from the mortgage.

Article 2127 of the Civil Code provided that the mortgage extends to the natural
accessions, to the improvements, growing fruits, and the rents or income not yet received
when the obligation becomes due, and to the amount of the indemnity granted or owing to
the proprietor from the insurers of the property mortgaged, or in virtue of expropriation for
public use, with the declarations, amplifications and limitations established by law, whether
the estate remains in the possession of the mortgagor, or it passes into the hands of a third
person.
 The real estate mortgage over the machineries and equipment is even in full accord
with the classification of such properties by the Civil Code of the Philippines as immovable
property. Article 415 of the Civil Code provided that the following are immovable property:
the Land, buildings, roads and constructions of all kinds adhered to the soil; xxx Machinery,
receptacles, instruments or implements intended by the owner of tenement for an industry
or works which may be carried on in a building or on a piece of land, and which tend directly
to meet the needs of the said industry or works.

HEIRS OF LORENZO BUENSUCESO, REPRESENTED BY GERMAN BUENSUCESO, AS

SUBSTITUTED BY LLUMINADA BUENSUCESO, ET AL. v. LOVY PEREZ, SUBSTITUTED
BY ERLINDA PEREZ-HERNANDEZ, ET AL.
G.R. No. 173926, March 6, 2013
J. Brion

While a tenant with a CLT is deemed the owner of a landholding, the CLT does not vest
full ownership on him. The tenant-holder of a CLT merely possesses an inchoate right that is
subject to compliance with certain legal preconditions for perfecting title and acquiring full
ownership. The holder must first comply with certain mandatory requirements to effect a
transfer of ownership. Failure on tenants part to comply with his obligations under the CLT will
not cause the automatic cancellation of the CLT nor of the disputed lots reversion to the
landowner.

Abandonment is a ground for the cancellation of a CLT and the forfeiture of the farmer-
beneficiarys right to the landholding. Nevertheless, for a cancellation or forfeiture to take place,
the proper procedures must be observed and a final judgment rendered declaring a cancellation
or forfeiture.

FACTS:

German was the son and heir of Lorenzo Buensuceso, the farmer-beneficiary of the
disputed agricultural lot. The disputed lot was awarded to Lorenzo pursuant to Operation Land
Transfer under Presidential Decree (P.D.) No. 27. Upon Lorenzos death, German allegedly
immediately occupied the lot and had been cultivating and residing within its premises since
then. German claimed that, in 1989, Lovy Perez forcibly entered the disputed lot, thus,
compelling him to file a petition for recovery of possession with the PARAD.

In her answer with counterclaim, Lovy argued that she is the real and lawful tenant of the
disputed lot as evidenced by: (1)the duly acknowledged and registered contract of leasehold,
between her and the landowner, Joaquin Garces, which Lorenzo signed as a witness; and
(2)the certifications issued by the Municipal Agrarian Reform Officer (MARO) of the Department
of Agrarian Reform(DAR), Gapan, Nueva Ecija, and by the Barangay Agrarian Reform Council
stating that she is the disputed lots registered agricultural lessee. She also claimed that she
has been paying the lease rentals to Garces, as shown by receipts, and the irrigation services
beginning 1984 as certified to by the National Irrigation Administration.

The PARAD dismissed the petition. The DARAB affirmed the PARADs decision. The CA
granted Lovys appeal and reversed the DARAB resolution. Hence, this petition.
ISSUE:

1. Whether petitioner is the owner of the disputed lot

2. Whether the lease contract between Lovy and Garces is valid
3. Whether Lorenzo abandoned the disputed lot

RULING:

On the issue of ownership of the disputed lot

We agree with the CA that the mere issuance of the CLT does not vest full ownership on
the holder and does not automatically operate to divest the landowner of all of his rights over the
landholding. The holder must first comply with certain mandatory requirements to effect a
transfer of ownership. Under R.A. No. 6657 in relation with P.D. No. 2728 and E.O. No. 228, the
title to the landholding shall be issued to the tenant-farmer only upon the satisfaction of the
following requirements: (1) payment in full of the just compensation for the landholding, duly
determined by final judgment of the proper court; (2) possession of the qualifications of a
farmer-beneficiary under the law; (3) full-pledged membership of the farmer-beneficiary in a duly
recognized farmers cooperative; and (4) actual cultivation of the landholding. We explained in
several cases that while a tenant with a CLT is deemed the owner of a landholding, the CLT
does not vest full ownership on him. The tenant-holder of a CLT merely possesses an inchoate
right that is subject to compliance with certain legal preconditions for perfecting title and
acquiring full ownership. For these reasons, we hold that Lorenzos right and claim to
ownership over the disputed lot were, at most, inchoate.

In the same vein, we hold that German as Lorenzos heir is not automatically
rendered the owner of the disputed lot. German must also still first comply with certain
procedural and mandatory requirements in order to acquire Lorenzos rights under the CLT,
including the right to acquire ownership of the disputed lot. Under Section 27 of R.A. No. 6657,
lands not yet fully paid by the beneficiary may be transferred, with prior approval of the DAR, to
any heir of the beneficiary who, as a condition for such transfer, shall cultivate the land for
himself.

On the validity of the lease contract between Garces and Lovy

Garces had no authority to execute the lease contract. While Garces, as landowner,
retained an interest over the disputed lot, any perceived failure on Lorenzos part to comply with
his obligations under the CLT did not cause the automatic cancellation of the CLT nor of the
disputed lots reversion to Garces. Lands acquired under P.D. No. 27 do not revert to the
landowner, and this is true even if the CLT is cancelled. The land must be transferred back to
the government and Garces could not, by himself, institute Lovy as the new tenant-beneficiary.

Thus, we declare the lease contract between Garces and Lovy as void. Consequently,
we cannot recognize Lovys claim that she is the present and actual agricultural lessee of the
disputed lot.

As to whether Lorenzo abandoned the disputed lot

Abandonment is a ground for the termination of tenancy relations under Section 8 of

R.A. No. 3844, and, under Section 22 of R.A. No. 6657 as well as under DAR Administrative
Order No. 02-94 in relation to Section 22, R.A. 6657, disqualifies the beneficiary of lots awarded
under P.D. No. 27 from its coverage. To additionally reiterate what we have discussed above,
actual cultivation of the farmholding is a mandatory condition for the transfer of rights under the
CLT to qualify the transferee as a beneficiary under Section 22 of R.A. No. 6657.

For abandonment to exist, the following requisites must concur: (1) a clear intent to
abandon; and (2) an external act showing such intent. The term is defined as the willful failure
of the ARB, together with his farm household, to cultivate, till, or develop his land to produce any
crop, or to use the land for any specific economic purpose continuously for a period of two
calendar years. It entails, among others, the relinquishment of possession of the lot for at least
two (2) calendar years and the failure to pay the amortization for the same period. What is
critical in abandonment is intent which must be shown to be deliberate and clear. The intent
must be established by the factual failure to work on the landholding absent any valid reason as
well as a clear intent, which is shown as a separate element.

In the present case, Lorenzo, in allowing and acquiescing to the execution of the lease
contract through his signature, with presumed full awareness of its implications, effectively
surrendered his rights over the disputed lot. His signing of the lease contract constitutes the
external act of abandonment.

We reiterate that abandonment is a ground for the cancellation of a CLT and the
forfeiture of the farmer-beneficiarys right to the landholding. Nevertheless, for a cancellation or
forfeiture to take place, the proper procedures must be observed and a final judgment rendered
declaring a cancellation or forfeiture.

ROBERN DEVELOPMENT CORPORATION, ET. AL. v. PEOPLES LANDLESS

ASSOCIATION REPRESENTED BY FLORIDA RAMOS, ET. AL.
G.R. No. 173622, March 11, 2013
J. Del Castillo

A contract of sale is perfected at the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price. Thus, for a contract of sale to be
valid, all of the following essential elements must concur: a) consent or meeting of the
minds; b) determinate subject matter; and c) price certain in money or its equivalent. In this
case, there is no perfected contract of sale between PELA and Al-Amanah for want of
consent and agreement on the price. After scrutinizing the testimonial and documentary
evidence in the records of the case, it is found that the parties did not agree on the price and
no consent was given, whether express or implied.

FACTS:

Al-Amanah, owner of the lot in this case, asked some of the members of PELA to
desist from building their houses on the lot and to vacate the same, unless they are
interested to buy it. The informal settlers thus expressed their interest to buy the lot, which
Al-Amanah turned down. The informal settlers together with other members comprising
PELA offered to purchase the lot. Al-Amanah disapproved PELAs offer. However, PELA
averred that it had already reached an agreement with Al-Amanah regarding the sale of the
subject lot based on their offered price.

Meanwhile, Al-Amanah accepted Roberns undated written offer. After Robern has
completely paid the purchase price, the title of the property was placed under its name. A
week later, PELA consigned P150,000 in the RTC of Davao City. Subsequently, PELA filed
a suit for Annulment and Cancellation of Void Deed of Sale against Al-Amanah and Robern,
insisting on a perfected contract of sale with Al-Amanah. The RTC dismissed PELAs
Complaint. It opined that the March 18, 1993 letter PELA has been relying upon as proof of
a perfected contract of sale was a mere offer which was already rejected. The CA reversed
the said decision.

ISSUE:

Whether there was a perfected contract of sale between PELA and Al-Amanah

RULING:

A contract of sale is perfected at the moment there is a meeting of minds upon the
thing which is the object of the contract and upon the price. Thus, for a contract of sale to be
valid, all of the following essential elements must concur: "a) consent or meeting of the
minds; b) determinate subject matter; and c) price certain in money or its equivalent." In the
case at bench, there is no controversy anent the determinate subject matter, i.e., the 2,000-
square meter lot. This leaves us to resolve whether there was a concurrence of the
remaining elements.

As for the price, fixing it can never be left to the decision of only one of the
contracting parties. "But a price fixed by one of the contracting parties, if accepted by the
other, gives rise to a perfected sale."

As regards consent, "when there is merely an offer by one party without acceptance
of the other, there is no contract." The decision to accept a bidders proposal must be
communicated to the bidder. However, a binding contract may exist between the parties
whose minds have met, although they did not affix their signatures to any written document,
 as acceptance may be expressed or implied. It "can be inferred from the contemporaneous
and subsequent acts of the contracting parties."5 Thus, we held:x x x The rule is that except
where a formal acceptance is so required, although the acceptance must be affirmatively
and clearly made and must be evidenced by some acts or conduct communicated to the
offeror, it may be made either in a formal or an informal manner, and may be shown by acts,
conduct, or words of the accepting party that clearly manifest a present intention or
determination to accept the offer to buy or sell. Thus, acceptance may be shown by the acts,
conduct, or words of a party recognizing the existence of the contract of sale.

There is no perfected contract of sale between PELA and Al-Amanah for want of
consent and agreement on the price. After scrutinizing the testimonial and documentary
evidence in the records of the case, we find no proof of a perfected contract of sale between
Al-Amanah and PELA. The parties did not agree on the price and no consent was given,
whether express or implied.

PILAR DEVELOPMENT CORPORATION v. RAMON DUMADAG, ET. AL.

G.R. No. 194336, March 11, 2013
J. Peralta

In the case of residential subdivisions, the allocation of the 3-meter strip along the
banks of a stream, like the Mahabang Ilog Creek in this case, is required and shall be
considered as forming part of the open space requirement pursuant to P.D. 1216 dated
October 14, 1977. Said law is explicit: open spaces are for public use and are, therefore,
beyond the commerce of men and that the areas reserved for parks, playgrounds and
recreational use shall be non-alienable public lands, and non-buildable. The parties have
no right or title over the property precisely because it is public land.

FACTS:

Petitioner filed a complaint for accion publiciana with damages against respondents
for allegedly building their shanties, without its knowledge and consent, in its property. It
claims that said parcel of land, which is duly registered in its name, was designated as an
open space of Pilar Village Subdivision intended for village recreational facilities and
amenities for subdivision residents. Respondents asserted that it is the local government,
not petitioner, which has jurisdiction and authority over them.

The trial court dismissed petitioners complaint, finding that the land being occupied
by respondents are situated on the sloping area going down and leading towards the
Mahabang Ilog Creek, and within the three-meter legal easement; thus, considered as
public property and part of public dominion under Article 502 of the New Civil Code (Code),
which could not be owned by petitioner. The CA sustained the dismissal of the case.

ISSUE:

Whether the petitioner retains ownership over the portion that is occupied by the respondent
within the 3-meter strip reserved for public easement

RULING:

We deny. An easement or servitude is a real right on another's property, corporeal

and immovable, whereby the owner of the latter must refrain from doing or allowing
somebody else to do or something to be done on his or her property, for the benefit of
another person or tenement; it is jus in re aliena, inseparable from the estate to which it
actively or passively belongs, indivisible, perpetual, and a continuing property right, unless
extinguished by causes provided by law.The Code defines easement as an encumbrance
imposed upon an immovable for the benefit of another immovable belonging to a different
owner or for the benefit of a community, or of one or more persons to whom the encumbered
estate does not belong. There are two kinds of easement according to source: by law or by
will of the owners the former are called legal and the latter voluntary easement. A legal
easement or compulsory easement, or an easement by necessity constituted by law has for
its object either public use or the interest of private persons.

While Article 630 of the Code provides for the general rule that "the owner of the
servient estate retains the ownership of the portion on which the easement is established,
and may use the same in such a manner as not to affect the exercise of the easement,"
Article 635 thereof is specific in saying that "all matters concerning easements established
for public or communal use shall be governed by the special laws and regulations relating
thereto, and, in the absence thereof, by the provisions of this Title Title VII on Easements or
Servitudes."

Certainly, in the case of residential subdivisions, the allocation of the 3-meter strip
along the banks of a stream, like the Mahabang Ilog Creek in this case, is required and shall
be considered as forming part of the open space requirement pursuant to P.D. 1216 dated
October 14, 1977. Said law is explicit: open spaces are "for public use and are, therefore,
beyond the commerce of men" and that "[the] areas reserved for parks, playgrounds and
recreational use shall be non-alienable public lands, and non-buildable."
 Petitioners right of ownership and possession has been limited by law with respect
to the 3-meter strip/zone along the banks of Mahabang Ilog Creek. Despite this, the Court
cannot agree with the trial courts opinion, as to which the CA did not pass upon, that
respondents have a better right to possess the subject portion of the land because they are
occupying an area reserved for public easement purposes. Similar to petitioner, respondents
have no right or title over it precisely because it is public land. Likewise, we repeatedly held
that squatters have no possessory rights over the land intruded upon. The length of time that
they may have physically occupied the land is immaterial; they are deemed to have entered
the same in bad faith, such that the nature of their possession is presumed to have retained
the same character throughout their occupancy.

RODOLFO G. CRUZ AND ESPERANZA IBIAS v. ATTY. DELFIN GRUSPE

G.R. No. 191431, March 13, 2013
J. Brion

Contracts are obligatory no matter what their forms may be, whenever the essential
requisites for their validity are present. In determining whether a document is an affidavit or
a contract, the Court looks beyond the title of the document, since the denomination or title
given by the parties in their document is not conclusive of the nature of its contents. In the
construction or interpretation of an instrument, the intention of the parties is primordial and is
to be pursued. If the terms of the document are clear and leave no doubt on the intention of
the contracting parties, the literal meaning of its stipulations shall control. If the words
appear to be contrary to the parties evident intention, the latter shall prevail over the former.
In this case, the terms of the Joint Affidavit of Undertaking executed by the parties readily
discloses that it contains stipulations characteristic of a contract.

FACTS:
 A mini bus owned and operated by Cruz and driven by one Arturo Davin collided with
the Toyota Corolla car of Gruspe; Gruspes car was a total wreck. Cruz, along with Leonardo
Q. Ibias went to Gruspes office and executed a Joint Affidavit of Undertaking promising
jointly and severally to replace the Gruspes damaged car in 20 days, of the same model
and of at least the same quality; or, alternatively, they would pay the cost of Gruspes car
with interest at 12% per month for any delayed payment until fully paid. When Cruz and
Leonardo failed to comply with their undertaking, Gruspe filed a complaint for collection of
sum of money against them. Cruz and Leonardo denied Gruspes allegation, claiming that
Gruspe, a lawyer, prepared the Joint Affidavit of Undertaking and forced them to affix their
signatures thereon, without explaining and informing them of its contents.

Leonardo died during the pendency of the case and was substituted by his widow,
Esperanza. Meanwhile, Gruspe sold the wrecked car for P130,000.00. The RTC ruled in
favor of Gruspe. The CA affirmed the decision, but reduced the interest rate to 12% per
annum pursuant to the Joint Affidavit of Undertaking.

ISSUE:

Whether the Joint Affidavit of Undertaking is a contract that can be the basis of an obligation
to pay a sum of money in favor of Gruspe

RULING:

Contracts are obligatory no matter what their forms may be, whenever the essential
requisites for their validity are present. In determining whether a document is an affidavit or
a contract, the Court looks beyond the title of the document, since the denomination or title
given by the parties in their document is not conclusive of the nature of its contents. In the
construction or interpretation of an instrument, the intention of the parties is primordial and is
to be pursued. If the terms of the document are clear and leave no doubt on the intention of
the contracting parties, the literal meaning of its stipulations shall control. If the words
appear to be contrary to the parties evident intention, the latter shall prevail over the former.

A simple reading of the terms of the Joint Affidavit of Undertaking readily discloses
that it contains stipulations characteristic of a contract. There is also no merit to the
argument of vitiated consent. An allegation of vitiated consent must be proven by
preponderance of evidence; Cruz and Leonardo failed to support their allegation.
 Although the undertaking in the affidavit appears to be onerous and lopsided, this
does not necessarily prove the alleged vitiation of consent. They, in fact, admitted the
genuineness and due execution of the Joint Affidavit and Undertaking when they said that
they signed the same to secure possession of their vehicle. If they truly believed that the
vehicle had been illegally impounded, they could have refused to sign the Joint Affidavit of
Undertaking and filed a complaint, but they did not. That the release of their mini bus was
conditioned on their signing the Joint Affidavit of Undertaking does not, by itself, indicate that
their consent was forced they may have given it grudgingly, but it is not indicative of a
vitiated consent that is a ground for the annulment of a contract.

Thus, on the issue of the validity and enforceability of the Joint Affidavit of
Undertaking, the CA did not commit any legal error that merits the reversal of the assailed
decision. "In order that the debtor may be in default, it is necessary that the following
requisites be present: (1) that the obligation be demandable and already liquidated; (2) that
the debtor delays performance; and (3) that the creditor requires the performance judicially
and extrajudicially." Default generally begins from the moment the creditor demands the
performance of the obligation. In this case, demand could be considered to have been made
upon the filing of the complaint on November 19, 1999, and it is only from this date that the
interest should be computed.

PURIFICACION ESTANISLAO AND RUPERTO ESTANISLAO v.

SPOUSES NORMA GUDITO AND DAMIANO GUDITO
G.R. No. 173166, March 13, 2013
J. Peralta

Petitioners have failed to prove that the transfer of the subject property was merely a
ploy designed to defeat and circumvent their right of first refusal under the law. The Deed of
Donation executed in favor of respondents was signed by the parties and their witnesses,
and was even notarized by a notary public. It is a settled rule in our jurisdiction that a
notarized document has in its favor the presumption of regularity and it carries the
evidentiary weight conferred upon it with respect to its due execution. It is admissible in
evidence and is entitled to full faith and credit upon its face. The donation made by the
Vasquez couple is a valid exercise of their right as owners of the subject property and
respondents are legally entitled to the said property as donees.

FACTS:

Respondents are the owners of a residential lot being leased by petitioners on a

month-to-month basis. Petitioners were the ones who built the house on the subject lot in
accordance with their lease agreement with Gaspar Vasquez. When Gaspar Vasquez died,
the portion of the lot on which petitioners house was erected was inherited by his son
Victorino Vasquez, married to Ester Vasquez (Vasquez couple). The Vasquez couple wanted
the Estanislao family and the other tenants to vacate the said property, but the tenants
refused. The Vasquez couple refused to accept their rental payments. Thus, petitioner
Purificacion Estanislao, with due notice to Ester Vasquez, deposited her rentals at Allied
Banking Corporation under a savings account in the name of Ester Vasquez as lessor. In the
interim, a Deed of Donation was executed by the Vasquez couple in favor of respondent
Norma Vasquez Gudito. Eventually, respondents notified petitioners to remove their house
and vacate the premises because of their urgent need of the residential lot. However,
petitioners failed to comply.

Respondents filed a Complaint for Unlawful Detainer/Ejectment against petitioners.

The MeTC of Manila ruled in favor of respondents, which was reversed by the RTC. The CA
reinstated the MeTCs decision.

ISSUE:

Whether the respondents are entitled to the physical or material possession of the property
in dispute

RULING:

In the case under review, respondents have overwhelmingly established their right of
possession by virtue of the Deed of Donation made in their favor. Moreover, they have
complied with the provisions of the law in order for them to legally eject the petitioners.

Here, it is undisputed that respondents do not own any other lot or real property
except the herein subject lot. They have urgent need of the same to build their own house to
be used as their residence. Also, petitioners had already been asked to leave the premises
as early as 1982, but sternly refused, hence, its former owners refused to accept their rental
payments. When the same property was donated to respondents, petitioners were allowed
to continue occupying the subject lot since respondents did not as yet have the money to
build a house of their own. But now that respondents have sufficient money to build their
own house, petitioners still rebuff respondents demand to vacate the premises and to
remove or demolish their house. Clearly, since respondents have complied with the
requirements of the law, their right to possess the subject property for their own use as
family residence cannot be denied.

It is also worthy to note that petitioners have failed to prove that the transfer of the
subject property was merely a ploy designed to defeat and circumvent their right of first
refusal under the law. As emphasized by the CA, the Deed of Donation executed in favor of
respondents was signed by the parties and their witnesses, and was even notarized by a
notary public.

Veritably, it is a settled rule in our jurisdiction that a notarized document has in its
favor the presumption of regularity and it carries the evidentiary weight conferred upon it
with respect to its due execution. It is admissible in evidence and is entitled to full faith and
credit upon its face.Having been prepared and acknowledged before a notary public, the
said Deed is vested with public interest, the sanctity of which deserves to be upheld unless
overwhelmed by clear and convincing evidence.Thus, the donation made by the Vasquez
couple is a valid exercise of their right as owners of the subject property and respondents
are legally entitled to the said property as donees.

Clearly, the circumstances required for the application of P.D. 1517 are lacking in this
case, since respondents had no intention of selling the subject property to third parties, but
seek the eviction of petitioners on the valid ground that they need the property for residential
purposes.

MARIA MENDOZA, ET. AL. v. JULIA POLICARPIO, ET. AL.

G.R. No. 176422, March 20, 2013
J. Reyes

Reserva troncal is a special rule designed primarily to assure the return of a

reservable property to the third degree relatives belonging to the line from which the
property originally came, and avoid its being dissipated into and by the relatives of the
inheriting ascendant. The reservor has the legal title and dominion to the reservable
property but subject to the resolutory condition that such title is extinguished if the reservor
predeceased the reservee. The reservor is a usufructuary of the reservable property. He
may alienate it subject to the reservation. The transferee gets the revocable and conditional
ownership of the reservor. The transferees rights are revoked upon the survival of the
reservees at the time of the death of the reservor but become indefeasible when the
reservees predecease the reservor.

FACTS:
 The disputed properties are three parcels of land presently in the name of
respondent Julia Delos Santos (respondent), with the third lot co-owned by Victoria
Pantaleon. Petitioners are grandchildren of Placido Mendoza (Placido) and Dominga
Mendoza (Dominga). Placido and Dominga had four children: Antonio, Exequiel, married to
Leonor, Apolonio and Valentin. Petitioners Maria, Deogracias, Dionisia, Adoracion, Marcela
and Ricardo are the children of Antonio. Petitioners Juliana, Fely, Mercedes, Elvira and
Fortunato, on the other hand, are Valentins children. Petitioners alleged that the properties
were part of Placido and Domingas properties that were subject of an oral partition and
subsequently adjudicated to Exequiel. After Exequiels death, it passed on to his spouse
Leonor and only daughter, Gregoria. After Leonors death, her share went to Gregoria. In
1992, Gregoria died intestate and without issue. They claimed that after Gregorias death,
respondent, who is Leonors sister, adjudicated unto herself all these properties as the sole
surviving heir of Leonor and Gregoria. Hence, petitioners claim that the properties should
have been reserved by respondent in their behalf and must now revert back to them,
applying Article 891 of the Civil Code on reserva troncal.

Respondent denies any obligation to reserve the properties as these did not originate
from petitioners familial line and were not originally owned by Placido and Dominga.
According to respondent, the properties were bought by Exequiel and Antonio from a certain
Alfonso Ramos in 1931. It appears, however, that it was only Exequiel who was in
possession of the properties. The RTC ruled in favor of the petitioners. The CA reversed
and set aside the RTC decision.

ISSUE:

Whether the subject properties are not reservable properties, coming as they do from the
family line of the petitioners Mendozas

RULING:

The principle of reserva troncal under Article 891 of the Civil Code provided that the
ascendant who inherits from his descendant any property which the latter may have
acquired by gratuitous title from another ascendant, or a brother or sister, is obliged to
reserve such property as he may have acquired by operation of law for the benefit of
relatives who are within the third degree and belong to the line from which said property
came.
 There are three (3) lines of transmission in reserva troncal. The first transmission is
by gratuitous title, whether by inheritance or donation, from an ascendant/brother/sister to a
descendant called the prepositus. The second transmission is by operation of law from the
prepositus to the other ascendant or reservor, also called the reservista. The third and last
transmission is from the reservista to the reservees or reservatarios who must be relatives
within the third degree from which the property came.

The lineal character of the reservable property is reckoned from the ascendant from
whom the prepositus received the property by gratuitous title. Based on the circumstances
of the present case, Article 891 on reserva troncal is not applicable.

It should be pointed out that the ownership of the properties should be reckoned only
from Exequiels as he is the ascendant from where the first transmission occurred, or from
whom Gregoria inherited the properties in dispute. The law does not go farther than such
ascendant/brother/sister in determining the lineal character of the property. It was also
immaterial for the CA to determine whether Exequiel predeceased Placido and Dominga or
whether Gregoria predeceased Exequiel. What is pertinent is that Exequiel owned the
properties and he is the ascendant from whom the properties in dispute originally came.
Gregoria, on the other hand, is the descendant who received the properties from Exequiel
by gratuitous title.

Article 891 provides that the person obliged to reserve the property should be an
ascendant (also known as the reservor/reservista) of the descendant/prepositus. Julia,
however, is not Gregorias ascendant; rather, she is Gregorias collateral relative. Article 964
of the Civil Code provides for the series of degrees among ascendants and descendants,
and those who are not ascendants and descendants but come from a common ancestor.

A collateral line is that constituted by the series of degrees among persons who are
not ascendants and descendants, but who come from a common ancestor. Gregorias
ascendants are her parents, Exequiel and Leonor, her grandparents, great-grandparents
and so on. On the other hand, Gregorias descendants, if she had one, would be her
children, grandchildren and great-grandchildren. Not being Gregorias ascendants, both
petitioners and Julia, therefore, are her collateral relatives. In determining the collateral line
of relationship, ascent is made to the common ancestor and then descent to the relative
from whom the computation is made. In the case of Julias collateral relationship with
Gregoria, ascent is to be made from Gregoria to her mother Leonor (one line/degree), then
to the common ancestor, that is, Julia and Leonors parents (second line/degree), and then
descent to Julia, her aunt (third line/degree). Thus, Julia is Gregorias collateral relative
within the third degree and not her ascendant.
 Moreover, petitioners cannot be considered reservees/reservatarios as they are not
relatives within the third degree of Gregoria from whom the properties came. The person
from whom the degree should be reckoned is the descendant/prepositusthe one at the
end of the line from which the property came and upon whom the property last revolved by
descent. It is Gregoria in this case. Petitioners are Gregorias fourth degree relatives, being
her first cousins. First cousins of the prepositus are fourth degree relatives and are not
reservees or reservatarios.

The conclusion, therefore, is that while it may appear that the properties are
reservable in character, petitioners cannot benefit from reserva troncal. First, because Julia,
who now holds the properties in dispute, is not the other ascendant within the purview of
Article 891 of the Civil Code and second, because petitioners are not Gregorias relatives
within the third degree. If at all, what should apply in the distribution of Gregorias estate are
Articles 1003 and 1009 of the Civil Code.

VEVENCIA ECHIN PABALAN, ET. AL. v. THE HEIRS OF SIMEON A.B. MAAMO, SR.
G.R. No. 174844, March 20, 2013
J. Perez

Under Articles 444 and 1942 of the old Civil Code, possession of real property is not
affected by acts of a possessory character which are merely tolerated by the possessor, or
which are due to his license. Granted that long, continued occupation, accompanied by acts of
a possessory character, affords some evidence that possession has been exerted in the
character of owner and under claim of right, this inference is unavailing to petitioners since
Simplecios continued possession of the property after his defeat in the ejectment suit was
clearly upon the tolerance of respondents predecessors-in-interest.

FACTS:

Onofre Palapo sold in favor of Placido Sy-Cansoy a parcel of land. Placido, in turn,
executed a notarized deed in Spanish, affirming sale of the same parcel in favor of Miguels
wife, Antonia Bayon. Faulting Simplecio Palapo with forcible entry into the property, Antonia,
represented by Simeon Maamo filed an ejectment complaint.

Simplecio avers as one of the heirs of Concepcion Palapo that he had been in legal
possession of the property for many years without once being disturbed by anyone. On the
strength of the aforesaid documents of transfer as well as the evidence of prior possession
adduced by Antonia, however, the trial court rendered a decsion ordering Simplecio to
vacate the parcel in litigation.
 The Maamos commenced the instant suit with the filing of their complaint for
recovery of real property and damages against the Palapos. Maamo maintained that their
parents later relented to Simplecios entreaty to be allowed to stay on the property as
administrator. The RTC declared defendants Palapo to be the legal owners and possessors
of the litigated portion. Having possessed the litigated portion in the concept of owner for
more than thirty years, defendants Palapo were also declared to have acquired the property
by means of prescription, without need of title or good faith. On appeal, the foregoing
Decision was reversed and set aside.

ISSUE:

Whether the petitioners have acquired the ownership of the property by their continued
possession of such since 1935

RULING:

Our perusal of the record shows that the CA correctly ruled that the land to which the
litigated portion pertains was purchased from Placido by respondents predecessor-in-
interest, Antonia, on 12 October 1912 and not on 29 October 1934, the date of the
document in which the former acknowledged the transaction in writing. Contrary to the
RTCs finding, therefore, Antonia already owned the property when petitioners own
predecessor-in-interest, Simplecio, was alleged to have forcibly entered into the property on
17 October 1934. Considering that Placido was, in turn, established to have purchased the
property from Onofre on 31 December 1910, it was from the latter date that respondents
rightfully traced their ownership and possession thereof. Reference to the aforesaid
transactions in the body of the 4 December 1934 ejectment complaint Antonia filed against
Simplecio before the Court of the Justice of the Peace of Liloan, Leyte also leave no doubt
that the same property was the subject matter of Civil Case No. 298.

To Our mind, the fact that the writ of execution issued in Civil Case No. 298 was
returned duly served also lends credence to respondents claim that Simplecios possession
of the property was upon Miguels tolerance. Since acts of a possessory character executed
due to license or by mere tolerance of the owner are inadequate for purposes of acquisitive
prescription, petitioners cannot claim to have acquired ownership of the property by virtue of
their possession thereof since 1935. Under Articles 444 and 1942 of the old Civil Code,
possession of real property is not affected by acts of a possessory character which are
merely tolerated by the possessor, or which are due to his license. Granted that long,
continued occupation, accompanied by acts of a possessory character, affords some
 evidence that possession has been exerted in the character of owner and under claim of
right, this inference is unavailing to petitioners since Simplecios continued possession of the
property after his defeat in the ejectment suit was clearly upon the tolerance of respondents
predecessors-in-interest.

Viewed in the light of the foregoing considerations, petitioners reliance on Sections

40 and 41 of Act No. 190 or the Code of Civil Procedure is, at the very least, misplaced.
Inasmuch as possession must be adverse, public, peaceful and uninterrupted in order to
consolidate prescription, it stands to reason that acts of a possessory character done by
virtue of a license or mere tolerance on the part of the real owner are not sufficient. It has
been ruled that this principle is applicable not only with respect to the prescription of the
dominium as a whole, but, to the prescription of right in rem. Considering that Article 1119 of
the present Civil Code also provided that acts of possessory character executed in virtue of
license or by mere tolerance of the owner shall not be available for the purposes of
possession, the error petitioners impute against the CA for applying the new Civil Code
provisions on prescription is more apparent than real. Then as now, possession must be en
concepto de dueo or adverse in order to constitute the foundation of a prescriptive right. If
not, such possessory acts, no matter how long, do not start the running of the period of
prescription.

GALILEO A. MAGLASANG v. NORTHWESTERN UNIVERSITY, INC.

G.R. No. 188986, March 20, 2013
CJ. Sereno

The court ruled that the power to rescind the obligations of the injured party is
implied in reciprocal obligations, such as in this case. On this score, the CA correctly applied
Article 1191, which provides thus: the power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with what is incumbent upon him.The
injured party may choose between the fulfillment and the rescission of the obligation, with
the payment of damages in either case. He may also seek rescission, even after he has
chosen fulfillment, if the latter should become impossible.The court shall decree the
rescission claimed, unless there be just cause authorizing the fixing of a period.

FACTS:

Respondent Northwestern University (Northwestern) engaged the services of

petitioner GL Enterprises to install a new IBS in Laoag City. Respondent required petitioner
to supply and install specific components in order to form the most modern IBS that would
be acceptable to CHED and would be compliant with the standards of the International
Maritime Organization (IMO). For this purpose, the parties executed two contracts. It was
stipulated that the contracts may be terminated if one party commits a substantial breach of
its undertaking. However, when they started installing the components, respondent halted
the operations. Northwestern explained that GL Enterprises violated the terms and
conditions of the contracts.

GL Enterprises filed a complaint for breach of contract. Northwestern asserted that

since the equipment delivered were not in accordance with the specifications provided by
the contracts, all succeeding works would be futile and would entail unnecessary expenses.
Hence, it prayed for the rescission of the contracts.

The RTC held both parties at fault. The trial court treated the contracts as impossible
of performance without the fault of either party or as having been dissolved by mutual
consent. Consequently, it ordered mutual restitution, which would thereby restore the parties
to their original positions. The CA declared the rescission of the contracts and proceeded to
affirm the RTCs order of mutual restitution.

ISSUE:

Whether rescission is proper, with claims of damages and attorneys fees by petitioner and
respondent, respectively

RULING:

The power to rescind the obligations of the injured party is implied in reciprocal
obligations, such as in this case. On this score, the CA correctly applied Article 1191, which
provides thus: the power to rescind obligations is implied in reciprocal ones, in case one of
the obligors should not comply with what is incumbent upon him.The injured party may
choose between the fulfillment and the rescission of the obligation, with the payment of
damages in either case. He may also seek rescission, even after he has chosen fulfillment,
if the latter should become impossible.The court shall decree the rescission claimed, unless
there be just cause authorizing the fixing of a period.

The two contracts require no less than substantial breach before they can be
rescinded. Since the contracts do not provide for a definition of substantial breach that
would terminate the rights and obligations of the parties, we apply the definition found in our
jurisprudence.
 It was thus incumbent upon GL Enterprises to supply the components that would
create an IBS that would effectively facilitate the learning of the students.However, GL
Enterprises miserably failed in meeting its responsibility. As contained in the findings of the
CA and the RTC, petitioner supplied substandard equipment when it delivered components
that (1) were old; (2) did not have instruction manuals and warranty certificates; (3) bore
indications of being reconditioned machines; and, all told, (4) might not have met the IMO
and CHED standards. Given that petitioner, without justification, supplied substandard
components for the new IBS, it is thus clear that its violation was not merely incidental, but
directly related to the essence of the agreement pertaining to the installation of an IBS
compliant with the CHED and IMO standards.

In contrast, Northwesterns breach, if any, was characterized by the appellate court

as slight or casual. By way of negative definition, a breach is considered casual if it does not
fundamentally defeat the object of the parties in entering into an agreement. Furthermore,
for there to be a breach to begin with, there must be a "failure, without legal excuse, to
perform any promise which forms the whole or part of the contract."

Here, as discussed, the stoppage of the installation was justified. The action of
Northwestern constituted a legal excuse to prevent the highly possible rejection of the IBS.
Hence, just as the CA concluded, we find that Northwestern exercised ordinary prudence to
avert a possible wastage of time, effort, resources and also of the P2.9 million representing
the value of the new IBS.

As between the parties, substantial breach can clearly be attributed to GL

Enterprises. For this reason, we concur in the result of the CA's Decision denying petitioner
actual damages in the form of lost earnings, as well as moral and exemplary damages.

With respect to attorney's fees, Article 2208 of the Civil Code allows the grant thereof
when the court deems it just and equitable that attorney's fees should be recovered. An
award of attorney's fees is proper if one was forced to litigate and incur expenses to protect
one's rights and interest by reason of an unjustified act or omission on the part of the party
from whom the award is sought.

SPOUSES LEHNER AND LUDY MARTIRES v. MENELIA CHUA

G.R. No. 174240, March 20, 2013
J. Peralta

One of the circumstances provided for under Article 1602 of the Civil Code, where a
contract shall be presumed to be an equitable mortgage, is "where it may be fairly inferred that
the real intention of the parties is that the transaction shall secure the payment of a debt or the
performance of any other obligation." In the instant case, it has been established that the intent
of both petitioners and respondent is that the subject property shall serve as security for the
latter's obligation to the former. The circumstances surrounding the execution of the disputed
Deed of Transfer would show that the said document was executed to circumvent the terms of
the original agreement and deprive respondent of her mortgaged property without the requisite
foreclosure.

Since the original transaction between the parties was a mortgage, the subsequent
assignment of ownership of the subject lots to petitioners without the benefit of foreclosure
proceedings, partakes of the nature of a pactum commissorium, as provided for under Article
2088 of the Civil Code.

FACTS:

Subject of the instant controversy are twenty-four memorial lots owned by

respondent, together with her mother, Florencia R. Calagos. Respondent borrowed from
petitioner spouses the amount of P150,000.00. The loan was secured by a real estate
mortgage over the abovementioned property. When respondent failed to fully settle her
obligation, ownership of the subject lots were transferred in the name of petitioners via a
Deed of Transfer, without foreclosure of the mortgage.

Respondent filed with the RTC of Quezon City a Complaint against petitioners
praying for the annulment of the contract of mortgage on the ground that the interest rates
imposed are unjust and exorbitant. Further, respondent averred that ownership of the
subject lots was transferred in the name of petitioners by virtue of a forged Deed of Transfer
and Affidavit of Warranty. The RTC ruled in favor of petitioners. The CA reversed it and
concluded that the Deed of Transfer which is in fact, an equitable mortgage. The CA held
that the true intention of respondent was merely to provide security for her loan and not to
transfer ownership of the property to petitioners.

ISSUE:

Whether the the subsequent assignment of ownership of the subject lots to petitioners
without the benefit of foreclosure proceedings is valid

RULING:
 An equitable mortgage has been defined as one which, although lacking in some
formality, or form or words, or other requisites demanded by a statute, nevertheless reveals
the intention of the parties to charge real property as security for a debt, there being no
impossibility nor anything contrary to law in this intent.

One of the circumstances provided for under Article 1602 of the Civil Code, where a
contract shall be presumed to be an equitable mortgage, is "where it may be fairly inferred
that the real intention of the parties is that the transaction shall secure the payment of a debt
or the performance of any other obligation." In the instant case, it has been established that
the intent of both petitioners and respondent is that the subject property shall serve as
security for the latter's obligation to the former. As correctly pointed out by the CA, the
circumstances surrounding the execution of the disputed Deed of Transfer would show that
the said document was executed to circumvent the terms of the original agreement and
deprive respondent of her mortgaged property without the requisite foreclosure.

Since the original transaction between the parties was a mortgage, the subsequent
assignment of ownership of the subject lots to petitioners without the benefit of foreclosure
proceedings, partakes of the nature of a pactum commissorium, as provided for under
Article 2088 of the Civil Code. Pactum commissorium is a stipulation empowering the
creditor to appropriate the thing given as guaranty for the fulfillment of the obligation in the
event the obligor fails to live up to his undertakings, without further formality, such as
foreclosure proceedings, and a public sale.

In the instant case, evidence points to the fact that the sale of the subject property,
as proven by the disputed Deed of Transfer, was simulated to cover up the automatic
transfer of ownership in petitioners' favor. While there was no stipulation in the mortgage
contract which provides for petitioners' automatic appropriation of the subject mortgaged
property in the event that respondent fails to pay her obligation, the subsequent acts of the
parties and the circumstances surrounding such acts point to no other conclusion than that
petitioners were empowered to acquire ownership of the disputed property without need of
any foreclosure.

Hence, courts are duty-bound to exercise caution in the interpretation and resolution
of contracts lest the lenders devour the borrowers like vultures do with their prey. Aside from
this aforementioned reason, the Court cannot fathom why respondent would agree to
transfer ownership of the subject property, whose value is much higher than her outstanding
obligation to petitioners. Considering that the disputed property was mortgaged to secure
the payment of her obligation, the most logical and practical thing that she could have done,
if she is unable to pay her debt, is to wait for it to be foreclosed. She stands to lose less of
the value of the subject property if the same is foreclosed, rather than if the title thereto is
directly transferred to petitioners. This is so because in foreclosure, unlike in the present
case where ownership of the property was assigned to petitioners, respondent can still claim
 the balance from the proceeds of the foreclosure sale, if there be any. In such a case, she
could still recover a portion of the value of the subject property rather than losing it
completely by assigning its ownership to petitioners.

APRIL 2013

SOLID BUILDERS INC. AND MEDINA FOODS INDUSTRIES INC.

v. CHINA BANKING CORPORATION
G.R. No. 179665. April 3, 2013
J. Leonardo-De Castro

Where the parties stipulated in their credit agreements, mortgage contracts and
promissory notes that the mortgagee is authorized to foreclose the mortgaged properties in
case of default by the mortgagors, the mortgagee has a clear right to foreclosure in case of
default, making the issuance of a Writ of Preliminary Injunction improper.

As SBI is not entitled to the issuance of a writ of preliminary injunction, so is MFII. The
accessory follows the principal. The accessory obligation of MFII as accommodation mortgagor
and surety is tied to SBIs principal obligation to CBC and arises only in the event of SBIs
default

FACTS:

China Banking Corporation (CBC) granted several loans to Solid Builders, Inc. (SBI),
which amounted to P139,999,234.34, exclusive of interests and other charges. To secure
the loans, Medina Foods Industries, Inc. (MFII) executed in CBCs favor several surety
agreements and contracts of real estate mortgage over parcels of land in the Loyola Grand
Villas in Quezon City and New Cubao Central in Cainta, Rizal. Subsequently, SBI proposed
to CBC a scheme through which SBI would sell the mortgaged properties and share the
proceeds with CBC on a 50-50 basis until such time that the whole obligation would be fully
paid. SBI also proposed that there be partial releases of the certificates of title of the
mortgaged properties without the burden of updating interests on all loans. Eventually, SBI
requested the restructuring of its loans, a reduction of interests and penalties and the
implementation of a dacion en pago of the New Cubao Central property.In response, CBC
suggested the updating of the obligation to avoid paying interests and charges.

The interest rates for the loans are actually rates booked since the new Promissory
Notes were effective. Any move of changing it or "re-pricing" the interest is only possible
every 90 days from the booking date, which represents the interest amortization payment
dates. No change or "re-pricing" in interest rates is possible since interest
payment/obligations have not yet been paid.
 Claiming that the interests, penalties and charges imposed by CBC were iniquitous
and unconscionable and to enjoin CBC from initiating foreclosure proceedings, SBI and MFII
filed a Complaint "To Compel Execution of Contract and for Performance and Damages,
With Prayer for Writ of Preliminary Injunction and Ex-Parte Temporary Restraining Order" in
the Regional Trial Court (RTC) of Pasig City.

CBC alleged that to implement the agreed restructuring of the loan, SBI executed ten
promissory notes stipulating that the interest rate shall be at 18.5% per annum. For its part,
MFII executed third party real estate mortgage over its properties in favor of CBC to secure
the payment of SBIs restructured loan. As SBI was delinquent in the payment of the
principal as well as the interest thereon, CBC demanded settlement of SBIs account.

Plaintiffs argued that the interest and penalties charged them in the subject letters
and attached statements of account increased during a seven-month period to an amount
they described as "onerous", "usurious" ad "greedy". Defendant, on the other hand, sought
to explain the increase in the interest as contained in the promissory notes which were
voluntarily and willingly signed by Soliven, therefore, binding on plaintiffs and that the
proposed plan of action is merely an oral contract still in the negotiation stage and not
binding. The trial court issued an Order granting the application of SBI and MFII for the
issuance of a writ of preliminary injunction. CA reversed. Hence, this petition.

ISSUE:

Whether or not plaintiffs have the right to ask for an injunctive writ in order to prevent
defendant bank from taking over their properties.

RULING:

The petition fails. A preliminary injunction is an order granted at any stage of an

action prior to judgment of final order, requiring a party, court, agency, or person to refrain
from a particular act or acts. It is a preservative remedy to ensure the protection of a partys
substantive rights or interests pending the final judgment in the principal action. A plea for an
injunctive writ lies upon the existence of a claimed emergency or extraordinary situation
which should be avoided for otherwise, the outcome of a litigation would be useless as far
as the party applying for the writ is concerned.
 A writ of preliminary injunction is an extraordinary event which must be granted only
in the face of actual and existing substantial rights. The duty of the court taking cognizance
of a prayer for a writ of preliminary injunction is to determine whether the requisites
necessary for the grant of an injunction are present in the case before it. In this connection,
a writ of preliminary injunction is issued to preserve the status quo ante, upon the applicants
showing of two important requisite conditions, namely: (1) the right to be protected exists
prima facie, and (2) the acts sought to be enjoined are violative of that right. It must be
proven that the violation sought to be prevented would cause an irreparable injury.

Here, SBI and MFII basically claim a right to have their mortgaged properties
shielded from foreclosure by CBC on the ground that the interest rate and penalty charges
imposed by CBC on the loans availed of by SBI are iniquitous and unconscionable. As
debtor-mortgagors, however, SBI and MFII do not have a right to prevent the creditor-
mortgagee CBC from foreclosing on the mortgaged properties simply on the basis of alleged
"usurious, exorbitant and confiscatory rate of interest."First, assuming that the interest rate
agreed upon by the parties is usurious, the nullity of the stipulation of usurious interest does
not affect the lenders right to recover the principal loan, nor affect the other terms thereof.
Thus, in a usurious loan with mortgage, the right to foreclose the mortgage subsists, and
this right can be exercised by the creditor upon failure by the debtor to pay the debt due.

Where the parties stipulated in their credit agreements, mortgage contracts and
promissory notes that the mortgagee is authorized to foreclose the mortgaged properties in
case of default by the mortgagors, the mortgagee has a clear right to foreclosure in case of
default, making the issuance of a Writ of Preliminary Injunction improper.

In addition, the default of SBI and MFII to pay the mortgage indebtedness
disqualifies them from availing of the equitable relief that is the injunctive writ. In particular,
SBI and MFII have stated in their Complaint that they have made various requests to CBC
for restructuring of the loan. The trial courts Order dated December 14, 2000 also found that
SBI wrote several letters to CBC "requesting, among others, for a reduction of interests and
penalties and restructuring of the loan." A debtors various and constant requests for
deferment of payment and restructuring of loan, without actually paying the amount due, are
clear indications that said debtor was unable to settle his obligation. SBIs default or failure
to settle its obligation is a breach of contractual obligation which tainted its hands and
disqualified it from availing of the equitable remedy of preliminary injunction.

As SBI is not entitled to the issuance of a writ of preliminary injunction, so is MFII.

The accessory follows the principal. The accessory obligation of MFII as accommodation
mortgagor and surety is tied to SBIs principal obligation to CBC and arises only in the event
of SBIs default.Thus, MFIIs interest in the issuance of the writ of preliminary injunction is
necessarily prejudiced by SBIs wrongful conduct and breach of contract.Even Article 1229
of the Civil Code, which SBI and MFII invoke, works against them. Under that provision, the
equitable reduction of the penalty stipulated by the parties in their contract will be based on
a finding by the court that such penalty is iniquitous or unconscionable. Here, the trial court
has not yet made a ruling as to whether the penalty agreed upon by CBC with SBI and MFII
is unconscionable. Such finding will be made by the trial court only after it has heard both
parties and weighed their respective evidence in light of all relevant circumstances. Hence,
for SBI and MFII to claim any right or benefit under that provision at this point is premature.

As no clear right that warrants the extraordinary protection of an injunctive writ has
been shown by SBI and MFII to exist in their favor, the first requirement for the grant of a
preliminary injunction has not been satisfied. In the absence of any requisite, and where
facts are shown to be wanting in bringing the matter within the conditions for its issuance,
the ancillary writ of injunction must be struck down for having been rendered in grave abuse
of discretion. Thus, the Court of Appeals did not err when it granted the petition for certiorari
of CBC and ordered the dissolution of the writ of preliminary injunction issued by the trial
court.

The provisional remedy of preliminary injunction may only be resorted to when there
is a pressing necessity to avoid injurious consequences which cannot be remedied under
any standard of compensation.

MOLDEX RAELTY INC. v. FLORA A. SABERON

G.R. No. 176289. April 8, 2013
J.Del Castillo

The lack of a license to sell or the failure on the part of a subdivision developer to
register the contract to sell or deed of conveyance with the Register of Deeds does not
result to the nullification or invalidation of the contract to sell it entered into with a buyer. The
contract to sell remains valid and subsisting. The intrinsic validity of the contract to sell is not
affected by the developers violation of Section 5 of PD 957.Nevertheless, the respondent in
this case is entitled to 50% refund under the Maceda Law.

FACTS:

Respondent Flora A. Saberon (Flora) interested in acquiring a 180-square meter lot

known as Lot 2, Block 1 of Metrogate Subdivision in Dasmarias, Cavite asked Moldex, the
developer, to reserve the lot for her as shown by a Reservation Application. Moldex sent
Flora notices reminding her to update her account. Upon inquiry, however, Flora was
shocked to find out that as of July 1996, she owed Moldex P247,969.10. In November 1996,
the amount ballooned to P491,265.91.Moldex thus suggested to Flora to execute a written
authorization for the sale of the subject lot to a new buyer and a written request for refund so
that she can get half of all payments she made. However, Flora never made a written
request for refund.

Moldex computed Floras unpaid account at P576,569.89. It then sent Flora a

Notarized Notice of Cancellation of Reservation Application and/or Contract to Sell.Flora, on
the other hand, filed before the Housing and Land Use Regulatory Board (HLURB) Regional
Field Office IV a Complaint for the annulment of the contract to sell, recovery of all her
payments with interests, damages, and the cancellation of Moldexs license to sell.Aside
from imputing bad faith on the part of Moldex in bloating her unpaid balance, Flora alleged
that the contract to sell between her and Moldex is void from its inception.

In its defense, Moldex averred that Flora was only able to pay P228,201.03 and
thereafter defaulted in her in payment from April 1994 to May 1997. Hence, Floras
subsequent payments were applied to her delinquencies. As regards the alleged bloating,
Moldex explained that the amount reflected in Floras Statement of Account included the
arrears and surcharges incurred due to her non-payment of the monthly installments.

The HLURB Arbiter declared as void the Contract to Sell entered into by the parties
because Moldex lacked the required license to sell at the time of the contracts perfection, in
violation of Section 5 of PD 957. The HLURB Board affirmed in toto the Arbiters decision.
The Office of the President affirmed the finding that the contract to sell was a nullity. Citing
Article 5 of the Civil Code, it held that acts executed against the provisions of mandatory or
prohibitory laws, like Section 5 of PD 957, are void. CA agreed with the findings of the
tribunals below. It ratiocinated that Moldexs non-observance of the mandatory provision of
Section 5 of PD 957 rendered the contract to sell void, notwithstanding Floras payments
and her knowledge that Moldex did not at that time have the requisite license to sell. It also
held that the subsequent issuance by the HLURB of a license to sell in Moldexs favor did
not cure the defect or result to the ratification of the contract. Hence, this petition.

ISSUE:

Whether the contract to sell entered with Flora remains valid and binding.

RULING:
 The court grants the Petition. The intrinsic validity of the contract to sell is not
affected by the developers violation of Section 5 of PD 957. A review of the relevant
provisions of P.D. 957 reveals that while the law penalizes the selling of subdivision lots and
condominium units without prior issuance of a Certificate of Registration and License to Sell
by the HLURB, it does not provide that the absence thereof will automatically render a
contract, otherwise validly entered, void. The penalty imposed by the decree is the general
penalty provided for the violation of any of its provisions. It is well-settled in this jurisdiction
that the clear language of the law shall prevail. This principle particularly enjoins strict
compliance with provisions of law which are penal in nature, or when a penalty is provided
for the violation thereof. With regard to P.D. 957, nothing therein provides for the nullification
of a contract to sell in the event that the seller, at the time the contract was entered into, did
not possess a certificate of registration and license to sell. Absent any specific sanction
pertaining to the violation of the questioned provisions (Secs. 4 and 5), the general penalties
provided in the law shall be applied. The general penalties for the violation of any provisions
in P.D. 957 are provided for in Sections 38 and 39. As can clearly be seen in the aforequoted
provisions, the same do not include the nullification of contracts that are otherwise validly
entered.

Moreover, Flora claims that the contract she entered into with Moldex is void
because of the latters failure to register the contract to sell/document of conveyance with
the Register of Deeds, in violation of Section 17of PD 957. However, just like in Section 5
which did not penalize the lack of a license to sell with the nullification of the contract,
Section 17 similarly did not mention that the developers or Moldexs failure to register the
contract to sell or deed of conveyance with the Register of Deeds resulted to the nullification
or invalidity of the said contract or deed. Extrapolating the ratio decidendi in Co Chien, thus,
non-registration of an instrument of conveyance will not affect the validity of a contract to
sell. It will remain valid and effective between the parties thereto as under PD 1529 or The
Property Registration Decree, registration merely serves as a constructive notice to the
whole world to bind third parties.

RESPONDENT IS NEVERTHELESS ENTITLED TO A 50% REFUND UNDER THE

MACEDA LAW.

Under the Maceda Law, the defaulting buyer who has paid at least two years of
installments has the right of either to avail of the grace period to pay or, the cash surrender
value of the payments. Down payments, deposits or options on the contract shall be
included in the computation of the total number of installment payments made.

HEIRS OF LAZARO GALLARDO, ET AL. v. PORFERIO SOLIMAN, ET AL.

G.R. No. 178952. April 10, 2013
J. Del Castillo
 When one party enters into a covenant with another, he must perform his obligations
with fealty and good faith. This becomes more imperative where such party has been given
a grant, such as land, under the land reform laws. While the tenant is emancipated from
bondage to the soil, the landowner is entitled to his just compensation for the deprivation of
his land.

FACTS:

Petitioners Prosperidad Panlaqui-Gallardo, Maria Carmen P. Gallardo-Nunag, Mario

Lazaro P. Gallardo, Joy Catalina P. Gallardo, Pinky Perpetua P. Gallardo and Lazaro P.
Gallardo, Jr. are the heirs of Lazaro Gallardo. Lazaro and Prosperidad are the registered
owners of a 4.3699-hectare parcel of land in BalingcanawayTarlac, Tarlac, covered. The
land was placed under the coverage of Operation Land Transfer pursuant to Presidential
Decree (PD) No. 27, and respondent Porferio Soliman was instituted as a qualified farmer
tenant-transferee thereof.

Petitioners filed a Complaint for collection of land amortizations, dispossession,

ejectment, and cancellation of Deed of Transfer and Emancipation Patent against
respondent Porferio before the Office of the Provincial Agrarian Reform Adjudicator
(PARAD), Diwa ng Tarlak, Tarlac City. The Complaint was later amended to include, as
additional respondents, Vivian Valete (Vivian), Antonio Soliman (Antonio), the Provincial
Agrarian Reform Office of Tarlac (Tarlac PARO), and the Register of Deeds of Tarlac.

It appears that a Kasunduan dated December 10, 1985 and a notarized Deed of
Transfer were executed by Lazaro and Porferio. Under said deeds, Porferio, as sole farmer-
beneficiary and in consideration for the transfer of the whole of the land in his favor, obliged
himself to pay the petitioners 999 cavans of palay in 15 equal yearly amortizations under the
governments Direct Payment Scheme pursuant to PD 27. It was agreed that an advance
payment of 66 cavans and 28 kilos, representing total lease payments made by Porferio to
Lazaro since 1973, shall be deducted from the 999 cavans, thus leaving an annual
amortization to be made by Porferio of about 62 cavans or 16 cavans per hectare per year.
However, Porferio paid only a total of 121.2 cavans or 480.9 cavans short of the total
amortizations due from 1986 to 1995, or 10 years into the deed. Notwithstanding the
demand of the petitioners, respondent failed to heed to their demand.

Respondents Porferio, Vivian and Antonio alleged that TCT No. 97603 has been
cancelled and new titles have been issued in their names, specifically TCT Nos. 21512,
21513, and 21514, pursuant to EP Nos. 437306 to 308. Thus, they argued that the PARAD
has no jurisdiction over the case and no authority to cancel such titles as the same pertain
to the regular courts. They further contended that between them and the petitioners, there is
no tenancy relationship.PARAD rendered its Decision declaring itself clothed with jurisdiction
over the controversy which partakes of an agrarian dispute. The PARAD also ruled that the
failure of Porferio, Vivian and Antonio to pay rentals/amortizations cannot be considered as
deliberate because they "labored under the honest belief that they are now vested with
absolute ownership" of the land; moreover they "cannot be expected to understand the legal
implications of the existing lien/encumbrance annotated on their respective titles entered in
1990 to insure payment of the land value" to petitioners. DARAB likewise upheld the validity
of the Emancipation Patents following the ratiocination of the PARAD that they have been
regularly issued. CA dismissed petitioners Petition for Review on the ground that the
verification and certification against forum shopping was signed by only four of the six
petitioners. Petitioners Mario Lazaro P. Gallardo and Lazaro P. Gallardo, Jr. did not sign, and
no special power of attorney to sign in their favor accompanied the Petition. Hence, the
present Petition.

Issues:

Whether the Court of Appeals erred in holding that the signingof the verification and
certification of non-forum shopping by only four of the six petitioners is insufficient to meet
the requirements of the rule.

Ruling:

The Court grants the Petition. The general rule is that the certificate of non-forum
shopping must be signed by all the plaintiffs in a case and the signature of only one of them
is insufficient. However, the Court has also stressed that the rules on forum shopping were
designed to promote and facilitate the orderly administration of justice and thus should not
be interpreted with such absolute literalness as to subvert its own ultimate and legitimate
objective. The rule of substantial compliance may be availed of with respect to the contents
of the certification. This is because the requirement of strict compliance with the provisions
regarding the certification of non-forum shopping merely underscores its mandatory nature
in that the certification cannot be altogether dispensed with or its requirements completely
disregarded. Thus, under justifiable circumstances, the Court has relaxed the rule requiring
the submission of such certification considering that although it is obligatory, it is not
jurisdictional.

In the instant case, petitioners share a common interest and defense inasmuch as
they collectively claim a right not to be dispossessed of the subject lot by virtue of their and
their deceased parents construction of a family home and occupation thereof for more than
10 years. The commonality of their stance to defend their alleged right over the controverted
lot thus gave petitioners x x x authority to inform the Court of Appeals in behalf of the other
petitioners that they have not commenced any action or claim involving the same issues in
another court or tribunal, and that there is no other pending action or claim in another court
or tribunal involving the same issues.

Here, all the petitioners are immediate relatives who share a common interest in the
land sought to be reconveyed and a common cause of action raising the same arguments in
support thereof. There was sufficient basis, therefore, for Domingo Hernandez, Jr. to speak
for and in behalf of his co-petitioners when he certified that they had not filed any action or
claim in another court or tribunal involving the same issue. Thus, the Verification/Certification
that Hernandez, Jr. executed constitutes substantial compliance under the Rules.

It was therefore error for the CA to have dismissed the Petition for Review.

Aside from the fact that petitioners substantially complied with the rules, we also find
it necessary for the CA to decide the case on the merits considering the vital issues
presented in the Petition. There is a need for the CA to resolve whether the Emancipation
Patents issued in the name of Vivian and Antonio were valid, considering that by the
evidence presented, they were never instituted as tenants to the land. Porferio appears to
be the sole tenant of the land, as can be seen from the Kasunduan and notarized Deed of
Transfer. It would be enlightening to know how Vivian and Antonio acquired patents and
certificates of title in their name notwithstanding the fact that they were never instituted as
tenants or beneficiaries of PD 27. This becomes more imperative considering that the
PARADs pronouncement that the issue regarding the cancellation of the Emancipation
Patents and certificates of title issued to Vivian and Antonio lies within the exclusive
jurisdiction of the DAR Secretary does not hold water. On the contrary, the DARAB has
exclusive jurisdiction over cases involving the cancellation of registered emancipation
patents. The DAR Secretary, on the other hand, has exclusive jurisdiction over the issuance,
recall or cancellation of Emancipation Patents/Certificates of Land Ownership Awards that
are not yet registered with the Register of Deeds.

Also, as the farmer tenant-transferee of the land under PD 27, Porferio is by law
required to make amortizations on the land until he completes payment of the fixed price
thereof. Under the Kasunduan and Deed of Transfer, he has to make good on his payments
to the landowners. If he fails to pay, cancellation of any Certificate of Land Transfer or
Emancipation Patent issued in his name is proper, pursuant to Section 2 of PD 816.
Considering the tenor of the law, the PARADs and DARABs pronouncement that
respondents cannot be faulted for they "labored under the honest belief that they were now
vested with absolute ownership" of the land, and that they "cannot be expected to
understand the legal implications of the existing lien/encumbrances annotated on their
respective titles entered into in 1990 to insure payment of the land value" to petitioners,
appears to be anchored not on legal ground. Besides, it is common maxim that "ignorance
of the law excuses no one from compliance therewith." Moreover, when one party enters
 into a covenant with another, he must perform his obligations with fealty and good faith. This
becomes more imperative where such party has been given a grant, such as land, under the
land reform laws. While the tenant is emancipated from bondage to the soil, the landowner
is entitled to his just compensation for the deprivation of his land.

The CA should likewise settle the issue as to whether Porferio may be said to have
deliberately refused to honor his obligation to pay the amortizations on the land, per the
Kasunduan and Deed of Transfer, considering that on record, written demand has been
served upon him, and despite such demand, Porferio failed to pay the amortizations.

Finally, an issue regarding interest arises, once it is resolved whether Porferio breached
his agreement with Lazaro under the Kasunduan and Deed of Transfer. The issue of
whether petitioners are entitled to recover interest on top of damages is a valid issue that
must be addressed. This could be done through a proper assessment of the evidence.

Royal Savings Bank, formerly Comsavings Bank, now GSIS

Family Bank v. Fernando Asia, Mike Latag, et al.
G.R. No. 183658. April 10, 2013
CJ. Sereno

The evident purpose underlying P.D. 385 is sufficiently served by allowing foreclosure
proceedings initiated by GFIs to continue until a judgment therein becomes final and executory,
without a restraining order, temporary or permanent injunction against it being issued. But if a
parcel of land is occupied by a party other than the judgment debtor, the proper procedure is for
the court to order a hearing to determine the nature of said adverse possession before it issues
a writ of possession.

One who claims to be the owner of a property possessed by another must bring the
appropriate judicial action for its physical recovery. The term "judicial process" could mean no
less than an ejectment suit or reinvindicatory action, in which the ownership claims of the
contending parties may be properly heard and adjudicated. The court finds that it was only
proper for the RTC to quash the Writ of Possession until a determination is made as to who,
between petitioner and respondents, has the better right to possess the property

Facts:

Paciencia Salita and her nephew, Franco Valenderia, borrowed the amount of 25,000
from petitioner. The latter loaned to them an additional 20,000 in May 1975. To secure the
payment of the aforementioned amounts loaned, Salita executed a Real Estate Mortgage over
her property. Notwithstanding demands, neither Salita nor Valenderia were able to pay off their
debts.
 As a result of their failure to settle their loans, petitioner instituted an extra-judicial
foreclosure proceeding against the Real Estate Mortgage. Pursuant to Act No. 3135, the
mortgaged property was sold at a public auction at which petitioner was the highest bidder.
Eventually, the redemption period expired. Both Salita and Valenderia failed to redeem the
foreclosed property. A new title covering the same property was issued in petitioners name.

Thereafter, Salita filed with the RTC a case for Reconveyance, Annulment of Title
and Damages against petitioner. She prayed for the nullification of foreclosure proceedings
and the reconveyance of the property. The RTC granted her prayer.CA reversed. Since
Salita did not appeal the CA ruling, it became final and executory. Petitioner insists that
because it is a government-owned financial institution, the general rules on real estate
mortgage found in Act 3135 do not apply to it. It prays that this Court rule that Presidential
Decree (P.D.) No. 385the law intended specifically to govern mortgage foreclosures
initiated by government-owned financial institutionsshould be applied to this
case.According to petitioner, when the RTC quashed the Writ of Possession the latter
violated Section 2 of P.D. 385. Thus, petitioner is now saying that, as a government financial
institution (GFI), it cannot be enjoined from foreclosing on its delinquent accounts in
observance of the mandate of P.D. 385.

ISSUE:

Whether the the general rules on real estate mortgage found in Act 3135 do not apply to a
government-owned financial institution.

RULING:

The Court is not persuaded. This Court had already declared in Philippine National
Bank v. Adil that once the property of a debtor is foreclosed and sold to a GFI, it would be
mandatory for the court to place the GFI in the possession and control of the property
pursuant to Section 4 of P.D. No. 385this rule should not be construed as absolute or
without exception.

The evident purpose underlying P.D. 385 is sufficiently served by allowing

foreclosure proceedings initiated by GFIs to continue until a judgment therein becomes final
and executory, without a restraining order, temporary or permanent injunction against it
being issued. But if a parcel of land is occupied by a party other than the judgment debtor,
 the proper procedure is for the court to order a hearing to determine the nature of said
adverse possession before it issues a writ of possession

This is because a third party, who is not privy to the debtor, is protected by the law.
Such third party may be ejected from the premises only after he has been given an
opportunity to be heard, to comply with the time-honored principle of due process.

In the same vein, under Section 33 of Rule 39 of the Rules on Civil Procedure, the
possession of a mortgaged property may be awarded to a purchaser in the extrajudicial
foreclosure, unless a third party is actually holding the property adversely vis--vis the
judgment debtor.

Notably, the Civil Code protects the actual possessor of a property, to wit:

Art. 433.Actual possession under claim of ownership raises a disputable presumption of

ownership. The true owner must resort to judicial process for the recovery of the property.

Under the aforequoted provision, one who claims to be the owner of a property
possessed by another must bring the appropriate judicial action for its physical recovery.
The term "judicial process" could mean no less than an ejectment suit or reivindicatory
action, in which the ownership claims of the contending parties may be properly heard and
adjudicated.We find that it was only proper for the RTC to quash the Writ of Possession until
a determination is made as to who, between petitioner and respondents, has the better right
to possess the property.

Sandoval Shipyards, Inc., and Rimport Industries, Inc., represented by Engr. Reynaldo G.
Importante v. Philippine Merchant Marine Academy (PMMA)
G.R. No. 188633. April 10, 2013
CJ. Sereno

Rescission entails a mutual restitution of benefits received. An injured party who has
chosen rescission is also entitled to the payment of damages. The factual circumstances,
however, rendered mutual restitution impossible. Both the RTC and the CA found that
petitioners delivered the lifeboats to Rosario. Although he was an engineer of respondent, it
never authorized him to receive the lifeboats from petitioners. Hence, as the delivery to
Rosario was invalid, it was as if respondent never received the lifeboat.
Facts:

Philippine Merchant Marine Academy (respondent) entered into a Ship Building

Contract with Sandoval Shipyards, Inc. through the latter's agent, Rimport Industries, Inc.
(petitioners). The contract states that petitioners would construct two units of 9.1 0-meter
lifeboats (lifeboats) to be used as training boats for the students of respondent. These
lifeboats should have 45-HP Gray Marine diesel engines and should be delivered within 45
working days from the date of the contract-signing and payment of the
mobilization/organization fund. Respondent, for its part, would pay petitioners P1,685,200 in
installments based on the progress accomplishment of the work as stated in the contract.

As agreed upon, respondent paid petitioners. Angel Rosario (Rosario), a faculty

member of respondent who claimed to have been verbally authorized by its president,
allegedly received the lifeboats at the Philippine Navy Wharf in good order and condition.

An inspection team had been sent to where the two lifeboats were docked to check
whether the plans and work specifications had been complied with. The team found that
petitioners had installed surplus Japan-made Isuzu C-240 diesel engines with plates marked
"Isuzu Marine diesel engine" glued to the top of the cylinder heads instead of the agreed
upon 45-HP Gray Marine diesel engines; that for the electric starting systems of the engines,
there was no manual which was necessary in case the systems failed; and that the
construction of the engine compartment was not in conformity with the approved plan. For
these reasons, respondents dean submitted a report and recommendation to the president
of petitioners stating the latters construction violations and asking for rectification.

Despite repeated demands from respondent, petitioners refused to deliver the

lifeboats that would comply with the agreed plans and specifications. As a result, respondent
filed a Complaint for Rescission of Contract with Damages against petitioners before the
RTC, and trial ensued.

The RTC held that although the caption of the Complaint was "Rescission of
Contract with Damages," the allegations in the body were for breach of contract. Petitioners
were found to have violated the contract by installing surplus diesel engines, contrary to the
agreed plan and specifications. The CA ruled that petitioners indeed committed a clear
substantial breach of the contract, which warranted its rescission. Rescission requires a
mutual restoration of benefits received. However, petitioners failed to deliver the lifeboats;
their alleged delivery to Rosario was invalid, as he was not a duly authorized representative
named in the contract. Hence, petitioners could not compel respondent to return something
it never had possession or custody of. Nonetheless, the CA deleted the award of attorneys
fees, as it found that the RTC failed to cite any specific factual basis to justify the award.
Hence, this petition.

Issue:

Whether the case is for rescission and not damages/breach of contract.

Ruling:

The Court denies the Petition.

Both the RTC and the CA found that petitioners violated the terms of the contract by
installing surplus diesel engines, contrary to the agreed plans and specifications, and by
failing to deliver the lifeboats within the agreed time. The breach was found to be substantial
and sufficient to warrant a rescission of the contract. Rescission entails a mutual restitution
of benefits received. An injured party who has chosen rescission is also entitled to the
payment of damages. The factual circumstances, however, rendered mutual restitution
impossible. Both the RTC and the CA found that petitioners delivered the lifeboats to
Rosario. Although he was an engineer of respondent, it never authorized him to receive the
lifeboats from petitioners. Hence, as the delivery to Rosario was invalid, it was as if
respondent never received the lifeboat. As it never received the object of the contract, it
cannot return the object. Unfortunately, the same thing cannot be said of petitioners. They
admit that they received a total amount of P1,516,680 from respondent as payment for the
construction of the lifeboats. For this reason, they should return the same amount to
respondent.

Although the RTC has legal basis to order the dismissal of Civil Case No. 13-2007,
the Court finds this sanction too severe to be imposed on the petitioner where the records of
the case is devoid of evidence of willful or flagrant disregard of the rules on mediation
proceedings. There is no clear demonstration that the absence of petitioner's representative
during mediation proceedings on March 1, 2008 was intended to perpetuate delay in the
litigation of the case. Neither is it indicative of lack of interest on the part of pe.titioner to
enter into a possible amicable settlement of the case.
Albert Chua, Jimmy Chua Chi Leong and Spouses Eduardo Solis and Gloria Victa v. B.E.
San Diego, Inc./Lorenzana Food Corporation Vs. B.E. San Diego, Inc.
G.R. No. 165863/G.R. No. 165875. April 10, 2013
J. Mendoza

Although Barrio Talaba and Barrio Niog are adjacent to each other, their respective
boundaries are clearly defined and delineated from the plans, maps and surveys on record. It
has not been shown, so far, that the said barrios were one and the same at some point in time.
Basic is the rule that a person, who claims that he has a better right to the property or prays for
its recovery, must prove his assertion by clear and convincing evidence and is duty bound to
identify sufficiently and satisfactorily the property. In the consolidated cases at bench, the
petitioners failed to discharge the burden of proving the superiority of their titles over those of
the respondent

FACTS:

The objects of the controversy are several portions of a large tract of land located in
the municipality of Bacoor, Cavite. The large tract of land is claimed to be originally owned
by one Juan Cuenca y Francisco, who had it surveyed way back in 1911. The land itself is
traversed by railroad tracks dividing the land into two (2) parcels. Juan Cuenca was issued
Original Certificate of Title No. 1020 covering the two parcels, designated as Lots 1 and 2.
Original Certificate of Title No. 1020 was later reconstituted as O.C.T. No. (1020) RO-9,
containing the technical descriptions of Lots 1 and 2.

Upon the demise of Juan Cuenca, an action for partition of his properties was filed by
Jose Cuenca, one of the surviving heirs. Lot 2-A of Juan Cuenca was later subdivided into
seven (7) lots in 1969. Of these seven subdivided parcels, one parcel (Lot 2-A-3) was
adjudicated to his heir, Pura Cuenca. It appears, however, that although the transfer
certificates of title issued to Pura and Ladislaw Cuenca stated that the lands covered therein
were originally registered as O.C.T. No. 1898, hence, referring to Lot 1 located at the
northern portion of Juan Cuenca's large tract of land, the technical description appearing in
said transfer certificates of title were taken or lifted from O.C.T. No. (1020) RO-9 covering
Lot 2, referring to the southern portion of the original tract of land.

All the lots were subdivided in part and common feature of all these succeeding titles
is the description that the property therein described is situated in the barrio of Talaba,
Bacoor, Cavite. Looking back, the records show that the original tract of land owned by Juan
Cuenca was bounded on the north by Calle Real de Talaba, on the south and southeast by
Sapa Niog, and on the west, by Calle Niog. The land was divided into two (2) by the railroad
tracks running from and going to east and west. The area located north of the railroad
tracks, bordering Calle Real de Talaba was later titled as O.C.T. (1898) 50-58, said parcel
straddling the barrios of Talaba, Zapote and Milicsi, as well as the poblacion proper.
 The controversy arose when herein appellees learned that the same parcels were
being claimed by herein appellant, B.E. San Diego, Incorporated. B.E. San Diego's claim
was based on two (2) titles registered in its name.

All parties resolutely seeking to enforce their respective claims over the subject
properties, three (3) civil suits for quieting of title were filed before the Regional Trial Court of
Bacoor, Cavite, Branch XIX. The first case, was filed by Lorenzana Food Corporation
versus B.E. San Diego, Incorporated, and other defendants. The second civil case, was filed
by Jimmy Chua Chi Leong and Albert Chua, also against B.E. San Diego, Inc., et al., as
defendants. The last case, was filed by B.E. San Diego, Inc., against spouses Eduardo and
Gloria Solis, as defendants.

B.E. San Diego countered that it and its predecessors-in-interest have been in the
open continuous and adverse possession in concept of owner of the subject property for
more than fifty (50) years prior to Lorenzana Food Corporation's purchase of the two (2)
parcels. It also argued that Original Certificate of Title No. 0-644 was not null and void since
it was issued upon application and proper proceedings in (LRC) Case No. N-557 and N-
30647, before the then Court of First Instance of Cavite.

B.E. San Diego claims it bought the subject property from Teodora Dominguez and
the absolute deed of sale was submitted in (LRC) Case No. N-577. It was further argued
that Lorenzana Food Corporation was erroneously claiming the subject property because
Lorenzana's titled property is described to be located in Barrio Talaba, while B.E. San
Diego's property is situated in Barrio Niog. Denying that Lorenzana Food Corporation's
predecessor-in-interest had been in possession of the subject property, B.E. San Diego
claimed that in 1979, by force, intimidation, threat, stealth, and strategy, Lorenzana Food
Corporation entered and occupied the subject property, despite barbed wire fencing with
warning signs, and security guards posted by B.E. San Diego.

RTC handed down its Joint in favor of LFC, Jimmy, Albert, and Spouses Solis, and
declared the titles of San Diego null and void. The rule is well-settled that a decree ordering
the registration of a particular parcel of land is a bar to a future application for registration
covering or affecting said lot. CA rendered its Decision, reversing the RTC Decision. The CA
ruled that the titles held by LFC, Jimmy, Albert, and Spouses Solis were defective while
those of San Diego showed no defects. Hence, it ordered the nullification and cancellation of
the TCTs and ordering Spouses Solis to vacate the subject premises. Hence this petition.
 After considering all the evidence presented by the parties, the CA rendered another
decision again in favor of San Diego. At any rate, petitioner LFC argues that it is an innocent
purchaser for value entitled to protection under the law considering that the subject
properties were purchased with the approval of the court in the course of the probate
proceedings and were not in possession of anyone.

ISSUE:

Whether the respondents claim over the disputed properties prevails over those of the
petitioners.

RULING:

A person, who seeks registration of title to a piece of land, who claims that he has a
better right to the property, or who prays for its recovery, must prove his assertion by clear
and convincing evidence, and is duty bound to identify sufficiently and satisfactorily the
property. After cautiously going over the voluminous records of these consolidated cases
and applying the pertinent law and jurisprudence on the matter, the Court holds that the
respondents claim over the disputed properties prevails over those of the petitioners.

The consolidated records reveal that the subject properties undeniably come from a
large land area consisting of 271,264 square meters (PSU-2075) located in the Municipality
of Bacoor, Cavite, which was originally owned by and registered in the name of Juan. PSU-
2075 was traversed by a railroad track dividing it into two lots: Lot 1 covering the northern
portion and Lot 2 covering the southern portion.

Petitioners failed to prove the superiority of their titles over those of the respondent.
In the consolidated cases at bench, the petitioners failed to discharge the burden of proving
the superiority of their titles over those of the respondent. Contrary to the petitioners
arguments, the evidence on record unmistakably show that their titles have common
defects. These are 1] the petitioners titles are annotated with the inscription that the land
described therein was originally registered under OCT No. 1898, but the technical
descriptions found therein were lifted from OCT No. (1020) RO-9; and 2) the petitioners
titles specifically state that the subject properties are located in the Barrio of Talaba, Bacoor,
Cavite, when the properties described therein are actually situated in the Barrio of Niog,
which is a separate and distinct locality.
 Clearly, the mismatch in the technical descriptions and the recital of facts in the
certification on the face of the petitioners titles creates a serious cloud of doubt on the
integrity of the said titles. The obvious disparities make it difficult to exactly determine the
subject parcels of land covered by the said titles in the sense that the technical descriptions
therein referred to the area south of Juans tract of land while the recital of facts in the
certification therein refers to the area north of Juans tract of land. It must be stressed that
the northern and southern portions of Juans tract of land have separate titles, OCT No.
1898 for the northern portion and OCT No. 1020 for the southern portion. In effect, the
petitioners alleged ownership rights over the subject properties have not been satisfactorily
and conclusively proven due to such inconsistencies.

The apparent defects in the certificates of title prove that the petitioners are claiming
the wrong property, as evidenced by the Certification of the Office of the Municipal Planning
and Development Coordinator, Bacoor, Cavite. In other words, the petitioners are claiming
ownership of parcels of land not in the location stated in their respective titles.

The properties, presently in possession of San Diego, are located in Barrio Niog, as
described in their titles. Although Barrio Talaba and Barrio Niog are adjacent to each other,
their respective boundaries are clearly defined and delineated from the plans, maps and
surveys on record. It has not been shown, so far, that the said barrios were one and the
same at some point in time. Basic is the rule that a person, who claims that he has a better
right to the property or prays for its recovery, must prove his assertion by clear and
convincing evidence and is duty bound to identify sufficiently and satisfactorily the property.

International Hotel Corporation v. Francisco B. Joaquin, Jr., et al.

G.R. No. 158361. April 10, 2013

J. Bersamin

To avoid unjust enrichment to a party from resulting out of a substantially performed

contract, the principle of quantum meruit may be used to determine his compensation in the
absence of a written agreement for that purpose. The principle of quantum meruit justifies
the payment of the reasonable value of the services rendered by him.

Considering that the agreement between the parties was not circumscribed by a
definite period, its termination was subject to a condition the happening of a future and
uncertain event. The prevailing rule in conditional obligations is that the acquisition of rights,
as well as the extinguishment or loss of those already acquired, shall depend upon the
happening of the event that constitutes the condition. Furthermore, quantum meruit should
apply in the absence of an express agreement on the fees

FACTS:

Respondent Francisco B. Joaquin, Jr. submitted a proposal to the Board of Directors

of the International Hotel Corporation (IHC) for him to render technical assistance in
securing a foreign loan for the construction of a hotel, to be guaranteed by the Development
Bank of the Philippines (DBP).The proposal encompassed nine phases. The IHC Board of
Directors approved phase one to phase six of the proposal for the project. IHC applied with
DBP for a foreign loan guaranty. DBP processed the application, and approved it.

Negotiations with Materials Handling Corporation and, later on, with its principal,
Barnes International (Barnes), ensued. While the negotiations with Barnes were ongoing,
Joaquin and Jose Valero, the Executive Director of IHC, met with another financier, the
Weston International Corporation (Weston), to explore possible financing.1When Barnes
failed to deliver the needed loan, IHC informed DBP that it would submit Weston for DBPs
consideration. As a result, DBP cancelled its previous guaranty.

IHC entered into an agreement with Weston, and communicated this development to DBP.
However, DBP denied the application for guaranty for failure to comply with the conditions.

Due to Joaquins failure to secure the needed loan, IHC, through its President
Bautista, canceled the 17,000 shares of stock previously issued to Joaquin and Suarez as
payment for their services. The latter requested a reconsideration of the cancellation, but
their request was rejected.

Consequently, Joaquin and Suarez commenced this action for specific performance,
annulment, damages and injunction by a complaint in the Regional Trial Court in Manila
(RTC), impleading IHC and the members of its Board of Directors. The complaint alleged
that the cancellation of the shares had been illegal, and had deprived them of their right to
participate in the meetings and elections held by IHC; that Barnes had been recommended
by IHC President Bautista, not by Joaquin; that they had failed to meet their obligation
because President Bautista and his son had intervened and negotiated with Barnes instead
of Weston; that DBP had canceled the guaranty because Barnes had failed to release the
loan; and that IHC had agreed to compensate their services with 17,000 shares of the
common stock plus cash of P1,000,000.00.
 RTC held IHC liable pursuant to the second paragraph of Article 1284 of the Civil
Code, it found that Joaquin and Suarez had failed to meet their obligations when IHC had
chosen to negotiate with Barnes rather than with Weston, the financier that Joaquin had
recommended; and that the cancellation of the shares of stock had been proper under
Section 68 of the Corporation Code, which allowed such transfer of shares to compensate
only past services, not future ones. CA concurred with the RTC, upholding IHCs liability
under Article 1186 of the Civil Code. It ruled that in the context of Article 1234 of the Civil
Code, Joaquin had substantially performed his obligations and had become entitled to be
paid for his services; and that the issuance of the shares of stock was ultra vires for having
been issued as consideration for future services.

ISSUE:

Whether Article 1186 and Article 1234 of the Civil Code can be the source of IHCs obligation
to pay respondents.

RULING:

Article 1186 and Article 1234 of the Civil Code cannot be the source of IHCs
obligation to pay respondents IHC argues that it should not be held liable because: (a) it was
Joaquin who had recommended Barnes; and (b) IHCs negotiation with Barnes had been
neither intentional nor willfully intended to prevent Joaquin from complying with his
obligations.

IHCs argument is meritorious.Article 1186 of the Civil Code reads: Article 1186. The
condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment. This
provision refers to the constructive fulfillment of a suspensive condition, whose application
calls for two requisites, namely: (a) the intent of the obligor to prevent the fulfillment of the
condition, and (b) the actual prevention of the fulfillment. Mere intention of the debtor to
prevent the happening of the condition, or to place ineffective obstacles to its compliance,
without actually preventing the fulfillment, is insufficient.

It is we ll to note that Article 1234 applies only when an obligor admits breaching
the contract after honestly and faithfully performing all the material elements thereof except
for some technical aspects that cause no serious harm to the obligee. IHC correctly submits
that the provision refers to an omission or deviation that is slight, or technical and
unimportant, and does not affect the real purpose of the contract.

The primary objective of the parties in entering into the services agreement was to
obtain a foreign loan to finance the construction of IHCs hotel project. This objective could
be inferred from IHCs approval of phase 1 to phase 6 of the proposal. Phase 1 and phase
2, respectively the preparation of a new project study and the settlement of the unregistered
mortgage, would pave the way for Joaquin and Suarez to render assistance to IHC in
applying for the DBP guaranty and thereafter to look for an able and willing foreign financial
institution acceptable to DBP. All the steps that Joaquin and Suarez undertook to accomplish
had a single objective to secure a loan to fund the construction and eventual operations of
the hotel of IHC. In that regard, Joaquin himself admitted that his assistance was specifically
sought to seek financing for IHCs hotel project.

Needless to say, finding the foreign financier that DBP would guarantee was the
essence of the parties contract, so that the failure to completely satisfy such obligation
could not be characterized as slight and unimportant as to have resulted in Joaquin and
Suarezs substantial performance that consequentially benefitted IHC. Whatever benefits
IHC gained from their services could only be minimal, and were even probably outweighed
by whatever losses IHC suffered from the delayed construction of its hotel. Consequently,
Article 1234 did not apply.

IHC is nonetheless liable to pay under the rule on constructive fulfillment of a mixed
conditional obligation

Notwithstanding the inapplicability of Article 1186 and Article 1234 of the Civil Code,
IHC was liable based on the nature of the obligation.

Considering that the agreement between the parties was not circumscribed by a definite
period, its termination was subject to a condition the happening of a future and uncertain
event. The prevailing rule in conditional obligations is that the acquisition of rights, as well as
the extinguishment or loss of those already acquired, shall depend upon the happening of
the event that constitutes the condition. Furthermore, quantum meruit should apply in the
absence of an express agreement on the fees
 Spouses Ignacio F. Juico and Alice P. Juico v. China Banking Corporation
G.R. No. 187678 . April 10, 2013
J. Villarama

The binding effect of any agreement between parties to a contract is premised on two
settled principles: (1) that any obligation arising from contract has the force of law between the
parties; and (2) that there must be mutuality between the parties based on their essential
equality. Any contract which appears to be heavily weighed in favor of one of the parties so as
to lead to an unconscionable result is void. Any stipulation regarding the validity or compliance
of the contract which is left solely to the will of one of the parties, is likewise, invalid.

Escalation clauses are not basically wrong or legally objectionable as long as they are
not solely potestative but based on reasonable and valid grounds. Obviously, the fluctuation in
the market rates is beyond the control of private respondent.

FACTS:

Spouses Ignacio F. Juico and Alice P. Juico (petitioners) obtained a loan from China
Banking Corporation (respondent) The loan was secured by a Real Estate Mortgage (REM)
over petitioners property located at 49 Greensville St., White Plains, Quezon City. When
petitioners failed to pay the monthly amortizations due, respondent demanded the full
payment of the outstanding balance with accrued monthly interests. On September 5, 2000,
petitioners received respondents last demand letter dated August 29, 2000.

The petitioners also received a demand letter dated May 2, 2001 from respondent for
the payment of P8,901,776.63, the amount of deficiency after applying the proceeds of the
foreclosure sale to the mortgage debt. As its demand remained unheeded, respondent filed
a collection suit in the trial court. Petitioners admitted the existence of the debt but
interposed, by way of special and affirmative defense, that the complaint states no cause of
action considering that the principal of the loan was already paid when the mortgaged
property was extrajudicially foreclosed and sold for P10,300,000. The RTC ruled in favor of
respondent. It ruled that the amount realized at the auction sale was applied to the interest,
conformably with Article 1253 of the Civil Code which provides that if the debt produces
interest, payment of the principal shall not be deemed to have been made until the interests
have been covered. This being the case, petitioners principal obligation subsists but at a
reduced amount of P8,901,776.66. CA, the latter affirmed the trial courts decision. Hence,
this petition.

ISSUE:
Whether the interest rates imposed upon them by respondent are valid.

RULING:

The appeal is partly meritorious. The principle of mutuality of contracts is expressed

in Article 1308 of the Civil Code, which provides:

Article 1308. The contract must bind both contracting parties; its validity or
compliance cannot be left to the will of one of them. Article 1956 of the Civil Code
likewise ordains that "no interest shall be due unless it has been expressly
stipulated in writing."

The binding effect of any agreement between parties to a contract is premised on

two settled principles: (1) that any obligation arising from contract has the force of law
between the parties; and (2) that there must be mutuality between the parties based on their
essential equality. Any contract which appears to be heavily weighed in favor of one of the
parties so as to lead to an unconscionable result is void. Any stipulation regarding the
validity or compliance of the contract which is left solely to the will of one of the parties, is
likewise, invalid.

Escalation clauses refer to stipulations allowing an increase in the interest rate

agreed upon by the contracting parties. This Court has long recognized that there is nothing
inherently wrong with escalation clauses which are valid stipulations in commercial contracts
to maintain fiscal stability and to retain the value of money in long term contracts. Hence,
such stipulations are not void per se.

Nevertheless, an escalation clause "which grants the creditor an unbridled right to

adjust the interest independently and upwardly, completely depriving the debtor of the right
to assent to an important modification in the agreement" is void. A stipulation of such nature
violates the principle of mutuality of contracts. Thus, this Court has previously nullified the
unilateral determination and imposition by creditor banks of increases in the rate of interest
provided in loan contracts.
 Escalation clauses are not basically wrong or legally objectionable as long as they
are not solely potestative but based on reasonable and valid grounds. Obviously, the
fluctuation in the market rates is beyond the control of private respondent.

In interpreting a contract, its provisions should not be read in isolation but in relation
to each other and in their entirety so as to render them effective, having in mind the intention
of the parties and the purpose to be achieved. The various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that sense which may result from all of
them taken jointly.

There is no indication that petitioners were coerced into agreeing with the foregoing
provisions of the promissory notes. In fact, petitioner Ignacio, a physician engaged in the
medical supply business, admitted having understood his obligations before signing them. At
no time did petitioners protest the new rates imposed on their loan even when their property
was foreclosed by respondent.

This notwithstanding, we hold that the escalation clause is still void because it grants
respondent the power to impose an increased rate of interest without a written notice to
petitioners and their written consent. Respondents monthly telephone calls to petitioners
advising them of the prevailing interest rates would not suffice. A detailed billing statement
based on the new imposed interest with corresponding computation of the total debt should
have been provided by the respondent to enable petitioners to make an informed decision.
An appropriate form must also be signed by the petitioners to indicate their conformity to the
new rates. Compliance with these requisites is essential to preserve the mutuality of
contracts. For indeed, one-sided impositions do not have the force of law between the
parties, because such impositions are not based on the parties essential equality.

Modifications in the rate of interest for loans pursuant to an escalation clause must be
the result of an agreement between the parties. Unless such important change in the
contract terms is mutually agreed upon, it has no binding effect. In the absence of consent
on the part of the petitioners to the modifications in the interest rates, the adjusted rates
cannot bind them. Hence, we consider as invalid the interest rates in excess of 15%, the
rate charged for the first year.

Spouses Oscar and Thelma Cacayorin v. Armed Forces

and Police Mutual Benefit Association, Inc.
G.R. No. 171298. April 15, 2013
J. Del Castillo
 Consignation is necessarily judicial. Article 1258 of the Civil Code specifically provides
that consignation shall be made by depositing the thing or things due at the disposal of judicial
authority. The said provision clearly precludes consignation in venues other than the courts.

The instant case presents a unique situation where the buyer, through no fault of his
own, was able to obtain title to real property in his name even before he could pay the purchase
price in full. There appears to be no vitiated consent, nor is there any other impediment to the
consummation of their agreement, just as it appears that it would be to the best interests of all
parties to the sale that it be once and for all completed and terminated.

FACTS:

Petitioner Oscar Cacayorin (Oscar) is a member of respondent Armed Forces and Police
Mutual Benefit Association, Inc. (AFPMBAI), a mutual benefit association duly organized and
existing under Philippine laws and engaged in the business of developing low-cost housing
projects for personnel of the Armed Forces of the Philippines, Philippine National Police, Bureau
of Fire Protection, Bureau of Jail Management and Penology, and Philippine Coast Guard. He
filed an application through a loan facility.

Oscar and his wife and co-petitioner herein, Thelma, on one hand, and the Rural Bank of
San Teodoro on the other, executed a Loan and Mortgage Agreement with the former as
borrowers and the Rural Bank as lender, under the auspices of Pag-IBIG or Home Development
Mutual Funds Home Financing Program.

The Rural Bank issued a letter of guaranty informing AFPMBAI that the proceeds of
petitioners approved loan in the amount of P77,418.00 shall be released to AFPMBAI after title
to the property is transferred in petitioners name and after the registration and annotation of the
parties mortgage agreement. On the basis of the Rural Banks letter of guaranty, AFPMBAI
executed in petitioners favor a Deed of Absolute Sale, and a new title Transfer Certificate of
Title No. 370178 (TCT No. 37017) was issued in their name, with the corresponding
annotation of their mortgage agreement with the Rural Bank, under Entry No. 3364.

Unfortunately, the Pag-IBIG loan facility did not push through and the Rural Bank closed
and was placed under receivership by the Philippine Deposit Insurance Corporation (PDIC).
Meanwhile, AFPMBAI somehow was able to take possession of petitioners loan documents and
TCT No. 37017, while petitioners were unable to pay the loan/consideration for the property.

AFPMBAI made oral and written demands for petitioners to pay the loan/ consideration
for the property. Petitioners filed a Complaint for consignation of loan payment, recovery of title
and cancellation of mortgage annotation against AFPMBAI, PDIC and the Register of Deeds of
Puerto Princesa City. Petitioners alleged in their Complaint that as a result of the Rural Banks
closure and PDICs claim that their loan papers could not be located, they were left in a
quandary as to where they should tender full payment of the loan and how to secure
cancellation of the mortgage annotation on TCT No. 37017.

AFPMBAI filed a Motion to Dismiss claiming that petitioners Complaint falls within the
jurisdiction of the Housing and Land Use Regulatory Board (HLURB) and not the Puerto
Princesa RTC, as it was filed by petitioners in their capacity as buyers of a subdivision lot and it
prays for specific performance of contractual and legal obligations decreed under Presidential
Decree No. 95714 (PD 957). It added that since no prior valid tender of payment was made by
petitioners, the consignation case was fatally defective and susceptible to dismissal.

The trial court denied AFPMBAIs Motion to Dismiss, declaring that since title has been
transferred in the name of petitioners and the action involves consignation of loan payments, it
possessed jurisdiction to continue with the case. It further held that the only remaining unsettled
transaction is between petitioners and PDIC as the appointed receiver of the Rural Bank. CA
reversed. Hence, this petition.

ISSUE:
Whether the Complaint in Civil Case No. 3812 makes out of consignation and falls within the
exclusive jurisdiction of the RTC?

RULING:

The Court grants the Petition. The Complaint makes out a case for consignation.

The settled principle is that "the allegations of the Complaint determine the nature of the
action and consequently the jurisdiction of the courts. This rule applies whether or not the
plaintiff is entitled to recover upon all or some of the claims asserted therein as this is a matter
that can be resolved only after and as a result of the trial.

Under Article 1256 of the Civil Code, the debtor shall be released from responsibility by
the consignation of the thing or sum due, without need of prior tender of payment, when the
creditor is absent or unknown, or when he is incapacitated to receive the payment at the time it
is due, or when two or more persons claim the same right to collect, or when the title to the
obligation has been lost. Applying Article 1256 to the petitioners case as shaped by the
allegations in their Complaint, the Court finds that a case for consignation has been made out,
as it now appears that there are two entities which petitioners must deal with in order to fully
secure their title to the property: 1) the Rural Bank (through PDIC), which is the apparent
creditor under the July 4, 1994 Loan and Mortgage Agreement; and 2) AFPMBAI, which is
currently in possession of the loan documents and the certificate of title, and the one making
demands upon petitioners to pay. Clearly, the allegations in the Complaint present a situation
where the creditor is unknown, or that two or more entities appear to possess the same right to
collect from petitioners. Whatever transpired between the Rural Bank or PDIC and AFPMBAI in
respect of petitioners loan account, if any, such that AFPMBAI came into possession of the loan
documents and TCT No. 37017, it appears that petitioners were not informed thereof, nor made
privy thereto.

Indeed, the instant case presents a unique situation where the buyer, through no fault of
his own, was able to obtain title to real property in his name even before he could pay the
purchase price in full. There appears to be no vitiated consent, nor is there any other
impediment to the consummation of their agreement, just as it appears that it would be to the
best interests of all parties to the sale that it be once and for all completed and terminated. For
this reason, Civil Case No. 3812 should at this juncture be allowed to proceed.

Finally, the lack of prior tender of payment by the petitioners is not fatal to their
consignation case. They filed the case for the exact reason that they were at a loss as to which
between the two the Rural Bank or AFPMBAI was entitled to such a tender of payment.
Besides, as earlier stated, Article 1256 authorizes consignation alone, without need of prior
tender of payment, where the ground for consignation is that the creditor is unknown, or does
not appear at the place of payment; or is incapacitated to receive the payment at the time it is
due; or when, without just cause, he refuses to give a receipt; or when two or more persons
claim the same right to collect; or when the title of the obligation has been lost.

Consignation is necessarily judicial; hence, jurisdiction lies with the RTC, not with the
HLURB. On the question of jurisdiction, petitioners case should be tried in the Puerto Princesa
RTC, and not the HLURB. Consignation is necessarily judicial,26 as the Civil Code itself
provides that consignation shall be made by depositing the thing or things due at the disposal of
judicial authority. The consignation having been made, the interested parties shall also be
notified thereof. The above provision clearly precludes consignation in venues other than the
courts. Elsewhere, what may be made is a valid tender of payment, but not consignation. The
two, however, are to be distinguished.

Ricardo Chu, Jr. and Dy Kok Eng v. Melania Caparas and Spouses Ruel and
Hermenegilda Perez
G.R. No. 175428. April 15, 2013

An action for reconveyance is a legal and equitable remedy that seeks to transfer or
reconvey property, wrongfully registered in another persons name, to its rightful owner. To
warrant reconveyance of the land, the plaintiff must allege and prove, among others, ownership
of the land in dispute and the defendants erroneous, fraudulent or wrongful registration of the
property. In the present petition, the petitioners failed to prove that the parcel of land they
owned was the subject property. Logically, there is nothing to reconvey as what the spouses
Perez registered in their names did not include the parcel of land which the petitioners, by their
evidence, own.

FACTS:

At the root of the case is a parcel of land with an area of 26,151 square meters (subject
property) located at Maguyam, Silang, Cavite, originally owned and registered in the name of
Miguela Reyes. Petitioners filed a complaint to recover possession of the subject property5
against the respondents, with a prayer to annul the sale of the subject property executed
between the respondents. In the complaint, the petitioners alleged that they are the successors-
in-interest of Miguela over the subject property, which Caparas held in trust for Miguela. The
petitioners also averred that the subject property was erroneously included in the sale of land
between the respondents.

The respondents failed to file an answer to the complaint and were declared in default.
The RTC thus allowed the petitioners to present their evidence ex parte against the
respondents. After an ex parte hearing, the RTC ruled in the petitioners favor. The RTC,
however, refused to approve, for lack of authority, the new survey plan for the subject property
that the petitioners submitted. RTC rendered a decision setting aside its earlier decision, and
dismissed the petitioners complaint for lack of merit. The RTC rejected the petitioners claim
that they were purchasers in good faith of the subject property considering that the spouses
Perezs title over the consolidated parcels of land was registered. The RTC ruled that even
granting that the subject property was included in the consolidated parcels of land sold to the
spouses Perez, the petitioners were deemed to have knowledge of the spouses Perezs interest
therein. CA dismissed the petitioners appeal and affirmed the February 19, 1998 decision of the
RTC. The CA declared that the petitioners resort to the court was premature since there was no
proof that the Bureau of Lands revoked its approval of the Caparas survey plan. In any event,
the CA declared that Chus admission and the existing and duly approved Caparas survey plan
belied their claim of encroachment in the petitioners property by the spouses Perez. CA upheld
the RTCs refusal to approve, for lack of authority, the new survey plan that the petitioners
submitted and also upheld the award of damages, attorneys fees, and costs. The CAs denial of
the petitioners motion for reconsideration prompted the present recourse.

ISSUE:
1. Whether the parcel of land sold to the petitioners is the subject property included in the
consolidated parcels of land sold to the spouses Perez.
2. Whether the awarding of damages is justified.

RULING:

On the Action for Reconveyance

1. In light of the above, the petitioners action against Caparas and the spouses Perez for
reconveyance, based on trust, must fail for lack of basis. An action for reconveyance is a legal
and equitable remedy that seeks to transfer or reconvey property, wrongfully registered in
another persons name, to its rightful owner. To warrant reconveyance of the land, the plaintiff
must allege and prove, among others, ownership of the land in dispute and the defendants
erroneous, fraudulent or wrongful registration of the property.

In the present petition, the petitioners failed to prove that the parcel of land they owned
was the subject property. Logically, there is nothing to reconvey as what the spouses Perez
registered in their names did not include the parcel of land which the petitioners, by their
evidence, own.

We also see no trust, express or implied, created between the petitioners and the
spouses Perez over the subject property. A trust by operation of law is the right to the beneficial
enjoyment of a property whose legal title is vested in another. A trust presumes the existence of
a conflict involving one and the same property between two parties, one having the rightful
ownership and the other holding the legal title. There is no trust created when the property
owned by one party is separate and distinct from that which has been registered in anothers
name. In this case, the Caparas survey plan and the deed of sale between the petitioners and
Miguela showed that the parcel of land sold to the petitioners is distinct from the consolidated
parcels of land sold by Caparas to the spouses Perez.

On the propriety of the award of damages and attorneys fees

2. Based on the above discussion, we find the award of damages and attorneys fees in
thespouses Perezs favor proper. As the RTC and the CA correctly ruled, the petitioners were
deemed to have been placed on constructive notice of the spouses Perezs title since the
registration proceedings are in rem. Petitioners undoubtedly filed and pursued an unfounded
claim against the spouses Perez, for which the latter incurred unnecessary expenses to protect
their interests. To repeat, the petitioners action for reconveyance against the spouses Perez
completely had no basis.

Finally, the RTC correctly ruled that the petitioners are liable to pay moral and exemplary
damages, attorneys fees and the costs of suit, pursuant to Article 2217 in relation to Article
2219,41 Article 222942 and Article 220842 of the Civil Code. As the RTC correctly observed,
Chu was a lawyer and a businessman.
 Rey Castigador Catedrilla v. Mario and Margie Lauron
G.R. No. 179011. April 15, 2013
J. Peralta

In suits to recover properties, all co-owners are real parties in interest. However,
pursuant to Article 487 of the Civil Code and the relevant jurisprudence, any one of them may
bring an action, any kind of action for the recovery of co-owned properties. Therefore, only one
of the co-owners, namely the co-owner who filed the suit for the recovery of the co-owned
property, is an indispensable party thereto. The other co-owners are not indispensable parties.
They are not even necessary parties, for a complete relief can be afforded in the suit even
without their participation, since the suit is presumed to have been filed for the benefit of all co-
owners.

FACTS:

Petitioner Rey Castigador Catedrilla filed with the Municipal Trial Court (MTC) of
Lambunao, Iloilo a Complaint for ejectment against the spouses Mario and Margie Lauron. The
case arose from a parcel of land, alleging that Lorenza Lizada is the owner of a parcel of land
known as Lot 183, located in Mabini Street, Lambunao, Iloilo. Lilia was succeeded by her heirs,
her husband Maximo and their children, one of whom is herein petitioner; that petitioner filed the
complaint as a co-owner of Lot No. 5; that sometime in 1980, respondents Mario and Margie
Lauron, through the tolerance of the heirs of Lilia, constructed a residential building of strong
materials on the northwest portion of Lot No. 5 covering an area of one hundred square meters;
that the heirs of Lilia made various demands for respondents to vacate the premises and even
exerted earnest efforts to compromise with them but the same was unavailing; and that
petitioner reiterated the demand on respondents to vacate the subject lot but respondents
continued to unlawfully withhold such possession.

Respondents claimed that petitioner had no cause of action against them, since they are
not the owners of the residential building standing on petitioner's lot, but Mildred Kascher
(Mildred), Mildred had already paid P10,000.00 as downpayment for the subject lot to Teresito
Castigador; that there were several instances that the heirs of Lilia offered the subject Lot 183
for sale to respondents and Mildred and demanded payment, however, the latter was only
interested in asking money without any intention of delivering or registering the subject lot; that
in 1998, Maximo, petitioner's father, and respondent Margie entered into an amicable settlement
before the Barangay Lupon of Poblacion Ilawod, Lambunao, Iloilo wherein Maximo offered the
subject lot to the spouses Alfons and Mildred Kascher in the amount of P90,000.00 with the
agreement that all documents related to the transfer of the subject lot to Maximo and his
children be prepared by Maximo, but the latter failed to comply; and that the amicable
settlement should have the force and effect of a final judgment of a court, hence, the instant suit
is barred by prior judgment. Respondents counterclaimed for damages.

The MTC rendered its Decision in favor of the plaintiff. RTC affirmed but deleted the
attorney's fees, since the MTC decision merely ordered the payment of attorney's fees without
any basis. The RTC found that petitioner, being one of the co-owners of the subject lot, is the
proper party in interest to prosecute against any intruder thereon. It found that the amicable
settlement signed and executed by the representatives of the registered owner of the premises
before the Lupon is not binding and unenforceable between the parties. It further ruled that even
if Mildred has her name in the tax declaration signifying that she is the owner of the house
constructed on the subject lot, tax declarations are not evidence of ownership but merely issued
to the declarant for purposes of payment of taxes; that she cannot be considered as an
indispensable party in a suit for recovery of possession against respondents; that Mildred
should have intervened and proved that she is an indispensable party because the records
showed that she was not in actual possession of the subject lot. CA reversed. The CA found that
petitioner's co-heirs to the subject lot should have been impleaded as co-plaintiffs in the
ejectment case against respondents, since without their presence, the trial court could not
validly render judgment and grant relief in favor of petitioner. Hence, this petition.

Issue:

Whether petitioner can file the action without impleading his co-owners.

Ruling:

Petitioner can file the action for ejectment without impleading his co-owners. In Wee v.
De Castro, wherein petitioner therein argued that the respondent cannot maintain an action for
ejectment against him, without joining all his co-owners, we ruled in this wise:
Article 487 of the New Civil Code is explicit on this point:

ART.487. Any one of the co-owners may bring an action in ejectment.

This article covers all kinds of action for the recovery of possession, i.e., forcible
entry and unlawful detainer (accion interdictal), recovery of possession (accion
publiciana), and recovery of ownership (accion de reivindicacion). As explained by the
renowned civilest, Professor Arturo M. Tolentino: A co-owner may bring such an action,
without the necessity of joining all the other co-owners as co-plaintiffs, because the suit
is deemed to be instituted for the benefit of all. If the action is for the benefit of the
plaintiff alone, such that he claims possession for himself and not for the co-ownership,
the action will not prosper.

In sum, in suits to recover properties, all co-owners are real parties in interest. However,
pursuant to Article 487 of the Civil Code and the relevant jurisprudence, any one of them may
bring an action, any kind of action for the recovery of co-owned properties. Therefore, only one
of the co-owners, namely the co-owner who filed the suit for the recovery of the co-owned
property, is an indispensable party thereto. The other co-owners are not indispensable parties.
They are not even necessary parties, for a complete relief can be afforded in the suit even
without their participation, since the suit is presumed to have been filed for the benefit of all co-
owners.

In this case, although petitioner alone filed the complaint for unlawful detainer, he stated
in the complaint that he is one of the heirs of the late Lilia Castigador, his mother, who inherited
the subject lot, from her parents. Petitioner did not claim exclusive ownership of the subject lot,
but he filed the complaint for the purpose of recovering its possession which would redound to
the benefit of the co-owners. Since petitioner recognized the existence of a co-ownership, he,
as a co-owner, can bring the action without the necessity of joining all the other co-owners as
co-plaintiffs.

Sps. Esmeraldo D. Vallido and Arsenia M. Vallido, rep. by Atty. Sergio C. Sumayod v. Sps.
Elmer Pono and Juliet Pono, et al.
G.R. No. 200173. April 15, 2013
J. Mendoza
 It is a recognized principle that a person dealing on a registered land need not go
beyond its certificate of title, it is also a firmly settled rule that where there are circumstances
which would put a party on guard and prompt him to investigate or inspect the property being
sold to him, such as the presence of occupants/tenants thereon, it is expected from the
purchaser of a valued piece of land to inquire first into the status or nature of possession of the
occupants. The burden of proving good faith lies with the second buyer (petitioners herein)
which is not discharged by simply invoking the ordinary presumption of good faith. After an
assiduous assessment of the evidentiary records, this Court holds that the petitioners are NOT
buyers in good faith as they failed to discharge their burden of proof.

FACTS:

Martino Dandan (Martino) was the registered owner of a parcel of land in Kananga,
Leyte. Martino, sold a portion of the subject property to respondent Purificacion Cerna
(Purificacion). The transfer, however, was not recorded in the Registry of Deeds. Purificacion
sold her 18,214 square meter portion of the subject property to respondent Marianito Pono
(Marianito). Marianito registered the portion he bought for taxation purposes, paid its taxes, took
possession, and allowed his son respondent Elmer Pono and daughter-in-law, Juliet Pono, to
construct a house thereon.

Meanwhile, Martino resettled in Cavite. He sold the whole subject property to his
grandson, petitioner Esmeraldo Vallido (Esmeraldo), also a resident of Noveleta, Cavite.
Considering that Martino had delivered OCT No. P-429 to Purificacion in 1960, he no longer had
any certificate of title to hand over to Esmeraldo.

Martino filed a petition seeking for the issuance of a new owners duplicate copy of OCT
No. P-429, which he claimed was lost. He stated that he could not recall having delivered the
said owners duplicate copy to anybody to secure payment or performance of any legal
obligation. The petition was granted by the RTC, Branch 12 of Ormoc City. Esmeraldo
registered the deed of sale in the Registry of Deeds and Transfer Certificate of Title (TCT) No.
TP-13294 was thereafter issued in the name of the petitioners.

Subsequently, the petitioners filed before the RTC a complaint for quieting of title,
recovery of possession of real property and damages against the respondents. In Respondents
Elmer and Juliet averred that their occupation of the property was upon permission of Marianito.
They included a historical chronology of the transactions from that between Martino and
Purificacion to that between Purificacion and Marianito.

The RTC promulgated a decision favoring the petitioners. The RTC held that there was a
double sale under Article 1544 of the Civil Code. The respondents were the first buyers while
the petitioners were the second buyers. CA reversed. Hence, this petition.

ISSUE:

Whether the petitioners in this case,are buyers and registrants in good faith.

RULING:

It is undisputed that there is a double sale and that the respondents are the first buyers
while the petitioners are the second buyers. The burden of proving good faith lies with the
second buyer (petitioners herein) which is not discharged by simply invoking the ordinary
presumption of good faith. After an assiduous assessment of the evidentiary records, this Court
holds that the petitioners are NOT buyers in good faith as they failed to discharge their burden
of proof.

Notably, it is admitted that Martino is the grandfather of Esmeraldo. As an heir, petitioner

Esmeraldo cannot be considered as a third party to the prior transaction between Martino and
Purificacion. The purpose of the registration is to give notice to third persons. And, privies are
not third persons. The vendor's heirs are his privies. Against them, failure to register will not
vitiate or annul the vendee's right of ownership conferred by such unregistered deed of sale.

The non-registration of the deed of sale between Martino and Purificacion is immaterial
as it is binding on the petitioners who are privies.6\ Based on the privity between petitioner
Esmeraldo and Martino, the petitioner as a second buyer is charged with constructive
knowledge of prior dispositions or encumbrances affecting the subject property. The second
buyer who has actual or constructive knowledge of the prior sale cannot be a registrant in good
faith.

Moreover, although it is a recognized principle that a person dealing on a registered land

need not go beyond its certificate of title, it is also a firmly settled rule that where there are
circumstances which would put a party on guard and prompt him to investigate or inspect the
property being sold to him, such as the presence of occupants/tenants thereon, it is expected
from the purchaser of a valued piece of land to inquire first into the status or nature of
possession of the occupants. As in the common practice in the real estate industry, an ocular
inspection of the premises involved is a safeguard that a cautious and prudent purchaser
usually takes. Should he find out that the land he intends to buy is occupied by anybody else
other than the seller who, as in this case, is not in actual possession, it would then be incumbent
upon the purchaser to verify the extent of the occupants possessory rights.

The failure of a prospective buyer to take such precautionary steps would mean
negligence on his part and would preclude him from claiming or invoking the rights of a
"purchaser in good faith." It has been held that "the registration of a later sale must be done in
good faith to entitle the registrant to priority in ownership over the vendee in an earlier sale."

There are several indicia that should have placed the petitioners on guard and prompted
them to investigate or inspect the property being sold to them. First, Martino, as seller, did not
have possession of the subject property. Second, during the sale on July 4, 1990, Martino did
not have the owners duplicate copy of the title. Third, there were existing permanent
improvements on the land. Fourth, the respondents were in actual possession of the land.
These circumstances are too glaring to be overlooked and should have prompted the
petitioners, as prospective buyers, to investigate or inspect the land. Where the vendor is not in
possession of the property, the prospective vendees are obligated to investigate the rights of
one in possession.

Lastly, it is uncontroverted that the respondents were occupying the land since January
4, 1960 based on the deed of sale between Martino and Puriticacion. They have also made
improvements on the land by erecting a house of mixed permanent materials thereon, which
was also admitted by the petitioners. The respondents, without a doubt, are possessors in good
faith. Ownership should therefore vest in the respondents because they were first in possession
of the property in good faith.
 Apolonio Garcia, in substituion of his deceased mother, Modesta Garcia, and Cristina
Salamat v. Dominga Robles Vda de Caparas
G.R. No. 180843. April 17, 2013
J. Del Castillo

Under the Dead Man's Statute Rule, "if one party to the alleged transaction is precluded
from testifying by death, insanity, or other mental disabilities, the other party is not entitled to the
undue advantage of giving his own uncontradicted and unexplained account of the transaction."
Thus, the alleged admission of the deceased Pedro Caparas (Pedro) that he entered into a
sharing of leasehold rights with the petitioners cannot be used as evidence against the herein
respondent as the latter would be unable to contradict or disprove the same.

FACTS:

Flora Makapugay is the owner of a 2.5-hectare farm in Barangay Lugam, Malolos,

Bulacan and being tilled by Eugenio Caparas as agricultural lessee under a leasehold
agreement. Makapugay passed away and was succeeded by her nephews and niece, namely
Amanda dela Paz-Perlas (Amanda), Justo dela Paz (Justo) and Augusto dela Paz (Augusto).
On the other hand, Eugenios children Modesta Garcia (Garcia), Cristina Salamat (Salamat)
and Pedro succeeded him.

Before she passed away, Makapugay appointed Amanda as her attorney-in-fact. After
Eugenio died, Amanda and Pedro entered into an agreement entitled "Kasunduan sa Buwisan",
followed by an April 19, 1979 Agricultural Leasehold Contract,8 covering the land. In said
agreements, Pedro was installed and recognized as the lone agricultural lessee and cultivator of
the land. Pedro passed away and his wife, herein respondent Dominga Robles Vda. de Caparas
(Dominga), took over as agricultural lessee.

The parties entered into, "Kasunduan sa Buwisan ng Lupa" whereby Garcia and
Salamat were acknowledged as Pedros co-lessees. Petitioners Garcia and Salamat filed a
Complaint for nullification of leasehold and restoration of rights as agricultural lessees against
Pedros heirs, represented by his surviving spouse and herein respondent Dominga. Before the
office of the Provincial Agrarian Reform Adjudicator (PARAD) of Bulacan. In their Complaint,
Garcia and Salamat claimed that when their father Eugenio died, they entered into an
agreement with their brother Pedro that they would alternately farm the land on a "per-season
basis"; that the landowner Makapugay knew of this agreement; that when Makapugay passed
away, Pedro reneged on their agreement and cultivated the land all by himself, deliberately
excluding them and misrepresenting to Amanda that he is Eugenios sole heir; that as a result,
Amanda was deceived into installing him as sole agricultural lessee in their 1979 Agricultural
Leasehold Contract; that when Amanda learned of Pedros misrepresentations, she executed an
Affidavit stating among others that Pedro assured her that he would not deprive Garcia and
Salamat of their "cultivatory rights"; that in order to correct matters, Amanda, Justo and Augusto
executed in their favor the 1996 "Kasunduan sa Buwisan ng Lupa", recognizing them as Pedros
co-lessees; that when Pedro passed away, Dominga took over the land and, despite demands,
continued to deprive them of their rights as co-lessees; that efforts to settle their controversy
proved futile, prompting the Barangay Agrarian Reform Committee to issue the proper
certification authorizing the filing of a case; and that they suffered damages as a consequence.
Petitioners prayed that the 1979 Agricultural Leasehold Contract between Pedro and Amanda
be nullified; that they be recognized as co-lessees and allowed to cultivate the land on an
alternate basis as originally agreed; and that they be awarded P50,000.00 attorneys fees and
costs of litigation.

Respondent Dominga claimed that when her father-in-law Eugenio died, only her
husband Pedro succeeded and cultivated the land, and that petitioners never assisted him in
farming the land and Pedro is the sole agricultural lessee of the land; that Amandas Affidavit
and "Kasunduan sa Buwisan ng Lupa" of even date between her and the petitioners are self-
serving and violate the existing 1979 Agricultural Leasehold Contract; that under Section 3813
of Republic Act No. 384414 (RA 3844), petitioners cause of action has prescribed. Dominga
further claimed that Pedro has been in possession of the land even while Eugenio lived; that
petitioners have never cultivated nor possessed the land even for a single cropping; that Pedro
has been the one paying the lease rentals as evidenced by receipts; that when Pedro died in
1984, she succeeded in his rights as lessee by operation of law, and that she had been
remitting lease rentals to the landowners since 1985; and that petitioners had no right to institute
themselves as her co-lessees. She prayed that the Complaint be dismissed; that the July 10,
1996 "Kasunduan sa Buwisan ng Lupa" be nullified; that the execution of a new leasehold
agreement between her and the landowners be ordered; and by way of counterclaim, that moral
damages and litigation costs be awarded her.

PARAD ruled in favor of the defendant and against the plaintiffs. DARAB reversed. The
assailed decision is affirmed in toto by the CA.

Issue:

Whether the death or permanent incapacity of the agricultural lessor, binds the leasehold of his
legal heirs

Ruling:

What the PARAD, DARAB and CA failed to consider and realize is that Amandas
declaration in her Affidavit covering Pedros alleged admission and recognition of the alternate
farming scheme is inadmissible for being a violation of the Dead Mans Statute, which provides
that "[i]f one party to the alleged transaction is precluded from testifying by death, insanity, or
other mental disabilities, the other party is not entitled to the undue advantage of giving his own
uncontradicted and unexplained account of the transaction." Thus, since Pedro is deceased,
and Amandas declaration which pertains to the leasehold agreement affects the 1996
"Kasunduan sa Buwisan ng Lupa" which she as assignor entered into with petitioners, and
which is now the subject matter of the present case and claim against Pedros surviving spouse
and lawful successor-in-interest Dominga, such declaration cannot be admitted and used
against the latter, who is placed in an unfair situation by reason of her being unable to contradict
or disprove such declaration as a result of her husband-declarant Pedros prior death.

If petitioners earnestly believed that they had a right, under their supposed mutual
agreement with Pedro, to cultivate the land under an alternate farming scheme, then they
should have confronted Pedro or sought an audience with Amanda to discuss the possibility of
their institution as co-lessees of the land; and they should have done so soon after the passing
away of their father Eugenio. However, it was only in 1996, or 17 years after Pedro was installed
as tenant in 1979 and long after his death in 1984, that they came forward to question Pedros
succession to the leasehold. As correctly held by the PARAD, petitioners slept on their rights,
and are thus precluded from questioning Pedros 1979 agricultural leasehold contract.
 Amanda, on the other hand, cannot claim that Pedro deceived her into believing that he
is the sole successor to the leasehold. Part of her duties as the landowners representative or
administrator was to know the personal circumstances of the lessee Eugenio; more especially
so, when Eugenio died. She was duty-bound to make an inquiry as to who survived Eugenio, in
order that the landowner or she as representative could choose from among them who
would succeed to the leasehold. Under Section 9 of RA 3844, Makapugay, or Amanda as
Makapugays duly appointed representative or administrator was required to make a choice,
within one month from Eugenios death, who would succeed as agricultural lessee.

In case of death or permanent incapacity of the agricultural lessor, the leasehold shall
bind his legal heirs.

Amanda may not claim ignorance of the above provision, as ignorance of the law
excuses no one from compliance therewith. Thus, when she executed the 1979 Agricultural
Leasehold Contract with Pedro, she is deemed to have chosen the latter as Eugenios
successor, and is presumed to have diligently performed her duties, as Makapugays
representative, in conducting an inquiry prior to making the choice.

The same holds true for petitioners. If it is true that they entered into a unique
arrangement with Pedro to alternately till the land, they were thus obliged to inform Makapugay
or Amanda of their arrangement, so that in the process of choosing Eugenios successor, they
would not be left out. But evidently, they did not; they slept on their rights, and true enough, they
were excluded, if there was any such alternate farming agreement between them. And after
Pedro was chosen and installed as Eugenios successor, they allowed 17 years to pass before
coming out to reveal this claimed alternate farming agreement and insist on the same.

With the above pronouncements, there is no other logical conclusion than that the 1996
"Kasunduan sa Buwisan ng Lupa" between Amanda and petitioners, which is grounded on
Pedros inadmissible verbal admission, and which agreement was entered into without obtaining
Domingas consent, constitutes an undue infringement of Domingas rights as Pedros
successor-in-interest under Section 9, and operates to deprive her of such rights and
dispossess her of the leasehold against her will. Under Section 732 of RA 3844, Dominga is
entitled to sennity of tenure; and under Section 16,33 any modification of the lease agreement
must be done with the consent of both parties and without prejudicing Dominga's security of
tenure.

Evangeline Rivera-Calingasan and E. Rical Enterprises v. Wilfredo Rivera, substututed by

Ma. Lydia S. Rivera, Freida Leah and Wilfredo S. Rivera, Jr.
G.R. No. 171555. April 17, 2013
J. Brion

The judgment in an ejectment case is conclusive between the parties and their
successors-in-interest by title subsequent to the commencement of the action; hence, it is
enforceable by or against the heirs of the deceased. This judgment entitles the winning party to:
(a) the restitution of the premises, (b) the sum justly due as arrears of rent or as reasonable
compensation for the use and occupation of the premises, and (c) attorneys fees and costs.

In this case, the death of Wilfredo extinguishes the right to the usufruct. Thus, what
actually survives under the circumstances is the award of damages, by way of compensation

FACTS:
 Respondent Wilfredo Rivera and his wife, Loreto Inciong, acquired several parcels of
land in Lipa City, Batangas. Subsequently, Loreto died, leaving Wilfredo and their two
daughters, Evangeline and Brigida Liza, as her surviving heirs.

About eleven (11) years later, Loretos heirs executed an extrajudicial settlement of her
one-half share of the conjugal estate, adjudicating all the properties in favor of Evangeline and
Brigida Liza; Wilfredo waived his rights to the properties, with a reservation of his usufructuary
rights during his lifetime. Almost a decade later Wilfredo filed with the Municipal Trial Court in
Cities (MTCC) of Lipa City a complaint for forcible entry against the petitioners and Star Honda,
Inc.

Wilfredo claimed that he lawfully possessed and occupied the two (2) parcels of land
located along C.M. Recto Avenue, Lipa City, Batangas with a building used for his furniture
business. Taking advantage of his absence due to his hospital confinement in September 2002,
the petitioners and Star Honda, Inc. took possession and caused the renovation of the building
on the property. The petitioners and Star Honda, Inc., with the aid of armed men, barred him
from entering the property.

MTCC dismissed the complaint. It found no evidence of Wilfredos prior possession and
subsequent dispossession of the property. It noted that Wilfredo admitted that both E. Rical
Enterprises and Star Honda, Inc. occupied the property through lease contracts from
Evangeline and her husband Ferdinand. RTC affirmed the MTCCs findings. It held that Wilfredo
lacked a cause of action to evict the petitioners and Star Honda, Inc. since Evangeline is the
registered owner of the property and Wilfredo had voluntarily renounced his usufructuary rights.
Wilfredo sought reconsideration of the RTCs decision and, in due course, attained this
objective; the RTC set aside its original decision and entered another, which ordered the
eviction of the petitioners and Star Honda, Inc. The CA affirmed with modification the RTCs
findings. Hence, the present petition.

ISSUE:

Who, between the petitioners and Wilfredo, had been in prior physical possession of the
property.

RULING:

The petition lacks merit.

Ejectment cases involve only physical possession or possession de facto.

"Ejectment cases - forcible entry and unlawful detainer - are summary proceedings
designed to provide expeditious means to protect actual possession or the right to possession
of the property involved. The only question that the courts resolve in ejectment proceedings is:
who is entitled to the physical possession of the premises, that is, to the possession de facto
and not to the possession de jure. It does not even matter if a party's title to the property is
questionable." Thus, "an ejectment case will not necessarily be decided in favor of one who has
presented proof of ownership of the subject property."

Indeed, possession in ejectment cases "means nothing more than actual physical
possession, not legal possession in the sense contemplated in civil law." In a forcible entry case,
"prior physical possession is the primary consideration. "A party who can prove prior possession
can recover such possession even against the owner himself. Whatever may be the character
of his possession, if he has in his favor prior possession in time, he has the security that entitle
him to remain on the property until a person with a better right lawfully ejects him. "The party in
peaceable, quiet possession shall not be thrown out by a strong hand, violence, or terror."

The respondents have proven prior physical possession of the property. In this case, we
are convinced that Wilfredo had been in prior possession of the property and that the petitioners
deprived him of such possession by means of force, strategy and stealth.

Wilfredos death did not render moot the forcible entry case.

The death of Wilfredo introduces a seeming complication into the case and on the
disposition we shall make. To go back to basics, the petition before us involves the recovery of
possession of real property and is a real action that is not extinguished by the death of a party.
The judgment in an ejectment case is conclusive between the parties and their successors-in-
interest by title subsequent to the commencement of the action; hence, it is enforceable by or
against the heirs of the deceased.1wphi1 This judgment entitles the winning party to: (a) the
restitution of the premises, (b) the sum justly due as arrears of rent or as reasonable
compensation for the use and occupation of the premises, and (c) attorneys fees and costs.

The complicating factor in the case is the nature and basis of Wilfredos possession; he
was holding the property as usufructuary, although this right to de jure possession was also
disputed before his death, hand in hand with the de facto possession that is subject of the
present case. Without need, however, of any further dispute or litigation, the right to the usufruct
is now rendered moot by the death of Wilfredo since death extinguishes a usufruct under Article
603(1) of the Civil Code. This development deprives the heirs of the usufructuary the right to
retain or to reacquire possession of the property even if the ejectment judgment directs its
restitution.

Thus, what actually survives under the circumstances is the award of damages, by way
of compensation, that the RTC originally awarded and which the CA and this Court affirmed.
This award was computed as of the time of the RTC decision (or roughly about a year before
Wilfredos death) but will now have to take into account the compensation due for the period
between the RTC decision and Wilfredos death. The computation is a matter of execution that
is for the RTC, as court of origin, to undertake. The heirs of Wilfredo shall succeed to the
computed total award under the rules of succession, a matter that is not within the authority of
this Court to determine at this point.

Holy Trinity Realty and Development Corporation v.

Spouses Carlos Abacan adn Elizabeth Abacan
G.R. No. 183858. April 17, 2013
CJ Sereno

As the case now stands, both parties are claiming ownership of the subject property:
petitioner, by virtue of a Deed of Sale executed in its favor by the registered land owner; and
respondents, by subsequently issued emancipation patents in their names. This issue would
more appropriately be ventilated in a full-blown proceeding, rather than in a motion to stay the
execution of the judgment rendered in the instant summary ejectment proceeding. To reiterate,
the sole issue in the present case is de facto possession of the subject property, and this was
conclusively settled by the MTCC in HTRDC's favor in its final and executory Consolidated
Decision of 25 May 2005.
FACTS:

A parcel of land located in Sumapang, Malolos City is registered in the name of Freddie
Santiago (Santiago). Petitioner Holy Trinity Realty Development Corporation (HTRDC) acquired
the property from Santiago, but later found that the lot was already occupied by some
individuals, among them respondent-spouses Carlos and Elizabeth Abacan.

HTRDC then filed a complaint for forcible entry against respondent-spouses and the
other occupants. It withdrew the complaint, however, because it needed to verify the exact
location of the property, which the occupants claimed was covered by emancipation patents
issued by the Department of Agrarian Reform Adjudication Board (DARAB).

HTRDC commenced a complaint with the DARAB for cancellation of emancipation

patents against some of the occupants of the land. During the pendency of the DARAB case,
the occupants possession was tolerated. The provincial adjudicator ordered the cancellation of
the emancipation patents of the occupants of the land.The DARAB later affirmed the decision of
the provincial adjudicator.

HTRDC filed a complaint for unlawful detainer and damages with the MTCC of Malolos
against the occupants of the subject land, again including respondent spouses.
The trial court ordered the occupants to vacate the premises and to pay reasonable rent,
attorneys fees and costs of suit. The MTCC then ordered the issuance of a writ of
execution.The decision became final and executory.

In order to prevent the enforcement of the writ of execution and demolition, respondents
filed several actions in the Regional Trial Court (RTC), which were subsequently dismissed. The
CA held that the MTCC had no jurisdiction over the unlawful detainer case. Hence, the present
petition.

ISSUE:
Whether the Court of Appeals committed reversible error in ruling that MTCC had no jurisdiction
over the unlawful detainer case

RULING:

The court finds merit in the instant petition.

Turning now to the merits of the petition, we find that the CA committed reversible error
in ruling that the MTCC had no jurisdiction over the unlawful detainer case. What was before it
was a petition for certiorari against the MTCCs denial of respondents motion to quash. The
petition was not directed at the MTCCs Consolidated Decision of 25 May 2005, nor could it be,
because a Rule 65 petition for certiorari must be filed not later than 60 days from notice of the
judgment. Since respondents failed to timely appeal the Consolidated Decision, it has long
attained finality and has become immutable and unalterable pursuant to the doctrine on finality
of judgment. Thus, as respondents sole argument in their motion to quash was the existence of
a material supervening event, and as the MTCCs denial of their motion was premised on the
conclusion that their subsequent acquisition of ownership was not a supervening event, the
resolution of the present case should be limited to that issue.
 It is well-settled that the sole issue in ejectment cases is physical or material possession
of the subject property, independent of any claim of ownership by the parties. The argument of
respondent-spouses that they subsequently acquired ownership of the subject property cannot
be considered as a supervening event that will bar the execution of the questioned judgment, as
unlawful detainer does not deal with the issue of ownership.

As the case now stands, both parties are claiming ownership of the subject property:
petitioner, by virtue of a Deed of Sale executed in its favor by the registered land owner; and
respondents, by subsequently issued emancipation patents in their names. This issue would
more appropriately be ventilated in a full-blown proceeding, rather than in a motion to stay the
execution of the judgment rendered in the instant summary ejectment proceeding. To reiterate,
the sole issue in the present case is de facto possession of the subject property, and this was
conclusively settled by the MTCC in HTRDC's favor in its final and executory Consolidated
Decision of 25 May 2005. We therefore rule that the CA committed reversible error in ruling that
the MTCC committed grave abuse of discretion in denying respondents' motion to quash the
alias writs of execution and demolition.

Evelyn Marcelo/Spouses Evelyn and Ricardo Marcelo v. Spouses Armando Silveri, Sr.
and Remedios Siverio
G.R. Nos. 184079/184490. April 17, 2013
J. Villarama, Jr.

Unlawful detainer is an action to recover possession of real property from one who
illegally withholds possession after the expiration or termination of his right to hold possession
under any contract, express or implied. The possession of the defendant in unlawful detainer is
originally legal but became illegal due to the expiration or termination of the right to possess. In
an unlawful detainer case, the sole issue for resolution is physical or material possession of the
property involved, independent of any claim of ownership by any of the parties. Where the issue
of ownership is raised by any of the parties, the courts may pass upon the same in order to
determine who has the right to possess the property. The adjudication is, however, merely
provisional and would not bar or prejudice an action between the same parties involving title to
the property.

FACTS:

G.R. No. 184079

Respondents spouses Ricardo and Evelyn Marcelo filed a Complaint for unlawful
detainer against petitioners spouses Armando Silverio, Sr., and his mother, Remedios Silverio.
Respondents represented themselves as the lawful owners and possessors of Lot 3976, a
residential land with an area of 5,004 square meters located in Marcelo Compound, Philip St.
Ext., Multinational Village, Paraaque City. They claimed ownership over said lot.

Respondents alleged that sometime in May 1987, petitioners sought permission to

construct a house within Lot 3976. Respondents agreed on the condition that petitioners will
vacate the moment they need the land. Subsequently, respondents made an oral demand on
petitioners to leave the house and return possession of the lot within 15 days from notice. As
respondents demands remained unheeded, they filed a complaint for unlawful detainer against
petitioners before Barangay Moonwalk in Paraaque City.
 The MeTC rendered judgment in favor of respondents Marcelo. The court a quo ruled
out forum shopping upon finding that the house subject of the present case is different from that
in Civil Case No. 2004-269. The structure involved in the latter case was "originally occupied by
petitioners relative and later taken over by them"17 while the house subject of the present case
was constructed by petitioners themselves. The MeTC held that petitioners failed to refute the
character of their possession as merely tolerated by respondents and they became deforciants
upon the latters demand for them to vacate the subject premises. RTC, affirmed the ruling of
the MeTC. The appellate court affirmed in toto the RTC judgment. It found no basis to dismiss
respondents complaint based on either forum shopping or splitting a cause of action.

G.R. No. 184490

Petitioners spouses Ricardo and Evelyn Marcelo filed a Complaint for unlawful detainer
against respondents Armando Silverio, Sr., and Remedios Silverio.

Petitioners Complaint bore essentially the same allegations as their Complaint in Civil
Case No. 2004-271 save for two allegations: (1) respondents requested petitioners permission
to construct a house in Lot 3976 in May 1986; and (2) respondents "improved the house and
even operated a sari-sari store" in Marcelo Compound.

Respondents belied petitioners claim of exclusive ownership and possession of the

subject property. According to the,, the land in dispute was first occupied by Graciano Marcelo
along with his sons Armando Marcelo, petitioner Ricardo Marcelo and Florante Marcelo.
Respondents anchor their right of possession on Florante Marcelo as co-owner of the said
property. Florante Marcelo is the husband of Marilou Silverio, the daughter of respondents
spouses Silverio.

The CA reversed and set aside the RTC judgment. It brushed aside the alleged
procedural infirmities that attended the filing of respondents petition for being trivial and
insufficient to warrant its dismissal. The appellate court found petitioners guilty of forum
shopping and splitting of a cause of action. It observed that the two cases for unlawful detainer
filed by petitioners are based on a single claim of ownership over Lot 3976 which embraces the
subject properties. The CA explains that an adjudication in either suit that petitioners are entitled
to the possession of Lot No. 3976 would necessarily mean res judicata in the other case. The
appellate court noted that the demand letter in both cases was served on respondents on the
same day.

Armando Silverio, Sr. and Remedios Silverio allege mainly that spouses Ricardo and
Evelyn Marcelo engaged in forum shopping and split a common cause of action when they filed
separate complaints for unlawful detainer based on a single claim of ownership over Lot No.
3976. The Silverios maintain that the spouses Marcelo are simply applicants for the issuance of
a sales patent over Lot No. 3976 and are actually occupying only 50 square meters of the
5,020-square-meter property. In support thereof, the Silverios invoke the Decision34 dated July
11, 2007 of the DENR which annulled and canceled the MSA filed by the spouses Marcelo over
Lot No. 3976. Ultimately, the Silverios insist that the subject property remains a public land.

The spouses Marcelo contend that while they claim ownership of Lot No. 3976 as a
whole, the portions thereof on which the two houses stand are distinct -- one has an area of 80
square meters while the other measures 120 square meters. In view of this, the spouses
Marcelo believe that the refusal by the Silverios to vacate said houses violated at least two
rights and gave rise to separate causes of action.
ISSUE:

Whether the filing of separate complaints for unlawful detainer against the same lessees who
refuse to vacate, on demand, two different houses constitutes forum shopping and splitting of a
cause of action.

RULING:

Unlawful detainer is an action to recover possession of real property from one who
illegally withholds possession after the expiration or termination of his right to hold possession
under any contract, express or implied. The possession of the defendant in unlawful detainer is
originally legal but became illegal due to the expiration or termination of the right to possess. In
an unlawful detainer case, the sole issue for resolution is physical or material possession of the
property involved, independent of any claim of ownership by any of the parties. Where the issue
of ownership is raised by any of the parties, the courts may pass upon the same in order to
determine who has the right to possess the property. The adjudication is, however, merely
provisional and would not bar or prejudice an action between the same parties involving title to
the property.

Forum shopping is a deplorable practice of litigants consisting of resort to two different

fora for the purpose of obtaining the same relief, to increase the chances of obtaining a
favorable judgment. The grave evil sought to be avoided by the rule against forum shopping is
the rendition by two competent tribunals of two separate and contradictory decisions.

In this case, the spouses Marcelo filed two cases for unlawful detainer against Armando
Silverio, Sr. and Remedios Silverio on July 12, 2004. In Civil Case No. 2004-269, the cause of
action is the alleged unlawful withholding of possession by the Silverios of the house which
Florante Marcelo and Marilou Silverio constructed in Lot 3976. On the other hand, the cause of
action in Civil Case No. 2004-271 for unlawful detainer is the supposed unlawful withholding of
possession by the Silverios of the house which they, themselves, built in Lot 3976. While the
main relief sought in Civil Case No. 2004-269 appears to be different from that in Civil Case No.
2004-271, the right on which both claims are hinged is the same the purported ownership by
the spouses Marcelo of Lot 3976

Basically, the cause of action in both cases is the unlawful withholding by the Silverios of
Lot 3976.

We find no merit in the contention of the spouses Marcelo that Civil Case Nos. 2004-269
and 2004-271 present distinct causes of action since they pertain to separate portions of the
Marcelo Compound. The analogy drawn by the spouses Marcelo between the ejectment of a
tenant leasing several units of a condominium project and the unlawful detainer cases they
brought against the Silverios is misplaced. In the former, there exists a lessor-lessee
relationship between the owner of the condominium and the tenant, respectively. Hence, the
rights and duties of the condominium owner and the tenant are defined by the terms of the
contract. In contrast, the parties in this case present adverse possessory claims over those
portions of Lot 3976 in which the houses concerned are situated.

In particular, the spouses Marcelo assert better right of possession based on their
alleged right as "lawful owners and possessors of a residential lot containing an area of 5,004
sq. m. known as Lot 3976 Paraaque Cad. 299 by virtue of a final and executory decision of the
Land Management Bureau (DENR) promulgated on Dec. 12, 1996 and Tax Dec. No. E-008-
083-77 issued in their name by the City Assessor of Paraaque." For their part, the Silverios
claim better right of possession on account of their actual occupation of the subject properties.
In either case, a finding that the spouses Marcelo have better right to possess the subject
property could only be premised on their lawful possession of the entire Lot No. 3976,
Paraaque Cad. 299. It follows, therefore, that a final adjudication in favor of the spouses
Marcelo in one case would constitute res judicata in the other.

The "absence of inconsistency test" finds no application in this case since it

presupposes that a final judgment has been rendered in the first case. By applying the "same
evidence test," however, it becomes apparent that the proof necessary to obtain affirmative
relief in Civil Case No. 2004-269 is the same as that in Civil Case No. 2004-271. Since the
spouses Marcelo are claiming sole ownership of Lot 3976 in their MSA, the evidence needed to
establish better right of possession over the house constructed by Florante Marcelo and Marilou
Silverio, and the one built by the Silverios is the same, regardless of the fact that they were built
on separate portions of said lot. We have ruled time and again that "a party cannot, by varying
the form of action, or adopting a different method of presenting his case, escape the operation
of the principle that one and the same cause of action shall not be twice litigated."

Evidently, the spouses Marcelo engaged in forum shopping by filing separate cases for
unlawful detainer based on a single claim of ownership over Lot 3976. Said act is likewise
tantamount to splitting a cause of action which, in this case, is a cause for dismissal on the
ground of litis pendentia. On this score alone, the petition for review on certiorari filed by the
spouses Marcelo in G.R. Nos. 184490 must fail, alongside their averments in G.R. No. 184079.

In any case, even if we confront the issue as to who between the spouses Marcelo and
the Silverios have better right of possession over the subject properties, the former would still
not prevail. It is undisputed by the spouses Marcelo that the Silverios presently occupy those
portions of Lot 3976 which are the subjects of the consolidated petitions before us. In particular,
the Silverios tie their possession of the parcel at issue in G.R. No. 184490 to Florante Marcelo
who appropriated a portion of Lot 3976 for himself, and with his wife, constructed a house
thereon in 1986. As regards the portion of Lot 3976 subject of G.R. No. 184079, the Silverios
have established their dwelling thereon in 1987 - long after Lot 3976 was classified as alienable
and disposable public land on January 3, 1968.

Meanwhile, the spouses Marcelo insist on their better right to possess the contested
parcels as holders of Tax Declaration No. E-008-19942 in the name of Ricardo Marcelo. Said
tax declaration, which covers Lot 3976, was issued for the year 2005 and canceled Tax
Declaration No. E-008-18821, also under the name of Ricardo Marcelo. Other than said tax
declaration, however, we found nothing in the records of these cases to show that the spouses
Marcelo have been consistently paying taxes on Lot 3976. We note that Tax Declaration No. E-
008-19942 was issued fairly recently, and by itself, is inadequate to convince the Court that the
spouses Marcelo have been in open, continuous and exclusive possession of the subject
portions of Lot 3976, by themselves or through a successor-in-interest, since January 3, 1968.
More importantly, it is ingrained in our jurisprudence that the mere declaration of a land for
taxation purposes does not constitute possession thereof nor is it proof of ownership in the
absence of the claimant's actual possession.

Considering that the Silverios are in actual possession of the subject portions of Lot
3976, they are entitled to remain on the property until a person who has a title or a better right
lawfully ejects them. The ruling in this case, however, does not preclude the Silverios and the
spouses Marcelo from introducing evidence and presenting arguments before the proper
administrative agency to establish any right to which they may be entitled under the law.

MAY 2013

JUNE 2013

MINORU FUJIKI v. MARIA PAZ GALELA MARINAY, SHINICHI MAEKARA, LOCAL CIVIL
REGISTRAR OF QUEZON CITY, AND THE ADMINISTRATOR AND
CIVIL REGISTRAR GENERAL OF THE NATIONAL STATISTICS OFFICE
G.R. No. 196049, June 26, 2013
J. Carpio

To hold that A.M. No. 02-11-10-SC applies to a petition for recognition of foreign
judgment would mean that the trial court and the parties should follow its provisions, including
the form and contents of the petition, the service of summons, the investigation of the public
prosecutor, the setting of pre-trial, the trial and the judgment of the trial court. This is absurd
because it will litigate the case anew. It will defeat the purpose of recognizing foreign
judgments, which is "to limit repetitive litigation on claims and issues."

In the recognition of foreign judgments, Philippine courts are incompetent to substitute

their judgment on how a case was decided under foreign law. They cannot decide on the "family
rights and duties, or on the status, condition and legal capacity" of the foreign citizen who is a
party to the foreign judgment. Thus, Philippine courts are limited to the question of whether to
extend the effect of a foreign judgment in the Philippines. In a foreign judgment relating to the
status of a marriage involving a citizen of a foreign country, Philippine courts only decide
whether to extend its effect to the Filipino party, under the rule of lex nationalii expressed in
Article 15 of the Civil Code.

FACTS:

Petitioner Minoru Fujiki (Fujiki) is a Japanese national who married respondent Maria
Paz Galela Marinay (Marinay) in the Philippines. The marriage did not sit well with petitioners
parents. Thus, Fujiki could not bring his wife to Japan where he resides. Eventually, they lost
contact with each other.Marinay met another Japanese, Shinichi Maekara (Maekara). Without
the first marriage being dissolved, Marinay and Maekara were married in Quezon City,
Philippines. Marinay allegedly suffered physical abuse from Maekara. She left Maekara and
started to contact Fujiki. Fujiki and Marinay met in Japan and they were able to reestablish their
relationship. Marinay was able obtain a judgment from a family court in Japan which declared
the marriage between Marinay and Maekara void on the ground of bigamy.

Fujiki filed a petition in the RTC entitled: "Judicial Recognition of Foreign Judgment (or
Decree of Absolute Nullity of Marriage)." Fujiki prayed that (1) the Japanese Family Court
judgment be recognized; (2) that the bigamous marriage between Marinay and Maekara be
declared void ab initio under Articles 35(4) and 41 of the Family Code of the Philippines; and (3)
for the RTC to direct the Local Civil Registrar of Quezon City to annotate the Japanese Family
Court judgment on the Certificate of Marriage between Marinay and Maekara and to endorse
such annotation to the Office of the Administrator and Civil Registrar General in the National
Statistics Office (NSO). RTC RTC immediately issued an Order dismissing the petition and
withdrawing the case from its active civil docket.The trial court based its dismissal on Section
5(4) of A.M. No. 02-11-10-SC which provides that "failure to comply with any of the preceding
requirements may be a ground for immediate dismissal of the petition." RTC took the view that
only "the husband or the wife," in this case either Maekara or Marinay, can file the petition to
declare their marriage void, and not Fujiki.

ISSUES:

1. Whether the Rule on Declaration of Absolute Nullity of Void Marriages and Annulment of
Voidable Marriages (A.M. No. 02-11-10-SC) is applicable.
2. Whether a husband or wife of a prior marriage can file a petition to recognize a foreign
judgment nullifying the subsequent marriage between his or her spouse and a foreign citizen
on the ground of bigamy and whether the Regional Trial Court can recognize the foreign
judgment in a proceeding for cancellation or correction of entries in the Civil Registry under
Rule 108 of the Rules of Court.

RULING:

The court grants the petition.

1. The Rule on Declaration of Absolute Nullity of Void Marriages and Annulment of Voidable
Marriages (A.M. No. 02-11-10-SC) does not apply in a petition to recognize a foreign judgment
relating to the status of a marriage where one of the parties is a citizen of a foreign country.
Moreover, in Juliano-Llave v. Republic, this Court held that the rule in A.M. No. 02-11-10-SC that
only the husband or wife can file a declaration of nullity or annulment of marriage "does not
apply if the reason behind the petition is bigamy.

To hold that A.M. No. 02-11-10-SC applies to a petition for recognition of foreign
judgment would mean that the trial court and the parties should follow its provisions, including
the form and contents of the petition, the service of summons, the investigation of the public
prosecutor, the setting of pre-trial, the trial and the judgment of the trial court. This is absurd
because it will litigate the case anew. It will defeat the purpose of recognizing foreign judgments,
which is "to limit repetitive litigation on claims and issues." The interpretation of the RTC is
tantamount to relitigating the case on the merits. In Mijares v. Raada, this Court explained that
"[i]f every judgment of a foreign court were reviewable on the merits, the plaintiff would be
forced back on his/her original cause of action, rendering immaterial the previously concluded
litigation."

2. A foreign judgment relating to the status of a marriage affects the civil status, condition and
legal capacity of its parties. However, the effect of a foreign judgment is not automatic. To
extend the effect of a foreign judgment in the Philippines, Philippine courts must determine if the
foreign judgment is consistent with domestic public policy and other mandatory laws. Article 15
of the Civil Code provides that "[l]aws relating to family rights and duties, or to the status,
condition and legal capacity of persons are binding upon citizens of the Philippines, even though
living abroad." This is the rule of lex nationalii in private international law. Thus, the Philippine
State may require, for effectivity in the Philippines, recognition by Philippine courts of a foreign
judgment affecting its citizen, over whom it exercises personal jurisdiction relating to the status,
condition and legal capacity of such citizen.

A petition to recognize a foreign judgment declaring a marriage void does not require
relitigation under a Philippine court of the case as if it were a new petition for declaration of
nullity of marriage. Philippine courts cannot presume to know the foreign laws under which the
foreign judgment was rendered. They cannot substitute their judgment on the status, condition
and legal capacity of the foreign citizen who is under the jurisdiction of another state. Thus,
Philippine courts can only recognize the foreign judgment as a fact according to the rules of
evidence.

There is therefore no reason to disallow Fujiki to simply prove as a fact the Japanese
Family Court judgment nullifying the marriage between Marinay and Maekara on the ground of
bigamy. While the Philippines has no divorce law, the Japanese Family Court judgment is fully
consistent with Philippine public policy, as bigamous marriages are declared void from the
beginning under Article 35(4) of the Family Code. Bigamy is a crime under Article 349 of the
Revised Penal Code. Thus, Fujiki can prove the existence of the Japanese Family Court
judgment in accordance with Rule 132, Sections 24 and 25, in relation to Rule 39, Section 48(b)
of the Rules of Court.

To be sure, a petition for correction or cancellation of an entry in the civil registry cannot
substitute for an action to invalidate a marriage. A direct action is necessary to prevent
circumvention of the substantive and procedural safeguards of marriage under the Family Code,
A.M. No. 02-11-10-SC and other related laws. Among these safeguards are the requirement of
proving the limited grounds for the dissolution of marriage, support pendente lite of the spouses
and children,the liquidation, partition and distribution of the properties of the spouses, and the
investigation of the public prosecutor to determine collusion. A direct action for declaration of
nullity or annulment of marriage is also necessary to prevent circumvention of the jurisdiction of
the Family Courts under the Family Courts Act of 1997 (Republic Act No. 8369), as a petition for
cancellation or correction of entries in the civil registry may be filed in the Regional Trial Court
"where the corresponding civil registry is located."In other words, a Filipino citizen cannot
dissolve his marriage by the mere expedient of changing his entry of marriage in the civil
registry.

However, this does not apply in a petition for correction or cancellation of a civil registry
entry based on the recognition of a foreign judgment annulling a marriage where one of the
parties is a citizen of the foreign country. There is neither circumvention of the substantive and
procedural safeguards of marriage under Philippine law, nor of the jurisdiction of Family Courts
under R.A. No. 8369. A recognition of a foreign judgment is not an action to nullify a marriage. It
is an action for Philippine courts to recognize the effectivity of a foreign judgment, which
presupposes a case which was already tried and decided under foreign law. The procedure in
A.M. No. 02-11-10-SC does not apply in a petition to recognize a foreign judgment annulling a
bigamous marriage where one of the parties is a citizen of the foreign country. Neither can R.A.
No. 8369 define the jurisdiction of the foreign court.

Article 26 of the Family Code confers jurisdiction on Philippine courts to extend the effect
of a foreign divorce decree to a Filipino spouse without undergoing trial to determine the validity
of the dissolution of the marriage. The second paragraph of Article 26 of the Family Code
provides that "[w]here a marriage between a Filipino citizen and a foreigner is validly celebrated
and a divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to
remarry, the Filipino spouse shall have capacity to remarry under Philippine law." In Republic v.
Orbecido,this Court recognized the legislative intent of the second paragraph of Article 26 which
is "to avoid the absurd situation where the Filipino spouse remains married to the alien spouse
who, after obtaining a divorce, is no longer married to the Filipino spouse"under the laws of his
or her country. The second paragraph of Article 26 of the Family Code only authorizes Philippine
courts to adopt the effects of a foreign divorce decree precisely because the Philippines does
not allow divorce. Philippine courts cannot try the case on the merits because it is tantamount to
trying a case for divorce.

The second paragraph of Article 26 is only a corrective measure to address the anomaly
that results from a marriage between a Filipino, whose laws do not allow divorce, and a foreign
citizen, whose laws allow divorce. The anomaly consists in the Filipino spouse being tied to the
marriage while the foreign spouse is free to marry under the laws of his or her country. The
correction is made by extending in the Philippines the effect of the foreign divorce decree, which
is already effective in the country where it was rendered. The second paragraph of Article 26 of
the Family Code is based on this Courts decision in Van Dorn v. Romillo which declared that the
Filipino spouse "should not be discriminated against in her own country if the ends of justice are
to be served."

The principle in Article 26 of the Family Code applies in a marriage between a Filipino
and a foreign citizen who obtains a foreign judgment nullifying the marriage on the ground of
bigamy. The Filipino spouse may file a petition abroad to declare the marriage void on the
ground of bigamy. The principle in the second paragraph of Article 26 of the Family Code
applies because the foreign spouse, after the foreign judgment nullifying the marriage, is
capacitated to remarry under the laws of his or her country. If the foreign judgment is not
recognized in the Philippines, the Filipino spouse will be discriminatedthe foreign spouse can
remarry while the Filipino spouse cannot remarry.

Under the second paragraph of Article 26 of the Family Code, Philippine courts are
empowered to correct a situation where the Filipino spouse is still tied to the marriage while the
foreign spouse is free to marry. Moreover, notwithstanding Article 26 of the Family Code,
Philippine courts already have jurisdiction to extend the effect of a foreign judgment in the
Philippines to the extent that the foreign judgment does not contravene domestic public policy. A
critical difference between the case of a foreign divorce decree and a foreign judgment nullifying
a bigamous marriage is that bigamy, as a ground for the nullity of marriage, is fully consistent
with Philippine public policy as expressed in Article 35(4) of the Family Code and Article 349 of
the Revised Penal Code. The Filipino spouse has the option to undergo full trial by filing a
petition for declaration of nullity of marriage under A.M. No. 02-11-10-SC, but this is not the only
remedy available to him or her. Philippine courts have jurisdiction to recognize a foreign
judgment nullifying a bigamous marriage, without prejudice to a criminal prosecution for bigamy.

In the recognition of foreign judgments, Philippine courts are incompetent to substitute

their judgment on how a case was decided under foreign law. They cannot decide on the "family
rights and duties, or on the status, condition and legal capacity" of the foreign citizen who is a
party to the foreign judgment. Thus, Philippine courts are limited to the question of whether to
extend the effect of a foreign judgment in the Philippines. In a foreign judgment relating to the
status of a marriage involving a citizen of a foreign country, Philippine courts only decide
whether to extend its effect to the Filipino party, under the rule of lex nationalii expressed in
Article 15 of the Civil Code.

For this purpose, Philippine courts will only determine (1) whether the foreign judgment
is inconsistent with an overriding public policy in the Philippines; and (2) whether any alleging
party is able to prove an extrinsic ground to repel the foreign judgment, i.e. want of jurisdiction,
want of notice to the party, collusion, fraud, or clear mistake of law or fact. If there is neither
inconsistency with public policy nor adequate proof to repel the judgment, Philippine courts
should, by default, recognize the foreign judgment as part of the comity of nations. Section
48(b), Rule 39 of the Rules of Court states that the foreign judgment is already "presumptive
evidence of a right between the parties." Upon recognition of the foreign judgment, this right
becomes conclusive and the judgment serves as the basis for the correction or cancellation of
entry in the civil registry. The recognition of the foreign judgment nullifying a bigamous marriage
is a subsequent event that establishes a new status, right and fact that needs to be reflected in
the civil registry. Otherwise, there will be an inconsistency between the recognition of the
effectivity of the foreign judgment and the public records in the Philippines.

However, the recognition of a foreign judgment nullifying a bigamous marriage is without

prejudice to prosecution for bigamy under Article 349 of the Revised Penal Code.The
recognition of a foreign judgment nullifying a bigamous marriage is not a ground for extinction of
criminal liability under Articles 89 and 94 of the Revised Penal Code. Moreover, under Article 91
of the Revised Penal Code, "[t]he term of prescription [of the crime of bigamy] shall not run
when the offender is absent from the Philippine archipelago."

Since A.M. No. 02-11-10-SC is inapplicable, the Court no longer sees the need to
address the questions on venue and the contents and form of the petition under Sections 4 and
5, respectively, of A.M. No. 02-11-10-SC.

J PLUS ASIA DEVELOPMENT CORPORATION v. UTILITY ASSURANCE CORPORATION

G.R. No. 199650, June 26, 2013
J. Villarama, Jr.

Petitioners liability under the suretyship contract is different from its liability under the
law. There is no question that as a surety, petitioner should not be made to pay more than its
assumed obligation under the surety bonds. However, it is clear from the above-cited
jurisprudence that petitioners liability for the payment of interest is not by reason of the
suretyship agreement itself but because of the delay in the payment of its obligation under the
said agreement.

FACTS:

Petitioner J Plus Asia Development Corporation represented by its Chairman, Joo Han
Lee, and Martin E. Mabunay, doing business under the name and style of Seven Shades of
Blue Trading and Services, entered into a Construction Agreement whereby the latter undertook
to build the former's 72-room condominium/hotel (Condotel Building 25) it was to be completed
within one year. Payment of the balance of the contract price will be based on actual work
finished within 15 days from receipt of the monthly progress billings. Per the agreed work
schedule, the completion date of the project was December 2008. Mabuhay also submitted the
required Performance Bond issued by respondent Utility Assurance Corporation (UTASSCO) in
the amount equivalent to 20% down payment or P8.4 million. Subesequently, petitioner had
already paid the total amount, however, Mabunay had accomplished only 27.5% of the project.
It terminated the contract and sent demand letters to Mabunay and respondent surety. As its
demands went unheeded, petitioner filed a Request for Arbitration before the Construction
Industry Arbitration Commission (CIAC). Mabunay claimed that the delay was caused by
retrofitting and other revision works ordered by Joo Han Lee. Furthermore, he alleged that the
termination of the contract by petitioner was premature and the filing of the complaint against
him was baseless, malicious and in bad faith.

Respondent argued that the performance bond merely guaranteed the 20% down
payment and not the entire obligation of Mabunay under the Construction Agreement. Since the
value of the projects accomplishment already exceeded the said amount, respondents
obligation under the performance bond had been fully extinguished. As to the claim for alleged
overpayment to Mabunay, respondent contended that it should not be credited against the 20%
down payment which was already exhausted and such applicationby petitioner is tantamount to
reviving an obligation that had been legally extinguished by payment. Respondent also set up a
cross-claim against Mabunay who executed in its favor an Indemnity Agreement whereby
Mabunay undertook to indemnify respondent for whatever amounts it may be adjudged liable to
pay petitioner under the surety bond.

CIAC rendered its Decision for the respondents Mabunay and Utassco to jointly and
severally pay claimant . CA agreed with the CIAC that the specific condition in the Performance
Bond did not clearly state the limitation of the suretys liability. Pursuant to Article 1377 of the
Civil Code, the CA said that the provision should be construed in favor of petitioner considering
that the obscurely phrased provision was drawn up by respondent and Mabunay. However, the
CA reversed the CIACs ruling that Mabunay had incurred delay which entitled petitioner to the
stipulated liquidated damages and unrecouped down payment. The CA opined that delay should
be reckoned only after the lapse of the one-year contract period, and consequently Mabunays
liability for liquidated damages arises only upon the happening of such condition. Hence, the
present petition.

ISSUE:

Whether Mabunay had incurred in delay as to the completion of the project and consequently its
liability for liquidated damages

RULING:

The court reverse the CA.

Default or mora on the part of the debtor is the delay in the fulfillment of the prestation by
reason of a cause imputable to the former. It is the non-fulfillment of an obligation with respect to
time.

Article 1169 of the Civil Code provides: ART. 1169. Those obliged to deliver or to do
something incur in delay from the time the obligee judicially or extrajudicially demands
from them the fulfillment of their obligation. It is a general rule that one who contracts to
complete certain work within a certain time is liable for the damage for not completing it
within such time, unless the delay is excused or waived.

In this jurisdiction, the following requisites must be present in order that the debtor may
be in default: (1) that the obligation be demandable and already liquidated; (2) that the debtor
delays performance; and (3) that the creditor requires the performance judicially or
extrajudicially.

In holding that Mabunay has not at all incurred delay, the CA pointed out that the
obligation to perform or complete the project was not yet demandable as of November 19, 2008
when petitioner terminated the contract, because the agreed completion date was still more
than one month away (December 24, 2008). Since the parties contemplated delay in the
completion of the entire project, the CA concluded that the failure of the contractor to catch up
with schedule of work activities did not constitute delay giving rise to the contractors liability for
damages.
 We cannot sustain the appellate courts interpretation as it is inconsistent with the terms
of the Construction Agreement. Article 1374 of the Civil Code requires that the various
stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense
which may result from all of them taken jointly. Here, the work schedule approved by petitioner
was intended, not only to serve as its basis for the payment of monthly progress billings, but
also for evaluation of the progress of work by the contractor. Article 13.01 (g) (iii) of the
Construction Agreement provides that the contractor shall be deemed in default if, among
others, it had delayed without justifiable cause the completion of the project "by more than thirty
(30) calendar days based on official work schedule duly approved by the OWNER." Records
showed that as early as April 2008, or within four months after Mabunay commenced work
activities, the project was already behind schedule for reasons not attributable to petitioner. In
the succeeding months, Mabunay was still unable to catch up with his accomplishment even as
petitioner constantly advised him of the delays.

Petitioner argues that it should not be made to pay interest because its issuance of the
surety bonds was made on the condition that its liability shall in no case exceed the amount of
the said bonds. We are not persuaded. Petitioners argument is misplaced. Jurisprudence is
clear on this matter. As early as Tagawa vs. Aldanese and Union Gurantee Co. and reiterated in
Plaridel Surety & Insurance Co., Inc. vs. P.L. Galang Machinery Co., Inc., and more recently, in
Republic vs. Court of Appeals and R & B Surety and Insurance Company, Inc., we have
sustained the principle that if a surety upon demand fails to pay, he can be held liable for
interest, even if in thus paying, its liability becomes more than the principal obligation. The
increased liability is not because of the contract but because of the default and the necessity of
judicial collection.

Petitioners liability under the suretyship contract is different from its liability under the
law. There is no question that as a surety, petitioner should not be made to pay more than its
assumed obligation under the surety bonds. However, it is clear from the above-cited
jurisprudence that petitioners liability for the payment of interest is not by reason of the
suretyship agreement itself but because of the delay in the payment of its obligation under the
said agreement.

POSEIDON INTERNATIONAL MARITIME SERVICES, INC. v. TITO R. TAMALA, FELIPE S.

SAURIN, JR. ARTEMIO A. BO-OC AND JOEL S. FERNANDEZ
G.R. No. 186475, June 26, 2013
J. Brion

Where the person making the waiver, however, has done so voluntarily, with a full
understanding of its terms and with the payment of credible and reasonable consideration, we
have no option but to recognize the transaction to be valid and binding. Absence of any
evidence showing that fraud, deception or misrepresentation attended the execution of the
waiver and quitclaim, the court is sufficiently convinced that a valid transaction took place.

The respondents are entitled to nominal damages for failure of Van Doorn to observe
the procedural requisites for the termination of employment under Article 283 of theLabor Code.

FACTS:

Poseidon hired the respondents, in behalf of Van Doorn, to man the fishing vessels of
Van Doorn and those of its partners Dinko Tuna Farmers Pty. Ltd. (Dinko) and Snappertuna
Cv. Lda. (Snappertuna). Poseidon and Van Doorn, with Goran of Snappertuna and Dinko Lukin
of Dinko, entered into another agreement (letter of acceptance) reducing the previously agreed
amount to 50% of the respondents unpaid salaries (settlement pay) for the unexpired portion of
their contract.

The respondents filed a complaint before the Labor Arbitration Branch of the NLRC,
National Capital Region for illegal termination of employment with prayer for the payment of
their salaries for the unexpired portion of their contracts; and for non-payment of salaries,
overtime pay and vacation leave pay. The respondents also prayed for moral and exemplary
damages and attorneys fees. The respondents anchored their claim on their agreement with
Goran, and contended that their subsequent execution of the waiver and quitclaim in favor of
Poseidon and Van Doorn should not be given weight nor allowed to serve as a bar to their
claim. The respondents alleged that their dire need for cash for their starving families compelled
and unduly influenced their decision to sign their respective waivers and quitclaims. In addition,
the complicated language employed in the document rendered it highly suspect.

The LA dismissed the respondents complaint for lack of merit, declaring as valid and
binding their waivers and quitclaims. LA dismissed the issue of illegal dismissal, noting that the
respondents already abandoned this issue in their pleadings. The respondents appealed the
LAs decision before the NLRC. The NLRC affirmed in toto the LAs decision. As the LA did, the
NLRC ruled that the respondents knowing and voluntary acquiescence to the settlement and
their acceptance of the payments made bind them and effectively bar their claims. The CA
granted the respondents petition and ordered Poseidon and Van Doorn to pay the respondents.
The CA also pointed out with emphasis that the pre-termination of the respondents employment
contract was simply the result of Van Doorns decision to stop its operations. Finally, the CA did
not consider the respondents complaint as a mere afterthought; the respondents are precisely
given under the Labor Code a three-year prescriptive period to allow them to institute such
actions. Hence,the present petition.

ISSUES:

1. Whether the respondents waivers and quitclaims are valid and whether these should bar
their claim for unpaid salaries
2. Whether the respondents are entitled to nominal damages

RULING:

1. The waivers and quitclaims signed by the respondents are valid and binding. Generally, this
Court looks with disfavor at quitclaims executed by employees for being contrary to public
policy. Where the person making the waiver, however, has done so voluntarily, with a full
understanding of its terms and with the payment of credible and reasonable consideration,
we have no option but to recognize the transaction to be valid and binding.

We find the requisites for the validity of the respondents quitclaim present in this case.
We base this conclusion on the following observations: First, the respondents acknowledged in
their various pleadings, as well as in the very document denominated as "waiver and quitclaim,"
that they voluntarily signed the document after receiving the agreed settlement pay. Second, the
settlement pay is reasonable under the circumstances, especially when contrasted with the
amounts to which they were respectively entitled to receive as termination pay pursuant to
Section 23 of the POEA-SEC and Article 283 of the Labor Code. Thus, the respondents
undeniably received more than what they were entitled to receive under the law as a result of
the cessation of the fishing operations. Third, the contents of the waiver and quitclaim are clear,
unequivocal and uncomplicated so that the respondents could fully understand the import of
what they were signing and of its consequences. Nothing in the records shows that what they
received was different from what they signed for.Fourth, the respondents are mature and
intelligent individuals, with college degrees, and are far from the naive and unlettered individuals
they portrayed themselves to be. Fifth, while the respondents contend that they were coerced
and unduly influenced in their decision to accept the settlement pay and to sign the waivers and
quitclaims, the records of the case do not support this claim. The respondents claims that they
were in "dire need for cash" and that they would not be paid anything if they would not sign do
not constitute the coercion nor qualify as the undue influence contemplated by law sufficient to
invalidate a waiver and quitclaim, particularly in the circumstances attendant in this case. The
records show that the respondents, along with their other fellow seafarers, served as each
others witnesses when they agreed and signed their respective waivers and quitclaims. Sixth,
the respondents voluntary and knowing conformity to the settlement pay was proved not only by
the waiver and quitclaim, but by the letters of acceptance and the vouchers evidencing
payment. With these documents on record, the burden shifts to the respondents to prove
coercion and undue influence other than through their bare self-serving claims. No such
evidence appeared on record at any stage of the proceedings.

In these lights and in the absence of any evidence showing that fraud, deception or
misrepresentation attended the execution of the waiver and quitclaim, we are sufficiently
convinced that a valid transaction took place. Consequently, we find that the CA erroneously
imputed grave abuse of discretion in misreading the submitted evidence, and in relying on the
May 25, 2005 agreement and on Section 10 of R.A. No. 8042.

2. The respondents are entitled to nominal damages for failure of Van Doorn to observe the
procedural requisites for the termination of employment under Article 283 of theLabor Code.

As a final note, we observe that while Van Doorn has a just and valid cause to terminate
the respondents employment, it failed to meet the requisite procedural safeguards provided
under Article 283 of the Labor Code. In the termination of employment under Article 283, Van
Doorn, as the employer, is required to serve a written notice to the respondents and to the
DOLE of the intended termination of employment at least one month prior to the cessation of its
fishing operations. Poseidon could have easily filed this notice, in the way it represented Van
Doorn in its dealings in the Philippines. While this omission does not affect the validity of the
termination of employment, it subjects the employer to the payment of indemnity in the form of
nominal damages.

ALI AKANG v. MUNICIPALITY OF ISULAN, SULTAN KUDARAT PROVINCE,

REPRESENTED BY ITS MUNICIPAL MAYOR AND MUNICIPAL VICE MAYOR AND
MUNICIPAL COUNCILORS/KAGAWADS
G.R. No. 186014. June 26, 2013
J. Reyes

A contract of sale is defined under Article 1458 of the Civil Code: By the contract of sale,
one of the contracting parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefore a price certain in money or its equivalent.The
elements of a contract of sale are: (a) consent or meeting of the minds, that is, consent to
transfer ownership in exchange for the price; (b) determinate subject matter; and (c) price
certain in money or its equivalent. The Deed of Sale executed by the petitioner and the
respondent is a perfected contract of sale, all its elements being present.

FACTS:

Ali Akang (petitioner) is a member of the national and cultural community belonging to
the Maguindanaon tribe of Isulan, Province of Sultan Kudarat and the registered owner of Lot
located at Kalawag III, Isulan, Sultan Kudarat. Sometime in 1962, a two-hectare portion of the
property was sold by the petitioner to the Municipality of Isulan, Province of Sultan Kudarat
(respondent) through then Isulan Mayor Datu Ampatuan under a Deed of Sale.

The respondent immediately took possession of the property and began construction of
the municipal building. Thirty-nine (39) years later, the petitioner, together with his wife, Patao
Talipasan, filed a civil action for Recovery of Possession of Subject Property and/or Quieting of
Title thereon and Damages against the respondent, represented by its Municipal Mayor, et al.
In his complaint, the petitioner alleged, among others, that the agreement was one to sell, which
was not consummated as the purchase price was not paid.

The respondent denied the petitioners allegations, claiming, among others: that the
petitioners cause of action was already barred by laches; that the Deed of Sale was valid; and
that it has been in open, continuous and exclusive possession of the property for forty (40)
years.

RTC rendered judgment in favor of the petitioner. The RTC construed the Deed of Sale
as a contract to sell, based on the wording of the contract, which allegedly showed that the
consideration was still to be paid and delivered on some future date a characteristic of a
contract to sell. The CA reversed the ruling of the RTC and upheld the validity of the sale. It
ruled that the Deed of Sale is not a mere contract to sell but a perfected contract of sale. There
was no express reservation of ownership of title by the petitioner and the fact that there was yet
no payment at the time of the sale does not affect the validity or prevent the perfection of the
sale. Hence, this petition.

ISSUES:

1. Whether the Deed of Sale dated July 18, 1962 is a valid and perfected contract of sale.
2. Whether the petitioners claim is barred by laches.

RULING:

The Court finds the petition devoid of merit.

1. A contract of sale is defined under Article 1458 of the Civil Code: By the contract of sale, one
of the contracting parties obligates himself to transfer the ownership of and to deliver a
determinate thing, and the other to pay therefore a price certain in money or its
equivalent.The elements of a contract of sale are: (a) consent or meeting of the minds, that
is, consent to transfer ownership in exchange for the price; (b) determinate subject matter;
and (c) price certain in money or its equivalent.

A contract to sell, on the other hand, is defined by Article 1479 of the Civil Code: A
bilateral contract whereby the prospective seller, while expressly reserving the ownership of the
subject property despite delivery thereof to the prospective buyer, binds himself to sell the said
property exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that
is, full payment of the purchase price.

In a contract of sale, the title to the property passes to the buyer upon the delivery of the
thing sold, whereas in a contract to sell, the ownership is, by agreement, retained by the seller
and is not to pass to the vendee until full payment of the purchase price.

The Deed of Sale executed by the petitioner and the respondent is a perfected contract
of sale, all its elements being present. There was mutual agreement between them to enter into
the sale, as shown by their free and voluntary signing of the contract. There was also an
absolute transfer of ownership of the property by the petitioner to the respondent as shown in
the stipulation. "x x x I petitioner hereby sell, transfer, cede, convey and assign as by these
presents do have sold, transferred, ceded, conveyed and assigned, x x x." There was also a
determine subject matter, that is, the two-hectare parcel of land as described in the Deed of
Sale. Lastly, the price or consideration is at Three Thousand Pesos (P3,000.00), which was to
be paid after the execution of the contract. The fact that no express reservation of ownership or
title to the property can be found in the Deed of Sale bolsters the absence of such intent, and
the contract, therefore, could not be one to sell. Had the intention of the petitioner been
otherwise, he could have: (1) immediately sought judicial recourse to prevent further
construction of the municipal building; or (2) taken legal action to contest the agreement. The
petitioner did not opt to undertake any of such recourses.

2. Laches has been defined as the failure or neglect, for an unreasonable and unexplained
length of time, to do that which, by exercising due diligence could or should have been done
earlier. It should be stressed that laches is not concerned only with the mere lapse of time.
As a general rule, an action to recover registered land covered by the Torrens System may
not be barred by laches. Neither can laches be set up to resist the enforcement of an
imprescriptible legal right. In exceptional cases, however, the Court allowed laches as a bar
to recover a titled property. In our jurisdiction, it is an enshrined rule that even a registered
owners of property may be barred from recovering possession of property by virtue of
laches. Under the Land Registration Act (now the Property Registration Decree), no title to
registered land in derogation to that of the registered owner shall be acquired by prescription
or adverse possession.

Vigilantibus sed non dormientibus jura subverniunt. The law aids the vigilant, not those
who sleep on their rights. This legal percept finds application in the petitioner's case.

CATHAY PACIFIC AIRWAYS v. JUANITA REYES, WILFREDO REYES, MICHAEL ROY

REYES, SIXTA LAPUZ, AND SAMPAGUITA TRAVEL CORP.
G.R. No. 185891, June 26, 2013
J. Perez

Since the contract between the parties is an ordinary one for services, the standard of
care required of respondent is that of a good father of a family under Article 1173 of the Civil
Code. This connotes reasonable care consistent with that which an ordinarily prudent person
would have observed when confronted with a similar situation. The test to determine whether
negligence attended the performance of an obligation is: did the defendant in doing the alleged
negligent act use that reasonable care and caution which an ordinarily prudent person would
have used in the same situation? If not, then he is guilty of negligence.
 FACTS:

This case started as a complaint for damages tiled by respondents against Cathay
Pacific Airways (Cathay Pacific) and Sampaguita Travel Corp. (Sampaguita Travel), now joined
as a respondent. Sometime in March 1997, respondent Wilfredo Reyes (Wilfredo) made a travel
reservation with Sampaguita Travel for his familys trip to Adelaide, Australia. Upon booking and
confirmation of their flight schedule, Wilfredo paid for the airfare and was issued four (4) Cathay
Pacific round-trip airplane tickets for Manila-HongKong-Adelaide-HongKong-Manila. One week
before they were scheduled to fly back home, Wilfredo reconfirmed his familys return flight with
the Cathay Pacific office in Adelaide. They were advised that the reservation was "still okay as
scheduled."

On their scheduled departure from Adelaide, when the airport check-in counter opened,
Wilfredo was informed by a staff from Cathay Pacific that the Reyeses did not have confirmed
reservations, and only Sixtas flight booking was confirmed. Nevertheless, they were allowed to
board the flight to HongKong due to adamant pleas from Wilfredo. When they arrived in
HongKong, they were again informed of the same problem. Unfortunately this time, the Reyeses
were not allowed to board because the flight to Manila was fully booked. Only Sixta was allowed
to proceed to Manila from HongKong. On the following day, the Reyeses were finally allowed to
board the next flight bound for Manila.

Upon arriving in the Philippines, Wilfredo went to Sampaguita Travel to report the
incident. He was informed by Sampaguita Travel that it was actually Cathay Pacific which
cancelled their bookings. Respondents filed a Complaint for damages against Cathay Pacific
and Sampaguita Travel and prayed for the following relief: a) P1,000,000.00 as moral damages;
b) P300,000.00 as actual damages; c) P100,000.00 as exemplary damages; and d)
P100,000.00 as attorneys fees.

Cathay Pacific asserted that in the case of Wilfredo with PNR No. J76TH, no valid ticket
number was inputted within a prescribed period which means that no ticket was sold. Thus,
Cathay Pacific had the right to cancel the booking. Cathay Pacific found that Sampaguita Travel
initially inputted a ticket number for PNR No. J76TH and had it cancelled the following day, while
the PNR Nos. HDWC3 and HTFMG of Juanita and Michael do not exist. On the other hand,
Sampaguita Travel, in its Answer, denied Cathay Pacifics claim that it was the cause of the
cancellation of the bookings. Sampaguita Travel maintained that it made the necessary
reservation with Cathay Pacific for respondents trip to Adelaide. After getting confirmed
bookings with Cathay Pacific, Sampaguita Travel issued the corresponding tickets to
respondents.

The Regional Trial Court (RTC) rendered a Decision, and found that respondents were
in possession of valid tickets but did not have confirmed reservations for their return trip to
Manila. Additionally, the trial court observed that the several PNRs opened by Sampaguita
Travel created confusion in the bookings. The trial court however did not find any basis to
establish liability on the part of either Cathay Pacific or Sampaguita Travel considering that the
cancellation was not without any justified reason. Finally, the trial court denied the claims for
damages for being unsubstantiated. CA ordered Cathay Pacific to pay P25,000.00 each to
respondents as nominal damages. Hence, this petition.
ISSUE:

Whether Cathay Pacific is liable for nominal damages for its alleged breach of contract with the
passengers even though Cathat Pacific was able to prove beyond reasonable doubt that it was
not at fault for the predicament of the respondent passengers

RULING:

The determination of whether or not the award of damages is correct depends on the
nature of the respondents contractual relations with Cathay Pacific and Sampaguita Travel. It is
beyond dispute that respondents were holders of Cathay Pacific airplane tickets and they made
the booking through Sampaguita Travel.

Cathay Pacific breached its contract of carriage with respondents when it disallowed
them to board the plane in Hong Kong going to Manila on the date reflected on their tickets.
Thus, Cathay Pacific opened itself to claims for compensatory, actual, moral and exemplary
damages, attorneys fees and costs of suit.

In contrast, the contractual relation between Sampaguita Travel and respondents is a

contract for services. The object of the contract is arranging and facilitating the latters booking
and ticketing. It was even Sampaguita Travel which issued the tickets.

Since the contract between the parties is an ordinary one for services, the standard of
care required of respondent is that of a good father of a family under Article 1173 of the Civil
Code. This connotes reasonable care consistent with that which an ordinarily prudent person
would have observed when confronted with a similar situation. The test to determine whether
negligence attended the performance of an obligation is: did the defendant in doing the alleged
negligent act use that reasonable care and caution which an ordinarily prudent person would
have used in the same situation? If not, then he is guilty of negligence.

There was indeed failure on the part of Sampaguita Travel to exercise due diligence in
performing its obligations under the contract of services. It was established by Cathay Pacific,
through the generation of the PNRs, that Sampaguita Travel failed to input the correct ticket
number for Wilfredos ticket. Cathay Pacific even asserted that Sampaguita Travel made two
fictitious bookings for Juanita and Michael.

The Court sustains the award of nominal damages in the amount of P25,000.00 to only
three of the four respondents who were aggrieved by the last-minute cancellation of their flights.
Nominal damages are recoverable where a legal right is technically violated and must be
vindicated against an invasion that has produced no actual present loss of any kind or where
there has been a breach of contract and no substantial injury or actual damages whatsoever
have been or can be shown. Under Article 2221 of the Civil Code, nominal damages may be
awarded to a plaintiff whose right has been violated or invaded by the defendant, for the
purpose of vindicating or recognizing that right, not for indemnifying the plaintiff for any loss
suffered.

Considering that the three respondents were denied boarding their return flight from
HongKong to Manila and that they had to wait in the airport overnight for their return flight, they
are deemed to have technically suffered injury. Nonetheless, they failed to present proof of
actual damages. Consequently, they should be compensated in the form of nominal
damages.The amount to be awarded as nominal damages shall be equal or at least
commensurate to the injury sustained by respondents considering the concept and purpose of
such damages. The amount of nominal damages to be awarded may also depend on certain
special reasons extant in the case.

Cathay Pacific and Sampaguita Travel acted together in creating the confusion in the
bookings which led to the erroneous cancellation of respondents bookings. Their negligence is
the proximate cause of the technical injury sustained by respondents. Therefore, they have
become joint tortfeasors, whose responsibility for quasi-delict, under Article 2194 of the Civil
Code, is solidary.

RAYMUNDO CODERIAS, as represented by his ATTORNEY-IN-FACT, MARLON M.

CODERIAS v. ESTATE OF JUAN CIDOCO, represented by its administrator, DR. RAUL
R. CARAG
G.R. No. 180476, June 26, 2013
J. Del Castillo

The Court cannot sanction the use of force to evict beneficiaries of land reform. Eviction
using force is reversion to the feudal system, where the landed elite have free rein over their
poor vassals. In effect, might is right.

It is a better rule that courts, under the principle of equity, will not be guided or bound
strictly by the statute of limitations or the doctrine of laches when to do so, manifest wrong or
injustice would result. It must also be emphasized that the statute of limitations has been
devised to operate primarily against those who slept on their rights and not against those
desirous to act but cannot do so for causes beyond their control.

FACTS:

The deceased Juan Chioco (Chioco) owned a 4-hectare farm in Lupao Nueva Ecija (the
farm). As tiller of the farm, petitioner Raymundo Coderias was issued a Certificate of Land
Transfer (CLT) on April 26, 1974.

In 1980, individuals connected with Chioco who was a former Governor of Nueva Ecija
threatened to kill petitioner if he did not leave the farm. His standing crops (corn and
vegetables) and house were bulldozed. For fear of his life, petitioner, together with his family,
left the farm.

In 1993 upon learning of Chiocos death, petitioner and his family re-established
themselves on the farm. On March 9, 19959 petitioner filed with the Department of Agrarian
Reform Adjudication Board (DARAB) in Talavera, Nueva Ecija a Petition against respondent
Chiocos estate praying that his possession and cultivation of the farm be respected; that the
corresponding agricultural leasehold contract between them be executed; that he be awarded
actual damages for the destruction of his house, his standing crops, unrealized harvest from
1980 up to 1993, attorneys fees and costs of litigation.

The PARAD issued a Decision dismissing the Petition on the ground of prescription.
Petitioner appealed to the DARAB, which set aside the decision of PARAD. Respondent went
up to the CA by Petition for Review. The CA reversed the decision of DARAB. Hence, this
petition.
ISSUE:

Whether or not petitioners cause of action had prescribed

RULING:

The Court grants the Petition.

It must be recalled from the facts that the farm has been placed under the coverage of
RA 3844. It is also undisputed that a tenancy relation existed between Chioco and petitioner. In
fact, a CLT had been issued in favor of the petitioner; thus, petitioner already had an expectant
right to the farm. A CLT serves as a provisional title of ownership over the landholding while the
lot owner is awaiting full payment of just compensation or for as long as the tenant-farmer is an
amortizing owner. This certificate proves inchoate ownership of an agricultural land primarily
devoted to rice and corn production. It is issued in order for the tenant-farmer to acquire the
land he was tilling. Since the farm is considered expropriated and placed under the coverage of
the land reform law, Chioco had no right to evict petitioner and enter the property. More
significantly, Chioco had no right to claim that petitioners cause of action had prescribed.

Under Section 8 of RA 3844, the agricultural leasehold relation shall be extinguished

only under any of the following three circumstances, to wit: (1) abandonment of the landholding
without the knowledge of the agricultural lessor; (2) voluntary surrender of the landholding by
the agricultural lessee, written notice of which shall be served three months in advance; or (3)
absence of the persons under Section 9 to succeed the lessee x x x. None of these is
obtaining in this case. In particular, petitioner cannot be said to have abandoned the
landholding. It will be recalled that Chioco forcibly ejected him from the property through threats
and intimidation. His house was bulldozed and his crops were destroyed. Petitioner left the
farm in 1980 and returned only in 1993 upon learning of Chiocos death. Two years after, or in
1995, he filed the instant Petition.

At any rate, respondent cannot legally invoke the strict application of the rules on
prescription because the failure of petitioner to immediately file the Petition was due to its own
maneuvers. This Court should not allow respondent to profit from its threats and intimidation.
Besides, if we subscribe to respondents ratiocination that petitioners cause of action had
already prescribed, it would lead to an absurd situation wherein a tenant who was unlawfully
deprived of his landholding would be barred from pursuing his rightful claim against the
transgressor.

It is a better rule that courts, under the principle of equity, will not be guided or bound
strictly by the statute of limitations or the doctrine of laches when to do so, manifest wrong or
injustice would result.It must also be emphasized that the statute of limitations has been
devised to operate primarily against those who slept on their rights and not against those
desirous to act but cannot do so for causes beyond their control.
 SPOUSES BILL AND VICTORIA HING v. ALEXANDER CHOACHUY, SR. AND ALLAN
CHOACHUY
G.R. No. 179736. June 26, 2013
J. Del Castillo

An individuals right to privacy under Article 26(1) of the Civil Code should not be
confined to his house or residence as it may extend to places where he has the right to exclude
the public or deny them access. The phrase "prying into the privacy of anothers residence,"
therefore, covers places, locations, or even situations which an individual considers as private.
And as long as his right is recognized by society, other individuals may not infringe on his right
to privacy

FACTS:

Petitioner-spouses Bill and Victoria Hing filed with the Regional Trial Court (RTC) of
Mandaue City a Complaint for Injunction and Damages with prayer for issuance of a Writ of
Preliminary Mandatory Injunction/Temporary Restraining Order, against respondents Alexander
Choachuy, Sr. and Allan Choachuy. Petitioners alleged that they are the registered owners of a
parcel of land (Lot 1900-B) situated in Barangay Basak, City of Mandaue, Cebu; that
respondents are the owners of Aldo Development & Resources, Inc. (Aldo) located at Lots 1901
and 1900-C, adjacent to the property of petitioners; that respondents constructed an auto-repair
shop building (Aldo Goodyear Servitec) on Lot 1900-C: Aldo filed a case against petitioners for
Injunction and Damages with Writ of Preliminary Injunction/TRO, docketed as Civil Case No.
MAN-5125; that in that case, Aldo claimed that petitioners were constructing a fence without a
valid permit and that the said construction would destroy the wall of its building, which is
adjacent to petitioners property; that the court, in that case, denied Aldos application for
preliminary injunction for failure to substantiate its allegations; that, in order to get evidence to
support the said case, respondents on June 13, 2005 illegally set-up and installed on the
building of Aldo Goodyear Servitec two video surveillance cameras facing petitioners property;
that respondents, through their employees and without the consent of petitioners, also took
pictures of petitioners on-going construction; and that the acts of respondents violate
petitioners right to privacy. Thus, petitioners prayed that respondents be ordered to remove the
video surveillance cameras and enjoined from conducting illegal surveillance.

Respondents claimed that they did not install the video surveillance cameras, nor did
they order their employees to take pictures of petitioners construction. They also clarified that
they are not the owners of Aldo but are mere stockholders.

The RTC issued an Order granting the application for a TRO. They are hereby directed
to immediately remove the revolving camera that they installed at the left side of their building
overlooking the side of petitioners lot and to transfer and operate it elsewhere at the back where
petitioners property can no longer be viewed within a distance of about 2-3 meters from the left
corner of Aldo Servitec, facing the road. The CA issued its Decision granting the Petition for
Certiorari. The CA ruled that the Writ of Preliminary Injunction was issued with grave abuse of
discretion because petitioners failed to show a clear and unmistakable right to an injunctive writ.
The CA explained that the right to privacy of residence under Article 26(1) of the Civil Code was
not violated since the property subject of the controversy is not used as a residence.The CA
alsosaid that since respondents are not the owners of the building, they could not have installed
video surveillance cameras. They are mere stockholders of Aldo, which has a separate juridical
personality. Thus, they are not the proper parties.
ISSUE:

Whether there is a violation of petitioners right to privacy

RULING:

The petition is meritorious. The right to privacy is the right to be let alone. The right to
privacy is enshrined in our Constitution and in our laws. It is defined as "the right to be free from
unwarranted exploitation of ones person or from intrusion into ones private activities in such a
way as to cause humiliation to a persons ordinary sensibilities." It is the right of an individual "to
be free from unwarranted publicity, or to live without unwarranted interference by the public in
matters in which the public is not necessarily concerned."Simply put, the right to privacy is "the
right to be let alone."

The Bill of Rights guarantees the peoples right to privacy and protects them against the
States abuse of power. In this regard, the State recognizes the right of the people to be secure
in their houses. No one, not even the State, except "in case of overriding social need and then
only under the stringent procedural safeguards," can disturb them in the privacy of their homes.

The right to privacy under Article 26(1) of the Civil Code covers business offices where
the public are excluded therefrom and only certain individuals are allowed to enter. Article 26(1)
of the Civil Code, on the other hand, protects an individuals right to privacy and provides a legal
remedy against abuses that may be committed against him by other individuals. It states: Art.
26. Every person shall respect the dignity, personality, privacy and peace of mind of his
neighbors and other persons. The following and similar acts, though they may not constitute a
criminal offense, shall produce a cause of action for damages, prevention and other relief: (1)
Prying into the privacy of anothers residence; This provision recognizes that a mans house is
his castle, where his right to privacy cannot be denied or even restricted by others. It includes
"any act of intrusion into, peeping or peering inquisitively into the residence of another without
the consent of the latter." The phrase "prying into the privacy of anothers residence," however,
does not mean that only the residence is entitled to privacy.

Thus, an individuals right to privacy under Article 26(1) of the Civil Code should not be
confined to his house or residence as it may extend to places where he has the right to exclude
the public or deny them access. The phrase "prying into the privacy of anothers residence,"
therefore, covers places, locations, or even situations which an individual considers as private.
And as long as his right is recognized by society, other individuals may not infringe on his right
to privacy. The CA, therefore, erred in limiting the application of Article 26(1) of the Civil Code
only to residences.

In ascertaining whether there is a violation of the right to privacy, courts use the
"reasonable expectation of privacy" test. This test determines whether a person has a
reasonable expectation of privacy and whether the expectation has been violated.51 In Ople v.
Torres,52 we enunciated that "the reasonableness of a persons expectation of privacy depends
on a two-part test: (1) whether, by his conduct, the individual has exhibited an expectation of
privacy; and (2) this expectation is one that society recognizes as reasonable." Customs,
community norms, and practices may, therefore, limit or extend an individuals "reasonable
expectation of privacy." Hence, the reasonableness of a persons expectation of privacy must be
determined on a case-to-case basis since it depends on the factual circumstances surrounding
the case.
 In this day and age, video surveillance cameras are installed practically everywhere for
the protection and safety of everyone. The installation of these cameras, however, should not
cover places where there is reasonable expectation of privacy, unless the consent of the
individual, whose right to privacy would be affected, was obtained. Nor should these cameras
be used to pry into the privacy of anothers residence or business office as it would be no
different from eavesdropping, which is a crime under Republic Act No. 4200 or the Anti-
Wiretapping Law.

RODOLFO S. SABIDONG v. NICOLASITO S. SOLAS (CLERK OF COURT IV)

A.M. No. P-01-1448. June 25, 2013
J. Villarama, Jr.

The sale of Lot 11 in favor of respondent did not violate the rule on disqualification to
purchase property because Sp. Proc. No. 1672 was then pending before another court (RTC)
and not MTCC where he was Clerk of Court.

A property forming part of the estate under judicial settlement continues to be subject of
litigation until the probate court issues an order declaring the estate proceedings closed and
terminated. The rule is that as long as the order for the distribution of the estate has not been
complied with, the probate proceedings cannot be deemed closed and terminated. The probate
court loses jurisdiction of an estate under administration only after the payment of all the debts
and the remaining estate delivered to the heirs entitled to receive the same

FACTS:

Trinidad Sabidong, complainants mother, is one of the occupants of a parcel of land,

originally registered in the name of C. N. Hodges and situated atJaro, Iloilo City. The Sabidongs
are in possession of one-half portion of Lot 11 of the said Estate (Hodges Estate), as the other
half-portion was occupied by Priscila Saplagio. Lot 11 was the subject of an ejectment suit filed
by the Hodges Estate. A decision was rendered in said case ordering the defendant to
immediately vacate the portion of Lot 11 leased to her and to pay the plaintiff rentals due,
attorneys fees, expenses and costs.

Respondent submitted an Offer to Purchase on installment Lots 11 and 12. The

Administratrix of the Hodges Estate rejected respondents offer in view of an application to
purchase already filed by the actual occupant of Lot 12. Subsequently, respondents Offer to
Purchase Lot 11 was approved upon the courts observation that the occupants of the subject
lots have not manifested their desire to purchase the lots. A Deed of Sale With Mortgage
covering Lot 11 was executed between respondent and the Hodges Estate represented by its
Administratrix, Mrs. Ruth R. Diocares. Lot 11 was thereby conveyed to respondent on
installment for the total purchase price of P50,000.

On motion of Ernesto Pe Benito, Administrator of the Hodges Estate, a writ of demolition

was issued by the probate court in favor of respondent and against all adverse occupants of Lot
11. The Court received the sworn letter-complaint asserting that as court employee respondent
cannot buy property in litigation (consequently he is not a buyer in good faith), commit
deception, dishonesty, oppression and grave abuse of authority. This Court adopted the
recommendation of the Court Administrator to treat the present administrative action as a
regular administrative matter and to designate the Executive Judge of the RTC of Iloilo City to
hear the evidence of the parties. The Court, however, noted without action the Court
Administrators recommendation to suspend respondent for six months.

The RTC of Iloilo, Branch 37, dismissed the case for annulment of title, damages and
injunction against respondent for lack of merit. Later on, the case was reassigned to Judge
Hortillo and subsequently to Judge Patricio. Respondent maintained that his purchase of the
subject land is not covered by the prohibition in paragraph 5, Article 1491 of the Civil Code. He
pointed out that he bought Lot 11-A a decade after the MTCC of Iloilo, Branch 3, had ordered
the ejectment of Priscila Saplagio and Trinidad Sabidong from the subject lot. He insisted that
public trust was observed when complainant was accorded his right of first refusal in the
purchase of Lot 11-A, albeit the latter failed to avail said right. Asserting that he is a buyer in
good faith and for value, respondent cited the dismissal of the cases for Estafa and annulment
of title and damages which complainant filed against him.

Based on the evidence presented, Judge Patricio concluded that respondent

misappropriated the money which he received for the filing of complainants loan application.
Such money could not have been used for the partition of Lot No. 1280-D-4-11 since the same
was already subdivided into Lots 11-A and 11-B when respondent presented the Contract to Sell
to complainant. Judge Patricio recommended the forfeiture of respondents salary for six months
to be deducted from his retirement benefits.

The Court Administrator held that by his unilateral acts of extinguishing the contract to
sell and forfeiting the amounts he received from complainant and Saplagio without due notice,
respondent failed to act with justice and equity. He found respondents denial to be anchored
merely on the fact that he had not issued receipts which was belied by his admission that he
had asked money for the expenses of partitioning Lot 11 from complainant and Saplagio. Since
their PAG-IBIG loan applications did not materialize, complainant should have returned the
amounts given to him by complainant and Saplagio.

ISSUE:

Whether the respondent as a clerk of court is liable from acquiring the property involved in
litigation.

RULING:

Article 1491, paragraph 5 of the Civil Code prohibits court officers such as clerks of court
from acquiring property involved in litigation within the jurisdiction or territory of their courts. For
the prohibition to apply, the sale or assignment of the property must take place during the
pendency of the litigation involving the property. Where the property is acquired after the
termination of the case, no violation of paragraph 5, Article 1491 of the Civil Code attaches.

A thing is said to be in litigation not only if there is some contest or litigation over it in
court, but also from the moment that it becomes subject to the judicial action of the judge. A
property forming part of the estate under judicial settlement continues to be subject of litigation
until the probate court issues an order declaring the estate proceedings closed and terminated.
The rule is that as long as the order for the distribution of the estate has not been complied with,
the probate proceedings cannot be deemed closed and terminated. The probate court loses
jurisdiction of an estate under administration only after the payment of all the debts and the
remaining estate delivered to the heirs entitled to receive the same. Since there is no evidence
to show that Sp. Proc. No. 1672 in the RTC of Iloilo, Branch 27, had already been closed and
terminated at the time of the execution of the Deed of Sale With Mortgage dated November 21,
1994, Lot 11 is still deemed to be "in litigation" subject to the operation of Article 1491 (5) of the
Civil Code.

This notwithstanding, we hold that the sale of Lot 11 in favor of respondent did not
violate the rule on disqualification to purchase property because Sp. Proc. No. 1672 was then
pending before another court (RTC) and not MTCC where he was Clerk of Court.

In this case, respondent deceived complainants family who were led to believe that he is
the legal representative of the Hodges Estate, or at least possessed of such power to intercede
for overstaying occupants of the estates properties like complainant. Boasting of his position as
a court officer, a City Sheriff at that, complainants family completely relied on his repeated
assurance that they will not be ejected from the premises. Upon learning that the lot they were
occupying was for sale and that they had to negotiate for it through respondent, complainants
family readily gave the amounts he demanded and, along with Saplagio, complied with the
requirements for a loan application with PAG-IBIG. All the while and unknown to complainants
family, respondent was actually working to acquire Lot 11 for himself.

SIME DARBY PILIPINAS, INC. v. JESUS B. MENDOZA

G.R. No. 202247, June 19, 2013
J. Carpio

While the share was bought by Sime Darby and placed under the name of Mendoza, his
title is only limited to the usufruct, or the use and enjoyment of the clubs facilities and privileges
while employed with the company. While Sime Darby paid for the purchase price of the club
share, Mendoza was given the legal title. Thus, a resulting trust is presumed as a matter of law.
The burden then shifts to the transferee to show otherwise.

FACTS:

Petitioner Sime Darby Pilipinas, Inc. (Sime Darby) employed Jesus B. Mendoza
(Mendoza) as sales manager to handle sales, marketing, and distribution of the company's tires
and rubber products. Sime Darby bought a Class "A" club share in Alabang Country Club (ACC)
from Margarita de Araneta. The share, however, was placed under the name of Mendoza in
trust for Sime Darby since the By-Laws of ACC state that only natural persons may own a club
share.

Mendoza endorsed the Club Share Certificate in blank and executed a Deed of
Assignment, also in blank, and handed over the documents to Sime Darby. Nine years later,
Sime Darby found an interested buyer of the club share. Before the sale could push through, the
broker required Sime Darby to secure an authorization to sell from Mendoza since the club
share was still registered in Mendozas name. However, Mendoza refused to sign the required
authority to sell or special power of attorney unless Sime Darby paid him the amount of
P300,000, claiming that this represented his unpaid separation benefits. As a result, the sale did
not push through and Sime Darby was compelled to return the payment to the prospective
buyer.

Sime Darby filed a complaint for damages with writ of preliminary injunction against
Mendoza with the Regional Trial Court (RTC) of Makati City, Branch 132. Sime Darby claimed
that it was the practice of the company to extend to its senior managers and executives the
privilege of using and enjoying the facilities of various club memberships, and that despite
having retired from Sime Darby for less than 10 years and long after the employment contract of
Mendoza with the company has been severed, Mendoza resumed using the facilities and
privileges of ACC, to the damage and prejudice of Sime Darby. Thus, Sime Darby prayed that a
restraining order be issued, pending the hearing on the issuance of a writ of preliminary
injunction, enjoining Mendoza from availing of the clubs facilities and privileges as if he is the
owner of the club share. Mendoza filed an Answer alleging ownership of the club share.
Mendoza stated that Sime Darby purchased the Class "A" club share and placed it under his
name as part of his employee benefits and bonus for past exemplary service.

The RTC denied Sime Darbys prayer for restraining order and preliminary injunction.
Sime Darby then filed a Motion for Summary Judgment explaining that a trial was no longer
necessary since there was no issue as to any material fact. Subsequently, the trial court
rendered a Decision in favor of Sime Darby. CA reversed. Hence, the instant petition.

ISSUE:

Whether Sime Darby is entitled to damages and injunctive relief against Mendoza, its former
employee

RULING:

The petition has merit.

In the present case, petitioner Sime Darby has sufficiently established its right over the
subject club share. Sime Darby presented evidence that it acquired the Class "A" club share of
ACC in 1987 through a Deed of Sale. Being a corporation which is expressly disallowed by
ACCs By-Laws to acquire and register the club share under its name, Sime Darby had the
share registered under the name of respondent Mendoza, Sime Darbys former sales manager,
under a trust arrangement. Such fact was clearly proved when in the application form dated 17
July 1987 of the ACC for the purchase of the club share, Sime Darby placed its name in full as
the owner of the share and Mendoza as the assignee of the club share. Also, in connection with
the application for membership, Sime Darby sent a letter dated 17 September 1987 addressed
to ACC confirming that "Mendoza, as Sime Darbys Sales Manager, is entitled to club
membership benefit of the Company."

While the share was bought by Sime Darby and placed under the name of Mendoza, his
title is only limited to the usufruct, or the use and enjoyment of the clubs facilities and privileges
while employed with the company. While Sime Darby paid for the purchase price of the club
share, Mendoza was given the legal title. Thus, a resulting trust is presumed as a matter of law.
The burden then shifts to the transferee to show otherwise.

It can be gathered then that Sime Darby did not intend to give up its beneficial interest
and right over the share. The company merely wanted Mendoza to hold the share in trust since
Sime Darby, as a corporation, cannot register a club share in its own name under the rules of
the ACC. At the same time, Mendoza, as a senior manager of the company, was extended the
privilege of availing a club membership, as generously practiced by Sime Darby.

However, Mendoza violated Sime Darbys beneficial interest and right over the club
share after he was informed by Atty. Ronald E. Javier of Sime Darbys plan to sell the share to
an interested buyer. Mendoza refused to give an authorization to sell the club share unless he
was paid P300,000 allegedly representing his unpaid retirement benefit. In August 2004,
Mendoza tried to appropriate the club share and demanded from ACC that he be recognized as
the true owner of the share as the named member in the stock certificate as well as in the
annual report issued by ACC. Despite being informed by Sime Darby to stop using the facilities
and privileges of the club share, Mendoza continued to do so. Thus, in order to prevent further
damage and prejudice to itself, Sime Darby properly sought injunction in this case.

In the present case, it was established that sometime in July 2004, plaintiff tried to sell
the share but defendant refused to give the authority. Thus, plaintiff was forced to return the
amount of P1,100,000 to the buyer. Additionally, plaintiff cannot make use of the facilities of the
club because defendant insists on enjoying it despite the fact that he is no longer connected
with the plaintiff. With this, the Court deems it proper to impose upon the defendant P100,000
as temperate damages.

Further, plaintiff having established its right to the relief being claimed and inasmuch as it
was constrained to litigate in order to protect its interest as well as incurred litigation expenses,
attorney's fees are hereby awarded in the amount of P250,000.

In sum, we grant the damages and injunctive relief sought by Sime Darby, as the true
owner of the ACC Class "A" club share. Sime Darby has the right to be protected from
Mendoza's act of using the facilities and privileges of ACC. Since the records show that Sime
Darby was dissolved on 31 December 2011, it has three years to convey its property and close
its affairs as a body corporate under the Corporation Code. Thus, Sime Darby may choose to
dispose of the club share in any manner it sees fit without undue interference from Mendoza,
who lost his right to use the club share when he retired from the company.

CONRADA O. ALMAGRO v. SPS. MANUEL AMAYA, SR. AND LUCILA MERCADO, JESUS
MERCADO, SR. AND RICARDO MERCADO
G.R. No. 179685, June 19, 2013
J. Velasco Jr.

Mere issuance of an Emancipation Patents (EP) does not put the ownership of
beneficiaries beyond attack and scrutiny. EPs issued to such beneficiaries may be corrected
and canceled for violations of agrarian laws, rules and regulations. In this case, respondents
were in bad faith in obtaining the EPs due to their fraudulent misrepresentation in their
application as agrarian reform beneficiaries. The landholdings cultivated by respondents are
primarily devoted to vegetable production, it is definitely outside the coverage, and necessarily
cannot properly be placed under the umbrella, of PD 27.

FACTS:

In 1976, Conrada allowed respondent spouses Manuel Amaya, Sr. and Lucila Mercado
(Sps. Amaya) to construct a house on a 46-square meter portion of Lot No. 13333 on the
condition that no additional improvements of such nature requiring additional lot space shall be
introduced and that they shall leave the area upon a 90-day notice. A decade later, Conrada
asked the Amayas to vacate. Instead of heeding the vacation demand, the Amayas, in a virtual
show of defiance, built permanent improvements on their house, the new structures eating an
additional 48 square meters of land space. On November 3, 1993 Conrada filed a Complaint
against the Sps. Amaya before the DARAB for ejectment and payment of rentals with damages.
 Conrada learned that herein respondents Manuel Amaya, Sr. (Manuel), Jesus Mercado,
Sr. (Jesus) and Ricardo Mercado (Ricardo) have made tenancy claims over an area allegedly
planted to corn area each was tilling. To add to her woes, she discovered that Emancipation
Patents (EPs) have been generated over portions of Lot No. 13333.

On October 16, 1995, Conrada filed a petition also before DARAB this time against
Manuel, Jesus and Ricardo, praying, in the main, for the cancellation of EPs. The gravamen of
Conradas gripe is that the subject lot has been primarily devoted to vegetables production and
cultivation, not to corn or rice, thus, outside the ambit of the OLT under PD 27.

RARAD ruled in favor of Conrada, declaring the property in question as outside the
coverage of the Operation Land Transfer (OLT) scheme. Respondent spouses appealed to the
DARAB. DARAB reversed the decision of RARAD. DARAB uphold the validity of the issuance of
the EPs to Manuel et al., thus effectively recognizing their tenurial rights over portions of Lot No.
13333. The CA affirmed the decision of DARAB. Hence, this petition.

ISSUE:

Whether the respondents made misprepresentation in their application for inclusion in the lists
of ARD under PD 27

RULING:

As aptly found by RARAD, there is ample evidence showing that respondents, in their
application for inclusion in the list of agrarian reform beneficiaries (ARBs) under PD 27 through
the OLT, made misrepresentation as to their entitlement to certain rights under the decree.
Respondents were in bad faith in obtaining the EPs due to their fraudulent misrepresentation on
a material point in the application as ARBs of PD 27 through the OLT.

The evidence adduced during the hearing of the consolidated land cases before the
office of the RARAD contradicts and belies respondents above averments. In this regard, the
Court accords respect to the findings of the RARAD who has the primary jurisdiction and
competence to determine the agricultural character of the land in question.

As determined by the RARAD on the basis of documentary and testimonial evidence,

and the more conclusive judicial admissions made by respondents, vegetables are the primary
crop planted in the areas respectively cultivated by respondents.

In Mercado v. Mercado and Gabriel v. Jamias, the Court has ruled that the mere
issuance of an EP does not put the ownership of ARBs beyond attack and scrutiny. EPs issued
to such beneficiaries may be corrected and canceled for violations of agrarian laws, rules and
regulations. In fact, DAR AO No. 02, Series of 1994, lists and defines the grounds for
cancellation of registered EPs or Certificates of Land Ownership Award (CLOA).

Respondents assertion in their application for lot award as ARBs under the OLT of PD
27that the parcels of land they respectively cultivate are devoted to corn production, when
they are in fact notcannot but be treated as erroneous, fraudulent deliberate statements of a
material fact, constituting material misrepresentation. Verily, the determination of whether the
subject lot is dedicated to the planting of corn, as to put it within the purview of PD 27, is,
ultimately, a conclusion of fact. Since the subject lot was not primarily planted to corn, except
occasionally during the panuig season (while the subject lot was planted to the regular
vegetables during the pangulilang and pang-enero seasons), respondents assertions in their
application were willfully and deliberately erroneous and fraudulent. And such fraudulent and
deliberate statement of an error, under the circumstances, is a falsity, a material
misrepresentation in the context of DAR AO No. 02, Series of 1994. A willful and deliberate
assertion of an erroneous conclusion of fact is verily a deliberate untruthful statement of a
material fact.

PD 27 pertinently provides, This shall apply to tenant farmers of private agricultural

lands primarily devoted to rice and corn under a system of sharecrop or lease-tenancy, whether
classified as landed estate or not.

It is, thus, clear that PD 27 encompasses only rice and corn land, i.e., agricultural lands
primarily devoted to rice and corn under a system of sharecrop or lease-tenancy. In the instant
case, since the landholdings cultivated by respondents are primarily devoted to vegetable
production, it is definitely outside the coverage, and necessarily cannot properly be placed
under the umbrella, of PD 27. Thus, as the RARAD found, the landholdings cultivated by
respondents which are portions of the subject lot were improperly placed under PD 27 through
OLT.

HOSPICIO D. ROSAROSO, ANOTNIO D. ROSAROSO, MANUEL D. ROSAROSO,

ALGERICA D. ROSAROSO AND CLEOFE LABINDAO v. LUCILA LABORTE SORIA,
SPOUSES HAM SOLUTAN AND LAILA SOLUTAN AND MERIDIAN REALTY
CORPORATION
G.R. No. 194846, June 19, 2013
J. Mendoza

When a piece of land is in the actual possession of persons other than the seller, the
buyer must be wary and should investigate the rights of those in possession. Without making
such inquiry, one cannot claim that he is a buyer in good faith. When a man proposes to buy or
deal with realty, his duty is to read the public manuscript, that is, to look and see who is there
upon it and what his rights are. A want of caution and diligence, which an honest man of
ordinary prudence is accustomed to exercise in making purchases, is in contemplation of law, a
want of good faith. The buyer who has failed to know or discover that the land sold to him is in
adverse possession of another is a buyer in bad faith.

FACTS:

Spouses Luis Rosaroso (Luis) and Honorata Duazo (Honorata) acquired several real
properties in Daan Bantayan, Cebu City, including the subject properties. The couple had nine
(9) children. A complaint for Declaration of Nullity of Documents with Damages was filed by Luis,
as one of the plaintiffs, against his daughter, Lucila R. Soria (Lucila); Lucilas daughter, Laila S.
Solutan (Laila); and Meridian Realty Corporation (Meridian). Due to Luis untimely death,
however, an amended complaint with the spouse of Laila, Ham Solutan (Ham); and Luis second
wife, Lourdes, included as defendants.

It was alleged by petitioners Hospicio, Antonio, Angelica, and Cleofe (petitioners) that
Luis, with the full knowledge and consent of his second wife, Lourdes, executed the Deed of
Absolute Sale in their favor. Despite the fact that the said properties had already been sold to
them, respondent Laila, in conspiracy with her mother, Lucila, obtained the Special Power of
Attorney (SPA), from Luis (First SPA) when Luis was sick, infirm, blind, and of unsound mind
which authorizes Laila to convey Lots. No. 8, 22 and 23 and Laila and Ham mortgaged Lot. 19
to Vital Lending. Furthermore, Meridian was in bad faith when it did not make any inquiry as to
who were the occupants and owners of said lots; and that if Meridian had only investigated, it
would have been informed as to the true status of the subject properties and would have
desisted in pursuing their acquisition. Petitioners, thus, prayed that they be awarded moral
damages, exemplary damages, attorneys fees, actual damages, and litigation expenses and
that the two SPAs and the deed of sale in favor of Meridian be declared null and void ab initio.

Respondents Lucila and Laila as well as Meridian, contested the First Sale in favor of
petitioners. They submitted that even assuming that it was valid, petitioners were estopped from
questioning the Second Sale in favor of Meridian because they failed not only in effecting the
necessary transfer of the title, but also in annotating their interests on the titles of the questioned
properties. With respect to the assailed SPAs and the deed of absolute sale executed by Luis,
they claimed that the documents were valid because he was conscious and of sound mind and
body when he executed them. In fact, it was Luis together with his wife who received the check
payment issued by Meridian where a big part of it was used to foot his hospital and medical
expenses.

RTC ruled in favor of petitioners. It held that when Luis executed the second deed of
sale in favor of Meridian, he was no longer the owner of Lot Nos. 19, 22 and 23 as he had
already sold them to his children by his first marriage. In fact, the subject properties had already
been delivered to the vendees who had been living there since birth and so had been in actual
possession of the said properties. On appeal, the CA reversed and set aside the RTC decision.
The CA ruled that the first deed of sale in favor of petitioners was void because they failed to
prove that they indeed tendered a consideration for the four (4) parcels of land.

ISSUES:

1. Whether the sale was valid

2. Whether Meridian is buyer in good faith

RULING:

1. The first Deed of Sale was valid.

The fact that the first deed of sale was executed, conveying the subject properties in
favor of petitioners, was never contested by the respondents. What they vehemently insist,
though, is that the said sale was simulated because the purported sale was made without a
valid consideration.

Under Section 3, Rule 131 of the Rules of Court, the following are disputable
presumptions: (1) private transactions have been fair and regular; (2) the ordinary course of
business has been followed; and (3) there was sufficient consideration for a contract. These
presumptions operate against an adversary who has not introduced proof to rebut them. They
create the necessity of presenting evidence to rebut the prima facie case they created, and
which, if no proof to the contrary is presented and offered, will prevail. The burden of proof
remains where it is but, by the presumption, the one who has that burden is relieved for the time
being from introducing evidence in support of the averment, because the presumption stands in
the place of evidence unless rebutted.

In this case, the respondents failed to trounce the said presumption. Aside from their
bare allegation that the sale was made without a consideration, they failed to supply clear and
convincing evidence to back up this claim. It is elementary in procedural law that bare
allegations, unsubstantiated by evidence, are not equivalent to proof under the Rules of Court.

The failure of the buyer to make good the price does not, in law, cause the ownership to
revest to the seller unless the bilateral contract of sale is first rescinded or resolved pursuant to
Article 1191 of the New Civil Code. Non-payment only creates a right to demand the fulfillment
of the obligation or to rescind the contract.

2. Meridian is not a buyer in good faith.

The fact that Meridian had them first registered will not help its cause. In case of double
sale, Article 1544 of the Civil Code provides:ART. 1544. If the same thing should have been sold
to different vendees, the ownership shall be transferred to the person who may have first
possession thereof in good faith, if it should be movable property. Should it be immovable
property, the ownership shall belong to the person acquiring it who in good faith first recorded it
in the Registry of Property.Should there be no inscription, the ownership shall pertain to the
person who in good faith was first in possession; and, in the absence thereof; to the person who
presents the oldest title, provided there is good faith.

Otherwise stated, ownership of an immovable property which is the subject of a double

sale shall be transferred: (1) to the person acquiring it who in good faith first recorded it in the
Registry of Property; (2) in default thereof, to the person who in good faith was first in
possession; and (3) in default thereof, to the person who presents the oldest title, provided there
is good faith. The requirement of the law then is two-fold: acquisition in good faith and
registration in good faith. Good faith must concur with the registration. If it would be shown that
a buyer was in bad faith, the alleged registration they have made amounted to no registration at
all.

The principle of primus tempore, potior jure (first in time, stronger in right) gains greater
significance in case of a double sale of immovable property. When the thing sold twice is an
immovable, the one who acquires it and first records it in the Registry of Property, both made in
good faith, shall be deemed the owner. Verily, the act of registration must be coupled with good
faith that is, the registrant must have no knowledge of the defect or lack of title of his vendor
or must not have been aware of facts which should have put him upon such inquiry and
investigation as might be necessary to acquaint him with the defects in the title of his vendor.)

When a piece of land is in the actual possession of persons other than the seller, the
buyer must be wary and should investigate the rights of those in possession. Without making
such inquiry, one cannot claim that he is a buyer in good faith. When a man proposes to buy or
deal with realty, his duty is to read the public manuscript, that is, to look and see who is there
upon it and what his rights are. A want of caution and diligence, which an honest man of
ordinary prudence is accustomed to exercise in making purchases, is in contemplation of law, a
want of good faith. The buyer who has failed to know or discover that the land sold to him is in
adverse possession of another is a buyer in bad faith.

In the case at bench, the fact that the subject properties were already in the possession
of persons other than Luis was never disputed. Sanchez, representative and witness for
Meridian.

It is clear that Meridian, through its agent, knew that the subject properties were in
possession of persons other than the seller. Instead of investigating the rights and interests of
the persons occupying the said lots, however, it chose to just believe that Luis still owned them.
Simply, Meridian Realty failed to exercise the due diligence required by law of purchasers in
acquiring a piece of land in the possession of person or persons other than the seller.

MITSUBISHI MOTORS PHILIPPINES SALARIED EMPLOYEES UNION v.

MITSUBISHI MOTORS PHILIPPINES CORPORATION
G.R. No. 175773, June 17, 2013
J. Del Castillo

The Collective Bargaining Agreement (CBA) of the parties in this case provides that the
company shoulder the hospitalization expenses of the dependents of covered employees
subject to certain limitations and restrictions. Accordingly, covered employees pay part of the
hospitalization insurance premium through monthly salary deduction while the company, upon
hospitalization of the covered employees' dependents, shall pay the hospitalization expenses
incurred for the same. The conflict arose when a portion of the hospitalization expenses of the
covered employees' dependents were paid/shouldered by the dependent's own health
insurance. While the company refused to pay the portion of the hospital expenses already
shouldered by the dependents' own health insurance, the union insists that the covered
employees are entitled to the whole and undiminished amount of said hospital expenses.

To allow reimbursement of amounts paid under other insurance policies shall constitute
double recovery which is not sanctioned by law. MMPSEU insists that MMPC is also liable for
the amounts covered under other insurance policies; otherwise, MMPC will unjustly profit from
the premiums the employees contribute through monthly salary deductions.

FACTS:

The parties CBA provides for the hospitalization insurance benefits for the covered
dependents. The hospitalization expenses must be covered by actual hospital and doctors bills
and any amount in excess of the above mentioned level of benefits will be for the account of the
employee. On separate occasions, three members of MMPSEU, namely, Calida, Oabel and
Martin, filed claims for reimbursement of hospitalization expenses of their dependents.

MMPC paid only a portion of their hospitalization insurance claims, not the full amount.
Since Martin adnd Calida had used some benefits from other health insurances. Claiming that
under the CBA, they are entitled to hospital benefits amounting to much higher amount, MMPC
denied the claims contending that double insurance would result if the said employees would
receive from the company the full amount of hospitalization expenses despite having already
received payment of portions thereof from other health insurance providers.

This prompted the MMPSEU President to write the MMPC President demanding full
payment of the hospitalization benefits. Alleging discrimination against MMPSEU union
members, she pointed out that full reimbursement was given in a similar claim filed by Luisito
Cruz (Cruz), a member of the Hourly Union.MMPSEU referred the dispute to the National
Conciliation and Mediation Board and requested for preventive mediation. MMPSEU alleged
that there is nothing in the CBA which prohibits an employee from obtaining other insurance or
declares that medical expenses can be reimbursed only upon presentation of original official
receipts. It stressed that the hospitalization benefits should be computed based on the formula
indicated in the CBA without deducting the benefits derived from other insurance providers.
Besides, if reduction is permitted, MMPC would be unjustly benefited from the monthly premium
contributed by the employees through salary deduction. MMPSEU added that its members had
legitimate claims under the CBA and that any doubt as to any of its provisions should be
resolved in favor of its members. Moreover, any ambiguity should be resolved in favor of labor.

MMPC argued that the reimbursement of the entire amounts being claimed by the
covered employees, including those already paid by other insurance companies, would
constitute double indemnity or double insurance, which is circumscribed under the Insurance
Code. Moreover, a contract of insurance is a contract of indemnity and the employees cannot be
allowed to profit from their dependents loss.

The Voluntary Arbitrator rendered a Decision finding MMPC liable to pay or reimburse
the amount of hospitalization expenses already paid by other health insurance companies. The
Voluntary Arbitrator held that the employees may demand simultaneous payment from both the
CBA and their dependents separate health insurance without resulting to double insurance,
since separate premiums were paid for each contract. He also noted that the CBA does not
prohibit reimbursement in case there are other health insurers.CA reversed and set aside the
decision of the Voluntary Arbitrator. Hence, this Petition.

ISSUE:

Whether the members of MMPSEU can claim full reimbursement from MMPC.

RULING:

The condition that payment should be direct to the hospital and doctor implies that
MMPC is only liable to pay medical expenses actually shouldered by the employees
dependents. It follows that MMPCs liability is limited, that is, it does not include the amounts
paid by other health insurance providers. This condition is obviously intended to thwart not only
fraudulent claims but also double claims for the same loss of the dependents of covered
employees.

It is well to note at this point that the CBA constitutes a contract between the parties and
as such, it should be strictly construed for the purpose of limiting the amount of the employers
liability. The terms of the subject provision are clear and provide no room for any other
interpretation. As there is no ambiguity, the terms must be taken in their plain, ordinary and
popular sense. Consequently, MMPSEU cannot rely on the rule that a contract of insurance is to
be liberally construed in favor of the insured. Neither can it rely on the theory that any doubt
must be resolved in favor of labor.

To allow reimbursement of amounts paid under other insurance policies shall constitute
double recovery which is not sanctioned by law. MMPSEU insists that MMPC is also liable for
the amounts covered under other insurance policies; otherwise, MMPC will unjustly profit from
the premiums the employees contribute through monthly salary deductions.

This contention is unmeritorious. To constitute unjust enrichment, it must be shown that

a party was unjustly enriched in the sense that the term unjustly could mean illegally or
unlawfully. A claim for unjust enrichment fails when the person who will benefit has a valid claim
to such benefit.

The CBA has provided for MMPCs limited liability which extends only up to the amount
to be paid to the hospital and doctor by the employees dependents, excluding those paid by
other insurers. Consequently, the covered employees will not receive more than what is due
them; neither is MMPC under any obligation to give more than what is due under the CBA.

Moreover, since the subject CBA provision is an insurance contract, the rights and
obligations of the parties must be determined in accordance with the general principles of
insurance law. Being in the nature of a non-life insurance contract and essentially a contract of
indemnity, the CBA provision obligates MMPC to indemnify the covered employees medical
expenses incurred by their dependents but only up to the extent of the expenses actually
incurred. This is consistent with the principle of indemnity which proscribes the insured from
recovering greater than the loss. Indeed, to profit from a loss will lead to unjust enrichment and
therefore should not be countenanced. As aptly ruled by the CA, to grant the claims of
MMPSEU will permit possible abuse by employees.

LAND BANK OF THE PHILIPPINES v. VIRGINIA PALMARES, LERMA P. AVELINO, MELILIA

P. VILLA, NINIAN P. CATEQUISTA, LUIS PALMARES, JR. SALVE P. VALENZUELA,
GEORGE P. PALMARES AND DENCEL P. PALMARES HEREIN REPRESENTED BY THEIR
ATTORNEY-IN-FACT, LERMA AVELINO
G.R. No. 192890. June 17, 2013
J. Perlas-Bernabe

The principal basis of the computation for just compensation is Section 17 of RA 6657,
which enumerates the following factors to guide the special agrarian courts in the determination
thereof: (1)the acquisition cost of the land; (2)the current value of the properties; (3)its nature,
actual use, and income; (4)the sworn valuation by the owner; (5)the tax declarations;(6)the
assessment made by government assessors; (7)the social and economic benefits contributed
by the farmers and the farmworkers, and by the government to the property; and (8)the non-
payment of taxes or loans secured from any government financing institution on the said land, if
any. Pursuant to its rule-making power under Section 4922 of the same law, the DAR translated
these factors into a basic formula.

While the determination of just compensation is essentially a judicial function vested in

the RTC acting as a special agrarian court, the judge cannot abuse his discretion by not taking
into full consideration the factors specifically identified by law and implementing rules.

FACTS:

Respondents inherited a 19.98-hectare agricultural land located in Barangay Tagubang,

Passi City, Iloilo. In 1995, they voluntarily offered the land for sale to the government pursuant to
Republic Act No. 6657 (RA 6657), the Comprehensive Agrarian Law of 1988. Accordingly, the
Department of Agrarian Reform (DAR) acquired 19.1071 hectares of the entire area, which was
valued by LBP at P440,355.92. Respondents, however, rejected said amount. Consequently,
the Department of Agrarian Reform Adjudication Board (DARAB) conducted summary
proceedings to determine just compensation for the land, but it resolved to adopt LBP's
valuation. Hence, the same amount was deposited to respondents' credit as provisional
compensation for the land.

Respondents filed a petition6 for judicial determination of just compensation. The RTC
rendered the assailed Decision fixing the just compensation of the land at P669,962.53. The trial
court arrived at its own computation by getting the average of (1) the price per hectare as
computed by LBP in accordance with DAR guidelines; and (2) the market value of the land per
hectare as shown in the 1997 tax declaration.

LBP appealed to the CA arguing that the computation made by the RTC failed to
consider the factors in determining just compensation enumerated under Section 17 of RA 665.
The appellate court affirmed the just compensation fixed by the RTC

ISSUE:

Whether or not the court of appeals committed a serious error of law in affirming that the
computation made by the RTC which failed to consider the factors in determining just
compensation enumerated under Section 17 of RA 665

RULING:

The principal basis of the computation for just compensation is Section 17 of RA 6657,
which enumerates the following factors to guide the special agrarian courts in the determination
thereof: (1) the acquisition cost of the land; (2) the current value of the properties; (3) its nature,
actual use, and income; (4) the sworn valuation by the owner; (5) the tax declarations; (6) the
assessment made by government assessors; (7) the social and economic benefits contributed
by the farmers and the farmworkers, and by the government to the property; and (8) the non-
payment of taxes or loans secured from any government financing institution on the said land, if
any. Pursuant to its rule-making power under Section 4922 of the same law, the DAR translated
these factors into a basic formula.

We emphasized therein that, while the determination of just compensation is essentially

a judicial function vested in the RTC acting as a special agrarian court, the judge cannot abuse
his discretion by not taking into full consideration the factors specifically identified by law and
implementing rules.

We agree with LBP in the instant case that the double take up of the market value per
tax declaration as a valuation factor completely destroys the rationale of the formula laid down
by the DAR. Thus, argues LBP:

x x x Market value accounts for only 10% under the basic formula of LV = (CNI
x 0.60) + (CS x .30) + (MV x .10). The 10% remains constant even under the
variation formulae of
LV = (CNI x .90) + (MV x .10) and LV = (CS x .90) + (MV x .10). It is only when
the data constituting CS (Comparable sales) and CNI (capitalized net income)
are absent that MV is given greater weight in determining just compensation.
This is not obtaining in this case.

x x x Greater weight is accorded CNI, 60% in the basic formula and 90% in the
other variation thereof, and this is not without a valid reason. The valuation
formula is heavily production based (net income) because that is the true value
of what landowners lose when their lands are expropriated and what the
farmers-beneficiaries gain when the lands are distributed to them. A more
fundamental reason for the valuation formula of DAR is the fidelity to the
principle of affordability, i.e. what the farmers-beneficiaries can reasonably
afford to pay based on what the land can produce. It must be emphasized that
agricultural lands are not residential lands, and farmers-beneficiaries are not
 given those lands so they can live there but so that they can till them. And
since they generally live on hand to mouth existence, their source of repaying
the just compensation is sourced from their income derived from the cultivation
of the land. Thus, the double take up of market value as a valuation factor
goes against the grain of affordability as the basic principle in the government-
supervised valuation formula for agrarian reform.

REPUBLIC OF THE PHILIPPINES v. EDWARD CAMACHO

G.R. No. 185604, June 13, 2013
J. Villarama, Jr

The nature of the proceeding for reconstitution of a certificate of title under R.A. No. 26
denotes a restoration of the instrument, which is supposed to have been lost or destroyed, in its
original form and condition. The purpose of such a proceeding is merely to have the certificate
of title reproduced, after proper proceedings, in the same form it was in when its loss or
destruction occurred. The same R.A. No. 26 specifies the requisites to be met for the trial court
to acquire jurisdiction over a petition for reconstitution of a certificate of title. Failure to comply
with any of these jurisdictional requirements for a petition for reconstitution renders the
proceedings null and void.

FACTS:

Respondent Edward M. Camacho filed a petition denominated as "Re: Petition for

Reconstitution of the Original Title of O.C.T. No. (not legible) and Issuance of Owner's Duplicate
Copy" before the RTC.

In support thereof, respondent alleged that the Original Certificate of Title (OCT) sought
to be reconstituted and whose number is no longer legible due to wear and tear, issued in the
name of Spouses Nicasio Lapitan and Ana Doliente (Spouses Lapitan) of Alcala, Pangasinan.
Respondent also alleged that the owners duplicate copy of the OCT is in his possession and
that he is the owner of the two parcels of land covered by the aforementioned OCT by virtue of
a Deed of Extra-Judicial Partition with Absolute Sale (the Deed) executed by the heirs of
Spouses Lapitan in his favor. Said OCT covers two parcels of land located in San Juan, Alcala,
Pangasinan, (Lot No. 1) and Namulatan, Bautista, Pangasinan (Lot No. 2)

RTC issued an Order finding the respondents petition sufficient in form and substance.
Subsequently, the Court, finding the documentary as well as the parole evidence adduced to be
adequate and sufficiently persuasive to warrant the reconstitution of the Original Certificate of
Title. Petitioner Republic of the Philippines, through the OSG, filed a Motion for Reconsideration
which was denied by the RTC in its Resolution.Petitioner appealed to the CA. CA affirmed the
RTCs findings and ruling, holding that respondents petition is governed by Section 10 of R.A.
No. 26 since the reconstitution proceedings is based on the owners duplicate copy of the OCT
itself. Hence, this petition.

ISSUE:

Whether the RTC properly acquired and was invested with jurisdiction in the first place to hear
and decide Land Registration Case No. V-0016 in the light of the strict and mandatory
provisions of R.A. No. 26

RULING:
 We resolve the sole issue in the negative.

Section 110 of Presidential Decree No. 1529, otherwise known as the Property
Registration Decree, as amended by R.A. No. 6732, allows the reconstitution of lost or
destroyed original Torrens title either judicially, in accordance with the special procedure laid
down in R.A. No. 26, or administratively, in accordance with the provisions of R.A. No. 6732.

The nature of the proceeding for reconstitution of a certificate of title under R.A. No. 26
denotes a restoration of the instrument, which is supposed to have been lost or destroyed, in its
original form and condition. The purpose of such a proceeding is merely to have the certificate
of title reproduced, after proper proceedings, in the same form it was in when its loss or
destruction occurred. The same R.A. No. 26 specifies the requisites to be met for the trial court
to acquire jurisdiction over a petition for reconstitution of a certificate of title. Failure to comply
with any of these jurisdictional requirements for a petition for reconstitution renders the
proceedings null and void. Thus, in obtaining a new title in lieu of the lost or destroyed one, R.A.
No. 26 laid down procedures which must be strictly followed in view of the danger that
reconstitution could be the source of anomalous titles or unscrupulously availed of as an easy
substitute for original registration of title proceedings.

It bears reiterating that respondents quest for judicial reconstitution in this case is
anchored on the owners duplicate copy of said OCT a source for reconstitution of title
provided under Section 2 (a) of R.A. No. 26,

Verily, while the CA invoked the appropriate provisions of R.A. No. 26, it failed, however,
to take note that Section 9 thereof mandatorily requires that the notice shall specify, among
other things, the number of the certificate of title and the names of the interested parties
appearing in the reconstituted certificate of title. In this case, the RTC failed to indicate these
jurisdictional facts in the notice.

Moreover, while the LRA confirmed the issuance of Decree No. 444263 in its Report, it
perplexes this Court that the LRA failed to state that an OCT was actually issued and mention
the number of the OCT sought to be reconstituted. In Republic of the Phils. v. El Gobierno De
Las Islas Filipinas, this Court denied the petition for reconstitution of title despite the existence
of a decree:

We also find insufficient the index of decree showing that Decree No. 365835 was
issued for Lot No. 1499, as a basis for reconstitution. We noticed that the name of the
applicant as well as the date of the issuance of such decree was illegible. While Decree
No. 365835 existed in the Record Book of Cadastral Lots in the Land Registration
Authority as stated in the Report submitted by it, however, the same report did not state
the number of the original certificate of title, which is not sufficient evidence in support of
the petition for reconstitution. The deed of extrajudicial declaration of heirs with sale
executed by Aguinaldo and Restituto Tumulak Perez and respondent on February 12,
1979 did not also mention the number of the original certificate of title but only Tax
Declaration No. 00393. As we held in Tahanan Development Corp. vs. Court of Appeals,
the absence of any document, private or official, mentioning the number of the certificate
of title and the date when the certificate of title was issued, does not warrant the granting
of such petition. (Emphasis supplied.)

Well-entrenched in this jurisdiction that where the words of a statute are clear, plain, and
free from ambiguity, it must be given its literal meaning and applied without attempted
interpretation. Verba legis non est recedendum. From the words of a statute there should be no
departure. In view of these lapses, the RTC did not acquire jurisdiction to proceed with the case
since the mandatory manner or mode of obtaining jurisdiction as prescribed by R.A. No. 26 had
not been strictly followed, thereby rendering the proceedings utterly null and void. As such, while
petitioner overlooked these jurisdictional infirmities and failed to incorporate them as additional
issues in its own petition, this Court has sufficient authority to pass upon and resolve the same
since they affect jurisdiction.

PRIVATIZATION AND MANAGEMENT OFFICE v. STRATEGIC

DEVELOPMENT AND/OR PHILIPPINE ESTATE CORPORATION
G.R. No. 200402, June 13, 2013
CJ Sereno

Article 1326 of the Civil Code, which specifically tackles offer and acceptance of bids,
provides that advertisements for bidders are simply invitations to make proposals, and that an
advertiser is not bound to accept the highest bidder unless the contrary appears.

Petitioner cannot be compelled to accept the bid of Dong-A Consortium since this forced
consent treads on the governments freedom to contract. The freedom of persons to enter into
contracts is a policy of the law, and courts should move with all necessary caution and
prudence when interfering with it.

FACTS:

The indebtedness or PNCC to various government financial institutions was transferred

to the National Government (NG) through the Committee on Privatization (COP)/Asset
Privatization Trust (APT) and the Bureau of Treasury. Consequently, APT slated the privatization
of PNCC in order to generate maximum cash recovery for the government. It announced the
holding of a public bidding involving the "as is, where is basis" package sale of stocks,
receivables, and securities owned by the National Government in the PNCC.

Dong-A Consortium, as a prospective bidder, received the accompanying bid documents

given by APT. APT conducted the bid. It first declared that Dong-A Consortium, Pacific
Infrastructure Development International, and Philippine Exporters Confederation qualified as
bidders. Thereafter, it announced that the indicative price of the PNCC properties was seven
billion pesos (P7,000,000,000).

The bidders were shocked with the valuation. Relying on their own due diligence
examinations, they protested that the indicative price was too high, considering the financial
statements and bid documents given by APT. Notwithstanding their protests, APT continued with
the bidding and opened the bid envelopes. None of the bid offers met the indicative price.

APT faxed a letter to Dong-A Consortium informing the latter that its offer had been
rejected. Dong-A Consortium responded and stressed to APT that the formers offer was not
only the highest, but was also competitive and most advantageous to the government. Dong-A
Consortium then asked for reconsideration and requested the award of the PNCC properties.
The term of APT expired. By virtue of Executive Order No. 323, petitioner PMO was organized
to implement the disposition of the government-acquired assets, including the PNCC shares.
PMO thus took over the correspondences involving the bid. It communicated to Dong-A
Consortium that the decision of the Board of Trustees of the APT had already been confirmed
by the COP; hence, the decision to reject the bid stood.
 STRADEC filed a Complaint for Declaration of Right to a Notice of Award and/or
Damages on behalf of Dong-A Consortium against PMO and PNCC. It contested the high
indicative price that caused it to lose the bid. STRADEC also pushed for the reduction of the
indicative price and demanded that a Notice of Award of the PNCC properties be issued in its
favor. PMO argued that STRADEC had no legal right to demand the issuance of a Notice of
Award even after having submitted the highest bid. PNCC claimed that STRADEC was merely
"sour graping" over its loss. Furthermore, STRADEC had allegedly failed to establish any act of
PNCC with respect to the manner of the bidding that would create a cause of action against the
latter.

RTC ruled that PMO had committed grave abuse of discretion in refusing to explain the
basis of the indicative price. The trial court explained that since competitive public bidding is
vested with public interest, it then follows that the government has an affirmative duty to
disclose its reasons for rejecting a bid.

The CA emphasized that competitive public bidding must be fair, legitimate and honest.
From this standard, it went on to state that PMO must not only reveal the basis of the indicative
price, but must also award the sale of the PNCC assets to Dong-A Consortium. PNCC moved
for reconsideration, but the motion is still pending in the CA. On the other hand, PMO
proceeded directly to this Court via a Rule 45 Petition.

ISSUE:

Whether PMO can be compelled to award Dong-A Consortium the PNCC assets that it
values at seven billion pesos (P7,000,000,000) for only P1,228,888,800. For a fraction of the
valuation, respondent claims entitlement on the grounds that (1) the peoples right to information
has been violated; (2) it submitted the highest bid; and (3) it conducted due diligence.

RULING:

The peoples right to information does not warrant the award of the bid to Dong-A
Consortium.

We rule that whether or not the peoples right to information has been violated by APTs
failure to disclose the basis of the indicative price, that right cannot be used as a ground to
direct the issuance of the Notice of Award to Dong-A Consortium. Under the ASBR, respondent
must at least match the indicative price in order to win.

Under the circumstances, the right to information, at most, affords to the claimant access
to records, documents, and papers which only means the opportunity to inspect and copy
them at his expense. Notably, even if the computations for arriving at the P7,000,000,000
valuation were explained, none of the participants would have won, since all of their offers were
way below the indicative price.

Likewise, the submission of the highest bid and the conduct of due diligence do not
justify an award to Dong-A Consortium.

The courts a quo also directed the issuance of the Notice of Award in favor of Dong-A
Consortium, because it submitted the highest bid, which appeared to be the most advantageous
to the government, and because it conducted due diligence. Like the previous ground alleged as
discussed above, these matters are irrelevant.

Obligations arising from agreements have the force of law between the contracting
parties and should be complied with in good faith. Here, the ASBR sets forth the terms and
conditions under which an award will be given. During the pretrial, both parties agreed that a
bidder wins only after satisfying and complying with all the terms and conditions of the ASBR,
including matching the indicative price. Since Dong-A Consortium failed to match the indicative
price, it could not have been considered a winner, and, is not entitled to a Notice of Award.

Article 1326 of the Civil Code, which specifically tackles offer and acceptance of bids,
provides that advertisements for bidders are simply invitations to make proposals, and that an
advertiser is not bound to accept the highest bidder unless the contrary appears. In the present
case, both the RTC and the CA unfortunately ignored the failure of Dong-A Consortium to match
the indicative price. They highlighted instead that the bidder conducted an extensive due
diligence examination based on the documents that the APT had given to it.

Whether or not the bidder conducts due diligence is its business decision. It does not
bind the government to give Dong-A Consortium the award. Furthermore, the ASBR insulates
the government from suits based on inaccurate data in the bidders due diligence examinations.
To substitute the valuation of Dong-A Consortium for that of APT is to unduly interfere with the
judgment of a government agency tasked to liquidate nonperforming assets of the government.
APT and PMO are mandated to determine the most advantageous prices that will improve the
financial situation of the government. Given that discretion, they cannot be directed by the
courts to do a particular act or be enjoined from doing an act within their prerogatives.

Petitioner cannot be compelled to accept the bid of Dong-A Consortium since this forced
consent treads on the governments freedom to contract. The freedom of persons to enter into
contracts is a policy of the law, and courts should move with all necessary caution and prudence
when interfering with it.

It must be remembered that in the field of competitive public bidding, the owner of the
property to be auctioned the government enjoys a wide latitude of discretion and autonomy
in choosing the terms of the agreement. This principle is especially true in this case, since the
policy decision then was for APT to liquidate nonperforming assets of the government in order
to recover losses. Therefore, absent any abuse of discretion, injustice, unfairness or fraudulent
acts, this Court refrains from discrediting the judgment call of APT to prefatorily refuse any offer
that fell below the indicative price.

In line, this Court maintains that it is unjust to force the government to award the PNCC
shares to a bidder at a drastically lower value. Corollary to this finding, this Court deletes the
grant of exemplary damages and attorney's fees grounded on the supposed arbitrariness and
bad faith of petitioner. With these definitive conclusions addressing the main issue, there is no
longer any need for us to discuss the other matters involved.
 PEOPLE OF THE PHILIPPINES v. PERCIVAL DELA ROSA Y BAYER
G.R. No. 201723. June 13, 2013
J. Reyes

Temperate or moderate damages avail when the court finds that some pecuniary loss
has been suffered but its amount cannot from the nature of the case, be proved with certainty In
this case, it cannot be denied that the heirs of Magdua suffered pecuniary loss, although the
exact amount was not proved with certainty

FACTS:

Accused-appellant Dela Rosa and his co-accused Jaylanie Tabasa (Tabasa) were
charged in an Information for Murder against Jojie Magdua by the use of bladed weapon which
caused his death. The RTC convicted Dela Rosa for Murder. RTC found that Dela Rosa and
Tabasa conspired with each other in treacherously assaulting Magdua with the common criminal
intent of killing him. Evidence showed that Magdua was unarmed when Tabasa boxed him and
Dela Rosa stabbed him on the chest and thereafter, at the back of his neck. The RTC also found
that treachery attended the commission of the crime as Magdua was merely conversing with his
friend Samson at the time he was attacked by Dela Rosa and Tabasa, catching him unarmed
and off-guard. The RTC gave weight and credence to the positive identification made by
Samson, pointing at Dela Rosa as one of the assailants. CA Affirmed. Hence, this petition.

ISSUE:

Whether the awarding of temperate damages is justified in this case.

RULING:

As to the award of damages, the Court finds that modifications are in order to conform to
prevailing jurisprudence. "When death occurs due to a crime, the following damages may be
awarded: (1) civil indemnity ex delicto for the death of the victim; (2) actual or compensatory
damages; (3) moral damages; (4) exemplary damages; and (5) temperate damages." Thus, the
amount of P50,000.00 as civil indemnity is increased to P75,000.00. Also, moral damages in the
amount of P75,000.00 must be awarded as it is mandatory in cases of murder and homicide,
without need of allegation and proof other than the death of the victim. The award of
P25,000.00 as temperate damages is likewise in order. Temperate or moderate damages avail
when the court finds that some pecuniary loss has been suffered but its amount cannot from the
nature of the case, be proved with certainty In this case, it cannot be denied that the heirs of
Magdua suffered pecuniary loss, although the exact amount was not proved with certainty. The
Court, however, deems it proper to reduce the amount of exemplary damages from
P100,000.00 to P30,000.00.
 DEOGENES O. RODRIGUEZ v. HON. COURT OF APPEALS AND
PHILIPPINE CHINESE CHARITABLE ASSOCIATION, INC.
G.R. No. 184589, June 13, 2013
J. Leonardo-De Castro

The real purpose of the Torrens system is to quiet title to land and to stop forever any
question as to its legality. Once a title is registered, the owner may rest secure, without the
necessity of waiting in the portals of the court, or sitting on the "mirador su casa," to avoid the
possibility of losing his land. A Torrens title is generally a conclusive evidence of the ownership
of the land referred to therein. A strong presumption exists that Torrens titles are regularly
issued and that they are valid. In this case, PCCAI is the registered owner of the subject
property under TCT No. 482970, which could be traced back to TCT No. 16781 issued to
Landicho. As between PCCAI and Rodriguez, the former is better entitled to the protection of
the Torrens system. PCCAI can rely on its TCT No. 482970 until the same has been annulled
and/or cancelled.

FACTS:

Purita Landicho (Landicho) filed before the Court of First Instance (CFI) of Rizal an
Application for Registration of a piece of land, located in Barrio Patiis, San Mateo, Rizal (subject
property), CFI rendered a decision affirming the application of Landicho. Eventually, Jose D.
Santos (Santos), Register of Deeds (ROD) for the Province of Rizal, issued Transfer Certificate
of Title (TCT) No. 167681 in Landichos name covering the subject property. Notably, ROD
Santos issued to Landicho a TCT rather than an OCT for the subject property; and although
TCT No. 167681 stated that it was issued pursuant to Decree No. 1480, no other detail
regarding the decree and the original registration of the subject property was filled out. The
subject property was thereafter sold several times, and as the old TCTs of the vendors were
cancelled, new TCTs were accordingly issued to the buyers. The sale of the subject property
could be traced from Landicho to Blue Chips Projects, Inc. (BCPI),; then to Winmar Poultry
Farm, Inc. (WPFI); and finally, to herein respondent Philippine Chinese Charitable Association,
Inc. (PCCAI).

A case was pending beore the RTC where ADRDI asserted ownership over the subject
property, which was a portion of a bigger tract of land measuring around 513 hectares, ADRDI
was also able to have its notice of adverse claim over the subject property annotated on TCT
Nos. 344936 and 425582 of BCPI and WPFI, respectively. ADRDI subsequently transferred the
subject property to Amado Araneta (Araneta).

Landicho executed a Deed of Absolute Sales over the subject property in favor of herein
petitioner Deogenes O. Rodriguez (Rodriguez). Two years later, Landicho died. Rodriguez filed
an Omnibus Motion before the RTC, he specifically stated that no decree of registration had
been issued by the LRC Commissioner (now the Administrator of the Land Registration
Authority [LRA]) and that no OCT had been ever issued by the ROD in Landichos name. The
RTC favorably acted on Rodriguezs Omnibus Motion in an Order. Finally, during the
proceedings in this case, this Court was made aware of the existence of claimants to the subject
property. However, this Court cannot, at this time and in this proceedings, rule on the legality or
illegality of these claims of ownership. It is best that these claims be ventilated in appropriate
proceedings specifically sought to for this purpose.

The LRA, upon receipt of a copy of the RTC Order, filed a Manifestation informing the
trial court that it cannot comply with said Order since there were already two existing titles
covering the subject property. The Court of Appeals, found merit in the Petition of PCCAI. The
appellate court gave great weight and credence to the Manifestation of the LRA reporting the
double titling and conflicting claims over the subject property.

ISSUE:

Whether the issuance of OCT to Rodriguez is justified in this case considering that a prior title
was already issued.

RULING:

The instant petition has no merit.

The real purpose of the Torrens system is to quiet title to land and to stop forever any
question as to its legality. Once a title is registered, the owner may rest secure, without the
necessity of waiting in the portals of the court, or sitting on the "mirador su casa," to avoid the
possibility of losing his land. A Torrens title is generally a conclusive evidence of the ownership
of the land referred to therein. A strong presumption exists that Torrens titles are regularly
issued and that they are valid. In this case, PCCAI is the registered owner of the subject
property under TCT No. 482970, which could be traced back to TCT No. 16781 issued to
Landicho. As between PCCAI and Rodriguez, the former is better entitled to the protection of
the Torrens system. PCCAI can rely on its TCT No. 482970 until the same has been annulled
and/or cancelled.

Section 48 of Presidential Decree No. 1529, otherwise known as the Property

Registration Decree, explicitly provides that "a certificate of title shall not be subject to collateral
attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance
with law."

The duty of LRA officials to issue decrees of registration is ministerial in the sense that
they act under the orders of the court and the decree must be in conformity with the decision of
the court and with the data found in the record. They have no discretion in the matter. However,
if they are in doubt upon any point in relation to the preparation and issuance of the decree,
these officials ought to seek clarification from the court. They act, in this respect, as officials of
the court and not as administrative officials, and their act is the act of the court. They are
specifically called upon to "extend assistance to courts in ordinary and cadastral land
registration proceedings."

That the LRA hesitates in issuing a decree of registration is understandable. Rather than
a sign of negligence or nonfeasance in the performance of its duty, the LRAs reaction is
reasonable, even imperative. Considering the probable duplication of titles over the same parcel
of land, such issuance may contravene the policy and the purpose, and thereby destroy the
integrity, of the Torrens system of registration.

The particular circumstances of this case similarly justify the relaxation of the rules of
procedure on intervention. First, the interests of both PCCAI and Rodriguez in the subject
property arose only after the CFI Decision dated November 16, 1965 in Land Reg. Case No. N-
5098 became final and executory. PCCAI bought the subject property from WPFI on November
13, 1973 and was issued TCT No. 482970 for the same on July 15, 1975; while Rodriguez
bought the subject property from Landicho on November 14, 1996. Second, as previously
discussed herein, both PCCAI and Rodriguez trace their titles back to Landicho. Hence, the
intervention of PCCAI could not unduly delay or prejudice the adjudication of the rights of
Landicho, the original party in Land Reg. Case No. N-5098. Third, the latest proceedings in
Land Reg. Case No. N-5098 involved Rodriguezs Omnibus Motion, filed before the RTC on
May 18, 2005, in which he prayed for the execution of the November 16, 1965 Decision of the
CFI. PCCAI moved to intervene in the case only to oppose Rodriguezs Omnibus Motion on the
ground that the subject property is already registered in its name under TCT No. 482970, which
originated from Landichos TCT No. 167681. And fourth, after learning of Rodriguezs Omnibus
Motion in Land Reg. Case No. N-5098 via the November 3, 2006 subpoena issued by the RTC,
PCCAI was reasonably expected to oppose the same. Such action was the most opportune and
expedient remedy available to PCCAI to prevent the RTC from ordering the issuance of a
decree of registration and OCT in Rodriguezs name. For this reason, the RTC should have
allowed the intervention of PCCAI.

LAND BANK OF THE PHILIPPINES v. ATTY. RICARDO D. GONZALEZ

G.R. No. 185281, June 13, 2013
J. Villarama Jr.

While the determination of just compensation is essentially a judicial function vested in

the RTC acting as a SAC, the judge cannot abuse his discretion by not taking into full
consideration the factors specifically identified by law and implementing rules. SACs are not at
liberty to disregard the formula laid down in DAR A.O. No. 5, series of 1998, because unless an
administrative order is declared invalid, courts have no option but to apply it. Simply put, courts
cannot ignore, without violating the agrarian reform law, the formula provided by the DAR for the
determination of just compensation.

FACTS:

Respondent Atty. Ricardo D. Gonzalez is the registered owner of two contiguous parcels
of land devoted to coconut production. The subject property was tenanted by spouses Virgilio
and Espera Tagupa, spouses Valeriano and Erlinda Inoc, spouses Isidro and Eden Soria and
spouses Rudy and Rosario Peligro (the tenants). Pursuant to the Comprehensive Agrarian
Reform Program (CARP), respondent voluntarily offered to sell the subject property to the
Department of Agrarian Reform (DAR) for 250,000.00 per hectare on December 9, 1996.

The DAR and the LBP valued the subject property at 150,795.51 or at 50,265.17 per
hectare. Respondent rejected the valuation but the LBP deposited 60,318.20 of the said sum
in cash and 90,477.31 thereof in bonds in the name of respondent. Respondent acknowledged
the receipt thereof.

The case was then referred to the Regional Agrarian Reform Adjudicator (RARAD). The
RARAD affirmed the valuation made by the DAR and the LBP since DAR A.O. No. 5, series of
1998 was applied in coming up with the valuation. Disappointed with the low valuation,
respondent filed before the SAC a petition for just compensation against the LBP, the DAR and
the tenants of the subject property. The SAC held that respondents asking price of 250,000.00
per hectare was quite high while LBPs valuation of 50,265.17 per hectare was considerably
low. The SAC opined that 143,904.25 per hectare was the fair valuation of the subject
property. The CA affirmed the findings and the ruling of the SAC. Invoking our ruling in Apo
Fruits Corporation v. Court of Appeals, the CA held that DAR A.O. No. 5, series of 1998 cannot
strictly bind the courts which, in the exercise of their judicial discretion, can make their own
computation pursuant to Section 1724 of Republic Act (R.A.) No. 6657. Hence, this petition.
ISSUE:

Whether or not the court of appeals can disregard the valuation factors under section 17 of R.A.
6657 as translated into a basic formula in DAR Administrative Order no. 05, series of 1998, as
amended, in fixing the just compensation of the subject property of the respondent

RULING:

Without doubt, Section 17 of R.A. No. 6657 is the principal basis of the computation for
just compensation in this case. The factors enumerated in Section 17 have been translated into
a basic formula outlined in DAR A.O. No. 5, series of 1998.

While the determination of just compensation is essentially a judicial function vested in

the RTC acting as a SAC, the judge cannot abuse his discretion by not taking into full
consideration the factors specifically identified by law and implementing rules. SACs are not at
liberty to disregard the formula laid down in DAR A.O. No. 5, series of 1998, because unless an
administrative order is declared invalid, courts have no option but to apply it. Simply put, courts
cannot ignore, without violating the agrarian reform law, the formula provided by the DAR for the
determination of just compensation.

There being no available information on Comparable Sales (CS), the applicable formula
is LV = (CNI x 0.90) + (MV x 0.10). To determine the CNI in this case, the LBP gathered the
necessary data on annual gross production (AGP), selling price (SP) of copra and net income
rate (NIR). The SAC in this case actually used the formula as provided under DAR A.O. No. 5,
series of 1998. However, as propounded by the LBP and as observed by this Court, the main
difference lies with the AGP used in the valuation. Save for the AGP and the Market Value (MV)
per Tax Declaration, the LBP and SACs respective data coincide with one another.

DAR A.O. No. 5, series of 1998 clearly provides that the AGP for purposes of computing
the CNI, is the annual gross production corresponding to the latest available 12-months gross
production immediately preceding the date of Field Investigation (FI). While the LBP relied on
the Field Investigation Report for the 1,125 AGP, the SAC, on the other hand, failed to
substantiate where the 3,375 AGP was based. Other than its bare statement regarding the
devaluation of the Philippine Peso, the SAC failed to fully expound on how it determined the
AGP.

In sum, we find LBPs valuation sufficiently substantiated and in accordance with Section
17 of R.A. No. 6657 and DAR A.O. No. 5, series of 1998.

DARPO, LAGUNA v. PARAMOUNT HOLDINGS-EQUITIES, INC., ET AL

G.R. No. 176838, June 13, 2013
J. Reyes

Not every sale or transfer of Agricultural Land would warrant DAR Adjudication Board's
jurisdiction. When a suit does not involve an agrarian dispute it does not fall under the
jurisdiction of DARAB. There must be a tenancy relationship between the party litigants or, the
controversy must relate to "tenurial arrangements" for the DARAB to validly take cognizance of
the controversy. An allegation to declare null and void a certain sale involving an agricultural
land does not ipso facto make the case an agrarian dispute. While the Court recognizes the
legal requirement for clearances in the sale and transfer of agricultural lands, the DARAB's
jurisdiction over such dispute is limited by the qualification that the land involved is under the
administration and disposition of the Department of Agrarian Reform and Land Bank or, under
the coverage of the CARP or other agrarian laws.

FACTS:

The case stems from the petition filed with the Office of the Provincial Adjudicator
(PARAD) by the DAR through Provincial Agrarian Reform Officer (PARO). The petition sought to
nullify the sale to the respondents of several parcels of land.

The PARO argued that the properties were agricultural land yet their sale was effected
without DAR Clearance as required under Republic Act No. 6657 (R.A. No. 6657), otherwise
known as the Comprehensive Agrarian Reform Law (CARL). Allegedly, the PARO came to
know of the transactions only after he had received a directive from the Secretary of Agrarian
Reform to investigate the matter, following the latters receipt of a letter-request from persons
who claimed to be the tenant-farmers of the properties previous owners.

The respondents opposed the petition, contending that since the matter involves an
administrative implementation of R.A. No. 6657, the case is cognizable by the Secretary of
Agrarian Reform, not the DARAB.

The PARAD issued a Resolution dismissing the petition for lack of jurisdiction. The
DARs motion for reconsideration was denied, prompting the filing of an appeal with the DARAB.
The DARAB granted the appeal. The respondents appeal the case to the CA. The CA annulled
and set aside the decision of DARAB. The CA emphasized that the DARABs jurisdiction over
the dispute should be determined by the allegations made in the petition. Since the action was
essentially for the nullification of the subject properties sale, it did not involve an agrarian suit
that is within the DARABs jurisdiction.

ISSUE:

Whether or not the DARAB has jurisdiction over the dispute that seeks the nullification of the
subject properties sale

RULING:

The jurisdiction of the DARAB is limited under the law, as it was created under Executive
Order (E.O.) No. 129-A specifically to assume powers and functions with respect to the
adjudication of agrarian reform cases under E.O. No. 229 and E.O. No. 129-A. Significantly, it
was organized under the Office of the Secretary of Agrarian Reform. The limitation on the
authority of it to mere agrarian reform matters is only consistent with the extent of DARs quasi-
judicial powers under R.A. No. 6657 and E.O. No. 229.

The jurisdiction of the PARAD and the DARAB is only limited to cases involving agrarian
disputes, including incidents arising from the implementation of agrarian laws.

Basic is the rule that the jurisdiction of a tribunal, including a quasi judicial office or
government agency, over the nature and subject matter of a petition or complaint is determined
by the material allegations therein and the character of the relief prayed for irrespective of
whether the petitioner or complainant is entitled to any or all such reliefs.
 Upon the Courts perusal of the records, it has determined that the PAROs petition with
the PARAD failed to indicate an agrarian dispute.

Not every sale or transfer of Agricultural Land would warrant DAR Adjudication Board's
jurisdiction. When a suit does not involve an agrarian dispute it does not fall under the
jurisdiction of DARAB. There must be a tenancy relationship between the party litigants or, the
controversy must relate to "tenurial arrangements" for the DARAB to validly take cognizance of
the controversy. An allegation to declare null and void a certain sale involving an agricultural
land does not ipso facto make the case an agrarian dispute. While the Court recognizes the
legal requirement for clearances in the sale and transfer of agricultural lands, the DARAB's
jurisdiction over such dispute is limited by the qualification that the land involved is under the
administration and disposition of the Department of Agrarian Reform and Land Bank or, under
the coverage of the CARP or other agrarian laws.

MANILA ELECTRIC COMPANY v. HEIRS OF SPOUSES DIONISIO DELOY AND PRAXEDES

MARTONITO, represented by POLICARPIO DELOY
G.R. No. 192893, June 5, 2013
J. Mendoza

Unlawful detainer is an action to recover possession of real property from one who
illegally withholds possession after the expiration or termination of his right to hold possession
under any contract, express or implied. The possession of the defendant in unlawful detainer is
originally legal but became illegal due to the expiration or termination of the right to possess.
The only issue to be resolved in an unlawful detainer case is physical or material possession of
the property involved, independent of any claim of ownership by any of the parties involved. An
ejectment case, based on the allegation of possession by tolerance, falls under the category of
unlawful detainer. Where the plaintiff allows the defendant to use his/her property by tolerance
without any contract, the defendant is necessarily bound by an implied promise that he/she will
vacate on demand, failing which, an action for unlawful detainer will lie.

FACTS:

The Deloys, represented by Policarpio Deloy, instituted the Complaint for Unlawful
Detainer against Manila Electric Company (MERALCO) before the MTCC. Respondents are the
owners, by way of succession, of a parcel of land consisting of 8,550 square meters located in
Trece Martires City (Trece Martires property). Dionisio, respondents predecessor-in-interest,
donated a 680-square meter portion (subject land) of the 8,550 square meter property to the
Communications and Electricity Development Authority (CEDA) for the latter to provide cheap
and affordable electric supply to the province of Cavite, a deed of donation was executed.
CEDA offered for sale to MERALCO, its electric distribution system, consisting of transformers
and accessories, poles and hardware, wires, service drops, and customer meters and all rights
and privileges necessary for providing electrical service in Cavite, a Deed of Absolute Sale was
executed. Thereafter, MERALCO occupied the subject land.MERALCO, wrote a letter to
Dionisio requesting the latters permission for the continued use of the subject land as a
substation site. The parties were not able to reach any agreement.

Meanwhile, respondents claimed that they had no immediate use for the subject land
and that they were preoccupied with the judicial proceedings to rectify errors involving the
reconstituted title of the Trece Martires property, which included the subject land. Respondents
offered to sell the subject land to MERALCO, but their offer was rejected. Respondents
demanded that MERALCO vacate the subject land. Despite the written demand, MERALCO did
not move out of the subject land. Thus, respondents were constrained to file the complaint for
unlawful detainer. Traversing respondents complaint, MERALCO countered that CEDA, as the
owner of the subject land by virtue of the deed of donation executed by Dionisio, lawfully sold to
it all rights necessary for the operation of the electric service in Cavite by way of a deed of sale.

The MTCC ruled that it had no jurisdiction over the case because it would require an
interpretation of the deed of donation making it one not capable of pecuniary estimation.
Nevertheless, it opined that MERALCO was entitled to the possession of the subject land. It was
of the view that it would only be when the deed of donation would be revoked or the deed of
sale nullified that MERALCOs possession of the subject land would become unlawful. RTC
sustained the MTCC decision. In partially granting the appeal, the CA explained that an
ejectment case, based on the allegation of possession by tolerance, would fall under the
category of unlawful detainer. Hence, this petition.

ISSUES:

Whether an action for unlawful detainer is the proper remedy in this case; If it is, who has a
better right of physical possession of the disputed property.

Ruling:

The petition lacks merit.

Unlawful detainer is an action to recover possession of real property from one who
illegally withholds possession after the expiration or termination of his right to hold possession
under any contract, express or implied. The possession of the defendant in unlawful detainer is
originally legal but became illegal due to the expiration or termination of the right to possess.
The only issue to be resolved in an unlawful detainer case is physical or material possession of
the property involved, independent of any claim of ownership by any of the parties involved. An
ejectment case, based on the allegation of possession by tolerance, falls under the category of
unlawful detainer. Where the plaintiff allows the defendant to use his/her property by tolerance
without any contract, the defendant is necessarily bound by an implied promise that he/she will
vacate on demand, failing which, an action for unlawful detainer will lie.

MERALCO posits that extrinsic evidence, such as the letter request, dated October 11,
1985, and the Internal Memorandum, dated December 6, 1985, cannot contradict the terms of
the deed of sale between CEDA and MERALCO pursuant to Section 9, Rule 130 of the Rules of
Court.

The Court has combed the records and is not convinced.

MERALCO acknowledged that the owners of the subject land were the Deloys. It is clear
as daylight. The first letter was written barely four (4) months after the deed of sale was
accomplished. As observed by the CA, MERALCO never disputed the declarations contained in
these letters which were even marked as its own exhibits. Pursuant to Section 26, Rule 130 of
the Rules of Evidence, these admissions and/or declarations are admissible against MERALCO.
Guided by the foregoing rules and jurisprudence, the Court holds that the letter and the internal
memorandum presented, offered and properly admitted as part of the evidence on record by
MERALCO itself, constitute an admission against its own interest. Hence, MERALCO should
appropriately be bound by the contents of the documents.
 The Court has read the MOA and the Deed of Absolute Sale but found nothing that
clearly stated that the subject land was included therein. What were sold, transferred and
conveyed were "its electric distribution facilities, service drops, and customers' electric meters
except those owned by the VENDOR'S customers, x x x, and all the rights and privileges
necessary for the operation of the electric service x x x." No mention was made of any land.
Rights and privileges could only refer to franchises, permits and authorizations necessary for
the operation of the electric service. The land on which the substation was erected was not
included, otherwise, it would have been so stated in the two documents. Otherwise, also,
MERALCO would not have written Dionisio to ask permission for the continued use of the
subject land.

At any rate, it is fundamental that a certificate of title serves as evidence of an

indefeasible and incontrovertible title to the property in favor of the person whose name appears
therein. It bears to emphasize that the titleholder is entitled to all the attributes of ownership of
the property, including possession. Thus, the Court must uphold the age-old rule that the person
who has a Torrens title over a land is entitled to its possession. In Pascual v. Coronel, the Court
reiterated the rule that a certificate of title has a superior probative value as against that of an
unregistered deed of sale in ejectment cases.

On a final note, the Court must stress that the ruling in this case is limited only to the
determination as to who between the parties has a better right to possession. This adjudication
is not a final determination on the issue of ownership and, thus, will not bar any party from filing
an action raising the matter of ownership.

SPOUSES RUBIN AND PORTIA HOJAS v. PHILIPPINE AMANAH BANK AND RAMON KUE
G.R. No. 193453, June 5, 2013
J. Mendoza

Estoppel is based on the grounds of public policy, fair dealing, good faith, and justice
and its purpose is to forbid one to speak against his own act, representations or commitments
to the injury of one to whom they were directed and who reasonably relied on it. Thus, in order
for this doctrine to operate, a representation must have been made to the detriment of another
who relied on it. In other words, estoppel would not lie against one who, in the first place, did
not make any representation.

In this case, there is no estoppel to speak of. The letter does not show that the Bank had
unqualifiedly represented to the Hojases that it had extended the redemption period to
December 31, 1988. Thus, the Hojases have no basis in positing that the public sale conducted
on November 4, 1988 was null and void for having been prematurely conducted.

FACTS:

Spouses Rubin and Portia Hojas (petitioners), alleged that they secured a loan from
respondent Philippine Amanah Bank (PAB) in the amount of P450,000.00; that this loan was
secured by a mortgage, covering both personal and real properties. Petitioners further averred
that for failure to pay the loan, PAB applied for the extrajudicial foreclosure of the mortgaged
real properties of petitioners with the Ex-Officio Sheriff; that consequently, PAB acquired said
real property. Despite notice regarding the redemption period demands remain unheeded, the
properties were awarded to Kue. Kue then sent another letter, informing them that he had
already acquired the said property and that they were requested to vacate the premises within
fifteen (15) days from receipt thereof; and that because of this development, petitioners filed an
action for "Determination of True Balance of Mortgage Debt, Annulment/Setting Aside of
Extrajudicial Foreclosure of Mortgage and Damages, with Prayer for Preliminary Injunction"
against PAB.

RTC dismissed petitioners complaint. It ruled, among others, that: 1) PAB was not guilty
of bad faith in conducting the extrajudicial foreclosure as it, at one time, even suspended the
conduct of the foreclosure upon the request of petitioners, who, nevertheless, failed to exert
effort to settle their accounts; 2) because petitioners failed to redeem their properties within the
period allowed, PAB became its absolute owner and, as such, it had the right to sell the same to
Kue, who acquired the property for value and in good faith; and 3) the subsequent foreclosure
and auction sale having been conducted above board and in accordance with the requisite legal
procedure, collusion between PAB and Kue was certainly alien to the issue. CA Affirmed.
Hence, this petition.

ISSUES:

1. Whether PAB had violated the principle of estoppel when the latter conducted the public sale
2. Whether respondents' repeated requests for information as regards the amount of loan
availed from the credit line and the amount of redemption, and petitioner's failure to accede
to said requests invalidate the foreclosure

RULING:

The petition is bereft of merit.

1. Through estoppel, an admission or representation is rendered conclusive upon the person

making it, and cannot be denied or disproved as against the person relying on it. This
doctrine is based on the grounds of public policy, fair dealing, good faith, and justice and its
purpose is to forbid one to speak against his own act, representations or commitments to
the injury of one to whom they were directed and who reasonably relied on it. Thus, in order
for this doctrine to operate, a representation must have been made to the detriment of
another who relied on it. In other words, estoppel would not lie against one who, in the first
place, did not make any representation.

As correctly held by the RTC and upheld by the CA, the date "December 31, 1988"
refers to the last day when owners of foreclosed properties, like petitioners, could submit their
payment proposals to the bank. The letter was very clear. It was about the availment of the
liberalized payment scheme of the bank. On the last day for redemption, the letter was also
clear. It was April 21, 1988. It was never extended.

The opportunity given to the petitioners was to avail of the liberalized payment scheme
which program would expire on December 31, 1988. As explained by Abraham Iribani (Iribani),
the OIC of the Project Development Department of PAB, it was to give a chance to previous
owners to repossess their properties on easy term basis, possibly by condonation of charges
and penalties and payment on instalment. The letter of Carpizo was an invitation to the
petitioners to come to the bank with their proposal. It appears that the petitioners could not
come up with a proposal acceptable to the bank.
 For said reason, the mortgaged property was included in the list of mortgaged properties
that would be sold through a scheduled public bidding. Thus, on August 11, 1988, Iribani wrote
the petitioners about the scheduled bidding. In response, the petitioners told Iribani that they
would go Manila to explain their case. They did not, however, return even after the public
bidding.

In this regard, the CA was correct when it wrote:

Here, there is no estoppel to speak of. The letter does not show that the Bank had
unqualifiedly represented to the Hojases that it had extended the redemption period to
December 31, 1988. Thus, the Hojases have no basis in positing that the public sale conducted
on November 4, 1988 was null and void for having been prematurely conducted.

Moreover, jurisprudence also characterizes a valid tender of payment as one where the
full redemption price is tendered. Consequently, in this case, the offer by respondents on July
24, 1986 to redeem the foreclosed properties for 1,872,935 and the subsequent consignation
in court of P1,500,000 on August 27, 1986, while made within the period of redemption, was
ineffective since the amount offered and actually consigned not only did not include the interest
but was in fact also way below the P2,782,554.66 paid by the highest bidder/purchaser of the
properties during the auction sale.

2. Article 1616 of the Civil Code of the Philippines provides: The vendor cannot avail himself of
the right to repurchase without returning to the vendee the price of the sale x x x. It is not
difficult to understand why the redemption price should either be fully offered in legal tender
or else validly consigned in court. Only by such means can the auction winner be assured
that the offer to redeem is being made in good faith.

Respondents' repeated requests for information as regards the amount of loan availed
from the credit line and the amount of redemption, and petitioner's failure to accede to said
requests do not invalidate the foreclosure. Respondents can find other ways to know the
redemption price. For one, they can examine the Certificate of Sale registered with the Register
of Deeds to verify the purchase price, or upon the filing of their complaint, they could have
moved for a computation of the redemption price and consigned the same to the court. At any
rate, whether or not respondents '"were diligent in asserting their willingness to pay is irrelevant.
Redemption within the period allowed by law is not a matter of intent but a question of payment
or valid tender of the full redemption price within said period.

Even the complaint instituted by respondents cannot aid their plight because the
institution of an action to annul a foreclosure sale does not suspend the running of the
redemption period. In the case at bench, the record is bereft of concrete evidence that would
show that, aside from the fact that petitioners manifested their intention to avail of the scheme,
they were also ready to pay the redemption price. Hence, as they failed to exercise their right of
redemption and failed to take advantage of the liberalized incentive scheme, PAB was well
within its right to sell its property in a public sale.

GREEN ACRES HOLDINGS, INC. v. VICTORIA CABRAL, SPS. ENRIQUES T. MORAGA

AND VICTORIA SORIANO, FILCON READY MIXED, INC., DEPARTMENT OF AGRARIAN
 REFORM ADJUDICATION BOARD, REGISTRY OF DEEDS OF BULACAN, MEYCAUAYAN
BRANCH
G.R No. 175542, June 5, 2013
J. Villarama, Jr.

For an action to quiet title to prosper, two indispensable requisites must concur: (1) the
plaintiff or complainant has a legal or equitable title or interest in the real property subject of the
action; and (2) the deed, claim, encumbrance, or proceeding claimed to be casting a cloud on
his title must be shown to be in fact invalid or inoperative despite its prima facie appearance of
validity or legal efficacy.

The petitioner may vindicate its rights in the property through an action for quieting of
title, a common law remedy designed for the removal of any cloud upon, or doubt, or
uncertainty affecting title to real property. The action for quieting of title may be brought
whenever there is a cloud on title to real property or any interest in real property by reason of
any instrument, record, claim, encumbrance, or proceeding that is apparently valid or effective,
but is, in truth and in fact, invalid, ineffective, voidable, or unenforceable, and may be prejudicial
to said title

FACTS:

Victoria Cabral was the original owner of a parcel of land in Barangay Pandayan,
Meycauayan, Bulacan. Three Emancipation Patents were issued to the spouses Enrique
Moraga and Victoria Soriano. The Spouses Moraga thereafter caused the cancellation of EP
No. 496041 and its conversion to TCT No. 256260 (M). Cabral filed a complaint before the
Provincial Agrarian Reform Adjudicator (PARAD) seeking the cancellation of the Emancipation
Patents issued to the Spouses Moraga on the grounds that these were obtained through fraud
and that the land is not suitable for rice and corn production and has long been classified as
residential, commercial, industrial and nonagricultural land by the Zoning Administrator of the
Housing and Land Use Regulatory Board. PARAD rendered a decision denying the petition.
Cabral appealed the decision to the Department of Agrarian Reform Adjudication Board
(DARAB).

While the appeal was pending, the Spouses Moraga subdivided the lot covered by TCT
No. 256260 (M) into three smaller lots, the properties subject of this case. Green Acres
purchased five lots from Filcon including the three subject properties. Except for an already
cancelled annotation of a real estate mortgage in favor of Philippine Commercial International
Bank (PCI Bank), the titles were free from any annotations, liens, notices, claims or
encumbrances. The titles of Filcon were cancelled by the Register of Deeds of Meycauayan,
Bulacan and new titles were issued in the name of Green Acres including TCT Nos. T-345660
(M), T-345661 (M) and T-345662 (M) covering the subject properties. Green Acres then
constructed a warehouse building complex on the said lots.

DARAB resolved Cabrals appeal and rendered judgment ordering the cancellation of
the titles issued in the names of the Spouses Moraga and those of Filcon for having been
illegally acquired. When Green Acres learned about the DARAB decision, it sent a Letter to
Filcon, advising the latter that it learned that the properties it bought from Filcon were the
subject of an adverse decision of the DARAB. Fearing that its titles and possession might be
disturbed by the DARAB decision, Green Acres reminded Filcon of its warranties under the
deed of sale.
 Green Acres filed a Complaint for Quieting of Title, Damages with Application for
Preliminary Injunction and Writ of Preliminary Attachment before the RTC of Malolos, Bulacan
against Cabral, the Spouses Moraga, Filcon, the DARAB and the Registry of Deeds of
Meycauayan, Bulacan. Green Acres sought to quiet its title and alleged that it is a purchaser in
good faith and for value, claiming that it had no notice or knowledge of any adverse claim, lien,
or encumbrance on the properties. Cabral denied all the material allegations in the complaint
and alleged that Green Acres never acquired valid title to the subject property, much less, can it
claim to be an innocent purchaser for value. She further averred that a declaratory judgment in
a petition to quiet title will effectively subject the DARAB decision to review. The trial court
granted the demurrer filed by the Cabrals and ordered the case dismissed. Subsequently,
Cabral filed with the PARAD a Motion for Issuance of Writ of Execution of the DARAB decision.
The PARAD issued a Resolution denying the Motion for Issuance of Writ of Execution for lack of
merit. Cabral filed with the CA a petition for certiorari under Rule 65 seeking to annul the
January 25, 2006 and September 11, 2006 Resolutions, as well as the February 27, 2007 Order
of the PARAD.CA denied Cabrals petition. Both Green Acres and Cabral are now before this
Court seeking the reversal of the CA decisions adverse to them.

Green Acres argues that the DARAB decision is among those enumerated in Article 476
of the Civil Code as a possible source of a cloud on title to real property. It contends that there
can hardly be any doubt that the DARAB Decision is an "instrument," or if not, a "record" and
reflects a "claim" on the properties, while the proceedings before the DARAB are "proceedings"
directed at the real properties now owned by Green Acres which are "apparently valid or
effective" but "unenforceable" against the titles of Green Acres. It also contends that the
appellate courts reliance on Foster-Gallego v. Spouses Galang is misplaced since nothing in
said case supports the proposition that a decision of a coordinate court cannot be a source of
cloud under Article 476 of the Civil Code. Green Acres submits that Foster-Gallego is not
applicable because the ruling there was that an action to quiet title is not the proper remedy
when to remove a cloud on a title, a final and executory decision of the court need to be
reviewed or vacated. In the present case, Green Acres does not seek a review or reversal of the
DARAB decision.

Cabral, for her part, insists that the DARAB decision is not among those enumerated in
Article 476 which may cast a cloud on title to real property. As to the applicability of Foster-
Gallego, she argues that assuming that the ruling on the main issue in said case is not directly
germane, the pronouncements therein on the nature, function, purpose and limitations of a case
for quieting of title and the power of the courts in such proceedings are applicable.

ISSUE:

Whether the said DARAB decision in favor of Cabral constitutes a cloud on Green Acres title
over the subject properties.

RULING:

Green Acres arguments are meritorious.

Article 476 of the Civil Code provides:

Art. 476. Whenever there is a cloud on title to real property or any interest
therein, by reason of any instrument, record, claim, encumbrance or proceeding which is
apparently valid or effective but is in truth and in fact invalid, ineffective, voidable, or
 unenforceable, and may be prejudicial to said title, an action may be brought to remove
such cloud or to quiet the title. An action may also be brought to prevent a cloud from
being cast upon title to real property or any interest therein.

Quieting of title is a common law remedy for the removal of any cloud upon, doubt, or
uncertainty affecting title to real property. Whenever there is a cloud on title to real property or
any interest in real property by reason of any instrument, record, claim, encumbrance, or
proceeding that is apparently valid or effective, but is in truth and in fact, invalid, ineffective,
voidable, or unenforceable, and may be prejudicial to said title, an action may be brought to
remove such cloud or to quiet the title. In such action, the competent court is tasked to
determine the respective rights of the complainant and the other claimants, not only to place
things in their proper places, and make the claimant, who has no rights to said immovable,
respect and not disturb the one so entitled, but also for the benefit of both, so that whoever has
the right will see every cloud of doubt over the property dissipated, and he can thereafter
fearlessly introduce any desired improvements, as well as use, and even abuse the property.

For an action to quiet title to prosper, two indispensable requisites must concur: (1) the
plaintiff or complainant has a legal or equitable title or interest in the real property subject of the
action; and (2) the deed, claim, encumbrance, or proceeding claimed to be casting a cloud on
his title must be shown to be in fact invalid or inoperative despite its prima facie appearance of
validity or legal efficacy.

There is no dispute as to the first requisite since Green Acres has legal title over the
subject properties. The issue lies in the second requisite.

A cloud on title consists of (1) any instrument, record, claim, encumbrance or

proceeding; (2) which is apparently valid or effective; (3) but is in truth and in fact invalid,
ineffective, voidable, or unenforceable; and (4) may be prejudicial to the title sought to be
quieted.

This Court holds that the DARAB decision in favor of Cabral satisfies all four elements of
a cloud on title.As Green Acres correctly points out, the DARAB decision, a final one at that, is
both an "instrument" and a "record." Blacks Law Dictionary defines an instrument as a
document or writing which gives formal expression to a legal act or agreement, for the purpose
of creating, securing, modifying or terminating a right. A record, on the other hand, is defined as
a written account of some act, court proceeding, transaction or instrument drawn up under
authority of law, by a proper officer, and designed to remain as a memorial or permanent
evidence of the matters to which it relates. It is likewise a "claim" which is defined as a cause of
action or a demand for money or property since Cabral is asserting her right over the subject
lots. More importantly, it is a "proceeding" which is defined as a regular and orderly progress in
form of law including all possible steps in an action from its commencement to the execution of
judgment and may refer not only to a complete remedy but also to a mere procedural step that
is part of a larger action or special proceeding.

Also, the DARAB decision is apparently valid and effective. It is a final decision that has
not been reversed, vacated or nullified. It is likewise apparently effective and may be prejudicial
to Green Acres titles since it orders the cancellation of the titles of the Spouses Moraga and
Filcon all from which Green Acres derived its titles. However, as discussed above, it is
ineffective and unenforceable against Green Acres because Green Acres was not properly
impleaded in the DARAB proceedings nor was there any notice of lis pendens annotated on the
title of Filcon so as to serve notice to Green Acres that the subject properties were under
litigation. As such, Green Acres is an innocent purchaser for value.

We agree with the CA's suggestion that the petitioner's proper recourse was either an
action for quieting of title or an action for reconveyance of the property. It is timely for the Court
to remind that the petitioner will be better off if it should go to the courts to obtain relief through
the proper recourse; otherwise, it would waste its own time and effort, aside from thereby unduly
burdening the dockets of the courts.

The petitioner may vindicate its rights in the property through an action for quieting of
title, a common law remedy designed for the removal of any cloud upon, or doubt, or uncertainty
affecting title to real property. The action for quieting of title may be brought whenever there is a
cloud on title to real property or any interest in real property by reason of any instrument, record,
claim, encumbrance, or proceeding that is apparently valid or effective, but is, in truth and in
fact, invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title. In the
action, the competent court is tasked to determine the respective rights of the plaintiff and the
other claimants, not only to put things in their proper places, and make the claimant, who has no
rights to the immovable, respect and not disturb the one so entitled, but also for the benefit of
both, so that whoever has the right will see every cloud of doubt over the property dissipated,
and he can thereafter fearlessly introduce any desired improvements, as well as use, and even
abuse the property.

NAGKAKAISANG MARALITA NG SITIO MASIGASIG, INC. v. MILITARY SHRINE SERVICES

PHILIPPINE VETERANS AFFAIRS OFFICE, DEPARTMENT OF NATIONAL DEFENSE
G.R. No. 187587, June 5, 2013
CJ Sereno

The resolution of whether the subject lots were declared as reclassified and disposable
lies in the determination of whether the handwritten addendum of President Marcos has the
force and effect of law.

Publication must be in full or it is no publication at all since its purpose is to inform the
public of the contents of the laws. As correctly pointed out by the petitioners, the mere mention
of the number of the presidential decree, the title of such decree, its whereabouts (e.g., "with
Secretary Tuvera"), the supposed date of effectivity, and in a mere supplement of the Official
Gazette cannot satisfy the publication requirement

FACTS:

By virtue of Proclamation No. 423, President Carlos P. Garcia reserved parcels of land in
the Municipalities of Pasig, Taguig, Paraaque, Province of Rizal and Pasay City for a military
reservation. The military reservation, then known as Fort William McKinley, was later on
renamed Fort Andres Bonifacio (Fort Bonifacio). President Ferdinand E. Marcos (President
Marcos) issued Proclamation No. 208, amending Proclamation No. 423, which excluded a
certain area of Fort Bonifacio and reserved it for a national shrine. The excluded area is now
known as Libingan ng mga Bayani, which is under the administration of herein respondent
Military Shrine Services Philippine Veterans Affairs Office (MSS-PVAO). Again, it issued
another proclamation which excluded barangaysLower Bicutan, Upper Bicutan and Signal
Village from the operation of Proclamation No. 423 and declared it open for disposition under
the provisions of Republic Act Nos. (R.A.) 274 and 730. It is worthy to note that, the handwritten
addendum of President Marcos was not included in the publication of Proclamation No. 2476
which covers some part of Western Bicutan as alienable and disposable land.

Informal settlers increased and occupied some areas of Fort Bonifacio including portions
of the Libingan ng mga Bayani. Thus, Brigadier General Fredelito Bautista issued General
Order No. 1323 creating Task Force Bantay (TFB), primarily to prevent further unauthorized
occupation and to cause the demolition of illegal structures at Fort Bonifacio.

Members of petitioner Nagkakaisang Maralita ng Sitio Masigasig, Inc. (NMSMI) filed a

Petition with the Commission on Settlement of Land Problems (COSLAP). The Petition prayed
for the following: (1) the reclassification of the areas they occupied, covering Lot 3 of SWO-13-
000-298 of Western Bicutan, from public land to alienable and disposable land pursuant to
Proclamation No. 2476; (2) the subdivision of the subject lot by the Director of Lands; and (3)
the Land Management Bureaus facilitation of the distribution and sale of the subject lot to its
bona fide occupants. Western Bicutan Lot Owners Association, Inc. (WBLOAI) filed a Petition-
in-Intervention substantially praying for the same reliefs. COSLAP issued a Resolution granting
the Petition and declaring the portions of land in question alienable and disposable, with
Associate Commissioner Lina Aguilar-General dissenting.

Herein respondent MSS-PVAO filed a Motion for Reconsideration, which was denied
MSS-PVAO filed a Petition with the Court of Appeals seeking to reverse the COSLAP
Resolutions. CA reversed and set aside. Both NMSMI and WBLOAI appealed the said Decision
by filing their respective Petitions for Review with this Court under Rule 45 of the Rules of Court.

ISSUE:

Whether the subject lots were not alienable and disposable by virtue of Proclamation No. 2476
on the ground that the handwritten addendum of President Marcos was not included in the
publication of the said law.

RULING:

The court denies the petition for lack of merit.

Considering that petitioners were occupying Lots 3 and 7 of Western Bicutan (subject
lots), their claims were anchored on the handwritten addendum of President Marcos to
Proclamation No. 2476. They allege that the former President intended to include all Western
Bicutan in the reclassification of portions of Fort Bonifacio as disposable public land when he
made a notation just below the printed version of Proclamation No. 2476.

However, it is undisputed that the handwritten addendum was not included when
Proclamation No. 2476 was published in the Official Gazette. The resolution of whether the
subject lots were declared as reclassified and disposable lies in the determination of whether
the handwritten addendum of President Marcos has the force and effect of law. In relation
thereto, Article 2 of the Civil Code expressly provides: ART. 2. Laws shall take effect after fifteen
days following the completion of their publication in the Official Gazette, unless it is otherwise
provided. This Code shall take effect one year after such publication.

Under the above provision, the requirement of publication is indispensable to give effect
to the law, unless the law itself has otherwise provided. The phrase "unless otherwise provided"
refers to a different effectivity date other than after fifteen days following the completion of the
laws publication in the Official Gazette, but does not imply that the requirement of publication
may be dispensed with. The issue of the requirement of publication was already settled in the
landmark case Taada v. Hon. Tuvera, in which we had the occasion to rule thus: Publication is
indispensable in every case, but the legislature may in its discretion provide that the usual
fifteen-day period shall be shortened or extended. An example, as pointed out by the present
Chief Justice in his separate concurrence in the original decision, is the Civil Code which did not
become effective after fifteen days from its publication in the Official Gazette but "one year after
such publication." The general rule did not apply because it was "otherwise provided."

It is not correct to say that under the disputed clause publication may be dispensed with
altogether. The reason is that such omission would offend due process insofar as it would deny
the public knowledge of the laws that are supposed to govern it. Surely, if the legislature could
validly provide that a law shall become effective immediately upon its approval notwithstanding
the lack of publication (or after an unreasonably short period after publication), it is not unlikely
that persons not aware of it would be prejudiced as a result; and they would be so not because
of a failure to comply with it but simply because they did not know of its existence. Significantly,
this is not true only of penal laws as is commonly supposed. One can think of many non-penal
measures, like a law on prescription, which must also be communicated to the persons they
may affect before they can begin to operate.

The term "laws" should refer to all laws and not only to those of general application, for
strictly speaking all laws relate to the people in general albeit there are some that do not apply
to them directly. An example is a law granting citizenship to a particular individual, like a relative
of President Marcos who was decreed instant naturalization. It surely cannot be said that such a
law does not affect the public although it unquestionably does not apply directly to all the
people. The subject of such law is a matter of public interest which any member of the body
politic may question in the political forums or, if he is a proper party, even in the courts of justice.
In fact, a law without any bearing on the public would be invalid as an intrusion of privacy or as
class legislation or as an ultra vires act of the legislature. To be valid, the law must invariably
affect the public interest even if it might be directly applicable only to one individual, or some of
the people only, and not to the public as a whole.

We hold therefore that all statutes, including those of local application and private laws,
shall be published as a condition for their effectivity, which shall begin fifteen days after
publication unless a different effectivity date is fixed by the legislature.

We agree that the publication must be in full or it is no publication at all since its purpose
is to inform the public of the contents of the laws. As correctly pointed out by the petitioners, the
mere mention of the number of the presidential decree, the title of such decree, its whereabouts
(e.g., "with Secretary Tuvera"), the supposed date of effectivity, and in a mere supplement of the
Official Gazette cannot satisfy the publication requirement.This is not even substantial
compliance. This was the manner, incidentally, in which the General Appropriations Act for FY
1975, a presidential decree undeniably of general applicability and interest, was "published" by
the Marcos administration. The evident purpose was to withhold rather than disclose information
on this vital law.
 PHILIPPINE NATIONAL CONSTRUCTION CORPORATION v. APAC MARKETING
CORPORATIO, REPRESENTED BY CESAR M. ONG, JR.
G.R. No. 190957, June 5, 2013
CJ Sereno

The award of attorneys fees under Article 2208 demands factual, legal, and equitable
justification to avoid speculation and conjecture surrounding the grant thereof. Due to the
special nature of the award of attorneys fees, a rigid standard is imposed on the courts before
these fees could be granted. Hence, it is imperative that they clearly and distinctly set forth in
their decisions the basis for the award thereof. It is not enough that they merely state the
amount of the grant in the dispositive portion of their decisions. It bears reiteration that the
award of attorneys fees is an exception rather than the general rule; thus, there must be
compelling legal reason to bring the case within the exceptions provided under Article 2208 of
the Civil Code to justify the award.

FACTS:

The present case involves a simple purchase transaction between defendant-appellant

Philippine National Construction Corporation (PNCC), represented by defendants-appellants
Rogelio Espiritu and Rolando Macasaet, and plaintiff-appellee APAC, represented by Cesar M.
Ong, Jr., involving crushed basalt rock delivered by plaintiff-appellee to defendant-appellant
PNCC. Plaintiff-appellee filed with the trial court a complaint against defendants-appellees for
collection of sum of money with damages whereby defendants-appellants would issue the check
corresponding to the value of the materials to be delivered, or "Check Before Delivery," but prior
to the implementation of the said payment agreement, defendants-appellants requested from
plaintiff-appellee a 30-day term from the delivery date within which to pay, which plaintiff-
appellee accepted; and after making deliveries pursuant to the purchase orders and despite
demands by plaintiff-appellee, defendants appellants failed and refused to pay and settle their
overdue accounts.

The complaint prayed for payment of the amount of P782,296.80 "plus legal interest at
the rate of not less than 6% monthly, to start in April, 1999 until the full obligation is completely
settled and paid," among others. Defendants-appellants filed a motion to dismiss, alleging that
the complaint was premature considering that defendant-appellant PNCC had been faithfully
paying its obligations to plaintiff-appellee, the trial court denied the motion to dismiss. Thus,
defendants-appellants filed their answer, alleging that the obligation of defendant-appellant
PNCC was only with respect to the balance of the principal obligation that had not been fully
paid which, based on the latest liquidation report, amounted to only P474,095.92. RTC ruled in
favor of the plaintiff. CA affirmed with some modifications., it ordered PNCC to pay legal interest
at six per cent (6%) per annum on the principal obligation, computed from January 8, 1999 until
its full payment in January 2001. Defendants-appellants Rogelio Espiritu and Rolando Macasaet
are absolved from liability.

ISSUE:

Whether the CA gravely erred in awarding attorneys fees to respondent.

RULING:

The petition is impressed with merit.

 Article 2208 of the New Civil Code of the Philippines states the policy that should guide
the courts when awarding attorneys fees to a litigant. As a general rule, the parties may
stipulate the recovery of attorneys fees. In the absence on such stipulation, this article
restrictively enumerates the instances when these fees may be recovered. In all cases, the
attorney's fees and expenses of litigation must be reasonable.

The general rule is that attorneys fees cannot be recovered as part of damages
because of the policy that no premium should be placed on the right to litigate. They are not to
be awarded every time a party wins a suit. The power of the court to award attorneys fees
under Article 2208 demands factual, legal, and equitable justification. Even when a claimant is
compelled to litigate with third persons or to incur expenses to protect his rights, still attorneys
fees may not be awarded where no sufficient showing of bad faith could be reflected in a partys
persistence in a case other than an erroneous conviction of the righteousness of his cause.

It is settled that the award of attorney's fees is the exception rather than the general rule;
counsel's fees are not awarded every time a party prevails in a suit because of the policy that no
premium should be placed on the right to litigate. Attorney's fees, as part of damages, are not
necessarily equated to the amount paid by a litigant to a lawyer. In the ordinary sense,
attorney's fees represent the reasonable compensation paid to a lawyer by his client for the
legal services he has rendered to the latter; while in its extraordinary concept, they may be
awarded by the court as indemnity for damages to be paid by the losing party to the prevailing
party. Attorney's fees as part of damages are awarded only in the instances specified in Article
2208 of the Civil Code. As such, it is necessary for the court to make findings of fact and law
that would bring the case within the ambit of these enumerated instances to justify the grant of
such award, and in all cases it must be reasonable.

We can glean from the above ruling that attorneys fees are not awarded as a matter of
course every time a party wins. We do not put a premium on the right to litigate. On occasions
that those fees are awarded, the basis for the grant must be clearly expressed in the decision of
the court.

Petitioner contends that the RTCs Decision has no finding that would fall under any of
the exceptions enumerated in Article 2208 of the new Civil Code. Further, it alleges that the
court a quo has not given any factual, legal, or equitable justification for applying paragraph 11
of Article 2208 as basis the latters exercise of discretion in holding petitioner liable for attorneys
fees.

We agree with petitioner on these points. We have consistently held that an award of
attorneys fees under Article 2208 demands factual, legal, and equitable justification to avoid
speculation and conjecture surrounding the grant thereof. Due to the special nature of the award
of attorneys fees, a rigid standard is imposed on the courts before these fees could be granted.
Hence, it is imperative that they clearly and distinctly set forth in their decisions the basis for the
award thereof. It is not enough that they merely state the amount of the grant in the dispositive
portion of their decisions. It bears reiteration that the award of attorneys fees is an exception
rather than the general rule; thus, there must be compelling legal reason to bring the case within
the exceptions provided under Article 2208 of the Civil Code to justify the award.

We have perused the assailed CAs Decision, but cannot find any factual, legal, or
equitable justification for the award of attorneys fees in favor of respondent. The appellate court
simply quoted the portion of the RTC Decision that granted the award as basis for the
affirmation thereof. There was no elaboration on the basis. There is therefore an absence of an
independent CA finding of the factual circumstances and legal or equitable basis to justify the
grant of attorneys fees. The CA merely adopted the RTCs rational for the award, which in this
case we find to be sorely inadequate.

SUSAN LIM-LUA V. DANILO Y. LUA

G.R. No. 175279-80, June 5, 2013
J. Villarama, Jr.

As a matter of law, the amount of support which those related by marriage and family
relationship is generally obliged to give each other shall be in proportion to the resources or
means of the giver and to the needs of the recipient. Such support comprises everything
indispensable for sustenance, dwelling, clothing, medical attendance, education and
transportation, in keeping with the financial capacity of the family.

Upon receipt of a verified petition for declaration of absolute nullity of void marriage or
for annulment of voidable marriage, or for legal separation, and at any time during the
proceeding, the court, motu proprio or upon verified application of any of the parties, guardian
or designated custodian, may temporarily grant support pendente lite prior to the rendition of
judgment or final order

FACTS:

Susan Lim-Lua filed an action for the declaration of nullity of her marriage with
respondent Danilo Y. Lua. In her prayer for support pendente lite for herself and her two
children, petitioner sought the amount of P500,000.00 as monthly support, citing respondents
huge earnings from salaries and dividends in several companies and businesses here and
abroad. It was grantedmby the court.

The amounts already extended to the two (2) children, being a commendable act of
defendant, should be continued by him considering the vast financial resources at his disposal.
Respondent filed a motion for reconsideration, asserting that petitioner is not entitled to spousal
support considering that she does not maintain for herself a separate dwelling from their
children and respondent has continued to support the family for their sustenance and well-being
in accordance with familys social and financial standing. As to the P250,000.00 granted by the
trial court as monthly support pendente lite, as well as the P1,750,000.00 retroactive support,
respondent found it unconscionable and beyond the intendment of the law for not having
considered the needs of the respondent.

Trial court denied the motion for violation of the threeday notice period under Section 4,
Rule 15 of the 1997 Rules of Civil Procedure, as amended, and therefore did not interrupt the
running of the period to appeal. CA reversed. Since respondent still failed and refused to pay
the support in arrears pendente lite, petitioner filed in the CA a Petition for Contempt of Court
with Damages,. Respondent, on the other hand, filed CA-G.R. SP No. 01315, a Petition for
Certiorari under Rule 65 of the Rules of Court ("Danilo Y. Lua versus Hon. Raphael B.
Yrastorza, Sr., in his capacity as Presiding Judge of Regional Trial Court of Cebu, Branch 14,
and Susan Lim Lua"). The two cases were consolidated. CA set aside the assailed orders of
the trial court. The appellate court said that the trial court should not have completely
disregarded the expenses incurred by respondent consisting of the purchase and maintenance
of the two cars, payment of tuition fees, travel expenses, and the credit card purchases
involving groceries, dry goods and books, which certainly inured to the benefit not only of the
two children, but their mother (petitioner) as well. It held that respondents act of deferring the
monthly support adjudged in CA-G.R. SP No. 84740 was not contumacious as it was anchored
on valid and justifiable reasons. Respondent said he just wanted the issue of whether to deduct
his advances be settled first in view of the different interpretation by the trial court of the
appellate courts decision in CA-G.R. SP No. 84740. It also noted the lack of contribution from
the petitioner in the joint obligation of spouses to support their children.

ISSUE:

Whether the petitioner is entitled to spousal support despite despite the pending action for nullity
of marriage. And if yes, whether certain expenses already incurred by the respondent may be
deducted from the total support in arrears owing to petitioner and her children pursuant to the
Decision dated April 12, 2005 in CA-G.R. SP No. 84740.

RULING:

The pertinent provision of the Family Code of the Philippines provides:

Article 194. Support comprises everything indispensable for sustenance,

dwelling, clothing, medical attendance, education and transportation, in keeping with the
financial capacity of the family.

The education of the person entitled to be supported referred to in the preceding

paragraph shall include his schooling or training for some profession, trade or vocation,
even beyond the age of majority. Transportation shall include expenses in going to and
from school, or to and from place of work. (Emphasis supplied.)

As a matter of law, the amount of support which those related by marriage and family
relationship is generally obliged to give each other shall be in proportion to the resources or
means of the giver and to the needs of the recipient. Such support comprises everything
indispensable for sustenance, dwelling, clothing, medical attendance, education and
transportation, in keeping with the financial capacity of the family.

Upon receipt of a verified petition for declaration of absolute nullity of void marriage or
for annulment of voidable marriage, or for legal separation, and at any time during the
proceeding, the court, motu proprio or upon verified application of any of the parties, guardian or
designated custodian, may temporarily grant support pendente lite prior to the rendition of
judgment or final order. Because of its provisional nature, a court does not need to delve fully
into the merits of the case before it can settle an application for this relief. All that a court is
tasked to do is determine the kind and amount of evidence which may suffice to enable it to
justly resolve the application. It is enough that the facts be established by affidavits or other
documentary evidence appearing in the record.

In this case, the amount of monthly support pendente lite for petitioner and her two
children was determined after due hearing and submission of documentary evidence by the
parties. Although the amount fixed by the trial court was reduced on appeal, it is clear that the
monthly support pendente lite of P115,000.00 ordered by the CA was intended primarily for the
sustenance of petitioner and her children, e.g., food, clothing, salaries of drivers and house
helpers, and other household expenses. Petitioners testimony also mentioned the cost of
regular therapy for her scoliosis and vitamins/medicines.
 As to the financial capacity of the respondent, it is beyond doubt that he can solely
provide for the subsistence, education, transportation, health/medical needs and recreational
activities of his children, as well as those of petitioner who was then unemployed and a full-time
housewife. Despite this, respondents counsel manifested during the same hearing that
respondent was willing to grant the amount of only P75,000.00 as monthly support pendente lite
both for the children and petitioner as spousal support. Though the receipts of expenses
submitted in court unmistakably show how much respondent lavished on his children, it appears
that the matter of spousal support was a different matter altogether. Rejecting petitioners prayer
for P500,000.00 monthly support and finding the P75,000.00 monthly support offered by
respondent as insufficient, the trial court fixed the monthly support pendente lite at P250,000.00.
However, since the supposed income in millions of respondent was based merely on the
allegations of petitioner in her complaint and registration documents of various corporations
which respondent insisted are owned not by him but his parents and siblings, the CA reduced
the amount of support pendente lite to P115,000.00, which ruling was no longer questioned by
both parties.

Controversy between the parties resurfaced when respondents compliance with the final
CA decision indicated that he deducted from the total amount in arrears (P2,645,000.00) the
sum of P2,482,348.16, representing the value of the two cars for the children, their cost of
maintenance and advances given to petitioner and his children. Respondent explained that the
deductions were made consistent with the fallo of the CA Decision in CA-G.R. SP No. 84740
ordering him to pay support pendente lite in arrears less the amount supposedly given by him to
petitioner as her and their two childrens monthly support.

The CA, in ruling for the respondent said that all the foregoing expenses already
incurred by the respondent should, in equity, be considered advances which may be properly
deducted from the support in arrears due to the petitioner and the two children. Said court also
noted the absence of petitioners contribution to the joint obligation of support for their children.

We reverse in part the decision of the CA. Subject to the sound discretion of the court,
either parent or both may be ordered to give an amount necessary for the support,
maintenance, and education of the child. It shall be in proportion to the resources or means of
the giver and to the necessities of the recipient.

In determining the amount of provisional support, the court may likewise consider the
following factors: (1) the financial resources of the custodial and non-custodial parent and those
of the child; (2) the physical and emotional health of the child and his or her special needs and
aptitudes; (3) the standard of living the child has been accustomed to; (4) the non-monetary
contributions that the parents will make toward the care and well-being of the child.

The Family Court may direct the deduction of the provisional support from the salary of
the parent. Since the amount of monthly support pendente lite as fixed by the CA was not
appealed by either party, there is no controversy as to its sufficiency and reasonableness. The
dispute concerns the deductions made by respondent in settling the support in arrears.

Here, the CA should not have allowed all the expenses incurred by respondent to be
credited against the accrued support pendente lite. As earlier mentioned, the monthly support
pendente lite granted by the trial court was intended primarily for food, household expenses
such as salaries of drivers and house helpers, and also petitioners scoliosis therapy sessions.
Hence, the value of two expensive cars bought by respondent for his children plus their
maintenance cost, travel expenses of petitioner and Angelli, purchases through credit card of
items other than groceries and dry goods (clothing) should have been disallowed, as these bear
no relation to the judgment awarding support pendente lite. While it is true that the dispositive
portion of the executory decision in CA-G.R. SP No. 84740 ordered herein respondent to pay
the support in arrears "less than the amount supposedly given by petitioner to the private
respondent as her and their two (2) children monthly support," the deductions should be limited
to those basic needs and expenses considered by the trial and appellate courts. The assailed
ruling of the CA allowing huge deductions from the accrued monthly support of petitioner and
her children, while correct insofar as it commends the generosity of the respondent to his
children, is clearly inconsistent with the executory decision in CA-G.R. SP No. 84740. More
important, it completely ignores the unfair consequences to petitioner whose sustenance and
well-being, was given due regard by the trial and appellate courts. This is evident from the
March 31, 2004 Order granting support pendente lite to petitioner and her children, when the
trial court observed:

While there is evidence to the effect that defendant is giving some forms of financial
assistance to his two (2) children via their credit cards and paying for their school expenses, the
same is, however, devoid of any form of spousal support to the plaintiff, for, at this point in time,
while the action for nullity of marriage is still to be heard, it is incumbent upon the defendant,
considering the physical and financial condition of the plaintiff and the overwhelming capacity of
defendant, to extend support unto the latter.

On appeal, while the Decision in CA-G.R. SP No. 84740 reduced the amount of monthly
support fixed by the trial court, it nevertheless held that considering respondents financial
resources, it is but fair and just that he give a monthly support for the sustenance and basic
necessities of petitioner and his children. This would imply that any amount respondent seeks to
be credited as monthly support should only cover those incurred for sustenance and household
expenses.

The amounts already extended to the two (2) children, being a commendable act of
petitioner, should be continued by him considering the vast financial resources at his disposal.
Suffice it to state that the matter of increase or reduction of support should be submitted to the
trial court in which the action for declaration for nullity of marriage was filed, as this Court is not
a trier of facts. The amount of support may be reduced or increased proportionately according to
the reduction or increase of the necessities of the recipient and the resources or means of the
person obliged to support. As we held in Advincula v. Advincula Judgment for support does
not become final. The right to support is of such nature that its allowance is essentially
provisional; for during the entire period that a needy party is entitled to support, his or her
alimony may be modified or altered, in accordance with his increased or decreased needs, and
with the means of the giver. It cannot be regarded as subject to final determination.
HEIRS OF MANUEL UY EK LIONG, represented by BELEN LIM VDA. DE UY v. MAURICIA
MEER CASTILLO, HEIRS OF BUENAFLOR C. UMALI, REPRESENTED BY NANCY UMALI,
VICTORIA H. CASTILLO, BERTILLA C. RADA, MARIETTA C. CAVANEZ, LEOVINA C.
JALBUENA AND PHILIP M. CASTILLO
G.R. No. 176425, June 5, 2013
J. Perez

Obligations arising from contracts, after all, have the force of law between the
contracting parties who are expected to abide in good faith with their contractual commitments,
not weasel out of them. Moreover, when the terms of the contract are clear and leave no doubt
as to the intention of the contracting parties, the rule is settled that the literal meaning of its
stipulations should govern. In such cases, courts have no authority to alter a contract by
construction or to make a new contract for the parties. Since their duty is confined to the
interpretation of the one which the parties have made for themselves without regard to its
wisdom or folly, it has been ruled that courts cannot supply material stipulations or read into the
contract words it does not contain. Indeed, courts will not relieve a party from the adverse
effects of an unwise or unfavorable contract freely entered into.

FACTS:

Respondent Mauricia Meer Castillo and her husband Felipe,was the owner of four
parcels of land, situated in Silangan Mayao, Lucena City. With the death of Felipe, a deed of
extrajudicial partition over his estate was executed by his heirs. Utilized as security for the
payment of a tractor purchased by Mauricias nephew, Santiago Rivera, from Bormaheco, Inc., it
appears, however, that the subject properties were subsequently sold at a public auction where
Insurance Corporation of the Philippines (ICP) tendered the highest bid. ICP likewise sold said
parcels in favor of Philippine Machinery Parts Manufacturing Co., Inc. (PMPMCI) which, in turn,
caused the same to be titled in its name.

Respondents and Buenaflor instituted Civil Case No. 8085 before the then Court of First
Instance (CFI) of Quezon, for the purpose of seeking the annulment of the transactions and/or
proceedings involving the subject parcels, as well as the TCTs procured by PMPMCI. They
procured the legal services of Atty. Edmundo Zepeda and the assistance of Manuel Uy Ek Liong
who, as financier, agreed to underwrite the litigation expenses entailed by the case. In
exchange, it was stipulated that they will be entitled to 40% of the share. Respondents and
Buenaflor entered into another notarized agreement denominated as a Kasunduan whereby
they agreed to sell their remaining sixty (60%) percent share in the subject parcels in favor of
Manuel for the sum of P180,000.00.

Manuel died and was survived by petitioners, Heirs of Manuel Uy Ek Liong, who were
later represented in the negotiations regarding the subject parcels and in this suit by petitioner
BelenLim Vda. de Uy. Subsequently, respondents wrote petitioners a letter essentially informing
petitioners that respondents were willing to sell their sixty (60%) percent share in the subject
parcels for the consideration of P500.00 per square meter. Insisting on the price agreed upon in
the Kasunduan, however, petitioners sent a letter, requesting respondents to execute within 15
days from notice the necessary Deed of Absolute Sale over their 60% share as aforesaid,
excluding the 1,750-square meter portion specified in their agreement with Manuel. The
respondents also called petitioners attention to the fact, among others, that their right to ask for
an additional consideration for the sale was recognized under the Kasunduan.
 Petitioners commenced the instant suit with the filing of their complaint for specific
performance and damages against the respondents and respondent Heirs of Buenaflor, as then
represented by Menardo Umali due to the fact of unjustified refusal to comply with their
obligation under the Kasunduan, petitioners prayed that the former be ordered to execute the
necessary Deed of Absolute Sale over their shares in the subject parcels, with indemnities for
moral and exemplary damages, as well as attorneys fees, litigation expenses and the costs of
the suit.

With the Kasunduan upheld as the law between the contracting parties and their privies,
the RTC disposed of the case ordering the respondents to execute and deliver a Deed of
Conveyance in favor of petitioners and for the latter to pay upon delivery thereof. Dissatisfied
with the RTCs decision, both petitioners and respondents perfected their appeals which were
docketed before the CA as CA-G.R. CV No. 84687. While petitioners prayed for the increase of
the monetary awards adjudicated a quo, as well as the further grant of liquidated damages in
their favor, respondents sought the complete reversal of the appealed decision on the ground
that the Agreement and the Kasunduan were null and void. CA reversed and set aside the
assailed decision. Hence, this petition.

ISSUE:

Whether the agreement and Kasunduan was void ab inition for being contrary to law and public
policy for being violative of Article 1491 of the New Civil Code and the Canons of Proffesional
Responsibility.

RULING:

We find the petition impressed with partial merit.

Absent a showing that the RTCs ruling on the foregoing issues was reversed and set
aside, we find that the CA reversibly erred in ruling on the validity of the Agreement which
respondents executed not only with petitioners predecessor-in-interest, Manuel, but also with
Atty. Zepeda. Since it is generally accepted that no man shall be affected by any proceeding to
which he is a stranger, the rule is settled that a court must first acquire jurisdiction over a party
either through valid service of summons or voluntary appearance for the latter to be bound by
a court decision. The fact that Atty. Zepeda was not properly impleaded in the suit and given a
chance to present his side of the controversy before the RTC should have dissuaded the CA
from invalidating the Agreement and holding that attorneys fees should, instead, be computed
on a quantum meruit basis. Admittedly, Article 1491 (5) of the Civil Code prohibits lawyers from
acquiring by purchase or assignment the property or rights involved which are the object of the
litigation in which they intervene by virtue of their profession. The CA lost sight of the fact,
however, that the prohibition applies only during the pendency of the suit and generally does not
cover contracts for contingent fees where the transfer takes effect only after the finality of a
favorable judgment.

Although executed on the same day, it cannot likewise be gainsaid that the Agreement
and the Kasunduan are independent contracts, with parties, objects and causes different from
that of the other. Defined as a meeting of the minds between two persons whereby one binds
himself, with respect to the other to give something or to render some service, a contract
requires the concurrence of the following requisites: (a) consent of the contracting parties; (b)
object certain which is the subject matter of the contract; and, (c) cause of the obligation which
is established. Executed in exchange for the legal services of Atty. Zepeda and the financial
assistance to be extended by Manuel, the Agreement concerned respondents transfer of 40%
of the avails of the suit, in the event of a favorable judgment in Civil Case No. 8085. While
concededly subject to the same suspensive condition, the Kasunduan was, in contrast,
concluded by respondents with Manuel alone, for the purpose of selling in favor of the latter
60% of their share in the subject parcels for the agreed price of P180,000.00. Given these clear
distinctions, petitioners correctly argue that the CA reversibly erred in not determining the
validity of the Kasunduan independent from that of the Agreement.

Viewed in the light of the autonomous nature of contracts enunciated under Article 1306
of the Civil Code, on the other hand, we find that the Kasunduan was correctly found by the
RTC to be a valid and binding contract between the parties. Already partially executed with
respondents receipt of P1,000.00 from Manuel upon the execution thereof, the Kasunduan
simply concerned the sale of the formers 60% share in the subject parcel, less the 1,750-
square meter portion to be retained, for the agreed consideration of P180,000.00. As a
notarized document that carries the evidentiary weight conferred upon it with respect to its due
execution, the Kasunduan was shown to have been signed by respondents with full knowledge
of its contents, as may be gleaned from the testimonies elicited from Philip and Leovina.

At any rate, our perusal of the record shows that respondents main objection to the
enforcement of the Kasunduan was the perceived inadequacy of the P180,000.00 which the
parties had fixed as consideration for 60% of the subject parcels. Rather than claiming vitiation
of their consent in the answer they filed a quo, respondents, in fact, distinctly averred that the
Kasunduan was tantamount to unjust enrichment and "a clear source of speculative profit" at
their expense since their remaining share in said properties had "a current market value of
P9,594,900.00, more or less."

In the absence of any showing, however, that the parties were able to agree on new
stipulations that would modify their agreement, we find that petitioners and respondents are
bound by the original terms embodied in the Kasunduan. Obligations arising from contracts,
after all, have the force of law between the contracting parties who are expected to abide in
good faith with their contractual commitments, not weasel out of them. Moreover, when the
terms of the contract are clear and leave no doubt as to the intention of the contracting parties,
the rule is settled that the literal meaning of its stipulations should govern. In such cases, courts
have no authority to alter a contract by construction or to make a new contract for the parties.
Since their duty is confined to the interpretation of the one which the parties have made for
themselves without regard to its wisdom or folly, it has been ruled that courts cannot supply
material stipulations or read into the contract words it does not contain. Indeed, courts will not
relieve a party from the adverse effects of an unwise or unfavorable contract freely entered into.

Our perusal of the Kasunduan also shows that it contains a penal clause which provides
that a party who violates any of its provisions shall be liable to pay the aggrieved party a penalty
fixed at P50,000.00, together with the attorneys fees and litigation expenses incurred by the
latter should judicial resolution of the matter becomes necessary. An accessory undertaking to
assume greater liability on the part of the obligor in case of breach of an obligation, the
foregoing stipulation is a penal clause which serves to strengthen the coercive force of the
obligation and provides for liquidated damages for such breach. "The obligor would then be
bound to pay the stipulated indemnity without the necessity of proof of the existence and the
measure of damages caused by the breach."

In the absence of a showing that they expressly reserved the right to pay the penalty in
lieu of the performance of their obligation under the Kasunduan, respondents were correctly
ordered by the RTC to execute and deliver a deed of conveyance over their 60% share in the
subject parcels in favor of petitiOners. Considering that the Kasunduan stipulated that
respondents would retain a portion of their share consisting of 1,750 square meters, said
disposition should, however, be modified to give full effect to the intention of the contracting
parties. Since the parties also fixed liquidated damages in the sum of P50,000.00 in case of
breach, we find that said amount should suffice as petitioners' indemnity, without further need of
compensation for moral and exemplary damages. In obligations with a penal clause, the penalty
generally substitutes the indemnity for damages and the payment of interests in case of non-
compliance. Usually incorporated to create an effective deterrent against breach of the
obligation by making the consequences of such breach as onerous as it may be possible, the
rule is settled that a penal clause is not limited to actual and compensatory damages

The RTC's award of attorney's fees in the sum of P50,000.00 is, however, proper. Aside
from the fact that the penal clause included a liability for said award in the event of litigation over
a breach of the Kasunduan, petitioners were able to prove that they incurred said sum in
engaging the services of their lawyer to pursue their rights and protect their interests.

HENRY L. SY v. LOCAL GOVERNMENT OF QUEZON CITY

G.R. No. 202690, June 5, 2013
J. Perlas- Bernabe

The constitutional limitation of "just compensation" is considered to be the sum

equivalent to the market value of the property, broadly described to be the price fixed by the
seller in open market in the usual and ordinary course of legal action and competition or the fair
value of the property as between one who receives, and one who desires to sell, it fixed at the
time of the actual taking by the government. It is well-settled that the amount of just
compensation is to be ascertained as of the time of the taking. In this case, the documents
presented do not reflect the value of the subject property at the time of its taking in 1986 but
rather, its valuation in 1996. Consequently, the case must be remanded to the RTC in order to
properly determine the amount of just compensation during such time the subject property was
actually taken.

FACTS:

The City, through then Mayor Ismael Mathay, Jr., filed a complaint for expropriation with
the RTC in order to acquire a 1,000 sq. m. parcel of land, owned and registered under the name
of Sy (subject property), which was intended to be used as a site for a multi-purpose barangay
hall, day-care center, playground and community activity center for the benefit of the residents
of Barangay Balingasa, Balintawak, Quezon City.

Sy did not question the Citys right to expropriate the subject property. Thus, only the
amount of just compensation remained at issue. Commissioners Ostaco and Alcantara,
recommended the payment of P5,500.00 per sq. m., to be computed from the date of the filing
of the expropriation complaint. On the other hand, Commissioner Salinas filed a separate
Report, recommending the higher amount of P13,500.00 per sq. m. as just compensation. RTC
adopted the findings of Commissioners Ostaco and Alcantara and thus, held that the just
compensation for the subject property should be set at P5,500.00 per sq. m. Further, it found no
basis for the award of damages and back rentals in favor of Sy. Finally, while legal interest was
not claimed, for equity considerations, it awarded six percent (6%) legal interest, computed from
November 7, 1996 until full payment of just compensation. CA affirmed but modified the same,
ordering the City to pay Sy the amount of P200,000.00 as exemplary damages and attorneys
fees equivalent to one percent (1%) of the total amount due. Hence, this petition.

ISSUES:

Whether the amount of just compensation as determined by the RTC as well as its grant of six
percent (6%) legal interest should be upheld; and the validity of the awading of exemplary
damages and attorneys fees.

RULING:

The petition is partly meritorious.

Based on a judicious review of the records and application of jurisprudential rulings, the
Court holds that the correct rate of legal interest to be applied is twelve percent (12%) and not
six percent (6%) per annum, owing to the nature of the Citys obligation as an effective
forbearance.

The constitutional limitation of "just compensation" is considered to be the sum

equivalent to the market value of the property, broadly described to be the price fixed by the
seller in open market in the usual and ordinary course of legal action and competition or the fair
value of the property as between one who receives, and one who desires to sell, it fixed at the
time of the actual taking by the government. Thus, if property is taken for public use before
compensation is deposited with the court having jurisdiction over the case, the final
compensation must include interests on its just value to be computed from the time the property
is taken to the time when compensation is actually paid or deposited with the court. In fine,
between the taking of the property and the actual payment, legal interests accrue in order to
place the owner in a position as good as (but not better than) the position he was in before the
taking occurred.

In many cases decided by this Court, it has been repeated time and again that the award
of 12% interest is imposed in the nature of damages for delay in payment which in effect makes
the obligation on the part of the government one of forbearance. This is to ensure prompt
payment of the value of the land and limit the opportunity loss of the owner that can drag from
days to decades.

x x x [T]he final compensation must include interests on its just value to be

computed from the time the property is taken to the time when compensation is actually
paid or deposited with the court. x x x (Emphasis supplied) This is based on the principle
that interest "runs as a matter of law and follows from the right of the landowner to be
placed in as good position as money can accomplish, as of the date of the taking."

All told, the Court finds the grant of exemplary damages in the amount of P200,000.00
as well as attorneys fees equivalent to 1% of the total amount due amply justified, square as it
is with existing jurisprudence.

Finally, the Court cannot sustain the amount of P5,500.00/sq. m. as just compensation
which was set by the RTC and upheld by the CA. The said valuation was actually arrived at after
considering: (a) the September 4, 1996 recommendation of the City Appraisal Committee; (b)
several sworn statements made by Sy himself; and (c) Sys own tax declaration for 1996.
 It is well-settled that the amount of just compensation is to be ascertained as of the time
of the taking. However, the above-stated documents do not reflect the value of the subject
property at the time of its taking in 1986 but rather, its valuation in 1996. Consequently, the case
must be remanded to the RTC in order to properly determine the amount of just compensation
during such time the subject property was actually taken.

PEOPLE OF THE PHILIPPINES v. RICARDO PAMINTUAN Y SAHAGUN

G.R. No. 192239, June 5, 2013
J. Leonardo- De Castro

Court of Appeals and the RTC should have recognized the entitlement of AAA to
exemplary damages on account of the attendance of her minority and the common-law
relationship between him and her mother. It did not matter that such qualifying circumstances
were not taken into consideration in fixing his criminal liability, because the term aggravating
circumstances as basis for awarding exemplary damages under the Civil Code was understood
in its generic sense.

FACTS:

Accused-appellant was charged before the Regional Trial Court (RTC) of Manila with the
crime of rape. RTC adjudged accused-appellant guilty of statutory rape and sentenced him thus.
The RTC found that AAA was only about 11 years old when she was raped by accused-
appellant. The trial court gave more weight to her testimony, which was found to be categorical,
straightforward, spontaneous and delivered in a frank manner. The trial court also downplayed
the absence of injuries on the part of AAA as a result of the sexual abuse, citing rulings of the
Court that such may be attributed to numerous factors and that the hymen of the victim need not
be penetrated or ruptured for rape to be consummated. On the other hand, accused-appellants
unsubstantiated defense of denial was disregarded by the trial court. Accused-appellant was
only convicted of statutory rape punishable by reclusion perpetua as the qualifying circumstance
of relationship, i.e., that he was the common-law husband of AAAs mother, was not alleged in
the information. CA Affirmed. Hence, this petition.

ISSUE:

Whether the awarding of exemplary damages should be upheld.

RULING:

The Court sustains the conviction of accused-appellant.

The court affirms the trial courts award of P50,000.00 as civil indemnity and P50,000.00
as moral damages. However, the award of exemplary damages is in order. The Court had
occasion to rule in People v. Arcillas that: According to the Civil Code, exemplary damages may
be imposed in criminal cases as part of the civil liability "when the crime was committed with one
or more aggravating circumstances." The law permits such damages to be awarded "by way of
example or correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages." Accordingly, the Court of Appeals and the RTC should have
recognized the entitlement of AAA to exemplary damages on account of the attendance of her
minority and the common-law relationship between him and her mother. It did not matter that
such qualifying circumstances were not taken into consideration in fixing his criminal liability,
because the term aggravating circumstances as basis for awarding exemplary damages under
the Civil Code was understood in its generic sense. x x x.

We also stated in People v. Nebria that the award of exemplary damages in rape cases
is proper in order to protect the young from sexual exploitation and abuse. Thus, we further
award P30,000.00 as exemplary damages in light of current jurisprudence.

JOSELITO C. BORROMEO v. JUAN T. MINA

G.R. No. 193747, June 5, 2013
J. Perlas- Bernabe

Petitioner cannot assert any right over the subject landholding, such as his present claim
for landholding exemption, because his title springs from a null and void source. A void contract
is equivalent to nothing; it produces no civil effect; and it does not create, modify or extinguish a
juridical relation. Hence, notwithstanding the erroneous identification of the subject landholding
by the MARO as owned by Cipriano Borromeo, the fact remains that petitioner had no right to
file a petition for landholding exemption since the sale of the said property to him by Garcia in
1982 is null and void

FACTS:

Subject of this case is a 1.1057 hectare parcel of agriculture land, situated in Barangay
Magsaysay, Naguilian, Isabela, registered in the name of respondent. Petitioner filed a Petition
before the Provincial Agrarian Reform Office (PARO) of Isabela, seeking that his landholding
over the subject property (subject landholding) be exempted from the coverage of the
governments OLT program and respondents emancipation patent over the subject property be
consequently revoked and cancelled.

Petitioner alleged that he purchased the aforesaid property from its previous owner, one
Serafin M. Garcia (Garcia), as evidenced by a deed of sale notarized. For various reasons,
however, he was not able to effect the transfer of title in his name. Subsequently, to his surprise,
he learned that an emancipation patent was issued in respondents favor without any notice to
him.

He equally maintained that his total agricultural landholdings was only 3.3635 hectares
and thus, within the landowner's retention limits under both PD 27 and Republic Act No. 6647,
otherwise known as the "Comprehensive Agrarian Reform Law of 1988." In this regard, he
claimed that the subject landholding should have been excluded from the coverage of the
governments OLT program. Petitioner filed a subsequent Petition also with the PARO which
contained identical allegations as those stated in his June 9, 2003 Petition (PARO petitions) and
similarly prayed for the cancellation of respondents emancipation patent.

Municipal Agrarian Reform Officer Unblas issued a Report, finding that the subject
property was erroneously identified by the same office as the property of petitioners father, the
late Cipriano Borromeo. In all actuality, however, the subject property was never owned by
Cipriano Borromeo as its true owner was Garcia notably, a perennial PD 27 landowner who
later sold the same to petitioner. PARO adopted the recommendation of the MARO. DAR
Regional Director Renato R. Navata issued an Order, finding that petitioner, being the true
owner of the subject property, had the right to impugn its coverage from the governments OLT
program. Further, considering that the subject property was erroneously identified as owned by
Cipriano Borromeo, coupled with the fact that petitioner's total agricultural landholdings was way
below the retention limits prescribed under existing agrarian laws, he declared the subject
landholding to be exempt from OLT coverage.

Respondent moved for reconsideration, challenging petitioner's ownership of the subject

property for lack of sufficient basis to show that his averred predecessor-in-interest, Garcia, was
its actual owner. DAR issue and order holding that the subject landholding was improperly
placed under the coverage of the governments OLT program on account of the erroneous
identification of the landowner, considering as well the fact that petitioners total agricultural
landholdings, i.e., 3.3635 hectares, was way below the retention limits under existing agrarian
laws. CA reversed and set aside. Hence, this petition.

ISSUE:

Whether the sale between petitioner and Garcia is null and void. Assuming arguendo, that it is
null and void, can the petitioner file a petition for landholding exemption.

RULING:

PD 27 prohibits the transfer of ownership over tenanted rice and/or corn lands after
October 21, 1972 except only in favor of the actual tenanttillers thereon.

Transfer of ownership over tenanted rice and/or corn lands after October 21, 1972 is
allowed only in favor of the actual tenant-tillers thereon. Hence, the sale executed by
Philbanking on January 11, 1985 in favor of petitioner was in violation of the aforequoted
provision of P.D. 27 and its implementing guidelines, and must thus be declared null and void.
(Emphasis and underscoring supplied)

Records reveal that the subject landholding fell under the coverage of PD 27 on October
21, 1972 and as such, could have been subsequently sold only to the tenant thereof, i.e., the
respondent. Notably, the status of respondent as tenant is now beyond dispute considering
petitioners admission of such fact. Likewise, as earlier discussed, petitioner is tied down to his
initial theory that his claim of ownership over the subject property was based on the 1982 deed
of sale. Therefore, as Garcia sold the property in 1982 to the petitioner who is evidently not the
tenant-beneficiary of the same, the said transaction is null and void for being contrary to law.

In consequence, petitioner cannot assert any right over the subject landholding, such as
his present claim for landholding exemption, because his title springs from a null and void
source. A void contract is equivalent to nothing; it produces no civil effect; and it does not create,
modify or extinguish a juridical relation. Hence, notwithstanding the erroneous identification of
the subject landholding by the MARO as owned by Cipriano Borromeo, the fact remains that
petitioner had no right to file a petition for landholding exemption since the sale of the said
property to him by Garcia in 1982 is null and void. Proceeding from this, the finding that
petitioners total agricultural landholdings is way below the retention limits set forth by law thus,
becomes irrelevant to his claim for landholding exemption precisely because he has no right
over the aforementioned landholding.
 SPOUSES FLORENTINO MALLARI AND AUREA MALLARI v. PRUDENTIAL BANK (now
Bank of the Philippine Islands)
G.R. No. 197861, June 5, 2013
J. Peralta

Petitioners defaulted in the payment of their loan obligation with respondent bank and
their contract provided for the payment of 12% p.a. penalty charge, and since there was no
showing that petitioners' failure to perform their obligation was due to force majeure or to
respondent bank's acts, petitioners cannot now back out on their obligation to pay the penalty
charge. A contract is the law between the parties and they are bound by the stipulations therein.

FACTS:

Petitioner Florentino T. Mallari obtained from respondent Prudential Bank-Tarlac Branch,

a loan in the amount of P300,000. The loan was subject to an interest rate of 21% per annum,
attorney's fees equivalent to 15% of the total amount due but not less than P200.00 and, in case
of default, a penalty and collection charges of 12% p.a. of the total amount due. Florentino and
Aurea Mallari (petitioners) obtained again from respondent bank another loan of P1.7 million.
Again, they stipulated that the loan will bear 23% interest p.a., attorney's fees equivalent to 15%
p.a. of the total amount due, but not less than P200.00, and penalty and collection charges of
12% p.a. Petitioners executed a Deed of Real Estate Mortgage in favor of respondent bank
covering petitioners' property. Petitioners failed to settle their loan obligations with respondent
bank, thus, the latter, through its lawyer, sent a demand letter to the former for them to pay their
obligations.

Respondent bank filed with the Regional Trial Court (RTC) of Tarlac, a petition for the
extrajudicial foreclosure of petitioners' mortgaged property for the satisfaction of the latter's
obligation. Petitioners filed a complaint for annulment of mortgage, deeds, injunction,
preliminary injunction, temporary restraining order and damages. Petitioners asked the court to
restrain respondent bank from proceeding with the scheduled foreclosure sale. RTC issued the
restraining order in its Order. Respondent bank filed its Motion to Lift Restraining Order, which
the RTC granted in its Order. Respondent bank then proceeded with the extrajudicial
foreclosure of the mortgaged property. Certificate of Sale was issued to respondent bank being
the highest bidder in the amount of P3,500,000.00.Trial thereafter ensued. Petitioner Florentino
was presented as the lone witness for the plaintiffs. Subsequently, respondent bank filed a
Demurrer to Evidence which was granted by the RTC.

The RTC found no legal basis for petitioners' claim that since the total obligation was
P1.7 million and respondent bank's bid price was P3.5 million, the latter should return to
petitioners the difference of P1.8 million. It found that since petitioners' obligation had reached
P2,991,294.82 as of January 31, 1992, but the certificate of sale was executed by the sheriff
only on July 7, 1993, after the restraining order was lifted, the stipulated interest and penalty
charges from January 31, 1992 to July 7, 1993 added to the loan already amounted to P3.5
million as of the auction sale.

The RTC found that the 23% interest rate p.a., which was then the prevailing loan rate of
interest could not be considered unconscionable, since banks are not hospitable or equitable
institutions but are entities formed primarily for profit. It also found that Article 1229 of the Civil
Code invoked by petitioners for the reduction of the interest was not applicable, since petitioners
had not paid any single centavo of the P1.7 million loan which showed they had not complied
with any part of the obligation. CA Affirmed. Hence, this petition.
ISSUE:

Whether the 23% p.a. interest rate and the 12% p.a. penalty charge on petitioners'
P1,700,000.00 loan to which they agreed upon is excessive or unconscionable under the
circumstances.

RULING:

Parties are free to enter into agreements and stipulate as to the terms and conditions of
their contract, but such freedom is not absolute. As Article 1306 of the Civil Code provides, "The
contracting parties may establish such stipulations, clauses, terms and conditions as they may
deem convenient, provided they are not contrary to law, morals, good customs, public order, or
public policy." Hence, if the stipulations in the contract are valid, the parties thereto are bound to
comply with them, since such contract is the law between the parties. In this case, petitioners
and respondent bank agreed upon on a 23% p.a. interest rate on the P1.7 million loan.
However, petitioners now contend that the interest rate of 23% p.a. imposed by respondent
bank is excessive or unconscionable, invoking our ruling in Medel v. Court of Appeals, Toring v.
Spouses Ganzon-Olan, and Chua v. Timan.

We are not persuaded.

In Medel v. Court of Appeals, we found the stipulated interest rate of 66% p.a. or a 5.5%
per month on a P500,000.00 loan excessive, unconscionable and exorbitant, hence, contrary to
morals if not against the law and declared such stipulation void. In Toring v. Spouses Ganzon-
Olan, the stipulated interest rates involved were 3% and 3.81% per month on a P10 million loan,
which we find under the circumstances excessive and reduced the same to 1% per month.
While in Chua v. Timan, where the stipulated interest rates were 7% and 5% a month, which are
equivalent to 84% and 60% p.a., respectively, we had reduced the same to 1% per month or
12% p.a. We said that we need not unsettle the principle we had affirmed in a plethora of cases
that stipulated interest rates of 3% per month and higher are excessive, unconscionable and
exorbitant, hence, the stipulation was void for being contrary to morals.

In this case, the interest rate agreed upon by the parties was only 23% p.a., or less than
2% per month, which are much lower than those interest rates agreed upon by the parties in the
above-mentioned cases. Thus, there is no similarity of factual milieu for the application of those
cases.

We do not consider the interest rate of 23% p.a. agreed upon by petitioners and
respondent bank to be unconscionable. Clearly, jurisprudence establish that the 24% p.a.
stipulated interest rate was not considered unconscionable, thus, the 23% p.a. interest rate
imposed on petitioners' loan in this case can by no means be considered excessive or
unconscionable.

We also do not find the stipulated 12% p.a. penalty charge excessive or unconscionable.
Here, petitioners defaulted in the payment of their loan obligation with respondent bank and
their contract provided for the payment of 12% p.a. penalty charge, and since there was no
showing that petitioners' failure to perform their obligation was due to force majeure or to
respondent bank's acts, petitioners cannot now back out on their obligation to pay the penalty
charge. A contract is the law between the parties and they are bound by the stipulations therein.
 ERNESTO. NATIVIDAD v. FERNANDO MARIANO, ANDRESS MARIANO AND DOROTEO
GARCIA
G.R. No. 179643, June 3, 2013
J. Brion

Section 7 of R.A. No. 3844 ordains that once the tenancy relationship is established, a
tenant or agricultural lessee is entitled to security of tenure. Section 36 of R.A. No. 3844
strengthens this right by providing that the agricultural lessee has the right to continue the
enjoyment and possession of the landholding and shall not be disturbed in such possession
except only upon court authority in a final and executory judgment, after due notice and hearing,
and only for the specifically enumerated causes.

The agricultural lessee's failure to pay the lease rentals, in order to warrant his
dispossession of the landholding, must be willful and deliberate and must have lasted for at
least two (2) years. Mere failure of an agricultural lessee to pay the agricultural lessor's share
does not necessarily give the latter the right to eject the former absent a deliberate intent on the
part of the agricultural lessee to pay.

FACTS:

Ernesto filed with the PARAD a petition for ejectment and collection of back lease rentals
against the respondents. In his petition, Ernesto alleged that he purchased the subject property
in a public auction held on July 17, 1988. Immediately after the purchase, he verbally
demanded that the respondents pay the lease rentals. Despite his repeated demands, the
respondents refused to pay, prompting him to orally request the respondents to vacate the
subject property. He filed the petition when the respondents refused his demand to vacate.

ISSUE:

Whether or not Ernesto had sufficient cause to eject the respondents from the subject property

RULING:

Non-payment of lease rentals as ground for eviction of tenants; Landowner with burden to prove
sufficient cause for eviction.

Section 7 of R.A. No. 3844 ordains that once the tenancy relationship is established, a
tenant or agricultural lessee is entitled to security of tenure. Section 36 of R.A. No. 3844
strengthens this right by providing that the agricultural lessee has the right to continue the
enjoyment and possession of the landholding and shall not be disturbed in such possession
except only upon court authority in a final and executory judgment, after due notice and hearing,
and only for the specifically enumerated causes.

The subsequent R.A. No. 6657 further reiterates, under its Section 6, that the security of
tenure previously acquired shall be respected. Finally, in order to protect this right, Section 37 of
R.A. No. 3844 rests the burden of proving the existence of a lawful cause for the ejectment of
the agricultural lessee on the agricultural lessor.

Non-payment of the lease rentals whenever they fall due is a ground for the ejectment of
an agricultural lessee under paragraph 6, Section 36 of R.A. No. 3844. In relation to Section 2 of
Presidential Decree (P.D.) No. 816, deliberate refusal or continued refusal to pay the lease
rentals by the agricultural lessee for a period of two (2) years shall, upon hearing and final
judgment, result in the cancellation of the CLT issued in the agricultural lessees favor.

The agricultural lessee's failure to pay the lease rentals, in order to warrant his
dispossession of the landholding, must be willful and deliberate and must have lasted for at
least two (2) years. The term deliberate is characterized by or results from slow, careful,
thorough calculation and consideration of effects and consequences, while the term willful is
defined, as one governed by will without yielding to reason or without regard to reason. Mere
failure of an agricultural lessee to pay the agricultural lessor's share does not necessarily give
the latter the right to eject the former absent a deliberate intent on the part of the agricultural
lessee to pay.

In the present petition, we do not find the respondents alleged non-payment of the lease
rentals sufficient to warrant their dispossession of the subject property. The respondents alleged
non-payment did not last for the required two-year period. To reiterate our discussion above, the
respondents rental payments were not yet due and the respondents were not in default at the
time Ernesto filed the petition for ejectment as Ernesto failed to prove his alleged prior verbal
demands. Additionally, assuming arguendo that the respondents failed to pay the lease rentals,
we do not consider the failure to be deliberate or willful. The receipts on record show that the
respondents had paid the lease rentals for the years 1988-1998. To be deliberate or willful, the
non-payment of lease rentals must be absolute, i.e., marked by complete absence of any
payment. This cannot be said of the respondents case. Hence, without any deliberate and
willful refusal to pay lease rentals for two years, the respondents ejectment from the subject
property, based on this ground, is baseless and unjustified.

Ernesto purchased the subject property in 1988. However, he only demanded the
payment of the lease rentals in 1998. All the while, the respondents had been paying the lease
rentals to Corazon and Laureano. With no demand coming from Ernesto for the payment of the
lease rentals for ten years, beginning from the time he purchased the subject property, the
respondents thus cannot be faulted for continuously paying the lease rentals to Corazon and
Laureano. Ernesto should have demanded from the respondents the payment of the lease
rental soon after he purchased the subject property. His prolonged inaction, whether by
intention or negligence, in demanding the payment of the lease rentals or asserting his right to
receive such rentals, at the very least, led the respondents to consider Corazon and Laureano
to still be the authorized payees of the lease rentals, given the absence of any objection on his
part.
 SPOUSES DELFIN O. TUMIBAY AND AURORA T. TUMIBA-DECEASED; GRACE JULIE
ANN TUMIBAY MANUEL, LEGAL REPRESENTATIVE v. SPOUSES MELVIN A. LOPEZ AND
ROWENA GAY T. VISITACION LOPEZ
G.R. No. 171692, June 3, 2013
J. Del-Castillo

In a contract to sell, the seller retains ownership of the property until the buyer has paid
the price in full. A buyer who covertly usurps the seller's ownership of the property prior to the
full payment of the price is in breach of the contract and the seller is entitled to rescission
because the breach is substantial and fundamental as it defeats the very object of the parties in
entering into the contract to sell.

In the case at bar, the court finds that respondent Rowenas act of transferring the title to
the subject land in her name, without the knowledge and consent of petitioners and despite
non-payment of the full price thereof, constitutes a substantial and fundamental breach of the
contract to sell

FACTS:

Petitioners filed a complaint for declaration of nullity ab initio of sale, and recovery of
ownership and possession of land with the RTC of Malaybalay City. Petitioners alleged that they
are the owners of a parcel of land located in Sumpong, Malaybalay, Bukidnon in the name of
petitioner Aurora. Petitioner Delfin acquired American citizenship while his wife, petitioner
Aurora, remained a Filipino citizen; that petitioner Aurora is the sister of Reynalda Visitacion .
Reynalda sold the subject land to her daughter, Rowena Gay T. Visitacion Lopez, through a
deed of sale for an unconscionable amount of P95,000.00 although said property had a market
value of more than P2,000,000.00; that the subject sale was done without the knowledge and
consent of petitioners; and that, for these fraudulent acts, respondents should be held liable for
damages. Petitioners prayed that (1) the deed of sale dated July 23, 1997 be declared void ab
initio, (2) the subject land be reconveyed to petitioners, and (3) respondents be ordered to pay
damages.

On the other hand, respondents averred that petitioners executed a special power of
attorney (SPA). Rowena paid the monthly installments thereon as evidenced by money orders;
that, in furtherance of the agreement, a deed of sale was executed and the corresponding title
was issued in favor of respondent Rowena; that the subject sale was done with the knowledge
and consent of the petitioners as evidenced by the receipt of payment by petitioners; and that
petitioners should be held liable for damages for filing the subject Complaint in bad faith.
Respondents prayed that the Complaint be dismissed and that petitioners be ordered to pay
damages. Rowena entered into a contract to sell over the subject land. Petitioners deny that
they agreed to sell the subject land to respondent Rowena for the price of P800,000.00 payable
in 10 years through monthly installments. They claim that the payments received from
respondent Rowena were for safekeeping purposes only pending the final agreement as to the
purchase price of the subject land.

RTC ruled in favor of the petitioners. CA reversed. Hence, this petition.

ISSUES:

1. Whether there was a contract to sell entered into by the petitioners and respondents
2. Whether the contract to sell is rescissible
3. Whether petitioner is entitled to moral damages and attorneys fees.

RULING:

The Petition is meritorious.

1. Rowena entered into a contract to sell over the subject land. We are inclined to give
credence to the claim of the respondents for the following reasons.

First, the payment of monthly installments was duly established by the evidence on
record consisting of money orders and checks payable to petitioner Aurora. Petitioners do not
deny that they received 23 monthly installments over the span of almost three years. As of
November 30, 1997 (i.e., the date of the last monthly installment), the payments already totaled
$12,000.00, to wit:

Second, in her testimony, petitioner Aurora claimed that the $1,000.00 in cash that she
received from respondent Rowena on January 25, 1995 was a mere deposit until the purchase
price of the subject land would have been finally agreed upon by both parties. However,
petitioner Aurora failed to explain why, after receiving this initial sum of $1,000.00, she thereafter
accepted from respondent Rowena 22 intermittent monthly installments in the amount of
$500.00. No attempt was made on the part of petitioners to return these amounts and it is fair to
assume that petitioners benefited therefrom.

Third, it strains credulity that respondent Rowena would make such monthly installments
for a substantial amount of money and for a long period of time had there been no agreement
between the parties as to the purchase price of the subject land.

We are, thus, inclined to rule that there was, indeed, a contractual agreement between
the parties for the purchase of the subject land and that this agreement partook of an oral
contract to sell for the sum of P800,000.00. A contract to sell has been defined as "a bilateral
contract whereby the prospective seller, while expressly reserving the ownership of the subject
property despite delivery thereof to the prospective buyer, binds himself to sell the said property
exclusively to the prospective buyer upon fulfillment of the condition agreed upon, that is, full
payment of the purchase price." In a contract to sell, "ownership is retained by the seller and is
not to pass until the full payment of the price x x x." It is "commonly entered into so as to protect
the seller against a buyer who intends to buy the property in installments by withholding
ownership over the property until the buyer effects full payment therefor."

In the case at bar, while there was no written agreement evincing the intention of the
parties to enter into a contract to sell, its existence and partial execution were sufficiently
established by, and may be reasonably inferred from the actuations of the parties, to wit: (1) the
title to the subject land was not immediately transferred, through a formal deed of conveyance,
in the name of respondent Rowena prior to or at the time of the first payment of $1,000.00 by
respondent Rowena to petitioner Aurora on January 25, 1995; (2) after this initial payment,
petitioners received 22 intermittent monthly installments from respondent Rowena in the sum of
$500.00; and, (3) in her testimony, respondent Rowena admitted that she had the title to the
subject land transferred in her name only later on or on July 23, 1997, through a deed of sale,
because she believed that she had substantially paid the purchase price thereof, and that she
was entitled thereto as a form of security for the installments she had already paid.

2. Respondent Rowena was in breach of the contract to sell.

 Although we rule that there was a contract to sell over the subject land between
petitioners and respondent Rowena, we find that respondent Rowena was in breach thereof
because, at the time the aforesaid deed of sale was executed on July 23, 1997, the full price of
the subject land was yet to be paid. In arriving at this conclusion, we take judicial notice of the
prevailing exchange rates at the time, as published by the Bangko Sentral ng Pilipinas, and
multiply the same with the monthly installments respondent Rowena paid to petitioners, as
supported by the evidence on record.

Respondent Rowenas reliance on the SPA as the authority or consent to effect the
premature transfer of title in her name is plainly misplaced. The terms of the SPA are clear. It
merely authorized Reynalda to sell the subject land at a price approved by petitioners. The SPA
could not have amended or novated the contract to sell to allow respondent Rowena to acquire
the title over the subject land despite non-payment of the price in full for the reason that the SPA
was executed four years prior to the contract to sell. In fine, the tenor of her testimony indicates
that respondent Rowena made a unilateral determination that she had substantially paid the
purchase price and that she is entitled to the transfer of title as a form of security for the
installments she had already paid, reasons, we previously noted, as unjustified.

The contract to sell is rescissible.

Article 1191 of the Civil Code provides:

Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek rescission
even after he has chosen fulfillment, if the latter should become impossible.The court
shall decree the rescission claimed, unless there be just cause authorizing the fixing of a
period. x x x

As a general rule, "rescission will not be permitted for a slight or casual breach of the
contract, but only for such breaches as are substantial and fundamental as to defeat the object
of the parties in making the agreement."

In the case at bar, we find that respondent Rowenas act of transferring the title to the
subject land in her name, without the knowledge and consent of petitioners and despite non-
payment of the full price thereof, constitutes a substantial and fundamental breach of the
contract to sell. As previously noted, the main object or purpose of a seller in entering into a
contract to sell is to protect himself against a buyer who intends to buy the property in
installments by withholding ownership over the property until the buyer effects full payment
therefor. As a result, the sellers obligation to convey and the buyers right toconveyance of the
property arise only upon full payment of the price. Thus, a buyer who willfully contravenes this
fundamental object or purpose of the contract, by covertly transferring the ownership of the
property in his name at a time when the full purchase price has yet to be paid, commits a
substantial and fundamental breach which entitles the seller to rescission of the contract.

Indeed, it would be highly iniquitous for us to rule that petitioners, as sellers, should
continue with the contract to sell even after the discovery of the aforesaid breach committed by
respondent Rowena, as buyer, considering that these acts betrayed in no small measure the
trust reposed by petitioners in her and her mother, Reynalda. Put simply, respondent Rowena
took advantage of the SPA, in the name of her mother and executed four years prior to the
contract to sell, to effect the transfer of title to the subject land in her (Rowenas) name without
the knowledge and consent of petitioners and despite non-payment of the full price.

We, thus, rule that petitioners are entitled to the rescission of the subject contract to sell.

3. Petitioners are entitled to moral damages and attorneys fees while respondent
Rowena is entitled to the reimbursement of the monthly installments with legal interest.

Article 1170 of the Civil Code provides:

Art. 1170. 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.

Fraud or malice (dolo) has been defined as a "conscious and intentional design to evade
the normal fulfillment of existing obligations" and is, thus, incompatible with good faith. In the
case at bar, we find that respondent Rowena was guilty of fraud in the performance of her
obligation under the subject contract to sell because (1) she knew that she had not yet paid the
full price (having paid only 32.58% thereof) when she had the title to the subject land transferred
to her name, and (2) she orchestrated the aforesaid transfer of title without the knowledge and
consent of petitioners. Her own testimony and documentary evidence established this fact.
Where fraud and bad faith have been established, the award of moral damages is proper.
Further, under Article 2208(2) of the Civil Code, the award of attorneys fees is proper where the
plaintiff is compelled to litigate with third persons or incur expenses to protect his interest
because of the defendants act or omission. Here, respondent Rowenas aforesaid acts caused
petitioners to incur expenses in litigating their just claims. We, thus, find respondent Rowena
liable for moral damages and attorneys fees which we fix at P100,000.00 and P50,000.00,
respectively.

Anent the monthly installments respondent Rowena paid to petitioners, our review of the
records leads us to conclude that respondent Rowena is entitled to the reimbursement of the
same with legal interest. Although respondent Rowena was clearly unjustified in prematurely
and covertly transferring the title to the subject land in her name, we deplore petitioners lack of
candor in prosecuting their claims before the trial court and intent to evade recognition of the
monthly installments that they received from respondent Rowena. The records indicate that, in
their Complaint, petitioners made no mention of the fact that they had entered into a contract to
sell with respondent Rowena and that they had received 23 monthly installments from the latter.
The Complaint merely alleged that the subject sale was done without the knowledge and
consent of petitioners. It was only later on, when respondent Rowena presented the proof of
payment of the monthly installments in her Answer to the Complaint, that this was brought to
light to which petitioners readily admitted. Further, no evidence was presented to prove that
respondent Rowena occupied the subject land or benefited from the use thereof upon
commencement of the contract to sell which would have justified the setting off of rental income
against the monthly installments paid by respondent Rowena to petitioners.

In view of the foregoing, the sums paid by respondent Rowena as monthly installments
to petitioners should, thus, be returned to her with legal interest. Since this amount is neither a
loan nor forbearance of money, we set the interest rate at 6% per annum computed from the
time of the filing of the Answer to the Complaint on May 19, 1998 until finality of judgement and
thereafter at 12% per annum until fully paid in accordance with our ruling in Eastern Shipping
Lines, Inc. v. Court of Appeals. Petitioners are, thus, ordered to pay respondent Rowena the
sum of P327,442.00 with an interest of 6% per annum computed from May 19, 1998 until finality
of judgment and thereafter of 12% per annum until fully paid.

Having ruled that respondent Rowena was in substantial breach of the contract to sell
because she had the title to the subject land transferred in her name without the knowledge and
consent of petitioners and despite lack of full payment of the purchase price, we now rule on the
validity of the deed of sale dated July 23, 1997 which was used to effect the aforesaid transfer
of ownership.

As can be seen, the SPA gave Reynalda the power and duty to, among others, (1) offer
for sale the subject land to prospective buyers, (2) seek the approval of petitioners as to the
selling price thereof, and (3) sign the contract of sale on behalf of petitioners upon locating a
buyer willing and able to purchase the subject land at the price approved by petitioners.
Although the SPA was executed four years prior to the contract to sell, there would have been
no obstacle to its use by Reynalda had the ensuing sale been consummated according to its
terms. However, as previously discussed, when Reynalda, as attorney-in-fact of petitioner
Aurora, signed the subject deed of sale dated July 23, 1997, the agreed price of P800,000.00
(which may be treated as the approved price) was not yet fully paid because respondent
Rowena at the time had paid only P260,262.50. Reynalda, therefore, acted beyond the scope of
her authority because she signed the subject deed of sale, on behalf of petitioners, at a price of
P95,000.00 which was not approved by the latter. For her part, respondent Rowena cannot
deny that she was aware of the limits of Reynaldas power under the SPA because she
(Rowena) was the one who testified that the agreed price for the subject land was P800,000.00.

It should be noted that, under Article 1898 of the Civil Code, the principals ratification of
the acts of the agent, done beyond the scope of the latters authority, may cure the defect in the
contract entered into between the agent and a third person. This seems to be the line of
reasoning adopted by the appellate court in upholding the validity of the subject sale. The
appellate court conceded that there was no evidence that respondents sought the approval of
petitioners for the subject sale but it, nonetheless, ruled that whatever defect attended the sale
of the subject land should be deemed impliedly ratified by petitioners acceptance of the monthly
installments paid by respondent Rowena. Though not clearly stated in its Decision, the appellate
court seemed to rely on the four monthly installments (i.e., August 31, September 30, October
31, and November 30, 1997) respondent Rowena paid to petitioners which the latter
presumably received and accepted even after the execution of the deed of sale dated July 23,
1997.

The court disagree.

That petitioners continued to receive four monthly installments even after the premature
titling of the subject land in the name of respondent Rowena, through the deed of sale dated
July 23, 1997, did not, by itself, establish that petitioners ratified such sale. On the contrary, the
fact that petitioners continued to receive the aforesaid monthly installments tended to establish
that they had yet to discover the covert transfer of title in the name of respondent Rowena. As
stated earlier, the evidence on record established that the subject sale was done without
petitioners knowledge and consent which would explain why receipt or acceptance by
petitioners of the aforementioned four monthly installments still occurred. Further, it runs
contrary to common human experience and reason that petitioners, as sellers, would forego the
reservation or retention of the ownership over the subject land, which was intended to
guarantee the full payment of the price under the contract to sell, especially so in this case
where respondent Rowena, as buyer, had paid only 32.58% of the purchase price. In a contract
to sell, it would be unusual for the seller to consent to the transfer of ownership of the property
to the buyer prior to the full payment of the purchase price because the reservation of the
ownership in the seller is precisely intended to protect the seller from the buyer. We, therefore,
find that petitioners claim that they did not ratify the subject sale, which was done without their
knowledge and consent, and that the subsequent discovery of the aforesaid fraudulent sale led
them to promptly file this case with the courts to be more credible and in accord with the
evidence on record. To rule otherwise would be to reward respondent Rowena for the fraud that
she committed on petitioners.

Based on the foregoing, we rule that (1) Reynalda, as agent, acted beyond the scope of
her authority under the SPA when she executed the deed of sale dated July 23, 1997 in favor of
respondent Rowena, as buyer, without the knowledge and consent of petitioners, and conveyed
the subject land to respondent Rowena at a price not approved by petitioners, as principals and
sellers, (2) respondent Rowena was aware of the limits of the authority of Reynalda under the
SPA, and (3) petitioners did not ratify, impliedly or expressly, the acts of Reynalda. Under Article
1898 of the Civil Code, the sale is void and petitioners are, thus, entitled to the reconveyance of
the subject land.
 SPOUSES DEO AGNER AND MARICON AGNER v. BPI FAMILY SAVINGS BANK, INC.
G.R. No. 182963, June 3, 2013

Settled is the principle which this Court has affirmed in a number of cases that stipulated
interest rates of three percent (3%) per month and higher are excessive, iniquitous,
unconscionable, and exorbitant. Since the stipulation on the interest rate is void for being
contrary to morals, if not against the law, it is as if there was no express contract on said
interest rate; thus, the interest rate may be reduced as reason and equity demand.

FACTS:

Petitioners spouses Deo Agner and Maricon Agner executed a Promissory Note with
Chattel Mortgage in favor of Citimotors, Inc. On the same day, Citimotors, Inc. assigned all its
rights, title and interests in the Promissory Note with Chattel Mortgage to ABN AMRO Savings
Bank, Inc. (ABN AMRO), likewise assigned the same to respondent BPI Family Savings Bank,
Inc. For failure to pay four successive installments respondent, through counsel, sent to
petitioners a demand letter, declaring the entire obligation as due and demandable and requiring
to pay Php576,664.04, or surrender the mortgaged vehicle immediately upon receiving the
letter. As the demand was left unheeded, respondent filed an action for Replevin and Damages
before the Manila Regional Trial Court (RTC).

RTC ruled in favor of respondents. CA affirmed.

ISSUE:

Whether respondents remedy of resorting to both actions of replevin and collection of

sum of money is contrary to the provision of Article 1484 of the Civil Code and the Elisco Tool
Manufacturing Corporation v. Court of Appeals ruling.

RULING:

The contention is untenable.

There is no violation of Article 1484 of the Civil Code and the Courts decision in Elisco
Tool Manufacturing Corporation v. Court of Appeals. The Court therein ruled: The remedies
provided for in Art. 1484 are alternative, not cumulative. The exercise of one bars the exercise
of the others. This limitation applies to contracts purporting to be leases of personal property
with option to buy by virtue of Art. 1485. The condition that the lessor has deprived the lessee of
possession or enjoyment of the thing for the purpose of applying Art. 1485 was fulfilled in this
case by the filing by petitioner of the complaint for replevin to recover possession of movable
property. By virtue of the writ of seizure issued by the trial court, the deputy sheriff seized the
vehicle on August 6, 1986 and thereby deprived private respondents of its use. The car was not
returned to private respondent until April 16, 1989, after two (2) years and eight (8) months,
upon issuance by the Court of Appeals of a writ of execution.

Compared with Elisco, the vehicle subject matter of this case was never recovered and
delivered to respondent despite the issuance of a writ of replevin. As there was no seizure that
transpired, it cannot be said that petitioners were deprived of the use and enjoyment of the
mortgaged vehicle or that respondent pursued, commenced or concluded its actual foreclosure.
The trial court, therefore, rightfully granted the alternative prayer for sum of money, which is
equivalent to the remedy of "exacting fulfillment of the obligation." Certainly, there is no double
recovery or unjust enrichment to speak of.

All the foregoing notwithstanding, We are of the opinion that the interest of 6% per
month should be equitably reduced to one percent (1%) per month or twelve percent (12%) per
annum, to be reckoned from May 16, 2002 until full payment and with the remaining outstanding
balance of their car loan as of May 15, 2002 as the base amount.

Settled is the principle which this Court has affirmed in a number of cases that stipulated
interest rates of three percent (3%) per month and higher are excessive, iniquitous,
unconscionable, and exorbitant. While Central Bank Circular No. 905-82, which took effect on
January 1, 1983, effectively removed the ceiling on interest rates for both secured and
unsecured loans, regardless of maturity, nothing in the said circular could possibly be read as
granting carte blanche authority to lenders to raise interest rates to levels which would either
enslave their borrowers or lead to a hemorrhaging of their assets. Since the stipulation on the
interest rate is void for being contrary to morals, if not against the law, it is as if there was no
express contract on said interest rate; thus, the interest rate may be reduced as reason and
equity demand.

JULY 2013

WILLIAM T. GO v. ALBERTO T. LOOYUKO, substituted by his legal heirs

TERESITA C. LOOYUKO, et al.
G.R. No. 196529. July 1, 2013
J. Mendoza

The sole issue for resolution in an unlawful detainer case is physical or material
possession of the property involved, independent of any claim of ownership by any of the
parties. When the defendant, however, raises the defense of ownership in his pleadings and the
question of possession cannot be resolved without deciding the issue of ownership, the issue of
ownership shall be resolved only to determine the issue of possession.

The Court agrees with William that the issue of ownership should be ruled upon
considering that such has been raised and it appears that it is inextricably linked to the question
of possession. Its resolution will then boil down to which of the parties respective evidence
deserves more weight

FACTS:

Respondent Alberto T. Looyuko (Looyuko) and Jimmy Go, brother of petitioner William
Go (William) were partners in a business called Noahs Ark Group of Companies (Noahs Ark).
William was appointed Chief of Staff of Noahs Ark Sugar Refinery. He was allowed by Looyuko
to occupy the townhouse in Gilmore Townhomes, Granada Street, Quezon City. Looyuko
demanded that William vacate the townhouse. Jimmy filed an adverse claim over the property,
annotating his interest on the title as co-owner. He claimed that the townhouse was bought
using funds from Noahs Ark and, hence, part of the property of the partnership. William refused
to vacate the property relying on the strength of his brothers adverse claim.

Looyuko filed a complaint for unlawful detainer against William before the MeTC. He
alleged that Williams occupation was merely by tolerance, on the understanding that he should
vacate the property upon demand. On the other hand, William presented the partnership
agreements, the contract to sell of the subject property to Noahs Ark, and the cash voucher
evidencing payment for the acquisition of the property.

Petitioner William, in his pleadings, argues that the QC RTC correctly appreciated the
evidence he presented to prove Jimmys co-ownership, reiterating that his evidence shows that
the actual owner is not respondent Looyuko but Noahs Ark, and that he was allowed to use the
property as part of his benefits and privileges as its Chief of Staff. He further argues that the CA
erred in holding that the ejectment case could proceed without resolving the issue of ownership,
and posits that the issue of ownership was properly raised and the MeTC, in fact, addressed
such issue. He contends that he is not attacking the validity of the certificate of title and that a
certificate of title does not foreclose the fact that the same may be under co-ownership not
mentioned in the certificate. He also argues that respondent Looyuko failed to prove that he had
prior physical possession of the property before he was unlawfully deprived of it, which is
fundamental in an ejectment case.

MeTC rendered a decision in favor of Looyuko stating that he had the right to the
possession of the said townhouse as its registered owner. QC RTC ruled in favor of William
and deferred the proceedings in the unlawful detainer case to await the outcome of the civil
case before the Pasig RTC. CA reversed. Hence, this petition.

ISSUE:

Whether the ejectment case can proceed without resolving the issue of ownership raised
by petitioner.

RULING:

The petition is bereft of merit.

This petition involves an action for unlawful detainer, which is an action to recover
possession of real property from one who unlawfully withholds possession after the expiration or
termination of his right to hold possession under any contract, express or implied. The
possession of the defendant in an unlawful detainer case is originally legal but becomes illegal
due to the expiration or termination of the right to possess. The sole issue for resolution in an
unlawful detainer case is physical or material possession of the property involved, independent
of any claim of ownership by any of the parties. When the defendant, however, raises the
defense of ownership in his pleadings and the question of possession cannot be resolved
without deciding the issue of ownership, the issue of ownership shall be resolved only to
determine the issue of possession.

The Court agrees with William that the issue of ownership should be ruled upon
considering that such has been raised and it appears that it is inextricably linked to the question
of possession. Its resolution will then boil down to which of the parties respective evidence
deserves more weight. Even granting, however, that all the pieces of documentary evidence
presented by William are valid, they will fail to bolster his case.

The TCT of respondent Looyuko is, therefore, evidence of indefeasible title over the
property and, as its holder, he is entitled to its possession as a matter of right. Thus, the
partnership agreements and other documentary evidence presented by petitioner William are
not, by themselves, enough to offset Looyukos right as registered owner. It must be
underscored, however, that this adjudication on ownership is merely provisional and would not
bar or prejudice the action between Jimmy and Looyuko involving their claimed shares in the
title over the property.

Lastly, William is mistaken in his argument that respondent Looyukos prior physical
possession is necessary for his action for unlawful detainer to prosper. Section 1 of Rule 70 of
the Rules of Court lays down the requirements for filing a complaint for unlawful detainer.
Nowhere does it appear in the above-cited rule that, in an action for unlawful detainer, the
plaintiff be in prior physical possession of the property. Thus, it has been held that prior physical
possession by the plaintiff is not an indispensable requirement in an unlawful detainer case
brought by a vendee or other person against whom the possession of any land is unlawfully
withheld after the expiration or termination of a right to hold possession.

CARLOS LIM, et al. v. DEVELOPMENT BANK OF THE PHILIPPINES

G.R. No. 177050. July 1, 2013
J. Del Castillo

"While the law recognizes the right of a bank to foreclose a mortgage upon the
mortgagors failure to pay his obligation, it is imperative that such right be exercised according
to its clear mandate. Each and every requirement of the law must be complied with, lest, the
valid exercise of the right would end."

FACTS:

Petitioners Carlos, Consolacion, and Carlito, all surnamed Lim, obtained a loan of
P40,000.00 from respondent Development Bank of the Philippines (DBP) to finance their cattle
raising business. On another day, the Lims obtained another loan from DBP.To secure the
loans, petitioners executed a Mortgage in favor of DBP over real properties covered by the
following titles registered in the Registry of Deeds for the Province of South Cotabato. Due to
violent confrontations between government troops and Muslim rebels in Mindanao from 1972 to
1977, petitioners were forced to abandon their cattle ranch. As a result, their business collapsed
and they failed to pay the loan amortizations. Edmundo asked for recomputation of their
liabilities to the bank due to the fact that a portion of it was already paid. Subsequently,
Edmundo received a Notice of Foreclosure scheduled the following day. To stop the foreclosure,
he was advised by the banks Chief Legal Counsel to pay an interest covering a 60-days period
or the amount of P60,000.00 to postpone the foreclosure for 60 days. He was also advised to
submit a written proposal for the settlement of the loan accounts.

Edmundo proposed the settlement of the accounts through dacion en pago, with the
balance to be paid in equal quarterly payments over five years. DBP rejected the proposal and
informed Edmundo that unless the accounts are fully settled as soon as possible, the bank will
pursue foreclosure proceedings.

Thereafter, the bank informed Edmundo of the banks new guidelines for the settlement
of outstanding loan accounts under Board Resolution No. 0290-92. Based on these guidelines,
petitioners outstanding loan obligation was computed at P3,500,000.00 plus. Tamayo then
proposed that petitioners pay 10% downpayment and the remaining balance in 36 monthly
installments. He also informed Edmundo that the bank would immediately prepare the
Restructuring Agreement upon receipt of the downpayment and that the conditions for the
settlement have been "pre-cleared" with the banks Regional Credit Committee. Thus, Edmundo
wrote a letter on October 30, 1992 manifesting petitioners assent to the proposal. Later on, he
already made the necessary downpayment. It appears however, the the Restructuring
Agreement was rejected and the bank offered new conditions. There was compliance on the
part of Edmundo, so the foreclosure proceedings push through, this prompted Edmundo to file
file before the RTC of General Santos City, a Complaint against DBP for Annulment of
Foreclosure and Damages with Prayer for Issuance of a Writ of Preliminary Injunction and/or
Temporary Restraining Order. Petitioners alleged that DBPs acts and omissions prevented
them from fulfilling their obligation; thus, they prayed that they be discharged from their
obligation and that the foreclosure of the mortgaged properties be declared void. They likewise
prayed for actual damages for loss of business opportunities, moral and exemplary damages,
attorneys fees, and expenses of litigation.

RTC issued a Temporary Restraining Order directing DBP to cease and desist from
consolidating the titles over petitioners foreclosed properties and from disposing the same. It
also declared that the foreclosure of [petitioners] mortgaged properties, the sale of the
properties under the foreclosure proceedings and the resultant certificate of sale issued by the
foreclosing Sheriff by reason of the foreclosure NULL and VOID. CA reversed and set aside the
RTC Decision.

ISSUES:

1. Whether the obligation was extinguished. And as a result of respondents said acts
and omissions, petitioners obligations should be deemed fully complied with and
extinguished in accordance with the principle of constructive fulfillment;
2. Whether the foreclosure is valid
3. Whether the computation of interests is valid
4. Whether the respondent should be held liable to pay petitioners actual and
compensatory damages, temperate damages, moral damages, exemplary damages,
attorneys fees and expenses of litigation.

RULING:

The Petition is partly meritorious.

1. The obligation was not extinguished or discharged.

The Promissory Notes subject of the instant case became due and demandable as early
as 1972 and 1976. The only reason the mortgaged properties were not foreclosed in 1977 was
because of the restraining order from the court. In 1978, petitioners made a partial payment of
P902,800.00. No subsequent payments were made. It was only in 1989 that petitioners tried to
negotiate the settlement of their loan obligations. And although DBP could have foreclosed the
mortgaged properties, it instead agreed to restructure the loan. In fact, from 1989 to 1994, DBP
gave several extensions for petitioners to settle their loans, but they never did, thus, prompting
DBP to cancel the Restructuring Agreement.

Petitioners, however, insist that DBPs cancellation of the Restructuring Agreement

justifies the extinguishment of their loan obligation under the Principle of Constructive Fulfillment
found in Article 1186 of the Civil Code.

We do not agree.
 As aptly pointed out by the CA, Article 1186 of the Civil Code, which states that "the
condition shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment," does not
apply in this case, viz: Article 1186 enunciates the doctrine of constructive fulfillment of
suspensive conditions, which applies when the following three (3) requisites concur, viz: (1) The
condition is suspensive; (2) The obligor actually prevents the fulfillment of the condition; and (3)
He acts voluntarily. Suspensive condition is one the happening of which gives rise to the
obligation. It will be irrational for any Bank to provide a suspensive condition in the Promissory
Note or the Restructuring Agreement that will allow the debtor-promissor to be freed from the
duty to pay the loan without paying it.

Besides, petitioners have no one to blame but themselves for the cancellation of the
Restructuring Agreement. It is significant to point out that when the Regional Credit Committee
reconsidered petitioners proposal to restructure the loan, it imposed additional conditions. In
fact, when DBPs General Santos Branch forwarded the Restructuring Agreement to the Legal
Services Department of DBP in Makati, petitioners were required to pay the amount of
P1,300,672.75, plus a daily interest of P632.15 starting November 16, 1993 up to the date of
actual payment of the said amount. This, petitioners failed to do. DBP therefore had reason to
cancel the Restructuring Agreement.

Moreover, since the Restructuring Agreement was cancelled, it could not have novated
or extinguished petitioners loan obligation. And in the absence of a perfected Restructuring
Agreement, there was no impediment for DBP to exercise its right to foreclose the mortgaged
properties.

2. The foreclosure sale is not valid.

But while DBP had a right to foreclose the mortgage, we are constrained to nullify the
foreclosure sale due to the banks failure to send a notice of foreclosure to petitioners.

The Act only requires (1) the posting of notices of sale in three public places, and (2) the
publication of the same in a newspaper of general circulation. Personal notice to the mortgagor
is not necessary. Nevertheless, the parties to the mortgage contract are not precluded from
exacting additional requirements.

Precisely, the purpose of the foregoing stipulation is to apprise respondent of any action
which petitioner might take on the subject property, thus according him the opportunity to
safeguard his rights. When petitioner failed to send the notice of foreclosure sale to respondent,
he committed a contractual breach sufficient to render the foreclosure sale on November 23,
1981 null and void. In view of foregoing, the CA erred in finding the foreclosure sale valid.

3. Penalties and interest rates should be expressly stipulated in writing.

As to the imposition of additional interest and penalties not stipulated in the Promissory
Notes, this should not be allowed. Article 1956 of the Civil Code specifically states that "no
interest shall be due unless it has been expressly stipulated in writing." Thus, the payment of
interest and penalties in loans is allowed only if the parties agreed to it and reduced their
agreement in writing.

In this case, petitioners never agreed to pay additional interest and penalties. Hence, we
agree with the RTC that these are illegal, and thus, void.
 Respondent bank failed to show the basis for charging additional interest on principal,
additional interest on regular interest and penalty charges on principal and penalty charges on
regular interest under items (2), (3), (4) and (5) above.

Moreover, respondent bank charged the petitioners twice under the same provisions in
the promissory notes. It categorically admitted that the additional interests and penalty charges
separately being charged referred to the same provision of the Promissory Notes, Exhibits "A"
and "C."

A perusal of the promissory notes, however, failed to justify respondent banks

computation of both interest and penalty under the same provision in each of the promissory
notes.

Respondent bank also admitted that the additional interests and penalties being charged
were not based on the stipulations in the Promissory Notes but were imposed unilaterally as a
matter of its internal banking policies. (TSN, 19 March 1996, pp. 23-24.) This banking policy,
however, has been declared null and void in Philippine National Bank vs. CA, 196 SCRA 536
(1991). The act of [respondent] bank in unilaterally changing the stipulated interest rate is
violative of the principle of mutuality of contracts under 1308 of the Civil Code and contravenes
1956 of the Civil Code. [Respondent] bank completely ignored [petitioners] "right to assent to
an important modification in their agreement and (negated) the element of mutuality in
contracts." (Philippine National Bank vs. CA, G.R. No. 109563, 9 July 1996; Philippine National
Bank vs. CA, 238 SCRA 20 1994). As in the PNB cases, [petitioners] herein never agreed in
writing to pay the additional interest, or the penalties, as fixed by [respondent] bank; hence
[respondent] banks imposition of additional interest and penalties is null and void.

Consequently, this case should be remanded to the RTC for the proper determination of
petitioners total loan obligation based on the interest and penalties stipulated in the Promissory
Notes.

4. DBP did not act in bad faith or in a wanton, reckless, or oppressive manner. Finally, as to
petitioners claim for damages, we find the same devoid of merit.

DBP did not act in bad faith or in a wanton, reckless, or oppressive manner in cancelling
the Restructuring Agreement. As we have said, DBP had reason to cancel the Restructuring
Agreement because petitioners failed to pay the amount required by it when it reconsidered
petitioners request to restructure the loan.

Likewise, DBPs failure to send a notice of the foreclosure sale to petitioners and its
imposition of additional interest and penalties do not constitute bad faith. There is no showing
that these contractual breaches were done in bad faith or in a wanton, reckless, or oppressive
manner.

PHILIPPINE NATIONAL BANK v. SPS. BERNARD AND CRESENCIA MARAON

G.R. No. 189316. July 1, 2013
J. Reyes

Rent is a civil fruit that belongs to the owner of the property producing it by right of
accession.The rightful recipient of the disputed rent in this case should thus be the owner of the
subject lot at the time the rent accrued. It is beyond question that Spouses Maraon never lost
ownership over the subject lot. This is the precise consequence of the final and executory
judgment in Civil Case No. 7213 rendered by the RTC on June 3, 2006 whereby the title to the
subject lot was reconveyed to them and the cloud thereon consisting of Emilies fraudulently
obtained title was removed.

FACTS:

The controversy at bar involves a 152-square meter parcel of land located at Cuadra-Smith
Streets, Downtown, Bacolod (subject lot) erected with a building leased by various tenants. The
subject lot was among the properties mortgaged by Spouses Rodolfo and Emilie Montealegre
(Spouses Montealegre) to PNB as a security for a loan. When Spouses Montealegre failed to
pay the loan, PNB initiated foreclosure proceedings on the mortgaged properties, including the
subject lot. In the auction sale, PNB emerged as the highest bidder. It was issued the
corresponding Certificate of Sale which was subsequently registered.

Before the expiration of the redemption period, Spouses Maraon filed before the RTC a
complaint for Annulment of Title, Reconveyance and Damages against Spouses Montealegre,
PNB, the Register of Deeds of Bacolod City and the Ex-Officio Provincial Sheriff of Negros
Occidental. The complaint, alleged that Spouses Maraon are the true registered owners of the
subject lot which was illegally cancelled under the name of Emilie who used a falsified Deed of
Sale bearing the forged signatures of Spouse Maraon to effect the transfer of title to the
property in her name.

RTC rendered its Decision in favor of the respondents. It concluded the sale to be null and
void and as such it did not transfer any right or title in law. PNB was adjudged to be a
mortgagee in good faith whose lien on the subject lot must be respected. What precipitated the
controversy at hand were the subsequent motions filed by Spouses Maraon for release of the
rental payments deposited with the Clerk of Court and paid to PNB by Tolete. Motions regarding
the withdrawal of deposited rentals were filed for by Spouses Maraon, which was subsequently
granted by the RTC.

The PNB differed with the RTCs ruling and moved for reconsideration averring that as
declared by the RTC in its Decision dated June 2, 2006, its mortgage lien should be carried over
to the new title reconveying the lot to Spouses Maraon, which was subsequently denied by the
RTC.

Aggrieved, PNB sought recourse with the CA via a petition for certiorari and mandamus
claiming that as the lawful owner of the subject lot per the RTCs judgment dated June 2, 2006,
it is entitled to the fruits of the same such as rentals paid by tenants hence, the ruling that "the
real estate mortgage lien of the PNB registered on the title of Lot No. 177-A-1 Bacolod Cadastre
shall stay and be respected." PNB also contended that it is an innocent mortgagee. CA denied
the petition and affirmed the RTCs judgment ratiocinating that not being parties to the mortgage
transaction between PNB and Spouses Montealegre, Spouses Maraon cannot be deprived of
the fruits of the subject lot as the same will amount to deprivation of property without due
process of law. It held that PNB is not a mortgagee in good faith because as a financial
institution imbued with public interest, it should have looked beyond the certificate of title
presented by Spouses Montealegre and conducted an inspection on the circumstances
surrounding the transfer to Spouses Montealegre. PNB asserts that it is entitled to the rent
because it became the subject lots new owner when the redemption period expired without the
property being redeemed.

ISSUE:
 Whether the mortgage lien of PNB was carried over to the new title issued to
Spouses Maraon and thus it retained the right to foreclose the subject lot upon non-
payment of the secured debt. Ruling of the Court

RULING:

The court denies the petition.

It is readily apparent from the facts at hand that the status of PNBs lien on the subject
lot has already been settled by the RTC in its Decision dated June 2, 2006 where it was
adjudged as a mortgagee in good faith whose lien shall subsist and be respected. The decision
lapsed into finality when neither of the parties moved for its reconsideration or appealed.

Being a final judgment, the dispositions and conclusions therein have become
immutable and unalterable not only as against the parties but even the courts. This is known as
the doctrine of immutability of judgments which espouses that a judgment that has acquired
finality becomes immutable and unalterable, and may no longer be modified in any respect even
if the modification is meant to correct erroneous conclusions of fact or law and whether it will be
made by the court that rendered it or by the highest court of the land.

Hence, as correctly argued by PNB, the issue on its status as a mortgagee in good faith
have been adjudged with finality and it was error for the CA to still delve into and, worse,
overturn, the same. The CA had no other recourse but to uphold the status of PNB as a
mortgagee in good faith regardless of its defects for the sake of maintaining stability of judicial
pronouncements. "The main role of the courts of justice is to assist in the enforcement of the
law and in the maintenance of peace and order by putting an end to judiciable controversies
with finality. Nothing better serves this role than the long established doctrine of immutability of
judgments."

Rent is a civil fruit that belongs to the owner of the property producing it by right of
accession. The rightful recipient of the disputed rent in this case should thus be the owner of the
subject lot at the time the rent accrued. It is beyond question that Spouses Maraon never lost
ownership over the subject lot. This is the precise consequence of the final and executory
judgment in Civil Case No. 7213 rendered by the RTC on June 3, 2006 whereby the title to the
subject lot was reconveyed to them and the cloud thereon consisting of Emilies fraudulently
obtained title was removed. Ideally, the present dispute can be simply resolved on the basis of
such pronouncement. However, the application of related legal principles ought to be clarified in
order to settle the intervening right of PNB as a mortgagee in good faith.

The protection afforded to PNB as a mortgagee in good faith refers to the right to have
its mortgage lien carried over and annotated on the new certificate of title issued to Spouses
Maraon as so adjudged by the RTC. Thereafter, to enforce such lien thru foreclosure
proceedings in case of non-payment of the secured debt, as PNB did so pursue. The principle,
however, is not the singular rule that governs real estate mortgages and foreclosures attended
by fraudulent transfers to the mortgagor.

Rent, as an accessory follow the principal. In fact, when the principal property is
mortgaged, the mortgage shall include all natural or civil fruits and improvements found thereon
when the secured obligation becomes due as provided in Article 2127 of the Civil Code, viz: Art.
2127. The mortgage extends to the natural accessions, to the improvements, growing fruits, and
the rents or income not yet received when the obligation becomes due, and to the amount of the
indemnity granted or owing to the proprietor from the insurers of the property mortgaged, or in
virtue of expropriation for public use, with the declarations, amplifications and limitations
established by law, whether the estate remains in the possession of the mortgagor, or it passes
into the hands of a third person.

Consequently, in case of non-payment of the secured debt, foreclosure proceedings

shall cover not only the hypothecated property but all its accessions and accessories as well.
However, the rule is not without qualifications. In Castro, Jr. v. CA the Court explained that
Article 2127 is predicated on the presumption that the ownership of accessions and accessories
also belongs to the mortgagor as the owner of the principal. After all, it is an indispensable
requisite of a valid real estate mortgage that the mortgagor be the absolute owner of the
encumbered property, thus:

All improvements subsequently introduced or owned by the mortgagor on the

encumbered property are deemed to form part of the mortgage. That the improvements are to
be considered so incorporated only if so owned by the mortgagor is a rule that can hardly be
debated since a contract of security, whether, real or personal, needs as an indispensable
element thereof the ownership by the pledgor or mortgagor of the property pledged or
mortgaged.

Otherwise stated, absent an adverse claimant or any evidence to the contrary, all
accessories and accessions accruing or attached to the mortgaged property are included in the
mortgage contract and may thus also be foreclosed together with the principal property in case
of non-payment of the debt secured. Corollary, any evidence sufficiently overthrowing the
presumption that the mortgagor owns the mortgaged property precludes the application of
Article 2127. Otherwise stated, the provision is irrelevant and inapplicable to mortgages and
their resultant foreclosures if the mortgagor is later on found or declared to be not the true
owner of the property, as in the instant case.

It is beyond question that PNBs mortgagors, Spouses Montealegre, are not the true
owners of the subject lot much less of the building which produced the disputed rent. The
foreclosure proceedings on August 16, 1991 caused by PNB could not have, thus, included the
building found on the subject lot and the rent it yields. PNBs lien as a mortgagee in good faith
pertains to the subject lot alone because the rule that improvements shall follow the principal in
a mortgage under Article 2127 of the Civil Code does not apply under the premises. Accordingly,
since the building was not foreclosed, it remains a property of Spouses Maraon; it is not
affected by non-redemption and is excluded from any consolidation of title made by PNB over
the subject lot. Thus, PNBs claim for the rent paid by Tolete has no basis.

It must be remembered that there is technically no juridical tie created by a valid

mortgage contract that binds PNB to the subject lot because its mortgagor was not the true
owner. But by virtue of the mortgagee in good faith principle, the law allows PNB to enforce its
lien. We cannot, however, extend such principle so as to create a juridical tie between PNB and
the improvements attached to the subject lot despite clear and undeniable evidence showing
that no such juridical tie exists.

Lastly, it is worthy to note that the effects of the foreclosure of the subject lot is in fact still
contentious considering that as a purchaser in the public sale, PNB was only substituted to and
acquired the right, title, interest and claim of the mortgagor to the property as of the time of the
levy. There being already a final judgment reconveying the subject lot to Spouses Maraon and
declaring as null and void Emilie's purported claim of ownership, the legal consequences of the
foreclosure sale, expiration of the redemption period and even the consolidation of the subject
lot's title in PNB's name shall be subjected to such final judgment.

Nonetheless, since the present recourse stemmed from a mere motion claiming
ownership of rent and not from a main action for annulment of the foreclosure sale or of its
succeeding incidents, the Court cannot proceed to make a ruling on the bearing of the CA's
Decision dated June 18, 2008 to PNB's standing as a purchaser in the public auction. Such
matter will have to be threshed out in the proper forum.

All told, albeit the dispositive portions of the assailed CA decision and resolution are
differently premised, they ought to be upheld as they convey the similar conclusion that
Spouses Maraon are the rightful owners of the rent earned by the building on the subject lot.

SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS AND DISTRICT

ENGINEER CELESTINO R. CONTRERAS v. SPOUSES HERACLEO AND RAMONA
TECSON
G.R. No. 179334. July 1, 2013
J. Peralta

When a property is taken by the government for public use, jurisprudence clearly
provides for the remedies available to a landowner. The owner may recover his property if its
return is feasible or, if it is not, the aggrieved owner may demand payment of just compensation
for the land taken. For failure of respondents to question the lack of expropriation proceedings
for a long period of time, they are deemed to have waived and are estopped from assailing the
power of the government to expropriate or the public use for which the power was exercised.

FACTS:

Respondent spouses Heracleo and Ramona Tecson (respondents) are co-owners of a

parcel of land located in San Pablo, Malolos, Bulacan. The land was among the properties
taken by the government sometime in 1940 without the owners consent and without the
necessary expropriation proceedings and used for the construction of the MacArthur Highway.
Respondents demanded the payment of the fair market value of the subject parcel of land.
Petitioner Celestino R. Contreras (petitioner Contreras), then District Engineer of the First
Bulacan Engineering District of petitioner Department of Public Works and Highways (DPWH),
offered to pay the subject land at the rate of P0.70 per square meter per Resolution of the
Provincial Appraisal Committee (PAC) of Bulacan. Unsatisfied with the offer, respondents
demanded for the return of their property or the payment of compensation at the current fair
market value.

As their demand remained unheeded, respondents filed a Complaintfor recovery of

possession with damages against petitioners, praying that they be restored to the possession of
the subject parcel of land and that they be paid attorneys fees. Respondents claimed that the
subject parcel of land was assessed at P2,543,800.00.

Petitioners moved for the dismissal of the complain. RTC issued an Ordergranting
respondents motion to dismiss based on the doctrine of state immunity from suit. As
respondents claim includes the recovery of damages, there is no doubt that the suit is against
the State for which prior waiver of immunity is required. CA reversed and set aside the dismissal
of the complaint and, consequently, remanded the case to the trial court for the purpose of
determining the just compensation to which respondents are entitled to recover from the
government. With the finality of the aforesaid decision, trial proceeded in the RTC. RTC
rendered a decision wherein it directed DPWH to pay complainants the amount of One
Thousand Five Hundred Pesos (P1,500.00) per square meter for the lot subject matter of this
case in accordance with the Resolution of the Provincial Appraisal Committee. CA affirmed
decision with the modification that the just compensation stated above should earn interest of
six percent (6%) per annum computed from the filing of the action on March 17, 1995 until full
payment.

ISSUE:

Whether the action is barred by prescription having been filed fifty-four (54) years after
the accrual of the action in 1940 and; Whether the just compensation should be based on the
value of the property at the time of taking in 1940 and not at the time of payment.

RULING:

The petition is partly meritorious.

It is undisputed that the subject property was taken by petitioners without the benefit of
expropriation proceedings for the construction of the MacArthur Highway. After the lapse of
more than fifty years, the property owners sought recovery of the possession of their property. Is
the action barred by prescription or laches? If not, are the property owners entitled to recover
possession or just compensation?

As aptly noted by the CA, the issues of prescription and laches are not proper issues for
resolution as they were not included in the pre-trial order. We quote with approval the CAs
ratiocination in this wise:Procedurally, too, prescription and laches are no longer proper issues
in this appeal. In the pre-trial order issued on May 17, 2001, the RTC summarized the issues
raised by the defendants, to wit: (a) whether or not the plaintiffs were entitled to just
compensation; (b) whether or not the valuation would be based on the corresponding value at
the time of the taking or at the time of the filing of the action; and (c) whether or not the plaintiffs
were entitled to damages. Nowhere did the pre-trial order indicate that prescription and laches
were to be considered in the adjudication of the RTC.

To be sure, the pre-trial order explicitly defines and limits the issues to be tried and
controls the subsequent course of the action unless modified before trial to prevent manifest
injustice. Even if we squarely deal with the issues of laches and prescription, the same must still
fail. Laches is principally a doctrine of equity which is applied to avoid recognizing a right when
to do so would result in a clearly inequitable situation or in an injustice. This doctrine finds no
application in this case, since there is nothing inequitable in giving due course to respondents
claim. Both equity and the law direct that a property owner should be compensated if his
property is taken for public use. Neither shall prescription bar respondents claim following the
long-standing rule "that where private property is taken by the Government for public use
without first acquiring title thereto either through expropriation or negotiated sale, the owners
action to recover the land or the value thereof does not prescribe."

When a property is taken by the government for public use, jurisprudence clearly
provides for the remedies available to a landowner. The owner may recover his property if its
return is feasible or, if it is not, the aggrieved owner may demand payment of just compensation
for the land taken. For failure of respondents to question the lack of expropriation proceedings
for a long period of time, they are deemed to have waived and are estopped from assailing the
power of the government to expropriate or the public use for which the power was exercised.
What is left to respondents is the right of compensation. The trial and appellate courts found that
respondents are entitled to compensation. The only issue left for determination is the propriety
of the amount awarded to respondents.

Just compensation is "the fair value of the property as between one who receives, and
one who desires to sell, x x x fixed at the time of the actual taking by the government." This rule
holds true when the property is taken before the filing of an expropriation suit, and even if it is
the property owner who brings the action for compensation.

The Court has uniformly ruled that just compensation is the value of the property at the
time of taking that is controlling for purposes of compensation. In Forfom, the payment of just
compensation was reckoned from the time of taking in 1973; in Eusebio, the Court fixed the just
compensation by determining the value of the property at the time of taking in 1980; in MIAA,
the value of the lot at the time of taking in 1972 served as basis for the award of compensation
to the owner; and in Republic, the Court was convinced that the taking occurred in 1956 and
was thus the basis in fixing just compensation. As in said cases, just compensation due
respondents in this case should, therefore, be fixed not as of the time of payment but at the time
of taking, that is, in 1940.

Both the RTC and the CA recognized that the fair market value of the subject property in
1940 was P0.70/sq m. Hence, it should, therefore, be used in determining the amount due
respondents instead of the higher value which is P1,500.00. While disparity in the above
amounts is obvious and may appear inequitable to respondents as they would be receiving such
outdated valuation after a very long period, it is equally true that they too are remiss in guarding
against the cruel effects of belated claim. The concept of just compensation does not imply
fairness to the property owner alone. Compensation must be just not only to the property owner,
but also to the public which ultimately bears the cost of expropriation.

Clearly, petitioners had been occupying the subject property for more than fifty years
without the benefit of expropriation proceedings. In taking respondents property without the
benefit of expropriation proceedings and without payment of just compensation, petitioners
clearly acted in utter disregard of respondents proprietary rights which cannot be countenanced
by the Court. For said illegal taking, respondents are entitled to adequate compensation in the
form of actual or compensatory damages which in this case should be the legal interest of six
percent (6%) per annum on the value of the land at the time of taking in 1940 until full payment.
This is based on the principle that interest runs as a matter of law and follows from the right of
the landowner to be placed in as good position as money can accomplish, as of the date of
taking.

SALLY GO-BANGAYAN v. BENJAMIN BANGAYAN, JR.

G.R. No. 201061. July 3, 2013
J. Carpio

Benjamin and Sally cohabitated without the benefit of marriage. Thus, only the
properties acquired by them through their actual joint contribution of money, property, or
industry shall be owned by them in common in proportion to their respective contributions.
Thus, both the trial court and the Court of Appeals correctly excluded the 37 properties being
claimed by Sally which were given by Benjamins father to his children as advance inheritance.
FACTS:

Benjamin Bangayan, Jr. (Benjamin) filed a petition for declaration of a non-existent

marriage and/or declaration of nullity of marriage.. Benjamin alleged that on 10 September
1973, he married Azucena Alegre (Azucena) in Caloocan City. They had three children.

He developed a romantic relationship with Sally GoBangayan and subsequently, lived

together. Sally brought Benjamin to an office in Santolan, Pasig City where they signed a
purported marriage contract. Sally, knowing Benjamins marital status, assured him that the
marriage contract would not be registered. They had two children namely: Bernice and Bentley.
Both of them acquired properties during their cohabitation. The relationship became sour. She
then filed criminal actions for bigamy and falsification of public documents against Benjamin,
using their simulated marriage contract as evidence. Benjamin, in turn, filed a petition for
declaration of a non-existent marriage and/or declaration of nullity of marriage before the trial
court on the ground that his marriage to Sally was bigamous and that it lacked the formal
requisites to a valid marriage. Benjamin also asked the trial court for the partition of the
properties he acquired with Sally in accordance with Article 148 of the Family Code, for his
appointment as administrator of the properties during the pendency of the case, and for the
declaration of Bernice and Bentley as illegitimate children. A total of 44 registered properties
became the subject of the partition before the trial court. Aside from the seven properties
enumerated by Benjamin in his petition, Sally named 37 properties in her answer.

The trial court ruled in favor of Benjamin. The trial court ruled that the marriage between
Benjamin and Sally was not bigamous. The trial court ruled that the second marriage was void
not because of the existence of the first marriage but because of other causes, particularly, the
lack of a marriage license. Hence, bigamy was not committed in this case. The trial court denied
Sallys claim for spousal support because she was not married to Benjamin, as well as for
Bernice and Bentley who were both of legal age and did not ask for support. Applying Article
148 of the Family Code, the trial court forfeited Sallys share in the properties covered under
TCT Nos. N-193656 and 253681 in favor of Bernice and Bentley while Benjamins share
reverted to his conjugal ownership with Azucena.

On appeal, the Court of Appeals rejected Sallys allegation that Benjamin failed to prove
his action for declaration of nullity of marriage. The Court of Appeals ruled that Benjamins
action was based on his prior marriage to Azucena and there was no evidence that the marriage
was annulled or dissolved before Benjamin contracted the second marriage with Sally. The
Court of Appeals ruled that only the properties acquired by the parties through their actual joint
contribution of money, property or industry shall be owned by them in common in proportion to
their respective contribution. The Court of Appeals ruled that the 37 properties being claimed by
Sally rightfully belong to Benjamin and his siblings.

Hence, the petition before this Court.

ISSUES:

1. Whether the marriage between Benjamin and Sally is null and void ab initio and non-
existent
2. Whether the property relation between Benjamin and Sally is governed by Article 148 of
the Civil Code.

RULING:
 The petition has no merit.

1. Validity of the Marriage between Benjamin and Sally

First, Benjamins marriage to Azucena on 10 September 1973 was duly established

before the trial court, evidenced by a certified true copy of their marriage contract. At the time
Benjamin and Sally entered into a purported marriage on 7 March 1982, the marriage between
Benjamin and Azucena was valid and subsisting.

On the purported marriage of Benjamin and Sally, Teresita Oliveros (Oliveros),

Registration Officer II of the Local Civil Registrar of Pasig City, testified that there was no valid
marriage license issued to Benjamin and Sally. Oliveros confirmed that only Marriage Licence
Nos. 6648100 to 6648150 were issued for the month of February 1982. Marriage License No.
N-07568 did not match the series issued for the month. Oliveros further testified that the local
civil registrar of Pasig City did not issue Marriage License No. N-07568 to Benjamin and Sally.
The certification from the local civil registrar is adequate to prove the non-issuance of a
marriage license and absent any suspicious circumstance, the certification enjoys probative
value, being issued by the officer charged under the law to keep a record of all data relative to
the issuance of a marriage license. Clearly, if indeed Benjamin and Sally entered into a
marriage contract, the marriage was void from the beginning for lack of a marriage license.

It was also established before the trial court that the purported marriage between
Benjamin and Sally was not recorded with the local civil registrar and the National Statistics
Office. As pointed out by the trial court, the marriage between Benjamin and Sally "was made
only in jest" and "a simulated marriage, at the instance of Sally, intended to cover her up from
expected social humiliation coming from relatives, friends and the society especially from her
parents seen as Chinese conservatives." In short, it was a fictitious marriage.

The fact that Benjamin was the informant in the birth certificates of Bernice and Bentley
was not a proof of the marriage between Benjamin and Sally. We see no inconsistency in
finding the marriage between Benjamin and Sally null and void ab initio and, at the same time,
non-existent. Under Article 35 of the Family Code, a marriage solemnized without a license,
except those covered by Article 34 where no license is necessary, "shall be void from the
beginning." In this case, the marriage between Benjamin and Sally was solemnized without a
license. It was duly established that no marriage license was issued to them and that Marriage
License No. N-07568 did not match the marriage license numbers issued by the local civil
registrar of Pasig City for the month of February 1982. The case clearly falls under Section 3 of
Article 35 which made their marriage void ab initio. The marriage between Benjamin and Sally
was also non-existent. Applying the general rules on void or inexistent contracts under Article
1409 of the Civil Code, contracts which are absolutely simulated or fictitious are "inexistent and
void from the beginning." Thus, the Court of Appeals did not err in sustaining the trial courts
ruling that the marriage between Benjamin and Sally was null and void ab initio and non-
existent.

Benjamin and Sally just signed a purported marriage contract without a marriage license.
The supposed marriage was not recorded with the local civil registrar and the National Statistics
Office. In short, the marriage between Benjamin and Sally did not exist. They lived together and
represented themselves as husband and wife without the benefit of marriage.

2. Property Relations Between Benjamin and Sally

 The Court of Appeals correctly ruled that the property relations of Benjamin and Sally is
governed by Article 148 of the Family Code which states:

Art. 148. In cases of cohabitation not falling under the preceding Article, only the
properties acquired by both of the parties through their actual joint contribution of money,
property, or industry shall be owned by them in common in proportion to their respective
contributions. In the absence of proof to the contrary, their contributions and
corresponding shares are presumed to be equal. The same rule and presumption shall
apply to joint deposits of money and evidences of credit.

If one of the parties is validly married to another, his or her share in the co-ownership
shall accrue to the absolute community of conjugal partnership existing in such valid marriage. If
the party who acted in bad faith is not validly married to another, his or her share shall be
forfeited in the manner provided in the last paragraph of the preceding Article.

The foregoing rules on forfeiture shall likewise apply even if both parties are in bad faith.

Benjamin and Sally cohabitated without the benefit of marriage. Thus, only the
properties acquired by them through their actual joint contribution of money, property, or industry
shall be owned by them in common in proportion to their respective contributions. Thus, both
the trial court and the Court of Appeals correctly excluded the 37 properties being claimed by
Sally which were given by Benjamins father to his children as advance inheritance. Sallys
Answer to the petition before the trial court even admitted that "Benjamins late father himself
conveyed a number of properties to his children and their respective spouses which included
Sally x x x."

As regards the seven remaining properties, we rule that the decision of the Court of
Appeals is more in accord with the evidence on record. Only the property covered by TCT No.
61722 was registered in the names of Benjamin and Sally as spouses. The properties under
TCT Nos. 61720 and 190860 were in the name of Benjamin with the descriptive title "married to
Sally." The property covered by CCT Nos. 8782 and 8783 were registered in the name of Sally
with the descriptive title "married to Benjamin" while the properties under TCT Nos. N-193656
and 253681 were registered in the name of Sally as a single individual. We have ruled that the
words "married to" preceding the name of a spouse are merely descriptive of the civil status of
the registered owner. Such words do not prove co-ownership. Without proof of actual
contribution from either or both spouses, there can be no co-ownership under Article 148 of the
Family Code.
 VECTOR SHIPPING CORPORATION, et al. v. AMERICAN HOME ASSURANCE CO., et al.
G.R. No. 159213. July 3, 2013
J. Bersamin

Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If
the insured property is destroyed or damaged through the fault or negligence of a party other
than the assured, then the insurer, upon payment to the assured, will be subrogated to the
rights of the assured to recover from the wrongdoer to the extent that the insurer has been
obligated to pay.

Subrogation under Article 2207 of the Civil Code gives rise to a cause of action created by
law. For purposes of the law on the prescription of actions, the period of limitation is ten years.

FACTS:

Vector was the operator of the motor tanker M/T Vector, while Soriano was the
registered owner of the M/T Vector. Respondent is a domestic insurance corporation. Caltex
entered into a contract of Affreightmentwith Vector for the transport of Caltexs petroleum cargo
through the M/T Vector. Caltex insured the petroleum cargo with respondent . In the evening of
December 20, 1987, the M/T Vector and the M/V Doa Paz, the latter a vessel owned and
operated by Sulpicio Lines, Inc., collided in the open sea near Dumali Point in Tablas Strait,
located between the Provinces of Marinduque and Oriental Mindoro. The collision led to the
sinking of both vessels. The entire petroleum cargo of Caltex on board the M/T Vector perished.

Respondent indemnified Caltex for the loss of the petroleum cargo in the full amount of
P7,455,421.08. Later on, Respondent filed a complaint against Vector, Soriano, and Sulpicio
Lines, Inc. to recover the full amount of P7,455,421.08 it paid to Caltex (Civil Case No. 92-620).
RTC dismissed the complaint on the ground that the action is based upon a quasi-delict and as
such must be commenced within four 4 years from the day they may be brought.The tort
complained of in this case occurred on 20 December 1987. The action arising therefrom would
under the law prescribe, unless interrupted, on 20 December 1991.When the case was filed
against defendants Vector Shipping and Francisco Soriano on 5 March 1992, the action not
having been interrupted, had already prescribed. CA reversed. Hence, this petition.

ISSUE:

Whether this action of respondent was already barred by prescription for bringing it only on
March 5, 1992. A related issue concerns the proper determination of the nature of the cause of
action as arising either from a quasi-delict or a breach of contract.

RULING:

The petition lacks merit.

We concur with the CAs ruling that respondents action did not yet prescribe. The legal
provision governing this case was not Article 1146 of the Civil Code, but Article 1144 of the Civil
Code, which states: Article 1144. The following actions must be brought within ten years from
the time the cause of action accrues:(1)Upon a written contract; (2)Upon an obligation created
by law; (3)Upon a judgment.
 We need to clarify, however, that we cannot adopt the CAs characterization of the cause
of action as based on the contract of affreightment between Caltex and Vector, with the breach
of contract being the failure of Vector to make the M/T Vector seaworthy, as to make this action
come under Article 1144 (1), supra. Instead, we find and hold that that the present action was
not upon a written contract, but upon an obligation created by law. Hence, it came under Article
1144 (2) of the Civil Code. This is because the subrogation of respondent to the rights of Caltex
as the insured was by virtue of the express provision of law embodied in Article 2207 of the Civil
Code, to wit:

Article 2207. If the plaintiffs property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of the
wrong or breach of contract complained of, the insurance company shall be
subrogated to the rights of the insured against the wrongdoer or the person who
has violated the contract. If the amount paid by the insurance company does not
fully cover the injury or loss, the aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or injury.

The juridical situation arising under Article 2207 of the Civil Code is well explained in
PanMalayan Insurance Corporation v. Court of Appeals, as follows:

Article 2207 of the Civil Code is founded on the well-settled principle of

subrogation. If the insured property is destroyed or damaged through the fault or
negligence of a party other than the assured, then the insurer, upon payment to the
assured, will be subrogated to the rights of the assured to recover from the wrongdoer to
the extent that the insurer has been obligated to pay. Payment by the insurer to the
assured operates as an equitable assignment to the former of all remedies which the
latter may have against the third party whose negligence or wrongful act caused the
loss. The right of subrogation is not dependent upon, nor does it grow out of, any privity
of contract or upon written assignment of claim. It accrues simply upon payment of the
insurance claim by the insurer [Compania Maritima v. Insurance Company of North
America, G.R. No. L-18965, October 30, 1964, 12 SCRA 213; Firemans Fund Insurance
Company v. Jamilla & Company, Inc., G.R. No. L-27427, April 7, 1976, 70 SCRA 323].

Verily, the contract of affreightment that Caltex and Vector entered into did not give rise
to the legal obligation of Vector and Soriano to pay the demand for reimbursement by
respondent because it concerned only the agreement for the transport of Caltexs petroleum
cargo. As the Court has aptly put it in Pan Malayan Insurance Corporation v. Court of Appeals,
supra, respondents right of subrogation pursuant to Article 2207, supra, was "not dependent
upon, nor did it grow out of, any privity of contract or upon written assignment of claim but
accrued simply upon payment of the insurance claim by the insurer."

Considering that the cause of action accrued as of the time respondent actually
indemnified Caltex in the amount of P7,455,421.08 on July 12, 1988, the action was not yet
barred by the time of the filing of its complaint on March 5, 1992, which was well within the 10-
year period prescribed by Article 1144 of the Civil Code.

The insistence by Vector and Soriano that the running of the prescriptive period was not
interrupted because of the failure of respondent to serve any extrajudicial demand was rendered
inconsequential by our foregoing finding that respondents cause of action was not based on a
quasi-delict that prescribed in four years from the date of the collision on December 20, 1987,
as the RTC misappreciated, but on an obligation created by law, for which the law fixed a longer
prescriptive period of ten years from the accrual of the action.

The payment made to Caltex as the insured being thereby duly documented, respondent
became subrogated as a matter of course pursuant to Article 2207 of the Civil Code. In legal
contemplation, subrogation is the "substitution of another person in the place of the creditor, to
whose rights he succeeds in relation to the debt;" and is "independent of any mere contractual
relations between the parties to be affected by it, and is broad enough to cover every instance in
which one party is required to pay a debt for which another is primarily answerable, and which in
equity and conscience ought to be discharged by the latter."

Lastly, Vector and Soriano argue that Caltex waived and abandoned its claim by not
setting up a cross-claim against them in Civil Case No. 18735, the suit that Sulpicio Lines, Inc.
had brought to claim damages for the loss of the M/V Doa Paz from them, Oriental Assurance
Company (as insurer of the M/T Vector), and Caltex; that such failure to set up its cross- claim
on the part of Caltex, the real party in interest who had suffered the loss, left respondent without
any better right than Caltex, its insured, to recover anything from them, and forever barred
Caltex from asserting any claim against them for the loss of the cargo; and that respondent was
similarly barred from asserting its present claim due to its being merely the successor-in-interest
of Caltex.

DR. LORNA C. FORMARAN v. DR. GLENDA B. ONG AND SOLOMON S. ONG

G.R. No. 186264. July 8, 2013
J. Perez

While the Deed of Absolute Sale was notarized, it cannot justify the conclusion that the
sale is a true conveyance to which the parties are irrevocably and undeniably bound. Although
the notarization of Deed of Absolute Sale, vests in its favor the presumption of regularity, it does
not validate nor make binding an instrument never intended, in the first place, to have any
binding legal effect upon the parties thereto.

FACTS:

Petitioner's avers that she owns a parcel of land which was donated to her intervivos by
her uncle and aunt, spouses Melquiades Barraca and Praxedes Casidsid. Upon the proddings
and representation of defendant (Respondent) Glenda, that she badly needed a collateral for a
loan which she was applying from a bank to equip her dental clinic, she made it appear that she
sold one-half of the afore-described parcel of land to the defendant Glenda; that the sale was
totally without any consideration and fictitious. She signed the prepared Deed of Absolute Sale
but did not appear in before theNotary Public. Defendant Glenda filed a case for unlawful
detainer against the plaintiff who consequently suffered anxiety, sleepless nights and
besmirched reputation; and that to protect plaintiffs rights and interest over the land in question,
she was constrained to file the instant case, binding herself to pay P50,000.00 as and for
attorney's fees.

Respondent Glenda insisted on her ownership over the land in question on account of a
Deed of Absolute Sale executed by the plaintiff in her favor; and that plaintiffs claim of
ownership therefore was virtually rejected by the Municipal Circuit Trial Court of Ibaja-Nabas,
Ibajay, Aklan, when it decided in her favor the unlawful detainer case she filed against the
plaintiff. Defendants are also claiming moral damages and attorneys fees in view of the filing of
the present case against them.

Petitioner filed on action for annulment of the Deed of Sale (Civil Case No. 5398) against
respondents before the Regional Trial Court (RTC), of Kalibo, Aklan, Branch The trial court
rendered a Decision in favor of petitioner and against the respondent by declaring the Deed of
Absolute Sale null and void for being an absolutely simulated contract and for want of
consideration; declaring the petitioner as the lawful owner entitled to the possession of the land
in question; as well as ordering (a) the cancellation of respondent Glendas Tax Declaration No.
1031, and (b) respondents to pay petitioner P25,000.00 for attorneys fees and litigation
expenses. CA reversed and set aside the Decision of the trial court and ordered petitioner to
vacate the land in question and restore the same to respondents.Hence, the present petition.

ISSUE:

Whether there is a valid contract of sale.

RULING:

The Court is in accord with the observation and findings of the (RTC, Kalibo, Aklan) thus:

"The amplitude of foregoing undisputed facts and circumstances clearly shows

that the sale of the land in question was purely simulated. It is void from the very
beginning (Article 1346, New Civil Code). If the sale was legitimate, defendant Glenda
should have immediately taken possession of the land, declared in her name for taxation
purposes, registered the sale, paid realty taxes, introduced improvements therein and
should not have allowed plaintiff to mortgage the land. These omissions properly
militated against defendant Glendas submission that the sale was legitimate and the
consideration was paid.

While the Deed of Absolute Sale was notarized, it cannot justify the conclusion that the
sale is a true conveyance to which the parties are irrevocably and undeniably bound. Although
the notarization of Deed of Absolute Sale, vests in its favor the presumption of regularity, it does
not validate nor make binding an instrument never intended, in the first place, to have any
binding legal effect upon the parties thereto (Suntay vs. Court of Appeals, G.R. No. 114950,
December 19, 1995; cited in Ruperto Viloria vs. Court of Appeals, et al., G.R. No. 119974, June
30, 1999)."

ORIENTAL PETROLEUM AND MINERALS CORPORATION v. TUSCAN REALTY, INC.

G.R. No. 195481. July 10, 2013
J. Abad

In this case, it was on account of Tuscan Realtys effort that Oriental Petroleum got
connected to Gateway, the prospective buyer, resulting in the latter two entering into a contract
to sell involving the two condominium units. Although Gateway turned around and sold the
condominium units to Ancheta, the fact is that such ultimate sale could not have happened
without Gateways indispensable intervention as intermediate buyer. Applying the principle of
procuring cause, therefore, Tuscan Realty should be given its brokers commission.

The term "procuring cause" refers to a cause which starts a series of events and results,
without break in their continuity, in the accomplishment of a brokers prime objective of
producing a purchaser who is ready, willing, and able to buy on the owners terms. This is
similar to the concept of proximate cause in Torts, without which the injury would not have
occurred. To be regarded as the procuring cause of a sale, a brokers efforts must have been
the foundation of the negotiations which subsequently resulted in a sale.

FACTS:

Respondent Tuscan Realty, Inc. filed a complaint for sum of money with application for
preliminary attachment against petitioner Oriental Petroleum and Minerals Corporation before
the Makati Regional Trial Court (RTC).Oriental Petroleum owned two condominium units at
Corinthian Plaza. It gave Tuscan Realty a "non-exclusive authority to offer" these units for sale.
Included in the lists given by Tuscan is Gateway Holdings Corporation. Subsequently, Oriental
Petroleum advised Tuscan Realty that it would undertake direct negotiation with a certain Gene
de los Reyes of Gateway for the sale of the units. This resulted in a contract to sell between
Oriental Petroleum and Gateway. Gateway apparently turned around nearly two months later
and assigned its rights as buyer of the units to Alonzo Ancheta in whose favor Oriental
Petroleum executed a deed of absolute sale, Tuscan Realty demanded payment of its brokers
commission of P2,087,862.00 by Oriental Petroleum. The latter refused to pay, however,
claiming that Tuscan Realty did nothing to close its deal with Gateway and Ancheta.

RTC granted Tuscan Realtys application for preliminary attachment but rendered a
decision six years later or on November 2, 2005, dismissing the complaint on the ground of
Tuscan Realtys failure to substantiate its allegation that it was responsible for closing the sale
of the subject condominium units. CA reversed and set aside the assailed decision. The CA
ordered Oriental Petroleum to pay Tuscan Realty its brokers commission of P2,087,862.00,
which is 3% of the final purchase price, plus 6% interest from the finality of its decision until
actual payment. Hence, the present petition.

ISSUE:

Whether Tuscan Realty is entitled to a brokers commission for the sale of Oriental
Petroleums condominium units to Ancheta.

RULING:

The CA invoked the principle of "procuring cause" in ordering the payment of brokers
commission to Tuscan Realty. The term "procuring cause" refers to a cause which starts a
series of events and results, without break in their continuity, in the accomplishment of a
brokers prime objective of producing a purchaser who is ready, willing, and able to buy on the
owners terms. This is similar to the concept of proximate cause in Torts, without which the injury
would not have occurred. To be regarded as the procuring cause of a sale, a brokers efforts
must have been the foundation of the negotiations which subsequently resulted in a sale.

Here, it was Tuscan Realty that introduced Gateway to Oriental Petroleum as an

interested buyer of its condominium units.

The evidence shows that on August 14, 1996 Tuscan Realty submitted an initial list of
prospective buyers with contact details. It twice updated this list with Gateway always on top of
the lists. Clearly then, it was on account of Tuscan Realtys effort that Oriental Petroleum got
connected to Gateway, the prospective buyer, resulting in the latter two entering into a contract
to sell involving the two condominium units. Although Gateway turned around and sold the
condominium units to Ancheta, the fact is that such ultimate sale could not have happened
without Gateways indispensable intervention as intermediate buyer. Applying the principle of
procuring cause, therefore, Tuscan Realty should be given its brokers commission.

Oriental Petroleum of course claims that Gateway was not a ready, willing, and able
purchaser and that it in fact assigned its right to Ancheta who became the ultimate buyer and
that, moreover, it was not Tuscan Realty that introduced Ancheta to Oriental Petroleum. But
there is no question that the contract to sell that Oriental Petroleum concluded with Gateway
was a valid and binding contract to sell, which precluded Oriental Petroleum from peddling the
properties to others. Indeed, Oriental Petroleum executed a deed of absolute sale in Anchetas
favor by virtue of Gateways assignment to him of its rights under the contract to sell.
Consequently, it cannot be said that Oriental Petroleum found a direct buyer in Ancheta without
the intermediate contract to sell in favor of Gateway, Tuscan Realtys proposed buyer.

Oriental Petroleum further points out that Tuscan Realty took no part in its negotiation
with Gateway. That may be the case but the reason why Tuscan Realty refrained from doing so
was because of Oriental Petroleums advice that it would henceforth directly negotiate the sale
with Gateway. Besides, assuming that the advice amounted to a revocation of Tuscan Realtys
authority to sell, the Court has always recognized the brokers right to his commission, although
the owner revoked his authority and directly negotiated with the buyer whom he met through the
brokers efforts. It would be unfair not to give the broker the reward he had earned for helping
the owner find a buyer who would pay the price.

Lastly, Oriental Petroleum is convinced that this is just a simple case of non-fulfillment of
a suspensive condition. It claims that the commission is only to be awarded if the properties
were sold at a minimum of P120,000.00 per square meter and that the delivery must be made
within the first week of January 1997. But these are just lame excuses to avoid liability. As the
CA correctly noted, Oriental Petroleum did not raise the issue regarding the delivery deadline in
its Answer. As for the fact that the properties were eventually sold for less than the original
asking price, that action was within Oriental Petroleums discretion. It decided the matter
unilaterally without consulting its broker. Consequently, it should be deemed to have waived its
own minimum price requirement.

FRANCISCO L. ROSARIO, JR. v. LELLANI DE GUZMAN, ARLEEN DE GUZMAN, et al.

G.R. No. 191247. July 10, 2013
J. Mendoza

Petitioner claims to have had an oral contract of attorneys fees with the deceased
spouses, Article 1145 of the Civil Code allows him a period of six (6) years within which to file
an action to recover professional fees for services rendered. Respondents never asserted or
provided any evidence that Spouses de Guzman refused petitioners legal representation. For
this reason, petitioners cause of action began to run only from the time the respondents
refused to pay him his attorneys fees.

FACTS:

Spouses Pedro and Rosita de Guzman engaged the legal services of Atty. Francisco L.
Rosario, Jr. (petitioner) as defense counsel in the complaint filed against them by one Loreta A.
Chong (Chong) for annulment of contract and recovery of possession with damages involving a
parcel of land in Paraaque City. Spouses de Guzman, represented by petitioner, won their
case at all levels. While the case was pending before this Court, Spouses de Guzman died in a
vehicular accident. Thereafter, they were substituted by their children.

Petitioner filed the Motion to Determine Attorneys Fees before the RTC. He alleged,
among others, that he had a verbal agreement with the deceased Spouses de Guzman that he
would get 25% of the market value of the subject land if the complaint filed against them by
Chong would be dismissed. Despite the fact that he had successfully represented them,
respondents refused his written demand for payment of the contracted attorneys fees.
Petitioner insisted that he was entitled to an amount equivalent to 25% percent of the value of
the subject land on the basis of quantum meruit. Petitioner claims that Spouses de Guzman
engaged his legal services and orally agreed to pay him 25% of the market value of the subject
land. He argues that a motion to recover attorneys fees can be filed and entertained by the
court before and after the judgment becomes final.

RTC rendered the assailed order denying petitioners motion on the ground that it was
filed out of time. Petitioner filed a motion for reconsideration, but it was denied by the RTC for
lack of merit. Hence, this petition.

ISSUE:

Whether petitioners oral contract with the deceased spouse can be considered a quasi-
contract upon which an action can be commenced within six years, pursuant to Article 1145 of
the Civil Code. Furthermore, whether the petitioner is entitled with the payment of attorneys
fees.

RULING:
The attorneys fee which a court may, in proper cases, award to a winning litigant is,
strictly speaking, an item of damages. It differs from that which a client pays his counsel for the
latters professional services. However, the two concepts have many things in common that a
treatment of the subject is necessary. The award that the court may grant to a successful party
by way of attorneys fee is an indemnity for damages sustained by him in prosecuting or
defending, through counsel, his cause in court. It may be decreed in favor of the party, not his
lawyer, in any of the instances authorized by law. On the other hand, the attorneys fee which a
client pays his counsel refers to the compensation for the latters services. The losing party
against whom damages by way of attorneys fees may be assessed is not bound by, nor is his
liability dependent upon, the fee arrangement of the prevailing party with his lawyer. The amount
stipulated in such fee arrangement may, however, be taken into account by the court in fixing
the amount of counsel fees as an element of damages.

The fee as an item of damages belongs to the party litigant and not to his lawyer. It
forms part of his judgment recoveries against the losing party. The client and his lawyer may,
however, agree that whatever attorneys fee as an element of damages the court may award
shall pertain to the lawyer as his compensation or as part thereof. In such a case, the court
upon proper motion may require the losing party to pay such fee directly to the lawyer of the
prevailing party.

The two concepts of attorneys fees are similar in other respects. They both require, as a
prerequisite to their grant, the intervention of or the rendition of professional services by a
lawyer. As a client may not be held liable for counsel fees in favor of his lawyer who never
rendered services, so too may a party be not held liable for attorneys fees as damages in favor
of the winning party who enforced his rights without the assistance of counsel. Moreover, both
fees are subject to judicial control and modification. And the rules governing the determination of
their reasonable amount are applicable in one as in the other.

In the case at bench, the attorneys fees being claimed by the petitioner refers to the
compensation for professional services rendered, and not as indemnity for damages. He is
demanding payment from respondents for having successfully handled the civil case filed by
Chong against Spouses de Guzman. The award of attorneys fees by the RTC in the amount of
P10,000.00 in favor of Spouses de Guzman, which was subsequently affirmed by the CA and
this Court, is of no moment. The said award, made in its extraordinary concept as indemnity for
damages, forms part of the judgment recoverable against the losing party and is to be paid
directly to Spouses de Guzman (substituted by respondents) and not to petitioner. Thus, to
grant petitioners motion to determine attorneys fees would not result in a double award of
attorneys fees. And, contrary to the RTC ruling, there would be no amendment of a final and
executory decision or variance in judgment.

The Court now addresses two (2) important questions: (1) How can attorneys fees for
professional services be recovered? (2) When can an action for attorneys fees for professional
services be filed? The case of Traders Royal Bank Employees Union-Independent v. NLRC is
instructive: As an adjunctive episode of the action for the recovery of bonus differentials in
NLRC-NCR Certified Case No. 0466, private respondents present claim for attorneys fees may
be filed before the NLRC even though or, better stated, especially after its earlier decision had
been reviewed and partially affirmed. It is well settled that a claim for attorneys fees may be
asserted either in the very action in which the services of a lawyer had been rendered or in a
separate action.

With respect to the first situation, the remedy for recovering attorneys fees as an
incident of the main action may be availed of only when something is due to the client.
Attorneys fees cannot be determined until after the main litigation has been decided and the
subject of the recovery is at the disposition of the court. The issue over attorneys fees only
arises when something has been recovered from which the fee is to be paid.

While a claim for attorneys fees may be filed before the judgment is rendered, the
determination as to the propriety of the fees or as to the amount thereof will have to be held in
abeyance until the main case from which the lawyers claim for attorneys fees may arise has
become final. Otherwise, the determination to be made by the courts will be premature. Of
course, a petition for attorneys fees may be filed before the judgment in favor of the client is
satisfied or the proceeds thereof delivered to the client.
It is apparent from the foregoing discussion that a lawyer has two options as to when to
file his claim for professional fees. Hence, private respondent was well within his rights when he
made his claim and waited for the finality of the judgment for holiday pay differential, instead of
filing it ahead of the awards complete resolution. To declare that a lawyer may file a claim for
fees in the same action only before the judgment is reviewed by a higher tribunal would deprive
him of his aforestated options and render ineffective the foregoing pronouncements of this
Court.

In this case, petitioner opted to file his claim as an incident in the main action, which is
permitted by the rules. As to the timeliness of the filing, this Court holds that the questioned
motion to determine attorneys fees was seasonably filed.

The records show that the August 8, 1994 RTC decision became final and executory on
October 31, 2007. There is no dispute that petitioner filed his Motion to Determine Attorneys
Fees on September 8, 2009, which was only about one (1) year and eleven (11) months from
the finality of the RTC decision. Because petitioner claims to have had an oral contract of
attorneys fees with the deceased spouses, Article 1145 of the Civil Code allows him a period of
six (6) years within which to file an action to recover professional fees for services rendered.
Respondents never asserted or provided any evidence that Spouses de Guzman refused
petitioners legal representation. For this reason, petitioners cause of action began to run only
from the time the respondents refused to pay him his attorneys fees.

At this juncture, having established that petitioner is entitled to attorneys fees and that
he filed his claim well within the prescribed period, the proper remedy is to remand the case to
the RTC for the determination of the correct amount of attorneys fees. Such a procedural route,
however, would only contribute to the delay of the final disposition of the controversy as any
ruling by the trial court on the matter would still be open for questioning before the CA and this
Court. In the interest of justice, this Court deems it prudent to suspend the rules and simply
resolve the matter at this level.

With respect to petitioners entitlement to the claimed attorneys fees, it is the Courts
considered view that he is deserving of it and that the amount should be based on quantum
meruit.Quantum meruit literally meaning as much as he deserves is used as basis for
determining an attorneys professional fees in the absence of an express agreement. The
recovery of attorneys fees on the basis of quantum meruit is a device that prevents an
unscrupulous client from running away with the fruits of the legal services of counsel without
paying for it and also avoids unjust enrichment on the part of the attorney himself. An attorney
must show that he is entitled to reasonable compensation for the effort in pursuing the clients
cause, taking into account certain factors in fixing the amount of legal fees.

Petitioner unquestionably rendered legal services for respondents deceased parents in

the civil case for annulment of contract and recovery of possession with damages. He
successfully represented Spouses de Guzman from the trial court level in 1990 up to this Court
in 2007, for a lengthy period of 17 years. After their tragic death in 2003, petitioner filed a notice
of death and a motion for substitution of parties with entry of appearance and motion to resolve
the case before this Court. As a consequence of his efforts, the respondents were substituted in
the place of their parents and were benefited by the favorable outcome of the case.

As earlier mentioned, petitioner served as defense counsel for deceased Spouses de

Guzman and respondents for almost seventeen (17) years. The Court is certain that it was not
an easy task for petitioner to defend his clients cause for such a long period of time, considering
the heavy and demanding legal workload of petitioner which included the research and
preparation of pleadings, the gathering of documentary proof, the court appearances, and the
various legal work necessary to the defense of Spouses de Guzman. It cannot be denied that
petitioner devoted much time and energy in handling the case for respondents. Given the
considerable amount of time spent, the diligent effort exerted by petitioner, and the quality of
work shown by him in ensuring the successful defense of his clients, petitioner clearly deserves
to be awarded reasonable attorneys fees for services rendered. Justice and equity dictate that
petitioner be paid his professional fee based on quantum meruit.

The Court, however, is resistant in granting petitioner's prayer for an award of 25%
attorney's fees based on the value of the property subject of litigation because petitioner failed
to clearly substantiate the details of his oral agreement with Spouses de Guzman. A fair and
reasonable amount of attorney's fees should be 15% of the market value of the property.
 JOYCE V. ARDIENTE v. SPOUSES JAVIER AND MA. THERESA PASTOFIDE
G.R. No. 161921. July 17, 2013
J. Peralta

Article 20 provides that "every person who, contrary to law, willfully or negligently causes
damage to another shall indemnify the latter for the same." It speaks of the general sanctions of
all other provisions of law which do not especially provide for its own sanction. When a right is
exercised in a manner which does not conform to the standards set forth in the said provision
and results in damage to another, a legal wrong is thereby committed for which the wrongdoer
must be responsible. Thus, if the provision does not provide a remedy for its violation, an action
for damages under either Article 20 or Article 21 of the Civil Code would be proper.

In the present case, intention to harm was evident on the part of petitioner when she
requested for the disconnection of respondent spouses water supply without warning or
informing the latter of such request

FACTS:

Petitioners, Joyce V. Ardiente and her husband Dr. Roberto S. Ardiente are owners of a
housing unit at Emily Homes, Balulang, Cagayan de Oro City.Joyce entered into a
Memorandum of Agreement (selling, transferring and conveying in favor of Ma. Theresa
Pastorfide all their rights and interests in the housing unit at Emily Homes in consideration of
P70,000.00.

For four (4) years, Ma. Theresa's use of the water connection in the name of Joyce
Ardiente was never questioned nor perturbed. Later on, the water connection of Ma. Theresa
was cut off. Cagayan de Oro Water District (COWD) told Ma. Theresa that she was delinquent
for three (3) months corresponding to the months. A certain, Mrs. Madjos later told her that it
was at the instance of Joyce Ardiente that the water line was cut off . Ma. Theresa paid the
delinquent bills. On the same date, through her lawyer, Ma. Theresa wrote a letter to the COWD
to explain who authorized the cutting of the water line. COWD, through the general manager,
[respondent] Gaspar Gonzalez, Jr., answered the letter dated March 15, 1999 and reiterated
that it was at the instance of Joyce Ardiente that the water line was cut off.

Ma. Theresa Pastorfide and her husband filed a complaint for damages against
petitioner, COWD and its manager Gaspar Gonzalez. RTC ruled in favor of respondents. CA
affirmed. Petitioner, COWD and Gonzalez filed their respective Motions for Reconsideration, but
these were denied by the CA COWD and Gonzalez filed a petition for review on certiorari with
this Court. However, based on technical grounds and on the finding that the CA did not commit
any reversible error in its assailed Decision, the petition was denied via a Resolution. COWD
and Gonzalez filed a motion for reconsideration, but the same was denied with finality.
Petitioner, on the other hand, timely filed the instant petition

ISSUE:

Whether the principle of abuse of rights has been violated resulting in damages under
Article 20 or other applicable provision of law.

RULING:
 Petitioner insists that she should not be held liable for the disconnection of respondent
spouses' water supply, because she had no participation in the actual disconnection. However,
she admitted in the present petition that it was she who requested COWD to disconnect the
Spouses Pastorfide's water supply. This was confirmed by COWD and Gonzalez in their cross-
claim against petitioner. While it was COWD which actually discontinued respondent spouses'
water supply, it cannot be denied that it was through the instance of petitioner that the Spouses
Pastorfide's water supply was disconnected in the first place.

It is true that it is within petitioner's right to ask and even require the Spouses Pastorfide
to cause the transfer of the former's account with COWD to the latter's name pursuant to their
Memorandum of Agreement. However, the remedy to enforce such right is not to cause the
disconnection of the respondent spouses' water supply. The exercise of a right must be in
accordance with the purpose for which it was established and must not be excessive or unduly
harsh; there must be no intention to harm another. Otherwise, liability for damages to the injured
party will attach. In the present case, intention to harm was evident on the part of petitioner
when she requested for the disconnection of respondent spouses water supply without warning
or informing the latter of such request. Petitioner claims that her request for disconnection was
based on the advise of COWD personnel and that her intention was just to compel the Spouses
Pastorfide to comply with their agreement that petitioner's account with COWD be transferred in
respondent spouses' name. If such was petitioner's only intention, then she should have
advised respondent spouses before or immediately after submitting her request for
disconnection, telling them that her request was simply to force them to comply with their
obligation under their Memorandum of Agreement. But she did not. What made matters worse is
the fact that COWD undertook the disconnection also without prior notice and even failed to
reconnect the Spouses Pastorfides water supply despite payment of their arrears. There was
clearly an abuse of right on the part of petitioner, COWD and Gonzalez. They are guilty of bad
faith.

The principle of abuse of rights as enshrined in Article 19 of the Civil Code provides that
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.
This article, known to contain what is commonly referred to as the principle of abuse of
rights, sets certain standards which must be observed not only in the exercise of one's rights,
but also in the performance of one's duties. These standards are the following: to act with
justice; to give everyone his due; and to observe honesty and good faith. The law, therefore,
recognizes a primordial limitation on all rights; that in their exercise, the norms of human
conduct set forth in Article 19 must be observed. A right, though by itself legal because
recognized or granted by law as such, may nevertheless become the source of some illegality.
When a right is exercised in a manner which does not conform with the norms enshrined in
Article 19 and results in damage to another, a legal wrong is thereby committed for which the
wrongdoer must be held responsible. But while Article 19 lays down a rule of conduct for the
government of human relations and for the maintenance of social order, it does not provide a
remedy for its violation. Generally, an action for damages under either Article 20 or Article 21
would be proper.

Corollarilly, Article 20 provides that "every person who, contrary to law, willfully or
negligently causes damage to another shall indemnify the latter for the same." It speaks of the
general sanctions of all other provisions of law which do not especially provide for its own
sanction. When a right is exercised in a manner which does not conform to the standards set
forth in the said provision and results in damage to another, a legal wrong is thereby committed
for which the wrongdoer must be responsible. Thus, if the provision does not provide a remedy
for its violation, an action for damages under either Article 20 or Article 21 of the Civil Code
would be proper.

The question of whether or not the principle of abuse of rights has been violated
resulting in damages under Article 20 or other applicable provision of law, depends on the
circumstances of each case.

To recapitulate, petitioner's acts which violated the abovementioned provisions of law is

her unjustifiable act of having the respondent spouses' water supply disconnected, coupled with
her failure to warn or at least notify respondent spouses of such intention. On the part of COWD
and Gonzalez, it is their failure to give prior notice of the impending disconnection and their
subsequent neglect to reconnect respondent spouses' water supply despite the latter's
settlement of their delinquent account.

As for exemplary damages, Article 2229 provides that exemplary damages may be
imposed by way of example or correction for the public good. Nonetheless, exemplary damages
are imposed not to enrich one party or impoverish another, but to serve as a deterrent against or
as a negative incentive to curb socially deleterious actions. In the instant case, the Court agrees
with the CA in sustaining the award of exemplary damages, although it reduced the amount
granted, considering that respondent spouses were deprived of their water supply for more than
nine (9) months, and such deprivation would have continued were it not for the relief granted by
the RTC.

With respect to the award of attorney's fees, Article 2208 of the Civil Code provides,
among others, that such fees may be recovered when exemplary damages are awarded, when
the defendant's act or omission has compelled the plaintiff to litigate with third persons or to
incur expenses to protect his interest, and where the defendant acted in gross and evident bad
faith in refusing to satisfy the plaintiffs plainly valid, just and demandable claim.

Philippine Tourism Authority (now known as Tourism Infrastructure and

Enterprise Zone Authority) v. Marcosa A. Sabandal-Herzenstiel, et al.
G.R. No. 196741. July 17, 2013
J. Perlas-Bernabe

Unlawfully entering the subject property and excluding therefrom the prior possessor
would necessarily imply the use of force and this is all that is necessary. In order to constitute
force, the trespasser does not have to institute a state of war. No other proof is necessary. In
the instant case, it is, thus, irrefutable that respondents sufficiently alleged that the possession
of the subject property was wrested from them through violence and force.

FACTS:

Petitioner Philippine Tourism Authority (now Tourism Infrastructure and Enterprise Zone
Authority) (petitioner) is the owner of the subject property and other parcels of land located in
Brgy. Basdiot, Moalboal, Cebu when it bought the same from Tri-Island Corporate Holdings, Inc.
(Tri-Island). It had then been in actual, physical, continuous, and uninterrupted possession of
the subject property and had declared the same for taxation purposes. Sometime in 1997,
however, respondents Pedro Tapales, Luis Tapales, Romeo Tapales (Tapaleses), and
SabandalHerzenstiel (respondents) by force, strategy and stealth entered into the 2,940 square
meter portion of the subject property, on which they proceeded to cut down some coconut trees,
introduced improvements and fenced the area. Petitioner made demands to vacate, which
respondents ignored, prompting the filing of a forcible entry complaint against them .

The Tapaleses acknowledged that the subject property had already been sold by its
administrator, Josefina Abrenica, to Tri-Island. They, however, claimed that the sale was tainted
with force and intimidation and hence void, including the subsequent transactions covering the
same property. Notwithstanding the sale, they remained in actual and physical possession of
the subject property and even introduced improvements thereon.

The MCTC declared that petitioner is the lawful owner of the subject property and had
been in prior possession. RTC dismissed respondents appeal. CA nullified and set aside the
rulings of both the MCTC and RTC, and declaring Sabandal-Herzenstiel as the lawful
possessor of the subject property. CA found petitioner to have failed to establish prior
possession of the subject property and rebut respondents claim of continued physical
possession in spite of the sale of the subject property to Tri-Island during which, Sabandal-
Herzenstiel leased and converted the property into a resort. Hence, the instant petition.

ISSUE:

Whether the respondents may be lawfully ejected from the subject property.

RULING:

The petition is meritorious.

In an action for forcible entry, the plaintiff must prove that he was in prior possession of
the disputed property and that the defendant deprived him of his possession by any of the
means provided for in Section 1, Rule 70 of the Rules, namely: force, intimidation, threats,
strategy, and stealth.

In this case, respondents failed to establish their prior and continued possession of the
subject property after its sale in favor of petitioner in 1981. On the contrary, they even admitted
in their answer to the complaint that petitioner exercised dominion over the same by instituting
caretakers and leasing portions thereof to third persons. Suffice it to state that possession in the
eyes of the law does not mean that a man has to have his feet on every square meter of the
ground before he is deemed in possession. Thus, finding petitioners assertion to be well-
founded, the MCTC properly adjudged petitioner to have prior possession over the subject
property as against Sabandal-Herzenstiel, who never claimed ownership or possession thereof.

Petitioners supposed failure to describe in detail the manner of respondents entry into
the subject property is inconsequential. Jurisprudence states that proving the fact of unlawful
entry and the exclusion of the lawful possessor as petitioner had sufficiently demonstrated
would necessarily imply the use of force. As held in Estel v. Heirs of Recaredo P. Diego, Sr.: x x
x Unlawfully entering the subject property and excluding therefrom the prior possessor would
necessarily imply the use of force and this is all that is necessary. In order to constitute force,
the trespasser does not have to institute a state of war. No other proof is necessary. In the
instant case, it is, thus, irrefutable that respondents sufficiently alleged that the possession of
the subject property was wrested from them through violence and force.
 And in David v. Cordova: x x x The foundation of a possessory action is really the
forcible exclusion of the original possessor by a person who has entered without right. The
words "by force, intimidation, threat, strategy or stealth" include every situation or condition
under which one person can wrongfully enter upon real property and exclude another, who has
had prior possession therefrom. If a trespasser enters upon land in open daylight, under the
very eyes of the person already clothed with lawful possession, but without the consent of the
latter, and there plants himself and excludes such prior possessor from the property, the action
of forcibly entry and detainer can unquestionably be maintained, even though no force is used
by the trespasser other than such as is necessarily implied from the mere acts of planting
himself on the ground and excluding the other party.

Similarly, in Arbizo v. Santillan, it has been held that the acts of unlawfully entering the
disputed premises, erecting a structure thereon, and excluding therefrom the prior possessor
would necessarily imply the use of force, as in this case. In fine, the Court upholds the findings
and conclusions of the MCTC, adjudging petitioner to be the lawful possessor of the subject
property, square as they are with existing law and jurisprudence. Accordingly, the CAs ruling on
the merits must perforce be reversed and set aside.

SPOUSES ANGELES DICO AND CELSO DICO, SR. v. VIZCAYA MANAGEMENT

CORPORATION, et al.
G.R. No. 161211. July 17, 2013
J.Bersamin

The prescription of actions for the reconveyance of real property based on implied trust
is 10 years. The defenses of lack of jurisdiction over the subject matter, litis pendentia, res
judicata, and prescription of action may be raised at any stage of the proceedings, even for the
first time on appeal, except that the objection to the lack of jurisdiction over the subject matter
may be barred by laches.

Verily, the reckoning point for purposes of the Dicos demand of reconveyance based on
fraud was their discovery of the fraud. Such discovery was properly pegged on the date of the
registration of the transfer certificates of title in the adverse parties names, because registration
was a constructive notice to the whole world.

FACTS:

Celso Dico was the registered owner of Lot No. 486 of the Cadiz Cadastre, Lot No. 486
was adjacent to Lot No. 29-B and Lot No. 1412 (formerly Lot No. 1118-B), both also of the Cadiz
Cadastre. Respondent Vizcaya Management Corporation (VMC) was the registered owner
under of Lot No. 29-B, also of the Cadiz Cadastre, comprising an area of 369,606 square
meters, more or less. VMC likewise claimed to be the owner of Lot No. 1412, formerly known as
Lot No. 1118-B, also of the Cadiz Cadastre, containing an area of 85,239 square meters, more
or less, and registered in its name. In sum, VMC, then newly formed, caused the consolidation
and subdivision of Lot No. 29-B, Lot No. 1412, Lot No. 1426-B, and Lot No. 1426-C.

VMC proceeded to develop the Don Eusebio Subdivision project using Lot No. 1 of the
consolidation-subdivision plan. The subdivision plan under PSD-102560 subdivided Lot No. 1
into 547 small lots. Subsequently, VMC also developed the Cristina Village Subdivision project
using Lots Nos. 2, 3, and 4. Starting 1971, VMC sold lots in its Don Eusebio Subdivision and
Cristina Village Subdivision.

In 1981, VMC filed against the Dicos a complaint for unlawful detainer in the City Court
of Cadiz. City Court of Cadiz rendered its decision in favor of VMC, ordering the Dicos to
demolish the concrete water gate or sluice gate (locally known as trampahan) located inside Lot
No. 1, Block 3 of the Cristina Village Subdivision. Inasmuch as the Dicos did not appeal, the
decision attained finality.

The Dicos commenced an action for the annulment and cancellation of the titles of VMC
(Civil Case No. 180-C), impleading VMC, the National Land Titles and Deeds Registration
Administration, and the Director of the Bureau of Lands. Alleging, that they were the registered
owners of Lot No. 486 and the possessors-by-succession of Lot No. 1412 (formerly Lot No.
1118) and Lot No. 489; that VMC had land-grabbed a portion of their Lot No. 486 totaling
111,966 square meters allegedly brought about by the expansion of Cristina Village Subdivision;
They prayed that the possession of Lot No. 486, Lot No. 1412, and Lot No. 489 be restored to
them; and that the judgment in Civil Case No. 649 be annulled. Celso died during the pendency
of the action, and was substituted by Angeles and their children. RTC ruled in favor of the Dicos.
CA reversed the RTC.

ISSUES:

Whether prescription already barred petitioners cause of action. All the other issues are
subsumed therein.

RULING:

The CA correctly pointed out that under Article 1456 of the Civil Code, the person
obtaining property through mistake or fraud is considered by force of law a trustee of an implied
trust for the benefit of the person from whom the property comes. Under Article 1144, Civil
Code, an action upon an obligation created by law must be brought within 10 years from the
time the right of action accrues. Consequently, an action for reconveyance based on implied or
constructive trust prescribes in 10 years.

Here, the CA observed that even granting that fraud intervened in the issuance of the
transfer certificates of title, and even assuming that the Dicos had the personality to demand the
reconveyance of the affected property on the basis of implied or constructive trust, the filing of
their complaint for that purpose only on May 12, 1986 proved too late for them.

That observation was correct and in accord with law and jurisprudence. Verily, the
reckoning point for purposes of the Dicos demand of reconveyance based on fraud was their
discovery of the fraud. Such discovery was properly pegged on the date of the registration of the
transfer certificates of title in the adverse parties names, because registration was a
constructive notice to the whole world. The long period of 29 years that had meanwhile lapsed
from the issuance of the pertinent transfer certificate of title on September 30, 1934 (the date of
recording of TCT No. RT-9933 (16739) in the name of the Lopezes) or on November 10, 1956
(the date of recording of TCT No. T-41835 in VMCs name) was way beyond the prescriptive
period of 10 years.
 REPUBLIC OF THE PHILIPPINES v. RICORDITO N. DE ASIS, JR.
G.R. No. 193874. July 24, 2013
J. Perlas-Bernabe

The nature of reconstitution proceedings under RA 26 denotes a restoration of the

instrument, which is supposed to have been lost or destroyed, in its original form and condition.
On this score, it bears stressing that the nature of reconstitution proceedings under RA 26
denotes a restoration of the instrument, which is supposed to have been lost or destroyed, in its
original form and condition. As such, reconstitution must be granted only upon clear proof that
the title sought to be restored had previously existed and was issued to the petitioner. Strict
compliance with the requirements of the law aims to thwart dishonest parties from abusing
reconstitution proceedings as a means of illegally obtaining properties otherwise already owned
by other parties.

FACTS:

De Asis filed a verified amended petition for Reconstitution, covering Lot No. 804-C
located at Pasong Tamo, Caloocan, Rizal (now No. 4, Panama St., Veterans Village, Brgy. Holy
Spirit, Quezon City), with an area of 30,052 square meters, more or less (subject property). De
Asis alleged that he purchased the subject property from Lauriano through a Deed of Absolute
Sale and that the same is free from any encumbrances. Likewise, no deed affecting it has been
presented or is pending before the Register of Deeds. Unfortunately, the original copy of TCT
No. 8240 was destroyed by the fire that gutted the Quezon City Hall on June 11, 1988, hence,
the amended petition based on the owners duplicate copy of TCT No. 8240, which was in his
possession. De Asis caused the publication of the notice of the amended petition in the
December 23 and 30, 2002 issues of the Official Gazette. However, the NPO certified that the
December 30, 2002 issue was officially released only on January 3, 2003, evidently short of the
thirty-day period preceding the January 30, 2003 scheduled hearing.

RTC granted the amended petition based on the evidence presented ex parte by De
Asis.

The Republic appealed the RTC Decision to the CA, arguing that De Asis failed to strictly
comply with the mandatory jurisdictional requirement on publication. CA affirmed the RTC
Decision in toto, ratiocinating that the thirty-day notice should be reckoned from the date of
issue of the Official Gazette, not from the date of its actual release, citing Section 13 of Republic
Act No. 26 (RA 26). While the CA conceded the stringent and mandatory nature of the
requirement of publication, it however considered the fact that the source of the reconstitution in
this case was the owners duplicate copy of title in De Asis possession, the authenticity of which
was never disputed by the Republic. The appellate court cited the case of Imperial v. CA
(Imperial), where the Court upheld the validity of the publication of the notice of the petition in
the March 27, 1995 and April 3, 1995 issues of the Official Gazette despite the NPO certification
that the last issue (pertaining to the April 3, 1995 issue) was officially released on March 28,
1995. The Court observed in the Imperial case that it is not uncommon among publishing
companies to release issues before the actual date of issue reflected on the cover of the
publication. What matters is that the petitioner in a reconstitution case caused the publication of
the notice of the petition in two (2) consecutive issues of the Official Gazette thirty (30) days
prior to the date of hearing. CA held that the LRAs report was not even a condition sine qua non
before a petition for reconstitution could be given due course. The Republics motion for
reconsideration was denied in the CA, hence, the present recourse.
ISSUES:

Whether there is (a) non-compliance with Sections 9 and 10 of RA 26 requiring

publication of the notice of hearing in two (2) successive issues of the Official Gazette at least
thirty (30) days prior to the date of hearing, a jurisdictional requisite; and Whether the LRAs
report which declared that the technical description of the subject property overlaps with other
properties.

RULING:

The petition is meritorious.

At the outset, the Court notes that the present amended petition for reconstitution is
anchored on the owners duplicate copy of TCT No. 8240 a source for reconstitution of title
under Section 3(a) of RA 26 which, in turn, is governed by the provisions of Section 10 in
relation to Section 9 of RA 26 with respect to the publication, posting, and notice requirements.
Section 10 reads:

SEC. 10. Nothing hereinbefore provided shall prevent any registered owner or
person in interest from filing the petition mentioned in section five of this Act directly with
the proper Court of First Instance, based on sources enumerated in sections 2(a), 2(b),
3(a), 3(b), and/or 4(a) of this Act: Provided, however, That the court shall cause a notice
of the petition, before hearing and granting the same, to be published in the manner
stated in section nine hereof: And, provided, further, That certificates of title reconstituted
pursuant to this section shall not be subject to the encumbrance referred to in section
seven of this Act.

Corollarily, Section 9 reads in part:

SEC. 9. x x x Thereupon, the court shall cause a notice of the petition to be

published, at the expense of the petitioner, twice in successive issues of the Official
Gazette, and to be posted on the main entrance of the provincial building and of the
municipal building of the municipality or city in which the land lies, at least thirty days
prior to the date of hearing, and after hearing, shall determine the petition and render
such judgment as justice and equity may require. x x x.

The foregoing provisions, therefore, clearly require that (a) notice of the petition should
be published in two (2) successive issues of the Official Gazette; and (b) publication should be
made at least thirty (30) days prior to the date of hearing. Substantial compliance with this
jurisdictional requirement is not enough; it bears stressing that the acquisition of jurisdiction over
a reconstitution case is hinged on a strict compliance with the requirements of the law.

Indubitably, therefore, there was a defect in the mandatory publication of the notice
required under Section 10 in relation to Section 9 of RA 26.

Hence, while Section 9 merely required that the notice of the petition should be
"published x x x twice in successive issues of the Official Gazette," jurisprudence expressly
clarified that "publication" means the actual circulation or release of the issue of the Official
Gazette on which the notice of the petition is printed. The law could not have possibly
contemplated "publication" independent of its actual dissemination to the public, for whose
benefit the requisite of publication is mandated in the first place. For sure, publication without
actual circulation of the printed material is worthless.

Consequently, the thirty-day period that precedes the scheduled hearing should be
reckoned from the time of the actual circulation or release of the last issue of the Official
Gazette, and not on the date of its issue as reflected on its front cover. To interpret it otherwise,
as the CA had erroneously done in this case, would render nugatory the purposes of publication
in reconstitution proceedings, which are to safeguard against spurious and unfounded land
ownership claims, to apprise all interested parties of the existence of such action, and to give
them enough time to intervene. Otherwise, unscrupulous parties would merely invoke
compliance with the requirement of two-time publication in the Official Gazette, without regard to
the date of its actual release, as a convenient excuse for their failure to observe the mandatory
prerequisite of publication.

Moreover, while it is true that the thirty-day period in this case was short by only three (3)
days, the principle of substantial compliance cannot apply, as the law requires strict compliance,
without which the Court is devoid of authority to pass upon and resolve the petition. Hence, in
view of the defect in the mandatory requirement of publication set forth in Section 10 in relation
to Section 9 of RA 26, therefore, the RTC did not acquire jurisdiction in this case, rendering null
and void the entire proceedings before it.

Finally, the Court notes that the RTC, as affirmed by the CA, failed to give due
consideration to the LRAs report stating that the technical description of the subject property
overlaps with other properties. In light of the LRAs finding, therefore, it behooved the RTC in
observance of diligence and prudence to notify the adjoining lot owners of the proceedings or,
at the very least, to order a resurvey of the subject property, at the expense of De Asis. As the
Republic had pointed out, the RTC ought to have proceeded with the utmost caution, having
been apprised of the LRAs report on the overlapping of properties. Records show, however, that
neither the Republic nor the LRA was afforded the opportunity to appear and present further
evidence in support of the LRAs report. Instead, the RTC merely disregarded the same.

On this score, it bears stressing that the nature of reconstitution proceedings under RA
26 denotes a restoration of the instrument, which is supposed to have been lost or destroyed, in
its original form and condition. On this score, it bears stressing that the nature of reconstitution
proceedings under RA 26 denotes a restoration of the instrument, which is supposed to have
been lost or destroyed, in its original form and condition. As such, reconstitution must be
granted only upon clear proof that the title sought to be restored had previously existed and was
issued to the petitioner. Strict compliance with the requirements of the law aims to thwart
dishonest parties from abusing reconstitution proceedings as a means of illegally obtaining
properties otherwise already owned by other parties.

As the Court had eloquently pronounced in Director of Lands v. CA:

The efficacy and integrity of the Torrens system must be protected and preserved
to ensure the stability and security of land titles for otherwise land ownership in the
country would be rendered erratic and restless and can certainly be a potent and
veritable cause of social unrest and agrarian agitation. The courts must exercise caution
and vigilance in order to guard the indefeasibility and imprescriptibility of the Torrens
Registration System against spurious claims and forged documents concocted and
foisted upon the destruction and loss of many public records as a result of the last World
War. The real purpose of the Torrens System which is to quiet title to the land must be
upheld and defended, and once a title is registered, the owner may rest secure, without
the necessity of waiting in the portals of the court or sitting in the mirador de su casa to
avoid the possibility of losing his land.

SPS. NAMAEL AND LOURDES BONROSTRO v. SPS. JUAN AND CONSTACIA LUNA
G.R. No. 172346. July 24, 2013
J. Del Castillo

Tender of payment "is the manifestation by the debtor of a desire to comply with or pay
an obligation. If refused without just cause, the tender of payment will discharge the debtor of
the obligation to pay but only after a valid consignation of the sum due shall have been made
with the proper court." Consignation is the deposit of the proper amount with a judicial authority
in accordance with rules prescribed by law, after the tender of payment has been refused or
because of circumstances which render direct payment to the creditor impossible or
inadvisable.

Tender of payment, without more, produces no effect.To have the effect of payment and
the consequent extinguishment of the obligation to pay, the law requires the companion acts of
tender of payment and consignation.

FACTS:

Respondent Constancia Luna, as buyer, entered into a Contract to Sell with Bliss
Development Corporation involving a house and lot in New Capitol Estates in Diliman, Quezon
City. Barely a year after, Constancia, this time as the seller, entered into another Contract to Sell
with petitioner Lourdes Bonrostro concerning the same property. The spouses Bonrostro took
possession of the property. However, except for the P200,000.00 down payment, Lourdes failed
to pay any of the stipulated subsequent amortization payments. Constancia and her husband,
respondent Juan Luna (spouses Luna), filed before the RTC a Complaint for Rescission of
Contract and Damages against the spouses Bonrostro praying for the rescission of the contract,
delivery of possession of the subject property, payment by the latter of their unpaid obligation,
and awards of actual, moral and exemplary damages, litigation expenses and attorneys fees.
On the other hand, spouses Bonrostro averred that they were willing to pay the balance and
requested for a 60-day extension.

The RTC ruled that the delay could not be considered a substantial breach. CA
concluded that since the contract entered into by and between the parties is a Contract to Sell,
rescission is not the proper remedy. Moreover, the subject contract being specifically a contract
to sell a real property on installment basis, it is governed by Republic Act No. 6552 or the
Maceda Law. The RTC under paragraphs 2 and 3 of the dispositive portion of its Decision
ordered the spouses Bonrostro to pay the spouses Luna the sums of P300,000.00 plus interest
of 2% per month from April 1993 to November 1993 and P330,000.00 plus interest of 2% per
month from July 1993 to November 1993, respectively. The CA modified these by reckoning the
payment of the 2% interest on the P300,000.00 from May 1, 1993 until fully paid and by
imposing interest at the legal rate on the P330,000.00 reckoned from August 1, 1993 until fully
paid. CA affirmed the RTCs finding that Lourdes was ready to pay her. However, the CA
modified the RTC Decision with respect to interest.
The spouses Luna no longer assailed the ruling. On the other hand, the spouses
Bonrostro filed a Partial Motion for Reconsideration. The CA, however, denied for lack of merit.
Hence, this Petition for Review on Certiorari.
ISSUE:

Whether the spouses Bonrostro are excused from paying the interests due upon
submitting the letter of their willingness to pay their obligation and whether the act of submitting
the letter be considered as tender of payment.

RULING:

The Petition lacks merit.

The spouses Bonrostros reliance on the RTCs factual finding that Lourdes was willing
and ready to pay on November 24, 1993 is misplaced. There being no breach to speak of in
case of non-payment of the purchase price in a contract to sell, as in this case, the RTCs
factual finding that Lourdes was willing and able to pay her obligation a conclusion arrived at
in connection with the said courts determination of whether the non-payment of the purchase
price in accordance with the terms of the contract was a substantial breach warranting
rescission therefore loses significance. The spouses Bonrostros reliance on the said factual
finding is thus misplaced. They cannot invoke their readiness and willingness to pay their
obligation on November 24, 1993 as an excuse from being made liable for interest beyond the
said date.

The spouses Bonrostro are liable for interest on the installments due from the date of
default until fully paid. The spouses Bonrostro assert that Lourdes letter of November 24, 1993
amounts to tender of payment of the remaining balance amounting to P630,000.00. Accordingly,
thenceforth, accrual of interest should be suspended.

Tender of payment "is the manifestation by the debtor of a desire to comply with or pay
an obligation. If refused without just cause, the tender of payment will discharge the debtor of
the obligation to pay but only after a valid consignation of the sum due shall have been made
with the proper court." "Consignation is the deposit of the proper amount with a judicial authority
in accordance with rules prescribed by law, after the tender of payment has been refused or
because of circumstances which render direct payment to the creditor impossible or
inadvisable."

"Tender of payment, without more, produces no effect." "To have the effect of payment
and the consequent extinguishment of the obligation to pay, the law requires the companion
acts of tender of payment and consignation."

As to the effect of tender of payment on interest, noted civilist Arturo M. Tolentino

explained as follows:
When a tender of payment is made in such a form that the creditor could have
immediately realized payment if he had accepted the tender, followed by a prompt
attempt of the debtor to deposit the means of payment in court by way of consignation,
the accrual of interest on the obligation will be suspended from the date of such tender.
But when the tender of payment is not accompanied by the means of payment, and the
debtor did not take any immediate step to make a consignation, then interest is not
suspended from the time of such tender. x x x x

Here, the subject letter merely states Lourdes willingness and readiness to pay but it
was not accompanied by payment. She claimed that she made numerous telephone calls to
Atty. Carbon reminding the latter to collect her payment, but, neither said lawyer nor Constancia
came to collect the payment. After that, the spouses Bonrostro took no further steps to effect
payment. They did not resort to consignation of the payment with the proper court despite
knowledge that under the contract, non-payment of the installments on the agreed date would
make them liable for interest thereon. The spouses Bonrostro erroneously assumed that their
notice to pay would excuse them from paying interest. Their claimed tender of payment did not
produce any effect whatsoever because it was not accompanied by actual payment or followed
by consignation. Hence, it did not suspend the running of interest. The spouses Bonrostro are
therefore liable for interest on the subject installments from the date of default until full payment
of the sums of P300,000.00 and P330,000.00.

The spouses Bonrostro are likewise liable for interest on the amount paid by the
spouses Luna to Bliss as amortization. The spouses Bonrostro want to be relieved from paying
interest on the amount of P214,492.62 which the spouses Luna paid to Bliss as amortizations
by asserting that they were prevented by the latter from fulfilling such obligation. They invoke
Art. 1186 of the Civil Code which provides that "the condition shall be deemed fulfilled when the
obligor voluntarily prevents its fulfillment."

However, the Court finds Art. 1186 inapplicable to this case. The said provision explicitly
speaks of a situation where it is the obligor who voluntarily prevents fulfillment of the condition.
Here, Constancia is not the obligor but the obligee. Moreover, even if this significant detail is to
be ignored, the mere intention to prevent the happening of the condition or the mere placing of
ineffective obstacles to its compliance, without actually preventing fulfillment is not sufficient for
the application of Art. 1186. Two requisites must concur for its application, to wit: (1) intent to
prevent fulfillment of the condition; and, (2) actual prevention of compliance.

In this case, while it is undisputed that Constancia indeed instructed Bliss on March 4,
1994 not to accept payment from anyone but her, there is nothing on record to show that Bliss
heeded the instruction of Constancia as to actually prevent the spouses Bonrostro from making
payments to Bliss. There is no showing that subsequent to the said letter, the spouses
Bonrostro attempted to make payment to and was refused by Bliss. Neither was there a witness
presented to prove that Bliss indeed gave effect to the instruction contained in Constancias
letter. While Bliss Project Development Officer, Mr. Ariel Cordero, testified during trial, nothing
could be gathered from his testimony regarding this except for the fact that Bliss received the
said letter. In view of these, the spouses Luna could not be said to have placed an effective
obstacle as to actually prevent the spouses Bonrostro from making amortization payments to
Bliss.

On the other hand, there are telling circumstances which militate against the spouses
Bonrostros claimed keenness to comply with their obligation to pay the monthly amortization.
After the execution of the contract in January 1993, they immediately took possession of the
property but failed to make amortization payments. It was only after seven months or on
November 18, 1993 that they made payments to Bliss in the amount of P46,303.44. Whether
the same covers previous unpaid amortizations is also not clear as the receipt does not indicate
the same and per Statement of Account as of March 8, 1994 issued by Bliss, the unpaid
monthly amortizations for February to November 1993 in the total amount of P78,271.69
remained outstanding. There was also no payment made of the amortizations due on December
4, 1993 and January 4, 1994 before the filing of the Complaint on January 11, 1994.

Under Article 2209 of the Civil Code, "if the obligation consists in the payment of a sum
of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation
to the contrary, shall be the payment of the interest agreed upon, and in the absence of
stipulation, the legal interest x x x." There being no stipulation on interest in case of delay in the
payment of amortization, the CA thus correctly imposed interest at the legal rate which is now
12% per annum.

REMAN RECIO v. HEIRS OF SPOUSES AGUEGO and MARIA ALTAMIRANO, namely

ALEJANDRO, et al., ALL SURNAMED ALTAMIRANO, et al.
G.R. No. 182349. July 24, 2013
J. Reyes

A valid contract of sale requires: (a) a meeting of minds of the parties to transfer
ownership of the thing sold in exchange for a price; (b) the subject matter, which must be a
possible thing; and (c) the price certain in money or its equivalent. In this case, all the elements
were present. However, there is no evidence to show that the other co-owners consented to
Alejandros sale transaction with the petitioner. Hence, for want of authority to sell Lot No. 3,
Alejandro only sold his aliquot share of the subject property to the petitioner.

FACTS:

Nena Recio , the mother of Reman Recio (petitioner), leased from the respondents
Altamiranos a parcel of land with improvements situated in Lipa City, Batangas. The Altamiranos
inherited the subject land from their deceased parents, the spouses Aguedo Altamirano and
Maria Valduvia.

Nena used the ground floor of the subject property as a retail store for grains and the
upper floor as the familys residence. The petitioner claimed that in 1988, the Altamiranos
offered to sell the subject property to Nena for Five Hundred Thousand Pesos (P500,000.00).
The latter accepted such offer, which prompted the Altamiranos to waive the rentals for the
subject property. However, the sale did not materialize at that time due to the fault of the
Altamiranos. Nonetheless, Nena continued to occupy and use the property with the consent of
the Altamiranos. The lots were subdivided into three, the petitioner and his family remained in
peaceful possession of Lot No. 3. Subsequently in 1994, the Altamiranos through Alejandro
entered into an oral contract of sale with the petitioner over the subject property. Payments were
eventually made, but as to the balance, Alejandro kept on avoiding the petitioner. Because of
this, the petitioner demanded from the Altamiranos, through Alejandro, the execution of a Deed
of Absolute Sale in exchange for the full payment of the agreed price. Petitioner filed a
complaint for Specific Performance with Damages. Pending the return of service of summons to
the Altamiranos, the petitioner discovered that the subject property has been subsequently sold
to respondents Lauro and Marcelina Lajarca (Spouses Lajarca). Thus, the petitioner filed an
Amended Complaint impleading the Spouses Lajarca and adding as a cause of action the
annulment of the sale between the Altamiranos and the Spouses Lajarca.

RTC ruled in favor of the Recios. CA affirmed with modification. CA held that the contract
of sale between Alejandro and the petitioner is valid because under a regime of co-ownership, a
co-owner can freely sell and dispose his undivided interest, citing Acabal v. Acabal.
Furthermore, the Spouses Lajarca were not buyers in good faith because they had knowledge
of the prior sale to the petitioner who even caused the annotation of the Notice of Lis Pendens
on TCT No. T-102563. Hence, this recourse.

ISSUE:
Whether the verbal contract of sale between Alejandro and the petitioner is valid.

RULING:

A valid contract of sale requires: (a) a meeting of minds of the parties to transfer
ownership of the thing sold in exchange for a price; (b) the subject matter, which must be a
possible thing; and (c) the price certain in money or its equivalent.

In the instant case, all these elements are present. The records disclose that the
Altamiranos were the ones who offered to sell the property to Nena but the transaction did not
push through due to the fault of the respondents. Thereafter, the petitioner renewed Nenas
option to purchase the property to which Alejandro, as the representative of the Altamiranos
verbally agreed. The determinate subject matter is Lot No. 3, which is covered under TCT No. T-
102563 and located at No. 39 10 de Julio Street (now Esteban Mayo Street), Lipa City,
Batangas. The price agreed for the sale of the property was Five Hundred Thousand Pesos
(P500,000.00). It cannot be denied that the oral contract of sale entered into between the
petitioner and Alejandro was valid.

However, the CA found that it was only Alejandro who agreed to the sale.There is no
evidence to show that the other co-owners consented to Alejandros sale transaction with the
petitioner. Hence, for want of authority to sell Lot No. 3, the CA ruled that Alejandro only sold his
aliquot share of the subject property to the petitioner.

The petitioner insists that the authority of Alejandro to represent his co-heirs in the
contract of sale entered into with the petitioner had been adequately proven during the trial. He
alleges that the other Altamiranos are deemed to have knowledge of the contract of sale
entered into by Alejandro with the petitioner since all of them, either personally or through their
authorized representatives participated in the sale transaction with the Spouses Lajarca
involving the same property covered by TCT No. T-102563. In fact, said TCT even contained a
notice of lis pendens which should have called their attention that there was a case involving the
property. Moreover, the petitioner points out that Alejandro represented a considerable majority
of the co-owners as can be observed from other transaction and documents, i.e., three (3)
Deeds of Sale executed in favor of the Spouses Lajarca and the two other buyers of the parcels
of land co-owned by the Altamiranos.

The petitioners contentions are untenable. Given the expressed requirement under the
Articles 1874 and 1878 of the Civil Code that there must be a written authority to sell an
immovable property, the petitioners arguments must fail. The petitioner asserts that since TCT
No. T-102563 contained a notice of lis pendens, the Altamiranos very well knew of the earlier
sale to him by Alejandro. While this may be true, it does not negate the fact that Alejandro did
not have any SPA. It was a finding that need not be disturbed that Alejandro had no authority
from his co-owners to sell the subject property.

Moreover, the fact that Alejandro allegedly represented a majority of the co-owners in the
transaction with the Spouses Lajarca, is of no moment. The Court cannot just simply assume
that Alejandro had the same authority when he transacted with the petitioner.

Woodchild case stressed that apparent authority based on estoppel can arise from the
principal who knowingly permit the agent to hold himself out with authority and from the principal
who clothe the agent with indicia of authority that would lead a reasonably prudent person to
believe that he actually has such authority. Apparent authority of an agent arises only from "acts
or conduct on the part of the principal and such acts or conduct of the principal must have been
known and relied upon in good faith and as a result of the exercise of reasonable prudence by a
third person as claimant and such must have produced a change of position to its detriment." In
the instant case, the sale to the Spouses Lajarca and other transactions where Alejandro
allegedly represented a considerable majority of the co-owners transpired after the sale to the
petitioner; thus, the petitioner cannot rely upon these acts or conduct to believe that Alejandro
had the same authority to negotiate for the sale of the subject property to him.

Indeed, the petitioner can only apply the principle of apparent authority if he is able to
prove the acts of the Altamiranos which justify his belief in Alejandros agency; that the
Altamiranos had such knowledge thereof; and if the petitioner relied upon those acts and
conduct, consistent with ordinary care and prudence.

The instant case shows no evidence on record of specific acts which the Altamiranos
made before tile sale of the subject property to the petitioner, indicating that they fully knew of
the representation of Alejandro. All that the petitioner relied upon were acts that happened after
the sale to him. Absent the consent of Alejandro's co-owners, the Court holds that the sale
between the other Altamiranos and the petitioner is null and void. But as held by the appellate
court, the sale between the petitioner and Alejandro is valid insofar as the aliquot share of
respondent Alejandro is concerned. Being a co-owner, Alejandro can validly and legally dispose
of his share even without the consent of all the other co-heirs. Since the balance of the full price
has not yet been paid, the amount paid shall represent as payment to his aliquot share. This
then leaves the sale of the lot of the Altamiranos to the Spouses Lajarca valid only insofar as
their shares are concerned, exclusive of the aliquot part of Alejandro, as ruled by the CA. The
Court finds no reversible error with the decision of the CA in all respects.

AMELIA GARCIA-QUIZON, et al. v. MA. LOURDES BELEN, for and in

behalf of MARIA LOURDES ELISE QUIAZON
G.R. No. 189121. July 31, 2013
J. Perez

A void marriage can be questioned even beyond the lifetime of the parties to the
marriage. It must be pointed out that at the time of the celebration of the marriage of Eliseo and
Amelia, the law in effect was the Civil Code, and not the Family Code, making the ruling in Nial
v. Bayadog applicable four-square to the case at hand. In Nial, the Court, in no uncertain
terms, allowed therein petitioners to file a petition for the declaration of nullity of their fathers
marriage to therein respondent after the death of their father, by contradistinguishing void from
voidable marriages.

FACTS:

This case started as a Petition for Letters of Administration of the Estate of Eliseo
Quiazon (Eliseo) , filed by herein respondents who are Eliseos common-law wife and daughter.
The petition was opposed by herein petitioners Amelia Garcia-Quaizon (Amelia) to whom Eliseo
was married. Amelia was joined by her children, Jenneth and Jenifer.

Maria Lourdes Elise Quiazon (Elise), represented by her mother, Ma. Lourdes Belen
(Lourdes), filed a Petition for Letters of Administration before the Regional Trial Court (RTC) of
Las Pias City. She claims that she is the natural child of Eliseo having been conceived and
born at the time when her parents were both capacitated to marry each other. Insisting on the
legal capacity of Eliseo and Lourdes to marry, Elise impugned the validity of Eliseos marriage to
Amelia by claiming that it was bigamous for having been contracted during the subsistence of
the latters marriage with one Filipito Sandico (Filipito). To prove her filiation to the decedent,
Elise, among others, attached to the Petition for Letters of Administration her Certificate of Live
Birth signed by Eliseo as her father.

ISSUE:

Whether the marriage of Amelia to Eliseo was void ab initio.

RULING:

Petitioners contention that the Court of Appeals erred in declaring Amelias marriage to
Eliseo as void ab initio is untenable. In a void marriage, it was though no marriage has taken
place, thus, it cannot be the source of rights. Any interested party may attack the marriage
directly or collaterally. A void marriage can be questioned even beyond the lifetime of the parties
to the marriage. It must be pointed out that at the time of the celebration of the marriage of
Eliseo and Amelia, the law in effect was the Civil Code, and not the Family Code, making the
ruling in Nial v. Bayadog applicable four-square to the case at hand. In Nial, the Court, in no
uncertain terms, allowed therein petitioners to file a petition for the declaration of nullity of their
fathers marriage to therein respondent after the death of their father, by contradistinguishing
void from voidable marriages.

Consequently, void marriages can be questioned even after the death of either party but
voidable marriages can be assailed only during the lifetime of the parties and not after death of
either, in which case the parties and their offspring will be left as if the marriage had been
perfectly valid. That is why the action or defense for nullity is imprescriptible, unlike voidable
marriages where the action prescribes. Only the parties to a voidable marriage can assail it but
any proper interested party may attack a void marriage.

It was emphasized in Nial that in a void marriage, no marriage has taken place and it
cannot be the source of rights, such that any interested party may attack the marriage directly or
collaterally without prescription, which may be filed even beyond the lifetime of the parties to the
marriage.

Relevant to the foregoing, there is no doubt that Elise, whose successional rights would
be prejudiced by her fathers marriage to Amelia, may impugn the existence of such marriage
even after the death of her father. The said marriage may be questioned directly by filing an
action attacking the validity thereof, or collaterally by raising it as an issue in a proceeding for
the settlement of the estate of the deceased spouse, such as in the case at bar. Ineluctably,
Elise, as a compulsory heir, has a cause of action for the declaration of the absolute nullity of
the void marriage of Eliseo and Amelia, and the death of either party to the said marriage does
not extinguish such cause of action.

Having established the right of Elise to impugn Eliseos marriage to Amelia, we now
proceed to determine whether or not the decedents marriage to Amelia is void for being
bigamous. Contrary to the position taken by the petitioners, the existence of a previous marriage
between Amelia and Filipito was sufficiently established by no less than the Certificate of
Marriage issued by the Diocese of Tarlac and signed by the officiating priest of the Parish of San
Nicolas de Tolentino in Capas, Tarlac. The said marriage certificate is a competent evidence of
marriage and the certification from the National Archive that no information relative to the said
marriage exists does not diminish the probative value of the entries therein. We take judicial
notice of the fact that the first marriage was celebrated more than 50 years ago, thus, the
possibility that a record of marriage can no longer be found in the National Archive, given the
interval of time, is not completely remote. Consequently, in the absence of any showing that
such marriage had been dissolved at the time Amelia and Eliseos marriage was solemnized,
the inescapable conclusion is that the latter marriage is bigamous and, therefore, void ab initio.

In the instant case, Elise, as a compulsory heir who stands to be benefited by the
distribution of Eliseos estate, is deemed to be an interested party. With the overwhelming
evidence on record produced by Elise to prove her filiation to Eliseo, the petitioners pounding
on her lack of interest in the administration of the decedents estate, is just a desperate attempt
to sway this Court to reverse the findings of the Court of Appeals. Certainly, the right of Elise to
be appointed administratix of the estate of Eliseo is on good grounds. It is founded on her right
as a compulsory heir, who, under the law, is entitled to her legitimate after the debts of the
estate are satisfied. Having a vested right in the distribution of Eliseos estate as one of his
natural children, Elise can rightfully be considered as an interested party within the purview of
the law.

ROLANDO M. MENDIOLA v. COMMERZ TRADING INT'L., INC.

G.R. No. 200895. July 31, 2013
J. Carpio

Basic is the principle that a contract is the law between the parties, and its stipulations
are binding on them, unless the contract is contrary to law, morals, good customs, public order
or public policy. Indeed, paragraph V of the MOA obligates petitioner to pay the taxes due from
the sale of the Genicon laparoscopic instrument. Petitioner admits that he is the one
"responsible in the payment of the EVAT and not the respondent, who merely acted as the
marketer"of the Genicon laparoscopic instrument. Hence, as between petitioner and
respondent, petitioner bears the burden for the payment of VAT.

FACTS:

Genicon, Inc. (Genicon) is a foreign corporation based in Florida, United States of

America, which designs, produces, and distributes "patented surgical instrumentation focused
exclusively on laparoscopic surgery. Petitioner, a physician by profession, entered into a
contract with Genicon to be its exclusive distributor of Genicon laparoscopic instruments in the
Philippines. Respondent sent a price quotation to Pampanga Medical Specialist Hospital, Inc.
(PMSHI), which thereafter agreed to purchase a Genicon laparoscopic instrument for Two
Million Six Hundred Thousand Pesos (P2,600,000.00). Then, petitioner ordered the
laparoscopic instrument from Genicon, which in turn shipped the medical equipment to the
Philippines. Respondent undertook the release of the laparoscopic instrument from the Bureau
of Customs and subsequently delivered the same to PMSHI.

Respondent remitted to petitioner P2,430,000.00 only, instead of P2,500,000.00. Despite

petitioners repeated demands, respondent failed to remit the remaining balance of P70,000.00
from the proceeds of the sale of the laparoscopic instrument. Consequently, petitioner filed a
collection suit against respondent with the Metropolitan Trial Court, Branch 79, Las Pias City
(MeTC). Respondent countered that petitioner had no cause of action because it did not owe
petitioner any amount. Respondent alleged that the case was a pre-emptive measure taken by
petitioner in anticipation of the collection suit respondent would file for over payment of the
purchase price of the laparoscopic instrument. Respondent claimed that the unremitted amount
of P70,000.00 represented a portion of the P267,857.14 Expanded Value Added Tax (EVAT)
which was erroneously and inadvertently credited or remitted by respondent to petitioners
account.

The MeTC ruled in favor of petitioner. The MeTC held that "respondent has no right to
retain the P70,000.00 x x x. Respondent had been duly compensated for its work done. It is not
its duty to pay any government taxes in whatever form because it is clearly a responsibility of
the buyer." RTC sustained the MeTC, holding that the MOA is the law between the parties.
Under the MOA, "there was no right or authority given to respondent to retain a portion of the
proceeds of any sale coursed through or obtained by it for taxation purposes." CA reversed the
RTCs award of interest and attorneys fees. Hence, this petition.

ISSUE:

Whether respondent has the right to retain the balance of the proceeds of the sale in the
amount of P70,000.00; and whether petitioner is entitled to the award of interest and attorneys
fees.

RULING:
The court denies the petition.

There is no dispute that the P70,000.00 respondent withheld from petitioner formed part
of the proceeds of the sale of the Genicon laparoscopic instrument.

Basic is the principle that a contract is the law between the parties, and its stipulations
are binding on them, unless the contract is contrary to law, morals, good customs, public order
or public policy. Indeed, paragraph V of the MOA obligates petitioner to pay the taxes due from
the sale of the Genicon laparoscopic instrument. Petitioner admits that he is the one
"responsible in the payment of the EVAT and not the respondent, who merely acted as the
marketer"of the Genicon laparoscopic instrument. Hence, as between petitioner and
respondent, petitioner bears the burden for the payment of VAT.

Thus, since respondent, as the seller on record, will be liable for the payment of the VAT
based on the official receipt it issued, we shall allow respondent to retain the P70,000.00 only
for the purpose of paying forthwith, if it has not done so yet, this amount to the BIR as the
estimated tax due on the subject sale. There remains a dispute on the computation of the
correct amount of VAT because respondent allegedly issued an official receipt only in the
amount of P520,000.00, instead of the P2,600,000.00 purchase price. Considering this, and the
foregoing findings, the BIR must be informed of this Decision for its appropriate action.

SALLY YOSHIZAKI v. JOY TRAINING CENTER OF AURORA, INC.

G.R. No. 174978. July 31, 2013
J. Brion

An action to nullify the sale of real properties on the ground that there is no contract of
agency between the parties is cognizable by courts of general jurisdiction. It is beyond the
ambit of SEC's original and exclusive jurisdiction prior to the enactment of RA 8799 which only
took effect August 3, 2000.
 The determination of the existence of a contract of agency and the validity of a contract
of sale requires the application of the relevant provisions of the Civil Code. It is a well-settled
rule that disputes concerning the application of the Civil Code are properly cognizable by courts
of general jurisdiction.

FACTS:

Respondent Joy Training Center of Aurora, Inc. (Joy Training) is a non-stock, non-profit
religious educational institution. It was the registered owner of a parcel of land and the building
thereon (real properties) located in Baler, Aurora. On November 10, 1998, the spouses Richard
and Linda Johnson (members of the BOT) sold the real properties, a Wrangler jeep, and other
personal properties in favor of the spouses Sally and Yoshio Yoshizaki. On the same date, a
Deed of Absolute Sale were executed.

As a consequence of the sale, Joy Training represented by its Acting Chairperson

Reuben V. Rubio filed an action for the Cancellation of Sale and Damages with prayer for the
issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction against the
respondent spouses before the Regional Trial Court of Baler, Aurora (RTC). In the complaint,
Joy Training alleged that the spouses Johnson sold its properties without the requisite authority
from the board of directors. It assailed the validity of a board resolution which purportedly
granted the spouses Johnson the authority to sell its real properties. It averred that only a
minority of the board authorized the sale through the resolution.

The spouses Yoshizaki on the other hand raised as defense that Joy Training authorized
the spouses Johnson to sell the parcel of land; that a majority of the board of trustees approved
the resolution; that Connie Dayot, the corporate secretary, issued a certification authorizing the
spouses Johnson to act on Joy Trainings behalf; and lastly, they assailed the RTCs jurisdiction
over the case. They posited that the case is an intra-corporate dispute cognizable by the
Securities and Exchange Commission (SEC). RTC ruled in favor of spouses Yoshizaki.

Joy Training appealed to the CA. The CA rendered a decision affirming the jurisdiction of
RTC to hear the case since it involves recovery of ownership. However as to the resolution of
the BOT authorizing spouses Johnson it held that it is void because it was not approved by a
majority of the board of trustees. It stated that under Section 25 of the Corporation Code, the
basis for determining the composition of the board of trustees is the list fixed in the articles of
incorporation. Furthermore, Section 23 of the Corporation Code provides that the board of
trustees shall hold office for one year and until their successors are elected and qualified. Seven
trustees constitute the board since Joy Training did not hold an election after its incorporation.

Issues:

1) Whether or not the RTC has jurisdiction over the present case; and
2) Whether or not there was a contract of agency to sell the real properties between Joy
Training and the spouses Johnson.
3) As a consequence of the second issue, whether or not there was a valid contract of
sale of the real properties between Joy Training and the spouses Yoshizaki.

HELD:

As to the issue of contract of agency, the Court ruled in the negative. As a general rule, a
contract of agency may be oral. However, it must be written when the law requires a specific
form. Specifically, Article 1874 of the Civil Code provides that the contract of agency must be
written for the validity of the sale of a piece of land or any interest therein. Otherwise, the sale
shall be void. A related provision, Article 1878 of the Civil Code, states that special powers of
attorney are necessary to convey real rights over immovable properties. Further the special
power of attorney mandated by law must be one that expressly mentions a sale or that includes
a sale as a necessary ingredient of the authorized act. Such power must be must express in
clear and unmistakable language. In the present case, the pieces of documentary evidence
(TCT No. T-25334, the resolution, and the certification) by Sally did not convince the Court as to
the existence of agency. Necessarily, the absence of a contract of agency renders the contract
of sale unenforceable. Joy Training effectively did not enter into a valid contract of sale with the
spouses Yoshizaki.

Finally, the Court reiterated the established principle that persons dealing with an agent
must ascertain not only the fact of agency, but also the nature and extent of the agents
authority. A third person with whom the agent wishes to contract on behalf of the principal may
require the presentation of the power of attorney, or the instructions as regards the agency. The
basis for agency is representation and a person dealing with an agent is put upon inquiry and
must discover on his own peril the authority of the agent. Thus, Sally bought the real properties
at her own risk; she bears the risk of injury occasioned by her transaction with the spouses
Johnson.

AUGUST 2013

SPOUSES CLEMENCIO C. SABITSANA, JR v. JUANITO F. MUERTEGUI, represented

by his Attorney-in-Fact DOMINGO A. MUERTEGUI, JR.,

G.R. No. 181359 August 5, 2013

J. Del Castillo

Both the trial court and the CA are, however, wrong in applying Article 1544 of the
Civil Code. Both courts seem to have forgotten that the provision does not apply to sales
involving unregistered land. Suffice it to state that the issue of the buyers good or bad faith
is relevant only where the subject of the sale is registered land, and the purchaser is buying
the same from the registered owner whose title to the land is clean. In such case, the
purchaser who relies on the clean title of the registered owner is protected if he is a
purchaser in good faith for value. Act No. 3344 applies to sale of unregistered lands. What
applies in this case is Act No. 3344, as amended, which provides for the system of
recording of transactions over unregistered real estate. Act No. 3344 expressly declares that
any registration made shall be without prejudice to a third party with a better right.

FACTS:

Alberto Garcia (Garcia) executed an unnotarized Deed of Sale in favor of respondent

Juanito Muertegui (Juanito) over a parcel of unregistered land (the lot) located in Leyte del
Norte covered by Tax Declaration (TD) No. 1996 issued in 1985 in Garcias name. Juanitos
father Domingo Muertegui, Sr. (Domingo Sr.) and brother Domingo Jr. took actual
possession of the lot and planted thereon coconut and ipil-ipil trees. They also paid the real
property taxes on the lot for the years 1980 up to 1998. Garcia sold the lot to the Muertegui
family lawyer, petitioner Atty. Clemencio C. Sabitsana, Jr. (Atty. Sabitsana), through a
notarized deed of absolute sale. The sale was registered and TD No. 1996 was cancelled
and a new one, TD No. 5327, was issued in Atty. Sabitsanas name. When Domingo Sr.
passed away, his heirs applied for registration and coverage of the lot under the Public Land
Act or Commonwealth Act No. 141.

Atty. Sabitsana opposed the application, claiming that he was the true owner of the
lot. He asked that the application for registration be held in abeyance until the issue of
conflicting ownership has been resolved. Juanito, through his attorney-in-fact Domingo Jr.
filed a case for quieting of title and preliminary injunction, against herein petitioners Atty.
Sabitsana and his wife, Rosario, claiming that they bought the lot in bad faith and are
exercising acts of possession and ownership over the same, which acts thus constitute a
cloud over his title. Petitioners next insist that the lot, being unregistered land, is beyond the
coverage of Article 1544 of the Civil Code, and instead, the provisions of Presidential Decree
(PD) No. 1529 should apply. This being the case, the Deed of Sale in favor of Juanito is
valid only as between him and the seller Garcia, pursuant to Section 113 of PD 1529; 27 it
cannot affect petitioners who are not parties thereto.

ISSUE:

Whether art. 1544 of the civil code instead of the property registration decree (P.D. No.
1529) should have been applied considering that the subject land was unregistered.

RULING:

Both the trial court and the CA are, however, wrong in applying Article 1544 of the
Civil Code. Both courts seem to have forgotten that the provision does not apply to sales
involving unregistered land. Suffice it to state that the issue of the buyers good or bad faith
is relevant only where the subject of the sale is registered land, and the purchaser is buying
the same from the registered owner whose title to the land is clean. In such case, the
purchaser who relies on the clean title of the registered owner is protected if he is a
purchaser in good faith for value. Act No. 3344 applies to sale of unregistered lands. What
applies in this case is Act No. 3344, as amended, which provides for the system of recording
of transactions over unregistered real estate. Act No. 3344 expressly declares that any
registration made shall be without prejudice to a third party with a better right
BOBBY TAN, v. GRACE ANDRADE, ET AL. / GRACE ANDRADE, ET AL. v. BOBBY TAN

G.R. No. 172017 / G.R. No. 171904 August 7, 2013

J. PERLAS-BERNABE

Pertinent to the resolution of this second issue is Article 160 of the Civil Code which
states that all property of the marriage is presumed to belong to the conjugal partnership,
unless it be proved that it pertains exclusively to the husband or to the wife. For this
presumption to apply, the party invoking the same must, however, preliminarily prove that
the property was indeed acquired during the marriage. As held in Go v. Yamane, 489 SCRA
107 (2006): As a condition sine qua non for the operation of Article 160 in favor of the
conjugal partnership, the party who invokes the presumption must first prove that the
property was acquired during the marriage. In other words, the presumption in favor of
conjugality does not operate if there is no showing of when the property alleged to be
conjugal was acquired. Moreover, the presumption may be rebutted only with strong, clear,
categorical and convincing evidence. There must be strict proof of the exclusive ownership
of one of the spouses, and the burden of proof rests upon the party asserting it.

FACTS:

Rosario Vda. De Andrade (Rosario) was the registered owner of four parcels of land
known as Lots 17, 18, 19, and 20 situated in Cebu City (subject properties) which she
mortgaged to and subsequently foreclosed by one Simon Diu (Simon). When the
redemption period was about to expire, Rosario sought the assistance of Bobby Tan (Bobby)
who agreed to redeem the subject properties. Thereafter, Rosario sold the same to Bobby
and her son, Proceso Andrade, Jr. (Proceso, Jr.), for P100,000.00 as evidenced by a Deed
of Absolute Sale dated April 29, 1983 (subject deed of sale). On July 26, 1983, Proceso, Jr.
executed a Deed of Assignment, ceding unto Bobby his rights and interests over the subject
properties in consideration of P50,000.00. The Deed of Assignment was signed by, among
others, Henry Andrade (Henry), one of Rosarios sons, as instrumental witness.

Notwithstanding the aforementioned Deed of Assignment, Bobby extended an Option

to Buy the subject properties in favor of Proceso, Jr., giving the latter until 7:00 in the
evening of July 31, 1984 to purchase the same for the sum of P310,000.00. When Proceso,
Jr. failed to do so, Bobby consolidated his ownership over the subject properties, and the
TCTs therefor were issued in his name. Rosarios children, namely, Grace, Proceso, Jr.,
Henry, Andrew, Glory, Miriam Rose, Joseph (all surnamed Andrade), Jasmin Blaza, and
Charity A. Santiago (Andrades), filed a complaint for reconveyance and annulment of deeds
of conveyance and damages against Bobby before the RTC, docketed as Civil Case No.
CEB 20969. In their complaint, they alleged that the transaction between Rosario and Bobby
(subject transaction) was not one of sale but was actually an equitable mortgage which was
entered into to secure Rosarios indebtedness with Bobby. They also claimed that since the
subject properties were inherited by them from their father, Proceso Andrade, Sr. (Proceso,
Sr.), the subject properties were conjugal in nature, and thus, Rosario had no right to
dispose of their respective shares therein. In this light, they argued that they remained as
co-owners of the subject properties together with Bobby, despite the issuance of the TCTs in
his name. In his defense, Bobby contended that the subject properties were solely owned by
Rosario per the TCTs issued in her name and that he had validly acquired the same upon
Proceso, Jr.s failure to exercise his option to buy back the subject properties. He also
interposed the defenses of prescription and laches against the Andrades.

ISSUE:

Whether or not the subject properties are conjugal in nature.

RULING:

The presumption in favor of conjugality does not operate if there is no showing of

when the property alleged to be conjugal was acquired. Moreover, the presumption may be
rebutted only with strong, clear, categorical and convincing evidence. There must be strict
proof of the exclusive ownership of one of the spouses, and the burden of proof rests upon
the party asserting it. The presumption under Article 160 cannot be made to apply where
there is no showing as to when the property alleged to be conjugal was acquired:

The issuance of the title in the name solely of one spouse is not determinative of the
conjugal nature of the property, since there is no showing that it was acquired during the
marriage of the Spouses Carlos Valdez, Sr. and Josefina L. Valdez. The presumption under
Article 160 of the New Civil Code, that property acquired during marriage is conjugal, does
not apply where there is no showing as to when the property alleged to be conjugal was
acquired. The presumption cannot prevail when the title is in the name of only one spouse
and the rights of innocent third parties are involved. Moreover, when the property is
registered in the name of only one spouse and there is no showing as to when the property
was acquired by same spouse, this is an indication that the property belongs exclusively to
the said spouse.

In this case, there is no evidence to indicate when the property was acquired by
petitioner Josefina. Thus, there is merit in petitioner Josefinas declaration in the deed of
absolute sale she executed in favor of the respondent that she was the absolute and sole
owner of the property.
 NATIONAL HOUSING AUTHORITY v. CORAZON B. BAELLO, ET AL.

G.R. No. 200858 August 7, 2013

J. Carpio

It was already established that the NHA acted in bad faith. The NHA also raised the
same issue in G.R. No. 143230. Having established that the NHA acted in bad faith, the
Court of Appeals did not err in sustaining the award of damages and attorneys fees to
respondents. The issue of reimbursement was also raised in G.R. No. 143230 where the
NHA alleged that the Court of Appeals gravely erred in ruling that it was a builder in bad
faith and therefore, not entitled to reimbursement of the improvement it introduced on the
property. Article 449 of the Civil Code applies in this case. It states: Art. 449. He who builds,
plants or sows in bad faith on the land of another, loses what is built, planted or sown
without right of indemnity. Thus, under Article 449 of the Civil Code, the NHA is not entitled
to be reimbursed of the expenses incurred in the development of respondents property.

FACTS:

On 21 September 1951, Pedro Baello (Pedro) and Nicanora Baello (Nicanora) filed
an application for registration of a parcel of land with the Court of First Instance (CFI) of
Rizal, covering the land they inherited from their mother, Esperanza Baello. The land,
situated in Sitio Talisay, Municipality of Caloocan, had an area of 147,972 square meters.
The case was docketed as LRC Case No. 520. The CFI of Rizal rendered its decision
confirming the title of the applicants to the land in question. The CFI of Rizal awarded the
land to Pedro and Nicanora, pro indiviso. Pedro was awarded 2/3 of the land while Nicanora
was awarded 1/3. The Republic of the Philippines, through the Director of the Bureau of
Lands, did not appeal. The decision became final and executory.

Acting on the orders of the CFI of Rizal, the Land Registration Commission issued
Decree No. 13400 in favor of "Pedro T. Baello, married to Josefa Caia" covering the 2/3
portion of the property and in favor of "Nicanora T. Baello, married to Manuel J. Rodriguez"
covering the remaining 1/3 portion. The Register of Deeds issued Original Certificate of Title
(OCT) No. (804) 53839 in favor of Pedro and Nicanora. The property was later subdivided
into two parcels of land: Pedros lot was Lot A (Baello property), with an area of 98,648
square meters, and covered by TCT No. 181493, while Nicanoras lot was Lot B (Rodriguez
property), with an area of 49,324 square meters. The subdivision plan was approved on 27
July 1971.

On 3 December 1971, Pedro died intestate, leaving 32 surviving heirs including

respondents Corazon B. Baello (Corazon), Wilhelmina Baello-Sotto (Wilhelmina), and
Ernesto B. Baello, Jr. (Ernesto), collectively referred to in this case as respondents. On 22
August 1975, Nicanora died intestate. Nicanoras husband died a few days later, on 30
August 1975.

During the martial law regime, President Ferdinand E. Marcos issued Presidential
Decree No. 569 creating a committee to expropriate the Dagat-Dagatan Lagoon and its
adjacent areas, including the Baello and Rodriguez properties. Thereafter, a truckload of
fully-armed military personnel entered the Baello property and ejected the family caretaker
at gunpoint. The soldiers demolished the two-storey residential structure and destroyed the
fishpond improvements on the Baello property. The NHA then took possession of the Baello
and Rodriguez properties. The Baello and Rodriguez heirs, for fear of losing their lives and
those of their families, decided to remain silent and did not complain. The NHA executed
separate conditional contracts to sell subdivision lots in favor of chosen beneficiaries who
were awarded 620 lots from the Baello property and 275 lots from the Rodriguez property.

On 13 April 1983, Proclamation No. 2284 was issued declaring the Metropolitan
Manila, including the Dagat-Dagatan area, as area for priority development and Urban Land
Reform Zones and the Baello and Rodriguez properties were included in the areas covered
by the proclamation. On 23 February 1987, after the EDSA People Power Revolution, the
heirs of Baello executed an extrajudicial partition of Pedros estate, which included the
Baello property. Respondents were issued TCT No. 280647 over an undivided portion,
comprising 8,404 square meters, of the Baello property. Corazon and Wilhelmina later sold
their shares to Ernesto who was issued TCT No. C-362547 in his name. Meanwhile, during
the pendency of Civil Case No. C-16399, respondents filed an action for Recovery of
Possession and Damages against the NHA and other respondents, NHA countered that
respondents derivative title, was obtained fraudulently because the land covered was
declared alienable and disposable only on 17 January 1986. The case was initially sent to
archives, upon joint motion of the parties, pending resolution by this Court of G.R. No.
143230. Trial resumed upon the denial by this Court of the NHAs petition in G.R. No.
143230.

ISSUE:

Whether or not NHA is a builder in bad faith

RULING:

In determining whether a builder acted in good faith, the rule stated in Article 526 of
the New Civil Code shall apply.

ART. 526. He is deemed a possessor in good faith who is not aware that there exists
in his title or mode of acquisition any flaw which invalidates it.

He is deemed a possessor in bad faith who possesses in any case contrary to the
foregoing.

In this case, no less than the trial court in Civil Case No. C-169 declared that the
petitioner not only acted in bad faith, but also violated the Constitution:

And the Court cannot disregard the fact that despite persistent urging by the
defendants for a negotiated settlement of the properties taken by plaintiff before the present
action was filed, plaintiff failed to give even the remaining UNAWARDED lots for the benefit
of herein defendants who are still the registered owners. Instead, plaintiff opted to
expropriate them after having taken possession of said properties for almost fourteen (14)
years.
 The callous disregard of the Rules and the Constitutional mandate that private
property shall not be taken without just compensation and unless it is for public use, is
UNSURPRISING, considering the catenna of repressive acts and wanton assaults
committed by the Marcos Regime against human rights and the Constitutional rights of the
people which have become a legendary part of history and mankind.

True it is, that the plaintiff may have a laudable purpose in the expropriation of the
land in question, as set forth in the plaintiffs cause of action that "The parcel of land as
described in the paragraph immediately preceding, together with the adjoining areas
encompassed within plaintiffs Dagat-Dagatan Development Project, are designed to be
developed pursuant to the Zonal Improvement Program (ZIP) of the Government, as a site
and services project, a vital component of the Urban III loan package of the International
Bank for Rehabilitation and Development (World Bank), which is envisioned to provide
affordable solution to the urban problems of shelter, environmental sanitation and poverty
and to absorb and ease the impact of immigration from rural areas to over-crowded
population centers of Metro Manila and resident middle income families who do not have
homelots of their own with the Metro Manila area."

The NHA likewise assails the award of damages to respondents. The NHA alleges
that it is not liable for damages because it acted in good faith. The NHA further alleges that,
granting it is liable, it should only be from the time ownership was transferred to
respondents. Further, the NHA claims that it has the right to retain the property until it is
reimbursed of the expenses incurred in its development.

Again, it was already established that the NHA acted in bad faith. The NHA also
raised the same issue in G.R. No. 143230. Having established that the NHA acted in bad
faith, the Court of Appeals did not err in sustaining the award of damages and attorneys
fees to respondents.
 REPUBLIC OF THE PHILIPPINES v. ANGELES BELLATE, ET AL.

G.R. No. 175685 August 7, 2013

J. BRION

Once a patent is registered and the corresponding certificate of title is issued, the
land covered by it ceases to be part of the public domain and becomes private property, and
the Torrens Title issued pursuant to the patent becomes indefeasible upon the expiration of
one year from the date of issuance of such patent. However, as held in The Director of
Lands v. De Luna, et al., 110 Phil. 28 (1960), even after the lapse of one year, the State may
still bring an action under Section 101 of Commonwealth Act No. 141 for the reversion to the
public domain of land which has been fraudulently granted to private individuals. The burden
of proof rests on the party who, as determined by the pleadings or the nature of the case,
asserts the affirmative of an issue. In other words, the Republic has the burden to prove that
Angeles committed fraud in his application for free patent.

FACTS:

Respondent Angeles Bellate filed Free Patent Application (FPA) No. (VIII-2) 8216
over Lot No. 2624, Cad. 422 on December 28, 1975. The lot has an area of 2,630 square
meters and is located in Barangay Matobato, Calbayog City. Pursuant to the FPA, the
Register of Deeds of Calbayog City issued Original Certificate of Title (OCT) No. 1546 on
March 27, 1976 in favor of Angeles.

On February 19, 1980, Enriquita Bellate-Quizan filed a protest against Angeles

before the Land Management Bureau. She prayed for the annulment of the FPA in favor of
Angeles. She said that the FPA was obtained through fraud and misrepresentation because
Angeles did not state the fact that the land had other occupants aside from him.

Meanwhile, Lot No. 2624 was divided into two smaller lots respectively. Respondent
Jesus Cabanto bought the smaller lot (Lot No. 2624-B) from Angeles. This led to the
cancellation of OCT No. 1546, and the issuance of Transfer Certificate of Title (TCT) No.
770 for Lot No. 2624-A, in the name of Angeles, and TCT No. 771 for Lot No. 2624-B, in the
name of Cabanto.

The Republic, through the Office of the Solicitor General, filed a case against
Angeles and spouses Cabanto and Marieta Juanerio (Juanerio) for the reversion of land to
the mass of public domain and for the annulment of the granted free patent alleging that
Angeles committed fraud and misrepresentation in securing his free patent when he stated
under oath that Lot No. 2624 was not occupied by any other person, contrary to the
investigation report.

ISSUE:
Whether or not the respondent committed fraud or misrepresentation of facts which would
warrant the cancelation of the free patent and certificate of title of the contested land

RULING:

The respondent did not commit fraud or misrepresentation of facts which would
warrant the cancellation of the free patent and certificate of title.

The certificate of title issued pursuant to any grant or patent involving public lands is
as conclusive and indefeasible as any other certificate of title issued to private lands in the
ordinary or cadastral registration proceedings. It is not subject to collateral attack. Though
the certificate of title is conclusive and indefeasible, however, Section 91 of Commonwealth
Act No. 141 (The Public Land Act) provides for the cancellation of the concession, title or
permit granted for any false statement in the application or omission of facts in the
application.

Once a patent is registered and the corresponding certificate of title is issued, the
land covered by it ceases to be part of the public domain and becomes private property, and
the Torrens Title issued pursuant to the patent becomes indefeasible upon the expiration of
one year from the date of issuance of such patent. However, as held in The Director of
Lands v. De Luna, et al., even after the lapse of one year, the State may still bring an action
under Section 101 of Commonwealth Act No. 141 for the reversion to the public domain of
land which has been fraudulently granted to private individuals. The burden of proof rests on
the party who, as determined by the pleadings or the nature of the case, asserts the
affirmative of an issue. In other words, the Republic has the burden to prove that Angeles
committed fraud in his application for free patent.
 COMSAVINGS BANK (NOW GSIS FAMILY BANK) v. SPOUSES DANILO AND
ESTRELLA CAPISTRANO

G.R. No. 170942, August 28, 2013

BERSAMIN, J.

A banking institution serving as an originating bank for the Unified Home Lending
Program (UHLP) of the Government owes a duty to observe the highest degree of diligence
and a high standard of integrity and performance in all its transactions with its clients
because its business is imbued with public interest.

FACTS:

Respondents were the owners of a residential lot situated in Bacoor, Cavite.

Desirous of building their own house on the lot, they availed themselves of the UHLP
implemented by the National Home Mortgage Finance Corporation (NHMFC). They
executed a construction contract with Carmencita Cruz-Bay, the proprietor of GCB Builders,
for the total contract price of P265,000.00 with the latter undertaking to complete the
construction within 75 days. To finance the construction, GCB Builders facilitated their loan
application with Comsavings Bank, an NHFMC-accredited originator. Thereafter,
respondents executed in favor of GCB Builders a deed of assignment of the amount of
the P300,000.00 proceeds of the loan from Comsavings Bank.

Comsavings Bank informed respondent Estrella Capistrano that she would have to
sign various documents as part of the requirements for the release of the loan. Among the
documents was a certificate of house completion and acceptance. On the same date,
Comsavings Bank handed Estrella a letter addressed to GCB Builders informing the latter
that respondents had complied with the preliminary requirements of the UHLP, and were
qualified to avail themselves of the loan amounting to P303,450.00 payable within 25 years
at 16% per annum, subject to the following terms and conditions, namely: the signing of
mortgage documents, 100% completion of the construction of the housing unit, original
certificate of occupancy permit and certification of completion, and submission of house
pictures signed by the borrower at the back.

Comsavings Bank informed respondents of the approval of an interim financing loan

ofP260,000.00 payable within 180 days, which amount was to be paid out of the proceeds of
the loan from NHMFC. GCB Builders thereafter received from Comsavings Bank the total
sum of P265,000.00 as construction cost in four releases.

After Comsavings Bank had released the total of P265,000.00 to GCB Builders as
construction cost, respondents inquired from GCB Builder when their house would be
completed considering that their contract stipulated a completion period of 75 days. Cruz-
Bay gave various excuses for the delay, such as the rainy season, but promised to finish the
construction as soon as possible. Year has ended with the construction of the house
unfinished.
 Respondents demanded the completion of the house. In reply, Cruz-Bay told them to
give the further amount of P25,000.00 to finish the construction. They requested a
breakdown of the amounts already spent in the construction considering that
the P303,450.00 that Comsavings Bank had been paid by NHMFC on their loan had been
more than the contract price of the contract. Instead of furnishing them the requested
breakdown, GCB Builders counsel sent a demand letter for an additional construction cost
of P52, 511.59.

Respondents received a letter from NHMFC advising that they should already start
paying their monthly amortizations of P4,278.00 because their loan had been released
directly to Comsavings Bank. Estrella Capistrano went to the construction site and found to
her dismay that the house was still unfinished. Respondents wrote to NHMFC protesting the
demand for amortization payments considering that they had not signed any certification of
completion and acceptance, and that even if there was such a certification of completion
and acceptance, it would have been forged.

Respondents sued GCB Builders and Comsavings Bank for breach of contract and
damages. They further amended their complaint to implead NHMFC as ab additional
defendant. The RTC rendered a decision in favor of respondents. Specifically, it found that
although the proceeds of the loan had been completely released, the construction of the
house of respondents remained not completed; that the house had remained in the
possession of GCB Builders, which had meanwhile leased it to another person; that GCB
Builders did not comply with the terms and conditions of the construction contract; and that
NHMFC approved the loan in the gross amount of P303,450.00, and released P289,000.00
of that amount to Comsavings Bank. It concluded that respondents were entitled to recover
from all defendants actual damages of P25,000.00; moral damages for their mental anguish
and sleepless night in the amount of P200,000.00; exemplary damages of P100,000.00;
and P30,000.00 as attorneys fees. It ruled, however, that only GCB Builders was liable for
the monthly rental of P4,500.00 because GCB Builders was alone in renting out the house;
and that NHMFC was equally liable with the other defendants by reason of its having
released the loan proceeds to Comsavings Bank without verifying whether the construction
had already been completed, thereby indicating that NHMFC had connived and
confederated with its co-defendants in the irregular release of the loan proceeds to
Comsavings Bank.

GCB Builders, Comsavings Bank and NHMFC appealed to the CA. The CA
promulgated the appealed decision affirming the RTC subject to the modification that
NHMFC was absolved of liability, and that the moral and exemplary damages were reduced.
Hence, this further appeal by Comsavings Bank.

ISSUE:

Whether the CA erred in finding petitioner bank jointly and severally liable with GCB Builders
to pay respondent actual, moral and exemplary damages, as well as attorneys fees.

RULING:

The petition is denied.

 Comsaving Banks liability was not based on its purchase of loan agreement with
NHMFC but on Article 20 and Article 1170 of the Civil Code

Article 20. Every person who, contrary to law, willfully or negligently causes
damage to another, shall indemnify the latter for the same.

Article 1170. 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.

Based on the provisions, a banking institution like Comsavings Bank is obliged to

exercise the highest degree of diligence as well as high standards of integrity and
performance in all its transactions because its business is imbued with public interest.

Gross negligence connotes want of care in the performance of ones duties; it is a

negligence characterized by the want of even slight care, acting or omitting to act in a
situation where there is duty to act, not inadvertently but willfully and intentionally, with a
conscious indifference to consequences insofar as other persons may be affected. It evinces
a thoughtless disregard of consequences without exerting any effort to avoid them.

There is no question that Comsavings Bank was grossly negligent in its dealings with
respondents because it did not comply with its legal obligation to exercise the required
diligence and integrity. As a banking institution serving as an originator under the UHLP and
being the maker of the certificate of acceptance/completion, it was fully aware that the
purpose of the signed certificate was to affirm that the house had been completely
constructed according to the approved plans and specifications, and that respondents had
thereby accepted the delivery of the complete house.

Given the purpose of the certificate, it should have desisted from presenting the
certificate to respondents for their signature without such conditions having been fulfilled.
Yet, it made respondents sign the certificate (through Estrella Capistrano, both in her
personal capacity and as the attorney-in-fact of her husband Danilo Capistrano) despite the
construction of the house not yet even starting. Its act was irregular per se because it
contravened the purpose of the certificate. Worse, the pre-signing of the certificate was
fraudulent because it was thereby enabled to gain in the process the amount of P17,306.83
in the form of several deductions from the proceeds of the loan on top of other benefits as
an originator bank. On the other hand, respondents were prejudiced, considering that the
construction of the house was then still incomplete and was ultimately defective.
Compounding their plight was that NHMFC demanded payment of their monthly
amortizations despite the non-completion of the house. Had Comsavings Bank been fair
towards them as its clients, it should not have made them pre-sign the certificate until it had
confirmed that the construction of the house had been completed.

As to the damages that should be awarded to respondents, moral and exemplary

damages were warranted.

Under Article 2219 of the Civil Code, moral damages may be recovered for the acts
or actions referred to in Article 20 of the Civil Code. Moral damages are meant to
compensate the claimant for any physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation and similar
injuries unjustly caused.

In their amended complaint, respondents claimed that the acts of GCB Builders and
Comsavings Bank had caused them to suffer sleepless nights, worries and anxieties. The
claim was well founded. Danilo worked in Saudi Arabia in order to pay the loan used for the
construction of their family home. His anxiety and anguish over the incomplete and defective
construction of their house, as well as the inconvenience he and his wife experienced
because of this suit were not easily probable.The award of moral damages of P100,000.00
awarded by the CA as exemplary damages is proper.

With respect to exemplary damages, the amount of P50,000.00 awarded by the CA.

However, the award of actual damages amounting to P25,000.00 is not warranted.

To justify an award for actual damages, there must be competent proof of the actual amount
of loss. Credence can be given only to claims duly supported by receipts. Respondents did
not submit any documentary proof, like receipts, to support their claim for actual damages.

Nonetheless, it cannot be denied that they had suffered substantial losses. Article
2224 of the Civil Code allows the recovery of temperate damages when the court finds that
some pecuniary loss was suffered but its amount cannot be proved with certainty. In lieu of
actual damages, therefore, temperate damages of P25,000.00 are awarded. Such amount,
in our view, is reasonable under the circumstances.

Article 2208 of the Civil Code allows recovery of attorneys fees when exemplary
damages are awarded or where the plaintiff has incurred expenses to protect his interest by
reason of defendants act or omission. Considering that exemplary damages were properly
awarded here, and that respondents hired a private lawyer to litigate its cause, we agree
with the RTC and CA that the P30,000.00 allowed as attorneys fees were appropriate and
reasonable.
 ADELAIDA SORIANO v. PEOPLE OF THE PHILIPPINES

G.R. No. 181692, August 14, 2013

J. VILLARAMA, JR.

Compensation is a mode of extinguishing to the concurrent amount, the debts of

persons who in their own right are creditors and debtors of each other. The object of
compensation is the prevention of unnecessary suits and payments through the mutual
extinction by operation of law of concurring debts.

FACTS:

Evelyn Alagao, daughter of private complainant Consolacion Alagao (Alagao), as

borrower-mortgagor, executed a "Contract of Loan Secured by Real Estate Mortgage with
Special Power to Sell Mortgage Property without Judicial Proceedings" in favor of petitioner as
lender-mortgagee. The instrument provides for a P40,000 loan secured by a parcel of land
registered in Evelyns name. It likewise provides that the loan was to be paid two years from the
date of execution of the contract and that Evelyn agrees to give petitioner of every harvest
from her corn land until the full amount of the loan has been paid, starting from the first harvest.
It was admitted by Alagao that she did not only receive P40,000 as provided in the contract of
loan but P51,730 in the form of fertilizers and cash advances.

Thereafter, Alagao and some companions delivered 398 sacks of corn grains to
petitioner. Petitioner prepared a voucher indicating that Alagao had received the amount
of P85,607 as full payment for the 398 sacks of corn grains. Alagao signed said voucher even if
she only received P3,000. According to Alagao, 64 of the 398 sacks will serve as partial
payment of her P40,000 loan with petitioner while the remaining balance will come from
the P85,607 cash she was supposed to receive as payment for the corn grains delivered so she
can redeem her daughters land title.

The Regional Trial Court rendered a decision finding petitioner guilty beyond reasonable
doubt of the crime of estafa. Petitioners conviction, however, was set aside by the CA. The CA
ruled that the prosecution failed to establish that petitioner made false pretenses, fraudulent
acts or fraudulent means to induce Alagao to deliver to her the 398 sacks of corn grains. In fact,
in Alagaos testimony, she admitted that she delivered the corn grains to petitioner because the
latter was demanding payment from her and she wanted to pay her obligation of P40,000 to
petitioner so that she could get back the title of her daughters mortgaged property and the
balance of the total cash value of the 398 sacks of corn. Thus, the CA heId. in the absence of
deceit, petitioners liability is only civil.

Unsatisfied, petitioner is now before this Court questioning her civil liability.

ISSUE:
Whether the Court of Appeals committed error in the computation of petitioners civil liability as it
failed to apply correctly the principle of set-off or compensation.

RULING:

The petition is granted.

 Compensation is a mode of extinguishing to the concurrent amount, the debts of
persons who in their own right are creditors and debtors of each other. The object of
compensation is the prevention of unnecessary suits and payments through the mutual
extinction by operation of law of concurring debts. Article 1279 of the Civil Code provides for the
requisites for compensation to take effect:

ART. 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same
time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable,
they be of the same kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by
third persons and communicated in due time to the debtor.

This Court rules that all the above requisites for compensation are present in the instant
case.First, petitioner and Alagao are debtors and creditors of each other. It is undisputable that
petitioner and Alagao owe each other sums of money. Petitioner owes P85,607 for the value of
the corn grains delivered to her by Alagao in September 1994 while Alagao owes
petitioner P51,730 by virtue of a loan extended by the latter in February 1994.

Second, both debts consist in a sum of money. There is no issue as to the P85,607 debt
by petitioner that it consists a sum of money. As to the P51,730 received by Alagao from
petitioner, though what was extended by petitioner consists of cash advances and fertilizers,
there is no dispute that said amount is payable in money.

Third, both debts are due. Upon delivery of the 398 sacks to petitioner, she was under
the obligation to pay for the value thereof as buyer. As to Alagaos debt, the contract of loan
provided that it is payable in February 1996. Though it was not yet due in September 1994
when she delivered the 398 sacks of corn grains to petitioner, it eventually became due at the
time of trial of the instant case.

Fourth, both debts are liquidated and demandable.1wphi1 A debt is liquidated when the
amount is known or is determinable by inspection of the terms and conditions of relevant
documents. There is no dispute that the value of the 398 sacks of corn grains is P85,607. As to
Alagaos debt, we disagree with respondent People that the loan amount is only P40,000 since
during pre-trial, Alagao herself admitted that she did not only receiveP40,000 but P51,730 in the
form of cash advances and fertilizers from petitioner. It is well settled that an admission made in
a stipulation of facts at pre-trial by the parties is considered a judicial admission and, under the
Rules of Court, requires no proof. Such admission may be controverted only by a showing that it
was made through a palpable mistake or that no such admission was made.

And lastly, neither of the debts are subject of a controversy commenced by a third
person. There are no third-party claims with respect to Alagaos P51,730 loan. As to
petitioners P85,607 debt representing the 398 sacks of corn grains, Alagao claims that she is
not the sole owner of all the 398 sacks. This claim of Alagao, however, was never substantiated
and a perusal of the information for estafa shows that the subject corn grains are all owned by
her. Moreover, the alleged other owners have not commenced any action to protect their claim
over it. Thus, theP85, 607 debt cannot be considered subject of a controversy by a third person.
 With the presence of all the requisites mentioned in Article 1279, legal compensation
took effect by operation of law as provided in Article 1290 of the Civil Code, to wit:

ART. 1290. When all the requisites mentioned in Article 1279 are present, compensation
takes effect by operation of law, and extinguishes both debts to the concurrent amount, even
though the creditors and debtors are not aware of the compensation.

DARIO NACAR, v. GALLERY FRAMES AND/OR FELIPE BORDEY, JR.,

G.R. No. 189871, August 13, 2013
J. Peralta

In the absence of an express stipulation as to the rate of interest that would govern the
parties, the rate of legal interest for loans or forbearance of any money, goods or credits and the
rate allowed in judgments shall no longer be twelve percent (12%) per annum but will now be
six percent (6%) per annum effective July 1, 2013.
FACTS:
Petitioner Dario Nacar filed a complaint for constructive dismissal before the Arbitration
Branch of the NLRC against respondents Gallery Frames (GF) and/or Felipe Bordey, Jr.

The Labor Arbiter rendered a Decision dated October 15, 1998 in favor of petitioner and
found that he was dismissed from employment without a valid or just cause. Thus, petitioner
was awarded backwages and separation pay in lieu of reinstatement in the amount
of P158,919.92.

Respondents appealed to the NLRC, but it was dismissed for lack of merit. Accordingly,
the NLRC sustained the decision of the Labor Arbiter. Respondents filed a motion for
reconsideration, but it was denied. Dissatisfied, respondents filed a Petition for Review on
Certiorari before the CA. The CA issued a Resolution dismissing the petition. Respondents filed
a Motion for Reconsideration, but it was likewise denied.Respondents then sought relief before
the Supreme Court. Finding no reversible error on the part of the CA, the SC denied the petition.

An Entry of Judgment was later issued certifying that the resolution became final and
executory. The case was, thereafter, referred back to the Labor Arbiter.

Petitioner filed a Motion for Correct Computation, praying that his backwages be
computed from the date of his dismissal up to the finality of the Resolution of the Supreme
Court. Upon recomputation, the Computation and Examination Unit of the NLRC arrived at an
updated amount in the sum of P471,320.31.

Thereafter, a Writ of Execution was issued by the Labor Arbiter ordering the Sheriff to
collect from respondents the total amount of P471,320.31. Respondents filed a Motion to Quash
Writ of Execution, arguing, among other things, that since the Labor Arbiter awarded separation
pay of P62,986.56 and limited backwages ofP95,933.36, no more recomputation is required to
be made of the said awards. They claimed that after the decision becomes final and executory,
the same cannot be altered or amended anymore. The Labor Arbiter issued an Order denying
the motion. Thus, an Alias Writ of Execution was issued.

Respondents again appealed before the NLRC, the latter granted the appeal in favor of
the respondents and ordered the recomputation of the judgment award. On August 20, 2003, an
Entry of Judgment was issued declaring the Resolution of the NLRC to be final and executory.
Consequently, another pre-execution conference was held, but respondents failed to appear on
time. Meanwhile, petitioner moved that an Alias Writ of Execution be issued to enforce the
earlier recomputed judgment award in the sum of P471,320.31.

The records of the case were again forwarded to the Computation and Examination Unit
for recomputation, where the judgment award of petitioner was reassessed to be in the total
amount of only P147,560.19. Petitioner then moved that a writ of execution be issued ordering
respondents to pay him the original amount as determined by the Labor Arbiter, pending the
final computation of his backwages and separation pay. The Labor Arbiter issued an Alias Writ
of Execution to satisfy the judgment award that was due to petitioner in the amount
of P147,560.19, which petitioner eventually received.

Petitioner then filed a Manifestation and Motion praying for the re-computation of the
monetary award to include the appropriate interests. The Labor Arbiter issued an Order granting
the motion, but only up to the amount ofP11,459.73. The Labor Arbiter reasoned that it is the
first Decision that should be enforced considering that it was the one that became final and
executory. However, the Labor Arbiter reasoned that since the decision states that the
separation pay and backwages are computed only up to the promulgation of the said decision, it
is the amount of P158,919.92 that should be executed. Thus, since petitioner already
receivedP147,560.19, he is only entitled to the balance of P11,459.73.

Petitioner then appealed before the NLRC, which appeal was denied by the NLRC.
Petitioner filed a Motion for Reconsideration, but it was likewise denied. Aggrieved, petitioner
then sought recourse before the CA. The CA rendered a Decision denying the petition. The CA
opined that since petitioner no longer appealed the October 15, 1998 Decision of the Labor
Arbiter, which already became final and executory, a belated correction thereof is no longer
allowed. The CA stated that there is nothing left to be done except to enforce the said judgment.
Consequently, it can no longer be modified in any respect, except to correct clerical errors or
mistakes.

Petitioner filed a Motion for Reconsideration, but it was denied. Hence, the petition.

ISSUE:
Whether the reckoning point for the computation of the backwages and separation pay
should be on May 27, 2002 or when the Resolution of the SC was entered in the Book of Entries
and not when the decision of the Labor Arbiter was rendered on October 15, 1998.

RULING:
The petition is granted.

There was no error in the CA decision confirming that a re-computation is necessary as

it essentially considered the labor arbiter's original decision. Under the terms of the decision
which is sought to be executed by the petitioner, no essential change is made by a
recomputation as this step is a necessary consequence that flows from the nature of the
illegality of dismissal declared by the Labor Arbiter in that decision. A recomputation is a part of
the law specifically, Article 279 of the Labor Code and the established jurisprudence on this
provision that is read into the decision. By the nature of an illegal dismissal case, the reliefs
continue to add up until full satisfaction, as expressed under Article 279 of the Labor Code. The
recomputation of the consequences of illegal dismissal upon execution of the decision does not
constitute an alteration or amendment of the final decision being implemented. The illegal
dismissal ruling stands; only the computation of monetary consequences of this dismissal is
affected, and this is not a violation of the principle of immutability of final judgments.
 That the amount respondents shall now pay has greatly increased is a consequence that
it cannot avoid as it is the risk that it ran when it continued to seek recourses against the Labor
Arbiter's decision. Article 279 provides for the consequences of illegal dismissal in no uncertain
terms, qualified only by jurisprudence in its interpretation of when separation pay in lieu of
reinstatement is allowed. When that happens, the finality of the illegal dismissal decision
becomes the reckoning point instead of the reinstatement that the law decrees. In allowing
separation pay, the final decision effectively declares that the employment relationship ended so
that separation pay and backwages are to be computed up to that point.

Finally, anent the payment of legal interest.

Recently, the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), in its Resolution
No. 796 dated May 16, 2013, approved the amendment of Section 2 of Circular No. 905, Series
of 1982 and, accordingly, issued Circular No. 799, Series of 2013, effective July 1, 2013, the
pertinent portion of which reads:

The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the
following revisions governing the rate of interest in the absence of stipulation in loan
contracts, thereby amending Section 2 of Circular No. 905, Series of 1982:

Section 1. The rate of interest for the loan or forbearance of any money, goods or
credits and the rate allowed in judgments, in the absence of an express contract as to
such rate of interest, shall be six percent (6%) per annum.

Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations

for Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of the Manual of Regulations for
Non-Bank Financial Institutions are hereby amended accordingly.

Thus, from the foregoing, in the absence of an express stipulation as to the rate of
interest that would govern the parties, the rate of legal interest for loans or forbearance of any
money, goods or credits and the rate allowed in judgments shall no longer be twelve percent
(12%) per annum - as reflected in the case of Eastern Shipping Lines - but will now be six
percent (6%) per annum effective July 1, 2013. It should be noted, nonetheless, that the new
rate could only be applied prospectively and not retroactively. Consequently, the twelve percent
(12%) per annum legal interest shall apply only until June 30, 2013. Come July 1, 2013 the new
rate of six percent (6%) per annum shall be the prevailing rate of interest when applicable.

Nonetheless, with regard to those judgments that have become final and executory prior
to July 1, 2013, said judgments shall not be disturbed and shall continue to be implemented
applying the rate of interest fixed therein.

To recapitulate and for future guidance, the guidelines laid down in the case of Eastern
Shipping Lines are accordingly modified to embody BSP-MB Circular No. 799, as follows:

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.1wphi1
 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:

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 6% 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.

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 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.

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 6% per annum from such finality until its satisfaction, this interim period being deemed to be
by then an equivalent to a forbearance of credit.

ANTIPOLO INING (DECEASED), SURVIVED BY MANUEL VILLANUEVA ET. AL. v.

LEONARDO R. VEGA ET. AL

G.R. No. 174727, August 12, 2013

J. DEL CASTILLO

A co-owner cannot acquire by prescription the share of the other co-owners, absent
any clear repudiation of the co-ownership. In order that the title may prescribe in favor of a
co-owner, the following requisites must concur: (1) the co-owner has performed unequivocal
acts of repudiation amounting to an ouster of the other co-owners; (2) such positive acts of
repudiation have been made known to the other co-owners; and (3) the evidence thereof is
clear and convincing.

FACTS:

Leon Roldan (Leon), married to Rafaela Menez (Rafaela), is the owner of a 3,120-
square meter parcel of land in Kalibo, Aklan. Leon and Rafaela died without issue. Leon was
survived by his siblings Romana Roldan (Romana) and Gregoria Roldan Ining (Gregoria),
who are now both deceased.

Romana was survived by her daughter Anunciacion Vega and grandson, herein
respondent Leonardo R. Vega (Leonardo) (also both deceased). Leonardo in turn is
survived by his wife Lourdes and children Restonilo I. Vega, Crispulo M. Vega, Milbuena
Vega-Restituto and Lenard Vega, the substituted respondents.

Herein petitioners, except for Ramon Tresvalles (Tresvalles) and Roberto Tajonera
(Tajonera), are Gregorias grandchildren or spouses thereof (Gregorias heirs).

In 1997, acting on the claim that one-half of subject property belonged to him as
Romanas surviving heir, Leonardo filed with the Regional Trial Court (RTC) of Kalibo, Aklan
Civil Case for partition, recovery of ownership and possession, with damages, against
Gregorias heirs.

During the course of the proceedings, the following additional relevant facts came to
light:

1. In 1995, Leonardo filed against petitioners Civil Case No. 4983 for partition with the
RTC Kalibo, but the case was dismissed and referred to the Kalibo Municipal Trial Court
(MTC), where the case was docketed as Civil Case No. 1366. However, on March 4,
1997, the MTC dismissed Civil Case No. 1366 for lack of jurisdiction and declared that
only the RTC can take cognizance of the partition case;

2. The property was allegedly sold by Leon to Enriquez through an unnotarized

document dated April 4, 1943. Enriquez in turn allegedly sold the property to Lucimo Sr.
on November 25, 1943 via another private sale document;

3. Petitioners were in sole possession of the property for more than 30 years, while
Leonardo acquired custody of OCT RO-630;

4. On February 9, 1979, Lucimo Sr. executed an Affidavit of Ownership of Land claiming

sole ownership of the property which he utilized to secure in his name Tax Declaration
No. 16414 (TD 16414) over the property and to cancel Tax Declaration No. 20102 in
Leons name;

5. Lucimo Sr. died in 1991; and

6. The property was partitioned among the petitioners, to the exclusion of Leonardo.

The trial court rendered a Decision dismissing the complaint on the ground that
plaintiffs right of action has long prescribed under Article 1141 of the New Civil Code.

The trial court found the April 4, 1943 and November 25, 1943 deeds of sale to be
spurious. It concluded that Leon never sold the property to Enriquez, and in turn, Enriquez
never sold the property to Lucimo Sr., hence, the subject property remained part of Leons
estate at the time of his death in 1962. Leons siblings, Romana and Gregoria, thus inherited
the subject property in equal shares. Leonardo and the respondents are entitled to
Romanas share as the latters successors.

However, the trial court held that Leonardo had only 30 years from Leons death in
1962 or up to 1992 within which to file the partition case. Since Leonardo instituted the
partition suit only in 1997, the same was already barred by prescription. It held that under
Article 1141 of the Civil Code, an action for partition and recovery of ownership and
possession of a parcel of land is a real action over immovable property which prescribes in
30 years. In addition, the trial court held that for his long inaction, Leonardo was guilty of
laches as well. Consequently, the property should go to Gregorias heirs exclusively.

Respondents moved for reconsideration but the same was denied. Only respondents
interposed an appeal with the CA. The CA issued the questioned Decision reversing and
setting aside the RTCs decision. Petitioners filed their Motion for Reconsideration which the
CA denied. Hence, the present Petition.

ISSUE:

Whether the appellate court erred in not upholding the decision of the trial court dismissing
the complaint on the ground of prescription and laches.

RULING:

The petition is denied.

The finding that Leon did not sell the property to Lucimo Sr. had long been settled
and had become final for failure of petitioners to appeal. Thus, the property remained part of
Leons estate.

One issue submitted for resolution by the parties to the trial court is whether Leon
sold the property to Lucimo Sr. The trial court, examining the two deeds of sale executed in
favor of Enriquez and Lucimo Sr., found them to be spurious. It then concluded that no such
sale from Leon to Lucimo Sr. ever took place. Despite this finding, petitioners did not appeal.
Consequently, any doubts regarding this matter should be considered settled. Thus,
petitioners insistence on Lucimo Sr.s 1943 purchase of the property to reinforce their claim
over the property must be ignored. Since no transfer from Leon to Lucimo Sr. took place, the
subject property clearly remained part of Leons estate upon his passing in 1962.

Leon died without issue; his heirs are his siblings Romana and Gregoria.

Since Leon died without issue, his heirs are his siblings, Romana and Gregoria, who
thus inherited the property in equal shares. In turn, Romanas and Gregorias heirs the
parties herein became entitled to the property upon the sisters passing. Under Article 777
of the Civil Code, the rights to the succession are transmitted from the moment of death.

Gregorias and Romanas heirs are co-owners of the subject property.

Thus, having succeeded to the property as heirs of Gregoria and Romana,

petitioners and respondents became co-owners thereof. As co-owners, they may use the
property owned in common, provided they do so in accordance with the purpose for which it
is intended and in such a way as not to injure the interest of the co-ownership or prevent the
other co-owners from using it according to their rights. They have the full ownership of their
parts and of the fruits and benefits pertaining thereto, and may alienate, assign or mortgage
them, and even substitute another person in their enjoyment, except when personal rights
are involved. Each co-owner may demand at any time the partition of the thing owned in
common, insofar as his share is concerned. Finally, no prescription shall run in favor of one
of the co-heirs against the others so long as he expressly or impliedly recognizes the co-
ownership.

For prescription to set in, the repudiation must be done by a co-owner.

Time and again, it has been held that "a co-owner cannot acquire by prescription the
share of the other co-owners, absent any clear repudiation of the co-ownership. In order that
the title may prescribe in favor of a co-owner, the following requisites must concur: (1) the
co-owner has performed unequivocal acts of repudiation amounting to an ouster of the other
co-owners; (2) such positive acts of repudiation have been made known to the other co-
owners; and (3) the evidence thereof is clear and convincing."

From the foregoing pronouncements, it is clear that the trial court erred in reckoning
the prescriptive period within which Leonardo may seek partition from the death of Leon in
1962. Article 1141 and Article 494 (fifth paragraph) provide that prescription shall begin to
run in favor of a co-owner and against the other co-owners only from the time he positively
renounces the co-ownership and makes known his repudiation to the other co-owners.

Lucimo Sr. challenged Leonardos co-ownership of the property only sometime in

1979 and 1980, when the former executed the Affidavit of Ownership of Land, obtained a
new tax declaration exclusively in his name, and informed the latter before the Lupon
Tagapamayapa of his 1943 purchase of the property. These apparent acts of repudiation
were followed later on by Lucimo Sr.s act of withholding Leonardos share in the fruits of the
property, beginning in 1988, as Leonardo himself claims in his Amended Complaint.
Considering these facts, the CA held that prescription began to run against Leonardo only in
1979 or even in 1980 when it has been made sufficiently clear to him that Lucimo Sr. has
renounced the co-ownership and has claimed sole ownership over the property. The CA
thus concluded that the filing of Civil Case No. 5275 in 1997, or just under 20 years counted
from 1979, is clearly within the period prescribed under Article 1141.

What escaped the trial and appellate courts notice, however, is that while it may be
argued that Lucimo Sr. performed acts that may be characterized as a repudiation of the co-
ownership, the fact is, he is not a co-owner of the property. Indeed, he is not an heir of
Gregoria; he is merely Antipolos son-in-law, being married to Antipolos daughter
Teodora. Under the Family Code, family relations, which is the primary basis for succession,
exclude relations by affinity.

Art. 150. Family relations include those:

(1) Between husband and wife;

(2) Between parents and children;

 (3) Among other ascendants and descendants; and

(4) Among brothers and sisters, whether of the full or half blood.

In point of law, therefore, Lucimo Sr. is not a co-owner of the property; Teodora is.
Consequently, he cannot validly effect a repudiation of the co-ownership, which he was
never part of. For this reason, prescription did not run adversely against Leonardo, and his
right to seek a partition of the property has not been lost.

Likewise, petitioners argument that Leonardos admission and acknowledgment in

his pleadings that Lucimo Sr. was in possession of the property since 1943 should be
taken against him, is unavailing. In 1943, Leon remained the rightful owner of the land, and
Lucimo Sr. knew this very well, being married to Teodora, daughter of Antipolo, a nephew of
Leon. More significantly, the property, which is registered under the Torrens system and
covered by OCT RO-630, is in Leons name. Leons ownership ceased only in 1962, upon
his death when the property passed on to his heirs by operation of law.

In fine, since none of the co-owners made a valid repudiation of the existing co-
ownership, Leonardo could seek partition of the property at any time.

SEPTEMBER 2013

HEIRS OF MARIO MALABANAN v. REPUBLIC OF THE PHILIPPINES

G.R. No. 179987, September 3, 2013
J. Bersamin

The petitioners failed to present sufficient evidence to establish that they and their
predecessors-in-interest had been in possession of the land since June 12, 1945. Without
satisfying the requisite character and period of possession - possession and occupation that is
open, continuous, exclusive, and notorious since June 12, 1945, or earlier - the land cannot be
considered ipso jure converted to private property even upon the subsequent declaration of it as
alienable and disposable. Prescription never began to run against the State, such that the land
has remained ineligible for registration and continues to be ineligible for land registration unless
Congress enacts a law or the President issues a proclamation declaring the land as no longer
intended for public service or for the development of the national wealth.1wphi1

FACTS:

Malabanan, who had purchased the subject property from Velazco, filed an application
for land registration. After trial, the RTC rendered judgment granting Malabanans application for
land registration. The CA reversed the RTC and dismissed the application. On appeal, the SC
affirmed the CA ruling because Malabanan failed to establish by sufficient evidence possession
and occupation of the property on his part and on the part of his predecessors-in interest since
June 12, 1945, or earlier. Hence, these motions for reconsideration.

ISSUE:

Whether the mere classification of the land as alienable or disposable should be deemed
sufficient to convert it into patrimonial property of the State
RULING:

Section 48 of the Public Land Act (CA No. 141) provides that The following-described
citizens of the Philippines, occupying lands of the public domain or claiming to own any such
lands or an interest therein, but whose titles have not been perfected or completed, may apply
to the Court of First Instance of the province where the land is located for confirmation of their
claims and the issuance of a certificate of title thereafter, under the Land Registration Act, to wit:
x x x x (b) Those who by themselves or through their predecessors-in-interest have been in
open, continuous, exclusive, and notorious possession and occupation of alienable and
disposable lands of the public domain, under a bona fide claim of acquisition of ownership,
since June 12, 1945, or earlier, immediately preceding the filing of the applications for
confirmation of title, except when prevented by war or force majeure. These shall be
conclusively presumed to have performed all the conditions essential to a Government grant
and shall be entitled to a certificate of title under the provisions of this chapter.

Bearing in mind such limitations under the Public Land Act, the applicant must satisfy the
following requirements in order for his application to come under Section 14(1) of the Property
Registration Decree, to wit: 1. The applicant, by himself or through his predecessor-in-interest,
has been in possession and occupation of the property subject of the application; 2. The
possession and occupation must be open, continuous, exclusive, and notorious; 3. The
possession and occupation must be under a bona fide claim of acquisition of ownership; 4. The
possession and occupation must have taken place since June 12, 1945, or earlier; and 5. The
property subject of the application must be an agricultural land of the public domain.

Taking into consideration that the Executive Department is vested with the authority to
classify lands of the public domain, Section 48(b) of the Public Land Act, in relation to Section
14(1) of the Property Registration Decree, presupposes that the land subject of the application
for registration must have been already classified as agricultural land of the public domain in
order for the provision to apply. Thus, absent proof that the land is already classified as
agricultural land of the public domain, the Regalian Doctrine applies, and overcomes the
presumption that the land is alienable and disposable as laid down in Section 48(b) of the Public
Land Act. However, emphasis is placed on the requirement that the classification required by
Section 48(b) of the Public Land Act is classification or reclassification of a public land as
agricultural.
An examination of Section 48(b) of the Public Land Act indicates that Congress
prescribed no requirement that the land subject of the registration should have been classified
as agricultural since June 12, 1945, or earlier. As such, the applicants imperfect or incomplete
title is derived only from possession and occupation since June 12, 1945, or earlier. This means
that the character of the property subject of the application as alienable and disposable
agricultural land of the public domain determines its eligibility for land registration, not the
ownership or title over it.

Alienable public land held by a possessor, either personally or through his predecessors-
in-interest, openly, continuously and exclusively during the prescribed statutory period is
converted to private property by the mere lapse or completion of the period. In fact, by virtue of
this doctrine, corporations may now acquire lands of the public domain for as long as the lands
were already converted to private ownership, by operation of law, as a result of satisfying the
requisite period of possession prescribed by the Public Land Act. It is for this reason that the
property subject of the application of Malabanan need not be classified as alienable and
disposable agricultural land of the public domain for the entire duration of the requisite period of
possession.
 To be clear, then, the requirement that the land should have been classified as alienable
and disposable agricultural land at the time of the application for registration is necessary only
to dispute the presumption that the land is inalienable.

The declaration that land is alienable and disposable also serves to determine the point
at which prescription may run against the State. The imperfect or incomplete title being
confirmed under Section 48(b) of the Public Land Act is title that is acquired by reason of the
applicants possession and occupation of the alienable and disposable agricultural land of the
public domain. Where all the necessary requirements for a grant by the Government are
complied with through actual physical, open, continuous, exclusive and public possession of an
alienable and disposable land of the public domain, the possessor is deemed to have acquired
by operation of law not only a right to a grant, but a grant by the Government, because it is not
necessary that a certificate of title be issued in order that such a grant be sanctioned by the
courts.

To sum up, we now observe the following rules relative to the disposition of public land
or lands of the public domain, namely: (1) As a general rule and pursuant to the Regalian
Doctrine, all lands of the public domain belong to the State and are inalienable. Lands that are
not clearly under private ownership are also presumed to belong to the State and, therefore,
may not be alienated or disposed; (2) The following are excepted from the general rule, to wit:
(a) Agricultural lands of the public domain are rendered alienable and disposable through any of
the exclusive modes enumerated under Section 11 of the Public Land Act. If the mode is judicial
confirmation of imperfect title under Section 48(b) of the Public Land Act, the agricultural land
subject of the application needs only to be classified as alienable and disposable as of the time
of the application, provided the applicants possession and occupation of the land dated back to
June 12, 1945, or earlier. Thereby, a conclusive presumption that the applicant has performed
all the conditions essential to a government grant arises, and the applicant becomes the owner
of the land by virtue of an imperfect or incomplete title. By legal fiction, the land has already
ceased to be part of the public domain and has become private property. (b) Lands of the public
domain subsequently classified or declared as no longer intended for public use or for the
development of national wealth are removed from the sphere of public dominion and are
considered converted into patrimonial lands or lands of private ownership that may be alienated
or disposed through any of the modes of acquiring ownership under the Civil Code. If the mode
of acquisition is prescription, whether ordinary or extraordinary, proof that the land has been
already converted to private ownership prior to the requisite acquisitive prescriptive period is a
condition sine qua non in observance of the law (Article 1113, Civil Code) that property of the
State not patrimonial in character shall not be the object of prescription.

To reiterate, then, the petitioners failed to present sufficient evidence to establish that
they and their predecessors-in-interest had been in possession of the land since June 12, 1945.
Without satisfying the requisite character and period of possession - possession and occupation
that is open, continuous, exclusive, and notorious since June 12, 1945, or earlier - the land
cannot be considered ipso jure converted to private property even upon the subsequent
declaration of it as alienable and disposable. Prescription never began to run against the State,
such that the land has remained ineligible for registration under Section 14(1) of the Property
Registration Decree. Likewise, the land continues to be ineligible for land registration under
Section 14(2) of the Property Registration Decree unless Congress enacts a law or the
President issues a proclamation declaring the land as no longer intended for public service or
for the development of the national wealth.1wphi1
 CZARINA T. MALVAR v. KRAFT FOOD PHILS., INC., ET. AL.
G.R. No. 183952, September 9, 2013
J. Bersamin

Circumstances show that Malvar and the respondents needed an escape from greater
liability towards the Intervenor, and from the possible obstacle to their plan to settle to pay. It
cannot be simply assumed that only Malvar would be liable towards the Intervenor at that point,
considering that the Intervenor, had it joined the negotiations as her lawyer, would have
tenaciously fought all the way for her to receive literally everything that she was entitled to,
especially the benefits from the stock option.

Under Article 2194 of the Civil Code, joint tort-feasors are solidarily liable for the
resulting damage. Joint tort-feasors are each liable as principals, to the same extent and in the
same manner as if they had performed the wrongful act themselves. It is likewise not an excuse
for any of the joint tort-feasors that individual participation in the tort was insignificant as
compared to that of the other. To stress, joint tort-feasors are not liable pro rata. The damages
cannot be apportioned among them, except by themselves. They cannot insist upon an
apportionment, for the purpose of each paying an aliquot part. They are jointly and severally
liable for the whole amount. Thus, as joint tort-feasors, Malvar and the respondents should be
held solidarily liable to the Intervenor.

FACTS:

Malvar is Krafts Vice President for Finance in the Southeast Asia Region of Kraft Foods
International. She was preventively suspended and was ultimately served a notice of
termination. She was later declared entitled to a separation pay. After the judgment in her favor
became final and executory, Malvar moved for the issuance of a writ of execution. The
Executive Labor Arbiter then referred the case to the Research and Computation Unit (RCU) for
the computation of the monetary awards under the judgment. The RCUs computation ultimately
arrived at the total sum of P41,627,593.75. Labor Arbiter Reyno, however, reduced Malvars
total monetary award.

On appeal, the NLRC adopted the computation by the RCU. After the writ of execution
was issued, a partial enforcement as effected by garnishing the respondents funds deposited
with Citibank. On appeal, the CA reversed and set aside the NLRC and the matter of
computation of monetary awards for private respondent was remanded to the Labor Arbiter.
Aggrieved, Malvar appealed to the Court, assailing the CAs decision.While her appeal was
pending in this Court, Malvar and the respondents entered into a compromise agreement.
Thereafter, Malvar filed an undated Motion to Dismiss/Withdraw Case. The Court then received
a so-called Motion for Intervention to Protect Attorneys Rights from The Law Firm of Dasal, et
al., whereby the Intervenor sought, among others, that both Malvar and KFPI be held and
ordered to pay jointly and severally the Intervenors contingent fees.

ISSUES:

1. Whether Malvars motion to dismiss the petition on the ground of the execution of the
compromise agreement was proper
2. Whether the Motion for Intervention to protect attorneys rights can prosper, and, if so, how
much could it recover as attorneys fees
RULING:

The Court approves the compromise agreement, and grants the Motion for Intervention
to Protect Attorney's Rights. A client has an undoubted right to settle her litigation without the
intervention of the attorney, for the former is generally conceded to have exclusive control over
the subject matter of the litigation and may at anytime, if acting in good faith, settle and adjust
the cause of action out of court before judgment, even without the attorneys intervention. It is
important for the client to show, however, that the compromise agreement does not adversely
affect third persons who are not parties to the agreement.

By the same token, a client has the absolute right to terminate the attorney-client
relationship at any time with or without cause. But this right of the client is not unlimited because
good faith is required in terminating the relationship. The limitation is based on Article 19 of the
Civil Code, which mandates that "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 right is also subject to the right of the attorney to be compensated.

A client may at any time dismiss his attorney or substitute another in his place, but if the
contract between client and attorney has been reduced to writing and the dismissal of the
attorney was without justifiable cause, he shall be entitled to recover from the client the full
compensation stipulated in the contract. However, the attorney may, in the discretion of the
court, intervene in the case to protect his rights. For the payment of his compensation the
attorney shall have a lien upon all judgments for the payment of money, and executions issued
in pursuance of such judgment, rendered in the case wherein his services had been retained by
the client.

On considerations of equity and fairness, the Court disapproves of the tendencies of

clients compromising their cases behind the backs of their attorneys for the purpose of
unreasonably reducing or completely setting to naught the stipulated contingent fees. Thus, the
Court grants the Intervenors Motion for Intervention to Protect Attorneys Rights as a measure
of protecting the Intervenors right to its stipulated professional fees that would be denied under
the compromise agreement. The Court does so in the interest of protecting the rights of the
practicing Bar rendering professional services on contingent fee basis.

Nonetheless, the claim for attorneys fees does not void or nullify the compromise
agreement between Malvar and the respondents. There being no obstacles to its approval, the
Court approves the compromise agreement. The Court adds, however, that the Intervenor is not
left without a remedy, for the payment of its adequate and reasonable compensation could not
be annulled by the settlement of the litigation without its participation and conformity. It remains
entitled to the compensation, and its right is safeguarded by the Court because its members are
officers of the Court who are as entitled to judicial protection against injustice or imposition of
fraud committed by the client as much as the client is against their abuses as her counsel. In
other words, the duty of the Court is not only to ensure that the attorney acts in a proper and
lawful manner, but also to see to it that the attorney is paid his just fees. Even if the
compensation of the attorney is dependent only on winning the litigation, the subsequent
withdrawal of the case upon the clients initiative would not deprive the attorney of the legitimate
compensation for professional services rendered.

In the absence of the lawyers fault, consent or waiver, a client cannot deprive the lawyer
of his just fees already earned in the guise of a justifiable reason. Here, Malvar not only
downplayed the worth of the Intervenors legal service to her but also attempted to camouflage
her intent to defraud her lawyer by offering excuses that were not only inconsistent with her
actions but, most importantly, fell short of being justifiable.
The stipulations of the written agreement between Malvar and the Intervenors, not being
contrary to law, morals, public policy, public order or good customs, were valid and binding on
her. They expressly gave rise to the right of the Intervenor to demand compensation. In a word,
she could not simply walk away from her contractual obligations towards the Intervenor, for
Article 1159 of the Civil Code provides that obligations arising from contracts have the force of
law between the parties and should be complied with in good faith.
 BANCO FILIPINO SAVINGS AND MORTGAGE BANK v. TALA REALTY SERVICES
CORPORATION, ET. AL./ NANCY L. TY v. BANCO FILIPINO SAVINGS AND MORTGAGE
BANK/ BANCO FILIPINO SAVINGS AND MORTGAGE BANK v. COURT OF APPEALS, ET.
AL.
G.R. No. 158866/ G.R. No. 181933/ G.R. No. 187551, September 9, 2013
J. Perlas-Bernabe

An implied trust could not have been formed between the Bank and Tala as this Court
has held that where the purchase is made in violation of an existing statute and in evasion of its
express provision, no trust can result in favor of the party who is guilty of the fraud. The Bank
cannot use the defense of nor seek enforcement of its alleged implied trust with Tala since its
purpose was contrary to law. As admitted by the Bank, it "warehoused" its branch site holdings
to Tala to enable it to pursue its expansion program and purchase new branch sites including its
main branch in Makati, and at the same time avoid the real property holdings limit under
Sections 25(a) and 34 of the General Banking Act which it had already reached.

FACTS:

In view of the restriction imposed by Sections 25(a) and 34 of Republic Act No. 337
limiting a banks real estate investments to only 50% of its capital assets, Banco Filipino,
through its board of directors, decided to "warehouse" several of its properties. Banco Filipino
entered into and, thereafter, proceeded to implement a rust agreement with Tala Realty by
selling to the latter some of its properties located in various cities and provinces nationwide. In
turn, Tala Realty leased these properties to Banco Filipino.

In August 1992, however, Tala Realty repudiated the trust agreement, asserted
ownership and claimed full title over the properties, prompting Banco Filipino to institute a total
of 17 complaints for the reconveyance of the said properties against Tala Realty and the
defendants.

The present consolidated petitions stemmed from three of these reconveyance cases. In
particular, the petition in G.R. No. 158866 filed by Banco Filipino assails the CAs Decision
which affirmed the Orders of the RTC dismissing Banco Filipinos complaint for reconveyance in
Civil Case No. 4992. Meanwhile, the petition in G.R. No. 181933 filed by Nancy assails the
CAs Decision which affirmed the Orders of the RTC denying Nancys motion to dismiss Banco
Filipinos complaint for reconveyance in Civil Case No. 95-0230. Lastly, the petition in G.R. No.
187551 filed by Banco Filipino assails the CAs Decision which affirmed the Orders of the
dismissing Banco Filipinos complaint for reconveyance in Civil Case No. 96-0036.

ISSUE:

Whether the reconveyance complaints filed by Banco Filipino before the courts a quo can be
allowed to prosper

RULING:

The petitions in G.R. Nos. 158866 and 187551 are denied, while the petition in G.R. No.
181933 is granted.
 At the outset, the basic facts as well as the issues raised in these petitions have already
been passed upon by the Court in its Decision dated April 7, 2009 in G.R. Nos. 130088, 131469,
155171, 155201, and 166608 as well as its more recent Decision dated June 27, 2012 in G.R.
No. 188302.Pertinently, in these cases, the Court applied the earlier case of Tala Realty
Services Corporation v. Banco Filipino Savings & Mortgage Bank, docketed as G.R. No.
137533, wherein it declared, in no uncertain terms, that the implied trust agreement between
Banco Filipino and Tala Realty is "in existent and void for being contrary to law." As such, Banco
Filipino cannot demand the reconveyance of the subject properties in the present cases; neither
can any affirmative relief be accorded to one party against the other since they have been found
to have acted in pari delicto, viz: An implied trust could not have been formed between the Bank
and Tala as this Court has held that "where the purchase is made in violation of an existing
statute and in evasion of its express provision, no trust can result in favor of the party who is
guilty of the fraud." x x x x x x The Bank cannot use the defense of nor seek enforcement of its
alleged implied trust with Tala since its purpose was contrary to law. As admitted by the Bank, it
"warehoused" its branch site holdings to Tala to enable it to pursue its expansion program and
purchase new branch sites including its main branch in Makati, and at the same time avoid the
real property holdings limit under Sections 25(a) and 34 of the General Banking Act which it had
already reached. x x x

Clearly, the Bank was well aware of the limitations on its real estate holdings under the
General Banking Act and that its "ware housing agreement" with Tala was a scheme to
circumvent the limitation. Thus, the Bank opted not to put the agreement in writing and call a
spade a spade, but instead phrased its right to reconveyance of the subject property at any time
as a "first preference to buy" at the "same transfer price." This arrangement which the Bank
claims to be an implied trust is contrary to law. Thus, while we find the sale and lease of the
subject property genuine and binding upon the parties, we cannot enforce the implied trust even
assuming the parties intended to create it. x x x "The courts will not assist the pay or in
achieving his improper purpose by enforcing a resultant trust for him in accordance with the
clean hands doctrine." The Bank cannot thus demand reconveyance of the property based on
its alleged implied trust relationship with Tala. x x x x x x x The Bank and Tala are in pari delicto,
thus, no affirmative relief should be given to one against the other. The Bank should not be
allowed to dispute the sale of its lands to Tala nor should Tala be allowed to further collect rent
from the Bank. The clean hands doctrine will not allow the creation or the use of a juridical
relation such as a trust to subvert, directly or indirectly, the law. Neither the Bank nor Tala came
to court with clean hands; neither will obtain relief from the court as one who seeks equity and
justice must come to court with clean hands. By not allowing Tala to collect from the Bank rent
for the period during which the latter was arbitrarily closed, both Tala and the Bank will be left
where they are, each paying the price for its deception.
 SMART COMMUNICATIONS, INC., v. ARSENIO ALDECOA, ET. AL.
G.R. No. 166330, September 11, 2013
J. Leonardo-De Castro

The Court demonstrated in AC Enterprises, Inc. the extensive factual considerations of a

court before it can arrive at a judgment in an action for abatement of nuisance. The test is
whether rights of property, of health or of comfort are so injuriously affected by the noise in
question that the sufferer is subjected to a loss which goes beyond the reasonable limit
imposed upon him by the condition of living, or of holding property, in a particular locality in fact
devoted to uses which involve the emission of noise although ordinary care is taken to confine it
within reasonable bounds; or in the vicinity of property of another owner who, though creating a
noise, is acting with reasonable regard for the rights of those affected by it.

A reading of the RTC Order dated January 16, 2001 readily shows that the trial court did
not take into account any of the foregoing considerations or tests before summarily dismissing
Civil Case No. Br. 23-632-2000. Without presentation by the parties of evidence on the
contested or disputed facts, there was no factual basis for declaring petitioner's cellular base
station a nuisance and ordering petitioner to cease and desist from operating the same.

FACTS:

Petitioner, a domestic corporation engaged in the telecommunications business

constructed and installed a cellular base station on a leased property. Around and close to the
cellular base station are houses, hospitals, clinics, and establishments, including the properties
of respondents.

Respondents filed before the RTC on May 23, 2000 a Complaint against petitioner for
abatement of nuisance and injunction with prayer for temporary restraining order and writ of
preliminary injunction. Petitioner sought the dismissal of respondents Complaint. The RTC
issued an Order granting petitioners Motion for Summary Judgment and dismissing
respondents Complaint. On appeal, the CA declared the cellular base station of petitioner a
nuisance that endangered the health and safety of the residents of Barangay Vira, Roxas,
Isabela. Hence, this petition.

ISSUE:

Whether petitioners communications tower is a nuisance per se/per accidens and together with
its standby generator maybe abated

RULING:

Article 694 of the Civil Code defines nuisance as any act, omission, establishment,
business, condition of property, or anything else which: (1) Injures or endangers the health or
safety of others; or (2) Annoys or offends the senses; or (3) Shocks, defies or disregards
decency or morality; or (4) Obstructs or interferes with the free passage of any public highway
or street, or any body of water; or (5) Hinders or impairs the use of property.

The Court, in AC Enterprises, Inc. v. Frabelle Properties Corporation, settled that a

simple suit for abatement of nuisance, being incapable of pecuniary estimation, is within the
exclusive jurisdiction of the RTC. Although respondents also prayed for judgment for moral and
exemplary damages, attorneys fees, and litigation expenses, such claims are merely incidental
to or as a consequence of, their principal relief.

Commercial and industrial activities which are lawful in themselves may become
nuisances if they are so offensive to the senses that they render the enjoyment of life and
property uncomfortable. The fact that the cause of the complaint must be substantial has often
led to expressions in the opinions that to be a nuisance the noise must be deafening or loud or
excessive and unreasonable. The determining factor when noise alone is the cause of
complaint is not its intensity or volume. It is that the noise is of such character as to produce
actual physical discomfort and annoyance to a person of ordinary sensibilities, rendering
adjacent property less comfortable and valuable. If the noise does that it can well be said to be
substantial and unreasonable in degree, and reasonableness is a question of fact dependent
upon all the circumstances and conditions. There can be no fixed standard as to what kind of
noise constitutes a nuisance.

The courts have made it clear that in every case the question is one of reasonableness.
What is a reasonable use of ones property and whether a particular use is an unreasonable
invasion of anothers use and enjoyment of his property so as to constitute a nuisance cannot
be determined by exact rules, but must necessarily depend upon the circumstances of each
case, such as locality and the character of the surroundings, the nature, utility and social value
of the use, the extent and nature of the harm involved, the nature, utility and social value of the
use or enjoyment invaded, and the like.

A finding by the LGU that the noise quality standards under the law have not been
complied with is not a prerequisite nor constitutes indispensable evidence to prove that the
defendant is or is not liable for a nuisance and for damages. Such finding is merely
corroborative to the testimonial and/or other evidence to be presented by the parties. The
exercise of due care by the owner of a business in its operation does not constitute a defense
where, notwithstanding the same, the business as conducted, seriously affects the rights of
those in its vicinity.

A reading of the RTC Order dated January 16, 2001 readily shows that the trial court did
not take into account any of the foregoing considerations or tests before summarily dismissing
Civil Case No. Br. 23-632-2000. Without presentation by the parties of evidence on the
contested or disputed facts, there was no factual basis for declaring petitioner's cellular base
station a nuisance and ordering petitioner to cease and desist from operating the same.
 UNICAPITAL, INC., ET. AL. v. RAFAEL JOSE CONSING, JR., ET. AL.
G.R. Nos. 175277 & 175285, September 11, 2013
J. Perlas-Bernabe

In this case, records disclose that Consing, Jr.s complaint contains allegations which
aim to demonstrate the abusive manner in which Unicapital and PBI, et al. enforced their
demands against him. Accordingly, these specific allegations, if hypothetically admitted, may
result into the recovery of damages pursuant to Article 19 of the Civil Code which states that
"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."

Likewise, Consing, Jr.s complaint states a cause of action for damages under Article 26
of the Civil Code which provides that: Article 26. Every person shall respect the dignity,
personality, privacy and peace of mind of his neighbors and other persons. The following and
similar acts, though they may not constitute a criminal offense, shall produce a cause of action
for damages, prevention and other relief: (1) Prying into the privacy of another's residence; (2)
Meddling with or disturbing the private life or family relations of another; (3) Intriguing to cause
another to be alienated from his friends; (4) Vexing or humiliating another on account of his
religious beliefs, lowly station in life, place of birth, physical defect, or other personal condition.

FACTS:

Consing, Jr. and his Dela Cruz obtained a loan from Unicapital secured by Promissory
Notes and a Real Estate Mortgage over a parcel of land registered in the name of Dela Cruz.
The loan and mortgage over the subject property was later on modified into an Option to Buy
Real Property and, after further negotiations, Dela Cruz decided to sell the same to Unicapital
and PBI.

Eventually, Unicapital purchased one-half of the subject property, while PBI bought the
remaining half. However, even before URI and PBI were able to have the titles transferred to
their names, Teng and Yu informed Unicapital that they are the lawful owners of the subject
property, and that Dela Cruzs title was a mere forgery. Further investigations on the subject
property later revealed that Dela Cruz's title was actually of dubious origin. PBI and Unicapital
sent separate demand letters to Dela Cruz and Consing, Jr., seeking the return of the purchase
price they had paid for the subject property. Consing, Jr. filed a complaint, denominated as a
Complex Action for Declaratory Relief and later amended to Complex Action for Injunctive
Relief. Unicapital, et al. filed separate Motions to dismiss. On the other hand, Unicapital and PBI
filed a complaint for sum of money with damages against Consing, Jr. and Dela Cruz. Consing,
Jr. filed a Motion for Consolidation.

The petitions in G.R. Nos. 175277 and 175285 filed by Unicapital, Inc., et al. assail the
CAs Joint Decision which affirmed the Resolution and Order of the RTC upholding the denial of
their motion to dismiss.

ISSUE:

Whether the CA erred in upholding the RTC-Pasig Citys denial of Unicapital, et al.s motion to
dismiss

RULING:
 In this case, the Court finds that Consing, Jr.s complaint in SCA No.1759 properly states
a cause of action since the allegations there insufficiently bear out a case for damages under
Articles 19 and 26 of the Civil Code. Records disclose that Consing, Jr.s complaint contains
allegations which aim to demonstrate the abusive manner in which Unicapital and PBI, et al.
enforced their demands against him. Among others, the complaint states that Consing, Jr. "has
constantly been harassed and bothered by Unicapital and PBI, et al.; x x x besieged by phone
calls from them; x x x has had constant meetings with them variously, and on a continuing basis,
such that he is unable to attend to his work as an investment banker." In the same pleading, he
also alleged that Unicapital and PBI, et al.s act of "demanding a postdated check knowing fully
well that he does not have the necessary funds to cover the same, nor is he expecting to have
them is equivalent to asking him to commit a crime under unlawful coercive force." Accordingly,
these specific allegations, if hypothetically admitted, may result into the recovery of damages
pursuant to Article 19 of the Civil Code which states that "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."

Likewise, Consing, Jr.s complaint states a cause of action for damages under Article 26
of the Civil Code which provides that: Article 26. Every person shall respect the dignity,
personality, privacy and peace of mind of his neighbors and other persons. The following and
similar acts, though they may not constitute a criminal offense, shall produce a cause of action
for damages, prevention and other relief: (1) Prying into the privacy of another's residence; (2)
Meddling with or disturbing the private life or family relations of another; (3) Intriguing to cause
another to be alienated from his friends; (4) Vexing or humiliating another on account of his
religious beliefs, lowly station in life, place of birth, physical defect, or other personal condition.

To add, a violation of Article 26 of the Civil Code may also lead to the payment of moral
damages under Article 2219(10) of the Civil Code. Records reveal that Consing, Jr., in his
complaint, alleged that "he has come to discover that Unicapital and PBI, et al. are speaking of
him in a manner that is inappropriate and libelous; and that they have spread their virulent
version of events in the business and financial community such that he has suffered and
continues to suffer injury upon his good name and reputation which, after all, is the most sacred
and valuable wealth he possesses - especially considering that he is an investment banker." In
similar regard, the hypothetical admission of these allegations may result into the recovery of
damages pursuant to Article 26, and even Article2219(10), of the Civil Code.

YASUO IWASAWA v. FELISA CUSTODIO GANGAN (A.K.A. FELISA GANGAN ARAMBULO

AND FELISA GANGAN IWASAWA), ET. AL.
G.R. No. 204169, September 11, 2013
J. Villarama, Jr.

In a petition for declaration of nullity of marriage, pieces of documentary evidence issued

by the NSO were offered but the NSO records custodian certifying the authenticity and due
execution of the public documents did not testify in court. There is no question that the
documents submitted by petitioner as evidence are all public documents. As provided in
Article 410 of the Civil Code, the books making up the civil register and all documents
relating thereto shall be considered public documents and shall be prima facie evidence of
the facts therein contained.
 As public documents, they are admissible in evidence even without further proof of their
due execution and genuineness. Thus, the RTC erred when it disregarded said documents
on the sole ground that the petitioner did not present the records custodian of the NSO who
issued them to testify on their authenticity and due execution since proof of authenticity and
due execution was not anymore necessary. Moreover, not only are said documents
admissible, they deserve to be given evidentiary weight because they constitute prima facie
evidence of the facts stated therein. And in the instant case, the facts stated therein remain
unrebutted since neither the private respondent nor the public prosecutor presented
evidence to the contrary.

FACTS:

When Yasauo Iwasa met Felisa Gangan, the latter introduced herself as single and has
never been married. On November 28, 2002, Petitioner and Private respondent got married.
After the wedding, the two resided in Japan. In July 2009, Felisa confessed to Yasauo that
she received a bad news that her previous husband Raymond Arambulo died. Petitioner
upon confirmation as to the truth of the private respondets confession filed a petition for the
declaration of his marriage to private respondent as null and void on the ground that their
marriage is a bigamous one, based on Article 35(4) in relation to Article 41 of the Family
Code of the Philippines. During trial, aside from his testimony, petitioner also offered the
pieces of documentary evidence issued by the National Statistics Office (NSO).

The RTC ruled that there was insufficient evidence to prove private respondents prior
existing valid marriage to another man. It held that while petitioner offered the certificate of
marriage of private respondent to Arambulo, it was only petitioner who testified about said
marriage. The RTC ruled that petitioners testimony is unreliable because he has no
personal knowledge of private respondents prior marriage nor of Arambulos death which
makes him a complete stranger to the marriage certificate between private respondent and
Arambulo and the latters death certificate. It further ruled that petitioners testimony about
the NSO certification is likewise unreliable since he is a stranger to the preparation of said
document. Petitioner filed a motion for reconsideration, but the same was denied by the
RTC.

ISSUE:

Whether the testimony of the NSO records custodian certifying the authenticity and due
execution of the public documents issued by said office was necessary before they could be
accorded evidentiary weight

RULING:
 There is no question that the documents submitted by petitioner as evidence are all
public documents. As provided in Article 410 of the Civil Code, the books making up the civil
register and all documents relating thereto shall be considered public documents and shall
be prima facie evidence of the facts therein contained.

As public documents, they are admissible in evidence even without further proof of their
due execution and genuineness.Thus, the RTC erred when it disregarded said documents
on the sole ground that the petitioner did not present the records custodian of the NSO who
issued them to testify on their authenticity and due execution since proof of authenticity and
due execution was not anymore necessary. Moreover, not only are said documents
admissible, they deserve to be given evidentiary weight because they constitute prima facie
evidence of the facts stated therein. And in the instant case, the facts stated therein remain
unrebutted since neither the private respondent nor the public prosecutor presented
evidence to the contrary.

This Court has consistently held that a judicial declaration of nullity is required before a
valid subsequent marriage can be contracted; or else, what transpires is a bigamous
marriage, which is void from the beginning as provided in Article 35(4) of the Family Code of
the Philippines. And this is what transpired in the instant case.

The exhibits directly prove the following facts: (1) that private respondent married
Arambulo on June 20, 1994 in the City of Manila; (2) that private respondent contracted a
second marriage this time with petitioner on November 28, 2002 in Pasay City; (3) that there
was no judicial declaration of nullity of the marriage of private respondent with Arambulo at
the time she married petitioner; (3) that Arambulo died on July 14, 2009 and that it was only
on said date that private respondents marriage with Arambulo was deemed to have been
dissolved; and (4) that the second marriage of private respondent to petitioner is bigamous,
hence null and void, since the first marriage was still valid and subsisting when the second
marriage was contracted.

MANUEL UY & SONS, INC. v. VALBUECO, INCORPORATED

G.R. No. 179594. September 11, 2013
J. Peralta

The two conditional deeds of sale entered into by the parties are contracts to sell, as
they both contained a stipulation that ownership of the properties shall not pass to the
vendee until after full payment of the purchase price. In a conditional sale, as in a contract to
sell, ownership remains with the vendor and does not pass to the vendee until full payment
 of the purchase price. The full payment of the purchase price partakes of a suspensive
condition, and non-fulfillment of the condition prevents the obligation to sell from arising. To
differentiate, a deed of sale is absolute when there is no stipulation in the contract that title
to the property remains with the seller until full payment of the purchase price.

Articles 1191 and 1592 of the Civil Code are applicable to contracts of sale, while R.A.
No. 6552 applies to contracts to sell. R.A. No. 6552, otherwise known as the Realty
Installment Buyer Act, applies to the subject contracts to sell. R.A. No. 6552 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 an installment by the buyer, which is
simply an event that prevents the obligation of the vendor to convey title from acquiring
binding force.

FACTS:

Petitioner Manuel Uy & Sons, Inc. is the registered owner of parcels of land located in
Teresa, Rizal. On November 29, 1973, Manuel Uy and Sons Inc., (vendor) executed two (2)
conditional deeds of sale in favor of respondent Valbueco, Incorporated (vendee) for the
sale of the parcels of land of the former. As a condition petitioner is required to release the
properties from existing mortgages and to remove the informal settlers in the said
properties. Also, both of conditional deeds of sale contain the provision that the ownership
of the properties shall not pass to the vendee until after payment of the full purchase price.

Respondent made partial payment for the two properties corresponding to the initial
payments and the first installments of the said properties. However, respondent suspended
further payment as it was not satisfied with the manner petitioner complied with its
obligations under the conditional deeds of sale. Consequently, petitioner sent respondent a
letter informing respondent of its intention to rescind the conditional deeds of sale and
attaching therewith the original copy of the respective notarial rescission.

On March 16, 2001, respondent again filed with the RTC a Complaint for specific
performance and damages, seeking to compel petitioner to accept the balance of the
purchase price for the two conditional deeds of sale and to execute the corresponding
deeds of absolute sale. The RTC dismissed the petition. On appeal, the CA reversed the
decision of the RTC.

ISSUE:
Whether it is proper to execute the deeds of absolute sale in favor of the respondent

RULING:

The two conditional deeds of sale entered into by the parties are contracts to sell, as
they both contained a stipulation that ownership of the properties shall not pass to the
vendee until after full payment of the purchase price. In a conditional sale, as in a contract to
sell, ownership remains with the vendor and does not pass to the vendee until full payment
of the purchase price. The full payment of the purchase price partakes of a suspensive
condition, and non-fulfillment of the condition prevents the obligation to sell from arising. To
differentiate, a deed of sale is absolute when there is no stipulation in the contract that title
to the property remains with the seller until full payment of the purchase price.

Ramos v. Heruela held that Articles 1191 and 1592 of the Civil Code are applicable to
contracts of sale, while R.A. No. 6552 applies to contracts to sell. R.A. No. 6552, otherwise
known as the Realty Installment Buyer Act, applies to the subject contracts to sell. R.A. No.
6552 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 an installment
by the buyer, which is simply an event that prevents the obligation of the vendor to convey
title from acquiring binding force.

It also provides the right of the buyer on installments in case he defaults in the payment
of succeeding installments as follows:

Section 3. In all transactions or contracts involving the sale or financing of real

estate on installment payments, including residential condominium apartments but
excluding industrial lots, commercial buildings and sales to tenants under Republic Act
Numbered Thirty-eight hundred forty-four, as amended by Republic Act Numbered Sixty-
three hundred eighty-nine, where the buyer has paid at least two years of installments,
the buyer is entitled to the following rights in case he defaults in the payment of
succeeding installments:

(a) To pay, without additional interest, the unpaid installments due within the total
grace period earned by him which is hereby fixed at the rate of one month grace period
for every one year of installment payments made: Provided, That this right shall be
exercised by the buyer only once in every five years of the life of the contract and its
extensions, if any.
 (b) If the contract is canceled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to fifty per cent of the total
payments made, and, after five years of installments, an additional five per cent every
year but not to exceed ninety per cent of the total payments made: Provided, That the
actual cancellation of the contract shall take place after thirty days from receipt by the
buyer of the notice of cancellation or the demand for rescission of the contract by a
notarial act and upon full payment of the cash surrender value to the buyer.

Down payments, deposits or options on the contract shall be included in the computation
of the total number of installment payments made.

Section 4. In case where less than two years of installments were paid, the seller
shall give the buyer a grace period of not less than sixty days from the date the
installment became due. If the buyer fails to pay the installments due at the expiration of
the grace period, the seller may cancel the contract after thirty days from receipt by the
buyer of the notice of cancellation or the demand for rescission of the contract by a
notarial act.

In this case, respondent has paid less than two years of installments; therefore, Section
4 of R.A. No. 6552 applies. The Court of Appeals held that even if respondent defaulted in
its full payment of the purchase price of the subject lots, the conditional deeds of sale
remain valid and subsisting, because there was no valid notice of notarial rescission to
respondent, as the notice was sent to the wrong address, that is, to Mahogany Products
Corporation, and it was received by a person employed by Mahogany Products Corporation
and not the respondent. The Court of Appeals stated that the allegation that Mahogany
Products Corporation and respondent have the same President, one Valeriano Bueno, is
irrelevant and has not been actually proven or borne by evidence. The appellate court held
that there was insufficient proof that respondent actually received the notice of notarial
rescission of the conditional deeds of sale; hence, the unilateral rescission of the conditional
deeds of sale cannot be given credence.

However, upon review of the records of this case, the Court finds that respondent had
been served a notice of the notarial rescission of the conditional deeds of sale when it was
furnished with the petitioner's Answer, dated February 16, 1995, to its first Complaint filed on
November 28, 1994 with the RTC of Antipolo City, which case was docketed as Civil Case
No.94-3426, but the complaint was later dismissed without prejudice on January15, 1996.
 Since respondent already received notices of the notarial rescission of the conditional
deeds of sale, together with petitioners Answer to the first Complaint five years before it
filed this case, it can no longer deny having received notices of the notarial rescission in this
case, as respondent admitted the same when it attached the notices of notarial rescission to
its Reply in this case. Consequently, respondent is not entitled to the relief granted by the
Court of Appeals.

Under R.A. No. 6552, the right of the buyer to refund accrues only when he has paid at
least two years of installments. In this case, respondent has paid less than two years of
installments; hence, it is not entitled to a refund.
S.C. MEGAWORLD CONSTRUCTION AND DEVELOPMENT CORPORATION v. ENGR. LUIS
U. PARADA, REPRESENTED BY ENGR. LEONARDO A. PARADA OF GENLITE
INDUSTRIES
G.R. No. 183804, September 11, 2013
J. Reyes

The settled rule is that novation is never presumed, but

must be clearly and unequivocally shown. In order for a new agreement to supersede the
old one, the parties to a contract must expressly agree that they are abrogating their old
contract in favor of a new one. Thus, the mere substitution of debtors will not result
innovation, and the fact that the creditor accepts payments from a third person, who has
assumed the obligation, will result merely in the addition of debtors and not novation, and
the creditor may enforce the obligation against both debtors. If there is no agreement as to
solidarity, the first and new debtors are considered obligated jointly.

FACTS:

S.C. Megaworld Construction and Development Corporation (petitioner) bought electrical

lighting materials from Gentile Industries, a sole proprietorship owned by Engineer Luis U.
Parada (respondent), for its Read-Rite project in Canlubang, Laguna. The petitioner was
unable to pay, but blamed it on its failure to collect under its sub-contract with the Enviro
KleenTechnologies, Inc. (Enviro Kleen). It was however able to persuade Enviro Kleen to
agree to settle its above purchase, but after paying the respondent P250, 000.00, Enviro
Kleen stopped making further payments, leaving an outstanding balance of P816, 627.00. It
also ignored the various demands of the respondent, who then filed a suit in the RTC, to
collect from the petitioner the said balance, plus damages, costs and expenses.

The petitioner denied liability the ground of novation it reasoned took place when the
latter accepted the partial payment of Enviro Kleen in its behalf, and thereby acquiesced to
the substitution of Enviro Kleen as the new debtor in the petitioners place. The RTC
ordered the respondent to pay principal obligation due plus the sum equivalent to twenty
percent (20%) per month of the principal obligation due from date of judicial demand until
fully paid as and for interest. On appeal, the Court of Appeals dismissed the petition.

ISSUE:

Whether there is novation in the present case

RULING:
 Novation is a mode of extinguishing an obligation by changing its objects or principal
obligations, by substituting a new debtor in place of the old one, or by subrogating a third
person to the rights of the creditor. It is "the substitution of a new contract, debt, or obligation
for an existing one between the same or different parties."

Article 1293 of the Civil Code defines novation as which consists in substituting a new
debtor in the place of the original one, may be made even without the knowledge or against
the will of the latter, but not without the consent of the creditor. Payment by the new debtor
gives him rights mentioned in Articles 1236 and 1237.

Thus, in order to change the person of the debtor, the former debtor must be expressly
released from the obligation, and the third person or new debtor must assume the formers
place in the contractual relation.Article 1293 speaks of substitution of the debtor, which may
either be in the form of expromision or delegacion, as seems to be the case here. In both
cases, the old debtor must be released from the obligation, otherwise, there is no valid
novation.

From the circumstances obtaining below, we can infer no clear and unequivocal consent
by the respondent to the release of the petitioner from the obligation to pay the cost of the
lighting materials. In fact, from the letters of the respondent to Enviro Kleen, it can be said
that he retained his option to go after the petitioner if Enviro Kleen failed to settle the
petitioners debt.

It is evident from the two (2) aforesaid letters that there is no indication of the
respondents intention to release the petitioner from its obligation to pay and to transfer it to
Enviro Kleen Technologies, Inc. The acquiescence of Enviro Kleen Technologies, Inc. to
assume the obligation of the petitioner to pay the unpaid balance of [P]816,627.00 to the
respondent when there is clearly no agreement to release the petitioner will result merely to
the addition of debtors and not novation. Hence, the creditor can still enforce the obligation
against the original debtor x x x. A fact which points strongly to the conclusion that the
respondent did not assent to the substitution of Enviro Kleen Technologies, Inc. as the new
debtor is the present action instituted by the respondent against the petitioner for the
fulfillment of its obligation. A mere recital that the respondent has agreed or consented to the
substitution of the debtor is not sufficient to establish the fact that there was a novation.

The settled rule is that novation is never presumed, but must be clearly and
unequivocally shown. In order for a new agreement to supersede the old one, the parties to
a contract must expressly agree that they are abrogating their old contract in favor of a new
one. Thus, the mere substitution of debtors will not result innovation, and the fact that the
creditor accepts payments from a third person, who has assumed the obligation, will result
merely in the addition of debtors and not novation, and the creditor may enforce the
obligation against both debtors. If there is no agreement as to solidarity, the first and new
debtors are considered obligated jointly.
 HILARIA BAGAYAS v. ROGELIO BAGAYAS, ET. AL.
G.R. Nos. 187308 and 187517, September 18, 2013
J. Perlas-Bernabe

It is a well-known doctrine that the issue as to whether the certificate of title was
procured by falsification or fraud can only be raised in an action expressly instituted for the
purpose. A Torrens title can be attacked only for fraud, within one year after the date of the
issuance of the decree of registration. Such attack must be direct, and not by a collateral
proceeding. The title represented by the certificate cannot be changed, altered, modified,
enlarged, or diminished in a collateral proceeding. The certificate of title serves as evidence of
an indefeasible title to the property in favor of the person whose name appears therein.

Section 108 of PD 1529 explicitly states that said provision "shall not be construed to
give the court authority to reopen the judgment or decree of registration." In fact, based on
settled jurisprudence, Section 108 of PD 1529 is limited only to seven instances. Hence, the
same cannot be said to constitute an attack on a certificate of title as defined by case law.

FACTS:

Petitioner filed a complaint for annulment of sale and partition before the RTC, claiming
that Rogelio, Felicidad, Rosalina, Michael, and Mariel, all surnamed Bagayas (respondents)
intended to exclude her from inheriting from the estate of her legally adoptive parents,
Maximino Bagayas (Maximino) and Eligia Clemente (Eligia), by falsifying a deed of absolute
sale purportedly executed by the deceased spouses (Maximino and Eligia) transferring two
parcels of land registered in their names to their biological children, respondent Rogelio and
Orlando Bagayas (Orlando). Said deed, which was supposedly executed on October 7,
1974, bore the signature of Eligia who could not have affixed her signature thereon as she
had been dead since August 21, 1971. By virtue of the same instrument, however, the
Bagayas brothers were able to secure in their favor TCT Nos. 375657 and 375658 over the
subject lands.

Rogelio claimed that after their parents had died, he and Orlando executed a document
denominated as Deed of Extrajudicial Succession over the subject lands to effect the
transfer of titles thereof to their names. Before the deed of extra judicial succession could be
registered, however, a deed of absolute sale transferring the subject lands to them was
discovered from the old files of Maximino, which they used by "reason of convenience" to
acquire title to the said lands.

The RTC ruled that the action for annulment of sale was improper as it constituted a
collateral attack on the title of Rogelio and Orlando. Petitioner did not appeal the decision of
the RTC .Hence, the decision attained finality. However, petitioner filed twin petitions for the
amendment of TCT Nos. 375657 and 375658 to include her name and those of her heirs
and successors-in-interest as registered owners to the extent of one-third of the lands
covered therein. The petitions were anchored on Section 108 of Presidential Decree No.
(PD) 1529. The RTC denied the on the ground of res judicata. Petitioner moved for
reconsideration but it was denied. Hence, this petition.

ISSUE:

Whether the dismissal of the earlier complaint on the ground that it is in the nature of a
collateral attack on the certificates of title constitutes a bar to a subsequent petition under
Section 108 of PD 1529

RULING:

It must be pointed out that LRC Nos. 08-34 and 08-35 praying that judgment be
rendered directing the Registry of Deeds of Tarlac to include petitioner's name, those of her
heirs and successors-in-interest as registered owners to the extent of one-third of the lands
covered by TCT Nos. 375657and 375658, were predicated on the theory that Section 108 of
PD 1529 is a mode of directly attacking the certificates of title issued to the Bagayas
brothers. On the contrary, however, the Court observes that the amendment of TCT Nos.
375657 and 375658 under Section 108 of PD 1529 is actually not the direct attack on said
certificates of title contemplated under Section 48of the same law. Jurisprudence instructs
that an action or proceeding is deemed to be an attack on a certificate of title when its
objective is to nullify the same, thereby challenging the judgment pursuant to which the
certificate of title was decreed. Corollary thereto, it is a well-known doctrine that the issue as
to whether the certificate of title was procured by falsification or fraud can only be raised in
an action expressly instituted for such purpose. As explicated in Borbajo v. Hidden View
Homeowners, Inc.:

It is a well-known doctrine that the issue as to whether the certificate of title was
procured by falsification or fraud can only be raised in an action expressly instituted for
the purpose. A Torrens title can be attacked only for fraud, within one year after the date
of the issuance of the decree of registration. Such attack must be direct, and not by a
collateral proceeding. The title represented by the certificate cannot be changed, altered,
modified, enlarged, or diminished in a collateral proceeding. The certificate of title serves
as evidence of an indefeasible title to the property in favor of the person whose name
appears therein.
 Contrary to the foregoing characterization, Section 108 of PD 1529 explicitly states that
said provision "shall not be construed to give the court authority to reopen the judgment or
decree of registration." In fact, based on settled jurisprudence, Section 108 of PD 1529 is
limited only to seven instances or situations, namely: (a) when registered interests of any
description, whether vested, contingent, expectant, or inchoate, have terminated and
ceased; (b) when new interests have arisen or been created which do not appear upon the
certificate; (c) when any error, omission or mistake was made in entering a certificate or any
memorandum thereon or on any duplicate certificate; (d) when the name of any person on
the certificate has been changed; (e) when the registered owner has been married, or,
registered as married, the marriage has been terminated and no right or interest of heirs or
creditors will thereby be affected; (f) when a corporation, which owned registered land and
has been dissolved, has not conveyed the same within three years after its dissolution; and
(g) when there is reasonable ground for the amendment or alteration of title. Hence, the
same cannot be said to constitute an attack on a certificate of title as defined by case
law. That said, the Court proceeds to resolve the issue as to whether or not the dismissal of
petitioners twin petitions for the amendment of TCT Nos. 375657 and 375658 was proper.
PHILIPPINE RECLAMATION AUTHORITY (FORMERLY KNOWN AS THE PUBLIC ESTATES
AUTHORITY) v. ROMAGO, INC./ROMAGO, INC. v. PHILIPPINE RECLAMATION
AUTHORITY
G.R. Nos. 174665 and 175221, September 18, 2013
J. Abad

In novation, a subsequent obligation extinguishes a previous one through substitution

either by changing the object or principal conditions, by substituting another in place of the
debtor, or by subrogating a third person into the rights of the creditor. Novation requires (a) the
existence of a previous valid obligation; (b) the agreement of all parties to the new contract; (c)
the extinguishment of the old contract; and (d) the validity of the new one. There cannot be
novation in this case since the proposed substituted parties did not agree to the PRAs
supposed assignment of its obligations under the contract for the electrical and light works at
Heritage Park to the HPMC. The latter definitely and clearly rejected the PRAs assignment of
its liability under that contract to the HPMC.

FACTS:

In order to convert former military reservations and installations to productive use and
raise funds out of the sale of portions of the countrys military camps, in 1992 Congress enacted
RA 7227, creating the Bases Conversion and Development Authority (BCDA). Pursuant to this
law, the President issued Executive Order 40, setting aside portions of Fort Bonifacio in Taguig,
Metro Manila, for the Heritage Park Project, aimed at converting a 105-hectare land into a world
class memorial park for the purpose of generating funds for the BCDA.

The BCDA entered into a Memorandum of Agreement with the Philippine Reclamation
Authority (PRA). Thereafter, the BCDA, PRA, and the Philippine National Bank (PNB)
executed a Pool Formation Trust Agreement (PFTA) under which BCDA, as project owner,
was to issue Heritage Park Investment Certificates that would evidence the holders right to
the perpetual use and care of specific interment plots. The PFTA designated PRA as Project
Manager, tasked with the physical development of the park. The PNB was to act as trustee
for the Heritage Park securitization.

After public bidding, the PRA awarded the outdoor electrical and lighting works for the
park to respondent Romago, Inc. (Romago) with which it entered into a Construction
Agreement. On receipt of the PRAs notice to proceed, Romago immediately began
construction works. Meanwhile, the parties to the PFTA organized the Heritage Park
Management Corporation (HPMC) to take over the management of the project. On February
24, 2000 the Chairman of HPMC Board of Trustees, Mr. Rogelio L. Singson, sent a notice of
termination of management to then PRA General Manager Carlos P. Doble with a demand
for the turnover of the park to HPMC. The PRA lost no time in informing Romago of the
consequent termination of its services.Because the HPMC refused to recognize the PRAs
contract with it, Romago filed with the Construction Industry Arbitration Commission (CIAC)
a complaint.
 PRA denied liability, claiming that its liability under its contract with Romago had been
extinguished by novation when it assigned all its obligations to the HPMC pursuant to the
provisions of the PFTA. The CIAC issued an order dropping RMMI as respondent but
denying the HPMCs motion to dismiss the case against it. The HPMC elevated the CIAC
order to the CA.

ISSUE:

Whether PRA is not liable to Romago because it assigned all its obligations to the HPMC
pursuant to the provisions of the PFTA

RULING:

In novation, a subsequent obligation extinguishes a previous one through substitution

either by changing the object or principal conditions, by substituting another in place of the
debtor, or by subrogating a third person into the rights of the creditor. Novation requires (a)
the existence of a previous valid obligation; (b) the agreement of all parties to the new
contract; (c) the extinguishment of the old contract; and (d) the validity of the new one.

There cannot be novation in this case since the proposed substituted parties did not
agree to the PRAs supposed assignment of its obligations under the contract for the
electrical and light works at Heritage Park to the HPMC. The latter definitely and clearly
rejected the PRAs assignment of its liability under that contract to the HPMC. Romago tried
to follow up its claims with the HPMC, not because of any new contract it entered into with
the latter, but simply because the PRA told it that the HPMC would henceforth assume the
PRAs liability under its contract with Romago.

Besides, Section 11.07 of the PFTA makes it clear that the termination of the PRAs
obligations is conditioned upon the turnover of documents, equipment, computer hardware
and software on the geographical information system of the Park; and the completion and
faithful performance of its respective duties and responsibilities under the PFTA. More
importantly, Section 11.07 did not say that the HPMC shall, thereafter, assume the PRAs
obligations. On the contrary, Section 7.01 of the PFTA recognizes that contracts that the
PRA entered into in its own name and makes it liable for the same. Thus, BCDA and [PRA]
shall be liable in accordance herewith only to the extent of the obligations specifically
undertaken by BCDA and [PRA] herein and any other documents or agreements relating to
the Project, and in which they are parties.
 JUAN SEVILLA, JR. v. EDEN VILLENA AGUILA
G.R. No. 202370, September 23, 2013
J. Carpio

Article 147 of the Family Code applies to the union of parties who are legally capacitated
and not barred by any impediment to contract marriage, but whose marriage is nonetheless
declared void under Article 36 of the Family Code, as in this case. Article147 of the Family
Code provided that when a man and a woman who are capacitated to marry each other, live
exclusively with each other as husband and wife without the benefit of marriage or under a
void marriage, their wages and salaries shall be owned by them in equal shares and the
property acquired by both of them through their work or industry shall be governed by the
rules on co-ownership. Under this property regime, property acquired during the marriage is
prima facie presumed to have been obtained through the couples joint efforts and governed
by the rules on co-ownership. In the present case, Salas did not rebut this presumption. In a
similar case where the ground for nullity of marriage was also psychological incapacity, we
held that the properties acquired during the union of the parties, as found by both the RTC
and the CA, would be governed by co-ownership

FACTS:

Eden Villena Aguila (Aguila) filed a Petition for Declaration of Nullity of Marriage of her
marriage to Juan Sevilla Salas (Salas) citing psychological incapacity under Article 36 of the
Family Code. The petition states that they "have no conjugal properties whatsoever." The
RTC rendered a Decision declaring the nullity of the marriage of Salas and Aguila. The RTC
Decision further provides for the "dissolution of their conjugal partnership of gains, if any."
Subsequently, Aguila filed a Manifestation and Motion stating that she discovered properties
and registered to "Juan S.Salas, married to Rubina C. Salas." The RTC ruled in favor of
Aguila and directed the partition of the properties registered to Juan S.Salas, married to
Rubina C. Salas." Rubina then filed a Complaint-in-Intervention, claiming, among others
that: (1) she is Rubina Cortez, a widow and unmarried to Salas; (2) the Discovered
Properties are her paraphernal properties; (3) Salas did not contribute money to purchase
the Discovered Properties. The RTC denied the Motion for Reconsideration filed by Salas.
On appeal, the CA affirmed the decision of the RTC.

ISSUE:

Whether Rubina has the right to intervene in the case on the ground that the properties are
her paraphernal properties

RULING:
 On both Salas and Rubinas contention that Rubina owns the Discovered Properties, we
likewise find the contention unmeritorious. The TCTs state that "Juan S. Salas, married to
Rubina C. Salas" is the registered owner of the Discovered Properties. A Torrens title is
generally a conclusive evidence of the ownership of the land referred to, because there is a
strong presumption that it is valid and regularly issued. The phrase "married to" is merely
descriptive of the civil status of the registered owner. Furthermore, Salas did not initially
dispute the ownership of the Discovered Properties in his opposition to the manifestation. It
was only when Rubina intervened that Salas supported Rubinas statement that she owns
the Discovered Properties.

Considering that Rubina failed to prove her title or her legal interest in the Discovered
Properties, she has no right to intervene in this case. The Rules of Court provide that only "a
person who has a legal interest in the matter in litigation, or in the success of either of the
parties, or an interest against both, or is so situated as to be adversely affected by a
distribution or other disposition of property in the custody of the court or of an officer thereof
may, with leave of court, be allowed to intervene in the action."

In Dio v. Dio, we held that Article 147 of the Family Code applies to the union of
parties who are legally capacitated and not barred by any impediment to contract marriage,
but whose marriage is nonetheless declared void under Article 36 of the Family Code, as in
this case. Article147 of the Family Code provided that when a man and a woman who are
capacitated to marry each other, live exclusively with each other as husband and wife
without the benefit of marriage or under a void marriage, their wages and salaries shall be
owned by them in equal shares and the property acquired by both of them through their
work or industry shall be governed by the rules on co-ownership. In the absence of proof to
the contrary, properties acquired while they lived together shall be presumed to have been
obtained by their joint efforts, work or industry, and shall be owned by them in equal shares.
For purposes of this Article, a party who did not participate in the acquisition by the other
party of any property shall be deemed to have contributed jointly in the acquisition thereof if
the formers efforts consisted in the care and maintenance of the family and of the
household. Neither party can encumber or dispose by acts inter vivos of his or her share in
the property acquired during cohabitation and owned in common, without the consent of the
other, until after the termination of their cohabitation.

When only one of the parties to a void marriage is in good faith, the share of the party in
bad faith in the co-ownership shall be forfeited in favor of their common children. In case of
default of or waiver by any or all of the common children or their descendants, each vacant
share shall belong to the respective surviving descendants. In the absence of descendants,
such share shall belong to the innocent party. In all cases, the forfeiture shall take place
upon termination of the cohabitation. Under this property regime, property acquired during
the marriage is prima facie presumed to have been obtained through the couples joint
efforts and governed by the rules on co-ownership. In the present case, Salas did not rebut
this presumption. In a similar case where the ground for nullity of marriage was also
psychological incapacity, we held that the properties acquired during the union of the parties,
as found by both the RTC and the CA, would be governed by co-ownership.
ANALITA P. INOCENCION, SUBSTITUTING FOR RAMON INOCENCION (DECEASED) v.
HOSPICIO DE SAN JOSE
G.R. No. 201787, September 25, 2013
J. Carpio

In the case of cession or assignment of lease rights on real property, there is a novation
by the substitution of the person of one of the parties the lessee. The personality of the
lessee, who dissociates from the lease, disappears. Only two persons remain in the juridical
relation the lessor and the assignee who is converted into the new lessee.

Assignment or transfer of lease, which is covered by Article 1649 of the Civil Code, is
different from a sublease arrangement, which is governed by Article 1650 of the same
Code. In a sublease, the lessee becomes in turn a lessor to a sublessee. The sublessee
then becomes liable to pay rentals to the original lessee. However, the juridical relation
between the lessor and lessee is not dissolved. The parties continue to be bound by the
original lease contract. Thus, in a sublease arrangement, there are at least three parties and
two distinct juridical relations.

FACTS:

On 1 March 1946, Hospicio de San Jose (HDSJ) leased a parcel of land to German
Inocencio (German). The lease contract was effective for a period of one year, and was
renewed for one-year periods several times. The last written contract was executed on 31
May 1951. Section 6 of the lease contract contains the intransferribility clause.

In 1946, German constructed two buildings on the parcel of land which he subleased. He
also designated his son Ramon Inocencio (Ramon) to administer the said property. German
passed away in 1997. After Germans passing, Ramon collected the rentals from the
sublessees, and paid the rentals to HDSJ, and the taxes on the property. On 1 March 2001,
HDSJs property administrator, Five Star Multi-Services, Inc., notified Ramon that HDSJ is
terminating the lease contract effective 31 March 2001. In its letter HDSJ acknowledged that
it had been accepting the monthly payments of Ramon.

Subsequently, HDSJ filed a Complaint for unlawful detainer against Ramon and his
sublessees, for illegally occupying the leased premises since 31 March 2001. While the
case was being tried before the MeTC-Pasay, Ramon passed away. He was then
substituted by his wife, Analita.
 The MeTC ruled in favor of HDSJ. On appeal, The RTC dismissed Analitas appeal and
affirmed the decision of the MeTC. Analita moved for reconsideration, but it was
denied. Analita then filed a petition for review under Rule 42 of the Rules of Court before the
CA. The CA affirmed the decision of the RTC but with modification.

ISSUE:

Whether the sublease contracts were invalid

RULING

Article 1311 of the Civil Code provided that contracts take effect only between the
parties, their assigns and heirs, except in case where the rights and obligations arising from
the contract are not transmissible by their nature, or by stipulation or by provision of law. The
heir is not liable beyond the value of the property he received from the decedent.

The general rule, therefore, is lease contracts survive the death of the parties and
continue to bind the heirs except if the contract states otherwise. In Sui Man Hui Chan v.
Court of Appeals, we held that a lease contract is not essentially personal in character. Thus,
the rights and obligations therein are transmissible to the heirs. The general rule, therefore,
is that heirs are bound by contracts entered into by their predecessors-in-interest except
when the rights and obligations arising therefrom are not transmissible by (1) their nature,
(2) stipulation or (3) provision of law. In the subject Contract of Lease, not only were there
no stipulations prohibiting any transmission of rights, but its very terms and conditions
explicitly provided for the transmission of the rights of the lessor and of the lessee to their
respective heirs and successors. The contract is the law between the parties. The death of a
party does not excuse nonperformance of a contract, which involves a property right, and
the rights and obligations thereunder pass to the successors or representatives of the
deceased. Similarly, nonperformance is not excused by the death of the party when the
other party has a property interest in the subject matter of the contract.

Section 6 of the lease contract provides that "this contract is nontransferable unless prior
consent of the lessor is obtained in writing." Section 6 refers to transfers inter vivos and not
transmissions mortis causa. What Section 6 seeks to avoid is for the lessee to substitute a
third party in place of the lessee without the lessors consent. This merely reiterates what
Article 1649 of the Civil Code, which provided that the lessee cannot assign the lease
without the consent of the lessor, unless there is a stipulation to the contrary.

In any case, HDSJ also acknowledged that Ramon is its month-to-month lessee. Thus,
the death of German did not terminate the lease contract executed with HDSJ, but instead
continued with Ramon as the lessee. HDSJ recognized Ramon as its lessee in a letter dated
1 March 2001. Section 6 of the lease contract requires written consent of the lessor before
the lease may be assigned or transferred. In Tamio v. Tecson, we held that in the case of
cession or assignment of lease rights on real property, there is a novation by the substitution
of the person of one of the parties the lessee. The personality of the lessee, who
dissociates from the lease, disappears; only two persons remain in the juridical relation
the lessor and the assignee who is converted into the new lessee.

Assignment or transfer of lease, which is covered by Article 1649 of the Civil Code, is
different from a sublease arrangement, which is governed by Article 1650 of the same Code.
In a sublease, the lessee becomes in turn a lessor to a sublessee. The sublessee then
becomes liable to pay rentals to the original lessee. However, the juridical relation between
the lessor and lessee is not dissolved. The parties continue to be bound by the original lease
contract. Thus, in a sublease arrangement, there are at least three parties and two distinct
juridical relations.

Ramon had a right to sublease the premises since the lease contract did not contain any
stipulation forbidding subleasing. Article 1650 of the Civil Code provided that when in the
contract of lease of things there is no express prohibition, the lessee may sublet the thing
leased, in whole or in part, without prejudice to his responsibility for the performance of the
contract toward the lessor.

Therefore, we hold that the sublease contracts executed by Ramon were valid.
 CRISANTA GUIDO-ENRIQUEZ v. ALICIA I. VICTORINO, ET. AL.
G.R. No. 180427, September 30, 2013
J. Peralta

This Court has already ruled in the Guido case that while TCT No. 23377 and its
derivative titles, which include TCT No. M-2102, serve as evidence of an indefeasible title to
the property in favor of the persons whose names appear therein, this Court took judicial
notice of the fact that certain portions of the land covered by TCT No. 23377 either "were in
possession of occupants who successfully obtained certificates of titles over the area
occupied by them" or were occupied by persons "who had not obtained certificates of titles
over the area possessed by them but the lengths of their possession were long enough to
amount to ownership, had the land been in fact unregistered."

FACTS:

Antonia Vda. De Victorino (Antonia) filed for an Application for Registration of Title over a
lot. The Republic, thru the Director of Lands, opposed said application alleging that it
belongs to the Republic of the Philippines. It appeared that the subject lot is a portion of a
large parcel of land covered by TCT No. M-2102, registered under the name of Antonia
Guido, et al., and, at the same time, overlapped with another lot which was also a subject of
an application for registration. There is a pending case filed by the Republic for annulment of
TCT No. 23377, the mother title of TCT No. M-2102, against Guido, et. al., (Guido case).

The Supreme Court rendered a decision Guido Case in favor of Guido, et. al., which was
appealed by the Republic. On August 15,1988, RTC-Pasig granted the application of
Antonia Victorino. The RTC-Pasig issued an Order for the Issuance of the Decree directing
the Commissioner of the Land Registration Commission to implement the said Decision,
considering the same has become final. However, pending the resolution of the Guido Case,
the Land Registration Authority held in abeyance the issuance of the decree in favor of
Antonia Victorino.On November 21, 1991, the Supreme Court issued a Decision in the
Guido Case in favor of (Antonia Guido, et.al.) and declared TCT 23377 issued under the
name of Guido, et. al. true and authentic.

Private Respondent Alicia Victorino filed a Manifestation and Motion for an Alias Order
for Issuance of a Decree in the Name of the New Owner-Transferee. Private Respondent
alleged that Antonia Victorino sold the subject lot in her favor. Private Respondent prayed
that the RTC-Pasig should issue an order annotating these decisions of the Supreme Court
and the RTC-Pasig in TCT M-2102 to segregate Antonia's portion. Private Respondent also
prayed that an Alias Order for the Issuance of decree of registration be issued in her favor
as the subject lot's new owner/transferee.
On November 19, 2002, the RTC-Pasig issued an order granting Private Respondent's
Motion and directing the Land Registration Authority to issue the corresponding decree after
payment of all taxes due on the land. The RTC-Pasig likewise ordered the Register of
Deeds of Rizal, Morong Branch, to make an annotation on TCT M-2102.

On December 4, 2002, Petitioner Crisanta Guido-Enriquez filed a Motion for

Clarification. Petitioner sought to clarify whether the August 15, 1988 decision ordered the
segregation of the subject lot and whether the Land Registration Authority has the authority
to move for said segregation. The RTC-Pasig denied Petitioner's Motion for being moot and
ordered the issuance of the decree in the name of Antonia Vda. De Victorino. Aggrieved,
herein petitioner filed a special civil action for certiorari with the CA. The CA denied the
petition and affirmed the decision of the RTC. Petitioner filed a Motion for Reconsideration
but it was denied by the CA. Hence, this petition.

ISSUE:

Whether the CA erred when it upheld the four (4) orders issued by RTC Pasig,
notwithstanding the fact that these orders altered, changed, modified and diminished in a
proceeding that is improper for altering, changing, modifying and diminishing a certificate of
land title

RULING:

This Court has already ruled in the abovementioned Guido case that while TCT No.
23377 and its derivative titles, which include TCT No. M-2102, serve as evidence of an
indefeasible title to the property in favor of the persons whose names appear therein, this
Court took judicial notice of the fact that certain portions of the land covered by TCT No.
23377 either "were in possession of occupants who successfully obtained certificates of
titles over the area occupied by them" or were occupied by persons "who had not obtained
certificates of titles over the area possessed by them but the lengths of their possession
were long enough to amount to ownership, had the land been in fact unregistered."

This Court then proceeded to rule that while prescription is unavailing against the
owners of the land covered by TCT No. 23377, on the ground that they are holders of a valid
certificate of title, the equitable presumption of laches may be applied against them for
failure to assert their ownership for such an unreasonable length of time. This prohac vice
ruling of the Court was further based on the established fact that the abovementioned
 owners, by agreement with the Office of the Solicitor General, have actually waived their
rights over the property subject of the said case in favor of "those who possessed and
actually occupied specific portions and obtained Torrens Certificates of Titles, and those who
possessed certain specific portions for such length of time as to amount to full ownership."
This Court, thus, held that it is imperative for those possessors, whose alleged bona fide
occupancy of specific portions of TCT No. 23377 is not evidenced by Torrens Titles, to prove
their claims in an appropriate proceeding. Among these occupants was, respondents'
predecessor-in-interest, Antonia Victorino who, as found by the RTC in its assailed decision
has duly proven that, together with her predecessor-in-interest, she has been in public,
peaceful, continuous, adverse possession against the whole world and in the concept of an
owner of the subject lot for a period of more than thirty (30) years.

OCTOBER 2013

FREDERICK VENTURA, MARITES VENTURA-ROXAS

v. HEIRS OF SPOUSES EUSTACIO T. ENDAYA and TRINIDAD L. ENDAYA

G.R. No. 190016, October 2, 2013

J. Perlas-Bernabe

A contract to sell is defined as a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the subject property despite delivery thereof to the
prospective buyer, binds himself to sell the said property exclusively to the latter upon his
fulfillment of the conditions agreed upon, i.e., the full payment of the purchase price and/or
compliance with the other obligations stated in the contract to sell. In a contract to sell, the
fulfillment of the suspensive condition will not automatically transfer ownership to the buyer
although the property may have been previously delivered to him. The prospective seller still
has to convey title to the prospective buyer by entering into a contract of absolute sale.

Aside from the payment of the purchase price and 12% interest p.a. on the outstanding
balance, the contract to sell likewise imposed upon petitioners the obligation to pay the real
property taxes over the subject properties as well as 12% interest p.a. on the arrears. However,
the summary of payments as well as the statement of account submitted by petitioners clearly
show that only the payments corresponding to the principal obligation and the 12% interest p.a.
on the outstanding balance were considered. Hence, petitioners indeed failed to comply with all
their obligations under the contract to sell and, as such, have no right to enforce the same.

FACTS:

Dolores Ventura entered into a Contract to Sell with spouses Endaya for the purchase
of two parcels of land, denominated as Lots 8 and 9, Block 3, situated in Marian Road II,
Marian Park, Paraaque City. The contract to sell provides that the purchase price shall be
paid by Dolores, wherein down payment shall be given upon execution of the contract and
the balance thereof within a 15-year payment period plus 12% interest per annum on the
outstanding balance and 12% interest p.a. on arrearages. It further provides that all
payments made shall be applied first, to the reimbursement of real estate taxes and other
charges; second, to the interest accrued to the date of payment; third, to the amortization of
the principal obligation; and fourth, to the payment of any other accessory obligation
subsequently incurred by the owner in favor of the buyer. It also imposed upon Dolores the
obligation to pay the real property taxes over the subject properties, or to reimburse Sps.
Endaya for any tax payments made by them, plus 1% interest per month. Upon full payment
of the stipulated consideration, Sps. Endaya undertook to execute a final deed of sale and
transfer ownership over the same in favor of Dolores.

Meanwhile, Dolores was placed in possession of the subject properties and allowed to
erect a building thereon. However, before the payment period expired, Dolores passed
away. Dolores children, filed before the RTC a Complaint for specific performance to compel
Sps. Endaya to execute a deed of sale over the subject properties. The petitioners averred
that due to the close friendship between their parents and Sps. Endaya, the latter did not
require Dolores to pay the down payment stated in the contract to sell and, instead, allowed
her to pay amounts as her means would permit. Further, the petitioners contend that the
total payments made exceeded the agreed purchase price including the interest thereon.
However, when petitioners demanded the execution of the corresponding deed of sale, Sps.
Endaya refused.

For their part, Sps. Endaya admitted the execution and genuineness of the contract to
sell and the passbook. However, they countered that Dolores did not pay the stipulated
down payment and remitted only a total of 22 installments and after her death, petitioners no
longer remitted any installment. Sps. Endaya also averred that prior to Dolores' death, the
parties agreed to a restructuring of the contract to sell whereby Dolores agreed to give a
"bonus" and to pay interest at the increased rate of 24% p.a. on the outstanding balance.
Sps. Endaya pointed out that the automatic cancellation clause under the contract rendered
the same cancelled with Dolores failure to make a down payment and to faithfully pay the
installments; hence, petitioners complaint for specific performance must fail.

The RTC decided in favour of petitioners and ordered Sps. Endaya to execute a deed of
absolute sale covering the sale of the subject properties. On appeal, the CA reversed the
RTC ruling finding that petitioners were not able to show that they fully complied with their
obligations under the contract to sell. Later, the respondent heirs of Sps. Endaya demanded
petitioners to vacate the property, but petitioner refused. Thus, petitioners filed the instant
petition.

ISSUE:
 Whether the action for specific performance which sought to enforce the contract to sell
and to compel the execution of a deed of sale over the subject properties may prosper.

RULING:

A contract to sell is defined as a bilateral contract whereby the prospective seller, while
expressly reserving the ownership of the subject property despite delivery thereof to the
prospective buyer, binds himself to sell the said property exclusively to the latter upon his
fulfillment of the conditions agreed upon, i.e., the full payment of the purchase price and/or
compliance with the other obligations stated in the contract to sell. Given its contingent
nature, the failure of the prospective buyer to make full payment and/or abide by his
commitments stated in the contract to sell prevents the obligation of the prospective seller to
execute the corresponding deed of sale to effect the transfer of ownership to the buyer from
arising.

To note, while the quality of contingency inheres in a contract to sell, the same should
not be confused with a conditional contract of sale. In a contract to sell, the fulfillment of the
suspensive condition will not automatically transfer ownership to the buyer although the
property may have been previously delivered to him. The prospective seller still has to
convey title to the prospective buyer by entering into a contract of absolute sale.On the other
hand, in a conditional contract of sale, the fulfillment of the suspensive condition renders the
sale absolute and the previous delivery of the property has the effect of automatically
transferring the sellers ownership or title to the property to the buyer.

Keeping with these principles, the Court finds that respondents had no obligation to
petitioners to execute a deed of sale over the subject properties. As aptly pointed out by the
CA, aside from the payment of the purchase price and 12% interest p.a. on the outstanding
balance, the contract to sell likewise imposed upon petitioners the obligation to pay the real
property taxes over the subject properties as well as 12% interest p.a. on the
arrears. However, the summary of payments as well as the statement of account submitted
by petitioners clearly show that only the payments corresponding to the principal obligation
and the 12% interest p.a. on the outstanding balance were considered in arriving at the
amount of P952,152.00. The Court has examined the petition as well as petitioners'
memorandum and found no justifiable reason for the said omission. Hence, the reasonable
conclusion would therefore be that petitioners indeed failed to comply with all their
obligations under the contract to sell and, as such, have no right to enforce the same.
Consequently, there lies no error on the part of the CA in reversing the RTC Decision and
dismissing petitioners complaint for specific performance seeking to compel respondents to
execute a deed of sale over the subject properties.
 OSCAR CONSTANTINO, MAXIMA CONSTANTINO and CASIMIRA MATURINGAN
v. HEIRS OF PEDRO CONSTANTINO, JR.

G.R. No. 181508, October 2, 2013

J. Perez

Under the pari delicto doctrine, the parties to a controversy are equally culpable or
guilty, they shall have no action against each other, and it shall leave the parties where it
finds them. As a doctrine in civil law, the rule on pari delicto is principally governed by
Articles 1411 and 1412 of the Civil Code. It must be stressed that Article 1412 of the Civil
Code that breathes life to the doctrine speaks of the rights and obligations of the parties to
the contract with an illegal cause or object which does not constitute a criminal offense. It
applies to contracts which are void for illegality of subject matter and not to contracts
rendered void for being simulated, or those in which the parties do not really intend to be
bound thereby.

In this case, there are two Deeds of extrajudicial assignments unto the signatories of the
portions of the estate of an ancestor common to them and another set of signatories likewise
assigning unto themselves portions of the same estate; hence, the principle of in pari delicto
cannot be applied. The inapplicability is dictated not only by the fact that two deeds, not one
contract, are involved, but because of the more important reason that such an application would
result in the validation of both deeds instead of their nullification as necessitated by their
illegality.

FACTS:

Pedro Sr. ancestors of the petitioners and respondents, owned several parcels of land,
one of which is an unregistered parcel of land declared for taxation purposes under Tax
Declaration. Pedro, Sr., upon his death, was survived by his six children. Later, Respondents
Asuncion and Josefina, great grandchildren of Pedro Sr., in representation of Pedro, Jr. filed
a complaint against petitioners who are grandchildren of Pedro Sr., for the nullification of a
document denominated as "Pagmamana sa Labas ng Hukuman," Tax Declaration Nos. 96-
10022 (02653) and 96-10022 (02655) and reinstatement of Tax Declaration No. 20814 in the
name of Pedro Sr. Respondents alleged that sometime petitioners asserted their claim of
ownership over the whole land owned by the late Pedro Sr., to the exclusion of respondents
who are occupying a portion thereof. Upon verification, respondents learned that a Tax
Declaration in the name of petitioner Oscar and his cousin Maxima was unlawfully issued,
which in effect canceled the Tax Declaration in the name of their ancestor Pedro Sr. Further,
the issuance of the new tax declaration was allegedly due to the execution of a simulated,
fabricated and fictitious document denominated as "Pagmamana sa Labas ng Hukuman,"
wherein the petitioners misrepresented themselves as the sole and only heirs of Pedro Sr. It
was further alleged that subsequently, the subject land was divided equally between
petitioners resulting in the issuance of Tax Declaration No. 96-10022-02653 in the name of
Oscar, and the other half in the name of Maxima covered by Tax Declaration No. 96-10022-
02652, which eventually was conveyed to her sister, petitioner Casimira in whose name a
new Tax Declaration was issued.

The petitioners, on the other hand, averred that Pedro Sr., upon his death, left several
parcels of land; that the document "Pagmamana sa Labas ng Hukuman" was perfectly valid
and legal, as it was a product of mutual and voluntary agreement between and among the
descendants of the deceased Pedro Sr. Further, petitioners alleged that the respondents
have no cause of action against them considering that the respondents lawful share over
the estate of Pedro Sr., had already been transferred to them as evidenced by the Deed of
Extrajudicial Settlement with Waiver executed by the heirs of Pedro Jr.

The RTC decided in favor of the respondents explaining that as a result of execution of
"Extrajudicial Settlement with Waiver executed by the heirs of Pedro Jr., and the
subsequent execution of another deed denominated as "Pagmamana sa Labas ng
Hukuman" executed by the heirs of Constantino, to the exclusion of the other heirs, both
parties acted equally at fault. They are in pari delicto, whereby the law leaves them as they
are and denies recovery by either one of them. On appeal, the CA ruled in favour of the
respondents declaring that the "Extrajudicial Settlement with Waiver" they executed actually
belongs to Pedro Jr; hence, it is erroneous for the trial court to declare the parties in pari
delicto.

ISSUE:

Whether parties are in pari delicto.

RULING:

Latin for "in equal fault," in pari delicto connotes that two or more people are at fault or
are guilty of a crime. Neither courts of law nor equity will interpose to grant relief to the
parties, when an illegal agreement has been made, and both parties stand in pari
delicto. Under the pari delicto doctrine, the parties to a controversy are equally culpable or
guilty, they shall have no action against each other, and it shall leave the parties where it
finds them.
 As a doctrine in civil law, the rule on pari delicto is principally governed by Articles 1411
and 1412 of the Civil Code. We do not dispute that herein parties, through the Deeds they
separately executed deprived each other of rightful shares in the two lots subject of the
separate contracts that is, if the two (2) parcels of land subject matter thereof, form part of
the estate of the late Pedro Sr.

Finding the inapplicability of the in pari delicto doctrine, We find occasion to stress that
Article 1412 of the Civil Code that breathes life to the doctrine speaks of the rights and
obligations of the parties to the contract with an illegal cause or object which does not
constitute a criminal offense. It applies to contracts which are void for illegality of subject
matter and not to contracts rendered void for being simulated, or those in which the parties
do not really intend to be bound thereby. Specifically, in pari delicto situations involve the
parties in one contract who are both at fault, such that neither can recover nor have any
action against each other.

In this case, there are two Deeds of extrajudicial assignments unto the signatories of the
portions of the estate of an ancestor common to them and another set of signatories
likewise assigning unto themselves portions of the same estate. The separate Deeds came
into being out of an identical intention of the signatories in both to exclude their co-heirs of
their rightful share in the entire estate of Pedro Sr. It was, in reality, an assignment of
specific portions of the estate of Pedro Sr., without resorting to a lawful partition of estate as
both sets of heirs intended to exclude the other heirs.

Clearly, the principle of in pari delicto cannot be applied. The inapplicability is dictated
not only by the fact that two deeds, not one contract, are involved, but because of the more
important reason that such an application would result in the validation of both deeds
instead of their nullification as necessitated by their illegality. It must be emphasized that the
underlying agreement resulting in the execution of the deeds is nothing but a void
agreement. Thus, any condition attached to the property or any agreement precipitating the
execution of the Deed of Extrajudicial Settlement with Waiver which was binding upon Maria
Laquindanum is applicable to respondents who merely succeeded Maria.
 FE ABELLA y PERPETUA v. PEOPLE OF THE PHILIPPINES

G.R. No. 198400, October 7, 2013

J. Reyes

Where the amount of actual damages cannot be determined because of the absence of
supporting receipts but entitlement is shown by the facts of the case, temperate damages may
be awarded. In the instant case, Benigno certainly suffered injuries, was actually hospitalized
and underwent medical treatment. Considering the nature of his injuries, it is prudent to award
temperate damages in the amount of P25,000.00, in lieu of actual damages. Further, Benigno is
entitled to moral damages in the amount of P25,000.00.

FACTS:

Petitioner was charged with frustrated homicide for hacking with intent to kill Benigno
Abella, with the use of scythe, hitting the latters neck thereby inflicting injury on the left
lateral aspect neck and incised wound on the left hand aspect. After the Information was
filed, the petitioner remained at large and was only arrested by agents of the NBI on October
7, 2002. The petitioner pleaded not guilty and trial ensued.

The Prosecution offered the testimonies of Benigno; Amelita, Benignos wife; Alejandro,
with whom the petitioner had a quarrel; and Dr. Ardiente, a surgeon who rendered medical
assistance to Benigno after the latter was hacked by the petitioner. The prosecutions
testimony revealed that Benigno incurred an expense of more than P10,000.00 for
hospitalization, but lost the receipts of his bills. Further, after the hacking incident, Benigno
could no longer move his left hand and was thus deprived of his capacity to earn a living as
a carpenter. Likewise, Dr. Ardiente testified that Benigno sustained wounds and since the
scythe used in the hacking was not sterile, complications and infections could have
developed from the big and open wounds sustained by Benigno, but fortunately did not. For
their part, the defense offered the testimonies of the petitioner; Fernando, a friend of the
petitioner; and Urbano. The petitioner relied on denial and alibi as defenses.

The RTC convicted the petitioner of the crime charged and was ordered to indemnify
offended-party complainant Benigno Abella. The RTC awarded P10,000.00 as actual
damages to Benigno for the medical expenses he incurred despite the prosecutions failure
to offer receipts as evidence. The petitioner was likewise ordered to pay P100,000.00 as
consequential damages, but the RTC did not explicitly lay down the basis for the award. On
appeal, the CA affirmed petitioners conviction but modified the sentence and deleted the
RTCs order for the payment of actual and consequential damages as there were no
competent proofs to justify the awards. The CA instead ruled that Benigno is entitled
to P30,000.00 as moral damages and P10,000.00 as temperate damages, the latter being
awarded when some pecuniary loss has been incurred, but the amount cannot be proven
with certainty.

ISSUE:

Whether the award of damages is proper

RULING:

As to the civil liability of the petitioner, the CA was correct in deleting the payment of the
consequential damages awarded by the trial court in the absence of proof thereof. Where
the amount of actual damages cannot be determined because of the absence of supporting
receipts but entitlement is shown by the facts of the case, temperate damages may be
awarded. In the instant case, Benigno certainly suffered injuries, was actually hospitalized
and underwent medical treatment. Considering the nature of his injuries, it is prudent to
award temperate damages in the amount of P25,000.00, in lieu of actual damages.
Furthermore, we find that Benigno is entitled to moral damages in the amount
of P25,000.00. There is sufficient basis to award moral damages as ordinary human
experience and common sense dictate that such wounds inflicted on Benigno would
naturally cause physical suffering, fright, serious anxiety, moral shock, and similar injury.

REPUBLIC OF THE PHILIPPINES v. CARMEN VICTORIA BELMONTE

G.R. No. 197028, October 9, 2013

J. Mendoza

Applicants for registration of title under Section 14(1) must sufficiently establish: (1) that
the subject land forms part of the disposable and alienable lands of the public domain; (2)
that the applicant and his predecessors-in-interest have been in open, continuous, exclusive
and notorious possession and occupation of the same; and (3) that his possession has been
under a bona fide claim of ownership since June 12, 1945, or earlier.
 These triple requirements of alienability and possession and occupation since June 12,
1945 or earlier under Section 14(1) are indispensable prerequisites to a favorable
registration of title to the property. Belmonte, however, failed to establish that she has met
the indispensable requirements of possession since June 12, 1945 or earlier to merit the
registration of the title in her name. Possession and occupational one, for 30 years or more,
does not suffice. As provided in P.D. No. 1073, it is mandatory that possession and
occupation of the piece of land by the applicant, by himself or through his predecessors-in-
interest, had commenced on June 12, 1945 or earlier. This requirement of possession and
occupation since June 12, 1945, or even earlier, is very fundamental "without satisfying the
requisite character and period of possession -possession and occupation that is open,
continuous, exclusive, and notorious since June 12, 1945, or earlier- the land cannot be
considered ipso jure converted to private property even upon the subsequent declaration of
it as alienable and disposable."

FACTS:

On October 24, 2002, Belmonte filed an Application for Registration and Confirmation of
Titles of two (2) lots identified as Lot No. 3766 and Lot No. 5194 located in Barangay
Hagonoy and Barangay Bambang, Taguig City, respectively. Daniel Victoria, Jr., Belmontes
attorney-in-fact and younger sibling, alleged that Belmonte inherited the subject properties
from Daniel Osorio Victoria and Rufina Cruz Victoria, their parents, as evidenced by an
extrajudicial settlement of estate. Belmonte narrated that her parents had been in
possession of the said lots since the Japanese occupation in 1943 and attached documents
in support of her application for registration, which included tax declaration thereof.
However, the OSG opposed the application arguing that Belmonte failed to comply with the
jurisdictional requirements of P.D. No. 1529.

The RTC granted Belmontes application for registration of land title. It held that she was
able to successfully establish her ownership over the lots in question. This decision was
affirmed by the CA explaining that Belomonte successfully established the possession and
occupation of her predecessors-in-interest since 1943 as the CA gave credence to the
testimonies of Daniel, Jr. who disclosed that, before the Japanese invasion, he used to
come with his mother to survey the lots and they had a tenant, Reyes; and Marietta Reyes
(Marietta) who narrated that, from the Japanese period up to 1967, her father-in-law
cultivated the subject lots, which was continued by her husband up to 1995. The OSG
moved for a reconsideration but the motion was denied; hence, this petition.

The OSG argued that Belmonte failed to prove open, continuous, exclusive and
notorious possession of the subject properties since June 12,1945 or earlier. The tax
declarations she submitted for the lots did not indicate possession since June 12, 1945 or
earlier.

ISSUE:

Whether possession and occupation since June 12, 1945 was substantiated.

RULING:

Based on these legal parameters (P.D. No. 1529 or the Property Registration Decree),
applicants for registration of title under Section 14(1) must sufficiently establish: (1) that the
subject land forms part of the disposable and alienable lands of the public domain; (2) that
the applicant and his predecessors-in-interest have been in open, continuous, exclusive and
notorious possession and occupation of the same; and (3) that his possession has been
under a bona fide claim of ownership since June 12, 1945, or earlier.

These triple requirements of alienability and possession and occupation since June 12,
1945 or earlier under Section 14(1) are indispensable prerequisites to a favorable
registration of title to the property. Each element must necessarily be proven by no less than
clear, positive and convincing evidence; otherwise, the application for registration should be
denied.

Belmonte, however, failed to convince the Court that she has met the indispensable
requirements of possession since June 12, 1945 or earlier to merit the registration of the title
in her name. Possession and occupational one, for 30 years or more, does not suffice. As
provided in P.D. No. 1073, it is mandatory that possession and occupation of the piece of
land by the applicant, by himself or through his predecessors-in-interest, had commenced
on June 12, 1945 or earlier. The burden of proving adverse, continuous, open, and public
possession in the concept of an owner rests upon the applicant, by no less than clear,
positive and convincing evidence.

The earliest tax declaration that Belmonte showed for Lot No. 5194 was dated 1949.
Evidently, it falls short of the time requirement of possession since 1945 or earlier. More
importantly, the Court cannot give any probative value to the 1949 tax declaration because
the property was declared in the name of a certain Francisca Osorio. Belmonte failed to
establish the connection between Francisca Osorio and her father and predecessor-in-
interest, Daniel Victoria. Hence, the Court cannot tack the possession of Osorio, the name
entered in the earliest tax declaration with that of Daniel, which was the name entered in
later tax declarations. As to Lot No. 3766, records show that Belmontes predecessor-in-
interest started declaring the property for tax purposes only in 1966.

As to the requirement of possession and occupation, the Court is likewise of the view
that these prerequisites were not sufficiently established. It is undisputed that Belmonte
resides outside the country and is not in actual possession of the said lots. Daniel, Jr.
testified that his sister, Belmonte, had a tenant who cultivated the land on her behalf. To
establish the tenancy, a certain Marietta took the witness stand to corroborate his statement.
She was allegedly the widow of the lands previous tenant. Unfortunately, her testimony was
not persuasive enough to prove the open and notorious possession and occupation of
Belmonte over the disputed lots.

Assuming arguendo that somebody cultivated the land, mere casual cultivation of the land
does not amount to exclusive and notorious possession that would give rise to
ownership. Except as to the self-serving declaration made by Marietta, no other evidence
was shown by Belmonte to substantiate her statements.

This requirement of possession and occupation since June 12, 1945, or even earlier, is
very fundamental that the Court, in its September 3, 2013 Resolution in Heirs of Mario
Malabanan vs. Republic of the Philippines, emphasized that "without satisfying the requisite
character and period of possession -possession and occupation that is open, continuous,
exclusive, and notorious since June 12, 1945, or earlier- the land cannot be considered ipso
jure converted to private property even upon the subsequent declaration of it as alienable
and disposable." Thus, absent clear and convincing evidence showing a valid claim of open,
continuous, exclusive, and notorious possession and occupation since June 12, 1945 or
earlier, the Court is constrained to deny Belmonte's application for registration of title.

SAN FERNANDO REGALA TRADING, INC. v. CARGILL PHILIPPINES, INC.

G.R. No. 178008, October 9, 2013

J. Abad

It is not enough for a seller to show that he is capable of delivering the goods on the
date he agreed to make the delivery. He has to bring his goods and deliver them at the
place their agreement called for, i.e., at the Ajinomoto Pasig River wharf. A stipulation
designating the place and manner of delivery is controlling on the contracting parties. The
thing sold can only be understood as delivered to the buyer when it is placed in the buyers
control and possession at the agreed place of delivery.
 As a rule, moral damages are not awarded to a corporation unless it enjoyed good
reputation that the offender debased and besmirched by his actuations. Besides, moral
damages are, as a rule, also not recoverable in culpa contractual except when bad faith had
been proved. In the case, San Fernando failed to show that Cargill was motivated by bad faith
or ill will when it failed to deliver the molasses as agreed. Further, in breach of contract, the
court may only award exemplary damages if the defendant acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner.

As to attorneys fees and expenses of litigation under Article 2208 of the Civil Code are
proper only when exemplary damages are awarded. Here, the Court has ruled that San
Fernando is not entitled to an award of exemplary damages. Both parties actually committed
shortcomings in complying with their contractual obligations.

FACTS:

Cargill and San Fernando Regala Trading, Inc. were cane molasses traders that did
business with each other for sometime. During the course of their contract, San Fernando
claimed that Cargill reneged on its contractual obligations to deliver certain quantities of
molasses. Cargill denied this, insisting that San Fernando actually refused to accept the
delivery of the goods. This resulted in Cargills filing a complaint for sum of money and
damages against San Fernando, wherein Cargill alleged that entered into Contract
5026 covering its sale to San Fernando of 4,000 metric tons (mt) of molasses at the price
of P3,950.00 per mt. Cargill agreed to deliver the molasses within the months of "April to
May 1997" at the wharf of Union Ajinomoto, Inc along the Pasig River, Metro Manila. The
contract was a risk-taking forward sale in that its execution was to take place about 10
months later when the parties did not yet know what the trading price of molasses would be.

Later, Cargill also entered into Contract 5047 covering another sale to San Fernando of
5,000 mt of molasses at P2,750.00 per mt. The delivery period under this contract was
within "October-November-December 1996," sooner than the delivery period under Contract
5026. Apparently, San Fernando had a deal with Ajinomoto for the supply of these molasses.
Cargill further alleged that it offered to deliver the 4,000 mt of molasses as required by
Contract 5026 but San Fernando accepted only 951 mt, refusing to accept the rest. Soon,
the barge carrying Cargills 1,174 mt of molasses, arrived at the Ajinomoto wharf but San
Fernando refused to accept the same. The barge then stayed at the wharf for 71 days,
waiting for San Fernandos unloading order. Due to the delay, the owner of the barges
lapped Cargill with demurrage and Cargill also suffered P3,480,000.00 in damages by way
of unrealized profits because it had to sell the cargo to another buyer at a loss. Further,
Cargill alleged that it earlier sought to deliver the molasses covered by Contract 5047 at the
Ajinomoto wharf but San Fernando refused for unjustified reasons to accept the delivery. As
such, Cargill suffered damages by way of unrealized profits. Thus, Cargill asks for awards of
unrealized profits and the return of the demurrage it paid, attorneys fees, and cost of
litigation.
 San Fernando claimed that except for the 951 mt of molasses that Cargill delivered in
March 1997, the latter made no further deliveries for Contract 5026. Indeed, Cargill sent San
Fernando a letter proposing a change in the delivery period but San Fernando rejected the
change since it had a contract to sell the molasses to Ajinomoto for P5,300.00 per
mt. Further, San Fernando maintained that Cargill delivered no amount of molasses in
connection with Contract 5047.

RTC dismissed Cargills complaint, however the CA ruled that Cargill was not entirely in
breach of Contract 5026 as Cargill made an advance delivery of 951 mt in March 1997, but
found Cargill guilty of breach of Contract 5047 which called for delivery of the molasses in
"October-November-December 1996." Further, the CA deleted the award of moral and
exemplary damages, attorneys fees, and cost of litigation.

ISSUE:

1. Whether there was breach of obligation to deliver.

2. Whether the award of moral and exemplary damages as well as attorneys fees are
proper.

RULING:

1. But Contract 5026 required Cargill to deliver 4,000 mt of molasses during the period
"April to May 1997." Thus, anything less than that quantity constitutes breach of the
agreement. And since Cargill only delivered a total of 2,125 mt of molasses during the
agreed period, Cargill should be regarded as having violated Contract 5026 with respect to
the undelivered balance of 1,875 mt of molasses.

It is not enough for a seller to show that he is capable of delivering the goods on the
date he agreed to make the delivery. He has to bring his goods and deliver them at the place
their agreement called for, i.e., at the Ajinomoto Pasig River wharf.
 A stipulation designating the place and manner of delivery is controlling on the
contracting parties. The thing sold can only be understood as delivered to the buyer when it
is placed in the buyers control and possession at the agreed place of delivery. Cargill
presented no evidence that it attempted to make other deliveries to complete the balance of
Contract 5026.

2. As a rule, moral damages are not awarded to a corporation unless it enjoyed good
reputation that the offender debased and besmirched by his actuations. San Fernando failed
to prove by sufficient evidence that it fell within this exception. Besides, moral damages are,
as a rule, also not recoverable in culpa contractual except when bad faith had been proved.
San Fernando failed to show that Cargill was motivated by bad faith or ill will when it failed to
deliver the molasses as agreed.

The Court rules that the CA correctly deleted the award of exemplary damages to
San Fernando. In breach of contract, the court may only award exemplary damages if the
defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. The
evidence has not sufficiently established that Cargills failure to deliver the molasses on time
was attended by such wickedness.

Attorneys fees and expenses of litigation under Article 2208 of the Civil Code are
proper only when exemplary damages are awarded. Here, the Court has ruled that San
Fernando is not entitled to an award of exemplary damages. Both parties actually committed
shortcomings in complying with their contractual obligations. San Fernando failed in
Contract 5026 to accept Cargills delivery of 1,174 mt of molasses; Cargill only complied
partially with its undertakings under Contract 5026and altogether breached its obligations
under Contract 5047. For these, they must bear their own expenses of litigation.

VIRGILIO G. CAGATAO v. GUILLERMO ALMONTE

G.R. No. 174004, October 9, 2013

J. Mendoza

Section 48 of P.D. No. 1529 clearly states that "a certificate of title shall not be subject to
collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in
accordance with law." Cagataos original complaint before the RTC was for the cancellation of
TCT No. T-249437 in the name of the Fernandez Siblings and the nullification of the deeds of
sale between the Fernandez Siblings and Spouses Fernandez, and the earlier one between the
latter and Almonte and Aguilar. Nowhere in his complaint did Cagatao mention that he sought to
invalidate TCT No. 12159-A. It was only during the course of the proceedings, when Spouses
Fernandez disclosed that they had purchased the property from Carlos, that Cagatao thought of
questioning the validity of TCT No. 12159-A. Thus, should Cagatao wish to question the
ownership of the subject lot of Carlos and Spouses Fernandez, he should institute a direct
action before the proper courts for the cancellation or modification of the titles in the name of
the latter two.

A person dealing with a registered land has the right to rely on the face of the Torrens
title and need not inquire further, unless the party concerned has actual knowledge of facts and
circumstances that would impel a reasonably cautious man to make such an inquiry. The
indefeasibility of a Torrens title as evidence of lawful ownership of the property protects buyers
in good faith who rely on what appears on the face of the said certificate of title. Moreover, a
potential buyer is charged with notice of only the burdens and claims annotated on the title.
There has been no showing that Spouses Fernandez were aware of any irregularity in Carlos
title that would make them suspicious and cause them to doubt the legitimacy of Carlos claim of
ownership, especially because there were no encumbrances annotated on Carlos title. Hence,
the current possessor, shall remain to be so until such time that his possession is successfully
contested by a person with a better right.

FACTS:

On February 16, 1949, a homestead patent over the property was issued in favor of
Gatchalian. Cagatao claimed that sometime in 1940, Gatchalian sold the lot to Manzulin in
exchange for one carabao, as embodied in a barter agreement which was destroyed or lost
during the World War II. Few years thereafter, Manzulin allegedly executed a private written
document in the Ilocano dialect, transferring ownership over the property to his son-in-law,
Cagatao, who then occupied and cultivated the land until the Fernandez Siblings attempted to
take possession of the lot. This prompted Cagatao to file a complaint for annulment of deeds of
sale, cancellation of title and demagaes aginst respondents.

The respondents, on the other hand, contended that on April 3, 1993, the Spouses
Fernandez purchased the property from Almonte and Aguilar who had in their possession a
tax declaration covering the said land. Believing that Carlos is the owner of the lot by virtue
of a certificate of title, reconstituted in the name of Carlos, Spouses Fernandez bought once
again the same property from the former, who then executed a deed of sale, in favor of
Spouses Fernandezs children resulting in the issuance of TCT No.T-249437 in their names.
Cagatao questioned the sale to Spouses Fernandez by Carlos because, at that time,
Manzulin was already the owner of the subject property. He also pointed out that it was
irregular that Spouses Fernandez would buy the same property from two different vendors
on two different occasions. Apart from these anomalous transactions, Cagatao insisted that
the certificate of title in the name of the Fernandez Siblings was a nullity as the sale was
simulated. The simulated sale was testified to by Avelina Fernandez who confirmed that she
and her husband did not sign the deed of sale purporting to have transferred ownership of
the property to the Fernandez Siblings.
 On their part, respondents claimed that Cagatao was unable to present proof of title or
any public document embodying the sale of the property from Gatchalian to Manzulin and
from the latter to Cagatao. They even if a homestead patent was indeed issued to
Gatchalian, it became void when Gatchalian did not occupy the land himself. Subsequently,
pending litigation, the RTC issued a writ of preliminary injunction restraining the respondents
from disturbing Cagataos possession of the land during the pendency of the case.

RTC ruled that Cagataos evidence was insufficient to prove his ownership over the land
in question because Manzulin never acquired a lawful title to the property from his
predecessor, Gatchalian. The RTC, further ruled that Cagataos claim of possession could
not prevail over the claim of ownership by Spouses Fernandez as evidenced by a certificate
of title and the deed of sale executed therein was upheld as valid. On appeal, the CA
modified the RTC decision explaining that the ownership of the land remained with
Gatchalian by virtue of the homestead patent in his name, and neither the alleged transfer to
Manzulin nor the theory of abandonment of the RTC could divest him of said title. Further,
the CA ruled that although Cagataos claim of ownership could not be recognized, his
possession could not be disturbed because only the true owner could challenge him for
possession of the subject property. Cagatao moved for reconsideration but the motion was
denied; hence, this petition.

ISSUES:

1. Whether the validity of certificate of title can be attacked collaterally

2. Whether the sale is valid

RULING:

1. Section 48 of P.D. No. 1529 clearly states that "a certificate of title shall not be subject
to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding
in accordance with law." An attack on the validity of the title is considered to be a collateral
attack when, in an action to obtain a different relief and as an incident of the said action, an
attack is made against the judgment granting the title. Cagataos original complaint before
the RTC was for the cancellation of TCT No. T-249437 in the name of the Fernandez
Siblings and the nullification of the deeds of sale between the Fernandez Siblings and
Spouses Fernandez, and the earlier one between the latter and Almonte and Aguilar.
Nowhere in his complaint did Cagatao mention that he sought to invalidate TCT No. 12159-
A. It was only during the course of the proceedings, when Spouses Fernandez disclosed
that they had purchased the property from Carlos, that Cagatao thought of questioning the
validity of TCT No. 12159-A.

Although the CA correctly ruled that the transfer from Gatchalian to Manzulin was
invalid, the existence of a valid Torrens title in the name of Carlos which has remained
unchallenged before the proper courts has made irrelevant the issue of whether Gatchalian
and his successors-in-interest should have retained ownership over the property. This is
pursuant to the principle that a Torrens title is irrevocable and its validity can only be
challenged in a direct proceeding. Hence, a Torrens certificate of title is indefeasible and
binding upon the whole world unless it is nullified by a court of competent jurisdiction in a
direct proceeding for cancellation of title.

Thus, should Cagatao wish to question the ownership of the subject lot of Carlos and
Spouses Fernandez, he should institute a direct action before the proper courts for the
cancellation or modification of the titles in the name of the latter two. He cannot do so now
because it is tantamount to a collateral attack on Carlos title, which is expressly prohibited
by law and jurisprudence.

2. A person dealing with a registered land has the right to rely on the face of the Torrens
title and need not inquire further, unless the party concerned has actual knowledge of facts
and circumstances that would impel a reasonably cautious man to make such an inquiry.
The indefeasibility of a Torrens title as evidence of lawful ownership of the property protects
buyers in good faith who rely on what appears on the face of the said certificate of title.
Moreover, a potential buyer is charged with notice of only the burdens and claims annotated
on the title.

In this case, there has been no showing that Spouses Fernandez were aware of any
irregularity in Carlos title that would make them suspicious and cause them to doubt the
legitimacy of Carlos claim of ownership, especially because there were no encumbrances
annotated on Carlos title. At any rate, that is the proper subject of another action initiated for
the purpose of questioning Carlos certificate of title from which Spouses Fernandez derived
their ownership because, otherwise, the title of Spouses Fernandez would become
indefeasible.

The Torrens system was adopted in this country because it was believed to be the most
effective measure to guarantee the integrity of land titles and to protect their indefeasibility
once the claim of ownership is established and recognized. If a person purchases a piece of
land on the assurance that the seller's title thereto is valid, he should not run the risk of
being told later that his acquisition was ineffectual after all. This would not only be unfair to
him. What is worse is that if this were permitted, public confidence in the system would be
eroded and land transactions would have to be attended by complicated and not necessarily
conclusive investigations and proof of ownership. The further consequence would be that
land conflicts could be even more numerous and complex than they are now and possibly
also more abrasive, if not even violent. The Government, recognizing the worthy purposes of
the Torrens system, should be the first to accept the validity of titles issued thereunder once
the conditions laid down by the law are satisfied.

While the Court finds that the validity of TCT No. 12159-A cannot be attacked
collaterally and that Cagatao had not sufficiently established his claim of ownership over the
subject property, it agrees with the CA that he, the current possessor, shall remain to be so
until such time that his possession is successfully contested by a person with a better right.

JAIME P. ADRIANO and LEGASPI TOWERS 300, INC.

v. ALBERTO LASALA and LOURDES LASALA

G.R. No. 197842, October 9, 2013

J. Mendoza

To recover moral damages in an action for breach of contract, the breach must be
palpably wanton, reckless and malicious, in bad faith, oppressive, or abusive. Hence, the
person claiming bad faith must prove its existence by clear and convincing evidence for the
law always presumes good faith. Bad faith does not simply connote bad judgment or
negligence; hence, it is a question of intention, which can be inferred from ones conduct
and/or contemporaneous statements. The inappropriate dealings of Adriano to acquire
financial gain at the expense of respondents, with the approval or acquiescence of the
Board; the hiring of unqualified personnel being used as a ground for termination despite the
fact that such hiring was upon their recommendation; and the repeated allegations of non-
compliance even if respondents had corrected already what were complained of, constituted
unjust and dishonest acts schemed by the petitioners to provide an appearance of validity to
the termination. These acts constituted bad faith on part of petitioner.

To warrant the award of exemplary damages, "the wrongful act must be accompanied
by bad faith, and an award of damages would be allowed only if the guilty party acted in a
wanton, fraudulent, reckless or malevolent manner."

Temperate damages maybe allowed in cases where from the nature of the case,
definite proof of pecuniary loss cannot be adduced, although the court is convinced that the
aggrieved party suffered some pecuniary loss. Indisputably, respondents in this case
suffered pecuniary loss because of the untimely termination of their services for no cause at
all. As there is no proof capable of ascertaining the actual loss, the CA rightfully awarded
temperate damages, in lieu of actual damages.

FACTS:

Petitioner entered into a security service contract with respondents for a period of one
year. Later, before the contract expires, respondents received a letter signed by Adriano,
reminding the respondents of their non-compliance with the security services agreement.
Adriano cited that respondents failed to assign security guards with the required height and
educational attainment and to provide the agreed service vehicle. In compliance,
respondents relieved and replaced the unqualified personnel with Adrianos recommendees.
A Ford Fiera was also produced although parked in a nearby area as no space in the
building was available. Despite positive responses, respondents received another letter,
reiterating the same instances of non-compliance. Dismayed, they talked to Adriano who
replied with an invitation to hold a meeting to which respondents agreed.

In the meeting, Adriano mentioned that the differences could only be settled by
cooperating with each other and requested from respondents the payment of P18,000.00, to
be given to Santos, the LT300 President; Captain Perez; and to Adriano himself. The
respondents came across, but the petitioners demanded another equivalent amount in
another meeting. However, patitioners still reiterated respondents violations and in the last
letter, petition added another grievance as to non-payment of the minimum wage.
Respondents then sought the cooperation of the LT3000 Board but to no avail. Soon, the
Board terminated the contracts without giving respondents opportunity to explain, causing
respondents to file a complaint for damages alleging that LT300 and Adriano illegally
terminated their services. The RTC ruled in favour of respondents, explaining that the
agreement could only be terminated for valid cause. Further, the RTC awarded moral and
exemplary damages. On appeal, the CA affirmed the RTC but modified the award of
damages and added temperate damages thereto. Motion for reconsideration was filed, but it
was denied; hence this petition.

ISSUE:

Whether there can be award of temperate damages, moral damages, and exemplary
damages.
RULING:

Under Article 2220 of the Civil Code, moral damages may be awarded in cases of
breach of contract provided that there was fraud or bad faith. To recover moral damages in
an action for breach of contract, the breach must be palpably wanton, reckless and
malicious, in bad faith, oppressive, or abusive. Hence, the person claiming bad faith must
prove its existence by clear and convincing evidence for the law always presumes good
faith.

Bad faith does not simply connote bad judgment or negligence. It imports a dishonest
purpose or some moral obliquity and conscious doing of a wrong, a breach of known duty
through some motive or interest or ill will that partakes of the nature of fraud. It is, therefore,
a question of intention, which can be inferred from ones conduct and/or contemporaneous
statements.

The CA decision to grant moral damages was grounded on the fact that the termination
was effected without valid reason. The Court finds more to what the CA had observed. The
inappropriate dealings of Adriano to acquire financial gain at the expense of respondents,
with the approval or acquiescence of the Board; the hiring of unqualified personnel being
used as a ground for termination despite the fact that such hiring was upon their
recommendation; and the repeated allegations of non-compliance even if respondents had
corrected already what were complained of, constituted unjust and dishonest acts schemed
by the petitioners to provide an appearance of validity to the termination. These mischievous
insinuations cannot escape the Courts attention as they manifested petitioners malicious
and unjust intent to do away with respondents services. It must be noted that respondents,
in the course of their engagement, were even commended for efficiency and service. With
these in mind, the Court is convinced that the petitioners acted in bad faith and are, thus,
liable for moral damages.

To warrant the award of exemplary damages, "the wrongful act must be accompanied
by bad faith, and an award of damages would be allowed only if the guilty party acted in a
wanton, fraudulent, reckless or malevolent manner." As bad faith attended the termination of
the service contract agreement, there is no reason to reverse the award for exemplary
damages.

Under Article 2224 of the Civil Code, when pecuniary loss has been suffered but the
amount cannot, from the nature of the case, be proven with certainty, temperate damages
may be recovered. Temperate damages maybe allowed in cases where from the nature of
the case, definite proof of pecuniary loss cannot be adduced, although the court is
convinced that the aggrieved party suffered some pecuniary loss.
 Indisputably, respondents in this case suffered pecuniary loss because of the untimely
termination of their services for no cause at all. As there is no proof capable of ascertaining
the actual loss, the CA rightfully awarded temperate damages, in lieu of actual damages.

EDS MANUFACTURING, INC. v. HEALTHCHECK INTERNATIONAL INC.

G.R. No. 162802, October 9, 2013

J. Peralta

The general rule is that rescission of a contract will not be permitted for a slight or casual
breach, but only for such substantial and fundamental violations as would defeat the very object
of the parties in making the agreement. In the present case, it is apparent that HCI violated its
contract with EMI to provide medical service to its employees in a substantial way. However,
although a ground exists to validly rescind the contract between the parties, it appears that EMI
failed to judicially rescind the same. It must be pointed that in the absence of a stipulation, a
party cannot unilaterally and extrajudicially rescind a contract. A judicial or notarial act is
necessary before a valid rescission can take place.

Even if Article 1191 were applicable, petitioner would still not be entitled to automatic
rescission. Under Article 1191of the Civil Code, the right to resolve reciprocal obligations, is
deemed implied in case one of the obligors shall fail to comply with what is incumbent upon
him. But that right must be invoked judicially. Consequently, even if the right to rescind is
made available to the injured party, the obligation is not ipso facto erased by the failure of
the other party to comply with what is incumbent upon him.

The party entitled to rescind should apply to the court for a decree of rescission. The
right cannot be exercised solely on a partys own judgment that the other committed a
breach of the obligation. The operative act which produces the resolution of the contract is
the decree of the court and not the mere act of the vendor.

FACTS:

HCI and Eds Manufacturing entered into a health anf medical insurance agreement for
one year, wherein HCI was to provide the 4,191 employees of EMI and their 4,592
dependents as host of medical services and benefits. Attached to the Agreement was a
Service Program which listed the services that HCI would provide and the responsibilities
that EMI would undertake in order to avail of the services. EMI paid the full premium for the
coverage in staggering amount. However, few months after the agreement, HCI notified EMI
that its accreditation with DLSUMC was suspended and advised it to avail of the services of
nearby accredited institutions. A more detailed communication to subscribers came out days
later informing them of the problems of the HMO industry in the wake of the Asian regional
financial crisis and proposing interim measures for the unexpired service contracts. In a
quickly convened meeting, EMI and HCI hammered out this handwritten 5-point agreement.

Although HCI had yet to settle its accounts with it, DLSUMC resumed services. Hence,
in another meeting with EMI, HCI undertook to settle all its accounts with DLSUMC in order
to maintain its accreditation. Despite this commitment, HCI failed to preserve its credit
standing with DLSUMC prompting the latter to suspend its accreditation for a second time
with a third suspension to follow and remain until the end of the contract period. As such,
employees of EMI complained that their HMO cards were being dishonoured by DLSUMC
and other hospitals and physicians. Thus, EMI notified HCI of its plan to rescind the
agreement on account of HCIs serious and repeated breach of its undertaking and
demanded a return of premium for the unused period.

What went in the way of the rescission of the contract was the failure of EMI to collect
all the HMO cards of the employees and surrender them to HCI as stipulated in the
Agreement. HCI had to tell EMI that its employees were still utilizing the cards even beyond
the pretermination date set by EMI. It asked for the surrender of the cards so that it could
process the pretermination of the contract and finalize the reconciliation of accounts.
Without responding to this reminder, EMI sent HCI two letters demanding for the payment of
the 2/3 portion of the premium that remained unutilized after the Agreement was rescinded
in the previous September.

HCI pre-empted EMIs threat of legal action by instituting a case for the unlawful
pretermination of the contract and failure of EMI to submit to a joint reconciliation of
accounts and deliver such assets as properly belonged to HCI. EMI, on the other, alleged
that HCI reneged on its duty to provide adequate medical coverage after EMI paid the
premium in full. Having rescinded the contract, it claimed that it was entitled to the unutilized
portion of the premium, and that the accounting required by HCI could not be undertaken
until it submitted the monthly utilization reports mentioned in the Agreement. EMI asked for
the dismissal of the complaint and interposed a counterclaim for damages.

The RTC ruled in favour of HCI finding that EMIs rescission of the Agreement was not
done through court action or by a notarial act and was based on casual or slight breaches of
the contract. On appeal, the CA reversed the decision ruled that although HCI substantially
breached their agreement, it also appears that EMI did not validly rescind the contract
between them. Thus, the CA dismissed the complaint filed by HCI, while at the same time
dismissing the counterclaim filed by EMI. Motion for Reconsideration was denied; hence the
petition.

ISSUE:

Whether there was a valid rescission of the agreement.

RULING:

The general rule is that rescission (more appropriately, resolution ) of a contract will not
be permitted for a slight or casual breach, but only for such substantial and fundamental
violations as would defeat the very object of the parties in making the agreement.

In the present case, it is apparent that HCI violated its contract with EMI to provide
medical service to its employees in a substantial way. As aptly found by the CA, the various
reports made by the EMI employees from July to August 1998 are living testaments to the
gross denial of services to them at a time when the delivery was crucial to their health and
lives.

However, although a ground exists to validly rescind the contract between the parties, it
appears that EMI failed to judicially rescind the same. In Iringan v. Court of Appeals, this
Court reiterated the rule that in the absence of a stipulation, a party cannot unilaterally and
extrajudicially rescind a contract. A judicial or notarial act is necessary before a valid
rescission (or resolution) can take place.

But in our view, even if Article 1191 were applicable, petitioner would still not be entitled
to automatic rescission. In Escueta v. Pando, we ruled that under Article 1124 (now Article
1191) of the Civil Code, the right to resolve reciprocal obligations, is deemed implied in case
one of the obligors shall fail to comply with what is incumbent upon him. But that right must
be invoked judicially. The same article also provides: "The Court shall decree the resolution
demanded, unless there should be grounds which justify the allowance of a term for the
performance of the obligation."
 This requirement has been retained in the third paragraph of Article 1191, which states
that "the court shall decree the rescission claimed, unless there be just cause authorizing
the fixing of a period." Consequently, even if the right to rescind is made available to the
injured party, the obligation is not ipso facto erased by the failure of the other party to comply
with what is incumbent upon him.

The party entitled to rescind should apply to the court for a decree of rescission. The
right cannot be exercised solely on a partys own judgment that the other committed a
breach of the obligation. The operative act which produces the resolution of the contract is
the decree of the court and not the mere act of the vendor. Since a judicial or notarial act is
required by law for a valid rescission to take place, the letter written by respondent declaring
his intention to rescind did not operate to validly rescind the contract.

NARCISO DEGAOS vs. PEOPLE OF THE PHILIPPINES

G.R. No. 162826. October 14, 2013
Bersamin, J.

In a contract of Sale, one of the contracting parties obligates himself to transfer the
ownership of and to deliver a determinate thing while the other party obligates himself to pay
therefor a price certain in money or its equivalent. There was no sale on credit in this case
because ownership of the items did not pass from one party to the other.

There is also no novation made. The acceptance of partial payments, without further
change in the original relation between the complainant and the accused, cannot produce
novation. There must be proof of intent to extinguish the original relationship, and such intent
cannot be inferred from the mere acceptance of payments on account of what is totally due.

FACTS:

An action for the recovery of sum of money was filed by the spouses Atty. Jose and Lydia
Bordador against accused siblings, Brigida Luz and Narciso Degaos. Lydia, a jeweler, entered
into an agreement with the accused that they would be receiving from the spouses Bordador
gold and pieces of jewelry under express obligation to sell the same on commission and remit
the proceeds thereof in cash, or if not, pay after one month or to return the unsold gold and
jewelry to the spouses Bordador within said period. A document entitled "Katibayan at
Kasunduan" is signed by Degaos after every time he gets jewelry from Lydia. Degaos signs
the receipts in Lydias presence. The accused were able to pay only up to a certain point and
despite oral and written demands, the accused failed and refused to pay the remaining unpaid
balance or to return the subject gold and jewelry. The RTC found both Luz and Degaos. Both
parties appealed to the Court of Appeals the CA affirmed the RTC decision.

ISSUES:

1. Whether or not the agreement entered into is a sale on credit

2. Whether or not there was novation of the agreement from sale to loan

RULING:
Transaction was an agency, not a sale on credit

Based on the express terms and tenor of the Kasunduan at Katibayan, Degaos received
and accepted the items under the obligation to sell them in behalf of the spouses Bordador and
he would be compensated with the overprice as commission. Plainly, the transaction was a
consignment under the obligation to account for the proceeds of sale, or to return the unsold
items. As such, Degaos was the agent of the spouses Bordador in the sale to others of the
items listed in the Kasunduan at Katibayan.

In Article 1458 of the Civil Code, one of the contracting parties in a contract of sale obligates
himself to transfer the ownership of and to deliver a determinate thing while the other party
obligates himself to pay therefor a price certain in money or its equivalent. Contrary to the
contention of Degaos, there was no sale on credit to him because the ownership of the items
did not pass to him.

Novation did not transpire

Degaos is incorrect to claim that the partial payments he made novated the contract from
agency to loan; that novation took place when the spouses Bordador accepted his partial
payments. Novation is the extinguishment of an obligation by the substitution or change of the
obligation by a subsequent one that terminates the first, either by (a) changing the object or
principal conditions; or (b) substituting the person of the debtor; or (c) subrogating a third person
in the rights of the creditor. In order that an obligation may be extinguished by another that
substitutes the former, it is imperative that the extinguishment be so declared in unequivocal
terms, or that the old and the new obligations be on every point incompatible with each other.
Obviously, in case of only slight modifications, the old obligation still prevails.

Novation is never presumed, and the animus novandi, whether totally or partially, must
appear by express agreement of the parties, or by their acts that are too clear and unequivocal
to be mistaken.

The extinguishment of the old obligation by the new one is necessary element of novation
which may be effected either expressly or impliedly. Express if the contracting parties
incontrovertibly disclose that their object in executing the new contract is to extinguish the old
one. While in Implied, no specific form is required and all that is prescribed by law would be an
irreconcilable incompatibility between the old and the new obligations.

The test of incompatibility is whether or not the two obligations can stand together, each
one having its independent existence. If they cannot, they are incompatible and the latter
obligation novates the first. Corollarily, changes that breed incompatibility must be essential in
nature and not merely accidental. The incompatibility must take place in any of the essential
elements of the obligation, such as its object, cause or principal conditions thereof; otherwise,
the change would be merely modificatory in nature and insufficient to extinguish the original
obligation.

The acceptance of partial payments, without further change in the original relation between
the complainant and the accused, cannot produce novation. There must be proof of intent to
extinguish the original relationship, and such intent cannot be inferred from the mere
acceptance of payments on account of what is totally due.
 GERSIP ASSOCIATION, INC., LETICIA ALMAZAN, ANGELA NARVAEZ, MARIA B.
PINEDA, LETICIA DE MESA AND ALFREDO D. PINEDA
v. GOVERNMENT INSURANCE SERVICE SYSTEM

G.R. No. 189827, October 16, 2013

J. VILLARAMA

The established GSIS Provident Fund Plan got the benefit of GSIS employees, there
is no doubt that respondent intended to establish a trust fund from the employees
contributions (5% of monthly salary) and its own contributions (45% of each members
monthly salary and all unremitted Employees Welfare contributions).SC cannot accept
petitioners submission that respondent could not impose terms and conditions on the
availment of benefits from the Fund on the ground that members already own respondents
contributions from the moment such was remitted to their account. Petitioners assertion that
the Plan was a purely contractual obligation on the part of respondent is likewise mistaken.

FACTS:

The GSIS Board of Trustees (GSIS Board) approved the proposed GSIS Provident
Fund Plan (Plan) to provide supplementary benefits to GSIS employees upon their
retirement, disability or separation from the service, and payment of definite amounts to their
beneficiaries in the event of death. Under the Plan, employees who are members of the
Provident Fund (Fund) contribute through salary deduction a sum equivalent to five percent
(5%) of their monthly salary while respondents monthly contribution is fixed at 45% of each
members monthly salary. A Committee of Trustees (Committee) appointed by respondent
administers the Fund by investing it "in a prudent manner to ensure the preservation of the
Fund capital and the adequacy of its earnings."

Petitioners filed a Petition with the GSIS Board alleging that they have not been paid
their portion of the GRF upon their retirement, to which they are entitled as "co-owners" of
the Fund. In its Answer, respondent asserted that petitioners as retiring members of the
Fund were entitled only to the benefits provided in Section 1(b), Article V of the PFRR and
that their claim is not covered by Section 8(a) to (d), Article IV which enumerates the
purposes for which the GRF is allocated. Respondent further contended that there is no
legal basis for petitioners theory that they are co-owners and not just beneficiaries of the
Fund.

The GSIS Board denied the petition for lack of merit. It held that the execution of the Trust
Agreement between respondent and the Committee is a clear indication that the parties
intended to establish an express trust, not a co-ownership, with respondent as Trustor, the
Committee as Trustee of the Fund and the members as Beneficiaries. As to the GRF, the
Board said that it answers only for the contingent claims mentioned in Section 8, Article IV
and there is no requirement in the PFRR for the accounting and partition of GRF.

ISSUE:

Whether the GSIS Provident fund is not a "trust" but a co-ownership

RULING:
 Trust is the legal relationship between one person having an equitable ownership in
property and another person owning the legal title to such property, the equitable ownership
of the former entitling him to the performance of certain duties and the exercise of certain
powers by the latter. A trust fund refers to money or property set aside as a trust for the
benefit of another and held by a trustee. Under the Civil Code, trusts are classified as either
express or implied. An express trust is created by the intention of the trustor or of the
parties, while an implied trust comes into being by operation of law.

There is no doubt that respondent intended to establish a trust fund from the
employees contributions (5% of monthly salary) and its own contributions (45% of each
members monthly salary and all unremitted Employees Welfare contributions). The Court
cannot accept petitioners submission that respondent could not impose terms and
conditions on the availment of benefits from the Fund on the ground that members already
own respondents contributions from the moment such was remitted to their account.
Petitioners assertion that the Plan was a purely contractual obligation on the part of
respondent is likewise mistaken.

In Development Bank of the Philippines v. Commission on Audit, this Court recognized

DBPs establishment of a trust fund to cover the retirement benefits of certain employees. We
noted that as the trustor, DBP vested in the trustees legal title over the Fund as well as control
over the investment of the money and assets of the Fund. The Trust Agreement therein also
stated that the principal and income must be used to satisfy all of the liabilities to the beneficiary
officials and employees under the Gratuity Plan.

REPUBLIC OF THE PHILIPPINES v. LIBERTY D. ALBIOS

G.R. No. 198780. October 16, 2013
Mendoza, J.

Entering into a marriage for the sole purpose of acquiring citizenship and evading
immigration laws does is a valid reason to enter into marriage. There is an undeniable intention
by both parties to consent and be bound together in marriage in order to acquire American
citizenship.

FACTS:

Daniel Lee Fringer, an American citizen, and respondent Liberty Albios were married before
the Metropolitan Trial Court. Afterwards, Albios filed with the RTC a petition for declaration of
nullity of her marriage with Fringer alleging that immediately after the marriage, they separated
and never lived as husband and wife because they never really had any intention of entering
into a married state or complying with any of their essential marital obligations. The marriage
was made in jest and, therefore, null and void ab initio.

The RTC declared the marriage void ab initio. The RTC was of the view that the parties
married each other for convenience only. Albios contracted the marriage to enable her to
acquire American citizenship in consideration for the $2,000.00 she paid Fringer to process her
petition for citizenship. Petitioner Republic of the Philippines, represented by the Office of the
Solicitor General, filed a motion for reconsideration. The RTC denied the motion. The OSG filed
an appeal before the CA. The CA affirmed the RTC ruling which found that the essential
requisite of consent was lacking.
ISSUE:

Whether or not the element of consent is lacking in the marriage made to acquire
citizenship

RULING:

A marriage, contracted for the sole purpose of acquiring American citizenship is NOT
void ab initio on the ground of lack of consent. Under Article 2 of the Family Code, consent is an
essential requisite of marriage. Article 4 of the same Code provides that the absence of any
essential requisite shall render a marriage void ab initio. Under said Article 2, for consent to be
valid, it must be (1) freely given and (2) made in the presence of a solemnizing officer. A "freely
given" consent requires that the contracting parties willingly and deliberately enter into the
marriage. Consent must be real in the sense that it is not vitiated nor rendered defective by any
of the vices of consent under Articles 45 and 46 of the Family Code, such as fraud, force,
intimidation, and undue influence. Consent must also be conscious or intelligent, in that the
parties must be capable of intelligently understanding the nature of, and both the beneficial or
unfavorable consequences of their act. Their understanding should not be affected by insanity,
intoxication, drugs, or hypnotism.

Based on the above, consent was not lacking between Albios and Fringer. There was
real consent because it was not vitiated nor rendered defective by any vice of consent. The
consent was also conscious and intelligent as they understood the nature and the beneficial and
inconvenient consequences of their marriage, as nothing impaired their ability to do so. That the
consent was freely given is best evidenced by their conscious purpose of acquiring American
citizenship through marriage. Such plainly demonstrates that they willingly and deliberately
contracted the marriage. There was a clear intention to enter into a real and valid marriage so
as to fully comply with the requirements of an application for citizenship. There was a full and
complete understanding of the legal tie that would be created between them, since it was that
precise legal tie which was necessary to accomplish their goal.

A marriage in jest is a pretended marriage, legal in form but entered into as a joke, with
no real intention of entering into the actual marriage status, and with a clear understanding that
the parties would not be bound. The ceremony is not followed by any conduct indicating a
purpose to enter into such a relation. It is a pretended marriage not intended to be real and with
no intention to create any legal ties whatsoever, hence, the absence of any genuine consent.
This kind of marriage is void ab initio, not for vitiated, defective, or unintelligent consent, but for
a complete absence of consent. There is no genuine consent because the parties have
absolutely no intention of being bound in any way or for any purpose.

The respondents marriage is not at all analogous to a marriage in jest. Albios and
Fringer had an undeniable intention to be bound in order to create the very bond necessary to
allow the respondent to acquire American citizenship. Only a genuine consent to be married
would allow them to further their objective, considering that only a valid marriage can properly
support an application for citizenship.

The avowed purpose of marriage under Article 1 of the Family Code is for the couple to
establish a conjugal and family life. The possibility that the parties in a marriage might have no
real intention to establish a life together is, however, insufficient to nullify a marriage freely
entered into in accordance with law. The nature, consequences, and incidents of marriage are
governed by law and not subject to stipulation. A marriage may, thus, only be declared void or
voidable under the grounds provided by law. There is no law that declares a marriage void if it is
entered into for purposes other than what the Constitution or law declares, such as the
acquisition of foreign citizenship. So long as all the essential and formal requisites prescribed by
law are present, and it is not void or voidable under the grounds provided by law, it shall be
declared valid.

Neither can their marriage be considered voidable on the ground of fraud under Article
45 (3) of the Family Code. Only the circumstances listed under Article 46 of the same Code may
constitute fraud, namely, (1) non- disclosure of a previous conviction involving moral turpitude;
(2) concealment by the wife of a pregnancy by another man; (3) concealment of a sexually
transmitted disease; and (4) concealment of drug addiction, alcoholism, or homosexuality. No
other misrepresentation or deceit shall constitute fraud as a ground for an action to annul a
marriage.

Entering into a marriage for the sole purpose of evading immigration laws does not
qualify under any of the listed circumstances. Furthermore, under Article 47 (3), the ground of
fraud may only be brought by the injured or innocent party. In the present case, there is no
injured party because Albios and Fringer both conspired to enter into the sham marriage.

ROBERT DA JOSE, ET AL. vs. CELERINA R. ANGELES, ET AL.

G.R. No. 187899. October 23, 2013
Villarama, Jr., J.

Under Article 2206 of the Civil Code, the heirs of the victim are entitled to indemnity for
loss of earning capacity. Compensation of this nature is awarded not for loss of earnings, but for
loss of capacity to earn money. Indemnification for loss of earning capacity, however, partakes
of the nature of actual damages which must be duly proven by competent proof and the best
obtainable evidence thereof as a general rule. Mere claims which are not substantiated cannot
be considered as sufficient ground for the granting of damages.

FACTS:

A vehicular collision took place involving a Mitsubishi Lancer registered under the name of,
and at that time driven by the late Eduardo Tuazon Angeles, husband of respondent Celerina
Angeles and father of respondents Edward Angelo and Celine Angeli Angeles, and a Nissan
Patrol registered under the name of petitioner Robert Da Jose which was driven by petitioner
Francisco Ocampo at the time. Eduardo was rushed by unidentified persons to the hospital but
despite treatment, died on the same day due to Hemorrhagic Shock as a result of Blunt
Traumatic Injury.

A criminal complaint for Reckless Imprudence Resulting in Homicide and Damage to

Property was filed against before the MTC. During the pendency of the criminal case,
respondents counsel sent petitioners via registered mail a demand-letter for payment within 5
days from receipt of the letter of damages and attorneys fees. Failing to reach any settlement,
a Complaint for Damages based on tort against Robert and Francisco was filed before the RTC.

The RTC held that it was recklessness or lack of due care on the part of defendant Ocampo
in operating the Nissan Patrol that was the proximate cause of the vehicular collision which
directly resulted in the death of Eduardo Angeles. The RTC rendered a judgement ordering
defendants Robert Da Jose and Francisco Ocampo to solidarily pay plaintiffs Celerina Rivera-
Angeles, Edward Angelo R. Angeles and Celine Angeli R. Angeles. On appeal, the Court of
Appeals affirmed the RTCs findings and ruling. The CA agreed with the RTCs findings that
Francisco was clearly negligent in driving the Nissan Patrol and that such negligence caused
the vehicular collision which resulted in the death of Eduardo.

ISSUE:

Whether or not the award of P2,316,000.00 by the CA for lost earning capacity valid

RULING:

Under Article 2206 of the Civil Code, the heirs of the victim are entitled to indemnity for
loss of earning capacity. Compensation of this nature is awarded not for loss of earnings, but for
loss of capacity to earn money. The indemnification for loss of earning capacity partakes of the
nature of actual damages which must be duly proven by competent proof and the best
obtainable evidence thereof. Thus, as a general rule, documentary evidence should be
presented to substantiate the claim for damages for loss of earning capacity. By way of
exception, damages for loss of earning capacity may be awarded despite the absence of
documentary evidence when (1) the deceased is self-employed and earning less than the
minimum wage under current labor laws, or (2) the deceased is employed as a daily wage
worker earning less than the minimum wage under current labor laws.

Based on the foregoing and in line with respondents claim that Eduardo during his
lifetime earned more or less an annual income of P1,000,000, the case falls under the purview
of the general rule rather than the exceptions. Failure by the respondents to show evidence
makes the grant of damages for loss of earning capacity invalid.

AQUILES RIOSA v. TABACO LA SUERTE CORPORATION

G.R. No. 203786. October 23, 2013
Mendoza, J.

When an alleged contract of sale is entered into by means of fraud, misrepresentation

and deceit employed by one party towards the other, the contract of sale is void. The first
element for a contract of sale consent or meeting of the minds, that is, consent to transfer
ownership in exchange for the price is missing. Had the party known that the document
presented was a contract of sale, he would not have affixed his signature on the document. It
has been held that the existence of a signed document purporting to be a contract of sale does
not preclude a finding that the contract is invalid when the evidence shows that there was no
meeting of the minds between the seller and buyer.

FACTS:

Petitioner Aquiles Riosa filed his Complaint for Annulment/Declaration of Nullity of Deed
of Absolute Sale and Transfer Certificate of Title, Reconveyance and Damages against
respondent Tabaco La Suerte Corporation before the Regional Trial Court. Aquiles alleges that
he is the owner and actual possessor of a 52-square meter commercial lot that he acquired
through a deed of cession and quitclaim executed by his parents. Subsequently, on three
occasions, he obtained loans from Sia Ko Pio in the total amount of P50,000.00, evidenced by a
purported document receipt of the loan. The loan was secured by a photocopy of the deed of
cession and quitclaim of Aquiles. That Aquiles signed the document purported as receipt
without reading it. Later, it was found out that the document was not a mere receipt but a Deed
of Sale and that it sold to La Suerte the lot which La Suerte registered in its name. Aquiles
claimed that by means of fraud, misrepresentation and deceit employed by Sia Ko Pio, he was
made to sign the document which he thought was a receipt and undertaking to pay the loan,
only to find out later that it was a document of sale.

In its Answer, La Suerte averred that it was the actual and lawful owner of the
commercial property, after purchasing it from Aquiles and that it only allowed Aquiles to remain
in possession of the property to avoid the ire of his father from whom he had acquired property
inter vivos, subject to his obligation to vacate the premises anytime upon demand of La Suerte.

The RTC ruled in favor of Aquiles and ordering the annulment of sale of the subject lot of
the title issued in the name of La Suerte as well as payment for damages and attorneys fee.
With its motion for reconsideration denied, La Suerte appealed to the Court of Appeals. The CA
reversed the RTC decision and upheld the validity of the subject deed of sale in favor of La
Suerte by holding that tax declarations or realty tax payments are not conclusive evidence of
ownership; payment of realty taxes could not defeat a certificate of title which was an absolute
and indefeasible evidence of ownership of the property in favor of the person whose name
appeared thereon. Motion for reconsideration was denied by the CA.

ISSUE:

Whether or not there was a perfected and valid contract of sale of the subject property
between Aquiles and La Suerte, through its Chief Executive Officer, Sia Ko Pio.

RULING:

The Supreme Court agrees with the finding of the RTC that there was no perfected
contract of sale. The elements of a contract of sale are: a] consent or meeting of the minds, that
is, consent to transfer ownership in exchange for the price; b] determinate subject matter; and c]
price certain in money or its equivalent.

In this case, there was no clear and convincing evidence that Aquiles definitely sold the
subject property to La Suerte, nor was there evidence that La Suerte authorized its chief
executive officer, Sia Ko Pio, to negotiate and conclude a purchase of the property. Aquiles
narration in open court is clear that he did not intend to transfer ownership of his property in
exchange for the amounts borrowed. Evidently, it was a series of transactions between Aquiles
and Sia Po Ko, but not between the parties. The transactions were between Aquiles, as
borrower, and Sia Ko Pio, as lender and not a sale between Aquiles, as vendor, and La Suerte,
as vendee. There was no agreement between the parties. As the first element was wanting,
Aquiles correctly argued that there was no contract of sale.

Under Article 1475 of the Civil Code, the contract of sale is perfected at the moment
there is a meeting of minds on the thing which is the object of the contract and on the price.
Aquiles acknowledged that he signed the receipt of the amount borrowed. There is, however, no
proof that the money came from La Suerte as the consideration of the sale. Accordingly, there is
no basis for a holding that the personal loan of Aquiles from Sia Ko Pio was the consideration
for the sale of his property in favor of La Suerte. The fact that the alleged deed of sale
indubitably bore Aquiles signature deserves no evidentiary value there being no consent from
him to part with his property. Had he known that the document presented to him was an
instrument of sale, he would not have affixed his signature on the document. It has been held
that the existence of a signed document purporting to be a contract of sale does not preclude a
finding that the contract is invalid when the evidence shows that there was no meeting of the
minds between the seller and buyer.

HEIRS OF FLORENTINO QUILO v. DEVELOPMENT BANK OF THE PHILIPPINES-

DAGUPAN BRANCH, ET AL.
G.R. No. 184369. October 23, 2013
Sereno, CJ.

A tenancy relationship is a juridical tie that arises between a landowner and a tenant
once they agree, expressly or impliedly, to undertake jointly the cultivation of a land belonging to
the landowner, as a result of which relationship the tenant acquires the right to continue working
on and cultivating the land. The relationship cannot be presumed.

FACTS:

The spouses Oliveros originally owned four parcels of land which Florentino Quilo
started using in 1966 by planting vegetables thereon. The spouses Oliveros later on mortgaged
the parcels of land to the Development Bank of the Philippines to secure a loan, for which they
executed an Affidavit of Non-Tenancy. Since they were unable to pay the loan, the mortgage
was foreclosed, and the title to the landholding consolidated with respondent bank. Respondent
bank sold the parcels of land to the spouses Del Mindo. Respondent spouses began to fence
the subject landholding shortly after.

Upon learning about the sale, Quilo filed a Complaint for Redemption with Damages
against respondents with the Regional Trial Court alleging that as an agricultural tenant of the
land, he had the preference and the priority to buy it. In view of the passage of R.A. No. 6657
which created the Department of Agrarian Reform Adjudication Board (DARAB) and giving it
jurisdiction over agrarian disputes, the RTC directed the parties to litigate their case before the
DARAB through the Regional Agrarian Reform Adjudication Board (RARAB). Quilo died during
the pendency so his heirs substituted for him in the pending case before the RARAB.

The RARAB dismissed the case "for lack of interest of the parties to proceed with the
case." On appeal, the DARAB granted the appeal and remanded the records of the case to the
RARAB for its resolution on the merits. The RARAB ruled for petitioners heirs of Quilo stating
that Quilo was a bonafide tenant and gave no weight to the Affidavit of Non-Tenancy issued by
the spouses Oliveros, since it was common knowledge that landowners routinely execute such
affidavits to enable them to mortgage their lands to banks. The respondents appealed to the
DARAB which upheld the RARAB ruling.

A Petition for Review was then filed with the Court of Appeals, questioning the basis of
both the RARAB and the DARAB rulings in fact and in law. The CA held that the RARAB and
the DARAB were mistaken in finding the existence of a tenancy relationship, there was no
evidence that the spouses Oliveros had given their consent to the tenancy relationship; and that
although Quilo was cultivating the land, this did not necessarily mean that he was doing so as a
tenant. Petitioners heirs filed a Motion for Reconsideration which was denied by the CA.

ISSUE:

Whether or not a tenancy relationship existed between Quilo and the spouses Oliveros

RULING:
Failure to Establish the Tenancy Relationship

A tenancy relationship is a juridical tie that arises between a landowner and a tenant
once they agree, expressly or impliedly, to undertake jointly the cultivation of a land belonging to
the landowner, as a result of which relationship the tenant acquires the right to continue working
on and cultivating the land. The relationship cannot be presumed. All the requisite conditions for
its existence must be proven: (1) The parties are the landowner and the tenant; (2) The subject
is agricultural land; (3) There is consent by the landowner; (4) The purpose is agricultural
production; (5) There is personal cultivation; and that, (6) There is a sharing of harvests.

The petitioners heirs have the burden of proving their affirmative allegation of tenancy.
In this case, the heirs failed to prove the elements of consent and sharing of harvests. There is
no evidence that the spouses Oliveros consented to a tenancy relationship with Quilo His self-
serving statement that he was a tenant was not sufficient to prove consent.

Mere occupation or cultivation of an agricultural land does not automatically convert the
tiller into an agricultural tenant recognized under agrarian laws.

EDILBERTO U. VENTURA, JR. v. SPS. PAULINO AND EVANGELINE ABUDA

G.R. No. 202932. October 23, 2013
Carpio, J.

In cases of cohabitation wherein the parties are incapacitated to marry each other, only
the properties acquired by both of the parties through their actual joint contribution of money,
property, or industry shall be owned by them in common in proportion to their respective
contributions. It is the burden of the one alleging to show that there was contribution made
otherwise, the properties will belong exclusively to the person who acquired it through his own
funds.

FACTS:

Socorro Torres and Esteban Abletes entered into a contract of marriage. Although
Socorro and Esteban never had common children, both of them had children from prior
marriages: Esteban had a daughter named Evangeline Abuda and Socorro had a son, who was
the father of Edilberto Ventura, Jr., the petitioner in this case. Evidence shows that Socorro had
a prior subsisting marriage to Crispin Roxas when she married Esteban. This marriage was not
annulled, and Crispin was alive at the time of Socorros marriage to Esteban. Estebans prior
marriage, meanwhile, was dissolved by virtue of his wifes death.

Sometime in 1968, Esteban purchased a portion of a lot with the remaining portion being
purchased by Evangeline on her fathers behalf. The property was covered by TCT No. 141782
issued to "Esteban Abletes, of legal age, Filipino, married to Socorro Torres." (VITAS). Starting
1978, Evangeline and Esteban also began operating small business establishments. (DELPAN)
. In 1997, Esteban sold these properties to Evangeline and her husband, Paulino Abuda when
Esteban was diagnosed with colon cancer.

Both Esteban and Socorro had already passed away when Edilberto discovered the
sale. Thus, a Petition for Annulment of Deeds of Sale was filed with the RTC alleging that the
sale of the properties was fraudulent because Estebans signature on the deeds of sale was
forged. Respondents, on the other hand, argued that because of Socorros prior marriage to
Crispin, her subsequent marriage to Esteban was null and void. Thus, neither Socorro nor her
heirs can claim any right or interest over the properties purchased by Esteban and respondents.
The RTC dismissed the petition for lack of merit. It ruled that the marriage between Socorro and
Esteban was void from the beginning under Article 83 of the Civil Code. The Vitas and Delpan
properties therefore are not conjugal but co-owned properties under Article 144 of the Civil
Code. And since Socorro did not contribute any funds for the acquisition of the properties, she
cannot be considered a co-owner, and her heirs cannot claim any rights over the Vitas and
Delpan properties. On appeal to the Court of Appeals, the CA sustained the decision of the
RTC.

ISSUE:

Whether or not the properties are exclusive, conjugal or co-owned properties

RULING:

The properties are exclusively owned by Esteban. Art. 148 of the Civil Code states that
in cases of cohabitation wherein the parties are incapacitated to marry each other, only the
properties acquired by both of the parties through their actual joint contribution of money,
property, or industry shall be owned by them in common in proportion to their respective
contributions. In the absence of proof to the contrary, their contributions and corresponding
shares are presumed to be equal. The same rule and presumption shall apply to joint deposits
of money and evidences of credit.

If one of the parties is validly married to another, his or her share in the co-ownership
shall accrue to the absolute community or conjugal partnership existing in such valid marriage. If
the party who acted in bad faith is not validly married to another, his or her share shall be
forfeited in the manner provided in the last paragraph of the preceding Article. x x x
Applying the foregoing provision, the Vitas and Delpan properties can be considered
common property if: (1) these were acquired during the cohabitation of Esteban and Socorro;
and (2) there is evidence that the properties were acquired through the parties actual joint
contribution of money, property, or industry.

The title of the Vitas property shows that it is owned by Esteban alone. The phrase
"married to Socorro Torres" is merely descriptive of his civil status, and does not show that
Socorro co-owned the property. The evidence on record also shows that Esteban acquired
ownership over the Vitas property prior to his marriage to Socorro, even if the certificate of title
was issued after the celebration of the marriage. Registration under the Torrens title system
merely confirms, and does not vest title.

With regards to the Delpan property, Edilbertos claim that the law presumes that
Esteban and Socorro jointly contributed to the acquisition because Estebans actual contribution
to the purchase of the property was not sufficiently proven as it was Evangeline who made
payments is also incorrect.

The Delpan property was acquired prior to the marriage of Esteban and Socorro.
Furthermore, even if payment of the purchase price of the Delpan property was made by
Evangeline, such payment was made on behalf of her father. Art. 1238 of the Civil Code states
that payment made by a third person who does not intend to be reimbursed by the debtor is
deemed to be a donation, which requires the debtors consent. But the payment is in any case
valid as to the creditor who has accepted it. Thus, it is clear that Evangeline paid on behalf of
her father, and the parties intended that the Delpan property would be owned by and registered
under the name of Esteban.

CALIFORNIA CLOTHING, INC. AND MICHELLE S. YBANEZ v. SHIRLEY G. QUINONES

G.R. No. 175822. October 23, 2013
J. Peralta

The issuance of the receipt notwithstanding, petitioners had the right to verify from
respondent whether she indeed made payment if they had reason to believe that she did not.
However, the exercise of such right is not without limitations. Any abuse in the exercise of such
right and in the performance of duty causing damage or injury to another is actionable under
Article 19 of the Civil Code regarding abuse of rights.

FACTS:

On July 25, 2001, respondent Shirley Quiones, a Reservation Ticketing Agent of Cebu
Pacific, went inside the Guess USA Boutique at Robinsons Department Store and fitted four
items and then decided to purchase black jeans worth P2,098.00. Respondent allegedly paid to
the cashier as evidenced by a receipt issued by the store. While she was walking in the mall, a
Guess employee approached and informed her that she failed to pay the item she got. She,
however, insisted that she paid and showed the employee the receipt issued in her favor. She
then suggested that they talk about it at the Cebu Pacific Office located at the basement of the
mall. When she arrived at the Cebu Pacific Office, the Guess employees allegedly subjected her
to humiliation in front of the clients of Cebu Pacific and repeatedly demanded payment for the
black jeans. They supposedly even searched her wallet to check how much money she had,
followed by another argument. Respondent, thereafter, went home.

On the same day, the Guess employees gave a letter of the incident to the Director of
Cebu Pacific and to the Human Resource Department of Robinsons. The latter in fact, even
conducted an investigation for purposes of canceling respondents Robinsons credit card.
Respondent was not given a copy of the said damaging letter. With the above experience,
respondent claimed to have suffered physical anxiety, sleepless nights, mental anguish, fright,
serious apprehension, besmirched reputation, moral shock and social humiliation. She thus filed
the Complaint for Damages before the RTC against petitioners California Clothing, Inc., and its
employees. She demanded the payment of moral, nominal, and exemplary damages, plus
attorneys fees and litigation expenses.

In their Answer, petitioners and the other defendants admitted the issuance of the receipt
of payment and explained that there was a miscommunication because instead of the cashier
issuing the official receipt, it was the invoicer who did it manually. The RTC rendered a decision
dismissing both the complaint and counterclaim of the parties. The trial court concluded that the
petitioners and the other defendants believed in good faith that respondent failed to make
payment, that they merely exercised a right under the honest belief that no payment was made.
The RTC likewise did not find it damaging when 1) a letter was sent to her employer and to the
mall which led to her being investigated, and 2) that a confrontation took place in front of Cebu
Pacific clients, because it was respondent herself who put herself in that situation by choosing
the venue for discussion. On appeal, the CA reversed and set aside the RTC decision.

ISSUE:

Whether or not respondent Quiones can validly claim for damages

RULING:

The complaint against petitioners stemmed from the principle of abuse of rights provided
for in Article 19 of the Civil Code. Respondent cried foul when petitioners allegedly embarrassed
her when they insisted that she did not pay for the black jeans she purchased from their shop
despite the evidence of payment which is the official receipt issued by the shop. The issuance of
the receipt notwithstanding, petitioners had the right to verify from respondent whether she
indeed made payment if they had reason to believe that she did not. However, the exercise of
such right is not without limitations. Any abuse in the exercise of such right and in the
performance of duty causing damage or injury to another is actionable under the Civil Code.

Under the abuse of rights principle found in Article 19 of the Civil Code, a person must,
in the exercise of legal right or duty, act in good faith. He would be liable if he instead acted in
bad faith, with intent to prejudice another. Good faith refers to the state of mind which is
manifested by the acts of the individual concerned. It consists of the intention to abstain from
taking an unconscionable and unscrupulous advantage of another. Malice or bad faith, on the
other hand, implies a conscious and intentional design to do a wrongful act for a dishonest
purpose or moral obliquity.

Initially, there was nothing wrong with petitioners asking respondent whether she paid or
not. The Guess employees were able to talk to respondent at the Cebu Pacific Office.
Considering, however, that respondent was in possession of the item purchased from the shop,
together with the official receipt of payment issued by petitioners, the latter cannot insist that no
such payment was made on the basis of a mere speculation. Their claim should have been
proven by substantial evidence in the proper forum.

The petitioners even went overboard and tried to force respondent to pay the amount
they were demanding in the guise of asking for assistance through a demand letter to
respondents employer which not only informed it of the incident but obviously imputed bad acts
on the part of respondent which are outrightly accusatory and would tarnish respondents
reputation in the eyes of her employer. To malign respondent without substantial evidence and
despite the latters possession of enough evidence in her favor, is clearly impermissible. A
person should not use his right unjustly or contrary to honesty and good faith, otherwise, he
opens himself to liability.

The exercise of a right must be in accordance with the purpose for which it was
established and must not be excessive or unduly harsh. In this case, petitioners obviously
abused their rights. Articles 20 and 21 of the Civil Code states
:
Article 20. Every person who, contrary to law, willfully or negligently causes damage to
another, shall indemnify the latter for the same.

Article 21. Any person who willfully causes loss or injury to another in a manner that is
contrary to morals or good customs, or public policy shall compensate the latter for the damage.

In view of the foregoing, respondent is entitled to an award of damages and attorneys

fees. Moral damages may be awarded whenever the defendant s wrongful act or omission is the
proximate cause of the plaintiffs physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation and similar injury in
the cases specified or analogous to those provided in Article 2219 of the Civil Code.
 REPUBLIC OF THE PHILIPPINES v. LUIS MIGUEL O. ABOITIZ
G.R. No. 174626. October 23, 2013
Mendoza, J.

Applicants for registration of land title must establish and prove: (1) that the subject land
forms part of the disposable and alienable lands of the public domain; (2) that the applicant and
his predecessors-in-interest have been in open, continuous, exclusive and notorious
possession and occupation of the same; and (3) that it is under a bona fide claim of ownership
since June 12, 1945, or earlier. Failure to establish all three is grounds for validly dismissing the
registration.a

FACTS:

On September 11, 1998, respondent Luis Miguel Aboitiz filed his application for
Registration of Land Title of a parcel of land with an area of 1,254 square meters identified as
Lot 11193 of the Cebu Cadastre 12 Extension before the Regional Trial Court. In support of his
application, Aboitiz attached all the documents evidencing possession and ownership of the
land. The Republic manifested that it would not adduce any evidence to oppose the application
for registration of Aboitiz. The RTC granted Aboitizs application for registration of the subject
property. Not in conformity with the ruling, the Republic appealed before the Court of Appeals
who reversed the ruling of the RTC and denied Aboitizs application for registration of land title.
The CA ruled that it was only from the date of declaration of such lands as alienable and
disposable that the period for counting the statutory requirement of possession since June 12,
1945 or earlier would commence. Possession prior to the date of declaration of the lands
alienability was not included. Aboitiz moved for reconsideration asserting that although the
subject land was classified as alienable and disposable only in 1957, the tax declarations, from
1963 to 1994, for a period of thirty one (31) years, converted the land, by way of acquisitive
prescription, to private property as it substantially met the requisite nature and character of
possession defined under P.D. No. 1529. The CA reversed itself and granted the application for
registration of land title of Aboitiz. The Republic moved for reconsideration but was denied by
the CA. Hence, this petition.

ISSUE:

Whether or not the CA erred in granting the application for registration on a motion for
reconsideration pursuant to Section 14 of P.D. No. 1529

RULING:

The registration is denied by the Supreme Court. Section 14(1) of P.D. No. 1529 states
that: SECTION 14. Who may apply. The following persons may file in the proper Court of
First Instance an application for registration of title to land, whether personally or through their
duly authorized representatives:
(1) Those who by themselves or through their predecessors-in-interest have been in
open, continuous, exclusive and notorious possession and occupation of alienable and
disposable lands of the public domain under a bona fide claim of ownership since June 12,
1945, or earlier.
xxxx
 Based on the above-quoted provisions, applicants for registration of land title must
establish and prove: (1) that the subject land forms part of the disposable and alienable lands of
the public domain; (2) that the applicant and his predecessors-in-interest have been in open,
continuous, exclusive and notorious possession and occupation of the same; and (3) that it is
under a bona fide claim of ownership since June 12, 1945, or earlier.

The foregoing requisites are indispensable for an application for registration of land title,
under Section 14(1) of P.D. No. 1529, to validly prosper. The absence of any one requisite
renders the application for registration substantially defective. Anent the first requisite, to
authoritatively establish the subject lands alienable and disposable character, it is incumbent
upon the applicant to present a CENRO or Provincial Environment and Natural Resources
Office (PENRO) Certification; and a copy of the original classification approved by the DENR
Secretary and certified as a true copy by the legal custodian of the official records.

The Supreme Court cannot find any evidence to show the subject lands alienable and
disposable character, except for a CENRO certification submitted by Aboitiz. Clearly, his attempt
to comply with the first requisite fell short due to his own omission. For this reason, the
application for registration of Aboitiz should be denied.

With regard to the third requisite, it must be shown that the possession and occupation
of a parcel of land by the applicant, by himself or through his predecessors-in-interest, started
on June 12, 1945 or earlier. A mere showing of possession and occupation for 30 years or more,
by itself, is not sufficient.

Unfortunately, Aboitiz likewise failed to satisfy this third requisite. The records and
pleadings of this case show that the earliest he and his predecessor-in-interest can trace back
possession and occupation of the subject land was only in the year 1963. Evidently, his
possession of the subject property commenced roughly eighteen years beyond June 12, 1945,
the reckoning date expressly provided. Aboitiz failed to present any convincing and persuasive
evidence to manifest compliance with the requisite period of possession and occupation since
June 12, 1945 or earlier. Accordingly, his application for registration of land title was legally
infirm.

Planters Development Bank v. Sps. Ernesto Lopez and Florentina Lopez, et al.
G.R. No. 186332. October 23, 2013
Brion, J.

Well-settled is the rule that rescission will not be permitted for a slight or casual breach
of the contract. The question of whether a breach of contract is substantial depends upon the
attending circumstances. Also, Article 1191 of the Civil Code expressly provides that rescission
is without prejudice to the rights of third persons who have acquired the thing, in accordance
with Article 1385 of the Civil Code. In turn, Article 1385 states that rescission cannot take place
when the things which are the object of the contract are legally in the possession of third
persons who did not act in bad faith.

FACTS:

Sometime in 1983, the spouses Emesto and Florentina Lopez applied for and obtained a
real estate loan in the amount of 3million from Planters Bank intended to finance the
construction of a four-story concrete dormitory building. The loan agreement provided that the
loan is payable for 14 years and bear a monetary interest at 21% per annum. Furthermore,
partial drawdowns on the loan shall be based on project completion, and shall be allowed upon
submission of job accomplishment reports by the project engineer. To secure the payment of the
loan, the spouses

Lopez mortgaged a parcel of land covered by TCT No. T-16233. The agreement was
amended thrice. First, to increase interest to 23% p.a. and shorten the term of the loan to 3
years. Second, to further increase interest to 25% p.a. And the third increased the amount of the
loan to 4.2million total to reflect the additional 1.2million loan obtained and to increase interest
to 27% p.a. as well as to shorten the term of the loan to 1 year. On August 15, 1984, Planters
Bank unilaterally increased the interest rate to 32% p.a. The spouses Lopez failed to avail the
full amount of the loan because Planters Bank refused to release the remaining amount so the
spouses Lopez filed against Planters Bank complaint for rescission of the loan agreements and
for damages with the Regional Trial Court. In defense, Planters Bank argued that the spouses
Lopez had no cause of action against its refusal to release the loan as the spouses Lopezs
violated the loan agreement, namely: (1) non-submission of the accomplishment reports; and
(2) construction of a six-story building. On November 16, 1984, Planters Bank foreclosed the
mortgaged properties in favor of third parties after the spouses Lopez defaulted on their loan.
The RTC ruled in Planters Banks favor holding that the spouses Lopez had no right to rescind
the loan agreements because they violated the agreement by failing to submit accomplishment
reports and by deviating from the construction project plans. That rescission cannot be resorted
to because the property was already sold to third parties when it was foreclosed.

The spouses Lopez died during the pendency of the case so on appeal to the Court of
Appeals, compulsory heirs all surnamed Joven substituted for the deceased Florentina Lopez.
The CA reversed the RTC ruling and held that Planters Banks refusal to release the loan was a
substantial breach of the contract. It also declared that Planters Bank was estopped from raising
the issue of the spouses Lopezs deviation from the construction project as it conducted several
ocular inspections and continuously released partial amounts of the loan despite knowledge of
the construction deviating from the project plan. Motions for reconsideration were denied.

ISSUES:

1. Whether or not there were violations of the loan agreement that gives rise to rescission
2. Whether or not the interest rates are valid

RULING:

1. Planters Bank indeed incurred in delay by not complying with its obligation to make
further loan releases. Its refusal to release the remaining balance, however, was merely a slight
or casual breach. Its breach was not sufficiently fundamental to defeat the object of the parties
in entering into the loan agreement. The well-settled rule is that rescission will not be permitted
for a slight or casual breach of the contract. The question of whether a breach of contract is
substantial depends upon the attending circumstances.

The factual circumstances of this case lead us to the conclusion that Planters Bank
substantially complied with its obligation. To reiterate, Planters Bank released 3.5million of the
4.2million loan. Only16.66% of the entire loan was withheld while the six-story building was
already 85% completed by the spouses Lopez. It is erroneous to solely impute the non-
completion of the building to Planters Bank as it is not an insurer of the buildings construction.
External factors, such as the steep price of the materials and the cost of labor, affected the
erection of the building. More importantly, the spouses Lopez took the risk that the project would
not be finished when they constructed a six-story building instead of four-story structure.

Even assuming that Planters Bank substantially breached its obligation, the fourth
paragraph of Article 1191 of the Civil Code expressly provides that rescission is without
prejudice to the rights of third persons who have acquired the thing, in accordance with Article
1385 of the Civil Code. In turn, Article 1385 states that rescission cannot take place when the
things which are the object of the contract are legally in the possession of third persons who did
not act in bad faith.

In the present case, the mortgaged properties had already been foreclosed. They were
already sold to the highest bidder at a public auction. The spouses Lopez did not overcome the
presumption that the buyers bought the foreclosed properties in good faith. The spouses Lopez
did not cause the annotation of notice of lis pendens at the back of the title of the mortgaged lot.
Moreover, the spouses Lopez did not adduce any evidence that would show that the buyers
bought the property with actual knowledge of the pendency of the present case. Furthermore,
the spouses Lopezs failure to pay the overdue loan made them parties in default, not entitled to
rescission under Article 1191 of the Civil Code.

2. Section 1 of BSP Circular No. 799, Series of 2013, which took effect on July 1, 2013,
provides: Section 1. The rate of interest for the loan or forbearance of any money, goods or
credits and the rate allowed in judgments, in the absence of an express contract as to such rate
of interest, shall be six percent (6%) per annum.

This provision amends Section 2 of Central Bank Circular No. 905-82, Series of 1982,
which states that the rate of interest for the loan or forbearance of any money, goods or credits
and the rate allowed in judgments, in the absence of express contract as to such rate of interest,
shall continue to be twelve percent (12%) per annum.

Since the Supreme Court declares as void the monetary interest agreed upon by the
parties, the SCimposes a compensatory interest of 12% p.a. which accrues from June 22, 1984
until June 30, 2013, pursuant to CB Circular No. 905-82. In recognition of the prospective
application of BSP Circular No. 799, we reduce the compensatory interest of 12% p.a. to 6%
p.a. from July 1, 2013 until the finality of this Decision.

PEOPLE OF THE PHILIPPINES v.

LYDIA CAPCO DE TENSUAN, represented by CLAUDIA C. ARUELO
G.R. No. 171136, October 23, 2013
J. Leonardo-De Castro

The requisites for the filing of an application for registration of title under Section 14(1)
of the Property Registration Decree are: (1) that the property in question is alienable and
disposable land of the public domain; and (2) that the applicants by themselves or through
 their predecessors-in-interest have been in open, continuous, exclusive and notorious
possession and occupation; and that such possession is under a bona fide claim of
ownership since June 12, 1945 or earlier. In Heirs of Mario Malabanan v. Republic, we
affirmed our earlier ruling in Republic v. Naguit, that Section 14(1) of the Property
Registration Decree merely requires the property sought to be registered as already
alienable and disposable at the time the application for registration of title is filed.

FACTS:

On August 11, 1998, Tensuan, represented by her sister, Claudia C. Aruelo, filed with
the MeTC an Application for Registration of two lots. In her Application for Registration,
Tensuan alleged that she is the absolute owner and possessor of the subject two
paraphernal parcels of land and said parcels of land were assessed for tax purposes. Then
Tensuan filed an motion to withdraw one of the applications because there was a legal
easement on.

OSG filed an opposition for the application and thereafter, Laguna Lake
Development authority filed its own opposition. To prove possession, Tensuan presented two
witnesses and several pieces of evidence. Engineer Ramon Magalona took the witness
stand for oppositor LLDA. He averred that based on the topographic map and technical
description of the subject property, the said property is located below the prescribed lake
elevation of 12.5 meters. Hence, the subject property forms part of the Laguna Lake bed
and, as such, is public land. During cross-examination, Magalona admitted that the
topographic map he was using as basis was made in the year 1967; that there had been
changes in the contour of the lake; and that his findings would have been different if the
topographic map was made at present time. He likewise acknowledged that the subject
property is an agricultural lot. When Magalona conducted an ocular inspection of the subject
property, said property and other properties in the area were submerged in water as the lake
level was high following the recent heavy rains. MeTC granted the application. CA affirmed.

ISSUE:

Whether or not the disputed parcel of land is alienable.

RULING:

The requisites for the filing of an application for registration of title under Section
14(1) of the Property Registration Decree are: (1) that the property in question is alienable
and disposable land of the public domain; and (2) that the applicants by themselves or
through their predecessors-in-interest have been in open, continuous, exclusive and
notorious possession and occupation; and that such possession is under a bona fide claim
 of ownership since June 12, 1945 or earlier. In Heirs of Mario Malabanan v. Republic, we
affirmed our earlier ruling in Republic v. Naguit, that Section 14(1) of the Property
Registration Decree merely requires the property sought to be registered as already
alienable and disposable at the time the application for registration of title is filed.

We proceed to determine first whether it has been satisfactorily proven herein that
the subject property was already alienable and disposable land of the public domain at the
time Tensuan filed her Application for Registration on August 11, 1998.

Under the Regalian doctrine, all lands of the public domain belong to the State, and
that the State is the source of any asserted right to ownership of land and charged with the
conservation of such patrimony. The same doctrine also states that all lands not otherwise
appearing to be clearly within private ownership are presumed to belong to the State.
Consequently, the burden of proof to overcome the presumption of ownership of lands of the
public domain is on the person applying for registration. Unless public land is shown to have
been reclassified and alienated by the State to a private person, it remains part of the
inalienable public domain.

As to what constitutes alienable and disposable land of the public domain, we turn to
our pronouncements in Secretary of the Department of Environment and Natural Resources
v. Yap: The 1935 Constitution classified lands of the public domain into agricultural, forest
or timber. Meanwhile, the 1973 Constitution provided the following divisions: agricultural,
industrial or commercial, residential, resettlement, mineral, timber or forest and grazing
lands, and such other classes as may be provided by law, giving the government great
leeway for classification. Then the 1987 Constitution reverted to the 1935 Constitution
classification with one addition: national parks. Of these, only agricultural lands may be
alienated. A positive act declaring land as alienable and disposable is required. In keeping
with the presumption of State ownership, the Court has time and again emphasized that
there must be a positive act of the government, such as an official proclamation,
declassifying inalienable public land into disposable land for agricultural or other purposes.
In fact, Section 8 of CA No. 141 limits alienable or disposable lands only to those lands
which have been "officially delimited and classified."

As proof that the subject property is alienable and disposable, Tensuan presented a
Certification dated July 29, 1999 issued by the CENRO-DENR which verified that "said land falls
within alienable and disposable land under Project No. 27-B L.C. Map No. 2623 under Forestry
Administrative Order No. 4-1141 dated January 3, 1968." However, we have declared
unequivocally that a CENRO Certification, by itself, is insufficient proof that a parcel of land is
alienable and disposable. The CENRO is not the official repository or legal custodian of the
issuances of the DENR Secretary declaring public lands as alienable and disposable. The
CENRO should have attached an official publication of the DENR Secretarys issuance
declaring the land alienable and disposable.
 REPUBLIC OF THE PHILIPPINES v. DIOSDADA I. GIELCZYK

G.R. No. 179990, October 23, 2013

J. Reyes

"Prescription is one of the modes of acquiring ownership under the Civil Code. There is
a consistent jurisprudential rule that properties classified as alienable public land may be
converted into private property by reason of open, continuous and exclusive possession of
at least thirty (30) years. With such conversion, such property may now fall within the
contemplation of "private lands" under Section 14(2), and thus susceptible to registration by
those who have acquired ownership through prescription. Thus, even if possession of the
alienable public land commenced on a date later than June 12, 1945, and such possession
being been [sic] open, continuous and exclusive, then the possessor may have the right to
register the land by virtue of Section 14(2) of the Property Registration Decree."

FACTS:

On July 17, 1995, the respondent sought the registration under her name several
parcel of lots. The respondent further alleged the following: (a) that the said parcels of land
were last assessed for taxation atP2,400.00; (b) that to the best of her knowledge and belief,
there is no mortgage nor encumbrance of any kind affecting said land, nor any person
having interest therein, legal or equitable; (c) that she had been in open, complete,
continuous, and peaceful possession in the concept of an owner over said parcels of land
up to the present time for more than 30 years, including the possession of her
predecessors-in-interest; (d) that she acquired title to said land by virtue of the deeds of
absolute sale; and (e) that said land is not occupied. The respondent, as far as known to
her, also alleged that the full names and complete addresses of the owners of all lands
adjoining the subject land.

The petitioner filed an opposition dated September 18, 1995 to the respondents
application for registration of title, alleging that neither the respondent nor her predecessors-
in-interest have been in open, continuous, exclusive, and notorious possession and
occupation of the land in question since June 12, 1945 or prior thereto and that the
muniments of title and/or the tax declarations and tax payment receipts of the respondent
attached to or alleged in the application do not constitute competent and sufficient evidence
of a bona fide acquisition of the land applied for or of their open, continuous, exclusive and
notorious possession and occupation thereof in the concept of an owner since June 12,
1945, or prior thereto; and that said muniments of title do not appear to be genuine and the
tax declarations and/or tax payment receipts indicate the pretended possession of the
respondent to be of recent vintage. Moreover, that the respondent can no longer avail of the
claim of ownership in fee simple on the basis of Spanish title or grant since she has failed to
 file an appropriate application for registrati on within the period of six months from February
16, 1976 as required by Presidential Decree (P.D.) No. 892. From the records, the petitioner
further alleged that the instant application was filed on July 7, 1995 and that the parcel of
land applied for is a portion of the public domain belonging to the petitioner and that the said
parcel is not subject to private appropriation. RTC held that the applicant has registrable title
over subject lots, and the same title was confirmed. CA denied the application and affirmed
RTCs ruling.

ISSUE:

Whether or not the respondent has been in open, continuous, notorious, exclusive, and
peaceful possession over the lands subject of of the application.

RULING:

After a thorough study of the records, the Court resolves to grant the petition. The
respondent failed to completely prove that there was an expressed State declaration that the
properties in question are no longer intended for public use, public service, the development
of the national wealth and have been converted into patrimonial property, and to meet the
period of possession and occupation required by law. Section 14 of P.D. No. 1529 or The
Property Registration Decree enumerates the persons who may apply for the registration of
title to land, to wit: Sec. 14. Who may apply. The following persons may file in the proper
Court of First Instance an application for registration of title to land, whether personally or
through their duly authorized representatives: (1) Those who by themselves or through their
predecessors-in- interest have been in open, continuous, exclusive and notorious
possession and occupation of alienable and disposable lands of the public domain under a
bona fide claim of ownership since June 12, 1945, or earlier; (2) Those who have acquired
ownership of private lands by prescription under the provision of existing laws; (3) Those
who have acquired ownership of private lands or abandoned river beds by right of accession
or accretion under the existing laws; (4) Those who have acquired ownership of land in any
other manner provided for by law.

In the case of Republic of the Philippines vs. Court of Appeals and Naguit, it was
ruled that:Did the enactment of the Property Registration Decree and the amendatory P.D.
No. 1073 preclude the application for registration of alienable lands of the public domain,
possession over which commenced only after June 12, 1945? It did not, considering Section
14(2) of the Property Registration Decree, which governs and authorizes the application of
"those who have acquired ownership of private lands by prescription under the provisions of
existing laws." "Prescription is one of the modes of acquiring ownership under the Civil
Code. There is a consistent jurisprudential rule that properties classified as alienable public
land may be converted into private property by reason of open, continuous and exclusive
possession of at least thirty (30) years. With such conversion, such property may now fall
within the contemplation of "private lands" under Section 14(2), and thus susceptible to
registration by those who have acquired ownership through prescription. Thus, even if
possession of the alienable public land commenced on a date later than June 12, 1945, and
such possession being been [sic] open, continuous and exclusive, then the possessor may
have the right to register the land by virtue of Section 14(2) of the Property Registration
Decree."

In the instant case, applicant-appellee was able to present tax declarations dating
back from 1948. Although tax declarations and realty tax payment of property are not
conclusive evidence of ownership, nevertheless, they are good indicia of the possession in
the concept of owner for no one in his right mind would be paying taxes for a property that is
not in his actual, or at the least constructive, possession. They constitute proof that the
holder has a claim of title over the property. The voluntary declaration of a piece of property
for taxation purposes manifests, not only ones sincere and honest desire to obtain title to
the property, but it also announces his adverse claim against the State and all other
interested parties, including his intention to contribute to the needed revenues of the
Government. All told, such acts strengthen ones bona fide claim of acquisition of ownership.

However, following our ruling in Republic of the Philippines v. T.A.N. Properties,

Inc., this CENRO Certification by itself is insufficient to establish that a public land is
alienable and disposable. While the certification refers to Forestry Administrative Order No.
4-1063 dated September 1, 1965, the respondent should have submitted a certified true
copy thereof to substantiate the alienable character of the land. In any case, the Court does
not need to further discuss whether the respondent was able to overcome the burden of
proving that the land no longer forms part of the public domain to support her application for
original land registration because of other deficiencies in her application.

Indeed, the respondent failed to meet the required period of possession and
occupation for purposes of prescription. From the time of the declaration on September 1,
1965 that the properties in question are purportedly alienable and disposable up to the filing
of the application of the respondent on July 17, 1995, the respondent and her predecessors-
in-interest had possessed and occupied the said properties for only 29 years and 10
months, short of two months to complete the whole 30-year possession period.

Granting por arguendo that the respondent and her predecessors-in-interest had
possessed and occupied the subject lots since 1948, the Court cannot still tack those years
to complete the 30-year possession period since the said lots were only declared alienable
and disposable on September 1, 1965. In Naguit, we ruled that for as long as the land was
declared alienable and disposable, the same is susceptible of prescription for purposes of
registration of imperfect title. In Lim v. Republic, we further clarified that "while a property
classified as alienable and disposable public land may be converted into private property by
reason of open, continuous, exclusive and notorious possession of at least 30 years, public
dominion lands become patrimonial property not only with a declaration that these are
alienable or disposable but also with an express government manifestation that the property
 is already patrimonial or no longer retained for public use, public service or the development
of national wealth. And only when the property has become patrimonial can the prescriptive
period for the acquisition of property of the public dominion begin to run."

While the subject lots were supposedly declared alienable or disposable on

September 1, 1965 based on the Certifications of the CENRO, the respondent still failed to
complete the 30-year period required to grant her application by virtue of prescription. The
respondent failed to present specific acts of ownership to substantiate her claim of open,
continuous, exclusive, notorious and adverse possession in the concept of an owner.

TING TING PUA v. SPOUSES BENITO LO BUN TIONG and CAROLINE SIOK CHING TENG
G.R. No. 198660, October 23, 2013
J. Velasco, Jr.

Article 1956 of the Civil Code, which refers to monetary interest, specifically mandates
that no interest shall be due unless it has been expressly stipulated in writing.

FACTS:

The controversy arose from a Complaint for a Sum of Money filed by petitioner Pua
against respondent-spouses Benito Lo Bun Tiong and Caroline Siok Ching Teng. In the
complaint, Pua prayed that, among other things, respondents, or then defendants, pay Pua
the amount PhP 8,500,000. During trial, petitioner Pua clarified that the PhP 8,500,000
check was given by respondents to pay the loans they obtained from her under a
compounded interest agreement on various dates in 1988. As Pua narrated, her sister, Lilian
Balboa, vouched for respondents ability to pay so that when respondents approached her,
she immediately acceded and lent money to respondents without requiring any collateral
except post-dated checks bearing the borrowed amounts. In all, respondents issued
17 checks for a total amount of PhP 1,975,000. These checks were dishonored upon
presentment to the drawee bank.

As a result of the dishonor, petitioner demanded payment. Respondents, however,

pleaded for more time because of their financial difficulties. Petitioner Pua obliged and
simply reminded the respondents of their indebtedness from time to time. Sometime in
September 1996, when their financial situation turned better, respondents allegedly called
and asked petitioner Pua for the computation of their loan obligations. Hence, petitioner
handed them a computation dated October 2, 1996 which showed that, at the agreed 2%
compounded interest rate per month, the amount of the loan payable to petitioner rose to
PhP 13,218,544.20. On receiving the computation, the respondents asked petitioner to
reduce their indebtedness to PhP 8,500,000. Wanting to get paid the soonest possible time,
petitioner Pua agreed to the lowered amount.
 Respondents then delivered to petitioner Asiatrust Check bearing the reduced amount
of PhP 8,500,000 with the assurance that the check was good. In turn, respondents
demanded the return of the 17 previously dishonored checks. Petitioner, however, refused to
return the bad checks and advised respondents that she will do so only after the
encashment the check which was dishonored when it was presented by petitioner to the
drawee bank. Hence, as claimed by petitioner, she decided to file a complaint to collect the
money owed her by respondents.

ISSUE:

Whether or not the interest has to be paid by the respondents.

RULING:

In the main, petitioner asserts that respondents owed her a sum of money way back in
1988 for which the latter gave her several checks. These checks, however, had all been
dishonored and petitioner has not been paid the amount of the loan plus the agreed interest. In
1996, respondents approached her to get the computation of their liability including the 2%
compounded interest. After bargaining to lower the amount of their liability, respondents
supposedly gave her a postdated check bearing the discounted amount of the money they owed
to petitioner. Like the 1988 checks, the drawee bank likewise dishonored this check. To prove
her allegations, petitioner submitted the original copies of the 17 checks issued by respondent
Caroline in 1988 and the check issued in 1996, Asiatrust Check No. BND057750. In ruling in her
favor, the RTC sustained the version of the facts presented by petitioner.

In Pacheco v. Court of Appeals, this Court has expressly recognized that a check
"constitutes an evidence of indebtedness" and is a veritable "proof of an obligation." Hence, it
can be used "in lieu of and for the same purpose as a promissory note." In fact, in the seminal
case of Lozano v. Martinez, We pointed out that a check functions more than a promissory note
since it not only contains an undertaking to pay an amount of money but is an "order addressed
to a bank and partakes of a representation that the drawer has funds on deposit against which
the check is drawn, sufficient to ensure payment upon its presentation to the bank." This Court
reiterated this rule in the relatively recent Lim v. Mindanao Wines and Liquour Galleria stating
that "a check, the entries of which are in writing, could prove a loan transaction.

Respondents cannot be obliged to pay the interest of the loan on the ground that the
supposed agreement to pay such interest was not reduced to writing. Article 1956 of the Civil
Code, which refers to monetary interest, specifically mandates that no interest shall be due
unless it has been expressly stipulated in writing. Thus, the collection of interest in loans or
forbearance of money is allowed only when these two conditions concur: (1) there was an
express stipulation for the payment of interest; (2) the agreement for the payment of the interest
was reduced in writing. Absent any of these two conditions, the money debtor cannot be made
liable for interest. Thus, petitioner is entitled only to the principal amount of the loan plus the
allowable legal interest from the time of the demand, at the rate of 6% per annum.

NOVEMBER 2013
HEIRS OF ROMULO D. SANDUETA v. DOMINGO ROBLES, HEIRS OF TEODORO ABAN

G.R. No. 203204, November 20, 2013

J. Perlas-Bernabe

In this case, records reveal that aside from the 4.6523-hectare tenanted riceland
covered by the OLT Program, the subject portion, petitioners predecessors-in-interest, Sps.
Sandueta, own other agricultural lands with a total area of 14.0910 has. which therefore
triggers the application of the first disqualifying condition under LOI 474. As such,
petitioners, being mere successors-in-interest, cannot be said to have acquired any
retention right to the subject portion. Accordingly, the subject portion would fall under the
complete coverage of the OLT Program hence, the 5 and 3-hectare retention limits as well
as the landowner s right to choose the area to be retained under Section 6 of RA 6657
would not apply altogether.

FACTS:

The heirs of Romulo and Isabel Sandueta (Sps. Sandueta) who died intestate in
1987 and 1996, respectively, and accordingly inherited several agricultural lands situated in
Dipolog City, Zamboanga del Norte. One of these parcels of land was tenanted by
Eufrecena Galeza, Teodoro Aban, and Domingo Pableo (tenants) who were instituted as
such by the original owner, Diosdado Jasmin, prior to its sale to Sps. Sandueta. The subject
portion was placed under the governments Operation Land Transfer (OLT) Program
pursuant to Presidential Decree No. (PD) 27 and consequently awarded to the above-
named tenants who were issued the corresponding Emancipation Patents (EPs).

Heirs of Sps. Sandueta filed before the Department of Agrarian Reform (DAR)
District Office in Dipolog City a petition seeking to exercise their right of retention over the
subject portion pursuant to Section 6 of Republic Act No. (RA) 6657, known as the
Comprehensive Agrarian Reform Law of 1988.

The DAR Regional Office issued an Order (April 5, 2006 Order) that a landowner
who failed to exercise his right of retention under PD 27 can avail of the right to retain an
area not exceeding 5 has. pursuant to Section 6 of RA 6657, adding that this award is
different from that which may be granted to the children of the landowner, to the extent of 3
has. each, in their own right as beneficiaries. However, to be entitled thereto, each child
must meet the age qualification and requirement of actual cultivation of the land or direct
management of the farm under Section 6, as well as the other conditions under Section
22 of RA 6657. As petitioners were absentee landowners who had left the cultivation of the
subject portion entirely to the tenants, Director Ragandang therefore concluded that they are
not entitled to exercise retention rights thereon and, hence, denied their petition for
retention. Despite such denial, Director Ragandang granted the decedent Romulo Sandueta
the right to retain 5 has. from the portion of Lot No. 3419 not covered by the OLT Program.

On appeal, DAR-Central Office Order affirming in toto Director Ragandangs April 5,

2006 Order which the CA also affirmed on appeal.

ISSUE:

Whether petitioners are entitled to avail of any retention right under Section 6 of RA 6657

RULING:

The petition is denied.

The right of retention, as protected and enshrined in the Constitution, balances the
effects of compulsory land acquisition by granting the landowner the right to choose the area
to be retained subject to legislative standards. Necessarily, since the said right is granted to
limit the effects of compulsory land acquisition against the landowner, it is a prerequisite that
the land falls under the coverage of the OLT Program of the government. If the land is
beyond the ambit of the OLT Program, the landowner need not as he should not apply
for retention since the appropriate remedy would be for him to apply for exemption. As
explained in the case of Daez v. CA (Daez):

Exemption and retention in agrarian reform are two (2) distinct concepts.

P.D. No. 27, which implemented the Operation Land Transfer (OLT) Program, covers
tenanted rice or corn lands. The requisites for coverage under the OLT program are the
following: (1) the land must be devoted to rice or corn crops; and (2) there must be a
system of share-crop or lease-tenancy obtaining therein. If either requisite is absent, a
landowner may apply for exemption. If either of these requisites is absent, the land is not
 covered under OLT. Hence, a landowner need not apply for retention where his
ownership over the entire landholding is intact and undisturbed.

To clarify, in Santiago v. Ortiz-Luis, the Court, citing the cases of Assn. of Small
Landowners and Reyes, stated that while landowners who have not yet exercised their
retention rights under PD 27 are entitled to new retention rights provided for by RA 6657, the
limitations under LOI 474 would equally apply to a landowner who filed an application under
RA 6657.

In this case, records reveal that aside from the 4.6523-hectare tenanted riceland
covered by the OLT Program, i.e. the subject portion, petitioners predecessors-in-interest,
Sps. Sandueta, own other agricultural lands with a total area of 14.0910 has. which
therefore triggers the application of the first disqualifying condition under LOI 474 as above-
highlighted. As such, petitioners, being mere successors-in-interest, cannot be said to have
acquired any retention right to the subject portion. Accordingly, the subject portion would fall
under the complete coverage of the OLT Program hence, the 5 and 3-hectare retention
limits as well as the landowner s right to choose the area to be retained under Section 6 of
RA 6657 would not apply altogether.

Nevertheless, while the CA properly upheld the denial of the petition for retention, the
Court must point out that the November 24, 2009 DARCO Order inaccurately phrased
Romulo Sanduetas entitlement to the remaining 14.0910-hectare landholding, outside of the
4.6523-hectare subject portion, as a vestige of his retention right. Since the 14.0910-hectare
landholding was not shown to be tenanted and hence, outside the coverage of the OLT
Program, there would be no right of retention, in its technical sense, to speak of. Keeping
with the Court s elucidation in Daez retention is an agrarian reform law concept which is only
applicable when the land is covered by the OLT Program; this is not, however, the case with
respect to the 14.0910-hectare landholding. Thus, if only to correct any confusion in
terminology, Romulo Sanduetas right over the 14.0910-hectare landholding should not be
deemed to be pursuant to any retention right but rather to his ordinary right of ownership as
it appears from the findings of the DAR that the landholding is not covered by the OLT
Program.

NUCCIO SAVERIO and NS INTERNATIONAL INC. v. ALFONSO G. PUYAT

G.R. No. 186433, November 27, 2013
J. Brion

In order for the ground of corporate ownership to stand, the following circumstances
should also be established: (1) that the stockholders had control or complete domination of
the corporations finances and that the latter had no separate existence with respect to the
act complained of; (2) that they used such control to commit a wrong or fraud; and (3) the
control was the proximate cause of the loss or injury. Applying these principles to the
 present case, we opine and so hold that the attendant circumstances do not warrant the
piercing of the veil of NSIs corporate fiction.

FACTS:

On July 22, 1996, the respondent granted a loan to NSI. The loan was made pursuant to
the Memorandum of Agreement and Promissory Not between the respondent and NSI,
represented by Nuccio. It was agreed that the respondent would extend a credit line with a
limit of P500,000.00 to NSI, to be paid within 30 days from the time of the signing of the
document. The loan carried an interest rate of 17% per annum, or at an adjusted rate of
25% per annum if payment is beyond the stipulated period. The petitioners received a total
amount of P300,000.00 and certain machineries intended for their fertilizer processing plant
business. The proposed business, however, failed to materialize. Nuccio made several
payments amounting to P600,000.00. However, as of December 16, 1999, the petitioners
allegedly had an outstanding balance of P460,505.86. When the petitioners defaulted in the
payment of the loan, the respondent filed a collection suit with the RTC. The petitioners
refuted the respondents allegation and insisted that they have already paid the loan,
evidenced by the respondents receipt for the amount of P600,000.00. They submitted that
their remaining obligation to pay the machineries value, if any, had long been extinguished
by their business failure to materialize.

RTC found that aside from the cash loan, the petitioners obligation to the respondent
also covered the payment of the machineries value. The RTC also brushed aside the
petitioners claim of partnership. The RTC thus ruled that the payment of P600,000.00 did
not completely extinguish the petitioners obligation. CA also affirmed the RTC.

ISSUE:

Whether or not the veil of corporate fiction should be pierced.

RULING:

The rule is settled that a corporation is vested by law with a personality separate and
distinct from the persons composing it. Following this principle, a stockholder, generally, is
not answerable for the acts or liabilities of the corporation, and vice versa. The obligations
incurred by the corporate officers, or other persons acting as corporate agents, are the direct
accountabilities of the corporation they represent, and not theirs. A director, officer or
employee of a corporation is generally not held personally liable for obligations incurred by
the corporation9 and while there may be instances where solidary liabilities may arise, these
circumstances are exceptional.

Incidentally, we have ruled that mere ownership by a single stockholder or by

another corporation of all or nearly all of the capital stocks of the corporation is not, by itself,
a sufficient ground for disregarding the separate corporate personality. Other than mere
ownership of capital stocks, circumstances showing that the corporation is being used to
commit fraud or proof of existence of absolute control over the corporation have to be
proven. In short, before the corporate fiction can be disregarded, alter-ego elements must
first be sufficiently established.

In order for the ground of corporate ownership to stand, the following circumstances
should also be established: (1) that the stockholders had control or complete domination of
the corporations finances and that the latter had no separate existence with respect to the
act complained of; (2) that they used such control to commit a wrong or fraud; and (3) the
control was the proximate cause of the loss or injury. Applying these principles to the present
case, we opine and so hold that the attendant circumstances do not warrant the piercing of
the veil of NSIs corporate fiction.

Aside from the undisputed fact of Nuccios 40% shareholdings with NSI, the RTC applied the
piercing the veil doctrine based on the following reasons. First, there was no board
resolution authorizing Nuccio to enter into a contract of loan. Second, the petitioners were
represented by one and the same counsel. Third, NSI did not object to Nuccios act of
contracting the loan. Fourth, the control over NSI was used to commit a wrong or fraud.
Fifth, Nuccios admission that "NS" in the corporate name "NSI" means "Nuccio Saverio."
We are not convinced of the sufficiency of these cited reasons. In our view, the RTC failed to
provide a clear and convincing explanation why the doctrine was applied. It merely declared
that its application of the doctrine of piercing the veil of corporate fiction has a basis,
specifying for this purpose the act of Nuccios entering into a contract of loan with the
respondent and the reasons stated above.

The records of the case, however, do not show that Nuccio had control or domination
over NSIs finances. The mere fact that it was Nuccio who, in behalf of the corporation,
signed the MOA is not sufficient to prove that he exercised control over the corporations
finances. Neither the absence of a board resolution authorizing him to contract the loan nor
NSIs failure to object thereto supports this conclusion. These may be indicators that, among
others, may point the proof required to justify the piercing the veil of corporate fiction, but by
themselves, they do not rise to the level of proof required to support the desired conclusion.
It should be noted in this regard that while Nuccio was the signatory of the loan and the
money was delivered to him, the proceeds of the loan were unquestionably intended for
NSIs proposed business plan. That the business did not materialize is not also sufficient
proof to justify a piercing, in the absence of proof that the business plan was a fraudulent
scheme geared to secure funds from the respondent for the petitioners undisclosed goals.

Considering that the basis for holding Nuccio liable for the payment of the loan has
been proven to be insufficient, we find no justification for the RTC to hold him jointly and
solidarily liable for NSIs unpaid loan.
 SPOUSES ELISEO R. BAUTISTA AND EMPERA TRIZ C. BAUTISTA vs. SPOUSES MILA
JALANDONI AND ANTONIO JALANDONI AND MANILA CREDIT CORPORATION
G.R. No. 171464, November 27, 2013

Manila Credit Corporation v. Spouses Mila and Antonio Jalandoni, and Spouses Eliseo
and Emperatriz C.Bautista
G.R. No. 199341. November 27, 2013
J. Mendoza

A buyer in good faith is one who buys the property of another without notice that some
other person has a right to or interest in such property. He is a buyer for value if he pays a full
and fair price at the time of the purchase or before he has notice of the claim or interest of some
other person in the property. "Good faith connotes an honest intention to abstain from taking
unconscientious advantage of another." To prove good faith, the following conditions must be
present: (a) the seller is the registered owner of the land; (b) the owner is in possession thereof;
and (3) at the time of the sale, the buyer was not aware of any claim or interest of some other
person in the property, or of any defect or restriction in the title of the seller or in his capacity to
convey title to the property. All these conditions must be present, otherwise, the buyer is under
obligation to exercise extra ordinary diligence by scrutinizing the certificates of title and
examining all factual circumstances to enable him to ascertain the seller's title and capacity to
transfer any interest in the property.

FACTS:

Spouses Jalandoni were the registered owners of two (2) parcels of land. In May 1997,
the Spouses Jalandoni applied for a loan with a commercial bank and, as a security thereof,
they offered to constitute a real estate mortgage over their two lots. After a routine credit
investigation, it was discovered that their titles over the two lots had been cancelled and new
TCTs were issued in the names of Spouses Baustista. Upon further investigation, they found out
that the bases for the cancellation of their titles were two deeds of absolute sale dated April 4,
1996 and May 4, 1996, purportedly executed and signed by them in favor of Spouses Baustista.
Aggrieved, Spouses Jalandoni filed a complaint for cancellation of titles and damages claiming
that they did not sell the subject lots and denied having executed the deeds of absolute sale.
They asserted that the owner's duplicate certificates of title were still in their possession and that
their signatures appearing on the deeds of absolute sale were forged and that said deeds were
null and void and transferred no title in favor of Spouses Bautista; that they never met the
Spouses Bautista nor did they appear before the notary public who notarized the deeds of
absolute sale.

Spouses Bautista claimed that Teresita Nasino offered to Eliseo Baustista two parcels of
land which were being sold at a bargain price because the owners were in dire need of money.
Nasino showed them the photocopies of the titles covering the subject lands and he told them
that she would negotiate with the Spouses Jalandoni, prepare the necessary documents and
cause the registration of the sale with the Register of Deeds and that since Nasino was a wife of
a friend, Spouses Baustista trusted her and gave her the authority to negotiate with Spouses
Jalandoni on their behalf.

MCC reiterated its claim in its motion to dismiss that the venue of the case was
improperly laid and that the complaint failed to state a cause of action against it as there was no
allegation made in the complaint as to its participation in the alleged falsification. MCC averred
that they found no indication of any defect in the titles of Spouses Bautista; that it exercised due
diligence and prudence in the conduct of its business and conducted the proper investigation
and inspection of the mortgaged properties; and that its mortgage lien could not be prejudiced
by the alleged falsification claimed by Spouses Jalandoni.

ISSUES:

1 Whether or not the Spouses Bautista are buyers in good faith and for value
2 Whether or not Spouses Jalandoni have better right over MCC

RULING:

1. "A buyer in good faith is one who buys the property of another without notice that
some other person has a right to or interest in such property. He is a buyer for value if he
pays a full and fair price at the time of the purchase or before he has notice of the claim or
interest of some other person in the property.""Good faith connotes an honest intention to
abstain from taking unconscientious advantage of another."To prove good faith, the following
conditions must be present: (a) the seller is the registered owner of the land; (b) the owner is
in possession thereof; and (3) at the time of the sale, the buyer was not aware of any claim
or interest of some other person in the property, or of any defect or restriction in the title of
the seller or in his capacity to convey title to the property. All these conditions must be
present, otherwise, the buyer is under obligation to exercise extra ordinary diligence by
scrutinizing the certificates of title and examining all factual circumstances to enable him to
ascertain the seller's title and capacity to transfer any interest in the property.

Tested by these conditions, Spouses Bautista cannot be deemed purchasers in good

faith. There were several circumstances that should have placed them on guard and
prompted them to conduct an investigation that went beyond the face of the title of the
subject lots. Their failure to take the necessary steps to determine the status of the subject
lots and the extent of Nasino's authority puts them into bad light. As correctly observed by
the RTC:

As a general rule, every person dealing with registered land may safely rely on
the correctness of the certificate of title and is under no obligation to look beyond the
certificate itself to determine the actual owner or the circumstances of its ownership.
However, there might be circumstance apparent on the face of the certificate of title or
situation availing which would excite suspicion as a reasonable prudent man to promptly
inquire as in the instant case where the transfer is being facilitated by a person other
than the registered owner.

The foregoing fact alone would have prompted suspicion over the transaction
considering that the same involves a valuable consideration. In addition, the following
circumstances would have placed Bautista on guard and should have behooved himself to
inquire further considering: (1) the non-presentation of the owner's duplicate certificate,
 where only photocopies of the certificates of title were presented to defendant Bautista; (2)
the price at which the subject lots were being sold; and (2) the continued failure and/or
refusal of the supposed sellers to meet and communicate with him.

While it may be true that Bautista's participation over the transaction was merely
limited to the signing of the Deeds of Sale, and there is no evidence on record that he was
party to the forgery or the simulation of the questioned contracts. Nevertheless, failing to
make the necessary inquiry under circumstances as would prompt a reasonably prudent
man to do so as in the instant case, is hardly consistent with any pretense of good faith,
which defendant Bautista invokes to claim the right to be protected as innocent purchaser
for value.

Spouses Bautistas claim of good faith is negated by their failure to verify the extent
and nature of Nasinos authority. Since Spouses Bautista did not deal with the registered
owners but with Nasino, who merely represented herself to be their agent, they should have
scrutinized all factual circumstances necessary to determine her authority to insure that
there are no flaws in her title or her capacity to transfer the land. They should not have
merely relied on her verbal representation that she was selling the subject lots on behalf of
Spouses Jalandoni. Moreover, Eliseos claim that he did not require Nasino to give him a
copy of the special power of attorney because he trusted her is unacceptable. Well settled is
the rule that persons dealing with an assumed agency are bound at their peril, if they would
hold the principal liable, to ascertain not only the fact of agency but also the nature and
extent of authority, and in case either is controverted, the burden of proof is upon them to
establish it.

2. Coming now to the petition of MCC, it claims to be a mortgagee in good faith and
asserts that it had no participation in the forgery of the deeds of sale.

Generally, the law does not require a person dealing with registered land to go
beyond the certificate of title to determine the liabilities attaching to the property. In the
absence of suspicion, a purchaser or mortgagee has a right to rely in good faith on the
certificates of title of the mortgagor and is not obligated to undertake further
investigation. For indeed the Court in several cases declared that a void title may be the
source of a valid title in the hands of an innocent purchaser for value.

Where the owner, however, could not be charged with negligence in the keeping of
its duplicate certificates of title or with any act which could have brought about the issuance
of another title relied upon by the purchaser or mortgagee for value, then the innocent
registered owner has a better right over the mortgagee in good faith.For "the law protects
and prefers the lawful holder of registered title over the transferee of a vendor bereft of any
transmissible rights."

The claim of indefeasibility of the petitioner's title under the Torrens land title system
would be correct if previous valid title to the same parcel of land did not exist. The
respondent had a valid title x x x It never parted with it; it never handed or delivered to
anyone its owner's duplicate of the transfer certificate of title; it could not be charged with
negligence in the keeping of its duplicate certificate of title or with any act which could have
brought about the issuance of another certificate upon which a purchaser in good faith and
for value could rely. If the petitioner's contention as to indefeasibility of his title should be
upheld, then registered owners without the least fault on their part could be divested of their
title and deprived of their property. Such disastrous results which would shake and destroy
the stability of land titles had not been foreseen by those who had endowed with
indefeasibility land titles issued under the Torrens system.

Thus, in the case of Tomas v. Philippine National Bank,the Court stated that:

We, indeed, find more weight and vigor in a doctrine which recognizes a
better right for the innocent original registered owner who obtained his certificate
of title through perfectly legal and regular proceedings, than one who obtains his
certificate from a totally void one, as to prevail over judicial pronouncements to
the effect that one dealing with a registered land, such as a purchaser, is under
no obligation to look beyond the certificate of title of the vendor, for in the latter
case, good faith has yet to be established by the vendee or transferee, being the
most essential condition, coupled with valuable consideration, to entitle him to
respect for his newly acquired title even as against the holder of an earlier and
perfectly valid title.

Spouses Jalandoni had not been negligent in any manner and indeed had not
performed any act which gave rise to any claim by a third person. As a matter of fact,
Spouses Jalandoni never relinquished their title over the subject lots. Thus, whatever rights
MCC may have acquired over the subject lots cannot prevail over, but must yield to the
superior rights of Spouses Jalandoni as no one can acquire a better right that the transferor
has.

GATCHALIAN REALTY, INC. v. EVELYN M. ANGELES

G.R. No. 202358, November 27, 2013

 J. Carpio

[T]his Court held that the Contract to Sell between the parties remained valid
because of the developers failure to send a notarized notice of cancellation and to refund
the cash surrender value. The defaulting buyer thus had the right to offer to pay the balance
of the purchase price, and the developer had no choice but to accept payment. However,
the defaulting buyer was unable to exercise this right because the developer sold the
subject lot. This Court ordered the developer to refund to the defaulting buyer the actual
value of the lot with 12% interest per annum computed from the date of the filing of the
complaint until fully paid, or to deliver a substitute lot at the option of the defaulting buyer.

FACTS:

On 28 December 1994, Angeles purchased a house and lot from GRI valued at Php
750,000.00 and Php 450,000.00, respectively, with 24% interest per annum to be paid by
installment within a period of ten years. The house and lot were delivered to Angeles in
1995. Nonetheless, under the contracts to sell executed between the parties, GRI retained
ownership of the property until full payment of the purchase price.

After sometime, Angeles failed to satisfy her monthly installments. Angeles was only
able to pay 35 and 48 installments for the house and lot. According to GRI,[Angeles was
given at least 12 notices for payment in a span of 3 years but she still failed to settle her
account despite receipt of said notices and without any valid reason. Angeles was again
given more time to pay her dues and likewise furnished with 3 notices reminding her to pay
her outstanding balance with warning of impending legal action and/or rescission of the
contracts, but to no avail. After giving a total of 51 months grace period for both contracts
and in consideration of the continued disregard of the demands, Angeles was served with a
notice of notarial rescission dated 11 September 2003 by registered mail which she
allegedly received on 19 September 2003 as evidenced by a registry return receipt.

Consequently Angeles was furnished by GRI with a demand letter demanding her to
pay the amount of Php 112,304.42 as outstanding reasonable rentals for her use and
occupation of the house and lot as of August 2003 and to vacate the same. She was
informed in said letter that the 50% refundable amount that she is entitled to has already
been deducted with the reasonable value for the use of the properties or the reasonable
rentals she incurred during such period that she was not able to pay the installments due
her. After deducting the rentals from the refundable amount, she still had a balance which
she was required to settle within fifteen (15) days from receipt of the letter.
 Allegedly, she subsequently sent postal money orders through registered mail to
GRI. In a letter dated 27 January 2004 Angeles was notified by GRI of its receipt of a postal
money order sent by Angeles. More so, she was requested to notify GRI of the purpose of
the payment. For her continued failure to satisfy her obligations with GRI and her refusal to
vacate the house and lot, GRI filed a complaint for unlawful detainer against Angeles on 11
November 2003.

MeTC ruled in favor of GRI. RTC ruled in favor of Angeles. CA reversed RTC.

ISSUE:

Whether or not there was an actual cancellation of contract between GRI and Angeles.

RULING:

There was no actual cancellation of the contracts because of GRIs failure to actually
refund the cash surrender value to Angeles. There is a mandatory twin requirement for
Notarized Notice of Cancellation and Refund of Cash Surrender Value.

The MeTC ruled that it was proper for GRI to compensate the rentals due from
Angeles occupation of the property from the cash surrender value due to Angeles from GRI.
The MeTC stated that compensation legally took effect in accordance with Article 1290 of
the Civil Code. However, it was error for the MeTC to apply Article 1279 as there was
nothing in the contracts which provided for the amount of rentals in case the buyer defaults
in her installment payments.

In Olympia Housing, Inc. v. Panasiatic Travel Corp, we ruled that the notarial act of
rescission must be accompanied by the refund of the cash surrender value.

x x x The actual cancellation of the contract can only be deemed to take place
upon the expiry of a 30-day period following the receipt by the buyer of the notice of
cancellation or demand for rescission by a notarial act and the full payment of the cash
surrender value.
 In Pagtalunan v. Dela Cruz Vda. De Manzano,40 we ruled that there is no valid
cancellation of the Contract to Sell in the absence of a refund of the cash surrender value.
We stated that: x x x Sec. 3 (b) of R.A. No. 6552 requires refund of the cash surrender value
of the payments on the property to the buyer before cancellation of the contract. The
provision does not provide a different requirement for contracts to sell which allow
possession of the property by the buyer upon execution of the contract like the instant case.
Hence, petitioner cannot insist on compliance with the requirement by assuming that the
cash surrender value payable to the buyer had been applied to rentals of the property after
respondent failed to pay the installments due.

In view of the absence of a valid cancellation, the Contract to Sell between GRI and
Angeles remains valid and subsisting.

In Active, this Court held that the Contract to Sell between the parties remained valid
because of the developers failure to send a notarized notice of cancellation and to refund
the cash surrender value. The defaulting buyer thus had the right to offer to pay the balance
of the purchase price, and the developer had no choice but to accept payment. However,
the defaulting buyer was unable to exercise this right because the developer sold the
subject lot. This Court ordered the developer to refund to the defaulting buyer the actual
value of the lot with 12% interest per annum computed from the date of the filing of the
complaint until fully paid, or to deliver a substitute lot at the option of the defaulting buyer.
 SPOUSES TEODORO and ROSARIO SARAZA and FERNANDO SARAZA v. WILLIAM
FRANCISCO

G.R. No. 198718, November 27, 2013

J. Reyes

Based on available evidence, it is then clear that the respondent had fully satisfied
his obligation under the subject Agreement given the stipulation in the document on his
initial payment of P1,200,000.00, and considering PNBs Certification that
the P2,000,000.00 loan of Spouses Saraza with the bank had been fully settled on April 22,
2005. Fernando, being equally bound by the terms of the document, was correctly ordered
by the RTC and the CA to duly comply with his own obligation under the contract,
particularly the obligation to execute a deed of sale over his 100-sq m property in Bangkal,
Makati City. The respondents satisfaction of his obligation under the Agreement also
rendered unmeritorious the petitioners counterclaim for damages.

FACTS:

The case stems from an amended complaint filed by William Francisco against
Fernando Saraza and Spouses Teodoro and Rosario Saraza. The respondent alleged in his
complaint that on September 1, 1999, he and Fernando executed an Agreement that
provided for the latters sale of his 100-square meter share in a lot situated in Bangkal,
Makati City, which at that time was still registered in the name of one Emilia Serafico for a
total consideration of P3,200,000.00. The amount of P1,200,000.00 was paid upon the
Agreements execution, while the balance of P2,000,000.00 was to be paid on installments
to the PNB to cover a loan of Spouses Saraza, Fernandos parents, with the bank. A final
deed of sale conveying the property was to be executed by Fernando upon full payment of
the PNB loan.

It was also agreed upon that should the parties fail for any reason to transfer the
subject property to the respondents name, Rosario and Fernandos 136-sq m property
covered encumbered to PNB to secure the loan that was to be paid by the respondent shall
be considered a collateral in favor of the respondent.Spouses Saraza signified their
conformity to the Agreement. The respondent was also allowed to take immediate
possession of the property through a contract of lease. The petitioners likewise furnished
PNB with an Authority, allowing the respondent to pay their obligations to the PNB, to
negotiate for a loan restructuring, to receive the owners duplicate copy of TCT No. 156126
upon full payment of the loan secured by its mortgage, and to perform such other acts as
may be necessary in connection with the settlement of the loan. When the remaining
balance of the PNB loan reached P226,582.13, the respondent asked for the petitioners
issuance of a SPA that would authorize him to receive from PNB the owners duplicate copy
of TCT No. 156126 upon full payment of the loan. The petitioners denied the request. Upon
inquiry from PNB, the respondent found out that the petitioners had instead executed an
Amended Authority, which provided that the owners copy of TCT No. 156126 should be
returned to the mortgagors upon full payment of the loan. Spouses Saraza also caused the
eviction of the respondent from the property covered by TCT No. 156126.These prompted
the respondent to institute the civil case for specific performance, sum of money and
damages. Trespondent allegedly took advantage of the trust that was reposed upon him by
the petitioners, who nonetheless did not formally demand payment from him but merely
waited for him to pay the amount.

The RTC held that contrary to the petitioners claim, however, declared that only
Fernando should be held liable for the respondents claims, since the main action was for
specific performance. CA affirmed.

ISSUE:

Whether or not the Petitioners are bound to comply with their obligations to the respondent
as embodied in their Agreement dated September 1, 1999.

RULING:

It is imperative to look into the respondents compliance with his covenants under the
subject Agreement in order to ascertain whether or not he can compel the petitioners to
satisfy their respective undertakings. The respondents obligation under the Agreement
pertains to the payment of the P3,200,000.00 consideration for Fernandos corresponding
duty of executing a Deed of Sale over the property formerly covered by TCT No. 40376. To
dispute the respondents claim that he has satisfied said obligation, the petitioners now raise
factual issues which the Court however emphasizes are not for the Court to reassess. For
one, the issue of whether or not the respondents obligation to pay has already been
satisfied is a factual question.

We consider the fact that both the RTC and the CA have determined that there has
been a full payment by the respondent of his P3,200,000.00 obligation under the
Agreement. Upon review, the Court finds no reason to deviate from this finding of the courts,
especially as it is supported by substantial evidence. To begin with, the petitioners do not
deny the authenticity and their execution of the subject Agreement, a matter that is also
sufficiently established by the fact that the document was acknowledged before a notary
public. As both the RTC and CA correctly held, such Agreement sufficiently proves the fact
of the respondents payment to the petitioners of the agreed initial payment
of P1,200,000.00

Given this categorical statement, the petitioners denial that they have received the
amount necessitated concrete and substantial proof. A perusal of the case records shows
that the petitioners failed in this regard. In addition to the foregoing, the petitioners plain
denial of the respondents claim of full payment is self-serving, belied by their admission that
they had not at anytime demanded from the respondent the payment ofP1,200,000.00. The
petitioners are presumed under the law to have taken ordinary care of their concerns; 26 thus,
they would have exerted efforts to demand payment of the amount due them if in fact, no
payment had been made. Moreover, given this presumption, the petitioners were supposed
to be wary of the import of affixing their signature on the Agreement, and would not have
voluntarily signed the subject Agreement if they did not intend to give full effect thereto.

Based on available evidence, it is then clear that the respondent had fully satisfied
his obligation under the subject Agreement given the stipulation in the document on his
initial payment of P1,200,000.00, and considering PNBs Certification that the P2,000,000.00
loan of Spouses Saraza with the bank had been fully settled on April 22, 2005. Fernando,
being equally bound by the terms of the document, was correctly ordered by the RTC and
the CA to duly comply with his own obligation under the contract, particularly the obligation
to execute a deed of sale over his 100-sq m property in Bangkal, Makati City. The
respondents satisfaction of his obligation under the Agreement also rendered unmeritorious
the petitioners counterclaim for damages.
 SPOUSES PIO DATO and SONIA Y. SIA v. BANK OF THE PHILIPPINE ISLANDS

G.R. No. 181873. November 27, 2013

J. Reyes

It is a settled rule of law that foreclosure is proper when the debtors are in default of
the payment of their obligation. As the CA had appositely considered, due to Spouses Sias
failure to pay their loans covered by promissory notes, the extrajudicial foreclosure of the
real estate mortgage is valid and binding against them. Finding for the non-payment of
obligations, Sps. Sias prayer to declare null and void the extrajudicial foreclosure of the
subject real estate mortgage is now foiled.

FACTS:

On May 23, 1990, petitioners Spouses Pio Dato and Sonia Y. Sia applied for
a P240,000.00 loan which was granted by the BPI with a term of six months and secured by
a real estate mortgage over a parcel of land owned by Spouses Sia. Subsequently, on
August 8, 1990, Spouses Sia availed of a P4 Million Revolving Promissory Note Line with a
term of one year, secured by the same real estate mortgage. Spouses Sia alleged that their
loan was "precipitated by the representation of the [BPI] that the same will be indorsed to
[Industrial Guarantee and Loan Fund] (IGLF) [in order] for the spouses to be able to avail of
a much lower interest rate and longer payment terms." Before the P240,000.00 and P4 M
loans matured, Spouses Sia approached BPI through Mona Padilla, account officer of BPI
for additional loans. One was for P2 Million, and another was for P2.8 Million. After some
discussion with Padilla, Spouses Sia agreed to obtain a Credit Facility of P5.7 Million using
the same collaterals offered in their previous loans and four additional parcels of land.

On November 23, 1990, Spouses Sia obtained P800,000.00 from their Credit Facility
of P5.7 Million which was credited to their current account with BPI after executing a
Promissory Note for the same amount. While Spouses Sia paid some of the interest on their
loans, the amount was insufficient to cover the principal amount of said loans. Padilla sent a
written reminder to Spouses Sia to settle all unpaid interest before February 22, 1991. Yet
the spouses failed to pay the same. Assistant Vice President, Danilo A. Quinto sent another
demand letter to them requesting payment of the outstanding loan.

Spouses Sia still failed to pay the principal amount of P4,240,000.00 exclusive of
interest, penalties and other charges. But the amount of P800,000.00 from the P5.7 Million
Credit Facility was paid through a Letter of Credit. As the P240,000.00 and P4 Million loans
of Spouses Sia were not yet settled, BPI cancelled the P5.7 Million Credit facility. To
facilitate and assist Spouses Sia in paying off their loans, the four lots which secured
the P5.7 Million Credit Line Facility were released. Spouses Sia agreed to sell the lots and
use the proceeds thereof to make partial payments of their loans. Consequently, BPI issued
a cancellation of the real estate mortgage over the four lots which secured the P5.7 Million
Credit Line Facility.

Despite the cancellation of the real estate mortgage, Spouses Sia failed to make
good their promise to sell the lots to pay off their loans.

In the course of the trial proceedings, Spouses Sia alleged that they discovered that
the document embodying the cancellation of the real estate mortgage presented by BPI. The
spouses claimed extinguishment of their obligation. They alleged that as BPI credited the
payment ofP5.7 Million to their account, which is more than sufficient to cover their
promissory notes of P240,000.00 and P4 Million, their obligation with the BPI was totally
extinguished as of August 5, 1991 and that the foreclosure proceedings on TCT No. 102343
is illegal and baseless for they have the right as of August 5, 1991 to secure full release of
said lot by such payment of P5.7 Million.

ISSUE:

Whether or not the foreclosure of the mortgage is binding to the spouses.

RULING:

The Court concurs with the CA and the RTC that BPI did not commit breach of
contract against Spouses Sia. In ruling so, the CA found that petitioner Pio admitted the
execution and genuineness of the notarized contract of real estate mortgage and promissory
note, including the signature of Spouses Sia on the letter of advice to signify their conformity
with the terms and conditions during his oral testimony.

Since both the RTC and the CA found no evidence on record to support Spouses
Sias bare assertions that the endorsement to IGLF is a condition precedent to their contract
of loan with BPI, the Court is inclined to disregard Spouses Sias contentions on this score.
 Initially, Spouses Sia insisted that the foreclosure of their real estate mortgage was
premature because BPI violated their agreement to have their loan endorsed to IGLF. The
Court is hardly convinced with Spouses Sias arguments. Both the RTC and the CA have
profusely examined the evidence on the record, wherein the following observations were
gathered: The bases of the extrajudicial foreclosure proceeding were the three real estate
mortgage contracts executed by Sps. Sia in favor of BPI.

Another argument posited by Spouses Sia is that, they neither executed any P5.7
Million promissory note nor did they receive P5.7 Million from BPI. Thus, there is no
existing P5.7 Million Credit Line Facility Agreement as far as they are concerned. It appears
from the allegations in their pleadings that Spouses Sia have misconstrued the concept of a
Credit Line Facility Agreement. The Court has previously defined a credit line as the
following:

[A] credit line is "that amount of money or merchandise which a banker,

merchant, or supplier agrees to supply to a person on credit and generally
agreed to in advance." It is the fixed limit of credit granted by a bank, retailer, or
credit card issuer to a customer, to the full extent of which the latter may avail
himself of his dealings with the former but which he must not exceed and is
usually intended to cover a series of transactions in which case, when the
customers line of credit is nearly exhausted, he is expected to reduce his
indebtedness by payments before making any further drawings.

Thus, contrary to the belief and understanding of Spouses Sia, BPI does not have to
require the execution of promissory note of the entire P5.7 Million since a credit line as
stated above, is merely a fixed limit of credit. Furthermore, still applying the above quoted
definition, a credit line usually presupposes a series of transactions until the credit line is
nearly exhausted. BPI is not obliged to release the amount of P5.7 Million to Spouses Sia all
at once, in a single transaction.

In any case, the extrajudicial foreclosure which is the subject of the present case
pertains to Spouses Sias failure to pay their P240,000.00 and P4 Million loans. The Court
sees no real issue as regards the P5.7 Million credit line since it is as plain as day that the
entire P5.7 Million was not availed of by Spouses Sia and that the real estate mortgages
securing such credit line were cancelled in their favor. Spouses Sia thwart the issue towards
the P5.7 Million credit line when the real issue is their non-payment of P4 Million
and P240,000.00 loans, which eventually led to the extrajudicial foreclosure of TCT No.
102434.
 It is a settled rule of law that foreclosure is proper when the debtors are in default of
the payment of their obligation. As the CA had appositely considered, due to Spouses Sias
failure to pay their loans covered by promissory notes, the extrajudicial foreclosure of the
real estate mortgage is valid and binding against them. Finding for the non-payment of
obligations, Sps. Sias prayer to declare null and void the extrajudicial foreclosure of the
subject real estate mortgage is now foiled.
 SPOUSES BAYANI H. ANDAL AND GRACIA G. ANDAL v. PHILIPPINE NATIONAL BANK,
REGISTER OF DEEDS OF BATANGAS CITY JOSE C. CORALES
G.R. No. 194201. November 27, 2013
J. Perez

The rate of interest declared illegal and unconscionable does not entitle petitioners-
spouses to stop payment of interest. It should be emphasized that only the rate of interest was
declared void. The stipulation requiring petitioners-spouses to pay interest on their loan remains
valid and binding. They are, therefore, liable to pay interest from the time they defaulted in
payment until their loan is fully paid.

FACTS:

Petitioners-spouses Andal obtained a loan from respondent bank in the amount of

P21,805,000.00, for which they executed twelve promissory notes undertaking to pay
respondent bank the principal loan with varying interest rates of 17.5% to 27% per interest
period. It was agreed upon by the parties that the rate of interest may be increased or
decreased for the subsequent interest periods, with prior notice to petitioners-spouses, in the
event of changes in interest rates prescribed by law or the Monetary Board or in the banks
overall cost of funds. To secure the payment of the said loan, petitioners-spouses executed in
favor of respondent bank a real estate mortgage using as collateral five (5) parcels of land
including all improvements therein, all situated in Batangas City.

Subsequently, respondent bank advised petitioners-spouses to pay their loan obligation,

otherwise the former will declare the latters loan due and demandable. Petitioners-spouses
paid P14,800,000.00 to respondent bank to avoid foreclosure of the properties subject of the
real estate mortgage. Accordingly, respondent bank executed a release of real estate mortgage
over two (2) parcels of land. However, despite payment, respondent bank proceeded to
foreclose the real estate mortgage with respect to the three (3) parcels of land.

A public auction sale of the properties proceeded, with the respondent bank emerging as
the highest and winning bidder. A certificate of sale of the properties involved was issued. This
prompted petitioners-spouses to file a complaint for annulment of mortgage, sheriffs certificate
of sale, declaration of nullity of the increased interest rates and penalty charges plus damages,
with the RTC. The RTC rendered judgment in favor of petitioners-spouses and against
respondent bank, ordering that the rate of interest should be reduced as it is hereby reduced to
6% in accordance with Article 2209 of the Civil Code and declaring as illegal and void the
foreclosure sales, the Certificates of Sales and the consolidation of titles of the subject real
properties. The CA affirmed the decision of the trial court with the modification that the rate of
interest shall be 12% per annum instead of 6%.

ISSUE:

Whether or not petitioner-spouses are liable to pay interest?

RULING:

It is clear from the contract of loan between petitioners-spouses and respondent bank
that petitioners-spouses, as borrowers, agreed to the payment of interest on their loan
obligation. That the rate of interest was subsequently declared illegal and unconscionable does
not entitle petitioners-spouses to stop payment of interest. It should be emphasized that only the
rate of interest was declared void. The stipulation requiring petitioners-spouses to pay interest
on their loan remains valid and binding. They are, therefore, liable to pay interest from the time
they defaulted in payment until their loan is fully paid.

It is worth mentioning that both the RTC and the CA are one in saying that petitioners-
spouses cannot be considered in default for their inability to pay the arbitrary, illegal and
unconscionable interest rates and penalty charges unilaterally imposed by respondent bank.
This is precisely the reason why the foreclosure proceedings involving petitioners-spouses
properties were invalidated. As pointed out by the CA, since the interest rates are null and void,
respondent bank has no right to foreclose petitioners-spouses properties and any foreclosure
thereof is illegal. Since there was no default yet, it is premature for respondent bank to foreclose
the properties subject of the real estate mortgage contract.

Thus, for the purpose of computing the amount of liability of petitioners-spouses, they
are considered in default from the date the Resolution of the Court in G.R. No. 194164
(Philippine National Bank v. Spouses Bayani H. Andal and Gracia G. Andal)which is the appeal
interposed by respondent bank to the Supreme Court from the judgment of the CA became
final and executory. Based on the records of G.R. No. 194164, the Court denied herein
respondent banks appeal in a Resolution dated 10 January 2011. The Resolution became final
and executory on 20 May 2011.

In addition, pursuant to Circular No. 799, series of 2013, issued by the Bangko Sentral
ng Pilipinas on 21 June 2013, the rate of interest for the loan or forbearance of any money,
goods or credits and the rate allowed in judgments, in the absence of an express contract as to
such rate of interest, shall be six percent (6%) per annum. Accordingly, the rate of interest of
12% per annum on petitioners-spouses obligation shall apply from 20 May 2011 the date of
default until 30 June 2013 only. From 1 July 2013 until fully paid, the legal rate of 6% per
annum shall be applied to petitioners-spouses unpaid obligation.
PEOPLE OF THE PHILIPPINES v. HERMENIGILDO MAGLENTE, ROLANDO VELASQUEZ,
DAN MAGSIPOC CANCELER AND PABLO INEZ
G.R. No. 201445. November 27, 2013
J. Reyes

In this case, civil indemnity in the amount of P30,000.00 awarded by the CA is deleted in
view of existing cases that no longer grant the same in the crime of frustrated murder.

FACTS:

The RTC convicted Maglente and Velasquez of the crimes of Murder and Frustrated
Murder. In Criminal Case for Murder, the appellants were ordered to pay the victims heirs the
following amounts: P75,000.00 as civil indemnity; P890,000.00 for actual damages; and
P50,000.00 for moral damages; and to pay the costs of suit. In Criminal Case for Frustrated
Murder, the appellants were ordered to jointly and severally pay victim Pepe A. Mendoza actual
damages in the amount of P769,098.24; and to pay the costs of suit.

The CA affirmed the findings of the RTC. The CA modified the award of damages,
except as to the moral damages. Thus, the CA Decision provided for the following dispositive
portion:

1 In Criminal Case for Murder-

a The trial courts award of P75,000.00 by way of civil indemnity is
reduced to P50,000.00;
b Exemplary damages of P30,000.00 is awarded to the heirs of the
deceased victim, in addition to the moral damages of P50,000.00; and
c Actual damages of P890,000.00 is reduced to 50,000.00.

2 In Criminal Case for Frustrated Murder

a Complainant Pepe A. Mendoza is awarded civil indemnity in the amount
of P30,000.00, moral damages of P25,000.00 and P25,000.00 as
exemplary damages;
b The actual damages of P769,098.24, awarded by the trial court, is
reduced to P129,548.11.

ISSUE:

Whether or not the award of damages was proper in the crimes of Murder and Frustrated
Murder

RULING:

Award of Damages for Murder.

Actual damages are recoverable only when the injured party proves the actual amount of
loss with reasonable degree of certainty based upon competent proof. In this case, only a
certification issued by the sales manager of the memorial park was presented to substantiate
the claim for actual damages in the amount of P840,000.00. The official receipts adduced,
however, showed only the total amount of P50,000.00. Hence, the CA correctly reduced the
same to that actually proven by the receipts presented.
 Moral damages in the amount of P50,000.00 was also correctly awarded by the CA. As
borne out by human nature and experience, a violent death invariably and necessarily brings
about emotional pain and anguish on the part of the victims family. Meanwhile, exemplary
damages in the amount of P30,000.00 was also properly awarded.

As to the civil indemnity, the Court deems it proper to reinstate the amount awarded by
the RTC, which is P75,000.00, as civil indemnity as such amount is mandatory and is granted
without need of evidence other than the commission of the crime.

Award of Damages for Frustrated Murder.

The Court also sustains the CAs award of actual damages in the amount of
P129,548.11, instead of the amount of P769,098.24 awarded by the RTC, as the official
receipts adduced by the prosecution to prove Mendozas hospitalization expenses proved only
such reduced amount.

The Court, however, modifies the amount of moral damages and exemplary damages
awarded in favor of the victim Mendoza to conform to prevailing jurisprudence. Thus, the
modified amounts of P40,000.00 as moral damages and P20,000.00 as exemplary damages
are hereby awarded.

Lastly, civil indemnity in the amount of P30,000.00 awarded by the CA is deleted in view
of existing cases that no longer grant the same in the crime of frustrated murder
 MORETO MIRALLOSA and all persons claiming rights and interests under him v.
CARMEL DEVELOPMENT INC.
G.R. No. 194538, Novemeber 27, 2013
CJ. Sereno

An unconstitutional law produces no effect and confers no right upon any person.Not
only the parties but all persons are bound by the declaration of unconstitutionality, which means
that no one may thereafter invoke it nor may the courts be permitted to apply it in subsequent
cases. It is, in other words, a total nullity.

FACTS:

Respondent Carmel Development, Inc. was the registered owner of a Caloocan property
known as the Pangarap Village located at Barrio Makatipo, Caloocan City. On 14 September
1973, President Ferdinand Marcos issued P.D. 293, which invalidated the titles of respondent
and declared them open for disposition to the members of the Malacaang Homeowners
Association, Inc. (MHAI). On the basis of P.D. 293, petitioners predecessor-in-interest, Pelagio
M. Juan, a member of the MHAI, occupied Lot No. 32 and subsequently built houses there. On
the other hand, respondent was constrained to allow the members of MHAI to also occupy the
rest of Pangarap Village.

On 29 January 1988, the Supreme Court promulgated Roman Tuason and Remedio V.
Tuason, Attorney-in-fact, Trinidad S. Viado v. The Register of Deeds, Caloocan City, Ministry of
Justice and the National Treasurer (Tuason), which declared P.D. 293 as unconstitutional and
void ab initio in all its parts. The Register of Deeds then cancelled the Memorandum inscripted
on respondents title, eventually restoring respondents ownership of the entire property.

Meanwhile, sometime in 1995, petitioner took over Lot No. 32 by virtue of an Affidavit
executed by Pelagio M. Juan in his favor. As a consequence of Tuason, respondent made
several oral demands on petitioner to vacate the premises, but to no avail. A written demand
letter which was sent sometime in April 2002 also went unheeded.

Respondent filed a Complaint for Unlawful Detainer before the MeTC. MeTC rendered a
decision in favor of the respondent. RTC rendered a Decision reversing the findings of the
MeTC. On appeal, the CA reversed and set aside the decision of RTC. Hence, the instant
Petition.

ISSUES:

1 Whether or not Tuason case may be applied here, despite petitioner not being a party
thereto
2 Whether or not petitioner is a builder in good faith

RULING:

1. Tuason may be applied despite petitioner not being a party to that case, because
an unconstitutional law produces no effect and confers no right upon any person.

As a general rule, a law declared as unconstitutional produces no effect whatsoever and

confers no right on any person. It matters not whether the person is a party to the original case,
because not only the parties but all persons are bound by the declaration of unconstitutionality,
which means that no one may thereafter invoke it nor may the courts be permitted to apply it in
subsequent cases. It is, in other words, a total nullity. Thus, petitioners invocation of the
doctrine of res inter alios judicatae nullum aliis praejudicium faciunt cannot be countenanced.
We have categorically stated that the doctrine does not apply when the party concerned is a
successor in interest by title subsequent to the commencement of the action, or the action or
proceeding is in rem, the judgment in which is binding against him. While petitioner may not
have been a party to Tuason, still, the judgment is binding on him because the declaration of
P.D. 293 as a nullity partakes of the nature of an in rem proceeding.

Neither may petitioner avail himself of the operative fact doctrine, which recognizes the
interim effects of a law prior to its declaration of unconstitutionality. The operative fact doctrine is
a rule of equity. As such, it must be applied as an exception to the general rule that an
unconstitutional law produces no effects. The doctrine is applicable when a declaration of
unconstitutionality will impose an undue burden on those who have relied on the invalid law, but
it can never be invoked to validate as constitutional an unconstitutional act.

In this case, petitioner could not be said to have been unduly burdened by reliance on an
invalid law. Petitioner merely anchored his right over the property to an Affidavit allegedly issued
by Pelagio M. Juan, a member of the MHIA, authorizing petitioner to occupy the same.
However, this Affidavit was executed only sometime in 1995, or approximately seven years after
the Tuason case was promulgated. At the time petitioner built the structures on the premises, he
ought to have been aware of the binding effects of the Tuason case and the subsequent
unconstitutionality of P.D. 293. These circumstances necessarily remove him from the ambit of
the operative fact doctrine.

2. Petitioner may not he deemed to be a builder in good faith.

We hold that petitioner is not a builder in good faith. A builder in good faith is "one who
builds with the belief that the land he is building on is his, or that by some title one has the right
to build thereon, and is ignorant of any defect or flaw in his title." Since petitioner only started
occupying the property sometime in 1995, or about seven years after Tuason was promulgated,
he should have been aware of the binding effect of that ruling. Since all judicial decisions form
part of the law of the land, its existence should be "on one hand, matter of mandatory judicial
notice; on the other, ignorantia legis non excusat." He thus loses whatever he has built on the
property, without right to indemnity, in accordance with Article 449 of the Civil Code.
 CERILA J. CALANASAN, REPRESENTED BY TEODORA J. CALANASAN AS ATTORNEY-
IN-FACT v. SPOUSES VIRGILIO DOLORITO AND EVELYN C. DOLORITO
G.R. No. 171937, November 25, 2013
J. Brion

In this case, the donation was onerous, since the donation imposed on the donee the
burden of redeeming the property for P15,000.00. As an endowment for a valuable
consideration, it partakes of the nature of an ordinary contract; hence, the rules of contract will
govern and Article 765 of the New Civil Code finds no application with respect to the onerous
portion of the donation.

FACTS:

The petitioner, Cerila Calanasan (Cerila), took care of her orphan niece, respondent
Evelyn C. Dolorita, since the latter was a child. In 1982, when Evelyn was already married to
respondent Virgilio Dolorita, the petitioner donated to Evelyn a parcel of land which had earlier
been mortgaged for P15,000.00. The donation was conditional: Evelyn must redeem the land
and the petitioner was entitled to possess and enjoy the property as long as she lived. Evelyn
signified her acceptance of the donation and its terms in the same deed. Soon thereafter,
Evelyn redeemed the property, had the title of the land transferred to her name, and granted the
petitioner usufructuary rights over the donated land.

On August 15, 2002, the petitioner, assisted by her sister Teodora Calanasan,
complained with the RTC that Evelyn had committed acts of ingratitude against her. She prayed
that her donation in favor of her niece be revoked. The petitioner died while the case was
pending with the RTC. Her sisters, Teodora and Dolores Calanasan, substituted for her.

After the petitioner had rested her case, the respondents filed a demurrer to evidence.
According to them, the petitioner failed to prove that it was Evelyn who committed acts of
ingratitude against the petitioner; thus, Article 7654 of the New Civil Code found no application
in the case. The RTC granted the demurrer to evidence and dismissed the complaint. The CA
affirmed the RTC ruling but on a different legal ground. The CA found that the donation was inter
vivos and onerous. Therefore, the deed of donation must be treated as an ordinary contract and
Article 765 of the New Civil Code finds no relevance.

ISSUE:

Whether or not the deed of donation must be treated as an ordinary contract?

RULING:

In Republic of the Phils. v. Silim, we classified donations according to purpose. A

pure/simple donation is the truest form of donation as it is based on pure gratuity. The
remuneratory/compensatory type has for its purpose the rewarding of the donee for past
services, which services do not amount to a demandable debt. A conditional/modal donation, on
the other hand, is a consideration for future services; it also occurs where the donor imposes
certain conditions, limitations or charges upon the donee, whose value is inferior to the donation
given. Lastly, an onerous donation imposes upon the donee a reciprocal obligation; this is made
for a valuable consideration whose cost is equal to or more than the thing donated.
 In De Luna v. Judge Abrigo, we recognized the distinct, albeit old, characterization of
onerous donations when we declared: "Under the old Civil Code, it is a settled rule that
donations with an onerous cause are governed not by the law on donations but by the rules on
contracts.

We agree with the CA that since the donation imposed on the donee the burden of
redeeming the property for P15,000.00, the donation was onerous. As an endowment for a
valuable consideration, it partakes of the nature of an ordinary contract; hence, the rules of
contract will govern and Article 765 of the New Civil Code finds no application with respect to
the onerous portion of the donation.

Insofar as the value of the land exceeds the redemption price paid for by the donee, a
donation exists, and the legal provisions on donation apply. Nevertheless, despite the
applicability of the provisions on donation to the gratuitous portion, the petitioner may not
dissolve the donation. She has no factual and legal basis for its revocation, as aptly established
by the RTC. First, the ungrateful acts were committed not by the donee; it was her husband who
committed them. Second, the ungrateful acts were perpetrated not against the donor; it was the
petitioner's sister who received the alleged ill treatments. These twin considerations place the
case out of the purview of Article 765 of the New Civil Code
.
 HEIRS OF THE LATE FELIX M. BUCTON v. SPOUSES GONZALO & TRINIDAD GO
G.R. No. 188395. November 20, 2013
J. Perez

While this Court protects the right of the innocent purchaser for value and does not
require him to look beyond the certificate of title, this protection is not extended to a purchaser
who is not dealing with the registered owner of the land. In case the buyer does not deal with
the registered owner of the real property, the law requires that a higher degree of prudence be
exercised by the purchaser.

FACTS:

The suit concerns a parcel of land with an area of 6,407 square meters situated in
Lapasan, Cagayan de Oro City. Sometime in March 1981, Felix received a phone call from
Gonzalo Go (Gonzalo) informing him that he has bought the subject property thru a certain
Benjamin Belisario (Belisario) who represented himself as the attorney-in-fact of Felix.
Surprised to learn about the transaction, Felix made an inquiry whereby he learned that the
owners duplicate certificate of title of the subject property was lost while in the possession of his
daughter, Agnes Bucton-Lugod. By an unfortunate turn of events, the said certificate of title fell
into the hands of Belisario, Josefa Pacardo and Salome Cabili, who allegedly conspired with
each other to unlawfully deprive Felix of his ownership of the above-mentioned property.

As shown in the annotation at the back of the title, the Spouses Bucton purportedly
authorized Belisario to sell the subject property to third persons, as evidenced by a Special
Power of Attorney (SPA) allegedly signed by the Spouses Bucton. On the strength of the said
SPA, Belisario, executed a Deed of Absolute Sale in favor of the Spouses Go. Consequently,
the Registry of Deeds of Cagayan de Oro City cancelled TCT in the name of Felix and issued a
new one in the names of the Spouses Go.

Meanwhile, Felix passed away. Claiming that the signatures of the Spouses Bucton on
the SPA were forged, the Heirs of Felix filed against the Spouses Go a complaint for Annulment
of the SPA and Deed of Absolute Sale before the RTC. The RTC issued a Judgment, finding
that the complaint filed by the Heirs of Felix is already barred by laches and prescription. The
court a quo observed that from the time the alleged fraudulent transaction was discovered in
1981 up to 1996 the complainants failed to take any legal step to assail the title of the Spouses
Go. The CA affirmed the decision of the RTC. Hence, this petition.

ISSUES:

1 Whether or not the Spouses Go are innocent purchasers for value

2 Whether or not the action of the heirs of felix are already barred by laches and prescription

RULING:

It has been consistently held that a forged deed can become a source of a valid title
when the buyers are in good faith.An innocent purchaser for value is one who buys the property
of another without notice that some other person has a right to or interest in it, and who pays a
full and fair price at the time of the purchase or before receiving any notice of another persons
claim. The burden of proving the status of a purchaser in good faith and for value lies upon one
who asserts that status. This onus probandi cannot be discharged by mere invocation of the
ordinary presumption of good faith.
 As a general rule, every person dealing with registered land may safely rely on the
correctness of the certificate of title issued therefore and the law will no way oblige him to go
beyond the certificate to determine the condition of the property. While this Court protects the
right of the innocent purchaser for value and does not require him to look beyond the certificate
of title, this protection is not extended to a purchaser who is not dealing with the registered
owner of the land. In case the buyer does not deal with the registered owner of the real
property, the law requires that a higher degree of prudence be exercised by the purchaser.

An assiduous examination of the records of this case pointed to the utter lack of good
faith of the Spouses Go. As buyers of the property dealing with an agent, the Spouses Go are
chargeable with knowledge of agents authority or the lack thereof, and their failure to ascertain
the genuineness and authenticity of the latters authority do not entitle them to invoke the
protection the law accords to purchasers in good faith and for value. They cannot close their
eyes to facts that should put a reasonable man on his guard and still claim that he acted in good
faith. Certainly, we cannot ascribe good faith to those who have not shown any diligence in
protecting their rights.

Likewise worthy of credence is the claim of the Heirs of Felix that the instant case is not
barred by laches or prescription. As held in Titong v. Court of Appeals, ownership and real rights
over real property are acquired by ordinary prescription through possession of ten years,
provided that the occupant is in good faith and with just title.

As pointed out earlier, the Spouses Go miserably failed to meet the requirements of
good faith and just title, thus, the ten-year prescriptive period is a defense unavailable to them. It
must be stressed that possession by virtue of a spurious title cannot be considered constructive
possession for the purpose of reckoning the ten-year prescriptive period. The conclusion of the
appellate court that prescription has already set in is erroneously premised on the absence of
forgery and the consequent validity of the deed of sale. And, extraordinary acquisitive
prescription cannot, similarly, vest ownership over the property upon the Spouses Go since the
law requires 30 years of uninterrupted adverse possession without need of title or of good
faith before real rights over immovable prescribes. The Spouses Go purportedly took
possession of the subject property since March 1981 but such possession was effectively
interrupted with the filing of the instant case before the RTC on 19 February 1996. This period is
15 years short of the thirty-year requirement mandated by Article 1137.
REPUBLIC OF THE PHILIPPINES v. ANTONIO, FELIZA, NEMESIO, ALBERTO, FELICIDAD,
RICARDO, MILAGROS AND CIPRIANO, ALL SURNAMED BACAS; EMILIANA CHABON,
SATURNINO ABDON, ESTELA, CHABON, LACSASA DEMON, PDERITA CHABON,
FORTUNATA, EMBALSADO, MINDA J. CASTILLO, PABLO CASTILLO, ARTURO P.
LEGASPI, AND JESSIE I. LEGASPI
G.R. No. 182913, November 20, 2013
J. Mendoza

Lands of the public domain, unless declared otherwise by virtue of a statute or law, are
inalienable and can never be acquired by prescription. No amount of time of possession or
occupation can ripen into ownership over lands of the public domain. All lands of the public
domain presumably belong to the State and are inalienable. Lands that are not clearly under
private ownership are also presumed to belong to the State and, therefore, may not be
alienated or disposed.

FACTS:

In 1938, Commonwealth President Manuel Luis issued Presidential Proclamation No.

265, which took effect on March 31, 1938, reserving for the use of the Philippine Army three (3)
parcels of the public domain situated in the barrios of Bulua and Carmen, then Municipality of
Cagayan, Misamis Oriental. The parcels of land were withdrawn from sale or settlement and
reserved for military purposes, subject to private rights, if any there be.

Civil cases were filed by the Republic of the for the cancellation and annulment of
Original Certificate of Title issued in favor of the Bacases and Chabons, covering certain parcels
of land occupied and utilized as part of the Camp Evangelista Military Reservation, Misamis
Oriental, presently the home of the 4th Infantry Division of the Philippine Army.

Civil Case against the Bacases

The Republic claimed in its petition for annulment before the RTC that the certificate of
title issued in favor of the Bacases was null and void because they fraudulently omitted to name
the military camp as the actual occupant in their application for registration. Specifically, the
Republic, through the Fourth Military Area, was the actual occupant of Lot and also the owner
and possessor of the adjoining Lots. Further, the Bacases failed to likewise state that Lot was
part of Camp Evangelista. These omissions constituted fraud which vitiated the decree and
certificate of title issued. Also, the Republic averred that the subject land had long been
reserved in 1938 for military purposes at the time it was applied for and, so, it was no longer
disposable and subject to registration.

Civil Case against the Chabons

In this case, the Republic claimed that it was the absolute owner and possessor of Lot
No. 4357. The said lot, together with Lots 4318 and 4354, formed part of the military reservation
known as Camp Evangelista in Cagayan de Oro City, which was set aside and reserved under
Presidential Proclamation No. 265 issued by President Quezon on March 31, 1938.

In its petition for annulment before the RTC, the Republic alleged that OCT issued in
favor of the Chabons and all transfer certificates of titles, if any, proceeding therefrom, were null
and void for having been vitiated by fraud and/or lack of jurisdiction. The Chabons concealed
that the fact that Lot 4357 was part of Camp Evangelista and that the Republic, through the
Armed Forces of the Philippines, was its actual occupant and possessor. Further, Lot 4357 was
a military reservation, established as such as early as March 31, 1938 and, thus, could not be
the subject of registration or private appropriation. As a military reservation, it was beyond the
commerce of man and the registration court did not have any jurisdiction to adjudicate the same
as private property.

The RTC dismissed the two complaints of the Republic. The CA sustained the
government and, accordingly, annulled the decision of the RTC.

ISSUES:

1 Whether or not the decisions of the LRC over the subject lands can still be questioned
2 Whether or not the applications for registration of the subject parcels of land should be
allowed

RULING:

1. The Republic can question even final and executory judgment when there was
fraud.

The governing rule in the application for registration of lands at that time was Section 21
of Act 496, which provided for the form and content of an application for registration. It requires,
among others that the names and addresses of all adjoining owners and occupants, if known be
stated, so that they may be notified of the case and be given an opportunity to come forward
and show to the court why the application for registration thereof is not to be granted.

In this case, there was no mention of the ownership or occupancy by the Philippine
Army. There was no indication of any efforts or searches exerted in determining other occupants
of the land. Such omission constituted fraud and deprived the Republic of its day in court. Not
being notified, the Republic was not able to file its opposition to the application and an appeal.

2. The Republic can also question a final and executory judgment when the LRC
had no jurisdiction over the land in question.

The Land Registration Court has no jurisdiction over non-registrable properties. The
subject lands, being part of a military reservation, are inalienable and cannot be the subjects of
land registration proceedings. Although the lower courts might have been correct in ruling that
there was substantial compliance with the requirements of law when they alleged that Camp
Evangelista was an occupant, the Republic is not precluded and estopped from questioning the
validity of the title.

The success of the annulment of title does not solely depend on the existence of actual
and extrinsic fraud, but also on the fact that a judgment decreeing registration is null and void.
Any title to an inalienable public land is void ab initio. Any procedural infirmities attending the
filing of the petition for annulment of judgment are immaterial since the LRC never acquired
jurisdiction over the property. All proceedings of the LRC involving the property are null and void
and, hence, did not create any legal effect. A judgment by a court without jurisdiction can never
attain finality.

As there had been no showing that the subject parcels of land had been segregated
from the military reservation, the respondents had to prove that the subject properties were
alienable and disposable land of the public domain prior to its withdrawal from sale and
settlement and reservation for military purposes under Presidential Proclamation No. 265.

The question is of primordial importance because it is determinative if the land can in

fact be subject to acquisitive prescription and, thus, registrable under the Torrens system.
Without first determining the nature and character of the land, all the other requirements such as
the length and nature of possession and occupation over such land do not come into play. The
required length of possession does not operate when the land is part of the public domain.

Respondents failed to prove that, before the proclamation, the subject lands were
already private lands. They merely relied on such "recognition" of possible private rights. There
was no allegation or showing that the government had earlier declared it open for sale or
settlement, or that it was already pronounced as inalienable and disposable.

Lands of the public domain, unless declared otherwise by virtue of a statute or law, are
inalienable and can never be acquired by prescription. No amount of time of possession or
occupation can ripen into ownership over lands of the public domain. All lands of the public
domain presumably belong to the State and are inalienable. Lands that are not clearly under
private ownership are also presumed to belong to the State and, therefore, may not be alienated
or disposed.
SYCAMORE VENTURES CORPORATION AND SPOUSES SIMON D. PAZ AND LENG LENG
PAZ v. METROBANK AND TRUST COMPANY
G.R. No. 173183, November 18, 2013
J. Brion

The court is once more faced by a petition filed by debtors who could not pay their
indebtedness and who, at the point of foreclosure, sought judicial recourse to delay the
inevitable. In this case, the issue used as anchor is the valuation of the mortgage property's
appraised value- an issue that hardly carries any significant consequence in extrajudicial
foreclosure proceedings. The Judiciary has been affected by these cases as they have
unnecessarily clogged the dockets of our courts, to the detriment of more important cases
equally crying for attention.

FACTS:

Sometime in 1997, Sycamore and the spouses Paz obtained from respondent
Metrobank a credit line of P180,000,000.00, secured by 10 real estate mortgages over
Sycamores 11 parcels of land, together with their improvements. Sycamore and the spouses
Paz withdrew from the credit line the total amount of P65,694,914.26, evidenced by 13
promissory notes.

Because the petitioners failed to pay their loan obligations and for violations of the terms
and conditions of their 13 promissory notes, Metrobank instituted extrajudicial foreclosure
proceedings over the six real estate mortgages, pursuant to Act No. 3135, as amended. The
public auction sale was set for various dates but the sale did not take place because Sycamore
and the spouses Paz asked for postponements.

Metrobank subsequently restructured Sycamore and the spouses Pazs loan, resulting in
the issuance of one promissory note in lieu of the 13 promissory notes previously issued, and
the execution of a single real estate mortgage covering the 12 parcels of land.

Despite reminders, Sycamore and the spouses Paz still failed to settle their loan
obligations, compelling Metrobank to file a second petition for auction sale, which was set for
October 25, 2002. On October 16, 2002, Sycamore and the spouses Paz once again asked for
the postponement of the October 25, 2002 public auction sale; they asked that the sale be
moved to November 26, 2002, but this time Metrobank refused to give in.

Sycamore and the spouses Paz filed before the RTC a complaint for the annulment of
the contract and of the real estate mortgage. They likewise asked for the issuance of a
temporary restraining order. The petitioners disputed Metrobanks alleged unilateral and
arbitrary reduction of the mortgaged properties appraisal value from P1,200.00 to P300.00-
P400.00 per square meter.

ISSUE:

Whether or not the determination of the mortgaged properties appraisal value constitutes a
prejudicial question that warrants the suspension of the foreclosure proceedings

RULING:
 Extrajudicial foreclosure is governed by Act No. 3135, as amended by Act No. 4118. In
brief, Act No. 3135 recognizes the right of a creditor to foreclose a mortgage upon the
mortgagors failure to pay his/her obligation. In choosing this remedy, the creditor enforces his
lien through the sale on foreclosure of the mortgaged property. The proceeds of the sale will
then be applied to the satisfaction of the debt. In case of a deficiency, the mortgagee has the
right to recover the deficiency resulting from the difference between the amount obtained in the
sale at public auction, and the outstanding obligation at the time of the foreclosure proceedings.

Certain requisites must be established before a creditor can proceed to an extrajudicial

foreclosure, namely: first, there must have been the failure to pay the loan obtained from the
mortgagee-creditor; second, the loan obligation must be secured by a real estate mortgage; and
third, the mortgagee-creditor has the right to foreclose the real estate mortgage either judicially
or extrajudicially.

Act No. 3135 has no requirement for the determination of the mortgaged properties
appraisal value. Nothing in the law likewise indicates that the mortgagee-creditors appraisal
value shall be the basis for the bid price. Neither is there any rule nor any guideline prescribing
the minimum amount of bid, nor that the bid should be at least equal to the properties current
appraised value. What the law only provides are the requirements, procedure, venue and the
mortgagors right to redeem the property. When the law does not provide for the determination
of the propertys valuation, neither should the courts so require, for our duty limits us to the
interpretation of the law, not to its augmentation.

Under the circumstances, we fail to see the necessity of determining the mortgaged
properties current appraised value. We likewise do not discern the existence of any prejudicial
question, anchored on the mortgaged properties appraised value that would warrant the
suspension of the foreclosure proceedings.

Whether Metrobanks reduced valuation is valid or not, or whether the valuation is

outrageously lower than its current value, has nothing to do with the foreclosure proceedings.
From this perspective, we cannot but conclude that that the recourses sought in this case have
been intended solely to delay the inevitable - the foreclosure sale and the closure of the
collection action -and are an abuse of the processes of this Court.
 ROMAN CATHOLIC ARCHBISHOP OF MANILA v. CRESENCIASTA TERESITA RAMOS,
ASSISTED BY HER HUSBAND PONCIANO FRANCISCO
G.R. No. 179181. November 18, 2013
J. Brion

Applicants in a judicial confirmation of imperfect title may register their titles upon a
showing that they or their predecessors-in-interest have been in open, continuous, exclusive,
and notorious possession and occupation of alienable and disposable lands of the public
domain, under a bona fide claim of acquisition or ownership, since June 12, 1945, or earlier
immediately preceding the filing of the application for confirmation of title. The burden of proof
in these cases rests on the applicants who must demonstrate clear, positive and convincing
evidence that: (1) the property subject of their application is alienable and disposable land of the
public domain; and (2) their alleged possession and occupation of the property were of the
length and of the character required by law.

FACTS:

Roman Catholic Archbishop of Manila (RCAM) filed an application for registration of title
of two (2) parcels of land in the Regional Trial Court acting as land registration court. The RCAM
claimed that it owned the property; that it acquired the property during the Spanish time; and
that since then, it has been in open, public, continuous and peaceful possession of it in the
concept of an owner. To support the claim of ownership, RCAM presented technical description
of two lots, a surveyors certificate and tax declarations issued on 1966.

The Republic of the Philippines (Republic), through the Director of Lands, filed an
opposition to the application. The Republic claimed that the property is part of the public domain
and cannot be subject to private appropriation. On the other hand, Cresencia Sta. Teresa
Ramos filed her opposition. She alleged that the property formed part of the entire property that
her family owns and has continuously possessed and occupied from the time of her
grandparents during Spanish time, up to the present. To further support her claim and her
prayer for confirmation of imperfect title, she presented the death certificates of her parents,
marriage certificate and several photographs of their established business on the subject lots
claiming possession over the property.

The Regional Trial Court denied the petition of RCAM and affirmed the ownership of
Cresencia but refused to issue title in Cresencias name. The Court of Appeals on the other
hand, affirmed the decision of RTC with modification, confirming the incomplete and imperfect
title of Cresencia. RCAM questions the propriety of the CAs confirmation of Cresencias title
over the property since she was not an applicant and merely the oppositor in the confirmation
and registration proceedings RCAM filed.

ISSUE:

Whether Cresencia is entitled to the benefits of C.A. No. 141 and P.D. No. 1529 for confirmation
and registration of imperfect title

RULING:

C.A. No. 141 governs the classification and disposition of lands of the public domain.
Section 11 of C.A. No. 141 provides, as one of the modes of disposing public lands that are
suitable for agriculture, the "confirmation of imperfect or incomplete titles." Section 48, on
the other hand, enumerates those who are considered to have acquired an imperfect or
incomplete title over public lands and, therefore, entitled to confirmation and registration under
the Land Registration Act.

Applicants in a judicial confirmation of imperfect title may register their titles upon a
showing that they or their predecessors-in-interest have been in open, continuous,
exclusive, and notorious possession and occupation of alienable and disposable lands of the
public domain, under a bona fide claim of acquisition or ownership, since June 12, 1945, or
earlier (or for at least 30 years in the case of the RCAM) immediately preceding the filing of
the application for confirmation of title. The burden of proof in these cases rests on the
applicants who must demonstrate clear, positive and convincing evidence that: (1) the property
subject of their application is alienable and disposable land of the public domain; and (2) their
alleged possession and occupation of the property were of the length and of the character
required by law.

The RTC and the CA, as it affirmed the RTC, dismissed the RCAM's application for its
failure to comply with the second requirement -possession of the property in the manner
and for the period required by law. We find no reason to disturb the RTC and the CA findings on
this point. The RCAM failed to prove possession of the property in the manner and for the
period required by law. The possession contemplated by Section 48(b) of C.A. No. 141 is actual,
not fictional or constructive. The various documents that it submitted, as well as the bare
assertions it made and those of its witnesses, that it had been in open, continuous, exclusive
and notorious possession of the property, hardly constitute the "well-nigh incontrovertible"
evidence required in cases of this nature. Most importantly, we find the RCAM's evidence to be
insufficient since it failed to comply with the first and most basic requirement- proof of the
alienable and disposable character of the property.

On the other hand, while the Supreme Court upholds the authority of the Court of
Appeals to confirm the title of the oppositor in a confirmation and registration proceedings, the
court did not agree with the conclusion reached by the Court of Appeals in confirming the title of
Cresencia. The various pieces of documentary evidence that Cresencia presented to support
her own claim of imperfect title hardly proved her alleged actual possession of the property. Like
RCAM, Cresencia was bound to adduce irrefutable evidence that proves her compliance with
the requirements for confirmation of title. Further, both parties failed to prove the first and most
basic requirement to confirm a title that is the presentation of competent and persuasive
evidence in proving that the property is alienable and disposable.
 CONSOLIDATED INDUSTRIAL GASES, INC. v. ALABANG MEDICAL CENTER,
G.R. No. 181983, November 13, 2013
J. Reyes

In a reciprocal obligation, a partys obligation to pay shall arise only after the other party
has performed all the prestations embodied in the contract serving as the law between them.

FACTS:

Consolidated Industrial Gases, Inc. (CIGI), as contractor and AMC, as owner, entered
into a contract whereby the former bound itself to provide labor and materials for the installation
of a medical gas pipeline system for the first, second and third floors (Phase1 installation
project) of the hospital. The problem arose after the parties entered into another agreement for
the continuation of the centralized medical oxygen and vacuum pipeline system in the hospitals
fourth & fifth floors (Phase 2installation project) at the cost of Two Million Two Hundred Sixty-
Seven Thousand Three Hundred Forty-Four Pesos and 42/100 (P2,267,344.42). This second
contract followed the same terms and conditions of the previous contract with the agreement
that the balance shall be paid through progress billing and within fifteen (15) days from the date
of receipt of the original invoice sent by CIGI. CIGI sent AMC an invoice for the unpaid balance
of P1,267,344.42 for the Phase 2 installation project which was left unheeded. CIGI then sent a
demand letter, however, AMC still failed to pay thus prompting CIGI to file a collection suit
before the RTC.

CIGI contended that AMCs obligation to pay is already due and demandable stating that
the project shall be paid through progress billing within fifteen (15) days from the date of receipt
of original invoice. Opposing, AMC claimed that its obligation to pay has not yet accrued
because CIGI still has not turned over a complete and functional medical oxygen and vacuum
pipeline system and alleged that CIGI has not yet tested Phases 1 and 2 which constitute one
centralized medical oxygen and vacuum pipeline system of the hospital despite substantial
payments already made.

RTC ruled that AMC have breached the contract for failure to perform its obligation of
paying the remaining balance of the contract price and CIGI was found to have faithfully
complied with its contractual obligations. AMC appealed to the CA which reversed the RTC
judgment. The CA ruled that it was CIGI who breached the contract when it failed to complete
the project and to turn over a fully functional centralized medical oxygen and vacuum pipeline
system.

ISSUE:

Whether or not CIGIs demand for payment upon AMC is proper

RULING:
Under the installation contracts, CIGI was bound to perform more prestations than
merely supplying labor and materials. Both of the installation contracts clearly show that CIGI
undertook to carry out more prestations than merely supplying labor and materials for the
medical oxygen and vacuum pipeline system. CIGI agreed also: (a) to perform a pressure drop,
leak testing, test run, painting/color coding of the installed centralized medical oxygen, vacuum
and nitrous oxide pipeline system; and (b) to conduct orientation, seminars and training for the
AMC employees who will be involved in the operation of the centralized pipeline system before
the formal turnover of the project. This is evident from the herein reproduced provisions of the
installation contracts.

CIGI failed to prove by substantial evidence that it requested AMC for electrical facilities
as such, its failure to conduct a test run and orientation/seminar is unjustified. CIGI failed to
amply support its allegation that it requested for electrical facilities from AMC. Tolentino, CIGIs
installation manager, testified that on August 23, 1999 they requested in writing for the electrical
facilities but no evidence of such document was submitted. It is but a self-serving allegation,
which by law is not equivalent to proof. In addition, Pineda, the one who actually sent the
request was not presented as witness thereby making Tolentinos statement mere hearsay
evidence bearing no probative value.

Even assuming that CIGI indeed made such request, it is unbelievable for AMC not to
furnish electrical facilities. As correctly observed by the CA, it is unlikely for AMC not to spend
minimal amount for the test run and risk the completion of its multi-million peso medical oxygen
and vacuum pipeline system.

From the foregoing, it is clear that AMCs obligation to pay and CIGIs right to demand
the unpaid balance for the Phase 2 installation project have not yet accrued. For failure to prove
that it requested for electrical facilities from AMC, the undisputed matter remains CIGI failed to
conduct the stipulated test run and seminar/orientation. Consequently, the dismissal of CIGIs
collection suit is imperative as the balance of the contract price is not yet demandable. For
having failed to perform its correlative obligation to AMC under their reciprocal contract, CIGI
cannot unilaterally demand for the payment of the remaining balance by simply sending an
invoice and billing statement to the former. Its right to demand for and collect payment will only
arise upon its completion of ALL its prestations under the subject contracts.
VIRGINIA Y. GOCHAN, FELIX Y. GOCHAN III, LOUISE Y. GOCHAN, ESTEBAN Y. GOCHAN,
JR., and DOMINIC Y. GOCHAN v. CHARLES MANCAO
G.R. No. 182314, November 13, 2013
J. Peralta

A party who is not the co-owner of a land subject of a compromise agreement cannot
claim that he was defrauded when the parties in the compromise agreement entered into the
same. As a third party to the agreement, he is not indispensable for the agreement to
materialize.

FACTS:

Felix Gochan (Gochan), Amparo Alo (Alo), and Jose A. Cabellon were co-owners of 2
parcels of land located in Cebu City and petitioners are successors-in-interest of Gochan, while
respondent bought parts of the land from the children of Angustias Velez and Eduardo Palacios,
who, together with Jose, Jesus, Carmen, and Vicente, all surnamed Velez, acquired the said
parcels of land from Alo.

Petitioners, including Mae Gochan, filed a case for legal redemption of for some of the
lots registered under the names of Gochan, Alo, and Genoveva S. De Villalon, who is the
successor-in-interest of Cabellon and it was brought in the RTC against the spouses Bonifacio
Paray, Jr. and Alvira Paray (sister of respondent), who purchased the lots from the heirs of Alo.
The parties entered a Compromise Agreement, where the Spouses Paray conveyed to
petitioners and Mae Gochan the properties for Php 650,000.00.
 Respondent filed a suit before the CA for Declaration of Nullity of Final Decision and
Compromise Agreement and the Registration of the Same Documents with the Register of
Deeds and argued that the legal redemption adversely affected the lots he owned. Petitioners
claimed that the petition states no cause of action on the grounds that: (1) respondent is not a
co-owner of the properties subject matter of the legal redemption case, hence, not a real party-
in-interest required to be impleaded therein; and (2) the reasons relied upon by him constitute
neither extrinsic fraud nor lack of jurisdiction. The CA ruled in favor of respondent.

ISSUE:

Whether or not the Court of Appeals erred in finding that extrinsic fraud was present when the
respondent was not impleaded in the redemption case and when petitioners entered into a
compromise agreement with Bonifacio Paray.

RULING:

To be clear, the governing law with respect to redemption by co-owners in case the
share of a co-owner is sold to a third person is Article 1620 of the New Civil Code, which
provides:
Art. 1620. A co-owner of a thing may exercise the right of redemption in
case the shares of all the other co-owners or of any of them, are sold to a third
person. If the price of the alienation is grossly excessive, the redemptioner shall
pay only a reasonable one. Should two or more co-owners desire to exercise
the right of redemption, they may only do so in proportion to the share they may
respectively have in the thing owned in common.

Article 1620 contemplates of a situation where a co-owner has alienated his pro-indiviso
shares to a third party or stranger to the co-ownership. Its purpose is to provide a method for
terminating the co-ownership and consolidating the dominion in one sole owner.

We already held that only the redeeming co-owner and the buyer are the
indispensable parties in an action for legal redemption, to theexclusion of the seller/co-owner.
Thus, the mere fact that respondent wasnot impleaded as a party in Civil Case No. CEB-22825
is not in itselfindicative of extrinsic fraud. If a seller/co-owner is not treated as anindispensable
party, how much more is a third person who merely allegedthat his lots are affected thereby?
Truly, the exclusion of respondent (orother alleged subdivision lot owners who are equally
affected) from the legalredemption case does not entitle him to the right to ask for the
annulment ofthe judgment under Rule 47 of the Rules, because he does not even have anylegal
standing to participate or intervene therein.

Assuming arguendo that respondent has the personality to be impleaded in Civil Case
No. CEB-22825 since it is settled that a person need not be a party to the judgment sought to
be annulled, still, he failed to prove with sufficient particularity the allegation that petitioners
practiced deceit or employed subterfuge that precluded him to fully and completely present his
case to the trial court. Like in other civil cases, the allegation of extrinsic fraud must be fully
substantiated by a preponderance of evidence in order to serve as basis for annulling a
judgment. Extrinsic fraud has to be definitively established by the claimant as mere allegation
does not instantly warrant the annulment of a final judgment. Ei incumbit probotio qui dicit,non
qui negat. He who asserts, not he who denies, must prove. Unfortunately, respondent failed to
discharge the burden.
 ALEJANDRO V. TANKEH v. DEVELOPMENT BANK OF THE PHILIPPINES, STERLING
SHIPPING LINES, INC., RUPERTO V. TANKEH, VICENTE ARENAS and ASSET
PRIVATIZATION TRUST
G.R. No. 171428, November 11, 2013
J. Leonen

A party to a loan agreement cannot claim that the promissory note is void as to him on
the ground of fraud if the same was not employed to deceive him into obtaining his consent. For
a contract to be void on the ground of fraud, the same must be causal fraud and not merely
incidental.

FACTS:

Alejandro Tankeh is the older brother of Ruperto Tankeh, the President of Sterling
Shipping Lines who was invited by the latter to be a shareholder in the company and serve as
the vice-president. In order to purchase a new vessel for the company, Ruperto loaned from the
Development Bank of the Philippines with the vessel as the collateral.

For failure to pay the obligation, the company Sterling Shipping assigned all its rights
over the vessel subject of collateral to DBP, which was in eventually turned over to Asset
Privatization Trust. The vessel was then sold to Singapore in a sum which the petitioner claimed
to be inadequate.

The petitioner filed a complaint the respondents seeking to declare the promissory note
null and void as to him on the ground of fraud and deceit as he was not able to fully exercise his
voting power as a member of the Board of Directors of the company. The RTC ruled in favor of
Alejandro but in appeal, the CA reversed the decision of the trial court. Hence, the present
petition.

ISSUE:

Whether the Court of Appeals erred in finding that respondent did not commit fraud against the
petitioner

RULING:

Fraud is defined in Article 1338 of the Civil Code as:

x x x fraud when, through insidious words or machinations of one of the

contracting parties, the other is induced to enter into a contract which, without
them, he would not have agreed to.

There are two types of fraud contemplated in the performance of contracts: dolo
incidente or incidental fraud and dolo causante or fraud serious enough to render a contract
voidable. Under Article 1344, the fraud must be serious to annul or avoid a contract and render
it voidable. This fraud or deception must be so material that had it not been present, the
defrauded party would not have entered into the contract.

Jurisprudence has shown that in order to constitute fraud that provides basis to annul
contracts, it must fulfill two conditions. First, the fraud must be dolo causante or it must be fraud
in obtaining the consent of the party. Second, this fraud must be proven by clear and convincing
evidence.

An assessment of the allegations in the pleadings and the findings of fact of both the trial
court and appellate court based on the evidence on record led to the conclusion that there had
been no dolo causante committed against the petitioner by Ruperto V. Tankeh. The petitioner
had given his consent to become a shareholder of the company without contributing a single
peso to pay for the shares of stock given to him by Ruperto V. Tankeh. This fact was admitted
by both petitioner and respondent in their respective pleadings submitted to the lower court.

In his Amended Complaint, the petitioner admitted that he had never invested any
amount in said corporation and that he had never been an actual member of said corporation.
All the money supposedly invested by him were put up by defendant Ruperto V. Tankeh. This
fact alone should have already alerted petitioner to the gravity of the obligation that he would be
undertaking as a member of the board of directors and the attendant circumstances that this
undertaking would entail. It also does not add any evidentiary weight to strengthen petitioners
claim of fraud. If anything, it only strengthens the position that petitioners consent was not
obtained through insidious words or deceitful machinations. The following facts show that
petitioner was fully aware of the magnitude of his undertaking:

First, petitioner was fully aware of the financial reverses that Sterling Shipping
Lines, Inc. had been undergoing, and he took great pains to release himself from the
obligation.

Second, his background as a doctor, as a bank organizer, and as a businessman

with experience in the textile business and real estate should have apprised him of the
irregularity in the contract that he would be undertaking. This meant that at the time
petitioner gave his consent to become a part of the corporation, he had been fully aware
of the circumstances and the risks of his participation. Intent is determined by the acts.

Finally, the records showed that petitioner had been fully aware of the effect of
his signing the promissory note. The bare assertion that he was not privy to the records
cannot counteract the fact that petitioner himself had admitted that after he had severed
ties with his brother, he had written a letter seeking to reach an amicable settlement with
respondent Rupert V. Tankeh. Petitioners actions defied his claim of a complete lack of
awareness regarding the circumstances and the contract he had been entering. The
required standard of proof clear and convincing evidence was not met. There was no
dolo causante or fraud used to obtain the petitioners consent to enter into the contract.
Petitioner had the opportunity to become aware of the facts that attended the signing of
the promissory note. He even admitted that he has a lawyer-son who the petitioner had
hoped would assist him in the administration of Sterling Shipping Lines, Inc. The totality
of the facts on record belies petitioners claim that fraud was used to obtain his consent
to the contract given his personal circumstances and the applicable law.

However, in refusing to allow petitioner to participate in the management of the business,

respondent Ruperto V. Tankeh was liable for the commission of incidental fraud. Although there
was no fraud that had been undertaken to obtain petitioners consent, there was fraud in the
performance of the contract. The records showed that petitioner had been unjustly excluded
from participating in the management of the affairs of the corporation. This exclusion from
themanagement in the affairs of Sterling Shipping Lines, Inc. constituted fraud incidental to the
performance of the obligation.
 First, petitioner was informed by Development Bank of the Philippines that it would still
pursue his liability for the payment of the promissory note. This would not have happened if
petitioner had allowed himself to be fully apprised of Sterling Shipping Lines, Inc.s financial
straits and if he felt that he could still participate in the companys operations. There is no
evidence that respondent Ruperto V. Tankeh showed an earnest effort to at least allow the
possibility of making petitioner part of the administration a reality. The respondent was the
brother of the petitioner and was also the primary party that compelled petitioner Alejandro
Tankeh to be solidarily bound to the promissory note. Ruperto V. Tankeh should have done his
best to ensure that he had exerted the diligence to comply with the obligations attendant to the
participation of petitioner.

Second, respondent Ruperto V. Tankehs refusal to enter into an agreement or

settlement with petitioner after the latters discovery of the sale of the M/V Sterling Ace was an
action that constituted bad faith. Due to Rupertos refusal, his brother, petitioner Alejandro,
became solidarily liable for an obligation that the latter could have avoided if he had been given
an opportunity to participate in the operations of Sterling Shipping Lines, Inc. The simple sale of
all of petitioners shares would not have solved petitioners problems, as it would not have
negated his liability under the terms of the promissory note.

Lastly, petitioner is still bound to the creditors of Sterling Shipping Lines, Inc., namely,
public respondents Development Bank of the Philippines and Asset Privatization Trust. This is
an additional financial burden for petitioner. Nothing in the records suggested the possibility that
Development Bank of the Philippines or Asset Privatization Trust through the Privatization
Management Office will not pursue or is precluded from pursuing its claim against the petitioner.
Although petitioner Alejandro voluntarily signed the promissory note and became a stockholder
and board member, respondent should have treated him with fairness, transparency, and
consideration to minimize the risk of incurring grave financial reverses.
HEIRS OF ROMULO D. SANDUETA v. DOMINGO ROBLES, HEIRS OF TEODORO ABAN

G.R. No. 203204, November 20, 2013

J. Perlas-Bernabe

In this case, records reveal that aside from the 4.6523-hectare tenanted riceland
covered by the OLT Program, the subject portion, petitioners predecessors-in-interest, Sps.
Sandueta, own other agricultural lands with a total area of 14.0910 has. which therefore
triggers the application of the first disqualifying condition under LOI 474. As such,
petitioners, being mere successors-in-interest, cannot be said to have acquired any
retention right to the subject portion. Accordingly, the subject portion would fall under the
complete coverage of the OLT Program hence, the 5 and 3-hectare retention limits as well
as the landowner s right to choose the area to be retained under Section 6 of RA 6657
would not apply altogether.

FACTS:

The heirs of Romulo and Isabel Sandueta (Sps. Sandueta) who died intestate in
1987 and 1996, respectively, and accordingly inherited several agricultural lands situated in
Dipolog City, Zamboanga del Norte. One of these parcels of land was tenanted by
Eufrecena Galeza, Teodoro Aban, and Domingo Pableo (tenants) who were instituted as
such by the original owner, Diosdado Jasmin, prior to its sale to Sps. Sandueta. The subject
portion was placed under the governments Operation Land Transfer (OLT) Program
pursuant to Presidential Decree No. (PD) 27 and consequently awarded to the above-
named tenants who were issued the corresponding Emancipation Patents (EPs).

Heirs of Sps. Sandueta filed before the Department of Agrarian Reform (DAR)
District Office in Dipolog City a petition seeking to exercise their right of retention over the
subject portion pursuant to Section 6 of Republic Act No. (RA) 6657, known as the
Comprehensive Agrarian Reform Law of 1988.

The DAR Regional Office issued an Order (April 5, 2006 Order) that a landowner
who failed to exercise his right of retention under PD 27 can avail of the right to retain an
area not exceeding 5 has. pursuant to Section 6 of RA 6657, adding that this award is
different from that which may be granted to the children of the landowner, to the extent of 3
has. each, in their own right as beneficiaries. However, to be entitled thereto, each child
must meet the age qualification and requirement of actual cultivation of the land or direct
management of the farm under Section 6, as well as the other conditions under Section
22 of RA 6657. As petitioners were absentee landowners who had left the cultivation of the
subject portion entirely to the tenants, Director Ragandang therefore concluded that they are
not entitled to exercise retention rights thereon and, hence, denied their petition for
retention. Despite such denial, Director Ragandang granted the decedent Romulo Sandueta
the right to retain 5 has. from the portion of Lot No. 3419 not covered by the OLT Program.

On appeal, DAR-Central Office Order affirming in toto Director Ragandangs April 5,

2006 Order which the CA also affirmed on appeal.

ISSUE:

Whether petitioners are entitled to avail of any retention right under Section 6 of RA 6657

RULING:

The petition is denied.

The right of retention, as protected and enshrined in the Constitution, balances the
effects of compulsory land acquisition by granting the landowner the right to choose the area
to be retained subject to legislative standards. Necessarily, since the said right is granted to
limit the effects of compulsory land acquisition against the landowner, it is a prerequisite that
the land falls under the coverage of the OLT Program of the government. If the land is
beyond the ambit of the OLT Program, the landowner need not as he should not apply
for retention since the appropriate remedy would be for him to apply for exemption. As
explained in the case of Daez v. CA (Daez):

Exemption and retention in agrarian reform are two (2) distinct concepts.

P.D. No. 27, which implemented the Operation Land Transfer (OLT) Program, covers
tenanted rice or corn lands. The requisites for coverage under the OLT program are the
following: (1) the land must be devoted to rice or corn crops; and (2) there must be a
system of share-crop or lease-tenancy obtaining therein. If either requisite is absent, a
 landowner may apply for exemption. If either of these requisites is absent, the land is not
covered under OLT. Hence, a landowner need not apply for retention where his
ownership over the entire landholding is intact and undisturbed.

To clarify, in Santiago v. Ortiz-Luis, the Court, citing the cases of Assn. of Small
Landowners and Reyes, stated that while landowners who have not yet exercised their
retention rights under PD 27 are entitled to new retention rights provided for by RA 6657, the
limitations under LOI 474 would equally apply to a landowner who filed an application under
RA 6657.

In this case, records reveal that aside from the 4.6523-hectare tenanted riceland
covered by the OLT Program, i.e. the subject portion, petitioners predecessors-in-interest,
Sps. Sandueta, own other agricultural lands with a total area of 14.0910 has. which
therefore triggers the application of the first disqualifying condition under LOI 474 as above-
highlighted. As such, petitioners, being mere successors-in-interest, cannot be said to have
acquired any retention right to the subject portion. Accordingly, the subject portion would fall
under the complete coverage of the OLT Program hence, the 5 and 3-hectare retention
limits as well as the landowner s right to choose the area to be retained under Section 6 of
RA 6657 would not apply altogether.

Nevertheless, while the CA properly upheld the denial of the petition for retention, the
Court must point out that the November 24, 2009 DARCO Order inaccurately phrased
Romulo Sanduetas entitlement to the remaining 14.0910-hectare landholding, outside of the
4.6523-hectare subject portion, as a vestige of his retention right. Since the 14.0910-hectare
landholding was not shown to be tenanted and hence, outside the coverage of the OLT
Program, there would be no right of retention, in its technical sense, to speak of. Keeping
with the Court s elucidation in Daez retention is an agrarian reform law concept which is only
applicable when the land is covered by the OLT Program; this is not, however, the case with
respect to the 14.0910-hectare landholding. Thus, if only to correct any confusion in
terminology, Romulo Sanduetas right over the 14.0910-hectare landholding should not be
deemed to be pursuant to any retention right but rather to his ordinary right of ownership as
it appears from the findings of the DAR that the landholding is not covered by the OLT
Program.

DECEMBER 2013

LAURA E. PARAGUYA vs. SPOUSES ALMA ESCUREL-CRUCILLO and EMETERIO CRUCILLO,

and the REGISTER OF DEEDS OF SORSOGON
G.R. No. 200265, December 2, 2013
J. Perlas-Bernabe
 A person cannot claim ownership over a land based on a title dated 1972 and failed to
assert the same for a substantial period of time as she would be barred by prescription and
laches.

FACTS:

Laura Paraguya discovered that her paternal grandfather, Ildefonso Estabillo, owned a
parcel of land through a document entitled Recognition of Ownership and Possession dated
December 1, 1972, as well as a titulo posesorio issued sometime in 1893 or 1895 in the name
of Estabillo.

On December 19, 1990, Paraguya filed before the RTC a Complaint against spouses
Crucillo and the RD for the annulment of title alleging that Escurel obtained the aforesaid title
through fraud and deceit. Paraguya claimed that Escurel was merely their administrator and
hence, had no right over the same. The RD denied any involvement in the aforesaid fraud,
maintaining that its issuance of title was his ministerial duty. Spouses Crucillo argued that
Paraguya's complaint had already been barred by laches and/or prescription. They further
alleged, among others, that Escurel, through her father, the late Angel Escurel, caused the
issuance of a free patent over the subject property. RTC ruled in favor of Paraguya. CA reversed
the RTC's ruling and ordered the dismissal of Paraguya's complaint.

ISSUE:

Whether or not the CA correctly dismissed Paraguya's complaint for annulment of title

RULING:

The petition has no merit.

It is an established rule that a Torrens certificate of title is not conclusive proof of ownership.
Verily, a party may seek its annulment on the basis of fraud or misrepresentation. However,
such action must be seasonably filed, else the same would be barred.

In this relation, Section 32 of PD 1529 provides that the period to contest a decree of
registration shall be one (1) year from the date of its entry and that, after the lapse of the said
period, the Torrens certificate of title issued thereon becomes incontrovertible and indefeasible,
viz:

Sec. 32. Review of decree of registration; Innocent purchaser for value. The decree of
registration shall not be reopened or revised by reason of absence, minority, or other disability
of any person adversely affected thereby, nor by any proceeding in any court for reversing
judgments, subject, however, to the right of any person, including the government and the
branches thereof, deprived of land or of any estate or interest therein by such adjudication or
confirmation of title obtained byactual fraud, to file in the proper Court of First Instance a petition
for reopening and review of the decree of registration not later than one year from and after the
date of the entry of such decree of registration, but in no case shall such petition be entertained
by the court where an innocent purchaser for value has acquired the land or an interest therein,
whose rights may be prejudiced. Whenever the phrase "innocent purchaser for value" or an
equivalent phrase occurs in this Decree, it shall be deemed to include an innocent lessee,
mortgagee, or other encumbrancer for value. Upon the expiration of said period of one year, the
decree of registration and the certificate of title issued shall become incontrovertible. Any person
 aggrieved by such decree of registration in any case may pursue his remedy by action for
damages against the applicant or any other persons responsible for the fraud. (Emphases and
underscoring supplied)

In view of the foregoing, the Court is impelled to sustain the CA's dismissal of Paraguya's
complaint for annulment of OCT No. P-1772924 since it was filed only on December 19, 1990,
or more than eleven (11) years from the title's date of entry on August 24, 1979. Based on
Section 32 of PD 1529, said title had become incontrovertible and indefeasible after the lapse of
one (1) year from the date of its entry, thus barring Paraguya's action for annulment of title.

The Court likewise takes note that Paraguya's complaint is likewise in the nature of an
action for reconveyance because it also prayed for the trial court to order Sps. Crucillo to
"surrender ownership and possession of the properties in question to [Paraguya], vacating them
altogether x x x." Despite this, Paraguya's complaint remains dismissible on the same ground
because the prescriptive period for actions for reconveyance is ten (10) years reckoned from the
date of issuance of the certificate of title, except when the owner is in possession of the
property, in which case the action for reconveyance becomes imprescriptible. Such exception is,
however, inapplicable in this case because as stipulated by the parties herein, it is Sps. Crucillo,
and not Paraguya, who are in possession of the land covered by OCT No. P-1 7729.

As a final point, it is well to note that even if the barring effect of Section 32 and the above-
stated prescriptive period for reconveyance are discounted, Paraguya's complaint for annulment
of title should be dismissed altogether since she merely relied on the titulo posesorio issued in
favor of Estabillo sometime in 1893 or 1895. Based on Section 1 of PD 892, entitled
"Discontinuance of the Spanish Mortgage System of Registration and of the Use of Spanish
Titles as Evidence in Land Registration Proceedings," Spanish titles can no longer be used as
evidence of ownership after six (6) months from the effectivity of the law, or starting August 16,
1976.
ISABELO C. DELA CRUZ vs. LUCILA C. DELA CRUZ
G.R. No. 192383, December 4, 2013
J. Abad

In waiving a right, the party waiving must expressly provide for the conditions necessary
to effect the same as the absence of those conditions will constitute an absolute waiver on her
part.

FACTS:

Petitioner Isabelo C. Dela Cruz claimed that in 1975 he and his sisters, respondent Lucila
C. Dela Cruz (Lucila) and Cornelia C. Dela Cruz (Cornelia), bought on installment a 240-square
meter land in Las Pias from Gatchalian Realty, Inc. To help Corazon L. Victoriano (Corazon), a
cousin who was in financial distress, Isabelo agreed to have the lot they bought used as
collateral for the loan that Corazon planned to secure from the Philippine Veterans Bank. But,
Corazon failed to pay her loan which resulted to the foreclosure of the property. Lucila then
redeemed the same.

Lucila then executed an affidavit of waiver relinquishing all her share, interest, and
participation to half of the lot to Isabelo and the other half to her niece, Emelinda C. Dela Cruz
(Emelinda). Claiming ownership of half of the subject property by virtue of Lucilas affidavit of
waiver, Isabelo filed an action for partition before the RTC but Lucila opposed and claimed that
the property, including the house built on it, belonged to her and that her affidavit of waiver did
 not cede ownership of half of the property to Isabelo since the affidavit made clear that her
waiver would take effect only if the problems that beset their family were resolved. RTC denied
Isabelos complaint for lack of merit. Isabelo then appealed to the CA which affirmed the
decision of the
RTC. Hence, the present petition.

ISSUE:

Whether or not the CA erred in failing to rule that Lucilas cession of half of the property to
Isabelo through waiver did not have the effect of making him part owner of the property with
a right to demand partition

RULING:

The petition is meritorious.

At bottom, the question is: did Lucilas affidavit of waiver ceding to Isabelo half of the
subject property conveys to him a right of ownership over that half? The CA agreed with the
RTC that Lucilas affidavit of waiver did not vest any property right to Isabelo since the condition
she set in that affidavit had not been fulfilled. This then gave Lucila the right in the meantime to
rescind the waiver, something that she eventually did. But, contrary to the position that the CA
and the RTC had taken, Lucilas waiver was absolute and contained no precondition. The
pertinent portion of the affidavit of waiver reads:

That to put everything in proper order, I hereby waive all my share, interest and participation in so
far as it refer to the one half portion (120 SQ. M.) of the above-parcel of land, with and in favor
of my brother ISABELO C. DELA CRUZ, of legal age, married, Filipino and residing at Las Pinas
City, and the other half portion (120 SQ. M.) in favor of my niece, EMELINDA C. DELA CRUZ,
also of legal age, single, Filipino and residing at Sto. Rosario Hagonoy, Bulacan;
xxxx

Evidently, Lucila would not have used the terms to put everything in proper order, I hereby
waive if her intent was to set a precondition to her waiver covering the property, half to
Isabelo and half to Emelinda. If that were her intention, she could have stated, subject to the
condition that everything is put in proper order, I hereby waive... or something to that effect.

The phrase hereby waive means that Lucila was, by executing the affidavit, already
waiving her right to the property, irreversibly divesting herself of her existing right to the same.
After he and his co-owner Emelinda accepted the donation, Isabelo became the owner of half of
the subject property having the right to demand its partition.
MODESTO SANCHEZ vs. ANDREW SANCHEZ
G.R. No. 187661, December 4, 2013
J. Perez

In assailing the validity of a title, a party cannot claim that the person challenging the
same is barred by prescription and laches as the right to challenge a void title is imprescriptible.

FACTS:

Andrew Sanchez owned a parcel of land and sent a pre-signed deed of sale to his brother
Modesto in response to latters offer to buy the subject parcel of land. However, the sale did not
 push through as Modesto lacked the financial means to purchase the land at the time. Although
the sale did not materialize, Andrew allowed his brother and his live-in partner to occupy the
property, an act of liberality on the part of Andrew.

Andrew then discovered that the Certificate of Title covering the subject parcel of land was
missing and went to the Register of Deeds to file an Affidavit of Loss but found out that Modesto
filed a petition for reconstitution based on a notarized deed of sale between them in 1981. In
2000, Andrew filed a case seeking the annulment of the said document on the ground of false
representation and deceit. During the pendency of the case, a new title in the name of Modesto
was issued resulting to the amendment of Andrews complaint to include Cancellation Of New
Title And Reconveyance Of Title. Modesto claimed that the complaint lack of cause of action,
prescription, and laches.

The RTC dismissed the complaint on the grounds of prescription and laches taking note of
the lapse of time between the date of the assailed document and the filing of the case and
concluded that Andrews action was time barred and the failure of Andrew to offer any valid
reason for the delay in asserting his right made him guilty of laches. But the CA held that the
trial court erred in dismissing the complaint of Andrew without the benefit of a trial. Hence, the
present petition.

ISSUE:

Whether or not Andrews complaint is barred by prescription and laches

RULING:

The petition is bereft of merit. We agree with the CAs ruling.

It is apparent from the records that the RTC did not conduct a hearing to receive evidence
proving that Andrew was guilty of prescription or laches. There was no full-blown trial. The case
was simply dismissed on the basis of the pleadings submitted by the parties. We note that the
RTC admitted the Amended Complaint and gave Andrew fifteen (15) days to comment on
Modestos Motion to Dismiss based on affirmative defenses and likewise gave Modesto the
same period to file his rejoinder, after which, it considered the matter submitted for resolution.

The Court has consistently held that the affirmative defense of prescription does not
automatically warrant the dismissal of a complaint under Rule 16 of the Rules of Civil
Procedure. An allegation of prescription can effectively be used in a motion to dismiss only
when the complaint on its face shows that indeed the action has already prescribed. If the issue
of prescription is one involving evidentiary matters requiring a full-blown trial on the merits, it
cannot be determined in a motion to dismiss. Those issues must be resolved at the trial of the
case on the merits wherein both parties will be given ample opportunity to prove their respective
claims and defenses.

Upon closer inspection of the complaint, it would seem that there are several possible
scenarios that may have occurred given the limited set of facts. The statement transaction did
not push through since defendant did not have the financial wherewithal to purchase the subject
property creates confusion and allows for several different interpretations. On one side, it can
be argued that said contract is void and consequently, the right to challenge such contract is
imprescriptible.
 On the other hand, a different analysis of the statement transaction did not push through
since defendant did not have the financial wherewithal to purchase the subject property may
yield another interpretation. One can also deduce that what actually transpired was a simple
non-payment of purchase price, which will not invalidate a contract and could only give rise to
other legal remedies such as rescission or specific performance. In this scenario, the contract
remains valid and therefore subject to prescription.

It is also apparent from the pleadings that both parties denied each others allegations. It is
then but logical to review more evidence on disputed matters. On this score alone, it is apparent
that the complaint on its face does not readily show that the action has already prescribed. We
emphasize once more that a summary or outright dismissal of an action is not proper where
there are factual matters in dispute, which require presentation and appreciation of evidence.

Furthermore, well settled is the rule that the elements of laches must be proven positively.
Laches is evidentiary in nature, a fact that cannot be established by mere allegations in the
pleadings and cannot be resolved in a motion to dismiss. At this stage therefore, the dismissal
of the complaint on the ground of laches is premature. Those issues must be resolved at the
trial of the case on the merits, wherein both parties will be given ample opportunity to prove their
respective claims and defenses.

OPTIMUM DEVELOPMENT BANK vs. SPOUSES BENIGNO V. JOVELLANOS and LOURDES

R. JOVELLANOS
G.R. No. 189145, December 4, 2013
J. Perlas-Bernabe

In an action for unlawful detainer, the cancellation of the contract to sell for non-payment
of monthly dues extinguishes the right of the buyer to lawfully possess the land as the payment
serves as the suspensive condition necessary to be fulfilled in order to convey rights to the
buyer.

FACTS:

Spouses Jovellanos entered into a Contract to Sell with Palmera Homes, Inc. for the
purchase of a residential house and lot with an undertaking to pay the remaining balance of the
contract price in equal monthly installments of for a period of 10 years starting June 12, 2005. In
2006, Palmera Homes assigned all its rights, title and interest in the Contract to Sell in favor of
petitioner Optimum Development Bank.

On April 10, 2006, Optimum informed the spouses of the cancellation of contract to sell for
failure to pay their monthly installments despite several written and verbal notices. In a final
demand letter dated May 25, 2006, Optimum required the spouses to vacate and deliver
possession of the subject property which, however, remained unheeded. Optimum then filed a
complaint for unlawful detainer before the MeTC. Spouses Jovellanos failed to file their answer
within the prescribed reglementary period. Upon the filing of their opposition, they claimed the
absence of jurisdiction of the court which the MeTC denied same. The MeTC then ordered the
spouses to vacate the subject property which the RTC affirmed. CA reversed the RTCs decision
stating that the controversy does not only involve the issue of possession but also the validity of
the cancellation of the Contract to Sell and the determination of the rights of the parties.

ISSUE:
 Whether or not the CA erred in holding that the action did not involve the issue of possession

RULING:

The petition is meritorious.

What is determinative of the nature of the action and the court with jurisdiction over it are
the allegations in the complaint and the character of the relief sought, not the defenses set up in
an answer. A complaint sufficiently alleges a cause of action for unlawful detainer if it recites
that:

(a) initially, possession of the property by the defendant was by contract with or by tolerance of the
plaintiff; (b) eventually, such possession became illegal upon notice by plaintiff to defendant of
the termination of the latter's right of possession; (c) thereafter, defendant remained in
possession of the property and deprived plaintiff of the enjoyment thereof; and (d) within one
year from the last demand on defendant to vacate the property, plaintiff instituted the complaint
for ejectment. Corollarily, the only issue to be resolved in an unlawful detainer case is physical
or material possession of the property involved, independent of any claim of ownership by any
of the parties involved.

In the case at bar, the unlawful detainer suit filed by Optimum against Sps. Jovellanos for
illegally withholding possession of the subject property is similarly premised upon the
cancellation or termination of the Contract to Sell between them. Indeed, it was well within the
jurisdiction of the MeTC to consider the terms of the parties agreement in order to ultimately
determine the factual bases of Optimums possessory claims over the subject property.
Proceeding accordingly, the MeTC held that Sps. Jovellanos non-payment of the instalments
due had rendered the Contract to Sell without force and effect, thus depriving the latter of their
right to possess the property subject of said contract. The foregoing disposition aptly squares
with existing jurisprudence. As the Court similarly held in the Union Bank case, the sellers
cancellation of the contract to sell necessarily extinguished the buyers right of possession over
the property that was the subject of the terminated agreement. Verily, in a contract to sell, the
prospective seller binds himself to sell the property subject of the agreement exclusively to the
prospective buyer upon fulfillment of the condition agreed upon which is the full payment of the
purchase price but reserving to himself the ownership of the subject property despite delivery
thereof to the prospective buyer. The full payment of the purchase price in a contract to sell is
a suspensive condition, the non-fulfillment of which prevents the prospective sellers
obligation to convey title from becoming effective, as in this case.

Further, it is significant to note that given that the Contract to Sell in this case is one which
has for its object real property to be sold on an installment basis, the said contract is especially
governed by and thus, must be examined under the provisions of RA 6552, or the Realty
Installment Buyer Protection Act, which provides for the rights of the buyer in case of his default
in the payment of succeeding installments.

Pertinently, since Sps. Jovellanos failed to pay their stipulated monthly installments as
found by the MeTC, the Court examines Optimums compliance with Section 4 of RA 6552, as
above-quoted and highlighted, which is the provision applicable to buyers who have paid less
than two (2) years-worth of installments. Essentially, the said provision provides for three (3)
requisites before the seller may actually cancel the subject contract: first, the seller shall give
the buyer a 60-day grace period to be reckoned from the date the installment became due;
second, the seller must give the buyer a notice of cancellation/demand for rescission by
 notarial act if the buyer fails to pay the installments due at the expiration of the said grace
period; and third, the seller may actually cancel the contract only after thirty (30) days from the
buyers receipt of the said notice of cancellation/demand for rescission by notarial act.

In the present case, the 60-day grace period automatically operated in favor of the buyers,
Sps. Jovellanos, and took effect from the time that the maturity dates of the installment
payments lapsed. With the said grace period having expired bereft of any installment payment
on the part of Sps. Jovellanos, Optimum then issued a notarized Notice of Delinquency and
Cancellation of Contract on April 10, 2006. Finally, in proceeding with the actual cancellation of
the contract to sell, Optimum gave Sps. Jovellanos an additional thirty (30) days within which to
settle their arrears and reinstate the contract, or sell or assign their rights to another.44 It was
only after the expiration of the thirty day (30) period did Optimum treat the contract to sell as
effectively cancelled making as it did a final demand upon Sps. Jovellanos to vacate the
subject property only on May 25, 2006.

Thus, based on the foregoing, the Court finds that there was a valid and effective
cancellation of the Contract to Sell in accordance with Section 4 of RA 6552 and since Sps.
Jovellanos had already lost their right to retain possession of the subject property as a
consequence of such cancellation, their refusal to vacate and turn over possession to Optimum
makes out a valid case for unlawful detainer as properly adjudged by the MeTC.METRO
CONCAST STEEL CORPORATION, SPOUSES JOSE S. DYCHIAO AND TIU OH YAN,
SPOUSES GUILLERMO AND MERCEDES DYCHIAO, AND SPOUSES VICENTE AND
FILOMENA DYCHIAO vs. ALLIED BANK CORPORATION
G.R. No. 177921, December 4, 2013
J. Perlas-Bernabe

A party in a contract cannot claim that his obligation to pay to another is extinguished for
the reason that his debtor failed to pay him and that the other party was witness to the same.
Such is not a mode of extinguishment of an obligation.

FACTS:

Metro Concast, a business engaged in manufacturing steel, through its officers, obtained
several loans from Allied Bank. When petitioners failed to settle their obligations, Allied Bank,
through counsel, sent demand letters seeking payment, but to no avail. Allied Bank then filed a
complaint for collection of sum of money against petitioners before the RTC.

In order to settle their debts with Allied Bank, petitioners offered the sale of Metro Concasts
remaining assets to Allied Bank, which the latter, however, refused. Instead, Allied Bank advised
them to sell the equipment and apply the proceeds of the sale to their outstanding obligations.
Accordingly, petitioners offered the equipment for sale, but since there were no takers, the
equipment was reduced into scrap metal.

Peakstar Oil Corporation (Peakstar) then expressed interest in buying the scrap metal and
during the negotiations, petitioners claimed that Atty. Peter Saw (Atty. Saw), a member of Allied
Banks legal department, acted as the latters agent. Unfortunately, Peakstar did not fulfill all its
obligations under the Memorandum of Agreement. In this regard, petitioners claimed that the
obligation to pay Allied Bank was extinguished upon failure of Peakstar to perform the obligation
and should be considered as force majeure and that since Allied Bank was the party that
accepted the terms and conditions of payment proposed by Peakstar, petitioners must therefore
be deemed to have settled their obligations.
 The RTC dismissed the subject complaint, holding that the causes of action sued upon had
been paid or otherwise extinguished. But the CA reversed the ruling of the RTC stating that the
MoA executed between Metro Concast, as seller of the ferro scrap, and Peakstar, as the buyer
thereof did not indicate that Allied Bank intervened or was a party thereto.

ISSUE:

Whether or not the loan obligations incurred by the petitioners under the subject promissory note
and various trust receipts have already been extinguished

RULING:

Article 1231 of the Civil Code states that obligations are extinguished either by payment or
performance, the loss of the thing due, the condonation or remission of the debt, the confusion
or merger of the rights of creditor and debtor, compensation or novation.

At the outset, the Court must dispel the notion that the MoA would have any relevance to
the performance of petitioners obligations to Allied Bank. The MoA is a sale of assets contract,
while petitioners obligations to Allied Bank arose from various loan transactions. Absent any
showing that the terms and conditions of the latter transactions have been, in any way, modified
or novated by the terms and conditions in the MoA, said contracts should be treated separately
and distinctly from each other, such that the existence, performance or breach of one would not
depend on the existence, performance or breach of the other. In the foregoing respect, the issue
on whether or not Allied Bank expressed its conformity to the assets sale transaction between
Metro Concast and Peakstar (as evidenced by the MoA) is actually irrelevant to the issues
related to petitioners loan obligations to the bank. Besides, as the CA pointed out, the fact of
Allied Banks representation has not been proven in this case and hence, cannot be deemed as
a sustainable defense to exculpate petitioners from their loan obligations to Allied Bank.

Now, anent petitioners reliance on force majeure, suffice it to state that Peakstars breach
of its obligations to Metro Concast arising from the MoA cannot be classified as a fortuitous
event under jurisprudential formulation. As discussed in Sicam v. Jorge:

Fortuitous events by definition are extraordinary events not foreseeable or avoidable. It is

therefore, not enough that the event should not have been foreseen or anticipated, as is
commonly believed but it must be one impossible to foresee or to avoid. The mere difficulty
to foresee the happening is not impossibility to foresee the same.

To constitute a fortuitous event, the following elements must concur: (a) the cause of the
unforeseen and unexpected occurrence or of the failure of the debtor to comply with obligations
must be independent of human will; (b) it must be impossible to foresee the event that
constitutes the caso fortuito or, if it can be foreseen, it must be impossible to avoid; (c) the
occurrence must be such as to render it impossible for the debtor to fulfill obligations in
a normal manner; and, (d) the obligor must be free from any participation in the aggravation of
the injury or loss. (Emphases supplied)
While it may be argued that Peakstar' s breach of the MoA was unforeseen by petitioners, the same
is clearly not "impossible" to foresee or even an event which is "independent of human will."
Neither has it been shown that said occurrence rendered it impossible for petitioners to pay their
loan obligations to Allied Bank and thus, negates the former's force majeure theory altogether.
 Dra. Leila A. Dela Llana vs.
Rebecca Biong, Doing Business Under the Name and Style of Pongkay Trading
G.R. No. 182356, December 04, 2013
J. Brion

The elements necessary to establish a quasi-delict case are: (1) damages to the
plaintiff; (2) negligence, by act or omission, of the defendant or by some person for whose acts
the defendant must respond, was guilty; and (3) the connection of cause and effect between
such negligence and the damages.

Dra. dela Llana did not present any testimonial or documentary evidence that directly
shows the causal relation between the vehicular accident and Dra. dela Llanas injury. Her claim
that Joels negligence caused her whiplash injury was not established because of the deficiency
of the presented evidence during trial. Therefore, the elements of quasi-delict were not
sufficiently met to warrant an award of damages to Dra. dela Llana.

FACTS:

Juan dela Llana was driving while his sister, Dra. dela Llana, was seated at the front
passenger seat. Juan stopped the car across the Veterans Memorial Hospital when the signal
light turned red. A few seconds after the car halted, a dump truck containing gravel and sand
suddenly rammed the cars rear end, violently pushing the car forward. Due to the impact, the
cars rear end collapsed and its rear windshield was shattered. Glass splinters flew, puncturing
Dra. dela Llana. Apart from these minor wounds, Dra. dela Llana did not appear to have
suffered from any other visible physical injuries. The traffic investigation report identified the
truck driver as Joel Primero. Joel later revealed that his employer was respondent Rebecca
Biong, doing business under the name and style of Pongkay Trading and was engaged in a
gravel and sand business.

A few weeks after the incident, Dra. dela Llana began to feel mild to moderate pain on the
left side of her neck and shoulder. The pain became more intense as days passed by. Her injury
became more severe. She consulted with Dr. Rosalinda Milla, a rehabilitation medicine
specialist, to examine her condition. Dr. Milla told her that she suffered from a whiplash injury,
an injury caused by the compression of the nerve running to her left arm and hand.Dra. dela
Llanas condition did not improve despite three months of extensive physical therapy. Dr. Flores,
a neuro-surgeon, finally suggested that she undergo a cervical spine surgery to release the
compression of her nerve. The operation released the impingement of the nerve, but
incapacitated Dra. dela Llana from the practice of her profession since June 2000 despite the
surgery.
Dra. dela Llana demanded from Rebecca compensation for her injuries, but Rebecca refused to
pay. Thus, Dra. dela Llana sued Rebecca for damages before the Regional Trial Court of
Quezon City (RTC).

The RTC ruled in favor of Dra. dela Llana and held that the proximate cause of Dra. dela
Llanas whiplash injury to be Joels reckless driving. The CA reversed the RTC ruling. It held that
Dra. dela Llana failed to establish a reasonable connection between the vehicular accident and
her whiplash injury by preponderance of evidence. Hence, this case.

ISSUE:
Whether the proximate cause of Dra. dela Llanas whiplash injury is Joels reckless driving

RULING:

Dra. dela Llana failed to establish her case by preponderance of evidence

Article 2176 of the Civil Code provides that [w]hoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay for the damage done. Such fault or
negligence, if there is no pre-existing contractual relation between the parties, is a quasi-delict.
Under this provision, the elements necessary to establish a quasi-delict case are: (1) damages
to the plaintiff; (2) negligence, by act or omission, of the defendant or by some person for whose
acts the defendant must respond, was guilty; and (3) the connection of cause and effect
between such negligence and the damages. These elements show that the source of
obligation in a quasi-delict case is the breach or omission of mutual duties that civilized society
imposes upon its members, or which arise from non-contractual relations of certain members of
society to others.

Based on these requisites, Dra. dela Llana must first establish by preponderance of
evidence the three elements of quasi-delict before we determine Rebeccas liability as
Joels employer. She should show the chain of causation between Joels reckless driving and
her whiplash injury. Only after she has laid this foundation can the presumption - that Rebecca
did not exercise the diligence of a good father of a family in the selection and supervision of
Joel - arise. Once negligence, the damages and the proximate causation are established, this
Court can then proceed with the application and the interpretation of the fifth paragraph of
Article 2180 of the Civil Code. Under Article 2176 of the Civil Code, in relation with the fifth
paragraph of Article 2180, an action predicated on an employees act or omission may be
instituted against the employer who is held liable for the negligent act or omission committed by
his employee. The rationale for these graduated levels of analyses is that it is essentially the
wrongful or negligent act or omission itself which creates the vinculum juris in extra-contractual
obligations.

In civil cases, a party who alleges a fact has the burden of proving it. He who alleges has
the burden of proving his allegation by preponderance of evidence or greater weight of
credible evidence. The reason for this rule is that bare allegations, unsubstantiated by
evidence, are not equivalent to proof. In short, mere allegations are not evidence.

In the present case, the burden of proving the proximate causation between Joels
negligence and Dra. dela Llanas whiplash injury rests on Dra. dela Llana. She must establish
by preponderance of evidence that Joels negligence, in its natural and continuous sequence,
unbroken by any efficient intervening cause, produced her whiplash injury, and without which
her whiplash injury would not have occurred.

Notably, Dra. dela Llana anchors her claim mainly on three pieces of evidence: (1) the
pictures of her damaged car, (2) the medical certificate dated November 20, 2000, and (3) her
testimonial evidence. However, none of these pieces of evidence show the causal relation
between the vehicular accident and the whiplash injury. In other words, Dra. dela Llana, during
trial, did not adduce the factum probans or the evidentiary facts by which the factum
probandum or the ultimate fact can be established.

Indeed, a perusal of the pieces of evidence presented by the parties before the trial court
shows that Dra. dela Llana did not present any testimonial or documentary evidence that
directly shows the causal relation between the vehicular accident and Dra. dela Llanas
injury. Her claim that Joels negligence caused her whiplash injury was not established
because of the deficiency of the presented evidence during trial. We point out in this respect
that courts cannot take judicial notice that vehicular accidents cause whiplash injuries. This
proposition is not public knowledge, or is capable of unquestionable demonstration, or ought to
be known to judges because of their judicial functions. We have no expertise in the field of
medicine. Justices and judges are only tasked to apply and interpret the law on the basis of the
parties pieces of evidence and their corresponding legal arguments.

In sum, Dra. dela Llana miserably failed to establish her case by preponderance of
evidence. While we commiserate with her, our solemn duty to independently and impartially
assess the merits of the case binds us to rule against Dra. dela Llanas favor. Her claim,
unsupported by preponderance of evidence, is merely a bare assertion and has no leg to stand
on.
 PHILIPPINE BANK OF COMMUNICATIONS VS. MARY ANN O. YEUNG
G.R. No. 179691, December 04, 2013
J. Brion

While the petitioner claims that it was not obliged to pay any surplus because the
balance from the proceeds was applied to the respondents other obligations and to those of her
attorney-in-fact, it failed, however, to show any supporting evidence showing that the mortgage
extended to those obligations. The petitioner, as mortgagee or purchaser, cannot just simply
apply the proceeds of the sale in its favor and deduct from the balance the respondents
outstanding obligations not secured by the mortgage. Thus, there is no reason to depart from
the CAs ruling that the balance or excess, after deducting the mortgage debt plus the stipulated
interest and the expenses of the foreclosure sale, must be returned to the respondent.

FACTS:

In order to secure a loan, Mary Ann O. Yeung (respondent) executed a Real Estate
Mortgage over a property located in Davao City in favor of the petitioner. The mortgaged
property was covered by Transfer Certificate of Title (TCT) No. T-187433, registered in the
respondents name.

After the respondent defaulted in her obligation, the petitioner initiated a petition for
extrajudicial foreclosure of the mortgage, pursuant to Act No. 3135, as amended. The
mortgaged property was consequently foreclosed and sold at public auction to the petitioner,
which emerged as the highest bidder.
A provisional certificate of sale was issued by the sheriff and the sale was registered with the
Register of Deeds. When the respondent failed to redeem the mortgage within the one year
redemption period, the petitioner consolidated its ownership over the property, resulting to the
cancellation of TCT No. T-187433 and to the issuance of TCT No. T-362374 in its name.

Thereafter, the petitioner filed with the RTC an ex parte petition for the issuance of a writ of
possession. The RTC granted the petition. The respondent thereafter filed a motion for recall
and/or revocation alleging that the writ of possession should not have been issued by the RTC
because the petitioner failed to remit the surplus from the proceeds of the sale. When the
motion was denied, the respondent filed a motion for reconsideration (MR) which the RTC
likewise denied. Hence, the respondent brought the matter to the CA on certiorari.

The CA granted the petition and ruled that the RTC gravely abused its discretion when it
ordered the issuance of a writ of possession. The CA ruled that the petitioners failure to remit
the surplus from the proceeds of the foreclosure sale (equivalent to 33% of the mortgage debt)
was a valid ground to defer the issuance of a writ of possession for reasons of equity. It
reversed the RTC orders and ordered the petitioner to remit the excess from the proceeds of the
foreclosure sale to the respondent. Hence, this case.

ISSUE:

Whether the petitioner is liable for any excess or surplus from the proceeds of the sale

RULING:

In setting aside the questioned RTC orders granting the petitioner a writ of possession, the
CA relied on the Courts ruling in Sulit v. Court of Appeals where we held that the failure of the
mortgagee to return to the mortgagor the surplus proceeds of the foreclosure sale carves out an
exception to the general rule that a writ of possession should issue as a matter of course.

The said ruling cannot be applied in the present case. A proper appreciation and analysis of
Sulit show that it cannot be cited in the present case because the factual milieu obtaining
therein are not analogous or similar to those involved in the case before us.

In addition, the petitioner contends that there was no excess or surplus that needs to be
returned to the respondent because her other outstanding obligations and those of her attorney-
in-fact were paid out of the proceeds. The relevant provision, Section 4 of Rule 68 of the Rules
of Civil Procedure, mandates that:

Section 4. Disposition of proceeds of sale. The amount realized from the foreclosure sale
of the mortgaged property shall, after deducting the costs of the sale, be paid to the person
foreclosing the mortgage, and when there shall be any balance or residue, after paying off the
mortgage debt due, the same shall be paid to junior encumbrancers in the order of their priority,
to be ascertained by the court, or if there be no such encumbrancers or there be a balance or
residue after payment to them, then to the mortgagor or his duly authorized agent, or to
the person entitled to it. [emphases and underscores ours]

Thus, in the absence of any evidence showing that the mortgage also covers the other
obligations of the mortgagor, the proceeds from the sale should not be applied to them. In the
present case, while the petitioner claims that it was not obliged to pay any surplus because the
balance from the proceeds was applied to the respondents other obligations and to those of her
attorney-in-fact, it failed, however, to show any supporting evidence showing that the mortgage
extended to those obligations. The petitioner, as mortgagee/purchaser cannot just simply apply
the proceeds of the sale in its favor and deduct from the balance the respondents outstanding
obligations not secured by the mortgage. Understood from this perspective, no reason exists to
depart from the CAs ruling that the balance or excess, after deducting the mortgage debt of
P1,950,000.00 plus the stipulated interest and the expenses of the foreclosure sale, must be
returned to the respondent.
 ANTONIO LOCSIN II VS. MEKENI FOOD CORPORATION
G.R. No. 192105, December 09, 2013
J. Del Castillo

Article 2142 of the New Civil Code clarifies that there are certain lawful, voluntary and
unilateral acts, which 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. In the absence of specific
terms and conditions governing the car plan arrangement between the petitioner and Mekeni, a
quasi-contractual relation was created between them. Consequently, Mekeni may not enrich
itself by charging petitioner for the use of its vehicle, which is otherwise absolutely necessary to
the full and effective promotion of its business.

Conversely, petitioner cannot recover the monetary value of Mekenis counterpart

contribution to the cost of the vehicle; that is not property or money that belongs to him, nor was
it intended to be given to him in lieu of the car plan. In other words, Mekenis share of the
vehicles cost was not part of petitioners compensation package. Thus, respondent Mekeni
Food Corporation should refund petitioner Antonio Locsin IIs payments under the car plan
agreement in the total amount of P112,500.00.

FACTS:

Respondent Mekeni Food Corporation (Mekeni) offered petitioner Antonio Locsin II the
position of Regional Sales Manager to oversee Mekenis National Capital Region
Supermarket/Food Service and South Luzon operations. In addition to a compensation and
benefit package, Mekeni offered petitioner a car plan, under which one-half of the cost of the
vehicle is to be paid by the company and the other half to be deducted from petitioners salary.
Mekenis offer was contained in an Offer Sheet which was presented to petitioner.

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

Subsequently, Locsin resigned effective February 25, 2006. By then, a total of P112,500.00
had been deducted from his monthly salary and applied as part of the employees share in the
car plan. Mekeni supposedly put in an equivalent amount as its share under the car plan. In his
resignation letter, petitioner made an offer to purchase his service vehicle by paying the
outstanding balance thereon. The parties negotiated, but could not agree on the terms of the
proposed purchase. Petitioner thus returned the vehicle to Mekeni. Petitioner made personal
and written follow-ups regarding his unpaid salaries, commissions, benefits, and offer to
purchase his service vehicle. Mekeni replied that the company car plan benefit applied only to
employees who have been with the company for five years; for this reason, the balance that
petitioner should pay on his service vehicle stood at P116,380.00 if he opts to purchase the
same.

Petitioner filed against Mekeni and/or its President, Prudencio S. Garcia, a Complaint for
the recovery of monetary claims consisting of unpaid salaries, commissions, sick/vacation leave
benefits, and recovery of monthly salary deductions which were earmarked for his cost-sharing
in the car plan. The case was docketed in the National Labor Relations Commission (NLRC),
National Capital Region (NCR), Quezon City.
 The Labor Arbiter ordered respondents to turn-over to complainant the subject vehicle upon
the said complainants payment to them of the sum of P100,435.84. On appeal, the Labor
Arbiters Decision was reversed.

On appeal to the CA, the court held that in the absence of evidence as to the stipulations of
the car plan arrangement between Mekeni and petitioner, the CA treated petitioners monthly
contributions in the total amount of P112,500.00 as rentals for the use of his service vehicle for
the duration of his employment with Mekeni. The appellate court applied Articles 1484-1486 of
the Civil Code, and added that the installments paid by petitioner should not be returned to him
inasmuch as the amounts are not unconscionable. Thus, petitioner filed the instant Petition.

ISSUE:

Whether petitioner is entitled to the reimbursement of P112,500.00, his total share in the car plan

RULING:

The Court cannot allow that payments made on the car plan should be forfeited by Mekeni
and treated simply as rentals for petitioners use of the company service vehicle. Nor may they
be retained by it as purported loan payments, as it would have this Court believe. In the first
place, there is precisely no stipulation to such effect in their agreement. Secondly, it may not be
said that the car plan arrangement between the parties was a benefit that the petitioner enjoyed;
on the contrary, it was an absolute necessity in Mekenis business operations, which benefited it
to the fullest extent: without the service vehicle, petitioner would have been unable to rapidly
cover the vast sales territory assigned to him, and sales or marketing of Mekenis products
could not have been booked or made fast enough to move Mekenis inventory. Poor sales,
inability to market Mekenis products, a high rate of product spoilage resulting from stagnant
inventory, and poor monitoring of the sales territory are the necessary consequences of lack of
mobility. Without a service vehicle, petitioner would have been placed at the mercy of inefficient
and unreliable public transportation; his official schedule would have been dependent on the
arrival and departure times of buses or jeeps, not to mention the availability of seats in them.
Clearly, without a service vehicle, Mekenis business could only prosper at a snails pace, if not
completely paralyzed. Its cost of doing business would be higher as well.

Any benefit or privilege enjoyed by petitioner from using the service vehicle was merely
incidental and insignificant, because for the most part the vehicle was under Mekenis control
and supervision. Free and complete disposal is given to the petitioner only after the vehicles
cost is covered or paid in full. Until then, the vehicle remains at the beck and call of Mekeni.
Given the vast territory petitioner had to cover to be able to perform his work effectively and
generate business for his employer, the service vehicle was an absolute necessity, or else
Mekenis business would suffer adversely. Thus, it is clear that while petitioner was paying for
half of the vehicles value, Mekeni was reaping the full benefits from the use thereof.

In light of the foregoing, it is unfair to deny petitioner a refund of all his contributions to the
car plan. Under Article 22 of the Civil Code, [e]very person who through an act of performance
by another, or 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. Article 2142 of
the same Code likewise clarifies that there are certain lawful, voluntary and unilateral acts,
which 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. In the absence of specific terms and conditions
governing the car plan arrangement between the petitioner and Mekeni, a quasi-contractual
relation was created between them. Consequently, Mekeni may not enrich itself by charging
petitioner for the use of its vehicle which is otherwise absolutely necessary to the full and
effective promotion of its business. It may not, under the claim that petitioners payments
constitute rents for the use of the company vehicle, refuse to refund what petitioner had paid, for
the reasons that the car plan did not carry such a condition; the subject vehicle is an old car that
is substantially, if not fully, depreciated; the car plan arrangement benefited Mekeni for the most
part; and any personal benefit obtained by petitioner from using the vehicle was merely
incidental.

Conversely, petitioner cannot recover the monetary value of Mekenis counterpart

contribution to the cost of the vehicle; that is not property or money that belongs to him, nor was
it intended to be given to him in lieu of the car plan. In other words, Mekenis share of the
vehicles cost was not part of petitioners compensation package. To start with, the vehicle is an
asset that belonged to Mekeni. Just as Mekeni is unjustly enriched by failing to refund
petitioners payments, so should petitioner not be awarded the value of Mekenis counterpart
contribution to the car plan, as this would unjustly enrich him at Mekenis expense.

There is unjust enrichment when a person unjustly retains a benefit to the loss of another,
or when a person retains money or property of another against the fundamental principles of
justice, equity and good conscience. The principle of unjust enrichment requires two conditions:
(1) that a person is benefited without a valid basis or justification, and (2) that such benefit is
derived at the expense of another.
 REPUBLIC OF THE PHILIPPINES VS. MARIA FE ESPINOSA CANTOR
G.R. No. 184621, December 10, 2013
J. Brion

Under Article 41 of the Family Code, there are four (4) essential requisites for the
declaration of presumptive death: 1) That the absent spouse has been missing for four
consecutive years, or two consecutive years if the disappearance occurred where there is
danger of death under the circumstances laid down in Article 391, Civil Code; 2) That the
present spouse wishes to remarry;3) That the present spouse has a well-founded belief that
the absentee is dead; and4) That the present spouse files a summary proceeding for the
declaration of presumptive death of the absentee.

The respondents well-founded belief was based on the inquiry she made from her
mother-in-law, her brothers-in-law, her sisters-in-law, as well as her neighbors and friends. In
the hopes of finding Jerry, she also allegedly made it a point to check the patients directory
whenever she went to a hospital. With the states policy to protect and strengthen marriage,
these earnest effort fall short of the stringent standard and degree of diligence required by
Article 41 of the Family Code and previous jurisprudence.

FACTS:

The respondent and Jerry were married on September 20, 1997. They lived together as
husband and wife in their conjugal dwelling. Sometime in January 1998, the couple had a
violent quarrel brought about by: (1) the respondents inability to reach sexual climax
whenever she and Jerry would have intimate moments; and (2) Jerrys expression of animosity
toward the respondents father.

After their quarrel, Jerry left their conjugal dwelling and this was the last time that the
respondent ever saw him. Since then, she had not seen, communicated nor heard anything
from Jerry or about his whereabouts.

On May 21, 2002, the respondent filed before the RTC a petition for her husbands
declaration of presumptive death. She claimed that she had a well-founded belief that Jerry was
already dead. She alleged that she had inquired from her mother-in-law, her brothers-in-law, her
sisters-in-law, as well as her neighbors and friends, but to no avail. In the hopes of finding Jerry,
she also allegedly made it a point to check the patients directory whenever she went to a
hospital. All these earnest efforts, the respondent claimed, proved futile, prompting her to file the
petition in court.

The RTC RTC issued an order granting the respondents petition and declaring Jerry
presumptively dead. The case reached the CA through a petition for certiorari filed by the
petitioner, Republic of the Philippines, through the Office of the Solicitor General (OSG). In its
decision, the CA dismissed the petitioners petition, finding no grave abuse of discretion on the
RTCs part, and, accordingly, fully affirmed the latters order. Hence, this present petition brought
by the petitioner.

ISSUE:

Whether the respondent had a well-founded belief that Jerry is already dead

RULING:
The Essential Requisites for the Declaration of Presumptive Death Under Article 41 of the
Family Code

Before a judicial declaration of presumptive death can be obtained, it must be shown that
the prior spouse had been absent for four consecutive years and the present spouse had a well-
founded belief that the prior spouse was already dead. Under Article 41 of the Family Code,
there are four (4) essential requisites for the declaration of presumptive death:
I. That the absent spouse has been missing for four consecutive years, or two consecutive
years if the disappearance occurred where there is danger of death under the
circumstances laid down in Article 391, Civil Code;
II. That the present spouse wishes to remarry;
III. That the present spouse has a well-founded belief that the absentee is dead; and
IV. That the present spouse files a summary proceeding for the declaration of presumptive
death of the absentee.

The burden of proof rests on the present spouse to show that all the requisites under Article 41
of the Family Code are present. Since it is the present spouse who, for purposes of declaration
of presumptive death, substantially asserts the affirmative of the issue, it stands to reason that
the burden of proof lies with him/her. He who alleges a fact has the burden of proving it and
mere allegation is not evidence.
Notably, Article 41 of the Family Code, compared to the old provision of the Civil Code that it
superseded, imposes a stricter standard. It requires a well-founded belief" that the absentee
is already dead before a petition for declaration of presumptive death can be granted.

The Family Code prescribes as "well founded belief" that the absentee is already dead
before a petition for declaration of presumptive death can be granted.

Thus, mere absence of the spouse (even for such period required by the law), lack of any news
that such absentee is still alive, failure to communicate or general presumption of absence
under the Civil Code would not suffice. This conclusion proceeds from the premise that Article
41 of the Family Code places upon the present spouse the burden of proving the additional and
more stringent requirement of well-founded belief which can only be discharged upon a
showing of proper and honest-to-goodness inquiries and efforts to ascertain not only the absent
spouses whereabouts but, more importantly, that the absent spouse is still alive or is already
dead.

The Requirement of Well-Founded Belief

The law did not define what is meant by well-founded belief. It depends upon the
circumstances of each particular case. Its determination, so to speak, remains on a case-to-
case basis. To be able to comply with this requirement, the present spouse must prove that
his/her belief was the result of diligent and reasonable efforts and inquiries to locate the
absent spouse and that based on these efforts and inquiries, he/she believes that under the
circumstances, the absent spouse is already dead. It requires exertion of active effort (not a
mere passive one).

In the case at bar, the respondents well-founded belief was anchored on her alleged
earnest efforts to locate Jerry, which consisted of the following:
(1) She made inquiries about Jerrys whereabouts from her in-laws, neighbors and friends; and
(2) Whenever she went to a hospital, she saw to it that she looked through the patients directory,
 hoping to find Jerry.

These efforts, however, fell short of the stringent standard and degree of diligence
required by jurisprudence for the following reasons:

First, the respondent did not actively look for her missing husband. It can be inferred from
the records that her hospital visits and her consequent checking of the patients directory therein
were unintentional. She did not purposely undertake a diligent search for her husband as her
hospital visits were not planned nor primarily directed to look for him. This Court thus considers
these attempts insufficient to engender a belief that her husband is dead.

Second, she did not report Jerrys absence to the police nor did she seek the aid of the
authorities to look for him. While a finding of well-founded belief varies with the nature of the
situation in which the present spouse is placed, under present conditions, we find it proper and
prudent for a present spouse, whose spouse had been missing, to seek the aid of the
authorities or, at the very least, report his/her absence to the police.

Third, she did not present as witnesses Jerrys relatives or their neighbors and friends, who
can corroborate her efforts to locate Jerry. Worse, these persons, from whom she allegedly
made inquiries, were not even named. As held in Nolasco, the present spouses bare assertion
that he inquired from his friends about his absent spouses whereabouts is insufficient as the
names of the friends from whom he made inquiries were not identified in the testimony nor
presented as witnesses.

Lastly, there was no other corroborative evidence to support the respondents claim that
she conducted a diligent search. Neither was there supporting evidence proving that she had a
well-founded belief other than her bare claims that she inquired from her friends and in-laws
about her husbands whereabouts.

In sum, the Court is of the view that the respondent merely engaged in a passive search
where she relied on uncorroborated inquiries from her in-laws, neighbors and friends. She
failed to conduct a diligent search because her alleged efforts are insufficient to form a well-
founded belief that her husband was already dead. As held in Republic of the Philippines v.
Court of Appeals (Tenth Div.), [w]hether or not the spouse present acted on a well-founded
belief of death of the absent spouse depends upon the inquiries to be drawn from a great many
circumstances occurring before and after the disappearance of the absent spouse and the
nature and extent of the inquiries made by [the] present spouse.

Strict Standard Approach Is Consistent with the States Policy to Protect and Strengthen
Marriage

In the above-cited cases, the Court, fully aware of the possible collusion of spouses in
nullifying their marriage, has consistently applied the strict standard approach. This is to
ensure that a petition for declaration of presumptive death under Article 41 of the Family Code is
not used as a tool to conveniently circumvent the laws. Courts should never allow procedural
shortcuts and should ensure that the stricter standard required by the Family Code is met.

The application of this stricter standard becomes even more imperative if we consider the
States policy to protect and strengthen the institution of marriage. Since marriage serves as the
familys foundation and since it is the states policy to protect and strengthen the family as a
basic social institution, marriage should not be permitted to be dissolved at the whim of the
parties. In interpreting and applying Article 41, this is the underlying rationale to uphold the
sanctity of marriage.
 MARIO REYES VS. HEIRS OF PABLO FLORO
G.R. No. 200713, December 11, 2013
J. Carpio

The essential requisites of a tenancy relationship are: (1) the parties are the landowner
and the tenant; (2) the subject is agricultural land; (3) there is consent; (4) the purpose is
agricultural production; (5) there is personal cultivation; and (6) there is sharing of harvests. All
these requisites are necessary to create a tenancy relationship between the parties.

The certifications from Bautista and the MARO declaring Reyes to be a tenant are not
enough evidence to prove that there is a tenancy relationship. One claiming to be a de jure
tenant has the burden to show, by substantial evidence, that all the essential elements of a
tenancy relationship are present. Since Reyes is not a de jure tenant or lessee, he is not
entitled to the benefits of redemption, pre-emption, peaceful possession, occupation and
cultivation of the subject land, as provided under existing tenancy laws.

FACTS:

The subject of the litigation involves a parcel of land identified as Lot 5 of the Consolidated
Subdivision Plan (LRC) Pcs-25816 covered by Transfer Certificate of Title (TCT) No. 279800.

Petitioner Mario Reyes (Reyes) filed with the Provincial Agrarian Reform Adjudicator
(PARAD) of Malolos City, Bulacan, a Complaint for Pre-Emption and Redemption, Maintenance
of Peaceful Possession, Occupation and Cultivation with prayer for the issuance of Restraining
Order/Injunction against Zenaida Reyes (Zenaida); Sun Industrial Corporation (Sun Industrial);
the Register of Deeds of Tabang, Guiginto, Bulacan; and respondents, heirs of Pablo Floro,
namely: Elena F. Vichico, Valeriano L. Floro, Ernesto L. Floro, Victoria Floro-Basilio, Avelina C.
Floro, Elsie C. Floro, Samuel C. Floro, Josephine C. Floro, Jerome C. Floro, and Pablito Floro.

In the Complaint, Reyes alleged that the land was formerly owned by Carmen T. Bautista
(Bautista) under one lot title, TCT No. T-264134. On 16 September 1983, Bautista allegedly sold
the land to Zenaida as evidenced by a Deed of Absolute Sale with Agricultural Tenants
Conformity. Before Bautista sold the land, Reyes was allegedly one of her tenant-lessees.

A day after the alleged sale, Bautista supposedly executed a document entitled
Pagpapatunay claiming that she was the original owner of the land and acknowledging Reyes
as her tenant, even though not registered with the Department of Agrarian Reform. In the same
document, Bautista attested that Reyes did not sign the deed of sale since he did not want to
give up his tenancy rights. Thereafter, Zenaida registered the land in her name under TCT No.
279800. Thereafter, Zenaida executed an Agricultural Leasehold Contract with Reyes, her
brother.

Reyes then recounted that sometime in January 2004, three unknown persons introduced
themselves as brokers and claimed that the heirs of Floro and Sun Industrial were selling the
land, which had already been transferred to their names, and demanded that Reyes vacate the
premises or else they would be forced to evict him. Reyes stated that he was the agricultural
lessee of Zenaida based on a issued by the Municipal Agrarian Reform Officer (MARO) of
Bulacan. However, without Reyes knowledge and consent, Zenaida conveyed and transferred
ownership of the land in favor of the late Pablo Floro and executed a deed of assignment with
waiver of rights in favor of Sun Industrial.
 Zenaida filed her Answer with Counterclaim. She alleged that since 1983 Reyes was the
actual occupant, cultivator and agricultural tenant-lessee over the subject land. Zenaida also
stated that: (1) she timely received Reyes rental payments as agricultural tenant-lessee and he
complied with the terms and conditions of the agricultural leasehold contract which they have
entered into; (2) as registered owner of the land, she had all the legal rights to dispose of the
land without Reyes consent; (3) she had no knowledge that Reyes wanted to acquire the land
and/or exercise his rights of pre-emption and redemption; and (4) she never tried to eject Reyes
from the land.
Respondent heirs filed their Answer with special and affirmative defenses and damages.

Respondent heirs maintained that they are the lawful owners of several parcels of land
covered by TCT Nos. 51068, 85587, 85588, 51062, 51066, 51065 and 51069 registered with
the Registry of Deeds of Bulacan. Respondent heirs asserted that before Sections 11 and 12 of
RA 3844 may be applied, it must first be established that a tenancy or leasehold relationship
existed between Reyes and Pablo Floro and/or his heirs. They added that while Zenaida is the
alleged registered owner of the land in the Complaint, the same is not valid since she never
acquired a valid and defensible title to the land. They averred that Zenaida was convicted of
falsification of public documents by the Regional Trial Court (RTC) of Bulacan, Branch 22, in
Criminal Case No. 9252-M. Since Zenaida falsified and forged the signature of Pablo Floro to
transfer the subject land under her name, she could not validly enter into any voluntary dealings
with anybody including Reyes and neither could they suffer for the misdeeds of Zenaida since
they were also victims of an illegal transfer of ownership. Further, the respondent heirs alleged
that Reyes did not cultivate the land since 1995 as certified by the Punong Barangay of Longos,
Malolos, Bulacan nor did Reyes tender a reasonable purchase price within 180 days from the
transfer of the land.

The PARAD decided the case in favor of Reyes, as a tenant-lessee entitled to redemption.
The PARAD added that Zenaidas conviction in a criminal case will not sever Reyes tenancy
relations, having been instituted by the previous owner, and thus entitled to security of tenure as
guaranteed by law.

Respondent heirs filed an appeal with the Department of Agrarian Reform Adjudication
Board (DARAB). In a Decision, the DARAB affirmed the decision of the PARAD and denied the
appeal for lack of merit. Respondent heirs filed a Motion for Reconsideration. In a Resolution,
the DARAB reconsidered and set aside its previous Decision. The resolution declared that
Reyes was not a tenant and ordered him to vacate the property.

The respondents filed a petition for review. The appellate court ruled that Zenaida was
never the owner of the land; thus, no tenancy relations existed between her and Reyes.

Reyes filed a Motion for Reconsideration. In a Resolution, the appellate court granted
Reyes motion and affirmed the findings and conclusions of the PARAD Decision dated, as
sustained on appeal by the DARAB in its Decision and Order.
The respondent heirs filed a Motion for Reconsideration. In a Resolution, the appellate court
granted the motion. Hence, this petition.

ISSUE:

Whether Reyes is a de jure tenant or lessee who is entitled to redemption, pre-emption, peaceful
possession, occupation and cultivation of the subject land
RULING:

In determining tenancy relations between the parties, it is a question of whether or not a

party is a de jure tenant. The essential requisites of a tenancy relationship are: (1) the parties
are the landowner and the tenant; (2) the subject is agricultural land; (3) there is consent; (4) the
purpose is agricultural production; (5) there is personal cultivation; and (6) there is sharing of
harvests. All these requisites are necessary to create a tenancy relationship between the
parties. The absence of one does not make an occupant, cultivator, or a planter, a de jure
tenant. Unless a person establishes his status as a de jure tenant, he is not entitled to security
of tenure nor is he covered by the Land Reform Program of the government under existing
tenancy laws.

In the present case, there is no dispute that the property under litigation is an agricultural
land. The controversy mainly lies on whether the parties are the true and legitimate landowner
and tenant. Reyes relies on the certifications from the MARO and Bautista, the alleged original
owner, manifesting that he was a tenant of the subject land to prove that a tenancy relationship
exists.

This is untenable.The MARO certification is merely preliminary and does not bind the courts
as conclusive evidence that Reyes is a lessee who cultivates the land for purposes of
agricultural production. In Bautista v. Araneta, the Supreme Court held that certifications issued
by administrative agencies or officers that a certain person is a tenant are merely provisional
and not conclusive on the courts. Here, the certification from Bautista has little evidentiary value,
without any corroborative evidence. The certification was not notarized and Bautista was not
even presented as a witness. Similarly, Reyes was not included as a legitimate and properly
registered agricultural tenant in the supposed Deed of Absolute Sale with Agricultural Tenants
Conformity which Bautista executed in favor of Zenaida.

Further, the genuineness of the agricultural leasehold contract that Zenaida entered into
with Reyes is doubtful. The records show that respondent heirs submitted two documentary
evidence with the PARAD which the provincial adjudicator disregarded: (1) a MARO
Certification dated 9 May 2005 manifesting that there is no copy on file, with the Municipal Land
Reform Office of Malolos, Bulacan, of the supposed leasehold contract; and (2) a
Pagpapatunay dated 8 June 2004 from the Punong Barangay of Malolos, Bulacan attesting that
since the year 1995 until the date of the affidavit, the subject land was not being used for
farming, cultivation or any agricultural purpose. These evidence can only mean that the
leasehold contract was falsified.

In addition, it should be kept in mind that Zenaida was convicted of falsification of public
documents as affirmed in the Supreme Court Resolution dated 8 December 2008 in G.R. No.
184728. Zenaida registered and transferred to her name four land titles owned by Pablo Floro
by forging the signature of Pablo Floro in a deed of sale. Likewise, in G.R. No. 169674 for
annulment of title, the court affirmed the ruling of the appellate court in declaring the titles issued
in the name of Zenaida and Sun Industrial as void.

Thus, from the findings of the lower court that Zenaida failed to submit concrete and reliable
evidence to lend credence to her claim of ownership of the subject land, it has been clearly
established that Zenaida is not the true and lawful owner and only concocted a story unworthy
of belief. As a consequence, the agricultural leasehold contract which Reyes entered into with
Zenaida is void.
 Next, Reyes failed to submit any proof that he personally cultivated the land for agricultural
production or that he shared the harvests with the landowner. Reyes only submitted a picture of
a hut erected on the land as an incident to his right to cultivate the land as a tenant. This is not
enough to prove that a leasehold relationship exists.

Lastly, Reyes insists that the consent of the Floros is not necessary since tenancy relations
is not terminated by changes in ownership. In Valencia v. Court of Appeals, the Court held that
while it is true that tenancy relations is not terminated by changes of ownership in case of sale,
alienation or transfer of legal possession, as stated in Section 10 of RA 3844:

Section 10. Agricultural Leasehold Relation Not Extinguished by Expiration of Period, etc. -
The agricultural leasehold relation under this Code shall not be extinguished by mere expiration
of the term or period in a leasehold contract nor by the sale, alienation or transfer of the legal
possession of the landholding. In case the agricultural lessor sells, alienates or transfers the
legal possession of the landholding, the purchaser or transferee thereof shall be subrogated to
the rights and substituted to the obligations of the agricultural lessor.

This provision assumes that a tenancy relationship exists. In this case, no such relationship
was ever created between Reyes and respondent heirs nor between Reyes and Zenaida
because Zenaida is not the true and lawful owner of the agricultural land.

Since Reyes claim on his supposed tenancy rights is based on the leasehold contract, as
well as the certifications from Bautista and the MARO, which were found to be inadequate to
prove that an agricultural tenancy relationship exists, then Reyes assertions must fail. In sum,
the certifications from Bautista and the MARO declaring Reyes to be a tenant are not enough
evidence to prove that there is a tenancy relationship. One claiming to be a de jure tenant has
the burden to show, by substantial evidence, that all the essential elements of a tenancy
relationship are present. Since Reyes is not a de jure tenant or lessee, he is not entitled to the
benefits of redemption, pre-emption, peaceful possession, occupation and cultivation of the
subject land, as provided under existing tenancy laws.
 ACE FOODS, INC. VS. MICRO PACIFIC TECHNOLOGIES CO., LTD.
G.R. No. 200602, December 11, 2013
J. Perlas-Bernabe

A contract of sale is defined under Art. 1458 of the New Civil code as one wherein one
of the contracting parties obligates himself to transfer the ownership and to deliver a
determinate thing, and the other to pay therefor a price certain in money or its equivalent. A
contract of sale may be absolute or conditional.

Bearing in mind its consensual nature, a contract of sale had been perfected at the
precise moment ACE Foods, as proved by its act of sending MTCL the Purchase Order,
accepted the latters proposal to sell the subject products in consideration of the purchase price.
From that point in time, the reciprocal obligations of the parties that MTCL will deliver the said
products to ACE Foods, and, on the other hand, ACE Foods will pay the purchase price therefor
within thirty (30) days from delivery already arose and consequently may be demanded.

FACTS:

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

MTCL sent a letter-proposal for the delivery and sale of the subject products to be installed
at various offices of ACE Foods. Aside from the itemization of the products offered for sale, the
said proposal further provides for the following terms, viz.:
TERMS : Thirty (30) days upon delivery
VALIDITY : Prices are based on current dollar rate and subject to changes without prior notice.
DELIVERY : Immediate delivery for items on stock, otherwise thirty (30) to forty-five days upon
receipt of [Purchase Order]
WARRANTY : One (1) year on parts and services. Accessories not included in warranty.
ACE Foods accepted MTCLs proposal and accordingly issued Purchase Order No. 100023
(Purchase Order) for the subject products. Thereafter, MTCL delivered the said products to ACE
Foods as reflected in the Invoice Receipt. The fine print of the invoice states, inter alia, that
[t]itle to sold property is reserved in MICROPACIFIC TECHNOLOGIES CO., LTD. until full
compliance of the terms and conditions of above and payment of the price (title reservation
stipulation). After delivery, the subject products were then installed and configured in ACE
Foodss premises. MTCLs demands against ACE Foods to pay the purchase price, however,
remained unheeded. Instead of paying the purchase price, ACE Foods sent MTCL a Letter
stating that it ha[s] been returning the [subject products] to [MTCL] thru [its] sales
representative Mr. Mark Anteola who has agreed to pull out the said [products] but had failed to
do so up to now.

ACE Foods lodged a Complaint against MTCL before the RTC, praying that the latter pull
out from its premises the subject products since MTCL breached its after delivery services
obligations to it, particularly, to: (a) install and configure the subject products; (b) submit a cost
benefit study to justify the purchase of the subject products; and (c) train ACE Foodss
technicians on how to use and maintain the subject products. ACE Foods likewise claimed that
the subject products MTCL delivered are defective and not working.

MTCL, in its Answer with Counterclaim, maintained that it had duly complied with its
obligations to ACE Foods and that the subject products were in good working condition when
 they were delivered, installed and configured in ACE Foodss premises. Thereafter, MTCL even
conducted a training course for ACE Foodss representatives or employees; MTCL, however,
alleged that there was actually no agreement as to the purported after delivery services.
Further, MTCL posited that ACE Foods refused and failed to pay the purchase price for the
subject products despite the latters use of the same for a period of nine (9) months.

The RTC rendered a Decision directing MTCL to remove the subject products from ACE
Foodss premises and pay actual damages and attorney fees.
MTCL elevated the matter on appeal. The CA reversed and set aside the RTCs ruling, ordering
ACE Foods to pay MTCL. Ace Foods moved for reconsideration but the same was denied;
hence, this case.

ISSUE:

Whether ACE Foods should pay MTCL the purchase price for the subject products

RULING:

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

The very essence of a contract of sale is the transfer of ownership in exchange for a
price paid or promised. This may be gleaned from Article 1458 of the Civil Code that defines a
contract of sale as follows:

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

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

Corollary thereto, a contract of sale is classified as a consensual contract, which means

that the sale is perfected by mere consent. No particular form is required for its validity. Upon
perfection of the contract, the parties may reciprocally demand performance, i.e., the vendee
may compel transfer of ownership of the object of the sale, and the vendor may require the
vendee to pay the thing sold.

In contrast, a contract to sell is defined as a bilateral contract whereby the prospective

seller, while expressly reserving the ownership of the property despite delivery thereof to the
prospective buyer, binds himself to sell the property exclusively to the prospective buyer upon
fulfillment of the condition agreed upon, i.e., the full payment of the purchase price. A contract to
sell may not even be considered as a conditional contract of sale where the seller may
likewise reserve title to the property subject of the sale until the fulfillment of a suspensive
condition, because in a conditional contract of sale, the first element of consent is present,
although it is conditioned upon the happening of a contingent event which may or may not
occur.
 In this case, the Court concurs with the CA that the parties have agreed to a contract of sale
and not to a contract to sell as adjudged by the RTC. Bearing in mind its consensual nature, a
contract of sale had been perfected at the precise moment ACE Foods, as evinced by its act of
sending MTCL the Purchase Order, accepted the latters proposal to sell the subject products in
consideration of the purchase price of P646,464.00. From that point in time, the reciprocal
obligations of the parties i.e., on the one hand, of MTCL to deliver the said products to ACE
Foods, and, on the other hand, of ACE Foods to pay the purchase price therefor within thirty
(30) days from delivery already arose and consequently may be demanded. Article 1475 of
the Civil Code makes this clear:

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

From that moment, the parties may reciprocally demand performance, subject to the
provisions of the law governing the form of contracts.
 DAVAO NEW TOWN DEVELOPMENT CORPORATION VS. SPOUSES GLORIA ESPINO
SALIGA AND CESAR SALIGA, AND SPOUSES DEMETRIO EHARA AND ROBERTA
SUGUE EHARA
G.R. No. 174588, December 11, 2013
J. Brion

The City Council of Davao City has the authority to adopt zoning resolutions and
ordinances. Under Section 3 of R.A. No. 2264 (the then governing Local Government Code),
municipal and/or city officials are specifically empowered to adopt zoning and subdivision
ordinances or regulations in consultation with the National Planning Commission. It has the
authority to re-classify the property as non-agricultural land. Considering that the property is no
longer agricultural as of June 15, 1988, it is removed from the operation of R.A. No. 6657. By
express provision, the CARL covers only those public or private lands devoted or suitable for
agriculture, the operative word being agricultural.

Under Section 7 of R.A. No. 3844, once the leasehold relation is established, the
agricultural lessee is entitled to security of tenure and acquires the right to continue working on
the landholding. Section 10 of this Act further strengthens such tenurial security by declaring
that the mere expiration of the term or period in a leasehold contract, or the sale, alienation or
transfer of the legal possession of the landholding shall not extinguish the leasehold relation;
and in case of sale or transfer, the purchaser or transferee is subrogated to the rights and
obligations of the landowner/lessor. However, the court cannot agree with the position that the
respondents are the tenants of DNTDC. This is because, despite the guaranty, R.A. No. 3844
also enumerates the instances that put an end to the lessees protected tenurial rights. Under
Section 7 of R.A. No. 3844, the right of the agricultural lessee to continue working on the
landholding ceases when the leasehold relation is extinguished or when the lessee is lawfully
ejected from the landholding. The expiration the five-year lease contract in 1986 could not have
done more than simply finally terminate any leasehold relationship that may have prevailed
under the terms of that contract.

FACTS:

At the root of the present controversy are two parcels of land 4.9964 hectares and 2.5574
hectares (subject property) registered in the name of Atty. Eugenio Mendiola (deceased).

The respondents - spouses Gloria Espino Saliga and Cesar Saliga (spouses Saliga) and
spouses Demetrio Ehara and Roberta Sugue Ehara (spouses Ehara), (collectively referred to as
respondents) - filed before the Office of the PARAD in Davao City a complaint for injunction,
cancellation of titles and damages against DNTDC.

The respondents claimed that they and their parents, from whom they took over the
cultivation of the landholding, had been tenants of the property as early as 1965. On August 12,
1981, the respondents and Eugenio executed a five-year lease contract. While they made
stipulations regarding their respective rights and obligations over the landholding, the
respondents claimed that the instrument was actually a device Eugenio used to evade the land
reform law.

The respondents also argued that pursuant to the provisions of Presidential Decree (P.D.)
No. 27, they, as tenants, were deemed owners of the property beginning October 21, 1972 (the
Acts effectivity date); thus, the subsequent transfer of the property to DNTDC was not valid.
The respondents added that DNTDC could not have been a buyer in good faith as it did not
 verify the status of the property whether tenanted or not tenanted - prior to its purchase. The
respondents submitted, among others, the pertinent tax declarations showing that the property
was agricultural as of 1985.

DNTDC alleged in defense that it purchased the property in good faith from the previous
owners (Paz M. Flores and Elizabeth M. Nepumuceno) in 1995. At that time, the alleged
tenancy relationship between the respondents and Eugenio had already expired following the
expiration of their lease contracts in 1986. DNTDC also claimed that prior to the sale, the Davao
City Office of the Zoning Administrator confirmed that the property was not classified as
agricultural; it pointed out that the affidavit of non-tenancy executed by the vendors affirmed the
absence of any recognized agricultural lessees on the property. DNTDC added that the property
had already been classified to be within an urban/urbanizing zone in the 1979-2000
Comprehensive Land Use Plan for Davao City that was duly adopted by the City Council of
Davao City and approved by the Human Settlement Regulatory Commission (HSRC) (now the
Housing and Land Use Regulatory Board [HLURB]).

In the decision of PARAD, it ruled that while it conceded that the respondents were tenants
of the property, it nevertheless ruled that the property had already been reclassified from
agricultural to non-agricultural uses prior to June 15, 1988, the date when Republic Act (R.A.)
No. 6657 (the Comprehensive Agrarian Reform Law of 1988) took effect. Thus, since R.A. No.
6657 covers only agricultural lands, the property fell outside its coverage. The respondents
appealed the case to the DARAB.

While pending appeal, DNTDC filed a case for ejectment against the respondent MTCC.
The MTCC ruled in favor of DNTDC and ordered the respondents children to vacate the
2.5574-hectare portion of the property. The children did not appeal the MTCC decision, but
instead filed before the Regional Trial Court (RTC) a petition for Prohibition against DNTDC to
enjoin the execution of the MTCC decision.

Thereafter, the respondents children and DNTDC entered into a compromise agreement.
The respondents children undertook to voluntarily and peacefully vacate the 2.5574-hectare
portion of the property and to remove and demolish their respective houses built on its
premises, while DNTDC agreed to give each of them the amount of P20,000.00 as financial
assistance. The RTC approved the compromise agreement.

Meanwhile, the DARAB reversed and set aside the PARADs ruling. When the DARAB
denied the DNTDCs motion for reconsideration, the DNTDC elevated the case to the CA via a
petition for review. The CA affirmed in toto the decision of the DARAB. DNTDC filed the present
petition after the CA denied its motion for reconsideration.

ISSUES:

1. Whether the property had been reclassified from agricultural to non-agricultural uses prior to
June 15, 1988 so as to remove it from the coverage of R.A. No. 6657
2. Whether an agricultural leasehold or tenancy relationship exists between DNTDC and the
respondents; and
3. Whether the compromise agreement signed by the respondents children in the RTC case
binds the respondents

RULING:
The subject property had been reclassified as non-agricultural prior to June 15, 1988; hence,
they are no longer covered by R.A. No. 6657

The court holds that the property had been reclassified to non-agricultural uses and was,
therefore, already outside the coverage of the Comprehensive Agrarian Reform Law (CARL)
after it took effect on July 15, 1988.

Indubitably, the City Council of Davao City has the authority to adopt zoning resolutions
and ordinances. Under Section 3 of R.A. No. 2264 (the then governing Local Government
Code), municipal and/or city officials are specifically empowered to adopt zoning and
subdivision ordinances or regulations in consultation with the National Planning
Commission.

The court holds that the property had been validly reclassified as non-agricultural land prior
to June 15, 1988. It notes the following facts established in the records that support this
conclusion: (1) the Davao City Planning and Development Board prepared the Comprehensive
Development Plan for the year 1979-2000 in order to provide for a comprehensive zoning plan
for Davao City; (2) the HSRC approved this Comprehensive Development Plan through Board
Resolution R-39-4 dated July 31, 1980; (3) the HLURB confirmed the approval per the
certification issued on April 26, 2006; (4) the City Council of Davao City adopted the
Comprehensive Development Plan through its Resolution No. 894 and City Ordinance No. 363,
series of 1982; (5) the Office of the City Planning and Development Coordinator, Office of the
Zoning Administrator expressly certified on June 15, 1995 that per City Ordinance No. 363,
series of 1982 as amended by S.P. Resolution No. 2843, Ordinance No. 561, series of 1992, the
property (located in barangay Catalunan Pequeo) is within an urban/urbanizing zone, (6) the
Office of the City Agriculturist confirmed the above classification and further stated that the
property is not classified as prime agricultural land and is not irrigated nor covered by an
irrigation project as certified by the National Irrigation Administration, per the certification issued
on December 4, 1998; and (7) the HLURB, per certification dated May 2, 1996, quoted the April
8, 1996 certification issued by the Office of the City Planning and Development Coordinator
stating that the Mintal District which includes barangay Catalunan Pequeo, is identified as one
of the urbaning [sic] district centers and priority areas and for development and investments in
Davao City.
Considering that the property is no longer agricultural as of June 15, 1988, it is removed from the
operation of R.A. No. 6657. By express provision, the CARL covers only those public or private
lands devoted or suitable for agriculture, the operative word being agricultural. Under Section
3(c) of R.A. No. 6657, agricultural lands refer to lands devoted to agricultural activity and not
otherwise classified as mineral, forest, residential, commercial, or industrial land. In its
Administrative Order No. 1, series of 1990, the DAR further explained the term agricultural
lands as referring to those devoted to agricultural activity as defined in R.A. 6657 and x x x
not classified in town plans and zoning ordinances as approved by the Housing and
Land Use Regulatory Board (HLURB) and its preceding competent authorities prior to 15
June 1988 for residential, commercial or industrial use. If only to emphasize, we reiterate -
only those parcels of land specifically classified as agricultural are covered by the CARL; any
parcel of land otherwise classified is beyond its ambit.

No tenancy relationship exists between DNTDC and the respondents; the tenancy
relationship between the respondents and Eugenio ceased when the property was
reclassified

The court notes that the respondents, through their predecessors-in-interest, had been
 tenants of Eugenio as early as 1965. Under Section 7 of R.A. No. 3844, once the leasehold
relation is established, the agricultural lessee is entitled to security of tenure and acquires the
right to continue working on the landholding. Section 10 of this Act further strengthens such
tenurial security by declaring that the mere expiration of the term or period in a leasehold
contract, or the sale, alienation or transfer of the legal possession of the landholding shall not
extinguish the leasehold relation; and in case of sale or transfer, the purchaser or transferee is
subrogated to the rights and obligations of the landowner/lessor. By the provisions of Section
10, mere expiration of the five-year term on the respondents lease contract could not have
caused the termination of any tenancy relationship that may have existed between the
respondents and Eugenio.

Still, however, the court cannot agree with the position that the respondents are the tenants
of DNTDC. This is because, despite the guaranty, R.A. No. 3844 also enumerates the instances
that put an end to the lessees protected tenurial rights. Under Section 7 of R.A. No. 3844, the
right of the agricultural lessee to continue working on the landholding ceases when the
leasehold relation is extinguished or when the lessee is lawfully ejected from the landholding.
Section 8 enumerates the causes that terminate a relationship, while Section 36 enumerates the
grounds for dispossessing the agricultural lessee of the landholding.

Notably, under Section 36(1) of R.A. No. 3844, as amended by Section 7 of R.A. No. 6389,
declaration by the department head, upon recommendation of the National Planning
Commission, to be suited for residential, commercial, industrial or some other urban purposes,
terminates the right of the agricultural lessee to continue in its possession and enjoyment. The
approval of the conversion, however, is not limited to the authority of the DAR or the courts.

In effect, therefore, whether the leasehold relationship between the respondents and
Eugenio had been established by virtue of the provisions of R.A. No. 3844 or of the five-year
lease contract executed in 1981, this leasehold relationship had been terminated with the
reclassification of the property as non-agricultural land in 1982. The expiration the five-year
lease contract in 1986 could not have done more than simply finally terminate any leasehold
relationship that may have prevailed under the terms of that contract.

Consequently, when the DNTDC purchased the property in 1995, there was no longer any
tenancy relationship that could have subrogated the DNTDC to the rights and obligations of the
previous owner. We, therefore, disagree with the findings of the CA, as it affirmed the DARAB
that a tenancy relationship exists between DNTDC and the respondents.

The respondents are not bound by the November 29, 2001 compromise agreement before
the RTC

First, the respondents position on this matter finds support in logic. Indeed, as the
respondents have well pointed out and contrary to DNTDCs position, this similarity in their last
names or familial relationship cannot automatically bind the respondents to any undertaking that
their children in the RTC case had agreed to. This is because DNTDC has not shown that the
respondents had expressly or impliedly acquiesced to their childrens undertaking; that the
respondents had authorized the latter to bind them in the compromise agreement; or that the
respondents cause of action in the instant case arose from or depended on those of their
children in the cases before the MTCC and the RTC. Moreover, the respondents children and
DNTDC executed the compromise agreement in the RTC case with the view of settling the
controversy concerning only the issue of physical possession over the disputed 2.5574-hectare
portion subject of the ejectment case before the MTCC.
 And second, the issues involved in the cases before the MTCC and the RTC are different
from the issues involved in the present case. In the ejectment case before the MTCC, the sole
issue was possession de jure, while in the prohibition case before the RTC, the issue was the
propriety of the execution of the decision of the MTCC in the ejectment case. In contrast, the
issues in the present controversy that originated from the PARAD boil down to the respondents
averred rights, as tenants of the property.

WELLER JOPSON, v.

FABIAN O. MENDEZ, JR. and DEVELOPMENT BANK OF THE PHILIPPINES

G.R. No. 191538, December 11, 2013

J. PERALTA

Petitioner claims tenancy relationship between him and DBP, however it must be
emphasized that in order for a tenancy agreement to arise, it is essential to establish all its
indispensable elements, viz.: (1) the parties are the landowner and the tenant or agricultural
lessee; (2) the subject matter of the relationship is an agricultural land; (3) there is consent
between the parties to the relationship; (4) the purpose of the relationship is to bring about
agricultural production; (5) there is personal cultivation on the part of the tenant or
agricultural lessee; and (6) the harvest is shared between the landowner and the tenant or
agricultural lessee. All these requisites are necessary to create a tenancy relationship, and
the absence of one or more requisites will not make the alleged tenant a de facto tenant.

FACTS:

Spouses Laura S. Pascual (Laura) and Jose H. Mendoza (Jose) owned a parcel of
land situated at Naga City, Camarines Sur. The said property was subdivided into sixtythree
(63) lots through a judicially approved subdivision and became part of Laura Subdivision.
Thus, TCT No. 687 was cancelled and, in its stead, TCT No. 986 (covering 31 lots), TCT No.
987 (covering 31 lots) and TCT No. 988 (covering 1 lot) were issued. Spouses Laura and
Jose conveyed to respondent Development Bank of the Philippines (respondent DBP), by
way of dacion en pago, the parcel of land covered by TCT No. 986 (subject landholding)
which has an area of eight thousand nine hundred forty-six (8,946) square meters, which
was later on sold to petitioner Fabian O. Mendez, Jr. as the highest bidder.
 A Complaint was filed by Weller Jopson, directed against respondent DBP,
[respondent Mendez] and Leonardo Tominio (Leonardo) for annulment of sale,
preemption/redemption and reinstatement. Jopson alleged that he is a bona fide tenant-
farmer of the parcel of land subject of the sale between respondent DBP and [respondent
Mendez]; his father Melchor Jopson (Melchor), was the original tenant of subject landholding
appointed as such by the spouses Laura and Jose in 1947.

The Register of Deeds of Naga City ruled in favor of the petitioner. In a

Resolution dated February 26, 1996, the PARAD reversed its earlier ruling and declared that
the parcel of land in question is duly classified and zonified as non-agricultural land in
accordance with pertinent laws and guidelines. Petitioner filed a Notice of Appeal with the
DARAB. DARAB reversed the PARADs ruling and held that there is a tenancy relationship
between respondent DBP and petitioner as evidenced by the sharing of harvest between
them. Thus, petitioner is not a mere caretaker but a bona fide tenant. CA nullified and set
aside the decision and resolution of the DARAB.

ISSUE:

Whether petitioner is a bona fide tenant of the subject property

RULING:

The petition is bereft of merit.

At the outset, it must be emphasized that in order for a tenancy agreement to arise, it
is essential to establish all its indispensable elements, viz.: (1) the parties are the landowner
and the tenant or agricultural lessee; (2) the subject matter of the relationship is an
agricultural land; (3) there is consent between the parties to the relationship; (4) the purpose
of the relationship is to bring about agricultural production; (5) there is personal cultivation
on the part of the tenant or agricultural lessee; and (6) the harvest is shared between the
landowner and the tenant or agricultural lessee. All these requisites are necessary to create
a tenancy relationship, and the absence of one or more requisites will not make the alleged
tenant a de facto tenant.

In this case, however, the facts substantiating a de jure tenancy are missing.
 First, besides petitioners bare assertion that a tenancy relationship exists between
him and respondent DBP, no other concrete proof was presented by petitioner to
demonstrate the relationship of petitioner and respondent DBP as tenant and landowner. In
fact, respondent DBP resolutely argued that petitioner is not a tenant but a mere caretaker
of the subject landholding.

Second, the subject matter of the relationship is not an agricultural land but a
commercial land. Section 3 (c) of Republic Act (R.A.) No. 6657, 13 otherwise known as
the Comprehensive Agrarian Reform Law (CARL), states that "an agricultural land refers to
land devoted to agricultural activity as defined therein and not classified as mineral, forest,
residential, commercial or industrial land."

As per Certification by the Office of the Zoning Administrator of Naga City, the
subject landholding covered by TCT No. 21190 is classified as secondary commercial zone
based on Zoning Ordinance No. 603 adopted on December 20, 1978 by the City Council
and approved by the National Coordinating Council for Town Planning and Zoning, Human
Settlements Commission on September 24, 1980. Thus, the reclassification of the subject
landholding from agricultural to commercial removes it from the ambit of agricultural land
over which petitioner claims a tenancy relationship is founded.

Third, the essential element of consent is absent. In the present case, no proof was
presented that respondent DBP recognized or hired petitioner as its legitimate tenant.
Besides petitioners self-serving assertions that he succeeded his father in tilling the subject
landholding, no other concrete evidence was presented to prove consent of the landowner.

JANUARY 2014

FIL-ESTATE PROPERTIES, INC. AND FIL-ESTATE NETWORK, INC., PETITIONERS, v.

SPOUSES CONRADO AND MARIA VICTORIA RONQUILLO, RESPONDENTS
G.R. NO.185798. January 13, 2014
J. Perez

The 1997 Asian Financial Crisis cannot be said to be unforeseeable and beyond the
control of a business corporation, especially a corporation engaged in real estate enterprise.
Such corporation is considered a master in projections of commodities and currency
movements and business risks. It has the ability to foresee such situation. Thus, the 1997 Asian
Financial Crisis is not an instance of caso fortuito.

FACTS:

Spouses Conrado and Maria Victoria Ronquillo bought a condominium unit at Central
Park Tower for a pre-selling contract price. The respondents paid the full downpayment and had
been paying the monthly amortizations until 1998. They stopped paying said monthly
amortization upon learning that construction works had stopped. Respondents demanded a full
refund of their payment with interest. The demand being left unheeded, the respondents were
constrained to file a Complaint for Refund and Damages before the Housing and Land Use
Regulatory Board (HLURB). They prayed for reimbursement/refund of their total amortization
payments, moral damages, attorneys fees and other litigation expenses.

The HLURB issued an Order of Default against the petitioners for failing to file their
Answer within the reglementary period despite service of summons. Petitioner filed a motion to
lift order of default and attached their position paper attributing delay in the construction to the
1997 financial crisis. They also denied committing fraud or misrepresentation which could entitle
the respondents to an award of moral damages.

Consequently, the HLURB rendered a judgment against petitioners and ordering them to
jointly and severally pay the respondents, among others, the amount equal to their total
amortizations payments with 12% interest and P100,000 as moral damages.

Petitioners appealed to the HLURB but the same was denied. Thereafter, they filed a
motion for reconsideration but the same was also denied. A Notice of Appeal was then filed with
the Office of the President but it such was dismissed for lack of merit. Petitioners moved for
reconsideration but the same was denied. Hence, this petition.

ISSUES:

1. Whether the 1997 Asian Financial Crisis constitute as fortuitous event which will exempt
petitioners from the performance of their contractual obligations

2. Whether the award of moral damages is proper

RULING:

Petition denied.

This petition did not present any justification for us to deviate from the rulings of the
HLURB, the Office of the President and the Court of Appeals. Indeed, the non-performance of
petitioners obligation entitles respondents to rescission under Article 1191 of the New Civil
Code which states:

Article 1191. The power to rescind obligations is implied in reciprocal ones, in case
one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the
obligation, with payment of damages in either case. He may also seek rescission, even after
he has chosen fulfillment, if the latter should become impossible.
 More in point is Section 23 of Presidential Decree No. 957, the rule governing the
sale of condominiums, which provides:

Section 23. Non-Forfeiture of Payments. No installment payment made by a buyer in

a subdivision or condominium project for the lot or unit he contracted to buy shall be
forfeited in favor of the owner or developer when the buyer, after due notice to the owner or
developer, desists from further payment due to the failure of the owner or developer to
develop the subdivision or condominium project according to the approved plans and within
the time limit for complying with the same. Such buyer may, at his option, be reimbursed
the total amount paid including amortization interests but excluding delinquency
interests, with interest thereon at the legal rate. (Emphasis supplied).

Notably, the issues had already been settled by the Court in the case of Fil-Estate
Properties, Inc. v. Spouses Go promulgated on 17 August 2007, where the Court stated that
the Asian financial crisis is not an instance of caso fortuito. Bearing the same factual milieu
as the instant case, G.R. No. 165164 involves the same company, Fil-Estate, albeit about a
different condominium property. The company likewise reneged on its obligation to
respondents therein by failing to develop the condominium project despite substantial
payment of the contract price. Fil-Estate advanced the same argument that the 1997 Asian
financial crisis is a fortuitous event which justifies the delay of the construction project. First
off, the Court classified the issue as a question of fact which may not be raised in a petition
for review considering that there was no variance in the factual findings of the HLURB, the
Office of the President and the Court of Appeals. Second, the Court cited the previous
rulings of Asian Construction and Development Corporation v. Philippine Commercial
International Bank and Mondragon Leisure and Resorts Corporation v. Court of
Appeals holding that the 1997 Asian financial crisis did not constitute a valid justification to
renege on obligations.

The aforementioned decision becomes a precedent to future cases in which the facts
are substantially the same, as in this case. The principle of stare decisis, which means
adherence to judicial precedents, applies.

The court also sustains the award of moral damages. In order that moral damages
may be awarded in breach of contract cases, the defendant must have acted in bad faith,
must be found guilty of gross negligence amounting to bad faith, or must have acted in
wanton disregard of contractual obligations. The Arbiter found petitioners to have acted in
bad faith when they breached their contract, when they failed to address respondents
grievances and when they adamantly refused to refund respondents payment.
 In fine, the court finds no reversible error on the merits in the impugned Court of
Appeals Decision and Resolution.
 THE METROPOLITAN BANK AND TRUST COMPANY, PETITIONER, v. ANA GRACE
ROSALES AND YO YUK TO, RESPONDENTS
G.R. NO. 183204. January 13, 2014
J. Del Castillo

The Hold Out Clause on the Application and Agreement for Deposit Account may apply
to assert a lien on any balance of the account and apply all or any part thereof against any valid
and existing obligation or indebtedness arising from the law, contracts, quasi-contracts, delicts
or quasi-delicts, matured or unmatured, that any of or all the depositors may owe to the Bank. It
does not apply in instances wherein the case is still pending and no final judgment of conviction
has been rendered. In this latter instance, there is still no valid and existing obligation to speak
of. Therefore, the Hold Out Clause cannot be applied.

Thus, since petitioner failed to show that respondents have an obligation to it under any
law, contract, quasi-contract, delict, or quasi-delict. And although a criminal case was filed by
petitioner against respondent Rosales, this is not enough reason for petitioner to issue a Hold
Out order as the case is still pending and no final judgment of conviction has been rendered
against respondent Rosales.

FACTS:

In 2000, respondents opened a Joint Peso Account with petitioner. In 2004, respondent
Rosales accompanied her client Liu Chiu Fang, a Taiwanese National applying for a retirees
visa from the Philippine Leisure and Retirement Authority (PLRA), to petitioners Escolta branch
to open a savings account, as required by PLRA. Since Liu Chiu Fang could only speak in
Mandarin, Rosales acted as an interpreter for her. Subsequently, respondents opened with
petitioner a Joint Dollar Accont.

In 2003, petitioner issued a Hold Out order against respondents accounts. Petitioner,
through its Special Audit Department Head Antonio Ivan Aguirre, filed before the Office of the
Prosecutor (OCP) a criminal case for Estafa through False Pretenses, Misrepresentation,
Deceit, and Use of Falsified Documents against respondent Rosales. The OCP issued an order
dismissing the criminal case for lack of probable cause. Petitioner moved for reconsideration.

Meanwhile, the respondents filed before the RTC a Complaint for Breach of Obligation
and Contract with Damages against petitioner. They alleged that they attempted several times
to withdraw their deposits but were unable to because petitioner had placed their accounts
under Hold Out status. No explanation, however, was given by petitioner as to why it issued the
Hold Out order. Thus, they prayed that the Hold Out order be lifted and that they be allowed to
withdraw their deposits. Petitioner, on the other hand, alleged that the respondents have no
cause of action because it has a valid reason for issuing the Hold Out order. It averred that due
to the fraudulent scheme of Rosales, it was compelled to reimburse Liu Chiu Fang and to file a
criminal case against Rosales.

While the civil case for breach of contract was being tried, the City Prosecutor of Manila
issued a resolution reversing the dismissal of the criminal complaint.

The RTC rendered a decision finding the petitioner liable for damages for breach of
contract. It ruled that it is the duty of petitioner to release the deposit to respondents as the act
of withdrawal of a bank deposit is an act of demand by the creditor. It also stated that the
recourse of the petitioner should be against its negligent employees and not against the
respondents. The CA affirmed the decision with modification on the award of actual damages.
The petitioner moved for reconsideration but the same was denied; hence, this petition.

ISSUE:

Whether the petitioner breached its contract with the respondents

RULING:

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

Authority to Withhold, Sell and/or Set Off:

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

JOINT ACCOUNT

xxxx
The Bank may, at any time in its discretion and with or without notice to all of the
Depositors, assert a lien on any balance of the Account and apply all or any part thereof against
any indebtedness, matured or unmatured, that may then be owing to the Bank by any or all of
the Depositors. It is understood that if said indebtedness is only owing from any of the
Depositors, then this provision constitutes the consent by all of the depositors to have the
Account answer for the said indebtedness to the extent of the equal share of the debtor in the
amount credited to the Account.

Petitioners reliance on the Hold Out clause in the Application and Agreement for
Deposit Account is misplaced.

The Hold Out clause applies only if there is a valid and existing obligation arising from
any of the sources of obligation enumerated in Article 1157of the Civil Code, to wit: law,
contracts, quasi-contracts, delict, and quasi-delict. In this case, petitioner failed to show that
respondents have an obligation to it under any law, contract, quasi-contract, delict, or quasi-
delict. And although a criminal case was filed by petitioner against respondent Rosales, this is
not enough reason for petitioner to issue a Hold Out order as the case is still pending and no
final judgment of conviction has been rendered against respondent Rosales. In fact, it is
significant to note that at the time petitioner issued the Hold Out order, the criminal complaint
had not yet been filed. Thus, considering that respondent Rosales is not liable under any of the
five sources of obligation, there was no legal basis for petitioner to issue the Hold Out order.
Accordingly, we agree with the findings of the RTC and the CA that the Hold Out clause does
not apply in the instant case.
 In view of the foregoing, the court finds that petitioner is guilty of breach of contract when
it unjustifiably refused to release respondents deposit despite demand. Having breached its
contract with respondents, petitioner is liable for damages.

THE CONJUGAL PARTNERSHIP OF THE SPOUSES VICENTE CADAVEDO AND BENITA

ARCOY-CADAVEDO, SUBSTITUTED BY THEIR HEIRS v. VICTORINO T. LACAYA
G.R. NO. 173188. January 15, 2014
J. Brion

Litigation should be for the benefit of the client, not the lawyer, particularly in a legal
situation when the law itself holds clear and express protection to the rights of the client to the
disputed property (a homestead lot). Premium consideration, in other words, is on the rights of
the owner, not on the lawyer who only helped the owner protect his rights. Matters cannot be
the other way around; otherwise, the lawyer does indeed effectively acquire a property right
over the disputed property. If at all, due recognition of parity between a lawyer and a client
should be on the fruits of the disputed property, which in this case, the Court properly accords.

Thus, since the transfer or assignment of the disputed one-half portion of the subject lot
to Atty. Lacaya took place while it was still under litigation and the lawyer-client relationship still
existed between him and the spouses Cadavedo, such transfer is well-within the prohibition of
Article 1491(5) of the New Civil Code.

FACTS:

The present controversy arose when the spouses Cadavedo filed an action before the
RTC against the spouses Ames for sum of money and/or voiding of contract of sale of
homestead after the latter failed to pay the balance of the purchase price. The spouses
Cadavedo initially engaged the services of Atty. Rosendo Bandal who, for health reasons, later
withdrew from the case; he was substituted by Atty. Lacaya.

Atty. Lacaya amended the complaint to assert the nullity of the sale and the issuance of
TCT No. T-4792 in the names of the spouses Ames as gross violation of the public land law. The
amended complaint stated that the spouses Cadavedo hired Atty. Lacaya on a contingency fee
basis. The contingency fee stipulation states that Atty. Lacaya will be paid P2,000 for attorneys
fees.

Different cases ensued between the spouses Ames and spouses Cadavedo regarding
the circumstances of the subject lot. Through all the cases, Atty. Lacaya remained to be the
counsel for the spouses Cadavedo.

With the finality of the civil case awarding the subject lot to the spouses Cadavedo and
issuance of writ of execution putting the possession of the subject land to the spouses
Cadavedo, Atty. Lacaya asked for one-half of the subject lot as attorneys fees. He caused the
subdivision of the subject lot into two equal portions, based on area, and selected the more
valuable and productive half for himself; and assigned the other half to the spouses Cadavedo.
Unsatisfied with the division, Vicente Cadaveda and his sons-in-law entered the portion
assigned to the respondents and ejected them. The latter responded by filing a counter-suit for
forcible entry before the Municipal Trial Court (MTC).
 Vicente and Atty. Lacaya entered into an amicable settlement (compromise
agreement) in Civil Case No. 215 (the ejectment case), re-adjusting the area and portion
obtained by each. Atty. Lacaya acquired 10.5383 hectares pursuant to the agreement. The MTC
approved the compromise agreement.

Subsequently, however, the spouses Cadavedo filed before the RTC an action against
the respondents, assailing the MTC-approved compromise agreement. The spouses Cadavedo
prayed, among others, that the respondents be ejected from their one-half portion of the subject
lot; that they be ordered to render an accounting of the produce of this one-half portion from
1981; and that the RTC fix the attorneys fees on a quantum meruit basis, with due
consideration of the expenses that Atty. Lacaya incurred while handling the civil cases.

The RTC ruled that contingent fee of 10.5383 hectares as excessive and
unconscionable. The RTC reduced the land area to 5.2691 hectares and ordered the
respondents to vacate and restore the remaining 5.2692 hectares to the spouses Cadavedo.
The RTC considered the one-half portion of the subject lot, as Atty. Lacayas contingent fee,
excessive, unreasonable and unconscionable. The RTC was convinced that the issues involved
the cases he handled for the spouses Cadavedo were not sufficiently difficult and complicated to
command such an excessive award; neither did it require Atty. Lacaya to devote much of his
time or skill, or to perform extensive research. The CA reversed and set aside the RTCs
decision and maintained the partition and distribution of the subject lot under the compromise
agreement.

ISSUE:

Whether the attorneys fee consisting of one-half of the subject lot is valid and reasonable

RULING:

The subject lot was the core of four successive and overlapping cases prior to the
present controversy. In three of these cases, Atty. Lacaya stood as the spouses Cadavedos
counsel.

The written agreement providing for a contingent fee of P2,000.00 should prevail
over the oral agreement providing for one-half of the subject lot.

Contrary to the respondents contention, this stipulation is not in the nature of a

penalty that the court would award the winning party, to be paid by the losing party. The
stipulation is a representation to the court concerning the agreement between the spouses
Cadavedo and Atty. Lacaya, on the latters compensation for his services in the case; it is
not the attorneys fees in the nature of damages which the former prays from the court as an
incident to the main action.

At this point, the court highlights that as observed by both the RTC and the CA and
agreed as well by both parties, the alleged contingent fee agreement consisting of one-half
of the subject lot was not reduced to writing prior to or, at most, at the start of Atty. Lacayas
engagement as the spouses Cadavedos counsel. An agreement between the lawyer and
his client, providing for the formers compensation, is subject to the ordinary rules governing
contracts in general. As the rules stand, controversies involving written and oral agreements
on attorneys fees shall be resolved in favor of the former. Hence, the contingency fee of
P2,000.00 stipulated in the amended complaint prevails over the alleged oral contingency
fee agreement of one-half of the subject lot.

The attorneys fee consisting of one-half of the subject lot is excessive and
unconscionable.

The court likewise strikes down the questioned attorneys fee and declares it void for
being excessive and unconscionable. The contingent fee of one-half of the subject lot was
allegedly agreed to secure the services of Atty. Lacaya in the first civil case only. Plainly, it
was intended for only one action as the two other civil cases had not yet been instituted at
that time. While the said civil case took twelve years to be finally resolved, that period of
time, as matters then stood, was not a sufficient reason to justify a large fee in the absence
of any showing that special skills and additional work had been involved. The issue involved
in that case, as observed by the RTC (and with which we agree), was simple and did not
require of Atty. Lacaya extensive skill, effort and research. The issue simply dealt with the
prohibition against the sale of a homestead lot within five years from its acquisition.

That Atty. Lacaya also served as the spouses Cadavedos counsel in the two
subsequent cases did not and could not otherwise justify an attorneys fee of one-half of the
subject lot. As asserted by the petitioners, the spouses Cadavedo and Atty. Lacaya made
separate arrangements for the costs and expenses for each of these two cases. Thus, the
expenses for the two subsequent cases had been considered and taken cared of.

Based on these considerations, the court therefore finds one-half of the subject lot as
attorneys fee excessive and unreasonable.

Article 1491 (5) of the Civil Code forbids lawyers from acquiring, by purchase or
assignment, the property that has been the subject of litigation in which they have taken part
by virtue of their profession. The same proscription is provided under Rule 10 of the Canons
of Professional Ethics.

A thing is in litigation if there is a contest or litigation over it in court or when it is

subject of the judicial action. Following this definition, the court finds that the subject lot was
still in litigation when Atty. Lacaya acquired the disputed one-half portion. We note in this
regard the following established facts: (1) on September 21, 1981, Atty. Lacaya filed a
motion for the issuance of a writ of execution in Civil Case No. 1721; (2) on September 23,
1981, the spouses Ames filed Civil Case No. 3352 against the spouses Cadavedo; (3) on
October 16, 1981, the RTC granted the motion filed for the issuance of a writ of execution
in Civil Case No. 1721 and the spouses Cadavedo took possession of the subject lot on
October 24, 1981; (4) soon after, the subject lot was surveyed and subdivided into two equal
portions, and Atty. Lacaya took possession of one of the subdivided portions; and (5) on May
13, 1982, Vicente and Atty. Lacaya executed the compromise agreement.

From these timelines, whether by virtue of the alleged oral contingent fee agreement
or an agreement subsequently entered into, Atty. Lacaya acquired the disputed one-half
portion (which was after October 24, 1981) while Civil Case No. 3352 and the motion for the
issuance of a writ of execution in Civil Case No. 1721 were already pending before the lower
courts. Similarly, the compromise agreement, including the subsequent judicial approval,
was effected during the pendency of Civil Case No. 3352. In all of these, the relationship of
a lawyer and a client still existed between Atty. Lacaya and the spouses Cadavedo.

Thus, whether the court considers these transactions the transfer of the disputed
one-half portion and the compromise agreement independently of each other or resulting
from one another, we find them to be prohibited and void by reason of public policy. Under
Article 1409 of the Civil Code, contracts which are contrary to public policy and those
expressly prohibited or declared void by law are considered inexistent and void from the
beginning.

While contingent fee agreements are indeed recognized in this jurisdiction as a valid
exception to the prohibitions under Article 1491 (5) of the Civil Code, this recognition does
not apply to the present case. A contingent fee contract is an agreement in writing where the
fee, often a fixed percentage of what may be recovered in the action, is made to depend
upon the success of the litigation. The payment of the contingent fee is not made during the
pendency of the litigation involving the clients property but only after the judgment has been
rendered in the case handled by the lawyer.

In the present case, the court reiterates that the transfer or assignment of the
disputed one-half portion to Atty. Lacaya took place while the subject lot was still under
litigation and the lawyer-client relationship still existed between him and the spouses
Cadavedo. Thus, the general prohibition provided under Article 1491 of the Civil Code,
rather than the exception provided in jurisprudence, applies. The CA seriously erred in
upholding the compromise agreement on the basis of the unproved oral contingent fee
agreement.
 Notably, Atty. Lacaya, in undertaking the spouses Cadavedos cause pursuant to the
terms of the alleged oral contingent fee agreement, in effect, became a co-proprietor having
an equal, if not more, stake as the spouses Cadavedo. Again, this is void by reason of public
policy; it undermines the fiduciary relationship between him and his clients.

The compromise agreement entered into between Vicente and Atty. Lacaya in Civil
Case No. 215 (ejectment case) was intended to ratify and confirm Atty. Lacayas acquisition
and possession of the disputed one-half portion which were made in violation of Article 1491
(5) of the Civil Code. As earlier discussed, such acquisition is void; the compromise
agreement, which had for its object a void transaction, should be void.

A contract whose cause, object or purpose is contrary to law, morals, good customs,
public order or public policy is inexistent and void from the beginning. It can never be
ratified nor the action or defense for the declaration of the inexistence of the contract
prescribe; and any contract directly resulting from such illegal contract is likewise void and
inexistent.

Consequently, the compromise agreement did not supersede the written contingent
fee agreement providing for attorneys fee of P2,000.00; neither did it preclude the
petitioners from questioning its validity even though Vicente might have knowingly and
voluntarily acquiesced thereto and although the MTC approved it in its June 10, 1982
decision in the ejectment case. The MTC could not have acquired jurisdiction over the
subject matter of the void compromise agreement; its judgment in the ejectment case could
not have attained finality and can thus be attacked at any time. Moreover, an ejectment case
concerns itself only with the issue of possession de facto; it will not preclude the filing of a
separate action for recovery of possession founded on ownership. Hence, the petitioners
in filing the present action and praying for, among others, the recovery of possession of the
disputed one-half portion and for judicial determination of the reasonable fees due Atty.
Lacaya for his services were not barred by the compromise agreement.

Atty. Lacaya is entitled to receive attorneys fees on a quantum meruit basis

In view of their respective assertions and defenses, the parties, in effect, impliedly
set aside any express stipulation on the attorneys fees, and the petitioners, by express
contention, submit the reasonableness of such fees to the courts discretion. We thus have
to fix the attorneys fees on a quantum meruit basis.

Quantum meruit meaning as much as he deserves is used as basis for

determining a lawyers professional fees in the absence of a contract x x x taking into
account certain factors in fixing the amount of legal fees. Its essential requisite is the
acceptance of the benefits by one sought to be charged for the services rendered under
circumstances as reasonably to notify him that the lawyer performing the task was expecting
to be paid compensation for it. The doctrine of quantum meruit is a device to prevent undue
enrichment based on the equitable postulate that it is unjust for a person to retain benefit
without paying for it.

Under Section 24, Rule 138 of the Rules of Court and Canon 20 of the Code of
Professional Responsibility, factors such as the importance of the subject matter of the
controversy, the time spent and the extent of the services rendered, the customary charges
for similar services, the amount involved in the controversy and the benefits resulting to the
client from the service, to name a few, are considered in determining the reasonableness of
the fees to which a lawyer is entitled.
 RIVELISA REALTY, INC., REPRESENTED BY RICARDO P. VENTURINA v. FIRST STA.
CLARA BUILDERS CORPORATION, REPRESENTED BY RAMON A. PANGILINAN, AS
PRESIDENT
G.R. NO. 189618 January 15, 2014
J. PERLAS-BERNABE

The principle of quantum meruit allows a party to recover the reasonable value of the
thing or services rendered despite the lack of a written contract, in order to avoid unjust
enrichment. The principle states that a person must be paid with an amount that he deserves. It
aims to prevent undue enrichment based on the equitable postulate that it is unjust for a person
to retain any benefit without paying for it. In the instant case, since First Sta. Clara already
performed certain works on the project with an estimated value of, to completely deny it
payment for the same would result in Rivelisa Realtys unjust enrichment at the First Sta.
Claras expense. Hence, it is only proper that First Sta. Clara must be paid on a quantum meruit
basis.

FACTS:

Rivelisa Realty entered into a Joint Venture Agreement (JVA) with First Sta. Clara for the
construction and development of a residential subdivision. According to its terms, First Sta.
Clara was to assume the horizontal development works in the remaining 69% undeveloped
portion of the project owned by Rivelisa Realty, and complete the same within twelve (12)
months from signing. Upon its completion, 60% of the total subdivided lots shall be transferred
in the name of First Sta. Clara. Also, since 31% of the project had been previously developed by
Rivelisa Realty which was assessed to have an aggregate worth of P10,000,000.00, it was
agreed that First Sta. Clara should initially use its own resources (in the same aggregate
amount of P10,000,000.00) before it can start claiming additional funds from the pre-sale of the
31% developed lots. 40% of the cost of additional works not originally part of the JVA was to be
shouldered by Rivelisa Realty, while 60% by First Sta. Clara.

Since First Sta. Clara ran out of funds after only two (2) months of construction, Rivelisa
Realty was forced to shoulder part of the payment due to the subcontractor hired by First Sta.
Clara. First Sta. Clara manifested its intention to back out from the JVA and to discontinue
operations when Rivelisa Realty refused to advance any more funds until 60% of the project
had been accomplished. After several exchanges, Rivelisa Realty agreed to reimburse First Sta.
Clara the amount of P3,000,000.00, emphasizing in its letter that the amount is actually over
and beyond its obligation under the JVA. However, the reimbursable amount of P3,000,000.00
remained unpaid despite several demands. Hence, First Sta. Clara filed a complaint for
rescission of the JVA against Rivelisa Realty before the RTC, claiming the payment of damages
for breach of contract and delay in the performance of an obligation.

For its part, Rivelisa Realty asserted that it was not obligated to pay First Sta. Clara any
amount at all since the latter had even failed to comply with its obligation to initially spend the
equivalent amount of P10,000,000.00 on the project before being entitled to cash payments.

The RTC dismissed the complaint and ordered First Sta. Clara to instead pay Rivelisa
Realty. As First Sta. Clara stopped working on the project halfway into the construction period
due to its own lack of funds, the RTC concluded that it was actually the party that first violated
the JVA. Dissatisfied, First Sta. Clara elevated the matter on appeal. The CA found Rivelisa
Realty still liable for First Sta. Claras actual accomplishments in the project. Rivelisa Realty
moved for reconsideration but the same was denied. Hence, this instant petition.
ISSUE:

Whether First Sta. Clara is entitled to be compensated for the development works it had
accomplished on the project

RULING:

The Court concurs with the CA that First Sta. Clara is entitled to be compensated for the
development works it had accomplished on the project based on the principle of quantum
meruit. Case law instructs that under this principle, a contractor is allowed to recover the
reasonable value of the thing or services rendered despite the lack of a written contract, in order
to avoid unjust enrichment. Quantum meruit means that, in an action for work and labor,
payment shall be made in such amount as the plaintiff reasonably deserves. The measure of
recovery should relate to the reasonable value of the services performed because the principle
aims to prevent undue enrichment based on the equitable postulate that it is unjust for a person
to retain any benefit without paying for it.

In this case, it is undisputed that First Sta. Clara already performed certain works on the
project with an estimated value of P4,578,152.10. Clearly, to completely deny it payment for the
same would result in Rivelisa Realtys unjust enrichment at the formers expense. Besides, as
may be gleaned from the parties correspondence, Rivelisa Realty obligated itself to
unconditionally reimburse First Sta. Clara the amount of P3,000,000.00 (representing First Sta.
Claras valuation of its accomplished works at P4,578,152.10, less the cash advances and
subcontractors fees) after the JVA had already been terminated by them through mutual assent.
As such, Rivelisa Realty cannot unilaterally renege on its promise by citing First Sta. Claras
non-fulfillment of the terms and conditions of the terminated JVA. For all these reasons, the CAs
ruling must be upheld.

DR. ENCARNACION C. LUMANTAS, M.D. v. HANZ CALAPIZ, REPRESENTED BY HIS

PARENTS, HILARIO CALAPIZ, JR. AND HERLITA CALAPIZ
G.R. NO. 163753. January 15, 2014
J. Bersamin

Where a doctor could have avoided a trauma from happening on the occasion of or
incidental to the circumcision of the petitioner, such doctor cannot escape civil liability even
though he was acquitted in the criminal aspect of the case.

Every person criminally liable is also civilly liable. However, the acquittal of the accused
does not necessarily mean his absolution from civil liability. When there is preponderance of
evidence to sustain the liability of the accused-defendant, the court will enforce such liability on
him.

FACTS:

Spouses Hilario Calapiz, Jr. and Herlita Calapiz brought a criminal charge against
the petitioner for reckless imprudence resulting to serious physical injuries when their son,
Hanz, had a damaged urethra that could not be fully repaired and reconstructed due to a
trauma believed to be caused by the medical procedures he underwent that were conducted
by the petitioner.

The RTC acquitted the petitioner of the crime charged for insufficiency of the
evidence. It held that the Prosecutions evidence did not show the required standard of care
to be observed by other members of the medical profession under similar circumstances.
Nonetheless, the RTC ruled that the petitioner was liable for moral damages because there
was a preponderance of evidence showing that Hanz had received the injurious trauma from
his circumcision by the petitioner. On appeal, the CA affirmed the RTC decision. It opined
that even if the petitioner had been acquitted of the crime charged, the acquittal did not
necessarily mean that he had not incurred civil liability considering that the Prosecution had
preponderantly established the sufferings of Hanz as the result of the circumcision.

ISSUE:

Whether the CA erred in affirming the petitioners civil liability despite his acquittal of the
crime of reckless imprudence resulting in serious physical injuries

RULING:

It is axiomatic that every person criminally liable for a felony is also civilly
liable. Nevertheless, the acquittal of an accused of the crime charged does not necessarily
extinguish his civil liability. In Manantan v. Court of Appeals, the Court elucidates on the two
kinds of acquittal recognized by our law as well as on the different effects of acquittal on the
civil liability of the accused, viz:

Our law recognizes two kinds of acquittal, with different effects on the civil liability of the
accused. First is an acquittal on the ground that the accused is not the author of the act or
omission complained of. This instance closes the door to civil liability, for a person who has
been found to be not the perpetrator of any act or omission cannot and can never be held
liable for such act or omission. There being no delict, civil liability ex delicto is out of the
question, and the civil action, if any, which may be instituted must be based on grounds
other than the delict complained of. This is the situation contemplated in Rule 111 of the
Rules of Court. The second instance is an acquittal based on reasonable doubt on the guilt
of the accused. In this case, even if the guilt of the accused has not been satisfactorily
established, he is not exempt from civil liability which may be proved by preponderance of
evidence only.
 Conformably with the foregoing, therefore, the acquittal of an accused does not
prevent a judgment from still being rendered against him on the civil aspect of the criminal
case unless the court finds and declares that the fact from which the civil liability might arise
did not exist.

Although it found the Prosecutions evidence insufficient to sustain a judgment of

conviction against the petitioner for the crime charged, the RTC did not err in determining
and adjudging his civil liability for the same act complained of based on mere
preponderance of evidence. In this connection, the Court reminds that the acquittal for
insufficiency of the evidence did not require that the complainants recovery of civil liability
should be through the institution of a separate civil action for that purpose.

The petitioners contention that he could not be held civilly liable because there was
no proof of his negligence deserves scant consideration. The failure of the Prosecution to
prove his criminal negligence with moral certainty did not forbid a finding against him that
there was preponderant evidence of his negligence to hold him civilly liable. With the RTC
and the CA both finding that Hanz had sustained the injurious trauma from the hands of the
petitioner on the occasion of or incidental to the circumcision, and that the trauma could
have been avoided, the Court must concur with their uniform findings. In that regard, the
Court need not analyze and weigh again the evidence considered in the proceedings a quo.
The Court, by virtue of its not being a trier of facts, should now accord the highest respect to
the factual findings of the trial court as affirmed by the CA in the absence of a clear showing
by the petitioner that such findings were tainted with arbitrariness, capriciousness or
palpable error.

ROBERTO R. DAVID v. EDUARDO C. DAVID

G.R. NO. 162365. January 15, 2014
J. Bersamin

In sales with the right to repurchase, the title and ownership of the property sold are
immediately vested in the vendee, subject to the resolutory condition of repurchase by the
vendor within the stipulated period. Once the conditions for the repurchase are complied with,
the ownership of the subject property is reverted back to the original vendor. Since, Eduardo
fulfilled the conditions for the exercise of the right to repurchase, he cannot be denied of
acquiring the property by exercising his right to repurchase the same.

FACTS:

Eduardo C. David (Eduardo) and his brother Edwin C. David (Edwin), acting on their
own and in behalf of their co-heirs, sold their inherited properties to Roberto. A deed of sale with
assumption of mortgage (deed of sale) embodied the terms of their agreement, stipulating that
the consideration for the sale was P6,000,000.00, of which P2,000,000 was to be paid to
Eduardo and Edwin, and the remaining P4,000,000.00 to be paid to Development Bank of the
Philippines (DBP) in Baguio City to settle the outstanding obligation secured by a mortgage on
such properties. The parties further agreed to give Eduardo and Edwin the right to repurchase
the properties within a period of three years from the execution of the deed of sale based on the
purchase price agreed upon, plus 12% interest per annum.

Roberto and Edwin executed a memorandum of agreement (MOA) with the Spouses
Marquez and Soledad Go (Spouses Go), by which they agreed to sell the Baguio City lot to the
latter for a consideration of P10,000,000.00. The MOA stipulated that in order to save payment
of high and multiple taxes considering that the x x x subject matter of this sale is mortgaged with
DBP, Baguio City, and sold [to Roberto], Edwin will execute the necessary Deed of Absolute
Sale in favor of [the Spouses Go], in lieu of [Roberto]. The Spouses Go then deposited the
amount of P10,000,000.00 to Robertos account. After the execution of the MOA, Roberto gave
Eduardo P2,800,000.00 and returned to him one of the truck tractors and trailers subject of the
deed of sale. Eduardo demanded for the return of the other truck tractor and trailer, but Roberto
refused to heed the demand.

Thus, Eduardo initiated this replevin suit against Roberto, alleging that he was
exercising the right to repurchase under the deed of sale; and that he was entitled to the
possession of the other motor vehicle and trailer. In his answer, Roberto denied that
Eduardo could repurchase the properties in question; and insisted that the MOA had
extinguished their deed of sale by novation.

The RTC ruled in favor of Eduardo holding that the stipulation giving Eduardo the
right to repurchase had made the deed of sale a conditional sale; that Eduardo had fulfilled
the conditions for the exercise of the right to repurchase; that the ownership of the
properties in question had reverted to Eduardo; that Robertos defense of novation had no
merit. The CA affirmed the RTC decision. Hence, this instant petition.

ISSUES:

1. Whether the respondent has exercised their right to repurchase

2. Whether there was novation when the parties executed the MOA

RULING:

A sale with right to repurchase is governed by Article 1601 of the Civil Code, which
provides that: Conventional redemption shall take place when the vendor reserves the right
to repurchase the thing sold, with the obligation to comply with the provisions of Article 1616
and other stipulations which may have been agreed upon. Conformably with Article
1616, the seller given the right to repurchase may exercise his right of redemption by paying
the buyer: (a) the price of the sale, (b) the expenses of the contract, (c) legitimate payments
made by reason of the sale, and (d) the necessary and useful expenses made on the thing
sold.

The CA and the RTC both found and held that Eduardo had complied with the
conditions stipulated in the deed of sale and prescribed by Article 1616 of the Civil Code.
Pertinently, the CA stated:

It should be noted that the alleged repurchase was exercised within the stipulated
period of three (3) years from the time the Deed of Sale with Assumption of Mortgage was
executed. The only question now, therefore, which remains to be resolved is whether or not
the conditions set forth in the Deed of Sale with Assumption of Mortgage, i.e. the tender of
the purchase price previously agreed upon, which is Php2.0 Million, plus 12% interest per
annum, and the amount paid by the defendant to DBP, had been satisfied.

From the testimony of the defendant himself, these preconditions for the exercise of
plaintiff's right to repurchase were adequately satisfied by the latter. Thus, as stated, from
the Php10 Million purchase price which was directly paid to the defendant, the latter
deducted his expenses plus interests and the loan, and the remaining amount he turned
over to the plaintiff. This testimony is an unequivocal acknowledgement from defendant that
plaintiff and his co-heirs exercised their right to repurchase the property within the agreed
period by satisfying all the conditions stipulated in the Deed of Sale with Assumption of
Mortgage. Moreover, defendant returned to plaintiff the amount of Php2.8 Million from the
total purchase price of Php10.0 Million. This only means that this is the excess amount
pertaining to plaintiff and co-heirs after the defendant deducted the repurchase price of
Php2.0 Million plus interests and his expenses. Add to that is the fact that defendant
returned one of the trucks and trailers subject of the Deed of Sale with Assumption of
Mortgage to the plaintiff. This is, at best, a tacit acknowledgement of the defendant that
plaintiff and his co-heirs had in fact exercised their right to repurchase. x x x

Considering that the factual findings of the trial court, when affirmed by the CA, are
binding on the Court, the Court affirms the judgment of the CA upholding Eduardos exercise
of the right of repurchase. Roberto could no longer assail the factual findings because his
petition for review on certiorari was limited to the review and determination of questions of
law only. A question of law exists when the doubt centers on what the law is on a certain set
of undisputed facts, while a question of fact exists when the doubt centers on the truth or
falsity of the alleged facts. Whether the conditions for the right to repurchase were complied
with, or whether there was a tender of payment, is a question of fact. With both the RTC and
the CA finding and holding that Eduardo had fulfilled the conditions for the exercise of the
right to repurchase, therefore, we conclude that Eduardo had effectively repurchased the
properties subject of the deed of sale.
The Court dismisses as devoid of merit Robertos insistence that the MOA had extinguished
the obligations established under the deed of sale by novation.

The issue of novation involves a question of fact, as it necessarily requires the

factual determination of the existence of the various requisites of novation, namely: (a) there
must be a previous valid obligation; (b) the parties concerned must agree to a new contract;
(c) the old contract must be extinguished; and (d) there must be a valid new contract. With
both the RTC and the CA concluding that the MOA was consistent with the deed of sale,
novation whereby the deed of sale was extinguished did not occur. In that regard, it is worth
repeating that the factual findings of the lower courts are binding on the Court.

In sales with the right to repurchase, the title and ownership of the property sold are
immediately vested in the vendee, subject to the resolutory condition of repurchase by the
vendor within the stipulated period. Accordingly, the ownership of the affected properties
reverted to Eduardo once he complied with the condition for the repurchase, thereby
entitling him to the possession of the other motor vehicle with trailer.
DEVELOPMENT BANK OF THE PHILIPPINES v. GUARIA AGRICULTURAL AND REALTY
DEVELOPMENT CORPORATION
G.R. NO. 160758. January 15, 2014
J. Bersamin

Loans are often secured by a mortgage. However, a mortgage contract is an accessory

contract, dependent upon the fulfillment or non-fulfillment of the principal contract, which is the
contract of loan. The mortgage contract cannot be enforced unless the obligation in the contract
of loan is due and demandable but left unpaid.

Although it is true that the contract may dictate the order of how the creditor and debtor
will fulfill their reciprocal obligations, it is presumed that the creditor will release the full amount
of loan before he can demand payment from the debtor thereof. Thus, the loan of Guaria
Corporation becomes due and demandable only after DBP has released the full amount of the
said loan.

FACTS:

Guaria Corporation applied for a loan from DBP to finance the development of its
resort complex situated in Trapiche, Oton, Iloilo. The loan and Guaria Corporation executed
a promissory note. Guaria Corporation executed a real estate mortgage over several real
properties in favor of DBP as well as a chattel mortgage over the personal properties
existing at the resort complex and those yet to be acquired out of the proceeds of the loan to
secure the performance of the obligation. Prior to the release of the loan, DBP required
Guaria Corporation to put up a cash equity of P1,470,951.00 for the construction of the
buildings and other improvements on the resort complex.

The loan was released in several instalments, and Guaria Corporation used the
proceeds to defray the cost of additional improvements in the resort complex. Guaria
Corporation demanded the release of the balance of the loan, but DBP refused. Instead,
DBP directly paid some suppliers of Guaria Corporation over the latters objection. DBP
found upon inspection of the resort project, its developments and improvements that
Guaria Corporation had not completed the construction works. DBP thus demanded that
Guaria Corporation expedite the completion of the project, and warned that it would initiate
foreclosure proceedings should Guaria Corporation not do so

Unsatisfied with the non-action and objection of Guaria Corporation, DBP initiated
extrajudicial foreclosure proceedings. A notice of foreclosure sale was sent to Guaria
Corporation. Thereafter, DBP applied for the issuance of a writ of possession by the RTC. At
first, the RTC denied the application but later granted it upon DBPs motion for
reconsideration.

The RTC ruled that the extra-judicial sales of the mortgaged properties. The CA
affirmed said decision. Hence, this petition.
ISSUE:

Whether the foreclosure sales of the mortgaged properties were valid

RULING:

The agreement between DBP and Guaria Corporation was a loan. Under the law, a
loan requires the delivery of money or any other consumable object by one party to another
who acquires ownership thereof, on the condition that the same amount or quality shall be
paid. Loan is a reciprocal obligation, as it arises from the same cause where one party is the
creditor, and the other the debtor. The obligation of one party in a reciprocal obligation is
dependent upon the obligation of the other, and the performance should ideally be
simultaneous. This means that in a loan, the creditor should release the full loan amount and
the debtor repays it when it becomes due and demandable.

By its failure to release the proceeds of the loan in their entirety, DBP had no right yet to
exact on Guaria Corporation the latters compliance with its own obligation under the loan.
Indeed, if a party in a reciprocal contract like a loan does not perform its obligation, the other
party cannot be obliged to perform what is expected of it while the others obligation remains
unfulfilled. In other words, the latter party does not incur delay.

Still, DBP called upon Guaria Corporation to make good on the construction works
pursuant to the acceleration clause written in the mortgage contract (i.e., Stipulation No.
26), or else it would foreclose the mortgages.

DBPs actuations were legally unfounded. It is true that loans are often secured by a
mortgage constituted on real or personal property to protect the creditors interest in case of
the default of the debtor. By its nature, however, a mortgage remains an accessory contract
dependent on the principal obligation, such that enforcement of the mortgage contract will
depend on whether or not there has been a violation of the principal obligation. While a
creditor and a debtor could regulate the order in which they should comply with their
reciprocal obligations, it is presupposed that in a loan the lender should perform its
obligation the release of the full loan amount before it could demand that the borrower
repay the loaned amount. In other words, Guaria Corporation would not incur in delay
before DBP fully performed its reciprocal obligation.
 Considering that it had yet to release the entire proceeds of the loan, DBP could not
yet make an effective demand for payment upon Guaria Corporation to perform its
obligation under the loan. According to Development Bank of the Philippines v. Licuanan, it
would only be when a demand to pay had been made and was subsequently refused that a
borrower could be considered in default, and the lender could obtain the right to collect the
debt or to foreclose the mortgage. Hence, Guaria Corporation would not be in default
without the demand.

Under the circumstances, DBPs foreclosure of the mortgage and the sale of the
mortgaged properties at its instance were premature, and, therefore, void and ineffectual.

Being a banking institution, DBP owed it to Guaria Corporation to exercise the

highest degree of diligence, as well as to observe the high standards of integrity and
performance in all its transactions because its business was imbued with public interest. The
high standards were also necessary to ensure public confidence in the banking system, for,
according to Philippine National Bank v. Pike: The stability of banks largely depends on the
confidence of the people in the honesty and efficiency of banks. Thus, DBP had to act with
great care in applying the stipulations of its agreement with Guaria Corporation, lest it
erodes such public confidence. Yet, DBP failed in its duty to exercise the highest degree of
diligence by prematurely foreclosing the mortgages and unwarrantedly causing the
foreclosure sale of the mortgaged properties despite Guaria Corporation not being yet in
default. DBP wrongly relied on Stipulation No. 26 as its basis to accelerate the obligation of
Guaria Corporation, for the stipulation was relevant to an Omnibus Agricultural Loan, to
Guaria Corporations loan which was intended for a project other than agricultural in nature.
EASTERN SHIPPING LINES, INC. v. BPI/MS INSURANCE CORP., AND MITSUI SUMITOMO
INSURANCE CO., LTD.
G.R. NO. 193986. January 15, 2014
J. Villarama, Jr.

The degree of diligence required of common carriers is extraordinary diligence. The

extraordinary responsibility of the common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by the carrier for transportation until
the same are delivered, actually or constructively, by the carrier to the consignee, or to the
person who has a right to receive them. Owing to this 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.

Petitioner, from the nature of their business and for reasons of public policy, are bound
to observe extraordinary diligence in the vigilance over the goods transported by them. Subject
to certain exceptions enumerated under Article 1734 of the Civil Code, common carriers are
responsible for the loss, destruction, or deterioration of the goods. Since petitioner is presumed
to be negligent, he has the burden of proving that it observed the degree of diligence required of
it. Its failure to do leads to the inevitable conclusion that it has been negligent in handling the
goods.

FACTS:

Sumitomo Corporation (Sumitomo) shipped on three different occasions through MV

Eastern Challenger V-9-S, a vessel owned by petitioner Eastern Shipping Lines, Inc.
(petitioner), various steel sheets in coil. The shipments arrived at the port of Manila. Upon
unloading from the vessel, the coils were observed to be in bad condition. The cargo was then
turned over to Asian Terminals, Inc. (ATI) for stevedoring, storage and safekeeping pending
Calamba Steels withdrawal of the goods. When ATI delivered the cargo to Calamba Steel, the
latter rejected its damaged portion for being unfit for its intended purpose.

Calamba Steel filed an insurance claim with Mitsui through the latters settling agent,
respondent BPI/MS Insurance Corporation(BPI/MS), and the former was paid the sums of
US$7,677.12,US$14,782.05 and US$7,751.15 for the damage suffered by all three shipments
or for the total amount of US$30,210.32. Correlatively, as insurer and subrogee of Calamba
Steel, Mitsui and BPI/MS filed a Complaint for Damages against petitioner and ATI.

The RTC ruled against defendants Eastern Shipping Lines, Inc. and Asian Terminals,
Inc. The CA affirmed with modification the RTCs findings and ruling, holding, among others, that
both petitioner and ATI were very negligent in the handling of the subject cargoes. Pointing to
the affidavit of Mario Manuel, Cargo Surveyor, the CA found that during the unloading
operations, the steel coils were lifted from the vessel but were not carefully laid on the ground.
Some were even dropped while still several inches from the ground while other coils bumped
or hit one another at the pier while being arranged by the stevedores and forklift operators of
ATI and [petitioner]. The CA added that such finding coincides with the factual findings of the
RTC that both petitioner and ATI were both negligent in handling the goods. However, for failure
of the RTC to state the justification for the award of attorneys fees in the body of its decision,
the CA accordingly deleted the same.

ISSUE:
Whether petitioner is solidarily liable with ATI on account of the damage incurred by the goods

RULING:

Petition denied.

It is settled in maritime law jurisprudence that cargoes while being unloaded generally
remain under the custody of the carrier. As herein before found by the RTC and affirmed by the
CA based on the evidence presented, the goods were damaged even before they were turned
over to ATI. Such damage was even compounded by the negligent acts of petitioner and ATI
which both mishandled the goods during the discharging operations. Thus, it bears stressing
unto petitioner that common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods transported
by them.

Subject to certain exceptions enumerated under Article 1734 of the Civil Code, common
carriers are responsible for the loss, destruction, or deterioration of the goods. The extraordinary
responsibility of the common carrier lasts from the time the goods are unconditionally placed in
the possession of, and received by the carrier for transportation until the same are delivered,
actually or constructively, by the carrier to the consignee, or to the person who has a right to
receive them. Owing to this 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. That is, unless they prove that they exercised
extraordinary diligence in transporting the goods. In order to avoid responsibility for any loss or
damage, therefore, they have the burden of proving that they observed such high level of
diligence. In this case, petitioner failed to hurdle such burden.
 THE PRESIDENT OF THE CHURCH OF JESUS CHRIST OF LATTER DAY SAINTS v. BTL
CONSTRUCTION CORPORATION / BTL CONSTRUCTION CORPORATION v. THE
PRESIDENT OF THE MANILA MISSION OF THE CHURCH OF JESUS CHRIST OF
LATTER DAY SAINTS AND BPI-MS INSURANCE CORPORATION
G.R. No. 176439 & G.R. No. 176718, January 15, 2014
J. Perlas-Bernabe

Parties, in good faith, may claim what is rightfully theirs from another even if there is a
showing that both have claims against each other. The law was created to protect the rights of
every party.

Hence,in a case where the parties have reciprocal obligations towards each other, such
as the present case, both parties are entitled to enforce their rights against each, in good faith,
other in order to claim what is due to them respectively.

FACTS:

COJCOLDS and BTL entered into a Construction Contract for the latters construction of
the formers meetinghouse facility known as the Medina Project. The construction period was
for eight months. However, due to bad weather conditions, power failures, and revisions in the
construction plans (as per Change Order Nos. 1 to 12 agreed upon by the parties), among
others, the completion date of the Medina Project was extended.

Due to financial losses in another project, BTL requested COJCOLDS to bill the latter
based on the 95% and 100% completion of the Medina Project and to execute deeds of
assignment in favor of its suppliers so that they may collect any eventual payments directly
from COJCOLDS, to which COJCOLDS granted. Thereafter, BTL ceased its operations in the
Medina Project because of its lack of funds to advance the cost of labor necessary to complete
the said project, as well as the supervening increase in the prices of materials and other items
for construction. Consequently, COJCOLDS terminated its Contract with BTL and engaged the
services of another contractor to finish the Medina Project.

BTL filed a complaint against COJCOLDS before the CIAC, claiming cost of labor,
materials, equipment, overhead expenses, lost profits and interests, the 10% retention money
stipulated in the contract with interest, actual damages, attorneys fees, moral and exemplary
damages, and costs of arbitration. COJCOLDS filed its answer with compulsory counterclaim,
praying for the award of liquidated damages in view of BTLs delay in completing the pending
project, reimbursement of the payments it directly made to BTLs suppliers as per the latters
request, cost overrun, and attorneys fees.

The parties agreed to a Terms of Reference (TOR) wherein it was stipulated that the
parties relationship with respect to the Medina Project is governed by, among others, the
Contract, and the General Conditions of the Contract .They also stipulated that 98% of the said
project had been completed.

The CIAC found the claims of both parties meritorious. Feeling aggrieved, COJCOLDS
elevated the matter to the CA. The CA modified the CIAC ruling. Both parties were dissatisfied,
hence, these petitions.

ISSUES:
 1. Whether COJCOLDS is liable to BTL

2. Whether BTL is liable to COJCOLDS

RULING:

Article 1724 of the Civil Code governs the recovery of additional costs in
contracts for a stipulated price (such as fixed lump-sum contracts), as well as the increase in
price for any additional work due to a subsequent change in the original plans and
specifications. Based on the same provision, such added costs can only be allowed upon the:
(a) written authority from the developer or project owner ordering or allowing the written
changes in work; and (b) written agreement of parties with regard to the increase in price or cost
due to the change in work or design modification. Case law instructs that compliance with these
two (2) requisites is a condition precedent for recovery. The absence of one or the other
condition thus bars the claim of additional costs. Notably, neither the authority for the changes
made nor the additional price to be paid therefor may be proved by any evidence other than the
written authority and agreement as above-mentioned.

In these cases, records reveal that there is neither a written authorization nor
agreement covering the additional price to be paid for the concrete retaining wall. This confirms
the CAs finding that the construction of the perimeter wall of the Medina Project, which is
included in the original plans and specifications for the same,already subsumes the construction
of the concrete retaining wall. Accordingly, COJCOLDS should not pay the amount of
P804,460.89 claimed by BTL as additional cost for the same.

In similar regard, the COJCOLDS should not be held liable for the costs of the
additional works taken under Change Order Nos. 8 to 12 amounting to P344,360.16 as claimed
by BTL. As correctly observed by the CA, BTL had, in fact, requested COJCOLDS to make the
payments therefor directly to its suppliers in view of its financial losses in another
project. Hence, considering that COJCOLDSs payment to BTLs suppliers already covered the
costs of said additional works upon its own request and to its own credit, BTL maintains no right
to pursue such claim.

With BTLs claims for the costs of additional works herein denied, COJCOLDSs
total liability to BTL thus stands in the amount of P1,612,017.74, which represents the unpaid
balance of 98% of the contract price, inclusive of the 10% retention money, as previously stated.

BTLs liability to COJCOLDS for liquidated damages is a result of its delay in the
performance of its obligations under the Contract. While the fact of BTLs delay has not been
seriously disputed in these cases, the Court must, however, resolve the extent of such delay in
view of the conflicting findings of the CIAC and the CA on the matter.

In these cases, records reveal that BTL sought for a 304-day extension of the original
completion deadline of September 15, 2000. Since Article 21.04 of the General
Conditions expressly recognizes that the architects recommendations regarding extensions of
time should be controlling, the Court upholds the CAs finding that BTL was only granted a 190-
day extension (from the original completion deadline) to finish the Medina Project, or until March
24, 2001. Despite such extension, BTL nevertheless failed to complete the same. In fact, as the
parties themselves admitted, the Medina Project was only 98% complete when the Contract
was terminated.
 Due to BTLs delay which impelled COJCOLDS to terminate the Contract and
subsequently hire the services of another contractor, i.e., Vigor, to finish the Medina Project, the
Court equally agrees with the CAs finding that COJCOLDS incurred a cost overrun
of P526,400.00.

Based on the records, BTL charged COJCOLDS the amount of P1,014,469.79 for the
modifications introduced to the Medina Project as indicated in Change Order Nos. 1 to 12. In
turn, COJCOLDS paid BTL the amount of P651,727.91 for the modifications covered by Change
Order Nos. 1 to 7 and no longer paid for those covered by Change Order Nos. 8 to 12 because,
as discussed earlier, COJCOLDS diverted such payments directly to BTLs suppliers upon its
own request and to its own credit. Accordingly, COJCOLDS paid P663,275.37 to these
suppliers, resulting in COJCOLDS actually paying a total of P1,315,003.28 for the works taken
under Change Order Nos. 1 to 12. This means that BTL was effectively overpaid the amount
of P300,533.49, and is therefore obliged to return the same to COJCOLDS pursuant to Article
2154 of the Civil Code which states that [i]f something is received when there is no right to
demand it, and it was unduly delivered through mistake, the obligation to return it arises.
 SPOUSES BERNADETTE AND RODULFO VILBAR v. ANGELITO L. OPINION
G.R. No. 176043. January 15, 2014
J. Del Castillo

Registration is the operative act which gives validity to the transfer or creates a lien upon
the land. A certificate of title serves as evidence of an indefeasible and incontrovertible title to
the property in favor of the person whose name appears therein. Since the spouses Vilbar did
not cause the transfer of the certificate title in their name, or at the very least, annotate or
register such sale in the original title in the name of Dulos Realty, have no indefeasible and
incontrovertible title over Lot 20 to support their claim.

FACTS:

Spouses Vilbar claimed that they and Dulos Realty and Development Corporation (Dulos
Realty), entered into a Contract to Sell a lot designated as Lot 20-B located in Airmens Village,
Las Pias City. Spouses Vilbar and Dulos Realty also executed a Contract to Sell covering Lot
21, Block 4 of Airmens Village. The spouses Vilbar obtained a housing loan from the
Development Bank of the Philippines (DBP) secured by a real estate mortgage over the said lot.
The spouses Vilbar were able to pay the loan in full and DBP issued the requisite Cancellation
of Mortgage. The spouses Vilbar have been in actual, open and peaceful possession of Lot 21
and occupy the same as absolute owners since 1981.

In contrast, Opinion claimed that he legally acquired Lots 20 and 21 through extra-
judicial foreclosure of mortgage constituted over the said properties by Otilio Gorospe, Sr. and
Otilio Lito Gorospe, Jr. (Gorospes) in his favor. Opinion alleged that on the Gorospes borrowed
money and to secure the loan, executed a Deed of Real Estate Mortgage over the subject lots
covered by TCT Nos. T-44796 (Lot 21) and T-44797 (Lot 20). The Gorospes defaulted,
prompting Opinion to file a Petition for Extra-Judicial Foreclosure of Real Estate Mortgage.
Subsequently, the subject properties were sold at a public auction where Opinion emerged as
the highest bidder. A Certificate of Sale was issued in his favor. The Gorospes failed to redeem
the properties within the reglementary period resulting in the eventual cancellation of their titles.
Thus, TCT No. T-59010 (Lot 21) and TCT No. T-59011 (Lot 20) in the name of Opinion were
issued by the Registry of Deeds of Las Pias City.

Opinion filed a Complaint for Accion Reinvindicatoria with Damages for him to be
declared as the lawful owner and possessor of the subject properties and for his titles to be
declared as authentic. He likewise prayed for the cancellation of the titles of spouses Vilbar and
Elena.

The RTC ruled in favor of Opinion declaring that he lawfully acquired the disputed
properties and that his titles are valid, the sources of which having been duly established.
Aggrieved, the Spouses Vilbar elevated the matter to the CA. The CA affirmed the RTC
decision. Hence, this petition.

ISSUE:

Who between the parties has a better right over Lots 20 and 21

RULING:
 A review of these documents in support of the claim of ownership of the spouses
Vilbar leads the Court to the same inescapable conclusion reached by the trial court. With
regard to Lot 20, spouses Vilbar brag of a Deed of Absolute Sale executed by Dulos Realty
in their favor and aver that they have the owners copy of TCT No. S-39849 and are
presently enjoying actual possession of said property. However, these are not sufficient
proofs of ownership. For some unknown reasons, the spouses Vilbar did not cause the
transfer of the certificate title in their name, or at the very least, annotate or register such
sale in the original title in the name of Dulos Realty. This, sadly, proved fatal to their cause.
Time and time again, this Court has ruled that a certificate of title serves as evidence of an
indefeasible and incontrovertible title to the property in favor of the person whose name
appears therein. Having no certificate of title issued in their names, spouses Vilbar have no
indefeasible and incontrovertible title over Lot 20 to support their claim. Further, it is an
established rule that registration is the operative act which gives validity to the transfer or
creates a lien upon the land

Failing to annotate the deed for the eventual transfer of title over Lot 20 in their
names, the spouses Vilbar cannot claim a greater right over Opinion, who acquired the
property with clean title in good faith and registered the same in his name by going through
the legally required procedure.

With respect to Lot 21, the Court is likewise puzzled as to why spouses Vilbars TCT
No. 36777 does not indicate where it came from. The issuance of the said title also becomes
suspect in light of the fact that no Deed of Absolute Sale was ever presented as basis for the
transfer of the title from Dulos Realty. In fact, the spouses Vilbar do not even know if a Deed
of Absolute Sale over Lot 21 was executed in their favor.

As the evidence extant on record stands, only a Contract to Sell which is legally
insufficient to serve as basis for the transfer of title over the property is available. At most, it
affords spouses Vilbar an inchoate right over the property. Absent that important deed of
conveyance over Lot 21 executed between Dulos Realty and the spouses Vilbar, TCT No.
36777 issued in the name of Bernadette Vilbar cannot be deemed to have been issued in
accordance with the processes required by law. In the same manner, absent the
corresponding inscription or annotation of the required transfer document in the original title
issued in the name of Dulos Realty, third parties are not charged with notice of said burden
and/or claim over the property.

Simply, the spouses Vilbar were not able to present material evidence to prove that
TCT No. 36777 was issued in accordance with the land registration rules.
 In addition, the real estate mortgage entered into by the spouses Vilbar with the DBP
does not, by itself, result in a conclusive presumption that they have a valid title to Lot 21.
The basic fact remains that there is no proof of conveyance showing how they acquired
ownership over Lot 21 justifying the issuance of the certificate of title in their name.

With respect to the tax declarations, the trial court aptly declared, thus:

As to the tax declarations and real property tax payments made by the defendants
Sps. Vilbar for Lot 21 the same are of no moment. It has been held that tax declarations are
not conclusive proofs of ownership, let alone of the private character of the land at best,
they are merely indicia of a claim of ownership. (Seville v. National Development Company,
351 SCRA 112) However, and with the plaintiff presenting convincing evidence of the basis
and validity of his acquisition of the subject lots, such indicia in favor of the defendant Sps.
Vilbar had been effectively impugned or refuted.
FRANCISCO LIM v. EQUITABLE PCI BANK, NOW KNOWN AS THE BANCO DE ORO
UNIBANK, INC.
G.R. No. 183198. January 15, 2014
J. Del Castillo

The presumption under Article 160 of the New Civil Code applies when the property
in question was acquired during the lifetime of the husband and the wife and the
subsistence of the marriage. It is not overcome by the fact that the property is registered in
the name of the husband or the wife alone. The consent of both spouses is required before
a conjugal property may be mortgaged. However, since the nature of the property was never
alleged in the complaint or raised during trial by the petitioner, the court cannot apply such
presumption in the instant case.

FACTS:

Franco Lim and his mother Victoria Yao Lim (Victoria) obtained from respondent
Equitable PCI Bank (respondent; formerly Equitable Banking Corporation) a loan. To secure
the loan, petitioner Francisco Lim and Franco executed in favor of respondent a Real Estate
Mortgage over the same property. However, when the loan was not paid, respondent
foreclosed the mortgaged property. A Writ of Possession in favor of respondent was then
issued by the Regional Trial Court.

Petitioner filed before the RTC of Pasig a Motion for the Issuance of Temporary
Restraining Order (TRO) and a Complaint for Cancellation of Special Power of Attorney,
Mortgage Contract, Certificate of Sale, TCT No. 9470, and Tax Declaration No. 96-31807,
with Damages and Issuance of Preliminary Mandatory Injunction against respondent,
Franco, and Victoria. Petitioner alleged that he did not authorize Franco to mortgage the
subject property to respondent and that his signatures in the Real Estate Mortgage and the
Surety Agreement were forged.

The RTC ruled in favor of the petitioner. It ruled that petitioner was able to prove by
preponderance of evidence that he did not participate in the execution of the mortgage
contract giving rise to the presumption that his signature was forged. The CA reversed the
decision. It ruled that petitioners mere allegation that his signature in the mortgage contract
was forged is not sufficient to overcome the presumption of regularity of the notarized
document.

Hence, this petition. It is worthy to note that it is only at this point that he insists that
the respondent should have been alerted by the fact that the mortgage contract was
executed without the consent of his wife.

ISSUE:

Whether the respondent bank should have alerted petitioners wife by the face that the
mortgage contract was executed without her consent

RULING:

The nature of the property was never raised as an issue, hence the absence of his
wifes signature on the mortgage contract has no bearing in this case.
 The court is not unaware that all property of the marriage is presumed to be
conjugal, unless it is shown that it is owned exclusively by the husband or the wife; that this
presumption is not overcome by the fact that the property is registered in the name of the
husband or the wife alone; and that the consent of both spouses is required before a
conjugal property may be mortgaged. However, the court finds it iniquitous to apply the
foregoing presumption especially since the nature of the mortgaged property was never
raised as an issue before the RTC, the CA, and even before this Court. In fact, petitioner
never alleged in his Complaint that the said property was conjugal in nature. Hence,
respondent had no opportunity to rebut the said presumption.

Worth mentioning, in passing, is the ruling in Philippine National Bank v. Court of

Appeals to wit:

The well-known rule in this jurisdiction is that a person dealing with a registered land
has a right to rely upon the face of the torrens certificate of title and to dispense with the
need of inquiring further, except when the party concerned has actual knowledge of facts
and circumstances that would impel a reasonably cautious man to make such inquiry.

A torrens title concludes all controversy over ownership of the land covered by a final
[decree] of registration. Once the title is registered the owner may rest assured without the
necessity of stepping into the portals of the court or sitting in the mirador de su casa to avoid
the possibility of losing his land.

Article 160 of the Civil Code provides as follows:

Art. 160. All property of the marriage is presumed to belong to the conjugal
partnership, unless it be proved that it pertains exclusively to the husband or to the wife.

The presumption applies to property acquired during the lifetime of the husband and
wife. In this case, it appears on the face of the title that the properties were acquired by
Donata Montemayor when she was already a widow. When the property is registered in the
name of a spouse only and there is no showing as to when the property was acquired by
said spouse, this is an indication that the property belongs exclusively to said spouse. And
this presumption under Article 160 of the Civil Code cannot prevail when the title is in the
name of only one spouse and the rights of innocent third parties are involved.

The PNB had a reason to rely on what appears on the certificates of title of the properties
mortgaged. For all legal purposes, the PNB is a mortgagee in good faith for at the time the
mortgages covering said properties were constituted the PNB was not aware to any flaw of
the title of the mortgagor. (Emphasis supplied)
THE HEIRS OF VICTORINO SARILI v. PEDRO F. LAGROSA, REPRESENTED IN THIS ACT
BY HIS ATTORNEY-IN-FACT, LOURDES LABIOS MOJICA
G.R. No. 193517. January 15, 2014
J. Perlas-Bernabe

Sps. Sarili purchased the subject property from Ramos on the strength of the
latters ostensible authority to sell under the subject SPA. The said document, however,
readily indicates flaws in its notarial acknowledgment since the respondents community tax
certificate (CTC) number was not indicated thereon. The due execution and authenticity of
the subject SPA are of great significance in determining the validity of the sale entered into
by Victorino and Ramon since the latter only claims to be the agent of the purported seller.
The rule that even if the procurement of a certificate of title was tainted with fraud and
misrepresentation, such defective title may be the source of a completely legal and valid
title in the hands of an innocent purchaser for value is not applicable to the Sps. Sarili. A
higher degree of prudence is required from one who buys from a person who is not the
registered owner, although the land object of the transaction is registered. Since Sps.
Sarilis claim over the subject property is based on forged documents, no valid title had
been transferred to them and, in turn, to petitioners.

FACTS:

Respondent, represented by his attorney-in-fact Lourdes Labios Mojica (Lourdes) via

a special power of attorney filed a complaint against Sps. Sarili and the Register of Deeds of
Caloocan City (RD) before the RTC, alleging, among others, that he is the owner of a certain
parcel of land situated in Caloocan City (subject property) and has been religiously paying
the real estate taxes therefor since its acquisition on November 29, 1974. Respondent
claimed that he is a resident of California, USA, and that during his vacation in the
Philippines, he discovered that a new certificate of title to the subject property was issued by
the RD in the name of Victorino married to Isabel Amparo (Isabel by virtue of a
falsified Deed of Absolute Sale dated February 16, 1978 purportedly executed by him and
his wife, Amelia U. Lagrosa (Amelia). He averred that the falsification of the said deed of
sale was a result of the fraudulent, illegal, and malicious acts committed by Sps. Sarili and
the RD in order to acquire the subject property and, as such, prayed for the annulment of
the TCT and that Sps. Sarili deliver to him the possession of the subject property, or, in the
alternative, that Sps. Sarili and the RD jointly and severally pay him the amount of
P1,000,000.00, including moral damages as well as attorneys fees.

In their answer, Sps. Sarili maintained that they are innocent purchasers for value,
having purchased the subject property from Ramon B. Rodriguez (Ramon), who possessed
and presented a Special Power of Attorney (subject SPA) to sell/dispose of the same, and,
in such capacity, executed a Deed of Absolute Sale dated November 20, 1992 conveying
the said property in their favor. In this relation, they denied any participation in the
preparation of the February 16, 1978 deed of sale. Further, they interposed a counterclaim
for moral and exemplary damages, as well as attorneys fees, for the filing of the baseless
suit.

The RTC ruled that respondents signature on the subject SPA as the same and
exact replica of his signature in the November 25, 1999 SPA in favor of Lourdes. Thus, with
Ramons authority having been established, it declared the November 20, 1992 deed of sale
executed by the latter as valid, genuine, lawful and binding and, as such, had validly
conveyed the subject property in favor of Sps. Sarili. It further found that respondent acted
with evident bad faith and malice and was, therefore, held liable for moral and exemplary
damages.

The CA declared the deeds of sale dated February 16, 1978 and November 20,
1992, as well as the subject SPA as void.

ISSUE:

Whether or not there was a valid conveyance of the subject property to Sps. Sarili

RULING:

It is well-settled that even if the procurement of a certificate of title was tainted with
fraud and misrepresentation, such defective title may be the source of a completely legal
and valid title in the hands of an innocent purchaser for value. Where innocent third
persons, relying on the correctness of the certificate of title thus issued, acquire rights over
the property, the court cannot disregard such rights and order the total cancellation of the
certificate. The effect of such an outright cancellation would be to impair public confidence in
the certificate of title, for everyone dealing with property registered under the Torrens system
would have to inquire in every instance whether the title has been regularly or irregularly
issued. This is contrary to the evident purpose of the law.

The general rule is that every person dealing with registered land may safely rely on
the correctness of the certificate of title issued therefor and the law will in no way oblige him
to go beyond the certificate to determine the condition of the property. Where there is
nothing in the certificate of title to indicate any cloud or vice in the ownership of the property,
or any encumbrance thereon, the purchaser is not required to explore further than what the
Torrens Title upon its face indicates in quest for any hidden defects or inchoate right that
may subsequently defeat his right thereto.

However, a higher degree of prudence is required from one who buys from a person
who is not the registered owner, although the land object of the transaction is registered. In
such a case, the buyer is expected to examine not only the certificate of title but all factual
circumstances necessary for him to determine if there are any flaws in the title of the
transferor. The buyer also has the duty to ascertain the identity of the person with whom he
is dealing with and the latters legal authority to convey the property.

In the present case, it is undisputed that Sps. Sarili purchased the subject property
from Ramos on the strength of the latters ostensible authority to sell under the subject SPA.
The said document, however, readily indicates flaws in its notarial acknowledgment since
the respondents community tax certificate (CTC) number was not indicated thereon. The
due execution and authenticity of the subject SPA are of great significance in determining
the validity of the sale entered into by Victorino and Ramon since the latter only claims to be
the agent of the purported seller (i.e., respondent). Article 1874 of the Civil Code provides
that [w]hen a sale of a piece of land or any interest therein is through an agent, the
authority of the latter shall be in writing; otherwise, the sale shall be void. In other words, if
the subject SPA was not proven to be duly executed and authentic, then it cannot be said
that the foregoing requirement had been complied with; hence, the sale would be void.

After a judicious review of the case, taking into consideration the divergent findings
of the RTC and the CA on the matter, the Court holds that the due execution and
authenticity of the subject SPA were not sufficiently established under Section 20, Rule 132
of the Rules of Court.

At this juncture, it is well to note that it was, in fact, the February 16, 1978 deed of
sale which as the CA found was actually the source of the issuance of TCT No. 262218.
Nonetheless, this document was admitted to be also a forgery. Since Sps. Sarilis claim over
the subject property is based on forged documents, no valid title had been transferred to
them (and, in turn, to petitioners). Verily, when the instrument presented is forged, even if
accompanied by the owners duplicate certificate of title, the registered owner does not
thereby lose his title, and neither does the assignee in the forged deed acquire any right or
title to the property.
MAGDALENA T. VILLASI v. SPOUSES FILOMENO GARCIA AND ERMELINDA HALILI-
GARCIA
G.R. No. 190106. January 15, 2014
J. Perez

There is an exception to the rule that accessory follows the principal. Where it can
be duly established that the owner of the accessory is different from the owner of the
principal, the two properties should be treated separately. Hence, when there are factual
and evidentiary evidence to prove that the building and the lot on which it stands are owned
by different persons, they shall be treated separately.

FACTS:

Petitioner Magdalena T. Villasi (Villasi) engaged the services of respondent Fil-

Garcia Construction, Inc. (FGCI) to construct a seven-storey condominium building. For
failure of Villasi to fully pay the contract price despite several demands, FGCI initiated a suit
for collection of sum of money before the RTC. The RTC ruled in favor of FGCI. The CA,
however, reversed the decision. FGCI filed a petition for review on certiorari, but the same
was denied. To enforce her right as prevailing party, Villasi filed a Motion for Execution. A
Writ of Execution was issued commanding the Sheriff to execute and make effective the
Decision of the Court of Appeals.

To satisfy the judgment, the sheriff levied on a building. While the building was
declared for taxation purposes in the name of FGCI, the lots in which it was erected were
registered in the names of the Spouses Filomeno Garcia and Ermelinda Halili-Garcia
(Spouses Garcia). After the mandatory posting and publication of notice of sale on
execution of real property were complied with, a public auction was scheduled. To forestall
the sale on execution, the Spouses Garcia filed an Affidavit of Third Party Claim and a
Motion to Set Aside Notice of Sale on Execution, claiming that they are the lawful owners of
the property which was erroneously levied upon by the sheriff. To persuade the court a
quo to grant their motion, the Spouses Garcia argued that the building covered by the levy
was mistakenly assessed by the City Assessor in the name of FGCI. The motion was
opposed by Villasi who insisted that its ownership belongs to FGCI and not to the Spouses
Garcia as shown by the tax declaration.

The RTC issue an order directing the Sheriff to hold in abeyance the conduct of the
sale on execution. Villasi moved for reconsideration but the same was denied. Hence, this
petition.

ISSUE:

Whether the building and the lot in which it was erected should be treated separate
properties

RULING:

While it is a hornbook doctrine that the accessory follows the principal, that is, the
ownership of the property gives the right by accession to everything which is produced
thereby, or which is incorporated or attached thereto, either naturally or artificially, such rule
is not without exception. In cases where there is a clear and convincing evidence to prove
that the principal and the accessory are not owned by one and the same person or entity,
the presumption shall not be applied and the actual ownership shall be upheld. In a number
of cases, we recognized the separate ownership of the land from the building and brushed
aside the rule that accessory follows the principal.

In Carbonilla v. Abiera, the court denied the claim of petitioner that, as the owner of
the land, he is likewise the owner of the building erected thereon, for his failure to present
evidence to buttress his position:

To set the record straight, while petitioner may have proven his ownership of the
land, as there can be no other piece of evidence more worthy of credence than a Torrens
certificate of title, he failed to present any evidence to substantiate his claim of ownership or
right to the possession of the building. Like the CA, we cannot accept the Deed of
Extrajudicial Settlement of Estate (Residential Building) with Waiver and Quitclaim of
Ownership executed by the Garcianos as proof that petitioner acquired ownership of the
building. There is no showing that the Garcianos were the owners of the building or that
they had any proprietary right over it. Ranged against respondents proof of possession of
the building since 1977, petitioners evidence pales in comparison and leaves us totally
unconvinced.

In Caltex (Phil.) Inc. v. Felias, the court ruled that while the building is a conjugal
property and therefore liable for the debts of the conjugal partnership, the lot on which the
building was constructed is a paraphernal property and could not be the subject of levy and
sale:

x x x. In other words, when the lot was donated to Felisa by her parents, as owners of the
land on which the building was constructed, the lot became her paraphernal property. The
donation transmitted to her the rights of a landowner over a building constructed on it.
Therefore, at the time of the levy and sale of the sheriff, Lot No. 107 did not belong to the
conjugal partnership, but it was paraphernal property of Felisa. As such, it was not
answerable for the obligations of her husband which resulted in the judgment against him in
favor of Caltex.

The rule on accession is not an iron-clad dictum. On instances where this Court was
confronted with cases requiring judicial determination of the ownership of the building
separate from the lot, it never hesitated to disregard such rule. The case at bar is of similar
import. When there are factual and evidentiary evidence to prove that the building and the
lot on which it stands are owned by different persons, they shall be treated separately. As
such, the building or the lot, as the case may be, can be made liable to answer for the
obligation of its respective owner.

FIRST UNITED CONSTRUCTORS CORPORATION AND BLUE STAR CONSTRUCTION

CORPORATION v. BAYANIHAN AUTOMOTIVE CORPORATION
G.R. No. 164985. January 15, 2014
J. Bersamin

Recoupment is allowed when a part of a claim upon which one is sued by means of
a legal or equitable right resulting from a counterclaim arises out of the same transaction.
Even if there is a series of transaction, such cannot be considered as one and the same
transaction for the purpose of recoupment. In a case where there is an earlier purchase of
the six dump trucks and a latter purchase of the Hino Prime Mover and the Isuzu Transit
Mixer, and as such constitutes a series of transaction, these transactions cannot be
considered as the same transactions for purposes of recoupment. A series of transaction is
different from one and the same transaction.

Legal compensation, on the other hand, applies even if the claims and counterclaims
do not stem from the same transactions. The important factor to consider in legal
compensation is that the parties must be creditors and debtors of each other. Since
petitioners spent for the repairs and spare parts of the alleged defective dump truck, they
become the creditor of the respondent as well as their debtor since the former has not paid
its obligation to the latter. Thus, the requisites of legal compensation are met.

FACTS:

FUCC ordered from the respondent one unit of Hino Prime Mover that the
respondent delivered on the same date it was ordered. Thereafter, FUCC again ordered
from the respondent one unit of Isuzu Transit Mixer that was also delivered to the
petitioners. For the two purchases, FUCC partially paid in cash, and the balance through
post-dated checks.

Upon presentment of the checks for payment, the respondent learned that FUCC
had ordered the payment stopped. The respondent immediately demanded the full
settlement of their obligation from the petitioners, but to no avail. Instead, the petitioners
informed the respondent that they were withholding payment of the checks due to the
breakdown of one of the dump trucks they had earlier purchased from respondent.

Due to the nonpayment of the obligation, the respondents commenced the present
action. In their answer, the petitioners averred that they had stopped the payment on the two
checks because of the respondents refusal to repair the second dump truck; and that they
had informed the respondent of the defects in that unit but the respondent had refused to
comply with its warranty, compelling them to incur expenses for the repair and spare parts. It
was the position of the respondent that the petitioners were not legally justified in
withholding payment of the unpaid balance of the purchase price of the Hino Prime Mover
and the Isuzu Transit Mixer due the alleged defects in one dump truck because the
purchase of the two units was an entirely different transaction from the sale of the dump
trucks, the warranties for which having long expired.The RTC ruled in favor of the
respondent. The CA affirmed the RTC decision. Hence, this petition.
 ISSUES:

1. Whether the petitioners validly exercised the right of recoupment through the withholding of
payment of the unpaid balance of the purchase price of the Hino Prime Mover and the Isuzu
Transit Mixer

2. Whether the costs of the repairs and spare parts for the alleged defective dump truck could be
offset for the petitioners obligations to the respondent

RULING:

Petitioners could not validly resort to recoupment against respondent.

Recoupment (reconvencion) is the act of rebating or recouping a part of a claim upon

which one is sued by means of a legal or equitable right resulting from a counterclaim
arising out of the same transaction. It is the setting up of a demand arising from the same
transaction as the plaintiffs claim, to abate or reduce that claim.
The legal basis for recoupment by the buyer is the first paragraph of Article 1599 of the Civil
Code, viz:

Article 1599. Where there is a breach of warranty by the seller, the buyer may, at his election:

(1) Accept or keep the goods and set up against the seller, the breach of warranty by
way of recoupment in diminution or extinction of the price;

xxxx

When the buyer has claimed and been granted a remedy in anyone of these ways,
no other remedy can thereafter be granted, without prejudice to the provisions of the second
paragraph of article 1191. (Emphasis supplied)

xxxx

It was improper for petitioners to set up their claim for repair expenses and other spare
parts of the dump truck against their remaining balance on the price of the prime mover and
the transit mixer they owed to respondent. Recoupment must arise out of the contract or
transaction upon which the plaintiffs claim is founded. To be entitled to recoupment,
therefore, the claim must arise from the same transaction, i.e., the purchase of the prime
mover and the transit mixer and not to a previous contract involving the purchase of the
dump truck. That there was a series of purchases made by petitioners could not be
considered as a single transaction, for the records show that the earlier purchase of the six
dump trucks was a separate and distinct transaction from the subsequent purchase of the
Hino Prime Mover and the Isuzu Transit Mixer. Consequently, the breakdown of one of the
dump trucks did not grant to petitioners the right to stop and withhold payment of their
remaining balance on the last two purchases.

Legal compensation was permissible.

Legal compensation takes place when the requirements set forth in Article 1278 and
Article 1279 of the Civil Code are present, to wit:
 Article 1278. Compensation shall take place when two persons, in their own right,
are creditors and debtors of each other.

A debt is liquidated when its existence and amount are determined. Accordingly, an
unliquidated claim set up as a counterclaim by a defendant can be set off against the
plaintiffs claim from the moment it is liquidated by judgment. Article 1290 of the Civil
Code provides that when all the requisites mentioned in Article 1279 of the Civil Code are
present, compensation takes effect by operation of law, and extinguishes both debts to the
concurrent amount. With petitioners expenses for the repair of the dump truck being already
established and determined with certainty by the lower courts, it follows that legal
compensation could take place because all the requirements were present.
 DOMINGO GONZALO v. JOHN TARNATE, JR.
G.R. No. 160600. January 15, 2014
J. Bersamin

Tarnate provided the equipment, labor and materials for the project in compliance
with his obligations under the subcontract and the deed of assignment. It was Gonzalo as
the contractor who received the payment for his contract with the DPWH as well as the 10%
retention fee that should have been paid to Tarnate pursuant to the deed of
assignment. Considering that Gonzalo refused despite demands to deliver to Tarnate the
stipulated 10% retention fee that would have compensated the latter for the use of his
equipment in the project, Gonzalo would be unjustly enriched at the expense of Tarnate if
the latter was to be barred from recovering because of the rigid application of the doctrine
of in pari delicto.

The application of the principle of in pari delicto is not always rigid. Where there
exists a reasonable justification for the non-application of the said principle, such as public
policy, the court will not apply the principle.

FACTS:

Petitioner Domingo Gonzalo (Gonzalo) subcontracted to respondent John Tarnate,

Jr. (Tarnate) the supply of materials and labor for the project under the latters business
known as JNT Aggregates. Their agreement stipulated, among others, that Tarnate would
pay to Gonzalo eight percent and four percent of the contract price, respectively, upon
Tarnates first and second billing in the project.

In furtherance of their agreement, Gonzalo executed a deed of assignment whereby he, as

the contractor, was assigning to Tarnate an amount equivalent to 10% of the total collection
from the DPWH for the project. This 10% retention fee was the rent for Tarnates equipment
that had been utilized in the project. In the deed of assignment, Gonzalo further authorized
Tarnate to use the official receipt of Gonzalo Construction in the processing of the
documents relative to the collection of the 10% retention fee and in encashing the check to
be issued by the DPWH for that purpose. The deed of assignment was submitted to the
DPWH. During the processing of the documents for the retention fee, however, Tarnate
learned that Gonzalo had unilaterally rescinded the deed of assignment by means of
an affidavit of cancellation of deed of assignment and that the disbursement voucher for the
10% retention fee had then been issued in the name of Gonzalo, and the retention fee
released to him.

Tarnate demanded the payment of the retention fee from Gonzalo, but to no avail. Thus, he
brought this suit against Gonzalo. In his answer, Gonzalo admitted the deed of
assignment and the authority given therein to Tarnate, but averred that the project had not
been fully implemented because of its cancellation by the DPWH, and that he had then
revoked the deed of assignment. He insisted that the assignment could not stand
independently due to its being a mere product of the subcontract that had been based on his
contract with the DPWH; and that Tarnate, having been fully aware of the illegality and
ineffectuality of the deed of assignment from the time of its execution, could not go to court
with unclean hands to invoke any right based on the invalid deed of assignment or on the
product of such deed of assignment. The RTC ruled in favor of Tarnate. The CA affirmed the
RTC.
ISSUE:

Whether the parties are in pari delicto

RULING:

According to Article 1412 (1) of the Civil Code, the guilty parties to an illegal contract
cannot recover from one another and are not entitled to an affirmative relief because they
are in pari delicto or in equal fault. The doctrine of in pari delicto is a universal doctrine that
holds that no action arises, in equity or at law, from an illegal contract; no suit can be
maintained for its specific performance, or to recover the property agreed to be sold or
delivered, or the money agreed to be paid, or damages for its violation; and where the
parties are in pari delicto, no affirmative relief of any kind will be given to one against the
other.

Nonetheless, the application of the doctrine of in pari delicto is not always rigid. An
accepted exception arises when its application contravenes well-established public policy. In
this jurisdiction, public policy has been defined as that principle of the law which holds that
no subject or citizen can lawfully do that which has a tendency to be injurious to the public or
against the public good.

Unjust enrichment exists, according to Hulst v. PR Builders, Inc., when a person

unjustly retains a benefit at the loss of another, or when a person retains money or property
of another against the fundamental principles of justice, equity and good conscience. The
prevention of unjust enrichment is a recognized public policy of the State, for Article 22 of
the Civil Code explicitly provides that [e]very person who through an act of performance by
another, or 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.

There is no question that Tarnate provided the equipment, labor and materials for the project
in compliance with his obligations under the subcontract and the deed of assignment; and
that it was Gonzalo as the contractor who received the payment for his contract with the
DPWH as well as the 10% retention fee that should have been paid to Tarnate pursuant to
the deed of assignment. Considering that Gonzalo refused despite demands to deliver to
Tarnate the stipulated 10% retention fee that would have compensated the latter for the use
of his equipment in the project, Gonzalo would be unjustly enriched at the expense of
Tarnate if the latter was to be barred from recovering because of the rigid application of the
doctrine of in pari delicto. The prevention of unjust enrichment called for the exception to
apply in Tarnates favor.
 UNION BANK OF THE PHILIPPINES v. DEVELOPMENT BANK OF THE PHILIPPINES
G.R. No. 191555. January 20, 2014
J. Perlas-Bernabe

For legal compensation to apply, all the requisites under Article 1279 of the New Civil
Code must be present. When all the requisites are present, legal compensation applies by
operation of law. Thus, absent any of the requisites enumerated in Article 1279, legal
compensation will not take effect. Hence, when a partys assumed obligation to another
becomes due and demandable upon the happening of condition, unless the condition
happens, the debts are not due and demandable. As such, the requisite that the debts or
obligations should be due and demandable for legal compensation to apply is not met.

FACTS:

Foodmasters, Inc. (FI) had outstanding loan obligations to both Union Banks
predecessor-in-interest, Bancom Development Corporation (Bancom), and to DBP.
DBP entered into a separate agreement with Bancom (Assumption Agreement) whereby the
former confirmed its assumption of FIs obligations to Bancom undertook to remit up to 30%
of any and all rentals due from FI to Bancom (subject rentals) which would serve as
payment of the assumed obligations, to be paid in monthly installments.

Meanwhile, FI assigned its leasehold rights under the Lease Agreement to

Foodmasters Worldwide, Inc. (FW). Bancom conveyed all its receivables, including, among
others, DBPs assumed obligations, to Union Bank.

Claiming that the subject rentals have not been duly remitted despite its repeated
demands, Union Bank filed a collection case against DBP before the RTC. In opposition,
DBP countered, among others, that the obligations it assumed were payable only out of the
rental payments made by FI. Thus, since FI had yet to pay the same, DBPs obligation to
Union Bank had not arisen. In addition, DBP sought to implead FW as third party-defendant
in its capacity as FIs assignee and, thus, should be held liable to Union Bank.

The RTC ruled in favor of Union Bank. DBP then elevated the matter to the CA. The
CA set aside the RTC ruling. It rejected Union Banks claim that DBP has the direct
obligation to remit the subject rentals not only from FWs rental payments but also out of its
own resources since said claim contravened the plain meaning of the Assumption
Agreement which specifies that the payment of the assumed obligations shall be made out
of the portion of the lease rentals or part of the proceeds of the sale of those properties of
[FI] conveyed to DBP. The monthly installments in satisfaction of the assumed
obligations would still have to be first sourced from said lease rentals as stipulated in the
assumption agreement. The CA ruled that DBP did not default in its obligations to remit the
subject rentals to Union Bank precisely because it had yet to receive the rental payments of
FW.

Both DBP and Union Bank elevated the matter to the Supreme Court via petition for
review on certiorari. The SC upheld the CAs finding that while DBP directly assumed FIs
obligations to Union Bank, DBP was only obliged to remit to the latter 30% of the lease
rentals collected from FW, from which any deficiency was to be settled by DBP. The Court
resolution became final and executory. Union Bank, then, filed a motion for execution before
the RTC. A writ of execution and garnishment was issued. DBP filed a motion for
reconsideration. The motion was denied, thus, prompting DBP to file a petition for certiorari.
 The CA dismissed the petition. DBP elevated the case to the SC. The SC set aside the CA
ruling. The court upheld the CAs finding that while DBP directly assumed FIs obligations to
Union Bank, DBP was only obliged to remit to the latter 30% of the lease rentals collected
from FW, from which any deficiency was to be settled by DBP.

Union Bank filed a Manifestation and Motion to Affirm Legal Compensation praying
that the RTC apply legal compensation between itself and DBP in order to offset the return
of the funds it previously received from DBP. Union Bank anchored its motion on two
grounds which were allegedly not in existence prior to or during trial, namely: (a) DBPs
assumed obligations became due and demandable; and (b) considering that FWI became
non-operational and non-existent, DBP became primarily liable to the balance of its
assumed obligation, which as of Union Banks computation after its claimed set-off.

ISSUE:

Whether Union Banks motion to affirm legal compensation must be granted

RULING:

Compensation is defined as a mode of extinguishing obligations whereby two

persons in their capacity as principals are mutual debtors and creditors of each other with
respect to equally liquidated and demandable obligations to which no retention or
controversy has been timely commenced and communicated by third parties. The requisites
therefor are provided under Article 1279 of the Civil Code which reads as follows:

Art. 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same time a
principal creditor of the other;

(2) That both debts consist in a sum of money, or if the things due are consumable, they be of
the same kind, and also of the same quality if the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by third
persons and communicated in due time to the debtor. (Emphases and underscoring
supplied)

The rule on legal compensation is stated in Article 1290 of the Civil Code which
provides that [w]hen all the requisites mentioned in Article 1279 are present, compensation
takes effect by operation of law, and extinguishes both debts to the concurrent amount, even
though the creditors and debtors are not aware of the compensation.

In this case, Union Bank filed a motion to seek affirmation that legal compensation
had taken place in order to effectively offset (a) its own obligation to return the funds it
previously received from DBP as directed under the Writ of Execution with (b) DBPs
assumed obligations under the Assumption Agreement. However, legal compensation could
not have taken place between these debts for the apparent reason that requisites 3 and 4
under Article 1279 of the Civil Code are not present. Since DBPs assumed obligations to
Union Bank for remittance of the lease payments are contingent on the prior payment
thereof by [FW] to DBP, it cannot be said that both debts are due (requisite 3 of Article 1279
of the Civil Code). Also, in the same ruling, the Court observed that any deficiency that DBP
had to make up for the full satisfaction of the assumed obligations cannot be determined
until after the satisfaction of Foodmasters obligation to DBP. In this regard, it cannot be
concluded that the same debt had already been liquidated, and thereby became
demandable (requisite 4 of Article 1279 of the Civil Code).
 PEREGRINA MACUA VDA. DE AVENIDO v. TECLA HOYBIA AVENIDO
G.R. No. 173540. January 22, 2014
J. Perez

Semper praesumitur pro matrimonio Always presume marriage. The absence of

a Marriage Certificate does not ipso facto mean that no marriage took place.

Marriage may be proven by any competent and relevant evidence. Hence, when one of
the parties to the marriage or one of the witnesses to the marriage testifies that the marriage
took place, it has been held to be admissible to prove the fact of such marriage. Thus, the
testimony of Tecla (wife) and Adelina, who was present during the marriage ceremony,
serves as an admissible evidence to prove the fact of marriage between Tecla and
Eustaquio.

FACTS:

Respondent Tecla Hoybia Avenido (Tecla) instituted a Complaint for Declaration of

Nullity of Marriage against Peregrina Macua Vda. de Avenido (Peregrina) on the ground that
she (Tecla), is the lawful wife of the deceased Eustaquio Avenido (Eustaquio). In her
complaint, Tecla alleged that her marriage to Eustaquio was solemnized on 30 September
1942 in Talibon, Bohol in rites officiated by the Parish Priest of the said town. According to
her, the fact of their marriage is evidenced by a Marriage Certificate recorded with the Office
of the Local Civil Registrar (LCR) of Talibon, Bohol. However, due to World War II, records
were destroyed. Thus, only a Certification was issued by the LCR.

In 1979, Tecla learned that her husband Eustaquio got married to another woman by
the name of Peregrina, which marriage she claims must be declared null and void for being
bigamous an action she sought to protect the rights of her children over the properties
acquired by Eustaquio.

Peregrina filed her answer to the complaint with counterclaim, essentially averring
that she is the legal surviving spouse of Eustaquio who died on 22 September 1989 in
Davao City, their marriage having been celebrated on 30 March 1979 at St. Jude Parish in
Davao City. She also contended that the case was instituted to deprive her of the properties
she owns in her own right and as an heir of Eustaquio.

The RTC denied Teclas petition as well as Peregrinas counterclaim. Tecla appealed
to the CA. The CA ruled in favor of Tecla by declaring the validity of her marriage to
Eustaquio, while pronouncing on the other hand, the marriage between Peregrina and
Eustaquio to be bigamous, and thus, null and void.

ISSUE:

Whether the existence of the marriage of Tecla and Eustaquio has been duly proven

RULING:

In the absence of the marriage contract, the trial court did not give credence to the
testimony of Tecla and her witnesses as it considered the same as mere self-serving
assertions. Superior significance was given to the fact that Tecla could not even produce her
own copy of the said proof of marriage.
 The CA, on the other hand, concluded that there was a presumption of lawful
marriage between Tecla and Eustaquio as they deported themselves as husband and wife
and begot four (4) children. Such presumption, supported by documentary evidence
consisting of the same Certifications disregarded by the trial court, as well as the testimonial
evidence especially that of Adelina Avenido-Ceno, created, according to the CA, sufficient
proof of the fact of marriage. Contrary to the trial courts ruling, the CA found that its
appreciation of the evidence presented by Tecla is well in accord with Section 5, Rule 130 of
the Rules of Court.

The court upholds the reversal by the CA of the decision of the trial court. As
correctly stated by the appellate court:

In the case at bench, the celebration of marriage between [Tecla] and EUSTAQUIO
was established by the testimonial evidence furnished by [Adelina] who appears to be
present during the marriage ceremony, and by [Tecla] herself as a living witness to the
event. The loss was shown by the certifications issued by the NSO and LCR of Talibon,
Bohol. These are relevant, competent and admissible evidence. Since the due execution
and the loss of the marriage contract were clearly shown by the evidence presented,
secondary evidence testimonial and documentary may be admitted to prove the fact of
marriage.
x x x x

The court a quo committed a reversible error when it disregarded (1) the testimonies of
[Adelina], the sister of EUSTAQUIO who testified that she personally witnessed the wedding
celebration of her older brother EUSTAQUIO and [Tecla] on 30 September 1942 at Talibon,
Bohol; [Climaco], the eldest son of EUSTAQUIO and [Tecla], who testified that his mother
[Tecla] was married to his father, EUSTAQUIO, and [Tecla] herself; and (2) the documentary
evidence mentioned at the outset. It should be stressed that the due execution and the loss
of the marriage contract, both constituting the condition sine qua non for the introduction of
secondary evidence of its contents, were shown by the very evidence the trial court has
disregarded.

The starting point then, is the presumption of marriage.

As early as the case of Adong v. Cheong Seng Gee, this Court has elucidated on the rationale
behind the presumption:

The basis of human society throughout the civilized world is that of marriage. Marriage in this
jurisdiction is not only a civil contract, but it is a new relation, an institution in the
maintenance of which the public is deeply interested. Consequently, every intendment of
the law leans toward legalizing matrimony. Persons dwelling together in apparent
matrimony are presumed, in the absence of any counter-presumption or evidence special to
the case, to be in fact married. The reason is that such is the common order of society, and
if the parties were not what they thus hold themselves out as being, they would be living in
the constant violation of decency and of law. A presumption established by our Code of Civil
Procedure is that a man and a woman deporting themselves as husband and wife have
entered into a lawful contract of marriage. (Sec. 334, No. 28) Semper praesumitur pro
matrimonio Always presume marriage.
 In the case at bar, the establishment of the fact of marriage was completed by the
testimonies of Adelina and Tecla; the unrebutted fact of the birth within the cohabitation of
Tecla and Eustaquio of four (4) children coupled with the certificates of the childrens birth
and baptism; and the certifications of marriage issued by the parish priest of the Most Holy
Trinity Cathedral of Talibon, Bohol.

FEBRUARY 2014

IGLESIA FILIPINA INDEPENDIENTE v. HEIRS OF BERNARDINO TAEZA

G.R. No. 179597, February 03, 2014
J. Peralta

Since respondents predecessor-in-interest obtained a transfer certificate of title in his

name over the property in question and the person supposedly transferring ownership was not
authorized to do so, the property had evidently been acquired by mistake. Thus, an implied trust
for the benefit of the person from whom the property comes is created since the party acquired
the property through mistake or fraud. An implied trust arises from the nature of circumstances
of the consideration involved in a transaction. It is created to satisfy the demands of justice and
equity.

FACTS:

The plaintiff-appellee Iglesia Filipina Independiente (IFI, for brevity), a duly registered
religious corporation, was the owner of a parcel of land described as Lot 3653, containing an
area of 31,038 square meters, situated at Ruyu (now Leonarda), Tuguegarao, Cagayan, and
covered by Original Certificate of Title No. P-8698. The said lot is subdivided as follows: Lot
Nos. 3653-A, 3653-B, 3653-C, and 3653-D.

The plaintiff-appellee, through its then Supreme Bishop Rev. Macario Ga, sold Lot 3653-
D to one Bienvenido de Guzman and Lot Nos. 3653-A and 3653-B to the defendant Bernardino
Taeza on installment. Taeza allegedly completed the payments.

A complaint for the annulment of the Deed of Sale with Mortgage between plaintiff-
appellee, through its then Supreme Bishop Rev. Macario Ga, and Bernardino Taeza was filed by
the Parish Council of Tuguegarao, Cagayan with the then Court of First Instance of Tuguegarao,
Cagayan, against their Supreme Bishop Macario Ga and the defendant Bernardino Taeza.

The said complaint was, however, subsequently dismissed on the ground that the
plaintiffs therein lacked the personality to file the case. Meanwhile, the defendant Bernardino
Taeza registered the subject parcels of land. In January 1990, a complaint for annulment of sale
was again filed by the plaintiff-appellee IFI, this time through Supreme Bishop Most Rev. Tito
Pasco, against the defendant-appellant, with the Regional Trial Court.

The RTC ruled that the deed of sale executed by and between Rev. Ga and the
defendant-appellant is null and void. Petitioner appealed the foregoing Decision to the CA. The
CA reversed and set aside the RTC ruling. The CA ruled that petitioner, being a corporation
sole, validly transferred ownership over the land in question through its Supreme Bishop, who
was at the time the administrator of all properties and the official representative of the church. It
further held that [t]he authority of the then Supreme Bishop Rev. Ga to enter into a contract and
represent the plaintiff-appellee cannot be assailed, as there are no provisions in its constitution
and canons giving the said authority to any other person or entity. Petitioner then elevated the
matter to this Court via a petition for review on certiorari.

ISSUE:

Whether Bernardino Taeza acquired ownership over the subject parcels of land

RULING:

The Constitution and Canons of the Philippine Independent Church provides in Art. IV
(a) that [a]ll real properties of the Church located or situated in such parish can be disposed of
only with the approval and conformity of the laymen's committee, the parish priest, the Diocesan
Bishop, with sanction of the Supreme Council, and finally with the approval of the Supreme
Bishop, as administrator of all the temporalities of the Church.

Evidently, under petitioner's Canons, any sale of real property requires not just the
consent of the Supreme Bishop but also the concurrence of the laymen's committee, the parish
priest, and the Diocesan Bishop, as sanctioned by the Supreme Council. However, petitioner's
Canons do not specify in what form the conformity of the other church entities should be made
known. Thus, as petitioner's witness stated, in practice, such consent or approval may be
assumed as a matter of fact, unless some opposition is expressed.

The Canons require that ALL the church entities listed in Article IV (a) thereof should give
its approval to the transaction. Thus, when the Supreme Bishop executed the contract of sale of
petitioner's lot despite the opposition made by the laymen's committee, he acted beyond his
powers.

This case clearly falls under the category of unenforceable contracts mentioned in Article
1403, paragraph (1) of the Civil Code, which provides, thus:

Art. 1403. The following contracts are unenforceable, unless they are
ratified:
(1) Those entered into in the name of another person by one who has been given
no authority or legal representation, or who has acted beyond his powers;

In the present case, however, respondents' predecessor-in-interest, Bernardino Taeza,

had already obtained a transfer certificate of title in his name over the property in question.
Since the person supposedly transferring ownership was not authorized to do so, the property
had evidently been acquired by mistake. In Vda. de Esconde v. Court of Appeals the Court
affirmed the trial court's ruling that the applicable provision of law in such cases is Article 1456
of the Civil Code which states that [i]f property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the
person from whom the property comes.

Construing this provision of the Civil Code, in Philippine National Bank v. Court of
Appeals, the Court stated:

A deeper analysis of Article 1456 reveals that it is not a trust in the

technical sense for in a typical trust, confidence is reposed in one person who
is named a trustee for the benefit of another who is called the cestui que trust,
respecting property which is held by the trustee for the benefit of the cestui
 que trust. A constructive trust, unlike an express trust, does not emanate from,
or generate a fiduciary relation. While in an express trust, a beneficiary and a
trustee are linked by confidential or fiduciary relations, in a constructive trust,
there is neither a promise nor any fiduciary relation to speak of and the
so-called trustee neither accepts any trust nor intends holding the
property for the beneficiary.

The concept of constructive trusts was further elucidated in the same case, as follows:

. . . implied trusts are those which, without being expressed, are

deducible from the nature of the transaction as matters of intent or which are
superinduced on the transaction by operation of law as matters of equity,
independently of the particular intention of the parties. In turn, implied trusts are
either resulting or constructive trusts. These two are differentiated from each
other as follows:

Resulting trusts are based on the equitable doctrine that

valuable consideration and not legal title determines the equitable
title or interest and are presumed always to have been
contemplated by the parties. They arise from the nature of
circumstances of the consideration involved in a transaction
whereby one person thereby becomes invested with legal title but
is obligated in equity to hold his legal title for the benefit of
another. On the other hand, constructive trusts are created by
the construction of equity in order to satisfy the demands of
justice and prevent unjust enrichment. They arise contrary to
intention against one who, by fraud, duress or abuse of
confidence, obtains or holds the legal right to property which
he ought not, in equity and good conscience, to hold. (Italics
supplied)

A constructive trust having been constituted by law between respondents as trustees

and petitioner as beneficiary of the subject property, may respondents acquire ownership over
the said property? The Court held in the same case of Aznar, that unlike in express trusts and
resulting implied trusts where a trustee cannot acquire by prescription any property entrusted to
him unless he repudiates the trust, in constructive implied trusts, the trustee may acquire
the property through prescription even if he does not repudiate the relationship. It is then
incumbent upon the beneficiary to bring an action for reconveyance before prescription bars the
same.

An action for reconveyance based on an implied or constructive trust must

perforce prescribe in ten years and not otherwise. A long line of decisions of this Court,
and of very recent vintage at that, illustrates this rule. Undoubtedly, it is now well-settled
that an action for reconveyance based on an implied or constructive trust prescribes in ten
years from the issuance of the Torrens title over the property.

It has also been ruled that the ten-year prescriptive period begins to run from
the date of registration of the deed or the date of the issuance of the certificate of
title over the property, x x x.
 Here, the present action was filed on January 19, 1990, while the transfer
certificates of title over the subject lots were issued to respondents' predecessor-in-
interest, Bernardino Taeza, only on February 7, 1990. Clearly, therefore, petitioner's
complaint was filed well within the prescriptive period stated above, and it is only just that
the subject property be returned to its rightful owner.
TEODORO S. TEODORO (DECEASED), substituted by his heirs/sons NELSON TEODORO
AND ROLANDO TEODORO v. DANILO ESPINO, ROSARIO SANTIAGO, JULIANA
CASTILLO, PAULINA LITAO, RAQUEL RODRIGUEZ, RUFINA DELA CRUZ, AND
LEONILA CRUZ
G.R. No. 189248, February 05, 2014
J. Perez

When a certain property remains to be registered in the name of the deceased ancestor,
the property becomes the co-owned property of all the heirs entitled to it. All of them are entitled
to exercise ownership and possession over the said property. Since, both parties assert prior
and exclusive physical possession in the concept of owner acquired through succession from
the same decedent, their aunt and grand aunt, respectively, Petra, and in turn, Petra inherited
the property from her father Genaro, in whose name the subject property is still registered, all of
the heirs are co-owners of the property. As co-owners, they are all entitled to the use and
possession of the property.

FACTS:

The subject property is a portion within Cadastral Lot No. 2476 with a total area of 248
square meters, covered by Tax Declaration No. 99-05003-0246, registered in the name of
Genaro, long deceased ascendant of all the parties. The subject property pertains to the vacant
lot where the old ancestral house of Genaro stood until its demolition in June 2004, at the
instance of Teodoro Teodoro.

Genaro had five children: Santiago; Maria, from whom respondents descended and
trace their claim of ownership and right of possession; Petra, Mariano, Teodoro Teodoros father;
and Ana. Genaro and his children are all deceased.

Respondents respective parents are first cousins of Teodoro Teodoro. All parties are
collateral relatives of Petra Teodoro: Teodoro Teodoro is her nephew while respondents are her
grandnephews and grandnieces, descendants of Petras sister, Maria Teodoro.

Of all Genaros children, only Petra occupied the subject property, living at the ancestral
house. Genaros other children, specifically Santiago, Maria and Mariano were bequeathed, and
stayed at, a different property within the same locality, still from the estate of their father.

After Petras death, her purported will, a holographic will, was probated in Special
Proceedings, which Decision on the wills extrinsic validity has become final and executory. In
the will, Petra, asserting ownership, devised the subject property to Teodoro Teodoro. Teodoro
Teodoro effected the demolition of the ancestral house, intending to use the subject property for
other purposes.

Soon thereafter, respondents, who resided at portions of Lot No. 2476 that surround the
subject property on which the ancestral house previously stood, erected a fence on the
surrounding portion, barricaded its frontage, and put up a sign thereat, effectively dispossessing
Teodoro Teodoro of the property bequeathed to him by Petra.
After Teodoro Teodoros demand for respondents to vacate the subject property went unheeded,
he filed the complaint for forcible entry against respondents. In their Answer, respondents
asserted their own ownership and possession of the subject property.
 MTC dismissed the complaint, ruling on the issue of ownership and ultimately resolving
the issue of who between Teodoro Teodoro and respondents had a better right to possess the
subject property. The RTC, in its appellate jurisdiction over forcible entry cases, acting on
Teodoro Teodoros appeal, adopted the factual findings of the MTC, but reversed the ruling,
ruled in favor of Teodoro Teodoro and ordered the ejectment of respondents from the subject
property.

Respondents then appealed the RTCs decision to the Court of Appeals. The appellate
court reversed the RTC, likewise dismissed the complaint as the MTC had done, but did not
reach the same result as that of the inferior court. In all, the appellate court found that Teodoro
Teodoro (substituted by his heirs Nelson and Rolando Teodoro at that juncture) failed to
discharge the burden of proof that he had prior actual physical possession of the subject
[property] before it was barricaded by [respondents] to warrant the institution of the forcible entry
suit. Hence, this petition.

ISSUE:

Whether the act of respondents in barricading the frontage of the portion of Lot No. 2476 on
which stood the ancestral house occupied by Petra amounted to Teodoro Teodoros unlawful
dispossession thereof through the forcible entry of respondents

RULING:

In this case, both parties assert prior and exclusive physical possession in the concept of
owner acquired through succession from the same decedent, their aunt and grand aunt,
respectively, Petra. In turn, Petra inherited the property from her father Genaro, in whose name
the subject property is still registered.

The court grants the petition. It reverses the decision of the Court of Appeals and restore
the decision of the RTC on the appeal reversing the MTC.

The court likewise affirms the finding of fact by the RTC which is decisive of the issue
that has remained unresolved inspite of a summary procedure and two appellate reviews of the
forcible entry case filed by Teodoro Teodoro.

In the sense that Teodoro Teodoro has not proven exclusive ownership, the MTC was
right. But exclusive ownership of Lot No. 2476 or a portion thereof is not in this case required of
Teodoro Teodoro for him to be entitled to possession. Co-ownership, the finding of both the
MTC at first instance and by the RTC on appeal, is sufficient. The pertinent provisions of the
Civil Code state:

Art. 484. There is co-ownership whenever the ownership of an undivided

thing or right belongs to different persons.

Art. 1078. When there are two or more heirs, the whole estate of the
decedent is, before its partition, owned in common by such heirs, subject to the
payment of debts of the deceased.

Certainly, and as found by the trial courts, the whole of Lot No. 2476 including the
portion now litigated is, owing to the fact that it has remained registered in the name of
Genaro who is the common ancestor of both parties herein, co-owned property. All, or both
Teodoro Teodoro and respondents are entitled to exercise the right of possession as co-
owners. Neither party can exclude the other from possession. Although the property
remains unpartitioned, the respondents in fact possess specific areas. Teodoro Teodoro
can likewise point to a specific area, which is that which was possessed by Petra. Teodoro
Teodoro cannot be dispossessed of such area, not only by virtue of Petras bequeathal in
his favor but also because of his own right of possession that comes from his co-
ownership of the property. As the RTC concluded, petitioners, as heirs substituting
Teodoro Teodoro in this suit, should be restored in the lawful possession of the disputed
area.
 PASIG PRINTING CORPORATION v. ROCKLAND CONSTRUCTION COMPANY, INC.
G.R. No. 193592
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE PRESIDENTIAL
COMMISSION ON GOOD GOVERNMENT (PCGG) AND MID-PASIG LAND
DEVELOPMENT CORPORATION (MPLDC) v. ROCKLAND CONSTRUCTION COMPANY,
INC.
G.R. No. 193610
MID-PASIG LAND DEVELOPMENT CORPORATION (MPLDC) v. ROCKLAND
CONSTRUCTION COMPANY, INC.
G.R. No. 193686, February 05, 2014
J. Mendoza

The original lease contract entered into by and between MPLDC and ECRM, the
predecessor in interest of Rockland, had long expired in 2003. As such, the right of Rockland to
possess the property has expired as well. It has been held by the court the a partys right to
possess a property can emanate from a contract, such as a contract of lease. When the
contract expires, the partys leasehold rights expire as well. He can no longer exercise any
possessory right over the said property.

FACTS:

MPLDC leased the subject property to ECRM Enterprises (ECRM). Subsequently,

ECRM assigned all its rights in the contract of lease including the option to renew to Rockland.
Later, Rockland erected a building on the area and subleased certain portions to MC Home
Depot. Thereafter, MPLDC demanded that Rockland vacate the property.

This had been the subject of three cases filed with the trial courts. The first was filed by
Rockland, a civil case for specific performance, asking MPLDC to execute a 3-year extended
contract of lease in its favor. The second was MPLDC to protect its interest an unlawful
detainer case. The third case was an indirect contempt case before the RTC filed by Rockland
against MPLDC. The crux of this controversy is the issue of possession covering the subject
property registered in the name of MPLDC.

All of the cases were elevated to the appellate and higher courts. In one of the three
case, the CA decision in the second case elevated to the Supreme Court entitled Mid-Pasig
Land Development Corporation v. Mario Tablante (Tablante), the SC ruled that a remand to the
MeTC for the unlawful detainer case would have been proper if not for the circumstances which
rendered the issue of possession moot and academic.

Despite its mootness as held in Tablante, the issue of possession again surfaced in
the third case. The RTC, however, awarded the possession to MPLDC with Rockland being
ordered to refrain from exercising any possessory rights over the same.

PPC moved to intervene in the third case claiming interest over the property based on
an alleged option to lease granted to it by MPLDC. The RTC issued the Omnibus Order denying
Rocklands motion for reconsideration on the dismissal of the indirect contempt case and
granting PPCs motion to intervene. The resolution was implemented by the Sheriff,
thus, possession of the subject property was turned over to PPC on the basis of the option to
lease agreement with MPLDC.
 Believing that the affirmation awarded the possession of the property to it, Rockland
sought restoration in the possession of the subject. In the course of the execution proceedings,
the trial court issued flip-flopping orders, the last (August 10, 2007 RTC Order) of
which awarded the possession to PPC.

With movants motion for reconsideration denied by the CA, petitions for certiorari under
Rule 45 were filed before this Court. The Court dismissed the petitions reiterating its
pronouncement in Tablante that the issue of possession and other related issues had become
moot and academic.

Hence, the filing of this motion for reconsideration seeking clarification and/or
reconsideration.

ISSUE:

Whether Rockland had a right to possess the subject property

RULING:

After a thorough review of the records, the Court agrees with the movants in their
submission that the dismissal of the petitions would affirm an erroneous ruling, which effectively
restored the possession of the subject property to Rockland despite the expiration of its contract
of lease.

Although the Tablante decision considered the main case or the issue of possession as
moot and academic, as can be gleaned therefrom, the Court granted the petition and reversed
the CA. In the process, the Court adjudicated on Rocklands right to possess the subject
property. The Court clearly stated that the said right was already extinguished by virtue of the
expiration of Rocklands leasehold rights way back in 2003.

Thus, the movants, in filing their motions, seek the Courts guidance in determining
whether the CA erred in not taking into consideration the mootness of Rocklands claim when it
issued an order commanding the restoration of the property to the latter.

The movants submit that by virtue of the Courts ruling in Tablante, which already
attained finality, the CA has erred in declaring that Rockland still has the right to possess the
subject property.

The Court agrees.

The CA erred in ordering the restoration of the possession to Rockland. The rule is that:

It is a rule of universal application, almost, that courts of justice constituted

to pass upon substantial rights will not consider questions in which no actual
interests are involved; they decline jurisdiction of moot cases. And where the issue
has become moot and academic, there is no justiciable controversy, so that a
declaration thereon would be of no practical use or value. There is no actual
substantial relief to which petitioners would be entitled and which would be negated
by the dismissal of the petition.
 Granting that the CA was not aware of Tablante, nonetheless, it had no factual or
legal basis in ordering the restoration of the possession of the subject property to
Rockland. It was very clear in the records that the original lease contract entered into by
and between MPLDC and ECRM, the predecessor in interest of Rockland, had long
expired in 2003.
 REPUBLIC OF THE PHILIPPINES v. EMMANUEL C. CORTEZ
G.R. No. 186639, February 05, 2014
J. Reyes

Applicants for registration of title must sufficiently establish first, that the subject land
forms part of the disposable and alienable lands of the public domain; second, that the applicant
and his predecessors-in-interest have been in open, continuous, exclusive, and notorious
possession and occupation of the same; and third, that it is under a bona fide claim of
ownership since June 12, 1945, or earlier. In the absence any of the enumerated requisites, the
application for registration of title of a land will not prosper. Since petitioner failed to comply with
the legal requirements for the registration of the subject property, he cannot be granted with a
registration of title of the property under his name.

FACTS:

Respondent Emmanuel C. Cortez (Cortez) filed with the RTC an application for judicial
confirmation of title over a parcel of land. In support of his application, Cortez submitted, inter
alia, the following documents: (1) tax declarations for various years from 1966 until 2005; (2)
survey plan of the property, with the annotation that the property is classified as alienable and
disposable; (3) technical description of the property, with a certification issued by a geodetic
engineer; (4) tax clearance certificate; (5) extrajudicial settlement of estate dated March 21,
1998, conveying the subject property to Cortez; and (6) escritura de particion extrajudicial dated
July 19, 1946, allocating the subject property to Felicisima Cotas Cortez mother.

As there was no opposition, the RTC issued an Order of General Default and Cortez
was allowed to present his evidence ex-parte. Subsequently, the RTC rendered a
Decision, which granted Cortez application for registration.

The Republic of the Philippines (petitioner), represented by the Office of the Solicitor
General, appealed to the CA, alleging that the RTC erred in granting the application for
registration despite the failure of Cortez to comply with the requirements for original registration
of title. The petitioner pointed out that, although Cortez declared that he and his predecessors-
in-interest were in possession of the subject parcel of land since time immemorial, no document
was ever presented that would establish his predecessors-in-interests possession of the same
during the period required by law. That petitioner claimed that Cortez assertion that he and his
predecessors-in-interest had been in open, adverse, and continuous possession of the subject
property for more than thirty (30) years does not constitute well-neigh incontrovertible evidence
required in land registration cases; that it is a mere claim, which should not have been given
weight by the RTC. Further, the petitioner alleged that there was no certification from any
government agency that the subject property had already been declared alienable and
disposable. As such, the petitioner claims, Cortez possession of the subject property, no matter
how long, cannot confer ownership or possessory rights.

The CA dismissed petitioners appeal and affirmed the RTC decision. Hence, this instant
petition.

ISSUE:

Whether the Cortez application for registration should be granted

RULING:
 Applicants for original registration of title to land must establish compliance with the
provisions of Section 14 of P.D. No. 1529, which pertinently provides that:

Sec. 14. Who may apply. The following persons may file in the proper Court of First
Instance an application for registration of title to land, whether personally or through their
duly authorized representatives:

(1) Those who by themselves or through their predecessors-in interest have been in
open, continuous, exclusive and notorious possession and occupation of alienable
and disposable lands of the public domain under a bona fide claim of ownership
since June 12, 1945, or earlier.

(2) Those who have acquired ownership of private lands by prescription under the
provision of existing laws.

xxxx

After a careful scrutiny of the records of this case, the Court finds that Cortez failed to
comply with the legal requirements for the registration of the subject property under Section
14(1) and (2) of P.D. No. 1529.

Section 14(1) of P.D. No. 1529 refers to the judicial confirmation of imperfect or
incomplete titles to public land acquired under Section 48(b) of C.A. No. 141, as amended by
P.D. No. 1073. Under Section 14(1) [of P.D. No. 1529], applicants for registration of title must
sufficiently establish first, that the subject land forms part of the disposable and alienable lands
of the public domain; second, that the applicant and his predecessors-in-interest have been in
open, continuous, exclusive, and notorious possession and occupation of the same; and third,
that it is under a bona fide claim of ownership since June 12, 1945, or earlier.

The first requirement was not satisfied in this case. To prove that the subject property
forms part of the alienable and disposable lands of the public domain, Cortez adduced in
evidence a survey plan Csd-00-000633 (conversion-subdivision plan of Lot 2697, MCadm 594-
D, Pateros Cadastral Mapping) prepared by Geodetic Engineer Oscar B. Fernandez and
certified by the Lands Management Bureau of the DENR.

However, Cortez reliance on the foregoing annotation in the survey plan is amiss; it
does not constitute incontrovertible evidence to overcome the presumption that the subject
property remains part of the inalienable public domain. In Republic of the Philippines v. Tri-Plus
Corporation, the Court clarified that, the applicant must at the very least submit a certification
from the proper government agency stating that the parcel of land subject of the application for
registration is indeed alienable and disposable.

The annotation in the survey plan presented by Cortez is not the kind of evidence
required by law as proof that the subject property forms part of the alienable and disposable
land of the public domain. Cortez failed to present a certification from the proper government
agency as to the classification of the subject property. Cortez likewise failed to present any
evidence showing that the DENR Secretary had indeed classified the subject property as
alienable and disposable. Having failed to present any incontrovertible evidence, Cortez claim
that the subject property forms part of the alienable and disposable lands of the public domain
must fail.
 Anent the second and third requirements, the Court finds that Cortez likewise failed to
establish the same. Cortez failed to present any evidence to prove that he and his
predecessors-in-interest have been in open, continuous, exclusive, and notorious possession
and occupation of the subject property since June 12, 1945, or earlier. Cortez was only able to
present oral and documentary evidence of his and his mothers ownership and possession of
the subject property since 1946, the year in which his mother supposedly inherited the same.

Other than his bare claim that his family possessed the subject property since time
immemorial, Cortez failed to present any evidence to show that he and his predecessors-in-
interest indeed possessed the subject property prior to 1946; it is a mere claim and not factual
proof of possession. It is a rule that general statements that are mere conclusions of law and
not factual proof of possession are unavailing and cannot suffice. An applicant in a land
registration case cannot just harp on mere conclusions of law to embellish the application but
must impress thereto the facts and circumstances evidencing the alleged ownership and
possession of the land.

Further, the earliest tax declaration presented by Cortez was only in 1966. Cortez failed
to explain why, despite his claim that he and his predecessors-in-interest have been in
possession of the subject property since time immemorial, it was only in 1966 that his
predecessors-in-interest started to declare the same for purposes of taxation.

That Cortez and his predecessors-in-interest have been in possession of the subject
property for fifty-seven (57) years at the time he filed his application for registration in 2003
would likewise not entitle him to registration thereof under Section 14(2) of P.D. No. 1529.

Section 14(2) of P.D. No. 1529 sanctions the original registration of lands acquired by
prescription under the provisions of existing laws. As Section 14(2) [of P.D. No. 1529]
categorically provides, only private properties may be acquired thru prescription and under
Articles 420 and 421 of the Civil Code, only those properties, which are not for public use, public
service or intended for the development of national wealth, are considered private.

The Court emphasized that there must be an official declaration by the State that the
public dominion property is no longer intended for public use, public service, or for the
development of national wealth before it can be acquired by prescription; that a mere
declaration by government officials that a land of the public domain is already alienable and
disposable would not suffice for purposes of registration under Section 14(2) of P.D. No. 1529.
The Court further stressed that the period of acquisitive prescription would only begin to run
from the time that the State officially declares that the public dominion property is no longer
intended for public use, public service, or for the development of national wealth.

Accordingly, although lands of the public domain that are considered patrimonial may be
acquired by prescription under Section 14(2) of P.D. No. 1529, before acquisitive prescription
could commence, the property sought to be registered must not only be classified as alienable
and disposable; it must also be declared by the State that it is no longer intended for public use,
public service or the development of the national wealth. Thus, absent an express declaration
by the State, the land remains to be property of public dominion.

The Court finds no evidence of any official declaration from the state attesting to the
patrimonial character of the subject property. Cortez failed to prove that acquisitive prescription
has begun to run against the State, much less that he has acquired title to the subject property
by virtue thereof. It is of no moment that Cortez and his predecessors-in-interest have been in
possession of the subject property for 57 years at the time he applied for the registration of title
thereto. [I]t is not the notorious, exclusive and uninterrupted possession and occupation of an
alienable and disposable public land for the mandated periods that converts it to patrimonial.
The indispensability of an official declaration that the property is now held by the State in its
private capacity or placed within the commerce of man for prescription to have any effect
against the State cannot be overemphasized.
 REPUBLIC OF THE PHILIPPINES v. EMMANUEL C. CORTEZ
G.R. No. 186639, February 05, 2014
J. Reyes

Applicants for registration of title must sufficiently establish first, that the subject land
forms part of the disposable and alienable lands of the public domain; second, that the applicant
and his predecessors-in-interest have been in open, continuous, exclusive, and notorious
possession and occupation of the same; and third, that it is under a bona fide claim of
ownership since June 12, 1945, or earlier. In the absence any of the enumerated requisites, the
application for registration of title of a land will not prosper. Since petitioner failed to comply with
the legal requirements for the registration of the subject property, he cannot be granted with a
registration of title of the property under his name.

FACTS:

Respondent Emmanuel C. Cortez (Cortez) filed with the RTC an application for judicial
confirmation of title over a parcel of land. In support of his application, Cortez submitted, inter
alia, the following documents: (1) tax declarations for various years from 1966 until 2005; (2)
survey plan of the property, with the annotation that the property is classified as alienable and
disposable; (3) technical description of the property, with a certification issued by a geodetic
engineer; (4) tax clearance certificate; (5) extrajudicial settlement of estate dated March 21,
1998, conveying the subject property to Cortez; and (6) escritura de particion extrajudicial dated
July 19, 1946, allocating the subject property to Felicisima Cotas Cortez mother.

As there was no opposition, the RTC issued an Order of General Default and Cortez
was allowed to present his evidence ex-parte. Subsequently, the RTC rendered a
Decision, which granted Cortez application for registration.

The Republic of the Philippines (petitioner), represented by the Office of the Solicitor
General, appealed to the CA, alleging that the RTC erred in granting the application for
registration despite the failure of Cortez to comply with the requirements for original registration
of title. The petitioner pointed out that, although Cortez declared that he and his predecessors-
in-interest were in possession of the subject parcel of land since time immemorial, no document
was ever presented that would establish his predecessors-in-interests possession of the same
during the period required by law. That petitioner claimed that Cortez assertion that he and his
predecessors-in-interest had been in open, adverse, and continuous possession of the subject
property for more than thirty (30) years does not constitute well-neigh incontrovertible evidence
required in land registration cases; that it is a mere claim, which should not have been given
weight by the RTC. Further, the petitioner alleged that there was no certification from any
government agency that the subject property had already been declared alienable and
disposable. As such, the petitioner claims, Cortez possession of the subject property, no matter
how long, cannot confer ownership or possessory rights.

The CA dismissed petitioners appeal and affirmed the RTC decision. Hence, this instant
petition.

ISSUE:

Whether the Cortez application for registration should be granted

RULING:
 Applicants for original registration of title to land must establish compliance with the
provisions of Section 14 of P.D. No. 1529, which pertinently provides that:

Sec. 14. Who may apply. The following persons may file in the proper Court
of First Instance an application for registration of title to land, whether personally or
through their duly authorized representatives:

(1) Those who by themselves or through their predecessors-in interest have been
in open, continuous, exclusive and notorious possession and occupation of
alienable and disposable lands of the public domain under a bona fide claim of
ownership since June 12, 1945, or earlier.

(2) Those who have acquired ownership of private lands by prescription under the
provision of existing laws.

xxxx

After a careful scrutiny of the records of this case, the Court finds that Cortez failed to
comply with the legal requirements for the registration of the subject property under Section
14(1) and (2) of P.D. No. 1529.

Section 14(1) of P.D. No. 1529 refers to the judicial confirmation of imperfect or
incomplete titles to public land acquired under Section 48(b) of C.A. No. 141, as amended by
P.D. No. 1073. Under Section 14(1) [of P.D. No. 1529], applicants for registration of title must
sufficiently establish first, that the subject land forms part of the disposable and alienable lands
of the public domain; second, that the applicant and his predecessors-in-interest have been in
open, continuous, exclusive, and notorious possession and occupation of the same; and third,
that it is under a bona fide claim of ownership since June 12, 1945, or earlier.

The first requirement was not satisfied in this case. To prove that the subject property
forms part of the alienable and disposable lands of the public domain, Cortez adduced in
evidence a survey plan Csd-00-000633 (conversion-subdivision plan of Lot 2697, MCadm 594-
D, Pateros Cadastral Mapping) prepared by Geodetic Engineer Oscar B. Fernandez and
certified by the Lands Management Bureau of the DENR.

However, Cortez reliance on the foregoing annotation in the survey plan is amiss; it
does not constitute incontrovertible evidence to overcome the presumption that the subject
property remains part of the inalienable public domain. In Republic of the Philippines v. Tri-Plus
Corporation, the Court clarified that, the applicant must at the very least submit a certification
from the proper government agency stating that the parcel of land subject of the application for
registration is indeed alienable and disposable.

The annotation in the survey plan presented by Cortez is not the kind of evidence
required by law as proof that the subject property forms part of the alienable and disposable
land of the public domain. Cortez failed to present a certification from the proper government
agency as to the classification of the subject property. Cortez likewise failed to present any
evidence showing that the DENR Secretary had indeed classified the subject property as
alienable and disposable. Having failed to present any incontrovertible evidence, Cortez claim
that the subject property forms part of the alienable and disposable lands of the public domain
must fail.
 Anent the second and third requirements, the Court finds that Cortez likewise failed to
establish the same. Cortez failed to present any evidence to prove that he and his
predecessors-in-interest have been in open, continuous, exclusive, and notorious possession
and occupation of the subject property since June 12, 1945, or earlier. Cortez was only able to
present oral and documentary evidence of his and his mothers ownership and possession of
the subject property since 1946, the year in which his mother supposedly inherited the same.

Other than his bare claim that his family possessed the subject property since time
immemorial, Cortez failed to present any evidence to show that he and his predecessors-in-
interest indeed possessed the subject property prior to 1946; it is a mere claim and not factual
proof of possession. It is a rule that general statements that are mere conclusions of law and
not factual proof of possession are unavailing and cannot suffice. An applicant in a land
registration case cannot just harp on mere conclusions of law to embellish the application but
must impress thereto the facts and circumstances evidencing the alleged ownership and
possession of the land.

Further, the earliest tax declaration presented by Cortez was only in 1966. Cortez failed
to explain why, despite his claim that he and his predecessors-in-interest have been in
possession of the subject property since time immemorial, it was only in 1966 that his
predecessors-in-interest started to declare the same for purposes of taxation.

That Cortez and his predecessors-in-interest have been in possession of the subject
property for fifty-seven (57) years at the time he filed his application for registration in 2003
would likewise not entitle him to registration thereof under Section 14(2) of P.D. No. 1529.

Section 14(2) of P.D. No. 1529 sanctions the original registration of lands acquired by
prescription under the provisions of existing laws. As Section 14(2) [of P.D. No. 1529]
categorically provides, only private properties may be acquired thru prescription and under
Articles 420 and 421 of the Civil Code, only those properties, which are not for public use, public
service or intended for the development of national wealth, are considered private.

The Court emphasized that there must be an official declaration by the State that the
public dominion property is no longer intended for public use, public service, or for the
development of national wealth before it can be acquired by prescription; that a mere
declaration by government officials that a land of the public domain is already alienable and
disposable would not suffice for purposes of registration under Section 14(2) of P.D. No. 1529.
The Court further stressed that the period of acquisitive prescription would only begin to run
from the time that the State officially declares that the public dominion property is no longer
intended for public use, public service, or for the development of national wealth.

Accordingly, although lands of the public domain that are considered patrimonial may be
acquired by prescription under Section 14(2) of P.D. No. 1529, before acquisitive prescription
could commence, the property sought to be registered must not only be classified as alienable
and disposable; it must also be declared by the State that it is no longer intended for public use,
public service or the development of the national wealth. Thus, absent an express declaration
by the State, the land remains to be property of public dominion.

The Court finds no evidence of any official declaration from the state attesting to the
patrimonial character of the subject property. Cortez failed to prove that acquisitive prescription
has begun to run against the State, much less that he has acquired title to the subject property
by virtue thereof. It is of no moment that Cortez and his predecessors-in-interest have been in
possession of the subject property for 57 years at the time he applied for the registration of title
thereto. [I]t is not the notorious, exclusive and uninterrupted possession and occupation of an
alienable and disposable public land for the mandated periods that converts it to patrimonial.
The indispensability of an official declaration that the property is now held by the State in its
private capacity or placed within the commerce of man for prescription to have any effect
against the State cannot be overemphasized.
RICARDO V. QUINTOS v. DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD
AND KANLURANG MINDORO FARMER'S COOPERATIVE, INC.
G.R. No. 185838, February 10, 2014
J. Perlas-Bernabe

APT was not authorized by the propertys landowner, GCFI, to install tenants thereon.
For a tenancy relationship to exist between the parties, the following essential elements must
be shown: (a) the parties are the landowner and the tenant; (b) the subject matter is agricultural
land; (c) there is consent between the parties; (d) the purpose is agricultural production; (e)
there is personal cultivation by the tenant; and (f) there is sharing of the harvests between the
parties. All the above elements must concur in order to create a tenancy relationship. The
absence of one does not make an occupant of a parcel of land, a cultivator or a planter thereon,
a de jure tenant entitled to security of tenure under existing tenancy laws. Hence, APT having
no authority from GCFI, the 53 KAMIFCI members could not have been tenants of property, the
requisite of consent of both parties being absent.

FACTS:

Golden Country Farms, Incorporated (GCFI) is a domestic corporation organized for the
purpose of engaging in poultry and livestock production, processing, and trading. Petitioner
Ricardo V. Quintos (Quintos) is the majority stockholder of GCFI who managed its properties
until 1975 when management was taken over by Armando Romualdez (Romualdez).

GCFI contracted substantial loans with the Philippine National Bank (PNB) and the
Development Bank of the Philippines (DBP), which were secured by several real estate
mortgages over GCFI properties, including the subject property. In 1981, Romualdez
abandoned the management of the GCFI properties, afterwhich DBP took over. Sometime
during the same year, certain people started to plant palay on the subject property, eventually
covering the riceland.

In the meantime, PNB and DBP transferred their financial claims against GCFI to the
Asset Privatization Trust (APT). For GCFIs continuous failure to pay its loans, PNB and DBP
initiated extra-judicial foreclosure proceedings against the GCFI properties, which were,
however, enjoined by the RTC. Thereafter, APT Officer-in-Charge Cesar Lacuesta (Lacuesta)
entered into a verbal agreement with 53 members of private respondent Kanlurang Mindoro
Farmers Cooperative, Inc. (KAMIFCI), allowing the latter to tend the standing mango trees,
induce their flowering, and gather the fruits at P300.00 per tree, the payment of which was to be
remitted to Quinto, who was then managing GCFI.

Quintos reacquired the possession and management of the GCFI properties, including
the subject property, through a Memorandum of Agreement between him and APT, which was
further approved by the RTC.

Quintos was informed by APT of the notice from the Department of Agrarian
Reform (DAR) placing the riceland under compulsory acquisition pursuant to the
Comprehensive Agrarian Reform Program (CARP) of the government. This prompted Quintos to
file a petition for exemption before the Office of the DAR Secretary (exemption case). In the
main, Quintos cited the Courts ruling in Luz Farms v. Secretary of the Department of Agrarian
Reform (Luz Farms) wherein it declared as unconstitutional the inclusion of lands devoted to
commercial raising of livestock, poultry, and swine under the CARP. The DAR Secretary denied
Quintoss petition for exemption. On appeal, the Office of the President (OP) rendered a
decision in the exemption case, ruling that the cessation of poultry and livestock activities on the
GCFI properties, including the subject property, a month prior to the effectivity of RA 6657, does
not a priori convert the properties to agricultural lands. In this relation, the OP concluded that the
act of the DAR in declaring the said properties as covered by the CARP without affording GCFI
the opportunity to contest the supposed conversion was arbitrary and confiscatory.

Meanwhile, KAMIFCI filed an action for the peaceful possession and enjoyment of the
subject property (tenancy case) against Quintos before the Office of the Provincial Adjudicator
(PARAD) asserting its rights under an agricultural leasehold tenancy agreement it purportedly
entered into with Lacuesta. In his answer, Quintos denied the personality of KAMIFCI as a
registered cooperative as well as the existence of any tenancy agreement covering the subject
property.

The PARAD rendered a Decision holding that there was a verbal lease tenancy
agreement entered into by Lacuesta with the 53 KAMIFCI members with respect to the mango
orchard, and such was binding upon APT and GCFI notwithstanding the Certification issued by
APT denying Lacuestas authority to enter into any tenurial relation and to issue GCFI official
receipts. Aggrieved, Quintos appealed to the DARAB.

DARAB rendered a Decision in the tenancy case, it (a) declared that the farmers in the
palayan area covering 355 has. (i.e., the Riceland) may qualify as farmer-beneficiaries in
the mango orchard as may be determined by the Municipal Agrarian Reform Officer; (b) held
that Certificates of Land Ownership Award (CLOAs) should be generated immediately and
distributed to qualified farmer-beneficiaries; and (c) affirmed the directive for Quintos not to
disturb the peaceful possession and cultivation of the farmers in the mango orchard.

Dissatisfied, Quintos appealed to the CA. The CA rendered a Decision, holding that
the tenancy agreement entered by APT with the 53 KAMIFCI members on the mango
orchard was binding upon GCFI since all its business concerns and transactions were
coursed through APT at that time. It, however, declared as premature the generation of
CLOAs in favor of the farmer-beneficiaries pending exercise of the landowners right of
retention and absent payment of just compensation. Considering that the OP Decision had
already attained finality, the CA no longer tackled the issues posed with respect to the
riceland.

ISSUE:

Whether the tenancy agreement purported in this case is valid

RULING:

Tenancy is a legal relationship established by the existence of particular facts as

required by law. For a tenancy relationship to exist between the parties, the following
essential elements must be shown: (a) the parties are the landowner and the tenant; (b) the
subject matter is agricultural land; (c) there is consent between the parties; (d) the purpose
is agricultural production; (e) there is personal cultivation by the tenant; and (f) there is
sharing of the harvests between the parties. All the above elements must concur in order to
create a tenancy relationship. Thus, the absence of one does not make an occupant of a
parcel of land, a cultivator or a planter thereon, a de jure tenant entitled to security of tenure
under existing tenancy laws.

The burden of proof rests on the one claiming to be a tenant to prove his affirmative
allegation by substantial evidence. His failure to show in a satisfactory manner the facts
upon which he bases his claim would put the opposite party under no obligation to prove his
exception or defense. The rule applies to civil and administrative cases.

In this relation, it bears stressing that the right to hire a tenant is basically a
personal right of a landowner, except as may be provided by law. Hence, the consent of
the landowner should be secured prior to the installation of tenants.

In the present case, the PARAD, the DARAB and the CA all held that a tenancy
relationship exists between GCFI and the 53 KAMIFCI members who were allegedly
installed as tenants by APT, the legal possessor of the mango orchard at that time.
Records are, however, bereft of any showing that APT was authorized by the
propertys landowner, GCFI, to install tenants thereon. To be sure, APT only assumed
the rights of the original mortgagees in this case, i.e., PNB and DBP, which, however, have
yet to exercise their right to foreclose the mortgaged properties due to the RTCs order
enjoining the same. It is settled that a mortgagee does not become the owner of the
mortgaged property until he has foreclosed the mortgage and, thereafter, purchased the
property at the foreclosure sale. With the foreclosure proceedings having been enjoined,
APT could not have been regarded as the landowner of the subject property. Thus, since
the consent of the standing landowner, GCFI, had not been secured by APT in this case, it
had no authority to enter into any tenancy agreement with the KAMIFCI members.
 BIGNAY EX-IM PHILIPPINES, INC. v. UNION BANK OF THE PHILIPPINE
XXX
UNION BANK OF THE PHILIPPINES v. BIGNAY EX-IM PHILIPPINES, INC.
G.R. No. 171590 & G.R. No. 171598, February 12, 2014
J. Del Castillo

Bignay purchased the property without knowledge of the pending Civil Case filed by
Rosario. Union Bank represented to Bignay that it had title to the property, and by assuming the
obligation to defend such title, it promised to do so at least in good faith and with sufficient
prudence, if not to the best of its abilities. The failure of Union Bank to do so constitutes as
breach of warranty against eviction.

More so, the gross negligence of Union Bank in defending its title to the property subject
matter of the sale thereby contravening the express undertaking under the deed of sale to
protect its title against the claims of third persons resulting in the buyers eviction from the
property amounts to bad faith, and the buyer is entitled to the remedies afforded under Article
1555 of the Civil Code.

Eviction shall take place whenever by a final judgment based on a right prior to the sale
or an act imputable to the vendor, the vendee is deprived of the whole or of a part of the thing
purchased. In case eviction occurs, the vendee shall have the right to demand of the vendor,
among others, the return of the value which the thing sold had at the time of the eviction, be it
greater or less than the price of the sale; the expenses of the contract, if the vendee has paid
them; and the damages and interests, and ornamental expenses, if the sale was made in bad
faith.

FACTS:

Alfonso de Leon (Alfonso) mortgaged in favor of Union Bank of the Philippines (Union
Bank) real property situated at Esteban Abada, Loyola Heights, Quezon City, which was
registered in his and his wife Rosarios name. The property was foreclosed and sold at auction
to Union Bank. After the redemption period expired, the bank consolidated its ownership.
However, Rosario filed against Alfonso and Union Bank a case for annulment in the RTC of the
mortgage claiming that Alfonso mortgaged the property without her consent, and for
reconveyance.

Meanwhile, in a Letter-Proposal, Bignay Ex-Im Philippines, Inc. (Bignay), through its

President, Milagros Ong Siy (Siy), offered to purchase the property. Thereafter, a Deed of
Absolute Sale was executed by and between Union Bank and Bignay whereby the property was
conveyed to Bignay. Bignay mortgaged the property to Union Bank, presumably to secure a
loan obtained from the latter.

In the case filed by the Rosario, the RTC rendered a decision finding that defendant
Alfonso de Leon, Jr. had alone executed the mortgage on their conjugal property upon a forged
signature of his wife plaintiff Rosario T. de Leon.

Union Bank appealed the decision to the CA. The CA appeal was dismissed for failure to
file appellants brief; the ensuing Petition for Review with this Court was similarly denied for late
filing and payment of legal fees. Union Bank next filed with the CA an action to annul the
decision, which was dismissed. After the Motion for Reconsideration was denied, it was Bignay
who filed a petition for the Annulment of the RTC decision.
 Meanwhile, as a result of the RTC decision, Bignay was evicted from the property; by
then, it had demolished the existing structure on the lot and begun construction of a new
building.

Subsequently, Bignay filed a civil case for breach of warranty against eviction under
Articles 1547 and 1548 of the Civil Code, with damages, against Union Bank and Robles.
Robles was dropped as party defendant upon agreement of the parties and in view of Union
Banks admission and confirmation that it had authorized all of Robless acts relative to the sale.

Union Bank interposed a Motion to Dismiss grounded on lack of or failure to state a

cause of action, claiming that it made no warranties in favor of Bignay when it sold the property
to the latter.

The trial court thus declared that Union Bank acted in bad faith in selling the subject
property to Bignay. Thus, it held that Bignay was entitled to the return of the value of the
property, as well as the cost of the building erected since Union Bank acted in bad faith. The CA
held that Union Bank is liable pursuant to its commitment under the deed of sale to defend the
title to the property against the claims of third parties.

ISSUE:

Whether Union Bank is liable for the breach of warranty against eviction

RULING:

Art. 1555. When the warranty has been agreed upon or nothing has been stipulated on
this point, in case eviction occurs, the vendee shall have the right to demand of the vendor:

(1) The return of the value which the thing sold had at the time of the eviction, be it greater or
less than the price of the sale;
(2) The income or fruits, if he has been ordered to deliver them to the party who won the suit
against him;
(3) The costs of the suit which caused the eviction, and, in a proper case, those of the suit
brought against the vendor for the warranty;
(4) The expenses of the contract, if the vendee has paid them;
(5) The damages and interests, and ornamental expenses, if the sale was made in bad faith.
The Court is convinced from an examination of the evidence and by the concurring
opinions of the courts below that Bignay purchased the property without knowledge of the
pending Civil Case filed by Rosario. Union Bank is therefore answerable for its express
undertaking under the deed of sale to defend its title to the Parcel/s of Land with improvement
thereon against the claims of any person whatsoever. By this warranty, Union Bank
represented to Bignay that it had title to the property, and by assuming the obligation to defend
such title, it promised to do so at least in good faith and with sufficient prudence, if not to the
best of its abilities.

The record reveals, however, that Union Bank was grossly negligent in the handling and
prosecution of the civil case filed by Rosario. Its appeal of the December 12, 1991 Decision in
said case was dismissed by the CA for failure to file the required appellants brief. Next, the
ensuing Petition for Review on Certiorari filed with this Court was likewise denied due to late
filing and payment of legal fees. Finally, the bank sought the annulment of the RTC judgment,
yet again, the CA dismissed the petition for its failure to comply with Supreme Court Circular No.
28-91. As a result, the RTC Decision became final and executory, and Bignay was evicted from
the property. Such negligence in the handling of the case is far from coincidental; it is decidedly
glaring, and amounts to bad faith. [N]egligence may be occasionally so gross as to amount to
malice [or bad faith]. Indeed, in culpa contractual or breach of contract, gross negligence of a
party amounting to bad faith is a ground for the recovery of damages by the injured party.

Eviction shall take place whenever by a final judgment based on a right prior to the sale
or an act imputable to the vendor, the vendee is deprived of the whole or of a part of the thing
purchased. In case eviction occurs, the vendee shall have the right to demand of the vendor,
among others, the return of the value which the thing sold had at the time of the eviction, be it
greater or less than the price of the sale; the expenses of the contract, if the vendee has paid
them; and the damages and interests, and ornamental expenses, if the sale was made in bad
faith. There appears to be no dispute as to the value of the building constructed on the property
by Bignay; the only issue raised by Union Bank in these Petitions is the propriety of the award of
damages, and the amount thereof is not in issue. The award in favor of Bignay of P4 million, or
the consideration or cost of the property, and P20 million the value of the building it erected
thereon is no longer in issue and is thus in order.
 REPUBLIC OF THE PHILIPPINES v. RODOLFO O. DE GRACIA
G.R. No. 171577, February 12, 2014
J. Perlas-Bernabe

Psychological incapacity, to be acceptable for purposes of annulling a marriage, must be

characterized by gravity, juridical antecedence, and incurability. Psychological incapacity to be
declared clinically or medically incurable is one thing; to refuse or be reluctant to perform one's
duties is another. It refers only to the most serious cases of personality disorders clearly
demonstrative of an utter insensitivity or inability to give meaning and significance to the
marriage. Natividads emotional immaturity and irresponsibility cannot fall under the
circumstances acknowledged as psychological incapacity.

FACTS:

Rodolfo and Natividad were married on February 15, 1969. On December 28, 1998,
Rodolfo filed a verified complaint for declaration of nullity of marriage (complaint) before the
RTC alleging that Natividad was psychologically incapacitated to comply with her essential
marital obligations.

In support of his complaint, Rodolfo testified, among others, that he first met Natividad
when they were students at the Barangay High School of Sindangan, and he was forced to
marry her barely three (3) months into their courtship in light of her accidental pregnancy. At the
time of their marriage, he was 21 years old, while Natividad was 18 years of age. He had no
stable job and merely worked in the gambling cockpits as kristo and bangkero sa hantak.
When he decided to join and train with the army, Natividad left their conjugal home and sold
their house without his consent. Thereafter, Natividad moved to Dipolog City where she lived
with a certain Engineer Terez (Terez), and bore him a child named Julie Ann Terez. After
cohabiting with Terez, Natividad contracted a second marriage on January 11, 1991 with
another man named Antonio Mondarez and has lived since then with the latter in Cagayan de
Oro City. From the time Natividad abandoned them in 1972, Rodolfo was left to take care of
their children and he exerted earnest efforts to save their marriage which, however, proved futile
because of Natividads psychological incapacity that appeared to be incurable.

Natividad failed to file her answer, as well as appear during trial, despite service of
summons. Nonetheless, she informed the court that she submitted herself for psychiatric
examination to Dr. Cheryl T. Zalsos (Dr. Zalsos) in response to Rodolfos claims. Rodolfo also
underwent the same examination.

In her two-page psychiatric evaluation report, Dr. Zalsos stated that both Rodolfo and
Natividad were psychologically incapacitated to comply with the essential marital obligations,
finding that both parties suffered from utter emotional immaturity [which] is unusual and
unacceptable behavior considered [as] deviant from persons who abide by established norms of
conduct. As for Natividad, Dr. Zalsos also observed that she lacked the willful cooperation of
being a wife and a mother to her two daughters. Similarly, Rodolfo failed to perform his
obligations as a husband, adding too that he sired a son with another woman. Further, Dr.
Zalsos noted that the mental condition of both parties already existed at the time of the
celebration of marriage, although it only manifested after. Based on the foregoing, Dr. Zalsos
concluded that the couples union was bereft of the mind, will and heart for the obligations of
marriage.
 The Office of the Solicitor General (OSG), representing petitioner Republic of the
Philippines (Republic), filed an opposition to the complaint, contending that the acts committed
by Natividad did not demonstrate psychological incapacity as contemplated by law, but are mere
grounds for legal separation under the Family Code.

The RTC declared the marriage between Rodolfo and Natividad void on the ground of
psychological incapacity. The CA affirmed the ruling of the RTC, finding that while Natividads
emotional immaturity, irresponsibility and promiscuity by themselves do not necessarily equate
to psychological incapacity, their degree or severity, as duly testified to by Dr. Zalsos, has
sufficiently established a case of psychological disorder so profound as to render [Natividad]
incapacitated to perform her essential marital obligations.

ISSUE:

Whether Natividad is psychologically incapacitated to warrant the annulment of her marriage

with Rodolfo

RULING:

Psychological incapacity, as a ground to nullify a marriage under Article 36 of the

Family Code, should refer to no less than a mental not merely physical incapacity that
causes a party to be truly incognitive of the basic marital covenants that concomitantly
must be assumed and discharged by the parties to the marriage which, as so expressed in
Article 68 of the Family Code, among others, include their mutual obligations to live together,
observe love, respect and fidelity and render help and support. There is hardly any doubt
that the intendment of the law has been to confine the meaning of psychological incapacity
to the most serious cases of personality disorders clearly demonstrative of an utter
insensitivity or inability to give meaning and significance to the marriage. In Santos v.
CA (Santos), the Court first declared that psychological incapacity must be characterized
by: (a) gravity (i.e., it must be grave and serious such that the party would be incapable of
carrying out the ordinary duties required in a marriage); (b) juridical antecedence (i.e., it
must be rooted in the history of the party antedating the marriage, although the overt
manifestations may emerge only after the marriage); and (c) incurability (i.e., it must be
incurable, or even if it were otherwise, the cure would be beyond the means of the party
involved). The Court laid down more definitive guidelines in the interpretation and application
of Article 36 of the Family Code in Republic of the Phils. v. CA, whose salient points are
footnoted hereunder. These guidelines incorporate the basic requirements that the Court
established in Santos.

The RTC, as affirmed by the CA, heavily relied on the psychiatric evaluation report of
Dr. Zalsos which does not, however, explain in reasonable detail how Natividads condition
could be characterized as grave, deeply-rooted, and incurable within the parameters of
psychological incapacity jurisprudence. Aside from failing to disclose the types of
psychological tests which she administered on Natividad, Dr. Zalsos failed to identify in her
report the root cause of Natividad's condition and to show that it existed at the time of the
parties' marriage. Neither was the gravity or seriousness of Natividad's behavior in relation
to her failure to perform the essential marital obligations sufficiently described in Dr. Zalsos's
report. Further, the finding contained therein on the incurability of Natividad's condition
remains unsupported by any factual or scientific basis and, hence, appears to be drawn out
as a bare conclusion and even self-serving. In the same vein, Dr. Zalsos's testimony during
trial, which is essentially a reiteration of her report, also fails to convince the Court of her
conclusion that Natividad was psychologically incapacitated. Verily, although expert opinions
furnished by psychologists regarding the psychological temperament of parties are usually
given considerable weight by the courts, the existence of psychological incapacity must still
be proven by independent evidence. After poring over the records, the Court, however, does
not find any such evidence sufficient enough to uphold the court a quo's nullity declaration.
To the Court's mind, Natividad's refusal to live with Rodolfo and to assume her duties as wife
and mother as well as her emotional immaturity, irresponsibility and infidelity do not rise to
the level of psychological incapacity that would justify the nullification of the parties'
marriage. Indeed, to be declared clinically or medically incurable is one thing; to refuse or be
reluctant to perform one's duties is another. To hark back to what has been earlier
discussed, psychological incapacity refers only to the most serious cases of personality
disorders clearly demonstrative of an utter insensitivity or inability to give meaning and
significance to the marriage. In the final analysis, the Court does not perceive a disorder of
this nature to exist in the present case. Thus, for these reasons, coupled too with the
recognition that marriage is an inviolable social institution and the foundation of the
family, the instant petition is hereby granted.
 TRADE AND INVESTMENT DEVELOPMENT CORPORATION OF THE PHILIPPINES
(FORMERLY PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE
CORPORATION.) v. ASIA PACES CORPORATION, PACES INDUSTRIAL
CORPORATION, NICOLAS C. BALDERRAMA, SIDDCOR INSURANCE CORPORATION
(NOW MEGA PACIFIC INSURANCE CORPORATION), PHILIPPINE PHOENIX SURETY
AND INSURANCE, INC., PARAMOUNT INSURANCE CORPORATION, AND FORTUNE
LIFE AND GENERAL INSURANCE COMPANY
G.R. No. 187403, February 12, 2014
J. Perlas-Bernabe

The Surety Bonds are suretyship contracts which secure the debt of ASPAC, the
principal debtor, under the Deeds of Undertaking to pay TIDCORP, the creditor, the damages
and liabilities it may incur under the Letters of Guarantee, within the bounds of the bonds
respective coverage periods and amounts. The payment extensions granted by Banque
Indosuez and PCI Capital pertain to TIDCORPs own debt under the Letters of Guarantee
wherein it (TIDCORP) irrevocably and unconditionally guaranteed full payment of ASPACs loan
obligations to the banks in the event of its (ASPAC) default.

Thus, there are two separate contracts involved. One involves a suretyship agreement
and another a contract of guaranty. A surety is an insurer of the debt, whereas a guarantor is an
insurer of the solvency of the debtor. In a suretyship agreement, when a debtor fails to pay, the
surety undertakes to pay the debt. A surety is considered as a solidary debtor. On the other
hand, when a person acts as a guarantor, he undertakes to pay the debt if, after going after the
debtor, the creditor remains unpaid.

FACTS:

Respondents Asia Paces Corporation (ASPAC) and Paces Industrial Corporation (PICO)
entered into a sub-contracting agreement with the Electrical Projects Company of Libya
(ELPCO), as main contractor, for the construction and erection of a double circuit bundle phase
conductor transmission line in the country of Libya. To finance its working capital requirements,
ASPAC obtained loans from foreign banks Banque Indosuez and PCI Capital (Hong Kong)
Limited (PCI Capital) which, upon the latters request, were secured by several Letters of
Guarantee issued by petitioner Trade and Investment Development Corporation of the
Philippines (TIDCORP), then Philippine Export and Foreign Loan Guarantee Corp. Under the
Letters of Guarantee, TIDCORP irrevocably and unconditionally guaranteed full payment of
ASPACs loan obligations to Banque Indosuez and PCI Capital in the event of default by the
latter.

As a condition precedent to the issuance by TIDCORP of the Letters of Guarantee,

ASPAC, PICO, and ASPACs President, respondent Nicolas C. Balderrama (Balderrama) had to
execute several Deeds of Undertaking, binding themselves to jointly and severally pay
TIDCORP for whatever damages or liabilities it may incur under the aforementioned letters. In
the same light, ASPAC, as principal debtor, entered into surety agreements (Surety Bonds) with
Paramount, Phoenix, Mega Pacific and Fortune (bonding companies), as sureties, also holding
themselves solidarily liable to TIDCORP, as creditor, for whatever damages or liabilities the
latter may incur under the Letters of Guarantee.

ASPAC eventually defaulted on its loan obligations to Banque Indosuez and PCI Capital,
prompting them to demand payment from TIDCORP under the Letters of Guarantee. TIDCORP
fully settled its obligations under the Letters of Guarantee to both Banque Indosuez and PCI
Capital. Seeking payment for the damages and liabilities it had incurred under the Letters of
Guarantee and with its previous demands therefor left unheeded, TIIDCORP filed a collection
case against: (a) ASPAC, PICO, and Balderrama on account of their obligations under the
deeds of undertaking; and (b) the bonding companies on account of their obligations under the
Surety Bonds.

The RTC partially granted TIDCORPs complaint and thereby found ASPAC, PICO, and
Balderrama jointly and severally liable to TIDCORP but absolved the bonding companies from
liability on the ground that the moratorium request and the consequent payment extensions
granted by Banque Indosuez and PCI Capital in TIDCORPs favor without their consent
extinguished their obligations under the Surety Bonds. As basis, the RTC cited Article 2079 of
the Civil Code which provides that an extension granted to the debtor by the creditor without the
consent of the guarantor/surety extinguishes the guaranty/suretyship, and, in this relation,
added that the bonding companies should not be held liable as sureties for the extended
period. The CA upheld the RTC decision with modifications. This led to the filing of separate
motions for reconsideration by TIDCORP and Balderrama, which were both denied. Only
TIDCORP elevated the matter to the SC.

ISSUE:

Whether the bonding companies liabilities to TIDCORP under the Surety Bonds have been
extinguished by the payment extensions granted by Banque Indosuez and PCI Capital to
TIDCORP under the Restructuring Agreement

RULING:

A surety is considered in law as being the same party as the debtor in relation to
whatever is adjudged touching the obligation of the latter, and their liabilities are interwoven as
to be inseparable. Although the contract of a surety is in essence secondary only to a valid
principal obligation, his liability to the creditor is direct, primary and absolute; he becomes liable
for the debt and duty of another although he possesses no direct or personal interest over the
obligations nor does he receive any benefit therefrom. The fundamental reason therefor is that a
contract of suretyship effectively binds the surety as a solidary debtor. This is provided under
Article 2047 of the Civil Code.

Thus, since the surety is a solidary debtor, it is not necessary that the original debtor first
failed to pay before the surety could be made liable; it is enough that a demand for payment is
made by the creditor for the suretys liability to attach. Article 1216 of the Civil Code provides
that the creditor may proceed against any one of the solidary debtors or some or all of them
simultaneously. The demand made against one of them shall not be an obstacle to those which
may subsequently be directed against the others, so long as the debt has not been fully
collected.

Comparing a suretys obligations with that of a guarantor, the Court, in the case
of Palmares v. CA, illumined that a surety is responsible for the debts payment at once if the
principal debtor makes default, whereas a guarantor pays only if the principal debtor is unable to
pay, viz.:

A surety is an insurer of the debt, whereas a guarantor is an insurer of the

solvency of the debtor. A suretyship is an undertaking that the debt shall be paid; a
guaranty, an undertaking that the debtor shall pay. Stated differently, a surety
 promises to pay the principals debt if the principal will not pay, while a guarantor
agrees that the creditor, after proceeding against the principal, may proceed
against the guarantor if the principal is unable to pay. A surety binds himself to
perform if the principal does not, without regard to his ability to do so. A guarantor,
on the other hand, does not contract that the principal will pay, but simply that he is
able to do so. In other words, a surety undertakes directly for the payment and is
so responsible at once if the principal debtor makes default, while a guarantor
contracts to pay if, by the use of due diligence, the debt cannot be made out of the
principal debtor. (Emphases and underscoring supplied; citations omitted)

Applying these principles, the Court finds that the payment extensions granted by
Banque Indosuez and PCI Capital to TIDCORP under the Restructuring Agreement did not
have the effect of extinguishing the bonding companies obligations to TIDCORP under
the Surety Bonds, notwithstanding the fact that said extensions were made without their
consent. This is because Article 2079 of the Civil Code refers to a payment extension granted
by the creditor to the principal debtor without the consent of the guarantor or surety. In this case,
the Surety Bonds are suretyship contracts which secure the debt of ASPAC, the principal debtor,
under the Deeds of Undertaking to pay TIDCORP, the creditor, the damages and liabilities it
may incur under the Letters of Guarantee, within the bounds of the bonds respective coverage
periods and amounts. No payment extension was, however, granted by TIDCORP in favor of
ASPAC in this regard; hence, Article 2079 of the Civil Code should not be applied with respect
to the bonding companies liabilities to TIDCORP under the Surety Bonds.

The payment extensions granted by Banque Indosuez and PCI Capital pertain to
TIDCORPs own debt under the Letters of Guarantee wherein it (TIDCORP) irrevocably and
unconditionally guaranteed full payment of ASPACs loan obligations to the banks in the event of
its (ASPAC) default. In other words, the Letters of Guarantee secured ASPACs loan
agreements to the banks. Under this arrangement, TIDCORP therefore acted as a
guarantor, with ASPAC as the principal debtor, and the banks as creditors.

Proceeding from the foregoing discussion, it is quite clear that there are two sets of
transactions that should be treated separately and distinctly from one another following the civil
law principle of relativity of contracts which provides that contracts 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 with knowledge thereof. Verily, as the Surety Bonds concern ASPACs
debt to TIDCORP and not TIDCORPs debt to the banks, the payments extensions (which
conversely concern TIDCORPs debt to the banks and not ASPACs debt to TIDCORP) would
not deprive the bonding companies of their right to pay their creditor (TIDCORP) and to be
immediately subrogated to the latters remedies against the principal debtor (ASPAC) upon the
maturity date. It must be stressed that these payment extensions did not modify the terms of the
Letters of Guarantee but only provided for a new payment scheme covering TIDCORPs liability
to the banks. In fine, considering the inoperability of Article 2079 of the Civil Code in this case,
the bonding companies liabilities to TIDCORP under the Surety Bonds except those issued by
Paramount and covered by its Compromise Agreement with TIDCORP have not been
extinguished. Since these obligations arose and have been duly demanded within the coverage
periods of all the Surety Bonds, TIDCORPs claim is hereby granted and the CAs ruling on this
score consequently reversed.
 GRACE M. GRANDE v. PATRICIO T. ANTONIO
G.R. No. 206248. February 18, 2014
J. Velasco, Jr.

An illegitimate child may use the surname of his father if the latter has expressly
recognized their filiation. However, the child is under no compulsion to use his fathers surname.
When Antonio recognized Andre Lewis and Jerard Patrick as his sons, the two children had the
right to use the surname of Antonio. However, they were under no compulsion or mandate to
use the same. The law uses the word may, which dictates that it is merely permissive.

FACTS:

Petitioner Grace Grande (Grande) and respondent Patricio Antonio (Antonio) for a period
of time lived together as husband and wife, although Antonio was at that time already married to
someone else. Out of this illicit relationship, two sons were born: Andre Lewis and Jerard
Patrick. The children were not expressly recognized by respondent as his own in the Record of
Births of the children in the Civil Registry. The parties relationship, however, eventually turned
sour, and Grande left for the United States with her two children. This prompted respondent
Antonio to file a Petition for Judicial Approval of Recognition with Prayer to take Parental
Authority, Parental Physical Custody, Correction/Change of Surname of Minors and for the
Issuance of Writ of Preliminary Injunction before the Regional Trial Court.

The RTC rendered a decision in favor of herein respondent Antonio, ruling that [t]he
evidence at hand is overwhelming that the best interest of the children can be promoted if they
are under the sole parental authority and physical custody of [respondent Antonio].

Aggrieved, petitioner Grande moved for reconsideration. However, her motion was
denied for being pro forma and for lack of merit.

Petitioner Grande then filed an appeal with the CA attributing grave error on the part of
the RTC for allegedly ruling contrary to the law and jurisprudence respecting the grant of sole
custody to the mother over her illegitimate children. The CA modified the ruling of the RTC,
giving the custody of the children to their mother but nevertheless ordering the Offices of the
Civil Registrar General and the City Civil Registrar of Makati City are DIRECTED to enter
the surname Antonio as the surname of Jerard Patrick and Andre Lewis, in their
respective certificates of live birth, and record the same in the Register of Births.

Dissatisfied with the decision, Grande interposed a partial motion for reconsideration,
particularly assailing the order of the CA insofar as it decreed the change of the minors
surname to Antonio. When her motion was denied, petitioner came to this Court via the
present petition.

ISSUE:

Whether a father has the right to compel the use of his surname by his illegitimate children upon
his recognition of their filiation

RULING:
 Central to the core issue is the application of Art. 176 of the Family Code, which was
amended by RA 9255 which now reads:

Art. 176. Illegitimate children shall use the surname and shall be under
the parental authority of their mother, and shall be entitled to support in conformity
with this Code. However, illegitimate children may use the surname of their
father if their filiation has been expressly recognized by their father through
the record of birth appearing in the civil register, or when an admission in a public
document or private handwritten instrument is made by the father. Provided, the
father has the right to institute an action before the regular courts to prove non-
filiation during his lifetime. The legitime of each illegitimate child shall consist of
one-half of the legitime of a legitimate child. (Emphasis supplied.)

From the foregoing provisions, it is clear that the general rule is that an illegitimate
child shall use the surname of his or her mother. The exception provided by RA 9255 is, in
case his or her filiation is expressly recognized by the father through the record of birth
appearing in the civil register or when an admission in a public document or private
handwritten instrument is made by the father. In such a situation, the illegitimate child may
use the surname of the father.

In the case at bar, respondent filed a petition for judicial approval of recognition of the
filiation of the two children with the prayer for the correction or change of the surname of the
minors from Grande to Antonio when a public document acknowledged before a notary
public under Sec. 19, Rule 132 of the Rules of Court is enough to establish the paternity of
his children. But he wanted more: a judicial conferment of parental authority, parental
custody, and an official declaration of his childrens surname as Antonio.

Parental authority over minor children is lodged by Art. 176 on the mother; hence,
respondents prayer has no legal mooring. Since parental authority is given to the mother,
then custody over the minor children also goes to the mother, unless she is shown to be
unfit.

Art. 176 gives illegitimate children the right to decide if they want to use the surname
of their father or not. It is not the father (herein respondent) or the mother (herein petitioner)
who is granted by law the right to dictate the surname of their illegitimate children.
 Nothing is more settled than that when the law is clear and free from ambiguity, it
must be taken to mean what it says and it must be given its literal meaning free from any
interpretation. Respondents position that the court can order the minors to use his surname,
therefore, has no legal basis.

On its face, Art. 176, as amended, is free from ambiguity. And where there is no
ambiguity, one must abide by its words. The use of the word may in the provision readily
shows that an acknowledged illegitimate child is under no compulsion to use the
surname of his illegitimate father. The word may is permissive and operates to confer
discretion upon the illegitimate children.
 REPUBLIC OF THE PHILIPPINES v. REMMAN ENTERPRISES, INC., REPRESENTED BY
RONNIE P. INOCENCIO
G.R. No. 199310, February 19, 2014
J. Reyes

Applicants for registration of title must sufficiently establish: first, that the subject land
forms part of the disposable and alienable lands of the public domain; second, that the applicant
and his predecessors-in-interest have been in open, continuous, exclusive, and notorious
possession and occupation of the same; and third, that it is under a bona fide claim of
ownership since June 12, 1945, or earlier.

For the second requisite, mere cultivation of the portions of land cannot constitute as
possession. Even if the claimant continuously cultivated the land, he cannot be said to have
occupied the same. The claimant must prove possession, as well as occupation, in the
performance of acts of ownership of the property.

Under the Regalian Doctrine, all lands of public domain belong to the state. So unless
there is an unequivocal showing that a party met all the requirements for the application of
registration, the ownership remains with the state.

FACTS:

Remman Enterprises, Inc. (respondent), filed an application with the RTC for judicial
confirmation of title over two parcels of land identified as Lot Nos. 3068 and 3077.

The RTC issued the Order finding the respondents application for registration sufficient
in form and substance and setting it for initial hearing

When the RTC called the case for initial hearing, only the Laguna Lake Development
Authority (LLDA) appeared as oppositor. Thus, the LLDA filed its Opposition to the respondents
application for registration, asserting that Lot Nos. 3068 and 3077 are not part of the alienable
and disposable lands of the public domain. On the other hand, the Republic of the Philippines
(petitioner), on July 16, 2002, likewise filed its Opposition, alleging that the respondent failed to
prove that it and its predecessors-in-interest have been in open, continuous, exclusive, and
notorious possession of the subject parcels of land since June 12, 1945 or earlier.

The RTC rendered a judgment confirming the title of the applicant Remman Enterprises
Incorporated over the parcels of land. The CA affirmed the RTC decision. Hence, this instant
petition.

ISSUE:

Whether the respondents application for registration should be granted

RULING:

The petitioner maintains that the lower courts erred in granting the respondents
application for registration since the subject properties do not form part of the alienable and
disposable lands of the public domain. The petitioner insists that the elevations of the subject
properties are below the reglementary level of 12.50 m and, pursuant to Section 41(11) of R.A.
No. 4850, are considered part of the bed of Laguna Lake.
 That the subject properties are not part of the bed of Laguna Lake, however, does not
necessarily mean that they already form part of the alienable and disposable lands of the public
domain. It is still incumbent upon the respondent to prove, with well-nigh incontrovertible
evidence, that the subject properties are indeed part of the alienable and disposable lands of
the public domain. While deference is due to the lower courts finding that the elevations of the
subject properties are above the reglementary level of 12.50 m and, hence, no longer part of the
bed of Laguna Lake pursuant to Section 41(11) of R.A. No. 4850, the Court nevertheless finds
that the respondent failed to substantiate its entitlement to registration of title to the subject
properties.

The respondent filed its application for registration of title to the subject properties under
Section 14(1) of Presidential Decree (P.D.) No. 1529, which provides that:

Sec. 14. Who may apply. The following persons may file in the proper Court
of First Instance an application for registration of title to land, whether personally or
through their duly authorized representatives:

(1) Those who by themselves or through their predecessors-in interest have been
in open, continuous, exclusive and notorious possession and occupation of
alienable and disposable lands of the public domain under a bona fide claim of
ownership since June 12, 1945, or earlier.
xxx
Section 14(1) of P.D. No. 1529 refers to the judicial confirmation of imperfect or
incomplete titles to public land acquired under Section 48(b) of Commonwealth Act
(C.A.) No. 141, or the Public Land Act, as amended by P.D. No. 1073. Under Section
14(1) of P.D. No. 1529, applicants for registration of title must sufficiently establish: first,
that the subject land forms part of the disposable and alienable lands of the public
domain; second, that the applicant and his predecessors-in-interest have been in open,
continuous, exclusive, and notorious possession and occupation of the same; and third,
that it is under a bona fide claim of ownership since June 12, 1945, or earlier.

The first requirement was not satisfied in this case. To prove that the subject property
forms part of the alienable and disposable lands of the public domain, the respondent presented
two certifications issued by Calamno, attesting that Lot Nos. 3068 and 3077 form part of the
alienable and disposable lands of the public domain under Project No. 27-B of Taguig, Metro
Manila as per LC Map 2623, approved on January 3, 1968.

However, the said certifications presented by the respondent are insufficient to prove
that the subject properties are alienable and disposable. In Republic of the Philippines v. T.A.N.
Properties, Inc., the Court clarified that, in addition to the certification issued by the proper
government agency that a parcel of land is alienable and disposable, applicants for land
registration must prove that the DENR Secretary had approved the land classification and
released the land of public domain as alienable and disposable. They must present a copy of
the original classification approved by the DENR Secretary and certified as true copy by the
legal custodian of the records.

The DENR certifications that were presented by the respondent in support of its
application for registration are thus not sufficient to prove that the subject properties are indeed
classified by the DENR Secretary as alienable and disposable. It is still imperative for the
respondent to present a copy of the original classification approved by the DENR Secretary,
which must be certified by the legal custodian thereof as a true copy. Accordingly, the lower
courts erred in granting the application for registration in spite of the failure of the respondent to
prove by well-nigh incontrovertible evidence that the subject properties are alienable and
disposable.

Anent the second and third requirements, the Court finds that the respondent failed to
present sufficient evidence to prove that it and its predecessors-in-interest have been in open,
continuous, exclusive, and notorious possession and occupation of the subject properties since
June 12, 1945, or earlier.

To prove that it and its predecessors-in-interest have been in possession and occupation
of the subject properties since 1943, the respondent presented the testimony of Cerquena. The
foregoing are but unsubstantiated and self-serving assertions of the possession and occupation
of the subject properties by the respondent and its predecessors-in-interest; they do not
constitute the well-nigh incontrovertible evidence of possession and occupation of the subject
properties required by Section 14(1) of P.D. No. 1529. Indeed, other than the testimony of
Cerquena, the respondent failed to present any other evidence to prove the character of the
possession and occupation by it and its predecessors-in-interest of the subject properties.

For purposes of land registration under Section 14(1) of P.D. No. 1529, proof of specific
acts of ownership must be presented to substantiate the claim of open, continuous, exclusive,
and notorious possession and occupation of the land subject of the application. Applicants for
land registration cannot just offer general statements which are mere conclusions of law rather
than factual evidence of possession. Actual possession consists in the manifestation of acts of
dominion over it of such a nature as a party would actually exercise over his own property.

Although Cerquena testified that the respondent and its predecessors-in-interest

cultivated the subject properties, by planting different crops thereon, his testimony is bereft of
any specificity as to the nature of such cultivation as to warrant the conclusion that they have
been indeed in possession and occupation of the subject properties in the manner required by
law. There was no showing as to the number of crops that are planted in the subject properties
or to the volume of the produce harvested from the crops supposedly planted thereon.

Further, assuming ex gratia argumenti that the respondent and its predecessors-in-
interest have indeed planted crops on the subject properties, it does not necessarily follow that
the subject properties have been possessed and occupied by them in the manner contemplated
by law. The supposed planting of crops in the subject properties may only have amounted to
mere casual cultivation, which is not the possession and occupation required by law.

Further, the Court notes that the tax declarations over the subject properties presented
by the respondent were only for 2002. The respondent failed to explain why, despite its claim
that it acquired the subject properties as early as 1989, and that its predecessors-in-interest
have been in possession of the subject property since 1943, it was only in 2002 that it started to
declare the same for purposes of taxation. While tax declarations are not conclusive evidence
of ownership, they constitute proof of claim of ownership. That the subject properties were
declared for taxation purposes only in 2002 gives rise to the presumption that the respondent
claimed ownership or possession of the subject properties starting that year. Likewise, no
improvement or plantings were declared or noted in the said tax declarations. This fact belies
the claim that the respondent and its predecessors-in-interest, contrary to Cerquenas
testimony, have been in possession and occupation of the subject properties in the manner
required by law.
 Having failed to prove that the subject properties form part of the alienable and
disposable lands of the public domain and that it and its predecessors-in-interest have been in
open, continuous, exclusive, and notorious possession and occupation of the same since June
12, 1945, or earlier, the respondents application for registration should be denied.
 PHILIPPINE NATIONAL BANK v. TERESITA TAN DEE, ANTIPOLO PROPERTIES, INC.,
(NOW PRIME EAST PROPERTIES, INC.) AND AFP-RSBS, INC.
G.R. No. 182128, February 19, 2014
J. Reyes

Petitioner is not obliged to perform any of the undertaking of respondent PEPI and AFP-
RSBS in its transactions with Dee under the contract to sell because it is not a privy thereto.
However, it is asked to respect the rights of the buyer Dee.

In a contract to sell, the seller retains ownership of the subject property. Thus, the seller
may still enter into a valid contract of mortgage. However, when the contract to sell ripens to an
absolute contract of sale, the mortgagor and mortgagee must respect the rights of the buyer
over the subject property. Such buyer is not privy to the contract between the mortgagor and
mortgagee; hence, the buyer can make the necessary actions to protect her rights over the
property. Despite the apparent validity of the mortgage between the petitioner and PEPI, the
former is still bound to respect the transactions between respondents PEPI and Dee.

FACTS:

Respondent Teresita Tan Dee (Dee) bought from respondent Prime East Properties
Inc. (PEPI) on an installment basis a residential lot located in Binangonan, Rizal. Subsequently,
PEPI assigned its rights over a 213,093-sq m property to respondent Armed Forces of the
Philippines-Retirement and Separation Benefits System, Inc. (AFP-RSBS), which included the
property purchased by Dee.

PEPI obtained a loan from petitioner Philippine National Bank (petitioner), secured by a
mortgage over several properties, including Dees property.

After Dees full payment of the purchase price, a deed of sale was executed by
respondents PEPI and AFP-RSBS on July 1998 in Dees favor. Consequently, Dee sought from
the petitioner the delivery of the owners duplicate title over the property, to no avail. Thus, she
filed with the HLURB a complaint for specific performance to compel delivery of TCT No.
619608 by the petitioner, PEPI and AFP-RSBS, among others. The HLURB ruled in favor of
Dee.

The HLURB decision was affirmed by its Board of Commissioners. On appeal, the Board
of Commissioners decision was affirmed by the OP. Hence, the petitioner filed a petition for
review with the CA, which affirmed the OP decision.

ISSUE:

Whether Dee is bound by the contract of mortgage between PNB and AFP-RSBS

RULING:

The petitioner is correct in arguing that it is not obliged to perform any of the undertaking
of respondent PEPI and AFP-RSBS in its transactions with Dee because it is not a privy thereto.
The basic principle of relativity of contracts is that contracts can only bind the parties who
entered into it, and cannot favor or prejudice a third person, even if he is aware of such contract
and has acted with knowledge thereof.
 The petitioner, however, is not being tasked to undertake the obligations of PEPI and
AFP-RSBS. In this case, there are two phases involved in the transactions between
respondents PEPI and Dee the first phase is the contract to sell, which eventually became the
second phase, the absolute sale, after Dees full payment of the purchase price. In a contract of
sale, the parties obligations are plain and simple. The law obliges the vendor to transfer the
ownership of and to deliver the thing that is the object of sale. On the other hand, the principal
obligation of a vendee is to pay the full purchase price at the agreed time. Based on the final
contract of sale between them, the obligation of PEPI, as owners and vendors of Lot 12, Block
21-A, Village East Executive Homes, is to transfer the ownership of and to deliver Lot 12, Block
21-A to Dee, who, in turn, shall pay, and has in fact paid, the full purchase price of the property.
There is nothing in the decision of the HLURB, as affirmed by the OP and the CA, which shows
that the petitioner is being ordered to assume the obligation of any of the respondents. There is
also nothing in the HLURB decision, which validates the petitioners claim that the mortgage has
been nullified. The order of cancellation/release of the mortgage is simply a consequence of
Dees full payment of the purchase price, as mandated by Section 25 of P.D. No. 957, to wit:

Sec. 25. Issuance of Title. The owner or developer shall deliver the title of
the lot or unit to the buyer upon full payment of the lot or unit. No fee, except those
required for the registration of the deed of sale in the Registry of Deeds, shall be
collected for the issuance of such title. In the event a mortgage over the lot or unit
is outstanding at the time of the issuance of the title to the buyer, the owner or
developer shall redeem the mortgage or the corresponding portion thereof within
six months from such issuance in order that the title over any fully paid lot or unit
may be secured and delivered to the buyer in accordance herewith.

It must be stressed that the mortgage contract between PEPI and the petitioner is
merely an accessory contract to the principal three-year loan takeout from the petitioner by
PEPI for its expansion project. It need not be belaboured that [a] mortgage is an accessory
undertaking to secure the fulfillment of a principal obligation, and it does not affect the
ownership of the property as it is nothing more than a lien thereon serving as security for a debt.

Note that at the time PEPI mortgaged the property to the petitioner, the prevailing
contract between respondents PEPI and Dee was still the Contract to Sell, as Dee was yet to
fully pay the purchase price of the property. On this point, PEPI was acting fully well within its
right when it mortgaged the property to the petitioner, for in a contract to sell, ownership is
retained by the seller and is not to pass until full payment of the purchase price. In other words,
at the time of the mortgage, PEPI was still the owner of the property. Moreover, the mortgage
bore the clearance of the HLURB, in compliance with Section 18 of P.D. No. 957, which
provides that [n]o mortgage on any unit or lot shall be made by the owner or developer without
prior written approval of the [HLURB].
Nevertheless, despite the apparent validity of the mortgage between the petitioner and PEPI,
the former is still bound to respect the transactions between respondents PEPI and Dee. The
petitioner was well aware that the properties mortgaged by PEPI were also the subject of
existing contracts to sell with other buyers. While it may be that the petitioner is protected by Act
No. 3135, as amended, it cannot claim any superior right as against the installment buyers. This
is because the contract between the respondents is protected by P.D. No. 957, a social justice
measure enacted primarily to protect innocent lot buyers. Thus, in Luzon Development Bank v.
Enriquez, the Court reiterated the rule that a bank dealing with a property that is already subject
of a contract to sell and is protected by the provisions of P.D. No. 957, is bound by the contract
to sell.
 NICANORA G. BUCTON (DECEASED), SUBSTITUTED BY REQUILDA B. YRAY,
PETITIONER, VS. RURAL BANK OF EL SALVADOR, INC., MISAMIS ORIENTAL, AND
REYNALDO CUYONG v. ERLINDA CONCEPCION AND HER HUSBAND AND AGNES
BUCTON LUGOD
G.R. No. 179625, February 24, 2014
J. Del Castillo

In a contract executed by an agent for a principal, the contract must upon its face
purport to be made, signed and sealed in the name of the principal. When the Real Estate
Mortgage, explicitly shows on its face, that it was signed by Concepcion, the agent, in her own
name and in her own personal capacity, and without indicating that he is signing for and in
behalf of his principal, the mortgage is only binding upon her, the agent, and not upon the
principal.

FACTS:

Nicanora G. Bucton filed with the Regional Trial Court (RTC). Petitioner alleged that she
is the owner of a parcel of land, covered by Transfer Certificate of Title (TCT) No. T-3838. She
further alleged that Erlinda Concepcion (Concepcion) borrowed the title on the pretext that she
was going to show it to an interested buyer; that Concepcion obtained a loan in the amount of
P30,000.00 from respondent bank; that Concepcion failed to pay the loan; that petitioners
house and lot were foreclosed by respondent sheriff without a Notice of Extra-Judicial
Foreclosure or Notice of Auction Sale; and that petitioners house and lot were sold in an
auction sale in favor of respondent bank.

Respondent bank filed an Answer interposing lack of cause of action as a defense. It

denied the allegation of petitioner that the SPA was forged. It averred that petitioner went to the
bank and promised to settle the loan of Concepcion. By way of cross-claim, respondent bank
prayed that in the event of an adverse judgment against it, Concepcion, its co-defendant, be
ordered to indemnify it for all damages. Since summons could not be served upon Concepcion,
petitioner moved to drop her as a defendant. This prompted the respondent bank to file a Third-
Party Complaint against spouses Concepcion and Agnes Bucton Lugod (Lugod), the daughter
of petitioner. Respondent bank claimed that it would not have granted the loan and accepted
the mortgage were it not for the assurance of Concepcion and Lugod that the SPA was valid.
Thus, respondent bank prayed that in case it be adjudged liable, it should be reimbursed by
third-party defendants.

The RTC issued a Decision sustaining the claim of petitioner that the SPA was forged as
the signatures appearing on the SPA are different from the genuine signatures presented by
petitioner. The CA reversed the findings of the RTC. The CA found no cogent reason to
invalidate the SPA, the Real Estate Mortgage, and Foreclosure Sale as it was not convinced
that the SPA was forged. Petitioner moved for reconsideration but the same was denied. Hence,
this petition.

ISSUE:

Whether the petitioner is bound by the contract of mortgage between respondent bank and
Concepcion

RULING:
The Real Estate Mortgage was entered into by Concepcion in her own personal
capacity.

As early as the case of Philippine Sugar Estates Development Co. v. Poizat, the court
already ruled that in order to bind the principal by a deed executed by an agent, the deed must
upon its face purport to be made, signed and sealed in the name of the principal. In other
words, the mere fact that the agent was authorized to mortgage the property is not sufficient to
bind the principal, unless the deed was executed and signed by the agent for and on behalf of
his principal.

In this case, the authorized agent failed to indicate in the mortgage that she was acting
for and on behalf of her principal. The Real Estate Mortgage, explicitly shows on its face, that it
was signed by Concepcion in her own name and in her own personal capacity. In fact, there is
nothing in the document to show that she was acting or signing as an agent of petitioner. Thus,
consistent with the law on agency and established jurisprudence, petitioner cannot be bound by
the acts of Concepcion.

In light of the foregoing, there is no need to delve on the issues of forgery of the SPA and
the nullity of the foreclosure sale. For even if the SPA was valid, the Real Estate Mortgage
would still not bind petitioner as it was signed by Concepcion in her personal capacity and not
as an agent of petitioner. Simply put, the Real Estate Mortgage is void and unenforceable
against petitioner.
PHILIPPPINE NATIONAL BANK v. SPOUSES ENRIQUE MANALO & ROSALINDA JACINTO,
ARNOLD J. MANALO, ARNEL J. MANALO, AND ARMA J. MANALO
G.R. No. 174433, February 24, 2014
J. Bersamin

A contract where there is no mutuality between the parties partakes of the nature of a
contract of adhesion. Any obscurity will be construed against the party who prepared the
contract; the latter being presumed the stronger party to the agreement, and who caused the
obscurity.

Moreover, in an increase of interest rate, the creditor, as in the case of PNB, cannot
validly increase the interest rate unilaterally. Even if the borrower paid the increased interest
without protest, such cannot be construed to mean that the borrower is estopped from assailing
the unilateral increase of interest rate.

FACTS:

Respondent Spouses Enrique Manalo and Rosalinda Jacinto (Spouses Manalo) applied
for an All-Purpose Credit Facility with Philippine National Bank (PNB) to finance the construction
of their house. After PNB granted their application, they executed a Real Estate Mortgage in
favor of PNB over their property as security for the loan. The credit facility was renewed and
increased several times over the years. As a consequence, the parties executed a Supplement
to and Amendment of Existing Real Estate Mortgage whereby another property was added as
security for the loan. The additional security was registered in the names of respondents Arnold,
Arnel, Anthony, and Arma, all surnamed Manalo, who were their children.

After the Spouses Manalo still failed to settle their unpaid account despite two demand
letters, PNB foreclosed the mortgage. During the foreclosure sale, PNB was the highest bidder
of the mortgaged properties of the Spouses Manalo. The sheriff issued to PNB the Certificate of
Sale.

After more than a year after the Certificate of Sale had been issued to PNB, the Spouses
Manalo instituted this action for the nullification of the foreclosure proceedings and damages.
They alleged that they had obtained a loan for P1,000,000.00 from a certain Benito Tan upon
arrangements made by Antoninus Yuvienco, then the General Manager of PNBs Bangkal
Branch where they had transacted; that they had been made to understand and had been
assured that the P1,000,000.00 would be used to update their account, and that their loan
would be restructured and converted into a long-term loan; that they had been surprised to
learn, therefore, that had been declared in default of their obligations, and that the mortgage on
their property had been foreclosed and their property had been sold; and that PNB did not
comply with Section 3 of Act No. 3135, as amended.

PNB and Antoninus Yuvienco countered that the P1,000,000.00 loan obtained by the
Spouses Manalo from Benito Tan had been credited to their account; that they did not make any
assurances on the restructuring and conversion of the Spouses Manalos loan into a long-term
one; that PNBs right to foreclose the mortgage had been clear especially because the Spouses
Manalo had not assailed the validity of the loans and of the mortgage; and that the Spouses
Manalo did not allege having fully paid their indebtedness.

The RTC ruled in favor of PNB. The RTC held, among others, that the Spouses
Manalos contract of adhesion argument was unfounded because they had still accepted the
terms and conditions of their credit agreement with PNB and had exerted efforts to pay their
obligation and that the Spouses Manalo were now estopped from questioning the interest rates
unilaterally imposed by PNB because they had paid at those rates for three years without
protest. The CA affirmed the decision of the RTC insofar as it upheld the validity of the
foreclosure proceedings initiated by PNB, but modified the Spouses Manalos liability for
interest. It directed the RTC to see to the recomputation of their indebtedness, and ordered that
should the recomputed amount be less than the winning bid in the foreclosure sale, the
difference should be immediately returned to the Spouses Manalo.

ISSUE:

Whether PNB can unilaterally impose the interest rate of the loan

RULING:

The credit agreement executed succinctly stipulated that the loan would be subjected to
interest at a rate determined by the Bank to be its prime rate plus applicable spread, prevailing
at the current month. This stipulation was carried over to or adopted by the subsequent
renewals of the credit agreement. PNB thereby arrogated unto itself the sole prerogative to
determine and increase the interest rates imposed on the Spouses Manalo. Such a unilateral
determination of the interest rates contravened the principle of mutuality of contracts embodied
in Article 1308 of the Civil Code.

The Court has declared that a contract where there is no mutuality between the parties
partakes of the nature of a contract of adhesion, and any obscurity will be construed against the
party who prepared the contract, the latter being presumed the stronger party to the agreement,
and who caused the obscurity. PNB should then suffer the consequences of its failure to
specifically indicate the rates of interest in the credit agreement.

PNB could not also justify the increases it had effected on the interest rates by citing the
fact that the Spouses Manalo had paid the interests without protest, and had renewed the loan
several times. The SC ruled that the CA, citing Philippine National Bank v. Court of
Appeals, rightly concluded that a borrower is not estopped from assailing the unilateral
increase in the interest made by the lender since no one who receives a proposal to change a
contract, to which he is a party, is obliged to answer the same and said partys silence cannot be
construed as an acceptance thereof.
Lastly, the CA observed, and properly so, that the credit agreements had explicitly
provided that prior notice would be necessary before PNB could increase the interest rates. In
failing to notify the Spouses Manalo before imposing the increased rates of interest, therefore,
PNB violated the stipulations of the very contract that it had prepared. Hence, the varying
interest rates imposed by PNB have to be vacated and declared null and void, and in their place
an interest rate of 12% per annum computed from their default is fixed pursuant to the ruling
in Eastern Shipping Lines, Inc. v. Court of Appeals.

Anent the correct rates of interest to be applied on the amount to be refunded by PNB,
the Court, in Nacar v. Gallery Frames and S.C. Megaworld Construction v. Parada, already
applied Monetary Board Circular No. 799 by reducing the interest rates allowed in judgments
from 12% per annum to 6% per annum. According to Nacar v. Gallery Frames, MB Circular No.
799 is applied prospectively, and judgments that became final and executory prior to its
effectivity on July 1, 2013 are not to be disturbed but continue to be implemented applying the
old legal rate of 12% per annum. Hence, the old legal rate of 12% per annum applied to
judgments becoming final and executory prior to July 1, 2013, but the new rate of 6% per
annum applies to judgments becoming final and executory after said date.

Conformably with Nacar v. Gallery Frames and S.C. Megaworld Construction v. Parada,
therefore, the proper interest rates to be imposed in the present case are as follows:

1. Any amount to be refunded to the Spouses Manalo shall bear interest of 12% per
annum computed from March 28, 2006, the date of the promulgation of the CA decision,
until June 30, 2013; and 6% per annum computed from July 1, 2013 until finality of this
decision; and
2. The amount to be refunded and its accrued interest shall earn interest of 6% per
annum until full refund.
 RUFA A. RUBIO, BARTOLOME BANTOTO, LEON ALAGADMO, RODRIGO DELICTA, AND
ADRIANO ALABATA v. LOURDES ALABATA
G.R. No. 203947, February 26, 2014
J. Mendoza

When strict application of the law will result to injustice, as well as unjust enrichment on
one party, the Court cannot follow law blindly. Petitioners could not afford to engage the
services of a private counsel and so were represented by the PAO. As has been repeatedly
stated all over the records, PAO, SAC-PAO in particular, failed them. SAC-PAO never informed
them of the abandonment by respondent of her appeal or of the entry of judgment. Under the
circumstances, they could not be faulted for their subsequent actions. In the pursuit of justice
and equity, the Court may, when the necessity arises, as in the present case, relax the rules to
assist the party. The Court believes that it is its bounden duty to exact justice in every way
possible and exercise its soundest discretion to prevent a wrong.

FACTS:

Petitioners Rufa A. Rubio, Bartolome Bantoto, Leon Alagadmo, Rodrigo Delicta, and
Adriano Alabata (petitioners) and respondent Lourdes Alabata (respondent) were
protagonists in an earlier case for annulment of declaration of heirship and sale,
reconveyance and damages before the Regional Trial Court, Branch 43, Dumaguete City
(RTC-43). The case was decided in favor of petitioner. Respondent appealed to the CA but
eventually withdrew the same. The CA resolution granting respondents motion to withdraw
became final and executor.

Unfortunately, the judgment was not executed. Petitioners claim that their counsel at
the Public Attorneys Office, Dumaguete City (PAO-Dumaguete), was never informed that
the entry of judgment had already been issued. They pointed out that, initially, their case
was handled by the PAO-Dumaguete, but when the RTC-43 decision was appealed to the
CA by respondent, their case was handed over to the Special Appealed Cases Division
(SAC-PAO) at the PAO Central Office in Manila. They explained that although a copy of the
Entry of Judgment was sent to Atty. Ma. Lourdes Naz, the SAC-PAO lawyer in charge of
their case, she failed to inform petitioners of the issued entry of judgment before she
resigned from PAO. She also failed to inform PAO-Dumaguete of the said development.
When petitioners followed up with PAO-Dumaguete, it was of the belief that the appeal of
respondent was still pending.

More than ten (10) years from the date when the RTC-43 decision was entered in the
CA Book of Entries of Judgments, petitioners found out that the said decision had become
final and executory when their nephew secured a copy of the Entry of Judgment.

Thus, petitioners, through PAO-Dumaguete, filed an action for revival of judgment

which was raffled to RTC-42. After respondent filed her Answer with Affirmative Defenses,
 RTC-42 granted her Motion to Dismiss and ordered petitioners case for revival of judgment
dismissed on the ground of prescription. Petitioners sought reconsideration, but RTC-42
denied the motion.

Petitioners then interposed an appeal before the CA. The latter rendered its assailed
decision denying petitioners appeal and affirming the dismissal by the RTC-42 of their case
for revival of judgment. The CA denied petitioners motion for reconsideration. Hence, this
petition.

ISSUE:

Whether the petitioners action for revival of judgment should be granted

RULING:

An action for revival of judgment is governed by Article 1144 (3), Article 1152 of the
Civil Code and Section 6, Rule 39 of the Rules of Court. Thus:

Art. 1144. The following actions must be brought within ten years from the
time the right of action accrues:

xxxx

(3) Upon a judgment

Article 1152 of the Civil Code states:

Art. 1152. The period for prescription of actions to demand the fulfillment of
obligations declared by a judgment commences from the time the judgment
became final.

To allow a strict application of the rules, however, would result in an injustice to

petitioners considering (1) that respondent decided not to contest the RTC-43 decision and
withdrew her appeal and (2) that no fault could be attributed to petitioners.
 Petitioners could not afford to engage the services of a private counsel and so were
represented by the PAO. As has been repeatedly stated all over the records, PAO, SAC-
PAO in particular, failed them. SAC-PAO never informed them of the abandonment by
respondent of her appeal or of the entry of judgment. Under the circumstances, they could
not be faulted for their subsequent actions. They went to PAO-Dumaguete and they were
told that the case was still pending on appeal. Due to their penury and unfamiliarity or
downright ignorance of the rules, they could not be expected to bypass PAO-Dumaguete
and directly verify the status of the case with the SAC-PAO. They had to trust their lawyer
and wait.

No prejudice is caused to respondent because she withdrew her appeal.

Withdrawing her appeal means that she respected the RTC-43 Decision, which voided the
Declaration of Heirship and Sale, dismissed respondents counterclaim, and ordered her to
reconvey the entire subject property to petitioners and to pay moral and exemplary damages
plus the cost of suit. Since the decision became final and executory, she has been in
possession of the property which rightfully belongs to petitioners. She will continue to hold
on to the property just because of a technicality.

Due to the peculiarities of this case, the Court, in the exercise of its equity jurisdiction,
relaxes the rules and decides to allow the action for the revival of judgment filed by
petitioners. The Court believes that it is its bounden duty to exact justice in every way
possible and exercise its soundest discretion to prevent a wrong. Although strict compliance
with the rules of procedure is desired, liberal interpretation is warranted in cases where a
strict enforcement of the rules will not serve the ends of justice; and that it is a better rule
that courts, under the principle of equity, will not be guided or bound strictly by the statute of
limitations or the doctrine of laches when to do so, manifest wrong or injustice would result.
HOMEOWNERS SAVINGS AND LOAN BANK v. ASUNCION P. FELONIA AND LYDIA C. DE
GUZMAN, REPRESENTED BY MARIBEL FRIAS
MARIE MICHELLE P. DELGADO, REGISTER OF DEEDS OF LAS PIAS CITY AND
RHANDOLFO B. AMANSEC, IN HIS CAPACITY AS CLERK OF COURT EX-OFFICIO
SHERIFF, OFFICE OF THE CLERK OF COURT, LAS PIAS CITY
G.R. No. 189477, February 26, 2014
J. Perez

Even if on the outset, a party is a mortgagee in good faith, if he subsequently purchases

the property with notice of lis pendens, he cannot claim to have a better right over the said
property by interposing the argument that he is a mortgagee in good faith.

FACTS:

Respondents Asuncion Felonia (Felonia) and Lydia de Guzman (De Guzman) were the
registered owners of a parcel of land covered by TCT No. T-402. Felonia and De Guzman
mortgaged the property to Delgado to secure the loan. However, instead of a real estate
mortgage, the parties executed a Deed of Absolute Sale with an Option to Repurchase. Felonia
and De Guzman filed an action for Reformation of Contract (Reformation case) before the RTC.
The RTC rendered a judgment in their favor. Aggrieved, Delgado elevated the case to the CA.
The CA affirmed the RTC decision. Such CA decision eventually became final.

Inspite of the pendency of the Reformation case in which she was the defendant,
Delgado filed a Petition for Consolidation of Ownership of Property Sold with an Option to
Repurchase and Issuance of a New Certificate of Title (Consolidation case) in the RTC. After
an ex parte hearing, the RTC ordered the issuance of a new title under Delgados name.

By virtue of the RTC decision, Delgado transferred the title to her name. Hence, TCT No.
T-402, registered in the names of Felonia and De Guzman, was canceled and TCT No. 44848 in
the name of Delgado, was issued. Aggrieved, Felonia and De Guzman elevated the case to the
CA through a Petition for Annulment of Judgment.

Meanwhile, Delgado mortgaged the subject property to Homeowners Savings and Loan
Bank (HSLB) using her newly registered title. Three (3) days later HSLB caused the annotation
of the mortgage. Three months after, Felonia and De Guzman caused the annotation of a Notice
of Lis Pendens on Delgados title, TCT No. 44848. HSLB foreclosed the subject property and
later consolidated ownership in its favor, causing the issuance of a new title in its name, TCT
No. 64668.

The CA rendered a decision in favor of Felonia and De Guzman. The decision of the CA,
declaring Felonia and De Guzman as the absolute owners of the subject property and ordering
the cancellation of Delgados title, became final and executor.

Claiming to be the absolute owners of the subject property, instituted the instant
complaint against Delgado, HSLB, Register of Deeds of Las Pias City and Rhandolfo B.
Amansec before the RTC of Las Pias City for Nullity of Mortgage and Foreclosure Sale,
Annulment of Titles of Delgado and HSLB, and finally, Reconveyance of Possession and
Ownership of the subject property in their favor. HSLB asserted that Felonia and De Guzman
are barred from laches as they had slept on their rights to timely annotate, by way of Notice
of Lis Pendens, the pendency of the Reformation case. HSLB also claimed that it should not be
bound by the decisions of the CA in the Reformation and Consolidation cases because it was
not a party therein. Finally, HSLB asserted that it was a mortgagee in good faith because the
mortgage between Delgado and HSLB was annotated on the title on 5 June 1995, whereas the
Notice of Lis Pendens was annotated only on 14 September 1995.

The RTC ruled in favor of Felonia and De Guzman as the absolute owners of the subject
property. The CA affirmed the RTC decision with modification. Hence, this instant petition.

ISSUE:

Whether HLSB has a better right over the property

RULING:

The rights of the parties to the present case are defined not by the determination of
whether or not HSLB is a mortgagee in good faith, but of whether or not HSLB is a purchaser in
good faith. And, HSLB is not such a purchaser.

A purchaser in good faith is defined as one who buys a property without notice that some
other person has a right to, or interest in, the property and pays full and fair price at the time of
purchase or before he has notice of the claim or interest of other persons in the property.

When a prospective buyer is faced with facts and circumstances as to arouse his
suspicion, he must take precautionary steps to qualify as a purchaser in good faith.

In the case at bar, HSLB utterly failed to take the necessary precautions. At the time the
subject property was mortgaged, there was yet no annotated Notice of Lis Pendens. However,
at the time HSLB purchased the subject property, the Notice of Lis Pendens was already
annotated on the title.

Lis pendens is a Latin term which literally means, a pending suit or a pending litigation
while a notice of lis pendens is an announcement to the whole world that a real property is in
litigation, serving as a warning that anyone who acquires an interest over the property does so
at his/her own risk, or that he/she gambles on the result of the litigation over the property. It is a
warning to prospective buyers to take precautions and investigate the pending litigation.

The purpose of a notice of lis pendens is to protect the rights of the registrant while the
case is pending resolution or decision. With the notice of lis pendens duly recorded and
remaining uncancelled, the registrant could rest secure that he/she will not lose the property or
any part thereof during litigation.

The doctrine of lis pendens is founded upon reason of public policy and necessity, the
purpose of which is to keep the subject matter of the litigation within the Courts jurisdiction until
the judgment or the decree have been entered; otherwise, by successive alienations pending
the litigation, its judgment or decree shall be rendered abortive and impossible of execution.

Indeed, at the time HSLB bought the subject property, HSLB had actual knowledge of
the annotated Notice of Lis Pendens. Instead of heeding the same, HSLB continued with the
purchase knowing the legal repercussions a notice of lis pendens entails. HSLB took upon itself
the risk that the Notice of Lis Pendens leads to. As correctly found by the CA, the notice of lis
pendens was annotated on 14 September 1995, whereas the foreclosure sale, where the
appellant was declared as the highest bidder, took place sometime in 1997. There is no doubt
that at the time appellant purchased the subject property, it was aware of the pending litigation
concerning the same property and thus, the title issued in its favor was subject to the outcome
of said litigation.

The subject of the lis pendens on the title of HSLBs vendor, Delgado, is the
Reformation case filed against Delgado by the herein respondents. The case was decided with
finality by the CA in favor of herein respondents. The contract of sale in favor of Delgado was
ordered reformed into a contract of mortgage. By final decision of the CA, HSLBs vendor,
Delgado, is not the property owner but only a mortgagee. As it turned out, Delgado could not
have constituted a valid mortgage on the property.

Insofar as the HSLB is concerned, there is no longer any public interest in upholding the
indefeasibility of the certificate of title of its mortgagor, Delgado. Such title has been nullified in a
decision that had become final and executory. Its own title, derived from the foreclosure of
Delgados mortgage in its favor, has likewise been nullified in the very same decision that
restored the certificate of title in respondents name. There is absolutely no reason that can
support the prayer of HSLB to have its mortgage lien carried over and into the restored
certificate of title of respondents.

MARCH 2014

JESUS G. CRISOLOGO AND NANETTE B. CRISOLOGO v. JEWM AGRO-INDUSTRIAL

CORPORATION
G.R. No. 196894. March 03, 2014
J.Mendoza

Pursuant to Section 108 of PD No. 1529, in an action for the cancellation of

memorandum annotated at the back of a certificate of title, the persons considered as
indispensable include those whose liens appear as annotations. As indispensable parties, they
must be given the proper notice of any proceeding involving the subject properties.

Thus, in a case where two (2) parcels of land were attached by various creditors and the
levies are annotated on the back of the titles of the subject properties, one creditor cannot file
an action for cancellation of lien without giving notice to all parties-in- interest, like other
creditors whose lien over the subject properties appear on the back of the titles of the subject
properties.

FACTS:

This controversy stemmed from various cases of collection for sum of money filed
against So Keng Kok, the owner of various properties including two (2) parcels of land covered
by TCT Nos. 292597 and 292600 (subject properties), which were attached by various creditors
including the petitioners in this case. As a result, the levies were annotated on the back of the
said titles.

Petitioners Jesus G. Crisologo and Nannette B. Crisologo (Spouses Crisologo) were the
plaintiffs in two (2) collection cases before RTC branch 15 against Robert Limso, So Keng Koc,
et al. Respondent JEWM Agro-Industrial Corporation (JEWM) was the successor-in-interest of
one Sy Sen Ben, the plaintiff in another collection case before RTC branch 8 against the same
defendants.
 RTC branch 8 rendered its decision based on a compromise agreement between the
parties wherein the defendants in said case were directed to transfer the subject properties in
favor of Sy Sen Ben. The latter subsequently sold the subject properties to one Nilda Lam who,
in turn, sold the same to JEWM. Thereafter, TCT Nos. 325675 and 325676 were eventually
issued in the name of JEWM, both of which still bearing the same annotations as well as the
notice of lis pendens in connection with the other pending cases filed against So Keng Kok.

A year thereafter, Spouses Crisologo prevailed in the separate collection case filed
before RTC-Br. 15 against Robert Lim So and So Keng Koc (defendants). Thus, the said
defendants were ordered to solidarily pay the Spouses Crisologo. When this decision attained
finality, they moved for execution. Acting on the same, the Branch Sheriff issued a notice of sale
scheduling an auction. The notice of sale included, among others, the subject properties
covered by TCT Nos. 325675 and 325676, now, in the name of JEWM.

In the same proceedings, JEWM immediately filed its Affidavit of Third Party Claim and
the Urgent Motion Ad Cautelam. It prayed for the exclusion of the subject properties from the
notice of sale. However, the same were denied.

To protect its interest, JEWM filed a separate action for cancellation of lien with prayer
for the issuance of a preliminary injunction before RTC-Br. 14. It prayed for the issuance of a
writ of preliminary injunction to prevent the public sale of the subject properties covered in the
writ of execution issued pursuant to the ruling of RTC-Br. 15; the cancellation of all the
annotations on the back of the pertinent TCTs; and the issuance of a permanent injunction order
after trial on the merits.

Spouses Crisologo filed an Omnibus Motion praying for the denial of the application for
writ or preliminary injuction filed by JEWM and asking for their recognition as parties. No motion
to intervene was, however, filed as the Spouses Crisologo believed that it was unnecessary
since they were already the John and Jane Does named in the complaint.

Thereafter, RTC-Br. 14 denied Spouses Crisologos Omnibus Motion and granted

JEWMs application for a writ of preliminary injunction. Thus, Spouses Crisologo filed a Very
Urgent Omnibus Motion before RTC-Br. 14 praying for reconsideration. This was denied for lack
of legal standing in court considering that their counsel failed to make the written formal notice
of appearance. JEWM moved to declare the defendants in default which was granted in an
order given in open court. Spouses Crisologo then filed their Very Urgent Manifestation arguing
that they could not be deemed as defaulting parties because they were not referred to in the
pertinent motion and order of default.

Spouses Crisologo filed with the CA a petition for certiorari under Rule 65 of the Rules of
Court assailing the RTC-Br. 14 orders. Pending disposition of the Amended Petition by the CA,
JEWM filed a motion before RTC-Br. 14 asking for the resolution of the case on the merits.
Subsequently, RTC-Br. 14 ruled in favor of JEWM.

The CA eventually denied the Petition filed by Spouses Crisologo for lack of merit. It
ruled that the writ of preliminary injunction subject of the petition was already fait accompli and,
as such, the issue of grave abuse of discretion attributed to RTC-Br. 14 in granting the relief had
become moot and academic. Hence, this petition.

ISSUE:
Whether the Spouses Crisologo are indispensable parties

RULING:

Spouses Crisologo restate the applicability of Section 108 of P.D. No. 1529 to the effect
that any cancellation of annotation of certificates of title must be carried out by giving notice to
all parties-in- interest. This they forward despite their recognition of the mootness of their
assertion over the subject properties.

In an action for the cancellation of memorandum annotated at the back of a certificate of

title, the persons considered as indispensable include those whose liens appear as annotations
pursuant to Section 108 of P.D. No. 1529, to wit:

Section 108. Amendment and alteration of certificates. -No erasure, alteration or

amendment shall be made upon the registration book after the entry of a certificate of title or of
a memorandum thereon and the attestation of the same by the Register of Deeds, except by
order of the proper Court of First Instance. A registered owner or other person having an interest
in registered property, or, in proper cases, the Register of Deeds with the approval of the
Commissioner of Land Registration, may apply by petition to the court upon the ground that the
registered interests of any description, whether vested, contingent, expectant inchoate
appearing on the certificate, have terminated and ceased; or that new interest not appearing
upon the certificates have arisen or been created; or that an omission or error was made in
entering a certificate or memorandum thereon, or on any duplicate certificate; x x x or upon any
other reasonable ground; and the court may hear and determine the petition after notice to all
parties in interest, and may order the entry or cancellation of a new certificate, the entry or
cancellation of a memorandum upon a certificate, or grant any other relief upon such terms and
conditions, requiring security or bond if necessary, as it may consider proper.

Here, undisputed is the fact that Spouses Crisologos liens were indeed annotated at the
back of TCT Nos. 325675 and 325676. Thus, as persons with their liens annotated, they stand
to be benefited or injured by any order relative to the cancellation of annotations in the pertinent
TCTs. In other words, they are as indispensable as JEWM itself in the final disposition of the
case for cancellation, being one of the many lien holders.

The reason behind this compulsory joinder of indispensable parties is the complete
determination of all possible issues, not only between the parties themselves but also as
regards other persons who may be affected by the judgment.

In this case, RTC-Br. 14, despite repeated pleas by Spouses Crisologo to be recognized
as indispensable parties, failed to implement the mandatory import of the aforecited rule.
Clearly, the cancellation of the annotation of the sale without notifying the buyers, Sps.
Crisologo, is a violation of the latters right to due process.
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE DEPARTMENT OF PUBLIC
WORKS AND HIGHWAYS (DPWH) v. ORTIGAS AND COMPANY LIMITED
PARTNERSHIP
G.R. No. 171496. March 03, 2014
J. Leonen

Where a party subdivided his property into five lots and reserved one lot for road
widening for a government project, the lot being reserved for road widening at the instance
of the Republic of the Philippines, the latter cannot rely on Section 50 of PD No. 1529
providing that delineated boundaries, streets, passageways, and waterways of a subdivided
land may not be closed or disposed of by the owner except by donation to the government.

While the lot segregated for road widening used to be part of the subdivided lots, the
intention to separate it from the delineated subdivision streets was obvious from the fact that
it was located at the fringes of the original lot exactly at petitioner Republic of the
Philippines intended location for the road widening project. Moreover, petitioner Republic of
the Philippines intention to take the property for public use was obvious from the completion
of the road widening for the flyover project and from the fact that the general public was
already taking advantage of the thoroughfare.

FACTS:

Respondent, Ortigas and Company Limited Partnership, is the owner of a parcel of

land known as Lot 5-B-2 with an area of 70,278 square meters in Pasig City. Upon the
request of the Department of Public Works and Highways, respondent Ortigas caused the
segregation of its property into five lots and reserved one portion for road widening for the
C-5 flyover project. It designated Lot 5-B-2-A, a 1,445-square-meter portion of its property,
for the road widening of Ortigas Avenue. Respondent Ortigas also caused the annotation of
the term road widening on its title. The title was then inscribed with an encumbrance that it
was for road widening and subject to Section 50 of Presidential Decree No. 1529 or the
Property Registration Decree.

Consequently, respondent Ortigas further subdivided Lot 5-B-2-A into two lots: Lot 5-
B-2-A-1, which was the portion actually used for road widening, and Lot 5-B-2-A-2, which
was the unutilized portion of Lot 5-B-2-A.

Respondent Ortigas filed with the Regional Trial Court a petition for authority to sell
to the government Lot 5-B-2-A-1. Respondent Ortigas alleged that the Department of Public
Works and Highways requested the conveyance of the property for road widening purposes.
Despite due notice to the public, including the Office of the Solicitor General and the
Department of Public Works and Highways, no one appeared to oppose respondent Ortigas
petition in the hearing. Respondent Ortigas was able to establish the jurisdictional facts of
the case and was allowed to present evidence ex parte before the appointed Commissioner.

Finding merit in respondent Ortigas' petition, the Regional Trial Court issued an order
on June 11, 2001, authorizing the sale of Lot 5-B-2-A-1 to petitioner Republic of the
Philippines.

Petitioner Republic of the Philippines, represented by the Office of the Solicitor

General, filed an opposition, alleging that respondent Ortigas' property can only be
 conveyed by way of donation to the government, citing Section 50 of Presidential Decree
No. 1529, also known as the Property Registration Decree.

Petitioner Republic of the Philippines also filed a motion for reconsideration of the
Regional Trial Court order reiterating its argument in its opposition. However, the same was
denied. The Court of Appeals dismissed petitioner Republic of the Philippines appeal as well
as its motion for reconsideration. Hence, this case.

ISSUE:

Whether Ortigas has authority to sell the land to the Republic of the Philippines

RULING:

Respondent Ortigas may sell its property to the government. It must be

compensated because its property was taken and utilized for public road purposes.

Petitioner Republic of the Philippines insists that the subject property may not be
conveyed to the government through modes other than by donation. It relies on Section 50
of the Property Registration Decree, which provides that delineated boundaries, streets,
passageways, and waterways of a subdivided land may not be closed or disposed of by the
owner except by donation to the government. It reads:

Section 50. Subdivision and consolidation plans. Any owner subdividing a tract of
registered land into lots which do not constitute a subdivision project as defined and
provided for under P.D. No. 957, shall file with the Commissioner of Land Registration or the
Bureau of Lands a subdivision plan of such land on which all boundaries, streets,
passageways and waterways, if any, shall be distinctly and accurately delineated.

If a subdivision plan, be it simple or complex, duly approved by the Commissioner of

Land Registration or the Bureau of Lands together with the approved technical descriptions
and the corresponding owners duplicate certificate of title is presented for registration, the
Register of Deeds shall, without requiring further court approval of said plan, register the
same in accordance with the provisions of the Land Registration Act, as amended: Provided,
however, that the Register of Deeds shall annotate on the new certificate of title covering the
street, passageway or open space, a memorandum to the effect that except by way of
donation in favor of the national government, province, city or municipality, no portion of any
street, passageway, waterway or open space so delineated on the plan shall be closed or
otherwise disposed of by the registered owner without the approval of the Court of First
Instance of the province or city in which the land is situated. (Emphasis supplied)

Petitioner Republic of the Philippines reliance on Section 50 of the Property

Registration Decree is erroneous. Section 50 contemplates roads and streets in a
subdivided property, not public thoroughfares built on a private property that was taken from
an owner for public purpose. A public thoroughfare is not a subdivision road or street.

More importantly, when there is taking of private property for some public purpose,
the owner of the property taken is entitled to be compensated. There is taking when the
following elements are present:

a. The government must enter the private property;

b. The entrance into the private property must be indefinite or permanent;
c. There is color of legal authority in the entry into the property;
d. The property is devoted to public use or purpose;
e. The use of property for public use removed from the owner all beneficial enjoyment of the
property.

All of the above elements are present in this case. Petitioner Republic of the
Philippines construction of a road a permanent structure on respondent Ortigas
property for the use of the general public is an obvious permanent entry on petitioner
Republic of the Philippines part. Given that the road was constructed for general public use
stamps it with public character, and coursing the entry through the Department of Public
Works and Highways gives it a color of legal authority.

As a result of petitioner Republic of the Philippines entry, respondent Ortigas may

not enjoy the property as it did before. It may not anymore use the property for whatever
legal purpose it may desire. Neither may it occupy, sell, lease, and receive its proceeds. It
cannot anymore prevent other persons from entering or using the property. In other words,
respondent Ortigas was effectively deprived of all the bundle of rights attached to ownership
of property.

It is true that the lot reserved for road widening, together with five other lots, formed
part of a bigger property before it was subdivided. However, this does not mean that all lots
delineated as roads and streets form part of subdivision roads and streets that are subject to
Section 50 of the Property Registration Decree. Subdivision roads and streets are
constructed primarily for the benefit of the owners of the surrounding properties. They are,
thus, constructed primarily for private use as opposed to delineated road lots taken at the
instance of the government for the use and benefit of the general public.

In this case, the lot was reserved for road widening at the instance of petitioner
Republic of the Philippines. While the lot segregated for road widening used to be part of the
subdivided lots, the intention to separate it from the delineated subdivision streets was
obvious from the fact that it was located at the fringes of the original lot exactly at
petitioner Republic of the Philippines intended location for the road widening project.
Moreover, petitioner Republic of the Philippines intention to take the property for public use
was obvious from the completion of the road widening for the C-5 flyover project and from
the fact that the general public was already taking advantage of the thoroughfare.

Delineated roads and streets, whether part of a subdivision or segregated for public
use, remain private and will remain as such until conveyed to the government by donation or
through expropriation proceedings. An owner may not be forced to donate his or her
property even if it has been delineated as road lots because that would partake of an illegal
taking. He or she may even choose to retain said properties. If he or she chooses to retain
them, however, he or she also retains the burden of maintaining them and paying for real
estate taxes.

An owner of a subdivision street, which was not taken by the government for public
use, would retain such burden even if he or she would no longer derive any commercial
value from said street. To remedy such burden, he or she may opt to donate it to the
government. In such case, however, the owner may not force the government to purchase
the property. That would be tantamount to allowing the government to take private property
to benefit private individuals. This is not allowed under the Constitution, which requires that
taking must be for public use.

RAFAEL VALES, CECILIA VALES-VASQUEZ, and YASMIN VALES-JACINTO

v. MA. LUZ CHORESCA GALINATO, ET AL.

G.R. No. 180134, March 5, 2014

J. PERLAS-BERNABE

Petitioners sought exemption of the subject lands from the OLT Program of the
government by claiming ownership thereof on the basis of a sale thereof by the registered
owners, i.e., Sps. Vales, executed on March 3, 1972. However, said transaction, in order to
be valid and equally deemed as binding against the tenants concerned, should be examined
in line with the provisions of the May 7, 1982 DAR Memorandum which provides that
tenants should (a) have actual knowledge of unregistered transfers of ownership of lands
covered by Torrens Certificate of Titles prior to October 21, 1972, (b) have recognized the
persons of the new owners, and (c) have been paying rentals/amortization to such new
owners in order to validate the transfer and bind the tenants to the same.

FACTS:

Spouses Perfecto and Marietta Vales (Sps. Vales) executed a Deed of Sale, all
situated in Barrio Manguna, Cabatuan, Iloilo, to their three (3) children, herein petitioners
(subject sale). However, the subject sale was not registered, hence, title to the subject lands
remained in the names of Sps. Vales. At the time of the sale, the subject lands were
tenanted.

Several months later, Presidential Decree No. (PD) 27 was passed decreeing the
emancipation of tenants. As required under Letter of Instruction No. (LOI) 41 issued on
November 21, 1972, petitioner Rafael Vales executed a sworn declaration, asserting that he
and his sisters are co-owners of the subject lands. This notwithstanding, the subject lands
were placed under the coverage of the governments Operation Land Transfer (OLT)
Program as properties belonging to Sps. Vales, not to petitioners.

Petitioners, then, entered into several Agricultural Leasehold Contracts with the
several tenants. These contracts were duly registered with the Office of the Municipal
Treasurer of Cabatuan. The following year, 1988, Emancipation Patents (EPs) were issued
to certain tenants of the subject lands. Petitioners claimed, however, that such issuances
were made "without [their] knowledge and despite their vehement protest and opposition."
ISSUES:

1. Whether subject lands are exempt from OLT Program coverage

2. Whether the petitioners are entitled to avail of any retention right under existing agrarian
laws.

RULING:

The petition lacks merit.

Propriety of the Denial of the Petition for Exemption

Petitioners sought exemption of the subject lands from the OLT Program of the
government by claiming ownership thereof on the basis of a sale thereof by the registered
owners, i.e., Sps. Vales, executed on March 3, 1972. However, said transaction, in order to
be valid and equally deemed as binding against the tenants concerned, should be examined
in line with the provisions of the May 7, 1982 DAR Memorandum which provides that tenants
should (a) have actual knowledge of unregistered transfers of ownership of lands covered
by Torrens Certificate of Titles prior to October 21, 1972, (b) have recognized the persons of
the new owners, and (c) have been paying rentals/amortization to such new owners in order
to validate the transfer and bind the tenants to the same.

In the case at bar, it is undisputed that the subject sale was not registered or even
annotated on the certificates of title covering the subject lands. More importantly, the CA,
which upheld the final rulings of the DAR Secretary and the OP, found that the tenants
categorically belied having actual knowledge of the said sale, and that the tenants still
recognized Sps. Vales as the landowners. In this regard, petitioners failed to show any
justifiable reason to warrant a contrary finding. Thus, keeping in mind that the factual
findings of the CA are generally accorded with finality absent any sufficient countervailing
reason therefor, it may be concluded that petitioners failed to comply with the requirements
stated under the May 7, 1982 DAR Memorandum. As a result, the subject sale could not be
considered as valid, especially as against the tenants and/or their relatives particularly,
herein respondents. The subject lands were therefore correctly placed under the OLT
Program of the government, which thereby warranted the denial of the petition for
exemption.
 Propriety of the Denial of the Petition for Retention

Anent the issue on retention, suffice it to state that Sps. Vales had no right to retain
the subject lands considering that their aggregate landholdings, consisting of 58.6060 has.,
exceeded the 24-hectare landholding limit as above-explained. Consequently, the subject
lands would fall under the complete coverage of the OLT Program, without any right of
retention on petitioners part, either under PD 27 or RA 6657, being mere successors-in-
interest of Sps. Vales by virtue of intestate succession. In this respect, the denial of the
petition for retention was likewise proper.

ONE NETWORK RURAL BANK, INC., PETITIONER, v. DANILO G. BARIC, RESPONDENT.

G.R. No. 193684, March 05, 2014
J. Del Castillo

Where a bank was merely a purchaser or transferee of the property that has a
pending forcible entry case, it cannot be made liable for nominal damages since it has not
violated or invaded a right. It is not prohibited from acquiring the property even while the
forcible entry case was pending, because as the registered owner of the subject property,
the seller may transfer his title at any time and the lease merely follows the property as a
lien or encumbrance.

FACTS:

Jaime Palado (Palado) was the registered owner of real property with a building
containing commercial spaces for lease (subject property). Respondent Danilo G. Baric
(Baric) was a lessee therein, operating a barber shop on one of the commercial spaces. A
written agreement, or Kasabutan, governed the lease.
Baric received a written notice from Palado demanding the return of the leased
commercial space within 40 days from December 15, 2000. Thereafter, the building was
demolished.
Baric filed a case for forcible entry with prayer for injunctive relief against Palado and
herein petitioner One Network Rural Bank, Inc. (Network Bank). Baric alleged that he had
been occupying the leased space since 1994; that in 2000, he renovated the leased space
with Palados consent and knowledge; that in December 2000, Palado sent him a notice to
vacate the premise; that Palado enclosed and fenced the premises and thus prevented him
from entering and using the same; that he was thus excluded from the leased premises by
means of strategy, violence, force and threat. Baric thus prayed that injunctive relief be
granted to restrain Palado and Network Bank from depriving him of possession; that he be
restored in his possession of the commercial space, and that any structure built thereon in
the meantime be demolished. Barics Amended Complaint was prompted by Network Banks
subsequent purchase of the subject property from Palado, whereupon TCT 231531 was
cancelled and TCT T-338511 was issued in the banks name. It then constructed a new
building on the lot.
Network Bank essentially claimed, among others, that as a buyer in good faith and
new owner of the subject property, it should not be made liable.
 MTCC rendered its Decision dismissing Barics Complaint for forcible entry. The RTC
affirmed the MTCC decision in toto. Upon petition for Review with the CA, the court issued
the assailed Decision reversing the MTCC and RTC decisions. It awarded nominal damages
to Baric for which respondents are solidarily liable.

ISSUE:

Whether One Network Bank is liable for nominal damages to Baric

RULING:

Nominal damages are recoverable where a legal right is technically violated and
must be vindicated against an invasion that has produced no actual present loss of any kind
or where there has been a breach of contract and no substantial injury or actual damages
whatsoever have been or can be shown. Under Article 2221 of the Civil Code, nominal
damages may be awarded to a plaintiff whose right has been violated or invaded by the
defendant, for the purpose of vindicating or recognizing that right, not for indemnifying the
plaintiff for any loss suffered. Nominal damages are not for indemnification of loss suffered
but for the vindication or recognition of a right violated or invaded.

Network Bank did not violate any of Barics rights; it was merely a purchaser or
transferee of the property. Surely, it is not prohibited from acquiring the property even while
the forcible entry case was pending, because as the registered owner of the subject
property, Palado may transfer his title at any time and the lease merely follows the property
as a lien or encumbrance. Any invasion or violation of Barics rights as lessee was
committed solely by Palado, and Network Bank may not be implicated or found guilty unless
it actually took part in the commission of illegal acts, which does not appear to be so from
the evidence on record. On the contrary, it appears that Baric was ousted through Palados
acts even before Network Bank acquired the subject property or came into the picture. Thus,
it was error to hold the bank liable for nominal damages.
SPS. ANTONIO FORTUNA AND ERLINDA FORTUNA v. REPUBLIC OF THE PHILIPPINES
G.R. No. 173423. March 05, 2014
J. Brion

For failure to present incontrovertible evidence that Lot No. 4457 has been
reclassified as alienable and disposable land of the public domain though a positive act of
the Executive Department, as well as present proof of that they possessed Lot No. 4457
since May 8, 1947, the spouses Fortunas application for registration of title must be denied.

FACTS:

The spouses Fortuna filed an application for registration of a 2,597-square meter

land identified as Lot No. 4457. The spouses Fortuna stated that Lot No. 4457 was originally
owned by Pastora Vendiola, upon whose death was succeeded by her children, Clemente
and Emeteria Nones. Emeteria renounced all her interest in Lot No. 4457 in favor of
Clemente. Clemente later sold the lot in favor of Rodolfo Cuenca. Rodolfo sold the same lot
to the spouses Fortuna through a deed of absolute sale.

The spouses Fortuna claimed that they, through themselves and their predecessors-
in-interest, have been in quiet, peaceful, adverse and uninterrupted possession of Lot No.
4457 for more than 50 years, and submitted as evidence the lots survey plan, technical
description, and certificate of assessment.

Although the respondent, Republic of the Philippines (Republic), opposed the

application, it did not present any evidence in support of its opposition. Since no private
opposition to the registration was filed, the RTC issued an order of general default against
the whole world, except the Republic.

In its Decision dated May 7, 2001, the RTC granted the application for registration in
favor of the spouses Fortuna.

The Republic appealed the RTC decision with the CA, arguing that the spouses
Fortuna did not present an official proclamation from the government that the lot has been
classified as alienable and disposable agricultural land. It also claimed that the spouses
Fortunas evidence Tax Declaration No. 8366 showed that possession over the lot dates
back only to 1948, thus, failing to meet the June 12, 1945 cut-off period provided under
Section 14(1) of Presidential Decree (PD) No. 1529 or the Property Registration Decree
(PRD).

In its decision dated May 16, 2005, the CA reversed and set aside the RTC decision.
The CA denied the spouses Fortunas motion for reconsideration of its decision.

ISSUE:

Whether petitioners application for registration of title should be granted

RULING:

The nature of Lot No. 4457 as alienable and disposable public land has not been
sufficiently established.
 The Constitution declares that all lands of the public domain are owned by the State.
Of the four classes of public land, i.e., agricultural lands, forest or timber lands, mineral
lands, and national parks, only agricultural lands may be alienated. Public land that has not
been classified as alienable agricultural land remains part of the inalienable public domain.
Thus, it is essential for any applicant for registration of title to land derived through a public
grant to establish foremost the alienable and disposable nature of the land. The Public Land
Act (PLA) provisions on the grant and disposition of alienable public lands, specifically,
Sections 11 and 48(b), will find application only from the time that a public land has been
classified as agricultural and declared as alienable and disposable.

In this case, the CA declared that the notation in the survey plan established the
alienable nature of the land. It also relied on the from the DENR Community Environment
and Natural Resources Office (CENRO) that there is, per record, neither any public land
application filed nor title previously issued for the subject parcel[.] However, the court finds
that neither of the above documents is evidence of a positive act from the government
reclassifying the lot as alienable and disposable agricultural land of the public domain.

Mere notations appearing in survey plans are inadequate proof of the covered
properties alienable and disposable character. These notations, at the very least, only
establish that the land subject of the application for registration falls within the approved
alienable and disposable area per verification through survey by the proper government
office. The applicant, however, must also present a copy of the original classification of the
land into alienable and disposable land, as declared by the DENR Secretary or as
proclaimed by the President.

The survey plan and the DENR-CENRO certification are not proof that the President
or the DENR Secretary has reclassified and released the public land as alienable and
disposable. The offices that prepared these documents are not the official repositories or
legal custodian of the issuances of the President or the DENR Secretary declaring the public
land as alienable and disposable.

For failure to present incontrovertible evidence that Lot No. 4457 has been
reclassified as alienable and disposable land of the public domain though a positive act of
the Executive Department, the spouses Fortunas claim of title through a public land grant
under the PLA should be denied.

In judicial confirmation of imperfect or incomplete title, the period of possession

should commence, at the latest, as of May 9, 1947

Although the above finding that the spouses Fortuna failed to establish the alienable
and disposable character of Lot No. 4457 serves as sufficient ground to deny the petition
and terminate the case, the court deems it proper to continue to address the other important
legal issues raised in the petition.

The PLA is the law that governs the grant and disposition of alienable agricultural
lands. Under Section 11 of the PLA, alienable lands of the public domain may be disposed
of, among others, by judicial confirmation of imperfect or incomplete title. This mode of
acquisition of title is governed by Section 48(b) of the PLA, the original version of which
states:

Sec. 48. The following-described citizens of the Philippines, occupying lands of the
 public domain or claiming to own any such lands or an interest therein, but whose titles have
not been perfected or completed, may apply to the Court of First Instance of the province
where the land is located for confirmation of their claims and the issuance of a certificate of
title therefor, under the Land Registration Act, to wit:

xxxx

(b) Those who by themselves or through their predecessors-in- interest have been in
open, continuous, exclusive, and notorious possession and occupation of agricultural lands
of the public domain, under a bona fide claim of acquisition or ownership, except as against
the Government, since July twenty-sixth, eighteen hundred and ninety-four, except when
prevented by war or force majeure. These shall be conclusively presumed to have
performed all the conditions essential to a government grant and shall be entitled to a
certificate of title under the provisions of this chapter. [emphasis supplied]

On June 22, 1957, the cut-off date of July 26, 1894 was replaced by a 30-year period
of possession under RA No. 1942. Section 48(b) of the PLA, as amended by RA No. 1942,
read:

(b) Those who by themselves or through their predecessors in interest have been in open,
continuous, exclusive and notorious possession and occupation of agricultural lands of the
public domain, under a bona fide claim of acquisition of ownership, for at least thirty years
immediately preceding the filing of the application for confirmation of title, except when
prevented by war or force majeure. [emphasis and underscore ours]

On January 25, 1977, PD No. 1073 replaced the 30-year period of possession by
requiring possession since June 12, 1945. Section 4 of PD No. 1073 reads:

SEC. 4. The provisions of Section 48(b) and Section 48(c), Chapter VIII of the Public
Land Act are hereby amended in the sense that these provisions shall apply only to
alienable and disposable lands of the public domain which have been in open, continuous,
exclusive and notorious possession and occupation by the applicant himself or thru his
predecessor-in-interest, under a bona fide claim of acquisition of ownership, since June 12,
1945. [emphasis supplied]

Under the PD No. 1073 amendment, possession of at least 32 years from 1945 up
to its enactment in 1977 is required. This effectively impairs the vested rights of applicants
who had complied with the 30-year possession required under the RA No. 1942
amendment, but whose possession commenced only after the cut-off date of June 12, 1945
was established by the PD No. 1073 amendment. To remedy this, the Court ruled in
Abejaron v. Nabasa that Filipino citizens who by themselves or their predecessors-in-
interest have been, prior to the effectivity of P.D. 1073 on January 25, 1977, in open,
continuous, exclusive and notorious possession and occupation of agricultural lands of the
public domain, under a bona fide claim of acquisition of ownership, for at least 30 years, or
at least since January 24, 1947 may apply for judicial confirmation of their imperfect or
incomplete title under Sec. 48(b) of the [PLA]. January 24, 1947 was considered as the cut-
off date as this was exactly 30 years counted backward from January 25, 1977 the
effectivity date of PD No. 1073.

It appears, however, that January 25, 1977 was the date PD No. 1073 was enacted;
based on the certification from the National Printing Office, PD No. 1073 was published in
 Vol. 73, No. 19 of the Official Gazette, months later than its enactment or on May 9, 1977.
This uncontroverted fact materially affects the cut-off date for applications for judicial
confirmation of incomplete title under Section 48(b) of the PLA.

Although Section 6 of PD No. 1073 states that [the] Decree shall take effect upon its
promulgation, the Court has declared in Taada, et al. v. Hon. Tuvera, etc., et al. that the
publication of laws is an indispensable requirement for its effectivity. [A]ll statutes, including
those of local application and private laws, shall be published as a condition for their
effectivity, which shall begin fifteen days after publication unless a different effectivity date is
fixed by the legislature. Accordingly, Section 6 of PD No. 1073 should be understood to
mean that the decree took effect only upon its publication, or on May 9, 1977. This,
therefore, moves the cut-off date for applications for judicial confirmation of imperfect or
incomplete title under Section 48(b) of the PLA to May 8, 1947. In other words, applicants
must prove that they have been in open, continuous, exclusive and notorious possession
and occupation of agricultural lands of the public domain, under a bona fide claim of
acquisition of ownership, for at least 30 years, or at least since May 8, 1947.

The spouses Fortuna were unable to prove that they possessed Lot No. 4457 since May 8,
1947

Even if the Court assumes that Lot No. 4457 is an alienable and disposable
agricultural land of the public domain, the spouses Fortunas application for registration of
title would still not prosper for failure to sufficiently prove that they possessed the land since
May 8, 1947.

The spouses Fortunas allegation that: (1) the absence of a notation that Tax
Declaration No. 8366 was a new tax declaration and (2) the notation stating that Tax
Declaration No. 8366 cancels the earlier Tax Declaration No. 10543 both indicate that
Pastora possessed the land prior to 1948 or, at the earliest, in 1947. We also observe that
Tax Declaration No. 8366 contains a sworn statement of the owner that was subscribed on
October 23, 1947. While these circumstances may indeed indicate possession as of 1947,
none proves that it commenced as of the cut-off date of May 8, 1947. Even if the tax
declaration indicates possession since 1947, it does not show the nature of Pastoras
possession. Notably, Section 48(b) of the PLA speaks of possession and occupation. Since
these words are separated by the conjunction and, the clear intention of the law is not to
make one synonymous with the other. Possession is broader than occupation because it
includes constructive possession. When, therefore, the law adds the word occupation, it
seeks to delimit the all-encompassing effect of constructive possession. Taken together with
the words open, continuous, exclusive and notorious, the word occupation serves to
highlight the fact that for an applicant to qualify, his possession must not be a mere fiction.
Nothing in Tax Declaration No. 8366 shows that Pastora exercised acts of possession and
occupation such as cultivation of or fencing off the land. Indeed, the lot was described as
cogonal.

Both under the 1935 and the present Constitutions, the conservation no less than the
utilization of the natural resources is ordained. There would be a failure to abide by its
command if the judiciary does not scrutinize with care applications to private ownership of
real estate. To be granted, they must be grounded in well-nigh incontrovertible evidence.
Where, as in this case, no such proof would be forthcoming, there is no justification for
viewing such claim with favor. It is a basic assumption of our polity that lands of whatever
classification belong to the state. Unless alienated in accordance with law, it retains its rights
over the same as dominus.

SPOUSES MARIO AND JULIA CAMPOS, PETITIONERS, v. REPUBLIC OF THE

PHILIPPINES, RESPONDENT
G.R. No. 184371, March 05, 2014
J. Brion

Petitioners failure to prove that they and their predecessors-in-interest have been in
open, continuous, exclusive and notorious possession and occupation of the subject land,
under a bona fide claim of ownership, since June 12, 1945, or earlier leads to the conclusion
that they cannot be granted a registration of title of the subject property under their name.
The oldest documentary evidence presented by the petitioners was a 1948 tax declaration
over the subject land in the name of Margarita Laigo. The petitioners failed to present
evidence of their possession prior to 1948. Further, the Spouses Campos placed in their
application that they base their possession since 1948.

FACTS:

The petitioners applied for the registration of a 6,904 square meter-parcel of land,
particularly described as Lot No. 3876, Cad-474-D, Case 17, Bauang Cadastre. The
petitioners bought the subject land from Roberto Laigo, as evidenced by a Deed of Absolute
Sale.

Only the Republic filed a formal opposition to the petitioners application, which the
MTC later dismissed due to the Republics failure to present testimonial or documentary
evidence to substantiate its grounds for objection.

The MTC rendered a decision granting the petitioners application for registration.
The Republic appealed to the CA. The CA reversed and set aside the MTCs decision and
dismissed the petitioners application for registration of title.

The CA held, among others, that the petitioners failed to establish when the subject
land became alienable; that while the DENR-CENRO La Union certified that Lot 3876 falls
within the Alienable and Disposable land of the Public Domain as per Project No. 9, L.C.
Map No. 3330 of Bauang Cadastre as certified on January 21, 1987, such certification (as
annotated in the lots Advance Plan) was inadequate to prove that the subject land was
classified as alienable and disposable on said date.

The petitioners moved to reconsider the CA decision but the CA denied their motion,
hence, the filing of the present petition for review for certiorari with this Court.

ISSUE:

Whether the application for registration of title should be granted

RULING:
Persons applying for registration of title under Section 14(1) of Presidential Decree
No. 1529 must prove: (1) that the land sought to be registered forms part of the disposable
and alienable lands of the public domain, and (2) that they have been in open, continuous,
exclusive and notorious possession and occupation of the same under a bona fide claim of
ownership since June 12, 1945, or earlier.
 As the CA did, the Court finds that the petitioners failed to prove that they and their
predecessors-in-interest have been in open, continuous, exclusive and notorious possession
and occupation of the subject land, under a bona fide claim of ownership, since June 12,
1945, or earlier. The oldest documentary evidence presented by the petitioners was a 1948
tax declaration over the subject land in the name of Margarita Laigo. The petitioners failed to
present evidence of their possession prior to 1948. In fact, the petitioners, in their application
for registration, base their possession of the subject land only from 1948, and not since
June 12, 1945, or earlier as required by law.

The Court emphasizes that since the effectivity of P.D. No. 1073 on January 25,
1977, it must be shown that possession and occupation of the land sought to be registered
by the applicant himself or through his predecessors-in-interest, started on June 12, 1945 or
earlier, which totally conforms to the requirement under Section 14(1) of P.D. No 1529. A
mere showing of possession and occupation for thirty (30) years or more is no longer
sufficient.

DR. FERNANDO P. SOLIDUM v. PEOPLE OF THE PHILIPPINES

G.R. No. 192123. March 10, 2014
J. Bersamin

In order to allow resort to the of res ipsa loquitur, the following essential requisites
must first be satisfied, to wit: (1) the accident was of a kind that does not ordinarily occur
unless someone is negligent; (2) the instrumentality or agency that caused the injury was
under the exclusive control of the person charged; and (3) the injury suffered must not have
been due to any voluntary action or contribution of the person injured.

Where the lack of oxygen causing the patients bradycardia during the operation
could have been triggered by the vago-vagal and not the negligence of his attending
physicians, res ipsa loquitur cannot apply, the first requisite being wanting.

FACTS:

Gerald Albert Gercayo (Gerald) was born with an imperforate anus. Two days after
his birth, Gerald underwent colostomy, a surgical procedure to bring one end of the large
intestine out through the abdominal wall, enabling him to excrete through a colostomy bag
attached to the side of his body.
Gerald, then three years old, was admitted at the Ospital ng Maynila for a pull-
through operation. Dr. Leandro Resurreccion headed the surgical team, and was assisted
by Dr. Joselito Luceo, Dr. Donatella Valea and Dr. Joseph Tibio. The anesthesiologists
included Dr. Marichu Abella, Dr. Arnel Razon and petitioner Dr. Fernando Solidum (Dr.
Solidum). During the operation, Gerald experienced bradycardia, and went into a coma. His
coma lasted for two weeks, but he regained consciousness only after a month. He could no
longer see, hear or move.
Agitated by her sons helpless and unexpected condition, Ma. Luz Gercayo (Luz)
lodged a complaint for reckless imprudence resulting in serious physical injuries with the
City Prosecutors Office of Manila against the attending physicians.
The RTC rendered its judgment finding Dr. Solidum guilty beyond reasonable doubt
of reckless imprudence resulting to serious physical injuries and to indemnify, jointly and
severally with the Ospital ng Maynila, Dr. Anita So and Dr. Marichu Abella, private
complainant Luz Gercayo, the amount of P500,000.00 as moral damages and P100,000.00
as exemplary damages.
Upon motion of Dr. Anita So and Dr. Marichu Abella to reconsider their solidary
liability, the RTC excluded them from solidary liability as to the damages.
The CA affirmed the conviction of Dr. Solidum. Dr. Solidum filed a motion for
reconsideration, but the CA denied his motion.

ISSUES:

1. Whether the doctrine of res ipsa loquitur is applicable

2. Whether Dr. Solidum has been negligent

RULING:

Applicability of Res Ipsa Loquitur

Res ipsa loquitur is literally translated as the thing or the transaction speaks for
itself. The doctrine res ipsa loquitur means that where the thing which causes injury is
shown to be under the management of the defendant, and the accident is such as in the
ordinary course of things does not happen if those who have the management use proper
care, it affords reasonable evidence, in the absence of an explanation by the defendant, that
the accident arose from want of care. It 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 with 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.

In order to allow resort to the doctrine, therefore, the following essential requisites
must first be satisfied, to wit: (1) the accident was of a kind that does not ordinarily occur
unless someone is negligent; (2) the instrumentality or agency that caused the injury was
under the exclusive control of the person charged; and (3) the injury suffered must not have
been due to any voluntary action or contribution of the person injured.

The Court considers the application here of the doctrine of res ipsa loquitur
inappropriate. Although it should be conceded without difficulty that the second and third
elements were present, considering that the anesthetic agent and the instruments were
exclusively within the control of Dr. Solidum, and that the patient, being then unconscious
during the operation, could not have been guilty of contributory negligence, the first element
was undeniably wanting. Luz delivered Gerald to the care, custody and control of his
physicians for a pull-through operation. Except for the imperforate anus, Gerald was then of
sound body and mind at the time of his submission to the physicians. Yet, he experienced
bradycardia during the operation, causing loss of his senses and rendering him immobile.
Hypoxia, or the insufficiency of oxygen supply to the brain that caused the slowing of the
heart rate, scientifically termed as bradycardia, would not ordinarily occur in the process of a
pull-through operation, or during the administration of anesthesia to the patient, but such
fact alone did not prove that the negligence of any of his attending physicians, including the
anesthesiologists, had caused the injury. In fact, the anesthesiologists attending to him had
sensed in the course of the operation that the lack of oxygen could have been triggered by
the vago-vagal reflex, prompting them to administer atropine to the patient.

Negligence of Dr. Solidum

In view of the inapplicability of the doctrine of res ipsa loquitur, the Court next
determines whether the CA correctly affirmed the conviction of Dr. Solidum for criminal
negligence.

Negligence is defined as the failure to observe for the protection of the interests of
another person that degree of care, precaution, and vigilance that the circumstances justly
demand, whereby such other person suffers injury. Reckless imprudence, on the other
hand, consists of voluntarily doing or failing to do, without malice, an act from which material
damage results by reason of an inexcusable lack of precaution on the part of the person
performing or failing to perform such act.

Dr. Antonio Vertido, a Senior Medico-Legal Officer of the National Bureau of

Investigation, was presented as a Prosecution witness, but his testimony concentrated on
the results of the physical examination he had conducted on Gerald.

In fine, Dr. Solidum was criminally charged for failing to monitor and regulate
properly the levels of anesthesia administered to said Gerald Albert Gercayo and using
100% halothane and other anesthetic medications. Indeed, Dr. Vertidos findings did not
preclude the probability that other factors related to Geralds major operation, which could or
could not necessarily be attributed to the administration of the anesthesia, had caused the
hypoxia and had then led Gerald to experience bradycardia. Dr. Vertido revealingly
concluded in his report, instead, that although the anesthesiologist followed the normal
routine and precautionary procedures, still hypoxia and its corresponding side effects did
occur.

The existence of the probability about other factors causing the hypoxia has
engendered in the mind of the Court a reasonable doubt as to Dr. Solidums guilt, and
moves us to acquit him of the crime of reckless imprudence resulting to serious physical
injuries.

The court clarifies that the acquittal of Dr. Solidum would not immediately exempt
him from civil liability. But we cannot now find and declare him civilly liable because the
circumstances that have been established here do not present the factual and legal bases
for validly doing so. His acquittal did not derive only from reasonable doubt. There was really
no firm and competent showing how the injury to Gerard had been caused. That meant that
the manner of administration of the anesthesia by Dr. Solidum was not necessarily the
cause of the hypoxia that caused the bradycardia experienced by Gerard. Consequently, to
adjudge Dr. Solidum civilly liable would be to speculate on the cause of the hypoxia. We are
not allowed to do so, for civil liability must not rest on speculation but on competent
evidence.

REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE DIRECTOR OF LANDS v.

ROSARIO DE GUZMAN VDA. DE JOSON
G.R. No. 163767. March 10, 2014
J. Bersamin
 An applicant for registration of titles mere reliance on a surveyor-geodetic engineers
notation in Survey Plan indicating that the survey was inside alienable and disposable land
to prove that the land in question formed part of the alienable and disposable lands of the
public domain is not sufficient to prove such fact. Such notation does not constitute a
positive government act validly changing the classification of the land in question. A mere
surveyor has no authority to reclassify lands of the public domain. Thus, applicants failure
to prove that the subject land has been classified as alienable and disposable lands of the
public domain, the application for registration of title must be denied.

FACTS:

The respondent filed her application for land registration in the CFI in Bulacan. The
jurisdictional requirements were met. The notice of initial hearing was also posted by the
Provincial Sheriff of Bulacan in a conspicuous place in the municipal building of Paombong,
Bulacan as well as on the property itself. On June 2, 1977, at the initial hearing of the
application, Fiscal Liberato L. Reyes interposed an opposition in behalf of the Director of
Lands and the Bureau of Public Works. Upon motion by the respondent and without
objection from Fiscal Reyes, the CFI commissioned the Acting Deputy Clerk of Court to
receive evidence in the presence of Fiscal Reyes.

The records show that the land subject of the application was a riceland with an area
of 12,342 square meters known as Lot 2633, Cad-297, Paombong, Bulacan, and covered by
plan Ap-03-001603; that the riceland had been originally owned and possessed by one
Mamerto Dionisio since 1907; that on May 13, 1926, Dionisio, by way of a deed of sale, had
sold the land to Romualda Jacinto; that upon the death of Romualda Jacinto, her sister
Maria Jacinto (mother of the respondent) had inherited the land; that upon the death of
Maria Jacinto in 1963, the respondent had herself inherited the land, owning and possessing
it openly, publicly, uninterruptedly, adversely against the whole world, and in the concept of
owner since then; that the land had been declared in her name for taxation purposes; and
that the taxes due thereon had been paid, as shown in Official Receipt No. H-7100234.

In their opposition filed by Fiscal Reyes, the Director of Lands and the Director of
Forest Development averred that whatever legal and possessory rights the respondent had
acquired by reason of any Spanish government grants had been lost, abandoned or
forfeited for failure to occupy and possess the land for at least 30 years immediately
preceding the filing of the application; and that the land applied for, being actually a portion
of the Labangan Channel operated by the Pampanga River Control System, could not be
subject of appropriation or land registration.

The Office of the Solicitor General (OSG) also filed in behalf of the Government an
opposition to the application, insisting that the land was within the unclassified region of
Paombong, Bulacan, as indicated in BF Map LC No. 637 dated March 1, 1927; that areas
within the unclassified region were denominated as forest lands and thus fell under the
exclusive jurisdiction, control and authority of the Bureau of Forest Development (BFD); and
that the CFI did not acquire jurisdiction over the application considering that: (1) the land
was beyond the commerce of man; (2) the payment of taxes vested no title or ownership in
the declarant or taxpayer.

The CFI rendered its decision, ordering the registration of the land in favor of the
respondent on the ground that she had sufficiently established her open, public, continuous,
and adverse possession in the concept of an owner for more than 30 years.
 The Republic, through the OSG, appealed to the CA, contending that the trial court
had erred in granting the application for registration despite the land not being the subject of
land registration due to its being part of the unclassified region denominated as forest land.

The CA promulgated its assailed judgment, affirming the decision of the trial court.

ISSUE:

Whether the land subject of the application for registration is susceptible of private
acquisition

RULING:

Section 14 (1) and (2) of the Property Registration Decree state:

Section 14. Who may apply. The following persons may file in the proper
[Regional Trial Court] an application for registration of title to land, whether personally or
through their duly authorized representatives:

(1) Those who by themselves or through their predecessors-in-interest have been in

open, continuous, exclusive and notorious possession and occupation of alienable and
disposable lands of the public domain under a bona fide claim of ownership since June 12,
1945, or earlier.

(2) Those who have acquired ownership of private lands by prescription under the
provision of existing laws.
xxxx

Section 14(1) deals with possession and occupation in the concept of an owner while
Section 14(2) involves prescription as a mode of acquiring ownership. In Heirs of Mario
Malabanan v. Republic, the Court set the guidelines concerning land registration
proceedings brought under these provisions of the Property Registration Decree in order
provide clarity to the application and scope of said provisions.

The respondent sought to have the land registered in her name by alleging that she
and her predecessors-in-interest had been in open, peaceful, continuous, uninterrupted and
adverse possession of the land in the concept of owner since time immemorial. However,
the Republic counters that the land was public land; and that it could not be acquired by
prescription. The determination of the issue hinges on whether or not the land was public; if
so, whether the respondent satisfactorily proved that the land had already been declared as
alienable and disposable land of the public domain; and that she and her predecessors-in-
interest had been in open, peaceful, continuous, uninterrupted and adverse possession of
the land in the concept of owner since June 12, 1945, or earlier.

Under Section 14(1), therefore, the respondent had to prove that: (1) the land formed
part of the alienable and disposable land of the public domain; and (2) she, by herself or
through her predecessors-in-interest, had been in open, continuous, exclusive, and
notorious possession and occupation of the subject land under a bona fide claim of
ownership from June 12, 1945, or earlier. It is the applicant who carries the burden of
proving that the two requisites have been met. Failure to do so warrants the dismissal of the
application.

The respondent unquestionably complied with the second requisite by virtue of her
having been in open, continuous, exclusive and notorious possession and occupation of the
land since June 12, 1945, or earlier. Nonetheless, what is left wanting is the fact that the
respondent did not discharge her burden to prove the classification of the land as demanded
by the first requisite. She did not present evidence of the land, albeit public, having been
declared alienable and disposable by the State. During trial, she testified that the land was
not within any military or naval reservation, and Frisco Domingo, her other witness,
corroborated her. Although the Republic countered that the verification made by the Bureau
of Forest Development showed that the land was within the unclassified region of
Paombong, Bulacan as per BF Map LC No. 637 dated March 1, 1927, such showing was
based on the 1st Indorsement dated July 22, 1977 issued by the Bureau of Forest
Development, which the CA did not accord any evidentiary weight to for failure of the
Republic to formally offer it in evidence. Still, Fiscal Reyes, in the opposition he filed in
behalf of the Government, argued that the land was a portion of the Labangan Channel
operated by the Pampanga River Control System, and could not be the subject of
appropriation or land registration. Thus, the respondent as the applicant remained burdened
with proving her compliance with the first requisite.

Belatedly realizing her failure to prove the alienable and disposable classification of
the land, the petitioner attached to her appellees brief the certification issued by the
Department of Environment and Natural ResourcesCommunity Environment and Natural
Resources Office (DENR-CENRO).

However, in its resolution of July 31, 2000, the CA denied her motion to admit the
appellees brief, and expunged the appellees brief from the records. Seeing another
opportunity to make the certification a part of the records, she attached it as Annex A of her
comment here. Yet, that attempt to insert would not do her any good because only evidence
that was offered at the trial could be considered by the Court.

Even had the respondents effort to insert the certification been successful, the same
would nonetheless be vain and ineffectual. In Menguito v. Republic, the Court pronounced
that a survey conducted by a geodetic engineer that included a certification on the
classification of the land as alienable and disposable was not sufficient to overcome the
presumption that the land still formed part of the inalienable public domain, to wit:

To prove that the land in question formed part of the alienable and disposable lands
of the public domain, petitioners relied on the printed words which read: This survey plan is
inside Alienable and Disposable Land Area, Project No. 27-B as per L.C. Map No. 2623,
certified by the Bureau of Forestry on January 3, 1968, appearing on Exhibit E (Survey
Plan No. Swo-13-000227).

This proof is not sufficient. Section 2, Article XII of the 1987 Constitution, provides:
All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all
forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other
natural resources are owned by the State. x x x. (Emphasis supplied.)

For the original registration of title, the applicant (petitioners in this case) must
overcome the presumption that the land sought to be registered forms part of the public
domain. Unless public land is shown to have been reclassified or alienated to a private
person by the State, it remains part of the inalienable public domain. Indeed, occupation
thereof in the concept of owner, no matter how long, cannot ripen into ownership and be
registered as a title. To overcome such presumption, incontrovertible evidence must be
shown by the applicant. Absent such evidence, the land sought to be registered remains
inalienable.

In the present case, petitioners cite a surveyor-geodetic engineers notation in

Exhibit E indicating that the survey was inside alienable and disposable land. Such
notation does not constitute a positive government act validly changing the classification of
the land in question. Verily, a mere surveyor has no authority to reclassify lands of the
public domain. By relying solely on the said surveyors assertion, petitioners have not
sufficiently proven that the land in question has been declared alienable.
 SPOUSES JOSE M. ESTACION, JR. AND AGELINA T. ESTACION v. HON. SECRETARY,
DEPARTMENT OF AGRARIAN REFORM, ET AL.
G.R. NO. 163361. March 12, 2014
J. Reyes

The Regional Trial Court, acting as a Special Agrarian Court, has jurisdiction to
determine just compensation at the very first instance, and the petitioner need not pass
through the DAR for initial valuation. The determination of just compensation is essentially a
judicial function, which is vested in the Regional Trial Court acting as a Special Agrarian
Court.

FACTS:

Spouses Jose M. Estacion, Jr. and Angelina T. Estacion (petitioners) initially filed a
petition for just compensation with the Regional Trial Court (RTC) of Negros Oriental, acting
as a Special Agrarian Court (SAC). In their petition, they alleged that they are the owners of
two parcels of adjacent land in Guihulngan, Negros Oriental. According to the petitioners,
sometime in February 1974, they were informed that their properties were placed
under the coverage of the Operation Land Transfer program of Presidential Decree
(P.D.) No. 27.

On May 12, 1998, the petitioners filed an Amended Petition and included the
Philippine National Bank (PNB) as respondent. It appears that sometime in October
1974, the petitioners mortgaged the properties covered as security for a P449,200.00-loan
they obtained from PNB. The mortgage was foreclosed on December 10, 1984 and title was
already transferred to the name of PNB. In including PNB as respondent, the petitioners
contended that its foreclosure of the mortgaged properties was done in violation of P.D. No.
27 and subsequently, Republic Act (R.A.) No. 6657, which prohibits the foreclosure of
properties covered by the agrarian laws.

The SAC dismissed the case for lack of jurisdiction and lack of cause of action. The
SAC sustained PNBs claim that it has already acquired the rights over the property by virtue
of the extrajudicial foreclosure of the mortgage. The SAC also ruled that the petitioners
failed to exhaust administrative remedies when they failed to secure prior determination of
just compensation by the DAR. The SAC further ruled that being a SAC of limited
jurisdiction, it does not have jurisdiction to nullify the extrajudicial foreclosure proceedings as
indirectly sought by the petitioners. On appeal, The CA dismissed the appeal for lack of
merit.

ISSUES:

1. Whether or not SAC has jurisdiction to determine just compensation and there is no
need to pass through the DAR

2. Whether or not the petitioners have no personality to file the petition for the determination of
just compensation

RULING:

The Regional Trial Court, acting as a Special Agrarian Court, has jurisdiction to
determine just compensation at the very first instance, and the petitioner need not pass
through the DAR for initial valuation. The determination of just compensation is essentially a
judicial function, which is vested in the Regional Trial Court acting as a Special Agrarian
Court. The Special Agrarian Court is not an appellate reviewer of the DAR decision in
administrative cases involving compensation. The Special Agrarian Court has jurisdiction
over the complaint for determination of just compensation, despite the absence of summary
administrative proceedings before the DAR Adjudication Board. Special Agrarian Court's
jurisdiction vested by Section 57 of RA 6657, as amended, is limited only to petitions for the
determination of just compensation to landowners and the prosecution of all criminal
offenses under RA 6657.

Records bear out the fact that at the time the petitioners filed the Amended Petition
in 1998, ownership of the properties sought to be compensated for was already transferred
to respondent PNB. As early as 1969, the petitioners already mortgaged the properties as
security for the sugar crop loan they originally obtained from respondent PNB, and as
admitted by the petitioners, respondent PNB foreclosed the mortgage on the property in
1982. As a result, title to the properties was consolidated in the name of PNB. Moreover, as
disclosed by PNB, the properties were already transferred to the government pursuant to
the mandate of Executive Order No. 407,which directed all government-owned and
-controlled corporations to surrender to the DAR all landholdings suitable for agriculture.
Clearly, the petitioners have no personality to seek determination of just compensation given
that ownership of and title to the properties have already passed on to PNB and eventually,
the State.
 MARIANO LIM v. SECURITY BANK CORPORATION
G.R. No. 188539. March 12, 2014
J. Peralta

Where a debtor obtained a loan six months after the execution of a Continuing
Suretyship, such obligation of the debtor is still covered by such Continuing Suretyship. This is
further bolstered when the contract clearly states that the surety is liable for all credit
accommodations extended to the debtor, both present and future obligations.

Hence, there is no shadow of doubt that petitioner Lim is liable for the principal of the
loan, together with the interest and penalties due thereon, even if said loan was obtained by the
principal debtor even after the date of execution of the Continuing Suretyship.

FACTS:

Petitioner executed a Continuing Suretyship in favor of respondent to secure any and all
types of credit accommodation that may be granted by the bank hereinto and hereinafter in
favor of Raul Arroyo.

The debtor, Raul Arroyo, defaulted on his loan obligation. Thereafter, petitioner received
a Notice of Final Demand informing him that he was liable to pay the loan obtained by Raul and
Edwina Arroyo, including the interests and penalty fees, and demanding payment thereof. For
failure of petitioner to comply with said demand, respondent filed a complaint for collection of
sum of money against him and the Arroyo spouses. Since the Arroyo spouses can no longer be
located, summons was not served on them, hence, only petitioner actively participated in the
case.

After trial, the Regional Trial Court of Davao (RTC) rendered judgment against petitioner
ordering him to pay the principal sum of two million pesos plus nineteen percent interest of the
outstanding principal interest due and unpaid to be computed from January 28, 1997 until fully
paid, plus two percent interest per month as penalty to be computed from February 28, 1997
until fully paid, attorney's fees and litigation expenses. Petitioner appealed to the CA, but the
appellate court affirmed the RTC decision. Hence this petition.

ISSUE:

Whether petitioner may validly be held liable for the principal debtor's loan obtained six months
after the execution of the Continuing Suretyship

RULING:

The nature of a suretyship is elucidated in Philippine Charter Insurance Corporation v.

Petroleum Distributors & Service Corporation in this wise:

A contract of suretyship is an agreement whereby a party, called the surety, guarantees

the performance by another party, called the principal or obligor, of an obligation or undertaking
in favor of another party, called the obligee. Although the contract of a surety is secondary only
to a valid principal obligation, the surety becomes liable for the debt or duty of another although
it possesses no direct or personal interest over the obligations nor does it receive any benefit
therefrom.
 This was explained in the case of Stronghold Insurance Company, Inc. v. Republic-Asahi
Glass Corporation, where it was written:

The surety's obligation is not an original and direct one for the performance of his own
act, but merely accessory or collateral to the obligation contracted by the principal.
Nevertheless, although the contract of a surety is in essence secondary only to a valid principal
obligation, his liability to the creditor or promisee of the principal is said to be direct, primary and
absolute; in other words, he is directly and equally bound with the principal.
xxxx
Thus, suretyship arises upon the solidary binding of a person deemed the surety with
the principal debtor for the purpose of fulfilling an obligation. A surety is considered in law as
being the same party as the debtor in relation to whatever is adjudged touching the obligation of
the latter, and their liabilities are interwoven as to be inseparable. x x x.
The essence of a continuing surety has been highlighted in the case of Totanes v. China
Banking Corporation in this wise:

Comprehensive or continuing surety agreements are, in fact, quite commonplace in

present day financial and commercial practice. A bank or financing company which anticipates
entering into a series of credit transactions with a particular company, normally requires the
projected principal debtor to execute a continuing surety agreement along with its sureties. By
executing such an agreement, the principal places itself in a position to enter into the projected
series of transactions with its creditor; with such suretyship agreement, there would be no need
to execute a separate surety contract or bond for each financing or credit accommodation
extended to the principal debtor.

The terms of the Continuing Suretyship executed by petitioner are very clear. It states
that petitioner, as surety, shall, without need for any notice, demand or any other act or deed,
immediately become liable and shall pay all credit accommodations extended by the Bank to
the Debtor, including increases, renewals, roll-overs, extensions, restructurings, amendments or
novations thereof, as well as (i) all obligations of the Debtor presently or hereafter owing to the
Bank, as appears in the accounts, books and records of the Bank, whether direct or indirect,
and (ii) any and all expenses which the Bank may incur in enforcing any of its rights, powers
and remedies under the Credit Instruments as defined hereinbelow. Such stipulations are valid
and legal and constitute the law between the parties, as Article 2053 of the Civil Code provides
that [a] guaranty may also be given as security for future debts, the amount of which is not yet
known; x x x. Thus, petitioner is unequivocally bound by the terms of the Continuing
Suretyship. There can be no cavil then that petitioner is liable for the principal of the loan,
together with the interest and penalties due thereon, even if said loan was obtained by the
principal debtor even after the date of execution of the Continuing Suretyship.

MINDA S. GAERLAN, PETITIONER, v. REPUBLIC OF THE PHILIPPINES, RESPONDENT

G.R. No. 192717, March 12, 2014
J. Villarama

CENRO Certification stating that Lot 4342 falls within the alienable and disposable area
is inadequate to prove that the subject lot is alienable and disposable. Moreover, the earliest
evidence of possession that petitioner and her predecessor-in-interest Mamerta Tan had over
the subject property was only in 1975 when Mamerta Tan purchased the subject lot from
Teresita Tan.

In fine, petitioner failed to prove that the subject property was classified as part of the
disposable and alienable land of the public domain; and she and her predecessors-in-interest
have been in open, continuous, exclusive, and notorious possession and occupation thereof
under a bona fide claim of ownership since June 12, 1945 or earlier. Thus, her application for
registration of title of the subject property under P.D. No. 1529 should be denied.

FACTS:

Petitioner filed an Application for original registration of title over a parcel of land known
as Lot 18793, Cad-237 of Cagayan Cadastre, with an area of 1,061 square meters, more or
less.

In her application, petitioner alleged that she acquired the above-mentioned property
from Mamerta Tan in November 1989 by virtue of a Deed of Absolute Sale of Unregistered
Land. She had the property declared for taxation purposes under her name and was issued Tax
Declaration Nos. 99893 and 058351.

After finding petitioners application sufficient in form and substance, the trial court set
the case for initial hearing.

The Republic of the Philippines, through the Office of the Solicitor General (OSG), filed
an Opposition to petitioners application for registration on the ground that (1) neither petitioner
nor her predecessors-in-interest have been in open, continuous, exclusive and notorious
possession and occupation of the subject land since June 12, 1945 or earlier; (2) the muniments
of title and tax declarations attached to the petition do not constitute competent and sufficient
evidence of a bona fide acquisition of the subject land; (3) the claim of ownership based on
Spanish title is no longer available for purposes of registration; and (4) the subject land is a
portion of the public domain, hence, not registrable. The trial court rendered Judgment granting
petitioners application for registration of title.

The Republic, through the OSG, appealed from the aforementioned decision asserting
that the trial court erred in ruling that the subject parcel of land is available for private
appropriation. The CA rendered a Decision reversing and setting aside the ruling of the trial
court and dismissing the application for registration of title filed by petitioner.
Hence, petitioner is now before the Supreme Court claiming that the CA erred in denying
her application for registration of title.

ISSUE:

Whether petitioners application for registration of title must be granted

RULING:

P.D. No. 1529 or the Property Registration Decree in relation to Section 48(b) of
Commonwealth Act No. 141, as amended by Section 4 of P.D. No. 1073 specifies those who are
qualified to apply for registration of land. Section 14 of P.D. No. 1529 and Section 48(b) of
Commonwealth Act No. 141, as amended provide thus:

SEC. 14. Who may apply. The following persons may file in the proper Court of First
Instance [now Regional Trial Court] an application for registration of title to land, whether
personally or through their duly authorized representatives:
 (1) Those who by themselves or through their predecessors-in-interest have been in
open, continuous, exclusive and notorious possession and occupation of alienable and
disposable lands of the public domain under a bona fide claim of ownership since June 12,
1945, or earlier.
xxxx
SEC. 48. The following described citizens of the Philippines, occupying lands of the
public domain or claiming to own any such lands or an interest therein, but whose titles have not
been perfected or completed, may apply to the Court of First Instance [now Regional Trial Court]
of the province where the land is located for confirmation of their claims and the issuance of a
certificate of title therefor, under the Land Registration Act, to wit:
xxxx
(b) Those who by themselves or through their predecessors-in-interest have been in the
open, continuous, exclusive and notorious possession and occupation of alienable and
disposable lands of the public domain, under a bona fide claim of acquisition or ownership,
since June 12, 1945, except when prevented by war or force majeure. These shall be
conclusively presumed to have performed all the conditions essential to a Government grant
and shall be entitled to certificate of title under the provisions of this chapter.

Based on the above-quoted provisions, applicants for registration of title must establish
and prove: (1) that the subject land forms part of the disposable and alienable lands of the
public domain; (2) that the applicant and his predecessors-in-interest have been in open,
continuous, exclusive and notorious possession and occupation of the same; and (3) that his
possession has been under a bona fide claim of ownership since June 12, 1945, or earlier. Each
element must necessarily be proven by no less than clear, positive and convincing evidence;
otherwise the application for registration should be denied.

Under the Regalian doctrine, all lands of the public domain belong to the State. The
burden of proof in overcoming the presumption of State ownership of the lands of the public
domain is on the person applying for registration, who must prove that the land subject of the
application is alienable and disposable. To overcome this presumption, incontrovertible
evidence must be presented to establish that the land subject of the application is alienable and
disposable.

To prove that the land subject of the application for registration is alienable, an applicant
must establish the existence of a positive act of the government such as a presidential
proclamation or an executive order; an administrative action; investigation reports of Bureau of
Lands investigators; and a legislative act or statute. The applicant may secure a certification
from the government that the lands applied for are alienable and disposable, but the certification
must show that the DENR Secretary had approved the land classification and released the land
of the public domain as alienable and disposable, and that the land subject of the application for
registration falls within the approved area per verification through survey by the PENRO or
CENRO. The applicant must also present a copy of the original classification of the land into
alienable and disposable, as declared by the DENR Secretary or as proclaimed by the
President.

To comply with the first requisite, petitioner submitted a CENRO Certification stating that
Lot 4342, Cad-237 located in Patag, Cagayan de Oro City falls within the alienable and
disposable area under Project No. 8, Block I. Petitioner also submitted LC Map No. 543 which
was certified and approved on December 31, 1925. The Court, however, finds that the attached
certification is inadequate to prove that the subject lot is alienable and disposable. The Supreme
Court held in Republic v. T.A.N. Properties, Inc. that a CENRO certification is insufficient to
prove the alienable and disposable character of the land sought to be registered. The applicant
must also show sufficient proof that the DENR Secretary has approved the land classification
and released the land in question as alienable and disposable. The Supreme Court ruled in
Republic v. T.A.N. Properties, Inc. that:

x x x it is not enough for the PENRO or CENRO to certify that a land is alienable and
disposable. The applicant for land registration must prove that the DENR Secretary had
approved the land classification and released the land of the public domain as alienable and
disposable, and that the land subject of the application for registration falls within the approved
area per verification through survey by the PENRO or CENRO. In addition, the applicant for
land registration must present a copy of the original classification approved by the DENR
Secretary and certified as a true copy by the legal custodian of the official records. These facts
must be established to prove that the land is alienable and disposable. Respondents failed to
do so because the certifications presented by respondent do not, by themselves, prove that the
land is alienable and disposable.
Thus, as it now stands, aside from the CENRO certification, an application for original
registration of title over a parcel of land must be accompanied by a copy of the original
classification approved by the DENR Secretary and certified as a true copy by the legal
custodian of the official records in order to establish that the land is indeed alienable and
disposable.

As to the second and third requisites, the Court agrees with the appellate court that
petitioner failed to establish that she and her predecessors-in-interest have been in open,
continuous, exclusive and notorious possession and occupation of the subject land on or before
June 12, 1945. Based on the records, the earliest evidence of possession that petitioner and her
predecessor-in-interest Mamerta Tan had over the subject property was only in 1975 when
Mamerta Tan purchased the subject lot from Teresita Tan. While Mamerta Tan testified that she
purchased the property from Teresita, the records are bereft of any evidence to show Teresitas
mode of acquisition of ownership over the subject lot or from whom she acquired the property
and when her possession of the subject lot had commenced.

In addition, Honesto Velez, City Assessor of Cagayan de Oro City, merely testified on the
tax declarations issued to certain persons including petitioner and Mamerta Tan as enumerated
in the Land History Card of Cadastral Lot 4342 but his testimony did not prove their possession
and occupation over the subject property. What is required is open, exclusive, continuous and
notorious possession by the applicant and her predecessors-in-interest, under a bona fide claim
of ownership, since June 12, 1945 or earlier. Here, it is not shown by clear and satisfactory
evidence that petitioner by herself or through her predecessors-in-interest had possessed and
occupied the land in an open, exclusive, continuous and notorious manner since June 12, 1945
or earlier.

In fine, since petitioner failed to prove that (1) the subject property was classified as part
of the disposable and alienable land of the public domain; and (2) she and her predecessors-in-
interest have been in open, continuous, exclusive, and notorious possession and occupation
thereof under a bona fide claim of ownership since June 12, 1945 or earlier, her application for
registration of title of the subject property under P.D. No. 1529 should be denied.
CARMENCITA SUAREZ v. MR. AND MRS. FELIX E. EMBOY, JR. AND MARILOU P. EMBOY-
DELANTAR
G.R. No. 187944. March 12, 2014
J. Reyes

Petitioners failure to allege and prove how and when the respondents entered the
subject lot and constructed a house upon it is fatal to her claim. It makes her complaint for
unlawful detainer fall short of the first required jurisdictional fact that the possession of the
respondents was by contract or by mere tolerance of the petitioner.

FACTS:

At the center of the dispute is a 222-square meter parcel of land, designated as Lot
No. 1907-A-2 (subject lot) covered by Transfer Certificate of Title (TCT) No. T-174880 issued in
the name of Carmencita Suarez. The subject lot used to be a part of Lot No. 1907-A, which was
partitioned among the heirs of Spouses Carlos Padilla (Carlos) and Asuncion Pacres
(Asuncion).

A house, which is occupied by respondents Felix and Marilou, stands in the subject lot.
The respondents claim that their mother, Claudia, had occupied the subject lot during her
lifetime and it was earmarked to become her share in Lot No. 1907-A. They had thereafter
stayed in the subject lot for decades after inheriting the same from Claudia, who had in turn
succeeded her own parents, Carlos and Asuncion. Respondents Felix and Marilou were asked
by their cousins, who are the Heirs of Vicente, to vacate the subject lot and to transfer to Lot No.
1907-A-5, a landlocked portion sans a right of way. They refused to comply insisting that
Claudias inheritance pertained to Lot No. 1907-A-2.

Not long after, the respondents received from Carmencitas counsel, Atty. Jufelenito R.
Pareja (Atty. Pareja), a demand letter requiring them to vacate the subject lot. They were
informed that Carmencita had already purchased on February 12, 2004 the subject lot from the
formers relatives. However, the respondents did not heed the demand. Instead, they
examined the records pertaining to the subject lot and uncovered possible anomalies thus, they
filed before the RTC a complaint for nullification of the partition and for the issuance of new
TCTs covering the heirs respective portions of Lot No. 1907-A.

Carmencita filed before the MTCC and against the respondents a complaint for unlawful
detainer, the origin of the instant petition. She alleged that she bought the subject lot from
Remedios, Moreno, Veronica and Dionesia, the registered owners thereof and the persons who
allowed the respondents to occupy the same by mere tolerance. As their successor-in-interest,
she claimed her entitlement to possession of the subject lot and the right to demand from the
respondents to vacate the same.

The MTCC upheld Carmencitas claims in its decision. The respondents were ordered to
vacate the subject lot and remove at their expense all the improvements they had built thereon.
The RTC affirmed in its entirety the MTCC ruling. The CA rendered the herein assailed Decision
reversing the disquisitions of the courts a quo and dismissing Carmencitas complaint for
unlawful detainer.

ISSUES:
 1. Whether Carmencitas complaint against the respondents had sufficiently alleged and
proven a cause of action for unlawful detainer

2. Whether the pendency of the respondents petition for nullification of partition of Lot No.
1907-A and for the issuance of new certificates of title can abate Carmencitas ejectment suit

RULING:

In a complaint for unlawful detainer, the following key jurisdictional facts must be alleged
and sufficiently established:
1 Initially, possession of property by the defendant was by contract with or by
. tolerance of the plaintiff;

2 Eventually, such possession became illegal upon notice by plaintiff to defendant of

. the termination of the latters right of possession;

3 Thereafter, the defendant remained in possession of the property and deprived the
. plaintiff of the enjoyment thereof; and

4 Within one year from the last demand on defendant to vacate the property, the
. plaintiff instituted the complaint for ejectment.

In the case at bar, the first requisite mentioned above is markedly absent. Carmencita
failed to clearly allege and prove how and when the respondents entered the subject lot and
constructed a house upon it. Carmencita was likewise conspicuously silent about the details on
who specifically permitted the respondents to occupy the lot, and how and when such tolerance
came about. Instead, Carmencita cavalierly formulated a legal conclusion, sans factual
substantiation, that (a) the respondents initial occupation of the subject lot was lawful by virtue
of tolerance by the registered owners, and (b) the respondents became deforciants unlawfully
withholding the subject lots possession after Carmencita, as purchaser and new registered
owner, had demanded for the former to vacate the property. It is worth noting that the absence
of the first requisite assumes even more importance in the light of the respondents claim that
for decades, they have been occupying the subject lot as owners thereof.

Again, this Court stresses that to give the court jurisdiction to effect the ejectment of an
occupant or deforciant on the land, it is necessary that the complaint must sufficiently show
such a statement of facts as to bring the party clearly within the class of cases for which the
statutes provide a remedy, without resort to parol testimony, as these proceedings are summary
in nature. In short, the jurisdictional facts must appear on the face of the complaint. When the
complaint fails to aver facts constitutive of forcible entry or unlawful detainer, as where it does
not state how entry was effected or how and when dispossession started, the remedy should
either be an accion publiciana or accion reivindicatoria.

In Amagan, the Court is emphatic that:

As a general rule, therefore, a pending civil action involving ownership of the same
property does not justify the suspension of ejectment proceedings. The underlying reasons for
the above ruling were that the actions in the Regional Trial Court did not involve physical or de
facto possession, and, on not a few occasions, that the case in the Regional Trial Court was
merely a ploy to delay disposition of the ejectment proceeding, or that the issues presented in
the former could quite as easily be set up as defenses in the ejectment action and there
resolved.

Only in rare instances is suspension allowed to await the outcome of the pending civil
action.

Indisputably, the execution of the MCTC Decision would have resulted in the demolition
of the house subject of the ejectment suit; thus, by parity of reasoning, considerations of equity
require the suspension of the ejectment proceedings. We note that, like Vda. de Legaspi, the
respondents suit is one of unlawful detainer and not of forcible entry. And most certainly, the
ejectment of petitioners would mean a demolition of their house, a matter that is likely to create
the confusion, disturbance, inconveniences and expenses mentioned in the said exceptional
case.

Necessarily, the affirmance of the MCTC Decision would cause the respondent to go
through the whole gamut of enforcing it by physically removing the petitioners from the premises
they claim to have been occupying since 1937. (Respondent is claiming ownership only of the
land, not of the house.) Needlessly, the litigants as well as the courts will be wasting much time
and effort by proceeding at a stage wherein the outcome is at best temporary, but the result of
enforcement is permanent, unjust and probably irreparable.

Carmencitas complaint for unlawful detainer is anchored upon the proposition that the
respondents have been in possession of the subject lot by mere tolerance of the owners. The
respondents, on the other hand, raise the defense of ownership of the subject lot and point to
the pendency of Civil Case No. CEB-30548, a petition for nullification of the partition of Lot
No. 1907-A, in which Carmencita and the Heirs of Vicente were impleaded as parties. Further,
should Carmencitas complaint be granted, the respondents house, which has been standing in
the subject lot for decades, would be subject to demolition. The foregoing circumstances, thus,
justify the exclusion of the instant petition from the purview of the general rule.

MACARIA ARGUELLES AND THE HEIRS OF THE DECEASED PETRONIO ARGUELLES v.

MALARAYAT RURAL BANK, INC.,
G.R. No. 200468, March 19, 2014
J. Villarama, Jr.

It is incumbent upon the respondent Malarayat Rural Bank to be more cautious in

dealing with the spouses Guia, and inquire further regarding the identity and possible adverse
claim of those in actual possession of the property, especially since the spouses Guia were not
the registered owners of the land being mortgaged. Since the subject land was not mortgaged
by the owner thereof and since the respondent Malarayat Rural Bank is not a mortgagee in
good faith, said bank is not entitled to protection under the law.

FACTS:

The late Fermina M. Guia was the registered owner of Lot 3 as evidenced by Original
Certificate of Title (OCT) No. P-12930. Fermina M. Guia sold the south portion of the land to the
spouses Petronio and Macaria Arguelles. Although the spouses Arguelles immediately acquired
possession of the land, the Deed of Sale was neither registered with the Register of Deeds nor
annotated on OCT No. P-12930. At the same time, Fermina M. Guia ordered her son Eddie
Guia and the latters wife Teresita Guia to subdivide the land covered by OCT No. P-12930 into
three lots and to apply for the issuance of separate titles therefor, to wit: Lot 3-A, Lot 3-B, and
Lot 3-C. Thereafter, she directed the delivery of the Transfer Certificate of Title (TCT)
corresponding to Lot 3-C to the vendees of the unregistered sale or the spouses Arguelles.
However, despite their repeated demands, the spouses Arguelles claimed that they never
received the TCT corresponding to Lot 3-C from the spouses Guia.

The spouses Guia obtained a loan from the respondent Malarayat Rural Bank and
secured the loan with a Deed of Real Estate Mortgage over Lot 3-C. The loan and Real Estate
Mortgage were made pursuant to the Special Power of Attorney purportedly executed by the
registered owner of Lot 3-C, Fermina M. Guia, in favor of the mortgagors, spouses Guia.
Moreover, the Real Estate Mortgage and Special Power of Attorney were duly annotated in the
memorandum of encumbrances of TCT No. T-83944 covering Lot 3-C.

The spouses Arguelles filed a complaint for Annulment of Mortgage and Cancellation of
Mortgage Lien with Damages against the respondent Malarayat Rural Bank with the RTC. In
asserting the nullity of the mortgage lien, the spouses Arguelles alleged ownership over the land
that had been mortgaged in favor of the respondent Malarayat Rural Bank. The respondent
Malarayat Rural Bank filed an Answer with Counterclaim and Cross-claim against cross-claim-
defendant spouses Guia wherein it argued that the failure of the spouses Arguelles to register
the Deed of Sale was fatal to their claim of ownership.

The RTC found that the spouses Guia were no longer the absolute owners of the land
described as Lot 3-C and covered by TCT No. T-83944 at the time they mortgaged the same to
the respondent Malarayat Rural Bank in view of the unregistered sale in favor of the vendee
spouses Arguelles. On appeal, the CA reversed and set aside the decision of the court a quo.
Hence, this petition.

ISSUE:

Whether the respondent Malarayat Rural Bank is a mortgagee in good faith who is entitled to
protection on its mortgage lien

RULING:

In this case, the court finds that the respondent Malarayat Rural Bank fell short of the
required degree of diligence, prudence, and care in approving the loan application of the
spouses Guia.

Respondent should have diligently conducted an investigation of the land offered as

collateral. Although the Report of Inspection and Credit Investigation found at the dorsal portion
of the Application for Agricultural Loan proved that the respondent Malarayat Rural Bank
inspected the land, the respondent turned a blind eye to the finding therein that the lot is
planted [with] sugarcane with annual yield (crops) in the amount of P15,000. The court
disagrees with respondents stance that the mere planting and harvesting of sugarcane cannot
reasonably trigger suspicion that there is adverse possession over the land offered as
mortgage. Indeed, such fact should have immediately prompted the respondent to conduct
further inquiries, especially since the spouses Guia were not the registered owners of the land
being mortgaged. They merely derived the authority to mortgage the lot from the Special Power
of Attorney allegedly executed by the late Fermina M. Guia. Hence, it was incumbent upon the
respondent Malarayat Rural Bank to be more cautious in dealing with the spouses Guia, and
inquire further regarding the identity and possible adverse claim of those in actual possession of
the property.
 Pertinently, in Land Bank of the Philippines v. Poblete, the Supreme Court ruled that
[w]here the mortgagee acted with haste in granting the mortgage loan and did not ascertain the
ownership of the land being mortgaged, as well as the authority of the supposed agent
executing the mortgage, it cannot be considered an innocent mortgagee.

Since the subject land was not mortgaged by the owner thereof and since the
respondent Malarayat Rural Bank is not a mortgagee in good faith, said bank is not entitled to
protection under the law. The unregistered sale in favor of the spouses Arguelles must prevail
over the mortgage lien of respondent Malarayat Rural Bank.

REPUBLIC OF THE PHILIPPINES v. ZURBARAN REALTY AND DEVELOPMENT

CORPORATION
G.R. No. 164408. March 24, 2014
J. Bersamin

The respondents application does not enlighten as to whether it was filed under Section
14(1) or Section 14(2) of P.D. No. 1529. Nevertheless, the totality of the evidence presented by
respondent show that its application was filed under Section 14(2) of P.D. No. 1529, that is an
application for registration of land based on possession and occupation of a land of the public
domain by those who have acquired ownership of private lands by prescription under the
provision of existing laws.

However, respondent failed to adduce evidence showing that the land in question was
within an area expressly declared by law either to be the patrimonial property of the State, or to
be no longer intended for public service or the development of the national wealth. As such, the
court is constrained to deny respondents application.

FACTS:

Respondent Zurbaran Realty and Development Corporation filed in the Regional Trial
Court (RTC) an application for original registration covering a 1,520 square meter parcel of land
denominated as Lot 8017-A of Subdivision Plan CSD-04-006985-D, Cad. 455-D, Cabuyao
Cadastre, alleging that it had purchased the land on March 9, 1992 from Jane de Castro Abalos,
married to Jose Abalos, for P300,000.00; that the land was declared for taxation purposes in the
name of its predecessor-in-interest under Tax Declaration No. 22711; that there was no
mortgage or encumbrance of any kind affecting the land, nor was there any other person or
entity having any interest thereon, legal or equitable, adverse to that of the applicant; and that
the applicant and its predecessors-in-interest had been in open, continuous and exclusive
possession and occupation of the land in the concept of an owner.

The Republic, represented by the Director of Lands, opposed the application, arguing
that the applicant and its predecessors-in-interest had not been in open, continuous, exclusive
and notorious possession and occupation of the land since June 12, 1945; that the muniments
of title and tax declaration presented did not constitute competent and sufficient evidence of a
bona fide acquisition of the land; and that the land was a portion of the public domain, and,
therefore, was not subject to private appropriation.

The RTC rendered its decision, holding that the respondent and its predecessors-in-
interest had been in open, public, peaceful, continuous, exclusive and adverse possession and
occupation of the land under a bona fide claim of ownership even prior to 1960 and, accordingly,
granted the application for registration.
 The Republic appealed, arguing that the issue of whether the applicant and its
predecessors-in-interest had possessed the land within the required length of time could not be
determined because there was no evidence as to when the land had been declared alienable
and disposable. The CA promulgated its judgment affirming the RTC. Hence, the Republic
appeals the adverse judgment of the CA.

ISSUE:

Whether the respondents presented sufficient evidence to show that it and its predecessors-in
interest have complied with the period of possession and occupation required by law

RULING:

Section 14 of P.D. No. 1529 enumerates those who may file an application for
registration of land based on possession and occupation of a land of the public domain, thus:

Section 14. Who may apply. The following persons may file in the proper Court of First
Instance an application for registration of title to land, whether personally or through their duly
authorized representatives:

(1) Those who by themselves or through their predecessors-in-interest have been in

open, continuous, exclusive and notorious possession and occupation of alienable and
disposable lands of the public domain under a bona fide claim of ownership since June 12,
1945, or earlier.

(2) Those who have acquired ownership of private lands by prescription under the
provision of existing laws.

The respondents application does not enlighten as to whether it was filed under Section
14(1) or Section 14(2) of P.D. No. 1529. The application alleged that the respondent and its
predecessors-in-interest had been in open, continuous and exclusive possession and
occupation of the property in the concept of an owner, but did not state when possession and
occupation commenced and the duration of such possession. At any rate, the evidence
presented by the respondent and its averments in the other pleadings reveal that the application
for registration was filed based on Section 14(2), not Section 14(1) of P.D. No. 1529. The
respondent did not make any allegation in its application that it had been in possession of the
property since June 12, 1945, or earlier, nor did it present any evidence to establish such fact.

With the application of the respondent having been filed under Section 14(2) of P.D. No.
1529, the crucial query is whether the land subject of the application had already been
converted to patrimonial property of the State. In short, has the land been declared by law as no
longer intended for public service or the development of the national wealth?

The respondent may perhaps object to a determination of this issue by the Court for the
same reason that it objects to the determination of whether it established when the land was
declared alienable and disposable, that is, the issue was not raised in and resolved and by the
trial court. But the objection would be futile because the issue was actually raised in the trial
court, as borne out by the Republics allegation in its opposition to the application to the effect
that the land is a portion of the public domain not subject to prescription. In any case, the
interest of justice dictates the consideration and resolution of an issue that is relevant to another
that was specifically raised. The rule that only theories raised in the initial proceedings may be
taken up by a party on appeal refers only to independent, not concomitant, matters to support or
oppose the cause of action.

Here, there is no evidence showing that the land in question was within an area
expressly declared by law either to be the patrimonial property of the State, or to be no longer
intended for public service or the development of the national wealth. The Court is left with no
alternative but to deny the respondents application for registration.
VILMA MACEDONIO v. CATALINA RAMO, YOLANDA S. MARQUEZ, SPOUSES ROEL AND
OPHELIA PEDRO, SPOUSES JOEFFRY AND ELIZA BALANAG, AND BPI FAMILY
SAVINGS BANK, INC.
G.R. No. 193516. March 24, 2014
J. Del Castillo

Petitioner, by filing a Protest with the DENR and claiming that Ramo is guilty of fraud
and misrepresentation in filing her application for a sales patent, and prodding the DENR to
initiate reversion proceedings so that she may apply for, bid, and acquire the property, admits
that Ramo is not the owner of the subject property, and was not so when the same was sold to
her. This being the case, petitioner concedes that her purchase of the property is illegal as the
same belongs to the State; thus, her only recourse is to obtain a refund of what she paid.

FACTS:

Civil Case No. 5703-R

On January 6, 2004, Vilma Macedonio (petitioner) filed with the Baguio RTC a civil case
for rescission of contract under Article 1191 of the Civil Code, with damages, against respondent
Catalina Ramo (Ramo).

The Complaint alleged that petitioner and Ramo entered into an agreement for the
purchase by petitioner of a 240-square meter portion of Ramo's 637-square meter unregistered
lot (the subject property). During the trial, the parties decided to settle. However, despite several
attempts, the parties failed to settle. The case was eventually terminated.

While the abovecase was pending, Remo was able to secure in her name a Sales
Patent, and on October 16, 2006, a certificate of title (Katibayan ng Orihinal na Titulo Blg. P-
3535 or OCT P-3535) over the subject property.

Ramo caused the subject property to be subdivided into three lots, which she then
transferred to herein respondents, spouses Roeland Ophelia Pedro (the Pedros), Yolanda S.
Marquez (Marquez), and spouses Joeffry and Elisa Balanag (the Balanags). The transfer to the
Pedros and Marquez were through Acknowledgment Trusts, whereby Ramo admitted that she
was not the owner of the lots but merely held them in trust for the true owners - the Pedros and
Marquez. On the other hand, the transfer of the remaining lot to the Balanags was through a
deed of sale. No part of the subject property was transferred to petitioner.

Petitioner moved to seek a refund of the payment she gave to Remo in their agreement
for the purchase of the 240-sqaure meter portion of the subject property. However, the court did
not act on such motion. Instead, it issued an order stating that the order which declared that
Civil Case 5703-R was already terminated has been final and executory.

Department of Environment and Natural Resources (DENR) Protest

Petitioner filed a written Protest with the office of the Regional Executive Director of the
DENR Cordillera Administrative Region, seeking an investigation into Ramo's acquisition of the
subject property, and claiming that Ramo's sales patent was issued despite her having
committed multiple violations of the law. It appears that to this date, no action has been taken on
the protest.
Civil Case No. 7150-R

Petitioner filed with the Baguio RTC another civil case against respondents for specific
performance, annulment of documents and titles, with damages.

Ramo filed her answer with motion to dismiss the case, claiming that in filing the case,
petitioner violated the rule against forum-shopping since there had already been a prior
terminated case (Civil Case No. 5703-R) and a pending Protest with the DENR.

The trial court issued an Order dismissing Civil Case No. 7150-R due to, among others,
forum shopping. Petitioner moved to reconsider, but in an August 16, 2010 Order, the trial court
stood its ground. Thus, petitioner instituted this direct recourse.

ISSUE:

Whether petitioner is entitled to the reliefs sought (specific performance, annulment of

documents and titles, with damages)

RULING:

In her pleadings, Ramo admitted and confessed her liability to petitioner: that to this day,
she owes petitioner the amount ofP850,000.00 as a result of the botched sale. A refund of the
said amount is what petitioner prays for in the alternative in her Complaint in Civil Case No.
7150-R. At the very least, this is what she is entitled to, including interest and attorney's fees for
having been compelled to litigate. The trial court in Civil Case No. 7150-R should appreciate
petitioner's cause this much. Indeed, if the trial court felt at any point that the DENR Protest
should substantially affect the outcome of the case before it and that it should give deference to
the better judgment of the DENR, it could restrict itself to petitioner's alternative prayer for a
refund.

In arriving at the foregoing conclusions, the Court took into consideration the evidence
and Ramo's admissions that while she refuses to honor her obligations under the sale or at
least return petitioner's money, she went on to subdivide and transfer or sell the property to
other individuals, which is absolutely unfair if not perverse. Apparently, this injustice has been
lost on the trial court, having decided the way it did by disregarding the basic facts and adhering
to technicalities.

Given the foregoing, if justice is to be truly served, the trial court should not have
dismissed Civil Case No. 7150-R.

Nonetheless, by filing a Protest with the DENR and claiming that Ramo is guilty of fraud
and misrepresentation in filing her application for a sales patent, and prodding the DENR to
initiate reversion proceedings so that she may apply for, bid, and acquire the property, petitioner
is deemed to have admitted that Ramo is not the owner of the subject property, and was not so
when the same was sold to her. This being the case, petitioner concedes that her purchase of
the property is illegal as the same belongs to the State; thus, her only recourse is to obtain a
refund of what she paid.