Supreme Court Decisions on CivilLaw

March 2009 to August 2012

August 2012 Philippine Supreme Court Decisions on

CivilLaw

Civil Code

Common carrier; damages. The operator of a. school bus

service is a common carrier in the eyes of the law. He is
bound to observe extraordinary diligence in the conduct
of his business. He is presumed to be negligent when
death occurs to a passenger. His liability may include
indemnity for loss of earning capacity even if the
deceased passenger may only be an unemployed high
school student at the time of the accident. Spouses
Teodorico and Nanette Perea v. Spouses Nicolas and
Teresita L. Zarate, et al.; G.R. No. 157917. August 29,
2012.

Contracts; rescission; consequences are restitution and in

this case, each party will bear its own damage. As
correctly observed by the RTC, the rescissory action
taken by GSIS is pursuant to Article 1191 of the Civil
Code. In cases involving rescission under the said
provision, mutual restitution is required. The parties
should be brought back to their original position prior to
the inception of the contract. Accordingly, when a decree
of rescission is handed down, it is the duty of the court to
require both parties to surrender that which they have
respectively received and to place each other as far as
practicable in [their] original situation. Pursuant to this,
Goldloop should return to GSIS the possession and
control of the property subject of their agreements while
GSIS should reimburse Goldloop whatever amount it had
received from the latter by reason of the MOA and the
Addendum.

Relevant also is the provision of Article 1192 of the Civil

Code which reads: In case both parties have committed
a breach of the obligation, the liability of the first infractor
shall be equitably tempered by the courts. If it cannot be
determined which of the parties first violated the contract,
the same shall be deemed extinguished, and each shall
bear his own damages. (Emphasis suppied.)

In this case, it cannot be determined with certainty which

between the parties is the first infractor. It could be GSIS
because of the high probability that even before the
execution of the agreements, real property taxes were
already imposed and unpaid such that when GSIS applied
for building permits, the tax liability was already in the
substantial amount of P54 million. It was just that GSIS
could not have been mindful of the same because of its
stand that it is tax exempt. But as this cannot be
conclusively presumed, there exists an uncertainty as to
which between the failure to comply on the part of each
party came first; hence, the last portion of Article 1192
finds application. Pursuant thereto, the parties respective
claims for damages are thus deemed extinguished and
each of them shall bear its own damage. Goldloop
Properties, Inc. vs. Government Service Insurance
System; G.R. No. 171076, August 1, 2012.

Contracts; rescission by reason of subject being under

litigation; resolution of litigation is not a condition to
rescission. Contracts which are rescissible due to fraud
or bad faith include those which involve things under
litigation, if they have been entered into by the defendant
without the knowledge and approval of the litigants or of
competent judicial authority. Thus, Article 1381(4) of the
Civil Code provides: The following contracts are
rescissible: x x x x (4) Those which refer to things under
litigation if they have been entered into by the defendant
without the knowledge and approval of the litigants or of
competent judicial authority[.]

The rescission of a contract under Article 1381(4) of the

Civil Code only requires the concurrence of the following:
first, the defendant, during the pendency of the case,
enters into a contract which refers to the thing subject of
litigation; and second, the said contract was entered into
without the knowledge and approval of the litigants or of a
competent judicial authority. As long as the foregoing
requisites concur, it becomes the duty of the court to
order the rescission of the said contract.
It bears stressing that the right to ask for the rescission of
a contract under Article 1381(4) of the Civil Code is not
contingent upon the final determination of the ownership
of the thing subject of litigation. The primordial purpose of
Article 1381(4) of the Civil Code is to secure the possible
effectivity of the impending judgment by a court with
respect to the thing subject of litigation. It seeks to
protect the binding effect of a courts impending
adjudication vis--vis the thing subject of litigation
regardless of which among the contending claims therein
would subsequently be upheld. Accordingly, a definitive
judicial determination with respect to the thing subject of
litigation is not a condition sine qua non before the
rescissory action contemplated under Article 1381(4) of
the Civil Code may beinstituted. Lilia B. Luz, et al. vs.
Florante Baylon; G.R. No. 182435, August 13, 2012.

Damages; moral; exemplary; attorneys fees. To be

recoverable, moral damages must be capable of proof
and must be actually proved with a reasonable degree of
certainty. Courts cannot simply rely on speculation,
conjecture or guesswork in determining the fact and
amount of damages. Yet, nothing was adduced here to
justify the grant of moral damages. What we have was
only the allegation on moral damages, with the complaint
stating that the respondents had been forced to litigate,
and that they had suffered mental anguish, serious
anxiety and wounded feelings from the petitioners refusal
to restore the possession of the land in question to them.
The allegation did not suffice, for allegation was not proof
of the facts alleged.

The Court cannot also affirm the exemplary damages

granted in favor of the respondents. Exemplary damages
were proper only if the respondents, as the plaintiffs,
showed their entitlement to moral, temperate or
compensatory damages. Yet, they did not establish their
entitlement to such other damages.

As to attorneys fees, the general rule is that such fees

cannot be recovered by a successful litigant as part of the
damages to be assessed against the losing party because
of the policy that no premium should be placed on the
right to litigate. Indeed, prior to the effectivity of the
present Civil Code, such fees could be recovered only
when there was a stipulation to that effect. It was only
under the present Civil Code that the right to collect
attorneys fees in the cases mentioned in Article 2208 of
the Civil Code came to be recognized. Such fees are now
included in the concept of actual damages.

Even so, whenever attorneys fees are proper in a case,

the decision rendered therein should still expressly state
the factual basis and legal justification for granting them.
Numeriano P. Abobon vs. Felicitas Abata Abobon, et al.;
G.R. No. 155830, August 15, 2012.
Family relations; filiation and support. There are four
significant procedural aspects of a traditional paternity
action that parties have to face: a prima facie case,
affirmative defenses, presumption of legitimacy, and
physical resemblance between the putative father and the
child. We explained that a prima facie case exists if a
woman declares supported by corroborative proof
that she had sexual relations with the putative father; at
this point, the burden of evidence shifts to the putative
father. We explained further that the two affirmative
defenses available to the putative father are: (1)
incapability of sexual relations with the mother due to
either physical absence or impotency, or (2) that the
mother had sexual relations with other men at the time of
conception.

Since filiation is beyond question, support follows as a

matter of obligation; a parent is obliged to support his
child, whether legitimate or illegitimate. Support consists
of everything indispensable for sustenance, dwelling,
clothing, medical attendance, education and
transportation, in keeping with the financial capacity of
the family. Thus, the amount of support is variable and, for
this reason, no final judgment on the amount of support is
made as the amount shall be in proportion to the
resources or means of the giver and the necessities of the
recipient. It 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
obligedto support. Charles Gotardo v. Divina Buling;
G.R. No. 165166, August 15, 2012.

Property; dried-up riverbed. If indeed a property was the

former bed of a creek that changed its course and passed
through the property of the claimant, then, pursuant to
Article 461, the ownership of the old bed left to dry by the
change of course was automatically acquired by the
claimant. Before such a conclusion can be reached, the
fact of natural abandonment of the old course must be
shown, that is, it must be proven that the creek indeed
changed its course without artificial or man-made
intervention. Thus, the claimant, in this case the Reyeses,
must prove three key elements by clear and convincing
evidence. These are: (1) the old course of the creek, (2)
the new course of the creek, and (3) the change of course
of the creek from the old location to the new location by
natural occurrence.

In this regard, the Reyeses failed to adduce indubitable

evidence to prove the old course, its natural
abandonment and the new course. In the face of a
Torrens title issued by the government, which is presumed
to have been regularly issued, the evidence of the
Reyeses was clearly wanting. Uncorroborated testimonial
evidence will not suffice to convince the Court to order
the reconveyance of the property to them. Spouses
Crispin Galang and Caridad Galang vs.Spouses Conrado
S. Reyes and Fe De Kastro Reyes (As substituted by their
legal heir: Hermenigildo K. Reyes); G.R. No. 184746,
August 8, 2012.

Property; possession as right of the owner. It is beyond

question under the law that the owner has not only the
right to enjoy and dispose of a thing without other
limitations than those established by law, but also the
right of action against the holder and possessor of the
thing in order to recover it. He may exclude any person
from the enjoyment and disposal of the thing, and, for this
purpose, he may use such force as may be reasonably
necessary to repel or prevent an actualor threatened
unlawful physical invasion or usurpation of his property.
Numeriano P. Abobon vs. Felicitas Abata Abobon, et al.;
G.R. No. 155830, August 15, 2012.

Special Laws

Family Code; family homes exemption from foreclosure.

Spouses Fortalezas argument that the subject property is
exempt from forced sale because it is a family home
deserves scant consideration. As a rule, the family home
is exempt from execution, forced sale or attachment.
However, Article 155(3) of the Family Code explicitly
allows the forced sale of a family home for debts secured
by mortgages on the premises before or after such
constitution. In this case, there is no doubt that spouses
Fortaleza voluntarily executed on January 28, 1998 a
deed of Real Estate Mortgage over the subject property
which was even notarized by their original counsel of
record. And assuming that the property is exempt from
forced sale, spouses Fortaleza did not set up and prove
to the Sheriff such exemption from forced sale before it
was sold at the public auction. Sps. Charlie Fortaleza and
Ofelia Fortaleza vs. Sps. Raul Lapitan and Rona Lapitan;
G.R. No. 178288, August 15, 2012.

P.D. No. 1529; collateral attack on titles is not allowed. In

order for him to properly assail the validity of the
respondents TCT, he must himself bring an action for that
purpose. Instead of bringing that direct action, he
mounted his attack as a merely defensive allegation
herein. Such manner of attack against the TCT was a
collateral one, which was disallowed by Section 48 of
Presidential Decree No. 1529. Numeriano P. Abobon vs.
Felicitas Abata Abobon, et al.; G.R. No. 155830, August
15, 2012.

P.D. No. 1529; registration of title. The present rule on the

matter then requires that an application for original
registration be accompanied by: (1) CENRO or PENRO
Certification; and (2) 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. Medida
failed in this respect. The records only include CENRO
Certifications on the subject properties alienability and
disposability, but not a copy of the original classification
approved by the DENR Secretary and certified as true
copy by its legal custodian.

Furthermore, even the CENRO Certifications filed before

this Court deserve scant consideration since these were
not presented during the trial. The genuineness and due
execution of these documents had not been duly proven
in the manner required by law.

In view of the failure of the respondent to establish by

sufficient proof that the subject parcels of land had been
classified as part of the alienable and disposable land of
the public domain, his application for registration of title
should be denied. Republic of the Philippines vs. Marlon
Medida; G.R. No. 195097, August 13, 2012.

July 2012 Philippine Supreme Court Decisions on

CivilLaw

Civil Code

Contracts; reciprocal obligations. Reciprocal obligations

are those which arise from the same cause, and in which
each party is a debtor and a creditor of the other, such
that the obligation of one is dependent upon the
obligation of the other. They are to be performed
simultaneously such that the performance of one is
conditioned upon the simultaneous fulfillment of the other.
For one party to demand the performance of the
obligation of the other party, the former must also perform
its own obligation. Accordingly, petitioner, not having
provided the services that would require the payment of
service fees as stipulated in the Lease Development
Agreement, is not entitled to collect the same. Subic Bay
Metropolitan Authority vs. Honorable Court of Appeals
and Subic International Hotel Corporation; G.R. No.
192885, July 4, 2012.

Contracts; contract of sale vs. contract to sell. The

elements of a contract of sale are, to wit: 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. It is the absence of the first element which
distinguishes a contract of sale from that of a contract to
sell.

In a contract to sell, the prospective seller explicitly

reserves the transfer of title to the prospective buyer,
meaning, the prospective seller does not as yet agree or
consent to transfer ownership of the property subject of
the contract to sell until the happening of an event, such
as, in most cases, the full payment of the purchase price.
What the seller agrees or obliges himself to do is to fulfill
his promise to sell the subject property when the entire
amount of the purchase price is delivered to him. In other
words, the full payment of the purchase price partakes of
a suspensive condition, the non-fulfillment of which
prevents the obligation to sell from arising and, thus,
ownership is retained by the prospective seller without
further remedies by the prospective buyer.

In a contract of sale, on the other hand, the title to the

property passes to the vendee upon the delivery of the
thing sold. Unlike in a contract to sell, the first element of
consent is present, although it is conditioned upon the
happening of a contingent event which may or may not
occur. If the suspensive condition is not fulfilled, the
perfection of the contract of sale is completely abated.
However, if the suspensive condition is fulfilled, the
contract of sale is thereby perfected, such that if there
had already been previous delivery of the property subject
of the sale to the buyer, ownership thereto automatically
transfers to the buyer by operation of law without any
further act having to be performed by the seller. The
vendor loses ownership over the property and cannot
recover it until and unless the contract is resolved or
rescinded. Virgilio S. David vs. Misamis Occidental II
Electric Cooperative, Inc., G.R. No. 194785, July 11,
2012.

Contracts; contract of sale; delivery. Among the terms

and conditions of the proposal to which MOELCI agreed,
it was stated:
2. Delivery Ninety (90) working days upon receipt of your
purchase order and downpayment. C&F Manila, freight,
handling, insurance, custom duties and incidental
expenses shall be for the account of MOELCI II.

On this score, it is clear that MOELCI agreed that the

power transformer would be delivered and that the freight,
handling, insurance, custom duties, and incidental
expenses shall be shouldered by it.

On the basis of this express agreement, Article 1523 of

the Civil Code becomes applicable. It provides:

Where, in pursuance of a contract of sale, the seller is

authorized or required to send the goods to the buyer
delivery of the goods to a carrier, whether named by the
buyer or not, for the purpose of transmission to the buyer
is deemed to be a delivery of the goods to the buyer,
except in the cases provided for in Article 1503, first,
second and third paragraphs, or unless a contrary intent
appears. (Emphasis supplied)

Thus, the delivery made by David to William Lines, Inc., as

evidenced by the Bill of Lading, was deemed to be a
delivery to MOELCI. David was authorized to send the
power transformer to the buyer pursuant to their
agreement. When David sent the item through the carrier,
it amounted to a delivery to MOELCI.
Furthermore, in the case of Behn, Meyer & Co. (Ltd.) v.
Yangco it was pointed out that a specification in a
contract relative to the payment of freight can be taken to
indicate the intention of the parties with regard to the
place of delivery. So that, if the buyer is to pay the freight,
as in this case, it is reasonable to suppose that the
subject of the sale is transferred to the buyer at the point
of shipment. In other words, the title to the goods
transfers to the buyer upon shipment or delivery to the
carrier.

Of course, Article 1523 provides a mere presumption and

in order to overcome said presumption, MOELCI should
have presented evidence to the contrary. The burden of
proof was shifted to MOELCI, who had to show that the
rule under Article 1523 was not applicable. In this regard,
however, MOELCI failed. Virgilio S. David vs. Misamis
Occidental II Electric Cooperative, Inc.; G.R. No. 194785,
July 11, 2012.

Contracts; interpretation. The rule is that it is not the title

of the contract, but its express terms or stipulations that
determine the kind of contract entered into by the parties.
Virgilio S. David vs. Misamis Occidental II Electric
Cooperative, Inc.; G.R. No. 194785, July 11, 2012.

Contracts; statute of frauds. There being delivery and

release, said fact constitutes partial performance which
takes the case out of the protection of the Statute of
Frauds. It is elementary that the partial execution of a
contract of sale takes the transaction out of the provisions
of the Statute of Frauds so long as the essential requisites
of consent of the contracting parties, object and cause of
the obligation concur and are clearly established to be
present. Virgilio S. David vs. Misamis Occidental II Electric
Cooperative, Inc.; G.R. No. 194785, July 11, 2012.

Damages; attorneys fees. David was compelled to file an

action against MOELCI but this reason alone will not
warrant an award of attorneys fees. It is settled that the
award of attorneys fees is the exception rather than the
rule. Counsels 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. Attorneys fees,
as part of damages, are not necessarily equated to the
amount paid by a litigant to a lawyer. In the ordinary
sense, attorneys 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. Attorneys fees as part of damages
are awarded only in the instances specified in Article 2208
of the Civil Code which demands factual, legal, and
equitable justification. Its basis cannot be left to
speculation or conjecture. In this regard, none was
proven. Moreover, in the absence of stipulation, a winning
party may be awarded attorneys fees only in case
plaintiffs action or defendants stand is so untenable as to
amount to gross and evident bad faith. MOELCIs case
cannot be similarly classified. Virgilio S. David vs. Misamis
Occidental II Electric Cooperative, Inc.;G.R. No. 194785,
July 11, 2012.

Damages; moral damages. A breach of contract may give

rise to an award of moral damages only if the party guilty
of the breach acted fraudulently or in bad faith. Likewise,
a breach of contract may give rise to exemplary damages
if the guilty party acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner.

The CIAC awarded moral and exemplary damages in

favor of petitioners on the basis of respondents failure to
make payments on time and in full. The CIAC gave merit
to the allegations of petitioners that the delayed and
staggered payments drained them financially and
emotionally, compelled them to apply for additional loans,
affected their reputation and credit standing adversely,
made them suffer mental anguish, serious anxiety and
sleepless nights, and prevented them from participating in
the bidding of other projects because of their financial
problems.

However, as already explained above, with the exception

of the down payment, petitioners agreed to a staggered
payment of the progress billings; hence, they cannot now
claim that they were adversely affected by respondents
payments in

installment. Also, with respect to the down payment, there

was no showing that respondents failure to pay the same
on time and in full was attended by fraud or bad faith or
was in wanton or oppressive disregard of petitioners
rights.

More importantly, an award of moral damages must be

anchored on a clear showing that the party entitled
thereto actually experienced mental anguish, besmirched
reputation, sleepless nights, wounded feelings, or similar
injury. Here, while petitioners alleged that their finances
were adversely affected, they did not present any
evidence thereof, such as documents evidencing the
loans they were supposedly compelled to obtain.

In the same manner, respondent also failed to present

sufficient evidence of their entitlement to moral and
exemplary damages. The alleged besmirched reputation it
allegedly suffered as a result of the building not having
been finished on time was not supported by any evidence
other than respondents bare allegation.

Absent any showing that the parties are entitled to moral

and exemplary damages, their respective claims therefor
must be disallowed. Engr. Emelyne P. Cayetano, et al. vs.
Colegio De San Juan De Letran-Calamba; G.R. No.
179545, July 11, 2012.

Human relations; unjust enrichment. To allow the

petitioner to leave the company before it has fulfilled the
reasonable expectation of service on his part will amount
to unjust enrichment. Pertinently, Article 22 of the New
Civil Code states:

Art. 22. Every 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 unjust enrichment when a person unjustly retains

a benefit at the loss of another, or when a person retains
the money or property of another against the fundamental
principles of justice, equity and good conscience. Two
conditions must concur: (1) a person is unjustly benefited;
and (2) such benefit is derived at the expense of or with
damages to another. The main objective of the principle of
unjust enrichment is to prevent one from enriching oneself
at the expense of another. It is commonly accepted that
this doctrine simply means that a person shall not be
allowed to profit or enrich himself inequitably at anothers
expense. The enrichment may consist of a patrimonial,
physical, or moral advantage, so long as it is appreciable
in money. It must have a correlative prejudice,
disadvantage or injury to the plaintiff which may consist,
not only of the loss of the property or the deprivation of its
enjoyment, but also of the non-payment of compensation
for a prestation or service rendered to the defendant
without intent to donate on the part of the plaintiff, or the
failure to acquire something what the latter would have
obtained.

As can be gathered from the facts, PAL invested a

considerable amount of money in sending the petitioner
abroad to undergo training to prepare him for his new
appointment as B747-400 Captain. In the process, the
petitioner acquired new knowledge and skills which
effectively enriched his technical know-how. As all other
investors, PAL expects a return on investment in the form
of service by the petitioner for a period of 3 years, which
is the estimated length of time within which the costs of
the latters training can be fully recovered. The petitioner
is, thus, expected to work for PAL and utilize whatever
knowledge he had learned from the training for the benefit
of the company. However, after only one (1) year of
service, the petitioner opted to retire from service, leaving
PAL stripped of a necessary manpower. Bibiano C. Elegir
vs. Philippine Airlines, Inc.; G.R. No. 181995, July 16,
2012.

Interest; rate of stipulated interest. The Court now comes

to Davids prayer that MOELCI be made to pay the total
sum of 5,472,722.27 plus the stipulated interest at 24%
per annum from the filing of the complaint. Although the
Court agrees that MOELCI should pay interest, the
stipulated rate is, however, unconscionable and should be
equitably reduced. While there is no question that parties
to a loan agreement have wide latitude to stipulate on any
interest rate in view of the Central Bank Circular No. 905
s. 1982 which suspended the Usury Law ceiling on
interest effective January 1, 1983, it is also worth
stressing that interest rates whenever unconscionable
may still be reduced to a reasonable and fair level. There
is nothing in the said circular which grants lenders carte
blanche authority to raise interest rates to levels which will
either enslave their borrowers or lead to a hemorrhaging
of their assets. Accordingly, the excessive interest of 24%
per annum stipulated in

the sales invoice should be reduced to 12% per annum.

Virgilio S. David vs. Misamis Occidental II Electric
Cooperative, Inc.;G.R. No. 194785, July 11, 2012.

Legal separation; application of Family Code provisions to

marriage entered into prior to the Family Codes
enactment; whats a vested right?; definition of net profits.
This case was actually decided based on procedural law.
The decision being questioned had actually become final
(in the words of the Court, immutable), so the rest,
which the tribunal set out after discussing lengthily [its
adverb, not mine] the immutability of the Decision is for
the enlightenment of the parties and the public at large.
Essentially, the Court noted that even if you got married
before the Family Code was enacted, how your property
is divvied up can still be governed by the Family Code
because of the latters provisions allowing retroactive
effect provided there is no prejudice to any vested right
(see Article 256 of the Family Code). Here, the husband
was divested of his share in the net profits of the conjugal
partnership pursuant to Article 129 in relation to Article 63
(2) of the Family Code. The husband argued that he
already had a vested right in the net profits. The Court
said that you can impair a vested right provided the
holder of the right was afforded due process, which took
place in this case, and besides, he is the guilt party and
finally, the decision is IMMUTABLE. Then the Court, in
defining net profits, went into a discussion of the
differences between the absolute community regime and
the conjugal partnership of gains. Again, in my view, the
discussion is obiter, but if you want to slog through it, you
are welcome. Brigido B. Quia vs. Rita C. Quiao, et al.;
G.R. No. 176556, July 4, 2012.

Mortgage; validity of blanket or dragnet clauses. As a

general rule, a mortgage liability is usually limited to the
amount mentioned in the contract. However, the amounts
named as consideration in a contract of mortgage do not
limit the amount for which the mortgage may stand as
security if from the four corners of the instrument the
intent to secure future and other indebtedness can be
gathered.
Alternatively, while a real estate mortgage may
exceptionally secure future loans or advancements, these
future debts must be specifically described in the
mortgage contract. An obligation is not secured by a
mortgage unless it comes fairly within the terms of the
mortgage contract.

The stipulation extending the coverage of a mortgage to

advances or loans other than those already obtained or
specified in the contract is valid and has been commonly
referred to as a blanket mortgage or dragnet clause.
In Prudential Bank v. Alviar, this Court elucidated on the
nature and purpose of such a clause as follows:

A blanket mortgage clause, also known as a dragnet

clause inAmerican jurisprudence, is one which is
specifically phrased to subsumeall debts of past or future
origins. Such clauses are carefully scrutinizedand strictly
construed. Mortgages of this character enable the
parties toprovide continuous dealings, the nature or
extent of which may not beknown or anticipated at the
time, and they avoid the expense andinconvenience of
executing a new security on each new transaction.
Adragnet clause operates as a convenience and
accommodation to theborrowers as it makes available
additional funds without their having toexecute additional
security documents, thereby saving time, travel,
loanclosing costs, costs of extra legal services, recording
fees, et cetera. xxx.
A mortgage that provides for a dragnet clause is in the
nature of a continuing guaranty and constitutes an
exception to the rule than an action to foreclose a
mortgage must be limited to the amount mentioned in the
mortgage contract. Its validity is anchored on Article 2053
of the Civil Code and is not limited to a single transaction,
but contemplates a future course of dealing, covering a
series of transactions, generally for an indefinite time or
until revoked. It is prospective in its operation and is
generally intended to provide security with respect to
future transactions within certain limits, and contemplates
a succession of liabilities, for which, as they accrue, the
guarantor becomes liable. In other words, a continuing
guaranty is one that covers all transactions, including
those arising in the future, which are within the
description or contemplation of the contract of guaranty,
until the expiration or termination thereof. Philippine
Charity Sweepstakes Office (PCSO) vs. New Dagupan
Metro Gas Corporation, et al.; G.R. No. 173171, July 11,
2012.

Property; property belonging to the State. The subject

lands are reclaimed lands, specifically portions of the
foreshore and offshore areas of Manila Bay. As such,
these lands remain public lands and form part of the
public domain. In the case of Chavez v. Public Estates
Authority and AMARI Coastal Development Corporation,
the Court held that foreshore and submerged areas
irrefutably belonged to the public domain and were
inalienable unless reclaimed, classified as alienable lands
open to disposition and further declared no longer
needed for public service. The fact that alienable lands of
the public domain were transferred to the PEA (now PRA)
and issued land patents or certificates of title in PEAs
name did not automatically make such lands private. This
Court also held therein that reclaimed lands retained their
inherent potential as areas for public use or public
service. Republic of the Philippines, represented by the
Philippine Reclamation Authority (PRA) vs. City of
Paraaque; G.R. No. 191109, July 18, 2012.

Special Laws

Administrative Code of 1997; definition of a GOCC. A

GOCC must have been organized as a stock or non-stock
corporation. The Philippine Reclamation Authority is
neither. It is not a GOCC. Instead, PRA is a government
instrumentality vested with corporate powers and
performing an essential public service pursuant to Section
2(10) of the Introductory Provisions of the Administrative
Code. Being an incorporated government instrumentality,
it is exempt from payment of real property tax. Republic
of the Philippines, represented by the Philippine
Reclamation Authority (PRA) vs. City of Paraaque; G.R.
No. 191109, July 18, 2012.
Administrative Code; real property owned by
Government. The Administrative Code allows real
property owned by the Republic to be titled in the name
of agencies or instrumentalities of the national
government. Such real properties remain owned by the
Republic and continue to be exempt from real estate tax.
Indeed, the Republic grants the beneficial use of its real
property to an agency or instrumentality of the national
government. This happens when the title of the real
property is transferred to an agency or instrumentality
even as the Republic remains the owner of the real
property. Such arrangement does not result in the loss of
the tax exemption, unless the beneficial use thereof has
been granted, for consideration or otherwise, to a

taxable person. Republic of the Philippines, represented

by the Philippine Reclamation Authority (PRA) vs. City of
Paraaque; G.R. No. 191109, July 18, 2012.

Interim rules on corporate rehabilitation; effect of stay

order on foreclosure. A Stay Order cannot suspend the
foreclosure of accommodation mortgages, because the
Stay Order may only cover the suspension of the
enforcement of all claims against the debtor, its
guarantors, and sureties not solidarily liable with the
debtor the enforcement of the mortgage lien cannot be
considered as a claim against a guarantor or a surety not
solidarily liable with the debtor corporations. While
spouses Chua executed Continuing Guaranty and
Comprehensive Surety undertakings in favor of Allied
Bank, the bank did not proceed against them as individual
guarantors or sureties. Rather, by initiating extrajudicial
foreclosure proceedings, the bank was directly
proceeding against the property mortgaged to them by
the spouses as security. The Civil Code provides that the
property upon which a mortgage is imposed directly and
immediately subjected to the fulfillment of the obligation
for whose security the mortgage was constituted. As
such, a real estate mortgage is a lien on the property
itself, inseparable from the property upon which it was
constituted. In this case, we find that the undertaking of
spouses Chua with respect to the loans of petitioner
corporations is the sale at public auction of certain real
properties belonging to them to satisfy the indebtedness
of petitioner corporations in case of a default by the latter.
This undertaking is properly that of a third-party
mortgagor or an accommodation mortgagor, whereby one
mortgages ones property to stand as security for the
indebtedness of another. Situs Development Corporation,
et al. vs. Asiatrust Bank, et al.; G.R. No. 180036, July 25,
2012.

P.D. No. 1529; cancellation or discharge of mortgage.

Section 62 of Presidential Decree (P.D.) No. 1529 appears
to require the execution of an instrument in order for a
mortgage to be cancelled or discharged. However, this
rule presupposes that there has been a prior registration
of the mortgage lien prior to its discharge. In this case, the
subject mortgage had already been cancelled or
terminated upon Galangs full payment before PCSO
availed of registration in 1992. As the subject mortgage
was not annotated on TCT No. 52135 at the time it was
terminated, there was no need for Peralta to secure a
deed of cancellation in order for such discharge to be fully
effective and duly reflected on the face of her title.
Philippine Charity Sweepstakes Office (PCSO) vs. New
Dagupan Metro Gas Corporation, et al.; G.R. No. 173171,
July 11, 2012.

P.D. No. 1529; confirmation of imperfect title. The

Supreme Court held that the respondent could not have
acquired title over the property through prescription
because the lands were of public dominion.

That properties of the public dominion are not susceptible

to prescription and that only properties of the State that
are no longer earmarked for public use, otherwise known
as patrimonial, may be acquired by prescription are
fundamental, even elementary, principles in this
jurisdiction. In Heirs of Mario Malabanan v. Republic, the
Supreme Court, in observance of the foregoing, clarified
the import of Section 14(2) and made the following
declarations: (a) the prescriptive period for purposes of
acquiring an imperfect title over a property of the State
shall commence to run from the date an official
declaration is issued that such property is no longer
intended for public service or the development of national
wealth; and (b) prescription will not run as against the
State even if the property has been previously classified
as alienable and disposable as it is that official declaration
that converts the property to patrimonial. Republic of the
Philippines vs. Metro Index Realty and Development
Corporation; G.R. No. 198585, July 2, 2012.

P.D. No. 1529; purchase of land; innocent purchaser.

Soquillo was not a purchaser in good faith. He and the
heirs of Coloso, Jr. who were his predecessors-in-interest,
knew about the sale made to Tortola and the possession
of the disputed property by Villaflores. Besides, Tortola
registered the sale, albeit with much delay, in 2002. As of
the time Tortolas complaint was titled, no registration was
effected by Soquillo. Santiago V. Soquillo vs. Jorge P.
Tortola; G.R. No. 192450, July 23, 2012.

P.D. No. 1529; registration of imperfect title; elements.

Section 14(1) of Presidential Decree No. 1529 refers to the
original registration of imperfect titles to public land
acquired under Section 11(4) in relation to Section 48(b) of
Commonwealth Act No. 141, or the Public Land Act, as
amended. Section 14(1) of Presidential Decree No. 1529
and Section 48(b) of Commonwealth Act No. 141 specify
identical requirements for the judicial confirmation of
imperfect titles, to wit:

1. That the subject land forms part of the alienable and

disposable lands of the public domain;
2. That the applicants, by themselves or through 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, and;

3. That such possession and occupation must be since

June 12, 1945 or earlier. Republic of the Philippines vs.
Michael C. Santos, et al., etc.; G.R. No. 180027, July 18,
2012.

P.D. No. 1529; registration of title to land acquired by

prescription. Section 14(2) of Presidential Decree No.
1529 sanctions the original registration of lands acquired
by prescription under the provisions of existing law. In
the seminal case of Heirs of Mario Malabanan v. Republic,
this Court clarified that the existing law mentioned in the
subject provision refers to no other than Republic Act No.
386, or the Civil Code of the Philippines. Malabanan
acknowledged that only lands of the public domain that
are patrimonial in character are susceptible to
acquisitivepresecription and, hence, eligible for
registration under Section 14(2) of Presidential Decree No.
1529. Applying the pertinent provisions of the Civil Code,
52 Malabanan further elucidated that in order for public
land to be considered as patrimonial there must be an
express declaration by the State that the public dominion
property is no longer intended for public service or the
development of the national wealth or that the property
has been converted into patrimonial.
Until then, the period of acquisitive prescription against
the State will not commence to run.The requirement of an
express declaration contemplated by Malabanan is
separate and distinct from the mere classification of
public land as alienable and disposable. On this point,
Malabanan was reiterated by the recent case of Republic
v. Rizalvo, Jr.

In this case, the respondents were not able to present any

express declaration from the State, attesting to the
patrimonial character of Lot 3. To put it bluntly, the
respondents were not able to prove that acquisitive
prescription has begun to run against the State, much
less that they have acquired title to Lot 3 by virtue thereof.
As jurisprudence tells us, a mere certification or report
classifying the subject land as alienable and disposable is
not sufficient. Republic of the Philippines vs. Michael C.
Santos, et al., etc.; G.R. No. 180027, July 18, 2012.

P.D. No. 1529; value of registration; innocent purchaser.

Construing the foregoing conjunctively, as to third
persons, a property registered under the Torrens system
is, for all legal purposes, unencumbered or remains to be
the property of the person in whose name it is registered,
notwithstanding the execution of any conveyance,
mortgage, lease, lien, order or judgment unless the
corresponding deed is registered. The law does not
require a person dealing with the owner of registered land
to go beyond the certificate of title as he may rely on the
notices of the encumbrances on the property annotated
on the certificate of title or absence of any annotation.
Registration affords legal protection such that the claim of
an innocent purchaser for value is recognized as valid
despite a defect in the title of the vendor.

A purchaser in good faith and for value is one who buys

property of another, without notice that some other
person has a right to, or interest in, such property, and
pays a full and fair price for the same, at the time of such
purchase, or before he has notice of the claim or interest
of some other person in the property.39 Good faith is the
opposite of fraud and of bad faith, and its non-existence
must be established by competent proof. Sans such
proof, a buyer is deemed to be in good faith and his
interest in the subject property will not be disturbed. A
purchaser of a registered property can rely on the
guarantee afforded by pertinent laws on registration that
he can take and hold it free from any and all prior liens
and claims except those set forth in or preserved against
the certificate of title.

This Court cannot give credence to PCSOs claim to the

contrary. PCSO did not present evidence, showing that
New Dagupan had knowledge of the mortgage despite its
being unregistered at the time the subject sale was
entered into. Peralta, in the compromise agreement, even
admitted that she did not inform New Dagupan of the
subject mortgage. PCSOs only basis for claiming that
New Dagupan was a buyer in bad faith was the latters
reliance on a mere photocopy of TCT No. 52135.
However, apart from the fact that the facsimile bore no
annotation of a lien or encumbrance, PCSO failed to
refute the testimony of Cua that his verification of TCT
No. 52135 with the Register of Deeds of Dagupan City
confirmed Peraltasclaim of a clean title.

Since PCSO had notice of New Dagupans adverse claim

prior to the registration of its mortgage lien, it is bound
thereby and thus legally compelled to respect the
proceedings on the validity of such adverse claim. It is
therefore of no moment if PCSOs foreclosure of the
subject mortgage and purchase of the subject property at
the auction sale took place prior to New Dagupans
acquisition of title as decreed in the Decision dated
January 21, 1994 of RTC Branch 43. The effects of a
foreclosure sale retroact to the date the mortgage was
registered.43 Hence, while PCSO may be deemed to have
acquired title over the subject property on May 20, 1992,
such title is rendered inferior by New Dagupans adverse
claim, the validity of which was confirmed per the
Decision dated January 21, 1994 of RTC Branch 43.
Philippine Charity Sweepstakes Office (PCSO) vs. New
Dagupan Metro Gas Corporation, et al.; G.R. No. 173171,
July 11, 2012.

SPV Act; extinguishment of credit . Petitioners cannot

take refuge in the provisions of the SPV Act of 2004 in
conjunction with Art. 1634 of the Civil Code. For the
debtor to be entitled to extinguish his credit by
reimbursing the assignee under Art. 1634, the following
requisites must concur:

(a) there must be a credit or other incorporeal right;

(b) the credit or other incorporeal right must be in

litigation;

(c) the credit or other incorporeal right must be sold to an

assignee pending litigation;

(d) the assignee must have demanded payment from the

debtor;

(e) the debtor must reimburse the assignee for the price
paid by the latter, the judicial costs incurred by the latter
and the interest on the price from the day on which the
same was paid; and

(f) the reimbursement must be done within 30 days from

the date of the assignees demand.

In this case, the credit owed by petitioner corporations to

Metrobank had already been extinguished when the bank
foreclosed upon the parcel of land mortgaged to it by the
spouses Chua as security for petitioners debts, in full
satisfaction of the loan the bank had extended. Therefore,
during the pendency of these proceedings, what was
transferred by Metrobank to Cameron was ownership
over the foreclosed property, subject only to the right of
redemption by the proper party within one year reckoned
from the date of registration of the Certificate of Sale.

Moreover, the provisions of the Civil Code on subrogation

and assignment of credits are only applicable to NPLs,
defined in the SPV Act of 2002 as follows:

Non-Performing Loans or NPLs refers to loans and

receivables such asmortgage loans, unsecured loans,
consumption loans, trade receivables,lease receivables,
credit card receivables and all registered andunregistered
security and collateral instruments, including but not
limitedto, real estate mortgages, chattel mortgages,
pledges, and antichresis,whose principal and/or interest
have remained unpaid for at least onehundred eighty
(180) days after they have become past due or any of
theevents of default under the loan agreement has
occurred.

What is involved in this case is more properly a real

property acquired by a financial institution in settlement of
a loan (ROPOA). Under the law, ROPOAs are defined in
this manner:
ROPOAs refers to real and other properties owned or
acquired by an[financial institution] in settlement of loans
and receivables, including realproperties, shares of
stocks, and chattels formerly constituting collateralsfor
secured loans which have been acquired by way of dation
in payment(dacion en pago) or judicial or extra-judicial
foreclosure or execution ofjudgment.

May the subject property be considered as one acquired

by Metrobank pursuant to an extrajudicial foreclosure
sale?

The Implementing Rules and Regulations of the SPV Act

of 2002 provide that, in case of extrajudicial foreclosure, a
property is deemed acquired by a financial institution on
the date of notarization of the Sheriffs Certificate. In this
case, a Certificate of Sale has not been executed in favor
of Metrobank in deference to the Stay Order issued by the
rehabilitation court. However, we reiterate that the
rehabilitation court has no jurisdiction to suspend
foreclosure proceedings over a third-party mortgage.
Much less can it restrain the issuance of a Certificate of
Sale after the subject properties have been sold at public
auction more than a year before the Petition for
Rehabilitation was filed. The property foreclosed by
Metrobank was clearly beyond the ambit of the Stay
Order. Consequently, there was no valid ground for the
Sheriff to withhold the issuance and execution of the
Certificate of Sale.
The parcel of land mortgaged to Metrobank and
subsequently transferred to Cameron should be treated
as a ROPOA as provided for by law. Hence, the
application of Art. 1634 finds no basis in law. Situs
Development Corporation, et al. vs. Asiatrust Bank, et al.;
G.R. No. 180036, July 25, 2012.

June 2012 Philippine Supreme Court Decisions on

CivilLaw

Civil Code

Agency; ratification. The complaint was anchored on the

supposed failure of FEBTC to duly investigate the
authority of Antonio in contracting the exceptionally and
relatively immense loans amounting to P5,000,000.00.
Marcos alleged therein that his property had thereby
become unlawfully burdened by unauthorized real estate
mortgage contracts, because the loans and the
mortgage contracts had been incurred by Antonio and his
wife only for themselves, to the exclusion of petitioner.
Yet, Marcos could not deny that under the express terms
of the SPA, he had precisely granted to Antonio as his
agent the authority to borrow money, and to transfer and
convey the property by way of mortgage to FEBTC; to
sign, execute and deliver promissory notes; and to
receive the proceeds of the loans on the formers behalf.
In other words, the mortgage contracts were valid and
enforceable against petitioner, who was consequently
fully bound by their terms.

Moreover, even if it was assumed that Antonios obtaining

the loans in his own name, and executing the mortgage
contracts also in his own name had exceeded his express
authority under the SPA, Marcos was still liable to FEBTC
by virtue of his express ratification of Antonios act. Under
Article 1898 of the Civil Code, the acts of an agent done
beyond the scope of his authority do not bind the
principal unless the latter expressly or impliedly ratifies
the same.

In agency, ratification is the adoption or confirmation by

one person of an act performed on his behalf by another
without authority. The substance of ratification is the
confirmation after the act, amounting to a substitute for a
prior authority. Here, there was such a ratification by
Marcos, as borne out by his execution of the letter of
acknowledgement on September 12, 1996.

But Marcos insists that the letter of acknowledgment was

only a mere letter (written) on a mimeographic paper a
mere scrap of paper, a document by adhesion. The Court
is confounded by Marcos dismissal of his own express
written ratification of Antonios act. Being himself a lawyer,
Marcos was aware of the import and consequences of the
letter of acknowledgment. The Court cannot agree with
his insistence that the letter was worthless due to its
being a contract of adhesion. The letter was not a
contract, to begin with, because it was only a unilateral
act of his. Secondly, his insistence was fallacious and
insincere because he knew as a lawyer that even
assuming that the letter could be treated as a contract of
adhesion it was nonetheless effective and binding like any
other contract. The Court has consistently held that a
contract of adhesion was not prohibited for that reason. In
Pilipino Telephone Corporation v. Tecson,for instance, the
Court said that contracts of adhesion were valid but might
be occasionally struck down only if there was a showing
that the dominant bargaining party left the weaker party
without any choice as to be completely deprived of an
opportunity to bargain effectively. That exception did not
apply here, for, verily, Marcos, being a lawyer, could not
have been the weaker party. As the tenor of the of
acknowledgment indicated, he was fully aware of the
meaning and sense of every written word or phrase, as
well as of the legal effect of his confirmation thereby of his
agents act. It is axiomatic that a mans act, conduct and
declaration, wherever made, if voluntary, are admissible
against him, for the reason that it is fair to presume that
they correspond with the truth, and it is his fault if they do
not. Marcos V. Prieto vs. Court of Appeals, et al.; G.R. No.
158597, June 18, 2012.

Agency; ratification; agency by estoppel. Under Articles

1898 and 1910, an agents act, even if done beyond the
scope of his authority, may bind the principal if he ratifies
them, whether expressly or tacitly. It must be stressed
though that only the principal, and not the agent, can
ratify the unauthorized acts, which the principal must
have knowledge of.

Neither Unimarine nor Cebu Shipyard was able to

repudiate CBICs testimony that it was unaware of the
existence of Surety Bond No. G (16) 29419 and
Endorsement No. 33152. There were no allegations either
that CBIC should have been put on alert with regard to
Quinains business transactions done on its behalf. It is
clear, and undisputed therefore, that there can be no
ratification in this case, whether express or implied.

Article 1911, on the other hand, is based on the principle

of estoppel, which is necessary for the protection of third
persons. It states that the principal is solidarily liable with
the agent even when the latter has exceeded his
authority, if the principal allowed him to act as though he
had full powers. However, for an agency by estoppel to
exist, the following must be established:

1. The principal manifested a representation of the

agents authority or knowingly allowed the agent to
assume such authority;
2. The third person, in good faith, relied upon such
representation; and
3. Relying upon such representation, such third person
has changed his position to his detriment.
In Litonjua, Jr. v. Eternit Corp., this Court said that [a]n
agency by estoppel, which is similar to the doctrine of
apparent authority, requires proof of reliance upon the
representations, and that, in turn, needs proof that the
representations predated the action taken in reliance.

This Court cannot agree with the Court of Appeals

pronouncement of negligence on CBICs part. CBIC not
only clearly stated the limits of its agents powers in their
contracts, it even stamped its surety bonds with the
restrictions, in order to alert the concerned parties.
Moreover, its company procedures, such as reporting
requirements, show that it has designed a system to
monitor the insurance contracts issued by its agents.
CBIC cannot be faulted for Quinains deliberate failure to
notify it of his transactions with Unimarine. In fact, CBIC
did not even receive the premiums paid by Unimarine to
Quinain.

Furthermore, nowhere in the decisions of the lower courts

was it stated that CBIC let the public, or specifically
Unimarine, believe that Quinain had the authority to issue
a surety bond in favor of companies other than the
Department of Public Works and Highways, the National
Power Corporation, and other government agencies.
Neither was it shown that CBIC knew of the existence of
the surety bond before the endorsement extending the life
of the bond, was issued to Unimarine. For one to
successfully claim the benefit of estoppel on the ground
that he has been misled by the representations of another,
he must show that he was not misled through his own
want of reasonable care and circumspection. Country
Bankers Insurance Corporation vs. Keppel Cebu
Shipyard, Inc., et al.; G.R. No. 166044, June 18, 2012.

Antichresis. For the contract of antichresis to be valid,

Article 2134 of the Civil Code requires that the amount of
the principal and of the interest shall be specified in
writing; otherwise the contract of antichresis shall be
void. In this case, the Heirs of Adolfo were indisputably
unable to produce any document in support of their claim
that the contract between Adolfo and Bangis was an
antichresis, hence, the CA properly held that no such
relationship existed between the parties. Aniceto Bangis,
substituted by his heirs, namely Rodolfo B. Bangis, et al.
vs.Heirs of Serafin and Salud Adolfo, namely: Luz A.
Banniester, et al.; G.R. No. 190875, June 13, 2012.

Contract of Adhesion. See entry under Agency;

ratification (case of Prieto v. Court of Appeals).

Contracts; novation. A novation arises when there is a

substitution of an obligation by a subsequent one that
extinguishes the first, either by changing the object or the
principal conditions, or by substituting the person of the
debtor, or by subrogating a third person in the rights of
the creditor. For a valid novation to take place, there must
be, therefore: (a) a previous valid obligation; (b) an
agreement of the parties to make a new contract; (c) an
extinguishment of the old contract; and (d) a valid new
contract. In short, the new obligation extinguishes the
prior agreement only when the substitution is
unequivocally declared, or the old and the new
obligations are incompatible on every point. A
compromise of a final judgment operates as a novation of
the judgment obligation upon compliance with either of
these two conditions.

To be clear, novation is not presumed. This means that

the parties to a contract should expressly agree to
abrogate the old contract in favor of a new one. In the
absence of the express agreement, the old and the new
obligations must be incompatible on every point. There is
incompatibility when the two obligations cannot stand
together, each one having its independent existence. If
the two obligations cannot stand together, the latter
obligation novates the first. Changes that breed
incompatibility must be essential in nature and not merely
accidental. The incompatibility must affect any of the
essential elements of the obligation, such as its object,
cause or principal conditions thereof; otherwise, the
change is merely modificatory in nature and insufficient to
extinguish the original obligation.

The receipt dated February 5, 1992 was only the proof of

Servandos payment of his obligation as confirmed by the
decision of the RTC. It did not establish the novation of
his agreement with the respondents. Indeed, the Court
has ruled that an obligation to pay a sum of money is not
novated by an instrument that expressly recognizes the
old, or changes only the terms of payment, or adds other
obligations not incompatible with the old ones, or the new
contract merely supplements the old one. A new contract
that is a mere reiteration, acknowledgment or ratification
of the old contract with slight modifications or alterations
as to the cause or object or principal conditions can stand
together with the former one, and there can be no
incompatibility between them. Moreover, a creditors
acceptance of payment after demand does not operate
as a modification of the original contract.

Lastly, the extension of the maturity date did not

constitute a novation of the previous agreement. It is
settled that an extension of the term or period of the
maturity date does not result in novation. Heirs of
Servando Franco vs. Sps. Veronica & Danilo Gonzales;
G.R. No. 159709, June 27, 2012.

Damages; actual damages and moral damages. For its

role in the conversion of the checks, which deprived SSPI
of the use thereof, Equitable is solidarily liable with Uy to
compensate SSPI for the damages it suffered.

Among the compensable damages are actual damages,

which encompass the value of the loss sustained by the
plaintiff, and the profits that the plaintiff failed to obtain.
Interest payments, which SSPI claims, fall under the
second category of actual damages.

SSPI computed its claim for interest payments based on

the interest rate stipulated in its contract with Interco. It
explained that the stipulated interest rate is the actual
interest income it had failed to obtain from Interco due to
the defendants tortious conduct.

The Court finds the application of the stipulated interest

rate erroneous. SSPI did not recover interest payments at
the stipulated rate from Interco because it agreed that the
delay was not Intercos fault, but that of the defendants.
If that is the case, then Interco is not in delay (at least not
after issuance of the checks) and the stipulated interest
payments in their contract did not become operational. If
Interco is not liable to pay for the 36% per annum interest
rate, then SSPI did not lose that income. SSPI cannot
lose something that it was not entitled to in the first place.
Thus, SSPIs claim that it was entitled to interest income
at the rate stipulated in its contract with Interco, as a
measure of its actual damage, is fallacious.

More importantly, the provisions of a contract generally

take effect only among the parties, their assigns and
heirs. SSPI cannot invoke the contractual stipulation on
interest payments against Equitable because it is neither a
party to the contract, nor an assignee or an heir to the
contracting parties.
Nevertheless, it is clear that defendants actions deprived
SSPI of the present use of its money for a period of two
years. SSPI is therefore entitled to obtain from the
tortfeasors the profits that it failed to obtain from July
1991 to June 1993. SSPI should recover interest at the
legal rate of 6% per annum, this being an award for
damages based on quasi-delict and not for a loan or
forbearance of money.

Both the trial and appellate courts awarded Pardo P3

million in moral damages. Pardo claimed that he was
frightened, anguished, and seriously anxious that the
government would prosecute him for money laundering
and tax evasion because of defendants actions. In other
words, he was worried about the repercussions that
defendants actions would have on him.

Equitable argues that Pardos fears are all imagined and

should not be compensated. The bank points out that
none of Pardos fears panned out.

Moral damages are recoverable only when they are the

proximate result of the defendants wrongful act or
omission. Both the trial and appellate courts found that
Pardo indeed suffered as a result of the diversion of the
three checks. It does not matter that the things he was
worried and anxious about did not eventually materialize.
It is rare for a person, who is beset with mounting
problems, to sift through his emotions and distinguish
which fears or anxieties he should or should not bother
with. So long as the injured partys moral sufferings are
the result of the defendants actions, he may recover
moral damages.

The Court, however, finds the award of P3 million

excessive. Moral damages are given not to punish the
defendant but only to give the plaintiff the means to
assuage his sufferings with diversions and recreation. We
find that the award of P50,000.00 as moral damages is
reasonable under the circumstances. Equitable Banking
Corporation vs. Special Steel Products, Inc. and Augusto
L. Pardo; G.R. No. 175350, June 13, 2012.

Damages; moral damages. The Court increased the

award of damages to 500,000 as moral damages and
100,000 as exemplary damages in connection with a
finding that the crime of Trafficking in Persons as a
Prostitute was committed. It quoted a previous ruling,
People v. Lalli, where the Court stated that: the award
finds basis in Article 2219 of the Civil Code, which states:

Art. 2219. Moral damages may be recovered in the

following and analogous cases: x x x

(3) Seduction, abduction, rape, or other lascivious acts;

The criminal case of Trafficking in Persons as a Prostitute

is an analogous case to the crimes of seduction,
abduction, rape, or other lascivious acts. In fact, it is
worse. To be trafficked as a prostitute without ones
consent and to be sexually violated four to five times a
day by different strangers is horrendous and atrocious.
There is no doubt that Lolita experienced physical
suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock,
and social humiliation when she was trafficked as a
prostitute in Malaysia. Since the crime of Trafficking in
Persons was aggravated, being committed by a
syndicate, the award of exemplary damages is likewise
justified.

The Court went to say that: [w]e find no legal impediment

to increasing the award of moral and exemplary damages
in the case at bar. Neither is there any logical reason why
we should differentiate between the victims herein and
those in that case, when the circumstances are
frighteningly similar. To do so would be to say that we
discriminate one from the other, when all of these women
have been the victims of unscrupulous people who
capitalized on the poverty of others. While it is true that
accused-appellant was not tried and convicted of the
crime of trafficking in persons, this Court based its award
of damages on the Civil Code, and not on the Anti-
Trafficking in Persons Act, as clearly explained in Lalli.
The People of the Philippines vs. Nurfrashir Hashim y
Saraban, et al. Bernadette Panscala, etc.;G.R. No.
194255, June 13, 2012.
Damages; quasi-delict; vicarious liability. As a general
rule, one is only responsible for his own act or omission.
Thus, a person will generally be held liable only for the
torts committed by himself and not by another. This
general rule is laid down in Article 2176 of the Civil Code.

Based on the above-cited article, the obligation to

indemnify another for damage caused by ones act or
omission is imposed upon the tortfeasor himself, i.e., the
person who committed the negligent act or omission. The
law, however, provides for exceptions when it makes
certain persons liable for the act or omission of another.

One exception is an employer who is made vicariously

liable for the tort committed by his employee. Article 2180
of the Civil Code states:

Article 2180. The obligation imposed by Article 2176 is

demandable not only for ones own acts or omissions, but
also for those of persons for whom one is responsible.

xxxx

Employers shall be liable for the damages caused by their

employees and household helpers acting within the scope
of their assigned tasks, even though the former are not
engaged in any business or industry.
xxxx

The responsibility treated of in this article shall cease

when the persons herein mentioned prove that they
observed all the diligence of a good father of a family to
prevent damage.

Under Article 2176, in relation with Article 2180, of the

Civil Code, 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.

Although the employer is not the actual tortfeasor, the law

makes him vicariously liable on the basis of the civil law
principle of pater familias for failure to exercise due care
and vigilance over the acts of ones subordinates to
prevent damage to another. In the last paragraph of
Article 2180 of the Civil Code, the employer may invoke
the defense that he observed all the diligence of a good
father of a family to prevent damage.

As its core defense, Filcar contends that Article 2176, in

relation with Article 2180, of the Civil Code is inapplicable
because it presupposes the existence of an employer-
employee relationship. According to Filcar, it cannot be
held liable under the subject provisions because the driver
of its vehicle at the time of the accident, Floresca, is not
its employee but that of its Corporate Secretary, Atty. Flor.
We cannot agree. It is well settled that in case of motor
vehicle mishaps, the registered owner of the motor
vehicle is considered as the employer of the tortfeasor-
driver, and is made primarily liable for the tort committed
by the latter under Article 2176, in relation with Article
2180, of the Civil Code. The rationale for the rule that a
registered owner is vicariously liable for damages caused
by the operation of his motor vehicle is explained by the
principle behind motor vehicle registration, which has
been discussed by this Court in Erezo, and cited by the
CA in its decision:

The main aim of motor vehicle registration is to identify

the owner so that if any accident happens, or that any
damage or injury is caused by the vehicle on the public
highways, responsibility therefor can be fixed on a definite
individual, the registered owner. Instances are numerous
where vehicles running on public highways caused
accidents or injuries to pedestrians or other vehicles
without positive identification of the owner or drivers, or
with very scant means of identification. It is to forestall
these circumstances, so inconvenient or prejudicial to the
public, that the motor vehicle registration is primarily
ordained, in the interest of the determination of persons
responsible for damages or injuries caused on public
highways. [emphasis ours]

Thus, whether there is an employer-employee relationship

between the registered owner and the driver is irrelevant
in determining the liability of the registered owner who the
law holds primarily and directly responsible for any
accident, injury or death caused by the operation of the
vehicle in the streets and highways. Filcar Transport
Services vs. Jose A. Espinas; G.R. No. 171456, June 20,
2012.

Damages; unjust enrichment. There is unjust enrichment

when (1) a person is unjustly benefited, and (2) such
benefit is derived at the expense of or with damages to
another. In the instant case, the fraudulent scheme
concocted by Uy allowed him to improperly receive the
proceeds of the three crossed checks and enjoy the
profits from these proceeds during the entire time that it
was withheld from SSPI. Equitable, through its gross
negligence and mislaid trust on Uy, became an unwitting
instrument in Uys scheme. Equitables fault renders it
solidarily liable with Uy, insofar as respondents are
concerned. Nevertheless, as between Equitable and Uy,
Equitable should be allowed to recover from Uy whatever
amounts Equitable may be made to pay under the
judgment. It is clear that Equitable did not profit in Uys
scheme. Disallowing Equitables cross-claim against Uy is
tantamount to allowing Uy to unjustly enrich himself at the
expense of Equitable. For this reason, the Court allows
Equitables cross-claim against Uy. Equitable Banking
Corporation vs. Special Steel Products, Inc. and Augusto
L. Pardo; G.R. No. 175350, June 13, 2012.
Equitable mortgage. Lomises questions the nature of the
agreement between him and Johnny, insisting that it was
a contract of loan, not an assignment of leasehold rights
and sale of improvements. In other words, what existed
was an equitable mortgage, as contemplated in Article
1602, in relation with Article 1604, of the Civil Code. 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. Article 1602 of the
Civil Code lists down the circumstances that may indicate
that a contract is an equitable mortgage:

Art. 1602. The contract shall be presumed to be an

equitable mortgage, in any of the following cases:

(1) When the price of a sale with right to repurchase is

unusually inadequate;

(2) When the vendor remains in possession as lessee or

otherwise;

(3) When upon or after the expiration of the right to

repurchase another instrument extending the period of
redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the
purchase price;

(5) When the vendor binds himself to pay the taxes on the
thing sold;

(6) In any other case where it may be fairly inferred that

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 any of the foregoing cases, any money, fruits, or other

benefit to be received by the vendee as rent or otherwise
shall be considered as interest which shall be subject to
the usury laws. [Emphasis ours.]

Based on Lomises allegations in his pleadings, we

consider three circumstances to determine whether his
claim is well-supported. First, Johnny was a mere college
student dependent on his parents for support when the
agreement was executed, and it was Johnnys mother,
Domes, who was the party actually interested in acquiring
the market stalls. Second, Lomises received only
P48,000.00 of the P68,000.00 that Johnny claimed he
gave as down payment; Lomises said that the P20,000.00
represented interests on the loan. Third, Lomises retained
possession of the market stalls even after the execution
of the agreement.
Whether separately or taken together, these
circumstances do not support a conclusion that the
parties only intended to enter into a contract of loan.

That Johnny was a mere student when the agreement

was executed does not indicate that he had no financial
capacity to pay the purchase price of P260,000.00.

As to the second point, Lomises contends that of the

P68,000.00 given by Johnny, he only received
P48,000.00, with the remaining P20,000.00 retained by
Johnny as interest on the loan. However, the testimonies
of the witnesses presented during trial, including Lomises
himself, negate this claim. On the third point, that Lomises
retained possession of the market stalls even after the
execution of his agreement with Johnny is also not an
indication that the true transaction between them was one
of loan. Johnny had yet to complete his payment and,
until Lomises decided to forego with their agreement, had
four more months to pay; until then, Lomises retained
ownership and possession of the market stalls.

Hence, the CA was correct in characterizing the

agreement between Johnny and Lomises as a sale of
improvements and assignment of leasehold rights.
Lomises Aludos, deceased, substituted by Flora Aludos
vs. Johnny M. Suerte; G.R. No. 165285, June 18, 2012.
Guarantee. By its tenor, Greys undertaking was a
guarantee. It says, payment unconditionally guaranteed
within sixty (60) days from Planters Products, Inc. Invoice
date up to Pesos: Two Hundred Thousand (P200,000.00)
only. As it happens, bank guarantees are highly regulated
transactions under the law. They are undertakings that are
not so casually issued by banks or by their branch
managers at the dorsal side of a clients promissory note
as if an afterthought. A bank guarantee is a contract that
binds the bank and so may be entered into only under
authority granted by its board of directors. Such authority
does not appear on any document. Indeed, PPI had no
right to expect branch manager Grey to issue one without
such authorization. United Coconut Planters Bank vs.
Planters Products, Inc., Janet Layson and Gregory Grey;
G.R. No. 179015, June 13, 2012.

Interest rate. We affirm the interest rate decreed by the

CA. Stipulated interest rates are illegal if they are
unconscionable and courts are allowed to temper interest
rates when necessary. In exercising this vested power to
determine what is iniquitous and unconscionable, the
Court must consider the circumstances of each case.
What may be iniquitous and unconscionable in one case,
may be just in another.

We cannot uphold the petitioners invocation of our ruling

in DBP v. Court of Appeals wherein the interest rate
imposed was reduced to 10% per annum. The overriding
circumstance prompting such pronouncement was the
regular payments made by the borrower. Evidently, such
fact is wanting in the case at bar, hence, the petitioner
cannot demand for a similar interest rate.

The circumstances attendant herein are similar to those in

Trade & Investment Development Corporation of the
Philippines v. Roblett Industrial Construction Corporation
wherein we levied the legal interest rate of 12% per
annum.

However, pursuant to Bank of the Philippine Islands, Inc.

v. Yu, we deem it proper to further reduce the penalty
charge decreed by the CA from 2% per month to 1% per
month or 12% per annum in view of the following factors:
(1) respondent has already received P7,504,522.27 in
penalty charges, and (2) the loan extended to respondent
was a short-term credit facility. RGM Industries, Inc. vs.
United Pacific Capital Corporation; G.R. No. 194781,
June 27, 2012.

Lease; implied lease. It bears emphasis that the

respondent did not give the petitioner a notice to vacate
upon the expiration of the lease contract in December
1997 (the notice to vacate was sent only on August 5,
1998), and the latter continued enjoying the subject
premises for more than 15 days, without objection from
the respondent. By the inaction of the respondent as
lessor, there can be no inference that it intended to
discontinue the lease contract. An implied new lease was
therefore created pursuant to Article 1670 of the Civil
Code.

An implied new lease or tacita reconduccion will set in

when the following requisites are found to exist: a) the
term of the original contract of lease has expired; b) the
lessor has not given the lessee a notice to vacate; and c)
the lessee continued enjoying the thing leased for fifteen
days with the acquiescence of the lessor.

Since the rent was paid on a monthly basis, the period of

lease is considered to be from month to month, in
accordance with Article 1687 of the Civil Code. [A] lease
from month to month is considered to be one with a
definite period which expires at the end of each month
upon a demand to vacate by the lessor. When the
respondent sent a notice to vacate to the petitioner on
August 5, 1998, the tacita reconduccion was aborted, and
the contract is deemed to have expired at the end of that
month. [A] notice to vacate constitutes an express act on
the part of the lessor that it no longer consents to the
continued occupation by the lessee of its property. After
such notice, the lessees right to continue in possession
ceases and her possession becomes one of detainer.
Viegely Samelo, represented by Attorney-in-Fact Cristina
Samelo vs. Manotok Services, Inc., etc.; G.R. No.
170509, June 27, 2012.
Lease; interest on unpaid rentals. The petitioner is liable
to pay interest by way of damages for her failure to pay
the rentals due for the use of the subject premises. We
reiterate that the respondents extrajudicial demand on
the petitioner was made on August 5, 1998. Thus, from
this date, the rentals due from the petitioner shall earn
interest at 6% per annum, until the judgment in this case
becomes final and executory. After the finality of
judgment, and until full payment of the rentals and
interests due, the legal rate of interest to be imposed shall
be 12%. Viegely Samelo, represented by Attorney-in-Fact
Cristina Samelo vs. Manotok Services, Inc., etc.; G.R. No.
170509, June 27, 2012.

Mortgage; deficiency claim; allowable after extrajudicial

foreclosure of mortgage. We rule that PNB had the legal
right to recover the deficiency amount. In Philippine
National Bank v. Court of Appeals, we held that: it is
settled that if the proceeds of the sale are insufficient to
cover the debt in an extrajudicial foreclosure of the
mortgage, the mortgagee is entitled to claim the
deficiency from the debtor. For when the legislature
intends to deny the right of a creditor to sue for any
deficiency resulting from foreclosure of security given to
guarantee an obligation it expressly provides as in the
case of pledges [Civil Code, Art. 2115] and in chattel
mortgages of a thing sold on installment basis [Civil Code,
Art. 1484(3)]. Act No. 3135, which governs the
extrajudicial foreclosure of mortgages, while silent as to
the mortgagees right to recover, does not, on the other
hand, prohibit recovery of deficiency. Accordingly, it has
been held that a deficiency claim arising from the
extrajudicial foreclosure is allowed.

Indeed, as we indicated in Prudential Bank v. Martinez,

the fact that the mortgaged property was sold at an
amount less than its actual market value should not
militate against the right to such recovery. Francisco
Rabat, et al. vs. Philippine National Bank; G.R. No.
158755, June 18, 2012.

Mortgage; pactum commissorium. The following are the

elements of pactum commissorium:

(1) There should be a property mortgaged by way of

security for the payment of the principal obligation; and

(2) There should be a stipulation for automatic

appropriation by the creditor of the thing mortgaged in
case of non-payment of the principal obligation within the
stipulated period.

Villars purchase of the subject property did not violate the

prohibition on pactum commissorium. The power of
attorney provision above did not provide that the
ownership over the subject property would automatically
pass to Villar upon Galass failure to pay the loan on time.
What it granted was the mere appointment of Villar as
attorney-in-fact, with authority to sell or otherwise
dispose of the subject property, and to apply the
proceeds to the payment of the loan. This provision is
customary in mortgage contracts, and is in conformity
with Article 2087 of the Civil Code.

Galass decision to eventually sell the subject property to

Villar for an additional P1,500,000.00 was well within the
scope of her rights as the owner of the subject property.
The subject property was transferred to Villar by virtue of
another and separate contract, which is the Deed of Sale.
Garcia never alleged that the transfer of the subject
property to Villar was automatic upon Galass failure to
discharge her debt, or that the sale was simulated to
cover up such automatic transfer. Pablo P. Garcia vs.
Yolanda Valdez Villar; G.R. No. 158891, June 27, 2012.

Ownership; acquisitive prescription. The claim of the

Heirs of Bangis that since they have been in possession
of the subject land since 1972 or for 28 years reckoned
from the filing of the complaint in 2000 then, the present
action has prescribed is untenable. It bears to note that
while Bangis indeed took possession of the land upon its
alleged mortgage, the certificate of title (TCT No. 6313)
remained with Adolfo and upon his demise, transferred to
his heirs, thereby negating any contemplated transfer of
ownership. Settled is the rule that no title in derogation of
that of the registered owner can be acquired by
prescription or adverse possession. Moreover, even if
acquisitive prescription can be appreciated in this case,
the Heirs of Bangis possession being in bad faith is two
years shy of the requisite 30-year uninterrupted adverse
possession required under Article 1137 of the Civil Code.

Consequently, the Heirs of Bangis cannot validly claim the

rights of a builder in good faith as provided for under
Article 449 in relation to Article 448 of the Civil Code.
Thus, the order for them to surrender the possession of
the disputed land together with all its improvements was
properly made. Aniceto Bangis, substituted by his heirs,
namely Rodolfo B. Bangis, et al. vs. Heirs of Serafin and
Salud Adolfo, namely: Luz A. Banniester, et al.; G.R. No.
190875, June 13, 2012.

Property; builder in bad faith. See entry under ownership;

acquisitive prescription (case of Bangis v. Heirs of Adolfo).

Sale at public auction; inadequacy of bid price. We have

consistently held that the inadequacy of the bid price at a
forced sale, unlike that in an ordinary sale, is immaterial
and does not nullify the sale; in fact, in a forced sale, a
low price is considered more beneficial to the mortgage
debtor because it makes redemption of the property
easier. Francisco Rabat, et al. vs. Philippine National
Bank; G.R. No. 158755, June 18, 2012.

Special Laws
Family Code; presumption of death; summary judicial
proceedings under the Family Code. Under Article 41 of
the Family Code, the losing party in a summary
proceeding for the declaration of presumptive death may
file a petition for certiorari with the CA on the ground that,
in rendering judgment thereon, the trial court committed
grave abuse of discretion amounting to lack of
jurisdiction. From the decision of the CA, the aggrieved
party may elevate the matter to this Court via a petition
for review on certiorari under Rule 45 of the Rules of
Court. (Digesters Note: This case also summarizes a
number of cases on proof for existence of a well-
founded belief that the absent spouse is already dead,
but there is no ruling on this point and the comment by
the Court that the Republics arguments are well-taken,
is obiter.) Republic of the Philippines vs. Yolanda Cadacio
Granada; G.R. No. 187512, June 13, 2012.

Land titles; conflicting titles. As held in the case of Top

Management Programs Corporation v. Luis Fajardo and
the Register of Deeds of Las Pias City: if two
certificates of title purport to include the same land,
whether wholly or partly, the better approach is to trace
the original certificates from which the certificates of titles
were derived.

Having, thus, traced the roots of the parties respective

titles supported by the records of the Register of Deeds of
Malaybalay City, the courts a quo were correct in
upholding the title of the Heirs of Adolfo as against TCT
No. T-10567 of Bangis, notwithstanding its earlier
issuance on August 18, 1976 or long before the Heirs of
Adolfo secured their own titles on May 26, 1998. To
paraphrase the Courts ruling in Mathay v. Court of
Appeals: where two (2) transfer certificates of title have
been issued on different dates, the one who holds the
earlier title may prevail only in the absence of any
anomaly or irregularity in the process of its registration,
which circumstance does not obtain in this case. Aniceto
Bangis, substituted by his heirs, namely Rodolfo B.
Bangis, et al. vs. Heirs of Serafin and Salud Adolfo,
namely: Luz A. Banniester, et al.; G.R. No. 190875, June
13, 2012.

P.D. No. 1529; Torrens title; collateral attack. As for the

spouses Decalengs contention that Certificate of Title No.
1 does not exist, the Court fully agrees with the Court of
Appeals that the same constitutes a collateral attack of
Certificate of Title No. 1. It is a hornbook principle that a
certificate of title serves as evidence of an indefeasible
title to the property in favor of the person whose name
appears therein. In order to establish a system of
registration by which recorded title becomes absolute,
indefeasible, and imprescriptible, the legislature passed
Act No. 496, which took effect onFebruary 1, 1903. Act
No. 496 placed all registered lands in the Philippines
under the Torrens system. The Torrens system requires
the government to issue a certificate of title stating that
the person named in the title is the owner of the property
described therein, subject to liens and encumbrances
annotated on the title or reserved by law. The certificate of
title is indefeasible and imprescriptible and all claims to
the parcel of land are quieted upon issuance of the
certificate. Presidential Decree No. 1529, known as the
Property Registration Decree, enacted on June 11, 1978,
amended and updated Act No. 496.

Section 48 of Presidential Decree No. 1529 provides:

Section 48. Certificate not subject to collateral attack. A

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

A Torrens title cannot be attacked collaterally, and the

issue on its validity can be raised only in an action
expressly instituted for that purpose. A collateral attack is
made when, in another action to obtain a different relief,
the certificate of title is assailed as an incident in said
action. Sps. Ambrosio Decaleng [as substituted by his
heirs] and Julia Wanay Decaleng vs.Bishop of the
Missionary District of Protestant Episcopal Church in the
United States of America, et al.; G.R. No. 171209 &
UDK-13672. June 27, 2012

P.D. No. 1529; Torrens title; collateral attack;

indefeasibility of title vs. possession. In Soriente v. Estate
of the Late Arsenio E. Concepcion, a similar allegation
possession of the property in dispute since time
immemorial was met with rebuke as such possession,
for whatever length of time, cannot prevail over a Torrens
title, the validity of which is presumed and immune to any
collateral attack.

The validity of respondents certificate of title cannot be

attacked by petitioner in this case for ejectment. Under
Section 48 of Presidential Decree No. 1529, a certificate
of title shall not be subject to collateral attack. It cannot
be altered, modified or cancelled, except in a direct
proceeding for that purpose in accordance with law. The
issue of the validity of the title of the respondents can only
be assailed in an action expressly instituted for that
purpose. Whether or not petitioner has the right to claim
ownership over the property is beyond the power of the
trial court to determine in an action for unlawful detainer.

Given the foregoing, the petitioners attempt to remain in

possession by casting a cloud on the respondents title
cannot prosper.

Neither will the sheer lapse of time legitimize the

petitioners refusal to vacate the subject area or bar the
respondents from gaining possession thereof. As ruled in
Spouses Ragudo v. Fabella Estate Tenants Association,
Inc., laches does not operate to deprive the registered
owner of a parcel of land of his right to recover
possession thereof. Heirs of Jose Maligaso, Sr., etc. vs.
Sps. Simon D. Encinas and Esperanza E. Encinas; G.R.
No. 182716, June 20, 2012.

April 2012 Philippine Supreme Court Decisions on

CivilLaw

Civil Code

Compensation/set-off; requisites. The applicable

provisions of law are Articles 1278, 1279 and 1290 of the
Civil Code of the Philippines:

Art. 1278. Compensation shall take place when two

persons, in their own right, are creditors and debtors of
each other.

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.

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.

Based on the foregoing, in order for compensation to be

valid, the five requisites mentioned in the above-quoted
Article 1279 should be present, as in the case at bench.
Insular Investment and Trust Corporation vs. Capital One
Equities Corp. and Planters Development Bank; G.R. No.
183308, April 25, 2012

Contracts; double sales; possession; actual and physical

delivery. A double sale calls for the application of the rules
in Article 1544 of the Civil Code, to wit:

If the same thing should have been sold to different

vendees, the ownership shall be transferred to the person
who may have first taken 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 the
possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good faith.

Jurisprudence has interpreted possession in Article 1544

of the Civil Code to mean both actual physical delivery
and constructive delivery. Actual delivery of a thing sold
occurs when it is placed under the control and
possession of the vendee. Delivery of a thing sold may
also be made constructively. Article 1498 of the Civil
Code states that: When the sale is made through a public
instrument, the execution thereof shall be equivalent to
the delivery of the thing which is the object of the
contract, if from the deed the contrary does not appear or
cannot clearly be inferred. The Roman Catholic Church
vs. Pante; G.R. No. 174118, April 11, 2012.

Contracts; mistake; voidable contract. For mistake as to

the qualification of one of the parties to vitiate consent,
two requisites must concur:
1. the mistake must be either with regard to the
identity or with regard to the qualification of one of the
contracting parties; and

2. the identity or qualification must have been the

principal consideration for the celebration of the contract.

The Roman Catholic Church vs. Pante; G.R. No. 174118,

April 11, 2012.

Damages; interest in case of breach of contract; interest

rate. Interest may be imposed even in the absence of
stipulation in the contract because Article 2210 of the
Civil Code expressly provides that [i]nterest may, in the
discretion of the court, be allowed upon damages
awarded for breach of contract.

Anent the interest rate, the general rule is that the

applicable rate of interest shall be computed in
accordance with the stipulation of the parties. Absent
any stipulation, the applicable rate of interest shall be
12% per annum when the obligation arises out of a loan
or a forbearance of money, goods or credits. In other
cases, it shall be six percent (6%). In this case, the
parties did not stipulate as to the applicable rate of
interest.

The contract involved in this case is admittedly not a loan

but a Conditional Deed of Sale. However, the contract
provides that the seller must return the payment made by
the buyer if the conditions are not fulfilled. There is no
question that they have in fact, not been fulfilled as the
seller has admitted this. Notwithstanding demand by the
buyer, the seller has failed to return the money and should
be considered in default from the time that demand was
made.

Even if the transaction involved a Conditional Deed of

Sale, can the stipulation governing the return of the
money be considered as a forbearance of money which
required payment of interest at the rate of 12%.
Forbearance is a contractual obligation of lender or
creditor to refrain during a given period of time, from
requiring the borrower or debtor to repay a loan or debt
then due and payable. Forbearance of money, goods or
credits refers to arrangements other than loan
agreements, where a person acquiesces to the temporary
use of his money, goods or credits pending happening of
certain events or fulfillment of certain conditions.
Hermojina Estores vs. Spouses Arturo and Laura
Supangan: G.R. No. 175139, April 18, 2012.

Damages; liquidated damages. Article 2226 of the Civil

Code allows the parties to a contract to stipulate on
liquidated damages to be paid in case of breach. It is
attached to an obligation in order to insure performance
and has a double function: (1) to provide for liquidated
damages, and (2) to strengthen the coercive force of the
obligation by the threat of greater responsibility in the
event of breach. As a general rule, contracts constitute
the law between the parties, and they are bound by its
stipulations. For as long as they are not contrary to law,
morals, good customs, public order, or public policy, the
contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem
convenient. Philippine Charter Insurance Corporation vs.
Petroleum Distributors & Service Corporation; G.R. No.
180898. April 18, 2012.

Damages; negligence; proximate cause. PNBs act of

releasing the proceeds of the check prior to the lapse of
the 15-day clearing period was the proximate cause of
the loss. Here, while PNB highlights Ofelias fault in
accommodating a strangers check and depositing it to
the bank, it remains mum in its release of the proceeds
thereof without exhausting the 15-day clearing period, an
act which contravened established banking rules and
practice. It is worthy of notice that the 15-day clearing
period alluded to is construed as 15 banking days. It
bears stressing that the diligence required of banks is
more than that of a Roman pater familias or a good father
of a family. The highest degree of diligence is expected.
PNB miserably failed to do its duty of exercising
extraordinary diligence and reasonable business
prudence. The disregard of its own banking policy
amounts to gross negligence, which the law defines as
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 wilfully and intentionally with
a conscious indifference to consequences in so far as
other persons may be affected. With regard to collection
or encashment of checks, suffice it to say that the law
imposes on the collecting bank the duty to scrutinize
diligently the checks deposited with it for the purpose of
determining their genuineness and regularity. The
collecting bank, being primarily engaged in banking, holds
itself out to the public as the expert on this field, and the
law thus holds it to a high standard of conduct. A bank is
expected to be an expert in banking procedures and it
has the necessary means to ascertain whether a check,
local or foreign, is sufficiently funded. Philippine National
Bank vs. Spouses Cheah Chee Chong and Ofelia
Camacho Cheah/Spouses Cheah Chee Chong and Ofelia
Camacho Chea vs. Philippine National Bank; G.R. Nos.
170865/G.R. No. 170892, April 25, 2012.

Damages; requisites. License to operate a cockpit is a

mere privilege, and even if he was able to get a business
permit from the mayor, this did not give him a license to
operate a cockpit. Without any legal right to operate a
cockpit in the municipality, petitioner is not entitled to
damages. Injury alone does not give petitioner the right to
recover damages; he must also have a right of action for
the legal wrong inflicted by the respondents. We need not
belabor that in order that the law will give redress for an
act causing damage, there must be damnum et injuria
that act must be not only hurtful, but wrongful. Danilo A.
Du vs. Venancio R. Jayoma, et al.; G.R. No. 175042, April
23, 2012.

Damages; res ipsa loquitur; elements; liability of employer.

Under the doctrine of res ipsa loquitur, [w]here the thing
that caused the injury complained of is shown to be under
the management of the defendant or his servants; and the
accident, in the ordinary course of things, would not
happen if those who had management or control used
proper care, it affords reasonable evidence in the
absence of a sufficient, reasonable and logical
explanation by defendant that the accident arose from
or was caused by the defendants want of care. Res ipsa
loquitur is merely evidentiary, a mode of proof, or a mere
procedural convenience, since it furnishes a substitute for,
and relieves a plaintiff of, the burden of producing a
specific proof of negligence. It recognizes that parties
may establish prima facie negligence without direct proof,
thus, it allows the principle to substitute for specific proof
of negligence. It permits the plaintiff to present along with
proof of the accident, enough of the attending
circumstances to invoke the doctrine, create an inference
or presumption of negligence and thereby place on the
defendant the burden of proving that there was no
negligence on his part. The doctrine is based partly on
the theory that the defendant in charge of the
instrumentality which causes the injury either knows the
cause of the accident or has the best opportunity of
ascertaining it while the plaintiff has no such knowledge,
and is therefore compelled to allege negligence in general
terms.

The requisites of the doctrine of res ipsa loquitur as

established by jurisprudence are as follows:

1) the accident is of a kind which does not ordinarily

occur unless someone is negligent;

2) the cause of the injury was under the exclusive control

of the person in charge and

3) the injury suffered must not have been due to any

voluntary action or contribution on the part of the person
injured.

The aforementioned requisites having been met, there

now arises a presumption of negligence which he could
have overcome by evidence that he exercised due care
and diligence in preventing strangers from using his jeep.
Unfortunately, he failed to do so.

The operator on record of a vehicle is primarily

responsible to third persons for the deaths or injuries
consequent to its operation, regardless of whether the
employee drove the registered owners vehicle in
connection with his employment. Absent the
circumstance of unauthorized use48 or that the subject
vehicle was stolen which are valid defenses available to a
registered owner, he cannot escape liability for quasi-
delict resulting from his jeeps use. Oscar Del Carmen, Jr.
vs. Geronimo Bacoy, guradian and representing the
children, namely, Mary Marjorie B. Monsalud, et al.; G.R.
No. 173870, April 25, 2012.

Property; acquisition by prescription; confirmation of

incomplete or imperfect titles; requirements. There must
be an express declaration by the State that the public
dominion property is no longer intended for public service
or the development of the national wealth or that the
property has been converted into patrimonial. Without
such express declaration, the property, even if classified
as alienable or disposable, remains property of the public
dominion, pursuant to Article 420(2), and thus incapable
of acquisition by prescription. It is only when such
alienable and disposable lands are expressly declared by
the State to be no longer intended for public service or for
the development of the national wealth that the period of
acquisitive prescription can begin to run. Such declaration
shall be in the form of a law duly enacted by Congress or
a Presidential Proclamation in cases where the President
is duly authorized by law.

For one to invoke the provisions of Section 14(2) and set

up acquisitive prescription against the State, it is
primordial that the status of the property as patrimonial be
first established. Furthermore, the period of possession
preceding the classification of the property as patrimonial
cannot be considered in determining the completion of
the prescriptive period.

Adverse, continuous, open, public possession in the

concept of an owner is a conclusion of law and the
burden to prove it by clear, positive and convincing
evidence is on the applicant. A claim of ownership will not
proper on the basis of tax declarations if unaccompanied
by proof of actual possession.

The counting of the thirty (30)-year prescriptive period for

purposes of acquiring ownership of a public land under
Section 14(2) can only start from the issuance of DARCO
Conversion Order. Before the property was declared
patrimonial by virtue of such conversion order, it cannot
be acquired by prescription. Jean Tan, et al. vs. Republic
of the Philippines; G.R. No. 193443, April 16, 2012.

Sale; rescission for breach of obligation to deliver;

constructive delivery, execution of public instrument. A
party is entitled to demand for the rescission of their
contract for the failure to deliver the physical possession
of the subject property and the certificate of title covering
the same notwithstanding the absence of stipulations in
the agreement expressly indicating the consequences of
such omission, pursuant to Article 1191 of the NCC,
which states that 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.

Article 1498 of the NCC generally considers the execution

of a public instrument as constructive delivery by the
seller to the buyer of the property subject of a contract of
sale. The case at bar, however, falls among the
exceptions to the foregoing rule since a mere presumptive
and not conclusive delivery is created as the respondent
failed to take material possession of the subject property.

There is symbolic delivery of the property subject of the

sale by the execution of the public instrument, unless
from the express terms of the instrument, or by clear
inference therefrom, this was not the intention of the
parties. Such would be the case, for instance, where the
vendor has no control over the thing sold at the moment
of the sale, and, therefore, its material delivery could not
have been made.

As a general rule, the execution of a public instrument

amounts to a constructive delivery of the thing subject of
a contract of sale. However, exceptions exist, among
which is when mere presumptive and not conclusive
delivery is created in cases where the buyer fails to take
material possession of the subject of sale. A person who
does not have actual possession of the thing sold cannot
transfer constructive possession by the execution and
delivery of a public instrument. Villamar vs. Mangaoil; G.R.
No. 188661, April 11, 2012.

Surety; novation. 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. The
suretys 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.

A surety is released from its obligation when there is a

material alteration of the principal contract in connection
with which the bond is given, such as a change which
imposes a new obligation on the promising party, or
which takes away some obligation already imposed, or
one which changes the legal effect of the original contract
and not merely its form. In this case, however, no new
contract was concluded and perfected as only the
revision of the work schedule originally agreed upon was
the subject thereof. There was no new contract/
agreement which could be considered to have substituted
the Building Contract. Philippine Charter Insurance
Corporation vs. Petroleum Distributors & Service
Corporation; G.R. No. 180898. April 18, 2012.

Will, extrinsic validity. The state of being forgetful does not

necessarily make a person mentally unsound so as to
render him unfit to execute a Will. Forgetfulness is not
equivalent to being of unsound mind. Besides, Article 799
of the New Civil Code states: To be of sound mind, it is
not necessary that the testator be in full possession of all
his reasoning faculties, or that his mind be wholly
unbroken, unimpaired, or unshattered by disease, injury
or other cause. It shall be sufficient if the testator was
able at the time of making the will to know the nature of
the estate to be disposed of, the proper objects of his
bounty, and the character of the testamentary act. Bare
allegations of duress or influence of fear or threats, undue
and improper influence and pressure, fraud and trickery
cannot be used as basis to deny the probate of a will.
Baltazar, et. al. vs. Laxa; G.R. No. 174489, April 11, 2012.

Special Laws

Torrens System; registration; action for reconveyance;

acquisitive prescription. Registration of a piece of land
under the Torrens System does not create or vest title,
because it is not a mode of acquiring ownership. A
certificate of title is merely an evidence of ownership or
title over the particular property described therein. Thus,
notwithstanding the indefeasibility of the Torrens title, the
registered owner may still be compelled to reconvey the
registered property to its true owners.

In an action for reconveyance, the decree of registration is

respected as incontrovertible. What is sought instead is
the transfer of the property or its title which has been
wrongfully or erroneously registered in another persons
name, to its rightful or legal owner, or to the one with a
better right. An action for annulment of title or
reconveyance based on fraud is imprescriptible where the
plaintiff is in possession of the property subject of the
acts.

Acquisitive prescription is a mode of acquiring ownership

by a possessor through the requisite lapse of time. In
order to ripen into ownership, possession must be in the
concept of an owner, public, peaceful and uninterrupted.
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. The party who asserts ownership by
adverse possession must prove the presence of the
essential elements of acquisitive prescription.

For civil interruption to take place, the possessor must

have received judicial summons.Heirs of Tanyag vs.
Gabriel, et. al.; G.R. No. 175763, April 11, 2012.

Free patent; prohibition against alienation. Section 118 of

CA 141 requires that before the five year prohibition
applies, there should be an alienation or encumbrance of
the land acquired under free patent or homestead.

In real property law, alienation is defined as the transfer of

the property and possession of lands, tenements, or other
things from one person to another. It is the act by which
the title to real estate is voluntarily resigned by one person
to another and accepted by the latter, in the forms
prescribed by law. In this case, Comia did not transfer,
convey or cede the property; but rather, he relinquished,
renounced and quitclaimed the property considering
that the property already belonged to the spouses. The
voluntary renunciation by Comia of that portion was not
an act of alienation, but an act of correcting the inclusion
of the property in his free patent.

In support of the fact that the alienation transpired prior to

the grant of a free patent, it is remarkable that Comia
never contested that the spouses had been in actual
possession of the subject portion even before his patent
application. The private ownership of land as when
there is a prima facie proof of ownership like a duly
registered possessory information or a clear showing of
open, continuous, exclusive, and notorious possession
is not affected by the issuance of a free patent over the
same land. Jose Abelgas, Jr., et al. vs. Servilliano Comia,
et al.; G.R. No. 163125, April 18, 2012.

Emancipation patents; cancellation; land titles; tax

declarations; mere tax declarations not conclusive
evidence of ownership or possession. Under DAR
Administrative Order No. 02, Series of 1994, emancipation
patents may be cancelled by the PARAD or the DARAB
for violations of agrarian laws, rules and regulations. The
same administrative order further states that
administrative corrections may include non-identification
of spouse, correction of civil status, corrections of
technical descriptions and other matters related to
agrarian reform; and that the DARABs decision may
include cancellation of registered EP/CLOA,
reimbursement of lease rental as amortization to ARBs,
reallocation of the land to qualified beneficiary, perpetual
disqualification to become an ARB, and other ancillary
matters related to the cancellation of the EP or CLOA.
However, the DARs issuance of an Emancipation Patent
and the corresponding OCT covering the contested lot
carries with it a presumption of regularity. The Petition to
correct/cancel Pablos Emancipation Patent can prosper
only if petitioners are able to present substantial evidence
that a portion of their lot was erroneously covered by the
patent. Substantial evidence refers to such relevant
evidence as a reasonable mind might accept as adequate
to support a conclusion.

Well settled is the rule that tax declarations and receipts

are not conclusive evidence of ownership or of the right to
possess land when not supported by any other evidence.
The fact that the disputed property may have been
declared for taxation purposes in the names of the
applicants for registration or of their predecessors-in-
interest does not necessarily prove ownership. They are
merely indicia of a claim of ownership. Sps. Magno v.
Heirs of Parulan; G.R. No. 183916, April 25, 2012.

March 2012 Philippine Supreme Court Decisions on

CivilLaw

Civil Code

Contracts; bad faith, fraud. 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 a known duty through some
motive or interest or ill will that partakes of the nature of
fraud. Fraud has been defined to include an inducement
through insidious machination. Insidious machination
refers to a deceitful scheme or plot with an evil or devious
purpose. Deceit exists where the party, with intent to
deceive, conceals or omits to state material facts and, by
reason of such omission or concealment, the other party
was induced to give consent that would not otherwise
have been given. These are allegations of fact that
demand clear and convincing proof. They are serious
accusations that can be so conveniently and casually
invoked, and that is why they are never presumed. In this
case, the evidence presented is insufficient to prove that
respondent acted in bad faith or fraudulently in dealing
with petitioner. R.S. Tomas, Inc. v. Rizal Cement
Company, Inc.; G.R. No. 173155.March 21, 2012

Contracts; rescission of contract. The rescission referred

to in Article 1191 of the Civil Code, more appropriately
referred to as resolution, is on the breach of faith by the
defendant, which is violative of the reciprocity between
the parties. The right to rescind, however, may be waived,
expressly or impliedly. While the right to rescind reciprocal
obligations is implied, that is, that such right need not be
expressly provided in the contract, nevertheless the
contracting parties may waive the same.

Hence, in spite of the existence of dispute or controversy

between the parties during the course of the Subcontract
Agreement, HRCC had agreed to continue the
performance of its obligations pursuant to the
Subcontract Agreement. In view of the provision of the
Subcontract Agreement, HRCC is deemed to have
effectively waived its right to effect extrajudicial rescission
of its contract with FFCCI. Accordingly, HRCC, in the
guise of rescinding the Subcontract Agreement, was not
justified in implementing a work stoppage. F.F. Cruz & Co.,
Inc. vs. HR Construction Corp.; G.R. No. 187521. March
14, 2012

Contracts; void and inexistent sale not subject to

ratification. As to the applicability of Article 1317 of the
Civil Code, contracts of sale lacking the approval of the
Secretary of the Interior/Agriculture and Natural
Resources fall under the class of void and inexistent
contracts enumerated in Article 1409, which cannot be
ratified. Section 18 of Act No. 1120 mandates the
approval by the Secretary for a sale of friar land to be
valid.

The official document denominated as Sale Certificate

clearly required both the signatures of the Director of
Lands who issued such sale certificate to an applicant
settler/occupant and the Secretary of the Interior/
Agriculture and Natural Resources indicating his approval
of the sale. These forms had been prepared and issued
by the Chief of the Bureau of Public Lands under the
supervision of the Secretary of the Interior, consistent with
Act No. 1120 as may be necessary x x x to carry into
effect all the provisions [thereof] that are to be
administered by or under [his] direction, and for the
conduct of all proceedings arising under such provisions.
Serverino M. Manotok IV, et al. vs. Heirs of Homer L.
Barque, represented by Teresita Barque Hernandez; G.R.
Nos. 162335 & 162605. March 6, 2012

Contracts; waiver of rights under contract. Waiver is

defined as a voluntary and intentional relinquishment or
abandonment of a known existing legal right, advantage,
benefit, claim or privilege, which except for such waiver
the party would have enjoyed; the voluntary abandonment
or surrender, by a capable person, of a right known by
him to exist, with the intent that such right shall be
surrendered and such person forever deprived of its
benefit; or such conduct as warrants an inference of the
relinquishment of such right; or the intentional doing of an
act inconsistent with claiming it.

FFCCIs voluntary payment in favor of HRCC, albeit in

amounts substantially different from those claimed by the
latter, is a glaring indication that it had effectively waived
its right to demand for the joint measurement of the
completed works. FFCCIs failure to demand a joint
measurement of HRCCs completed works reasonably
justified the inference that it had already relinquished its
right to do so. F.F. Cruz & Co., Inc. vs. HR Construction
Corp.; G.R. No. 187521. March 14, 2012

Damages; loss of earning capacity. Damages for loss of

earning capacity is in the nature of actual damages, which
as a rule must be duly proven by documentary evidence,
not merely by the self-serving testimony of the widow. 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 earning
less than the minimum wage under current labor laws,
and judicial notice may be taken of the fact that in the
deceaseds line of work no documentary evidence is
available; or (2) the deceased is employed as a daily wage
worker earning less than the minimum wage under current
labor laws.

It was error for the Court of Appeals to have awarded

damages for loss of earning capacity based on Nelfas
testimony alone. First, while it is conceded that the
deceased was self-employed, the Court cannot accept
that in his line of work there was no documentary proof
available to prove his income from such occupation.
There would have been receipts, job orders, or some form
of written contract or agreement between the deceased
and his clients when he is contracted for a job. Second,
and more importantly, decedent was not earning less
than the minimum wage at the time of his death. Paulita
Edith Serra vs. Nelfa T. Mumar; G.R. No. 193861. March
14, 2012

Employer; liability for damages. Under Article 2180 of the

Civil Code, employers are liable for the damages caused
by their employees acting within the scope of their
assigned tasks. Whenever an employees negligence
causes damage or injury to another, there instantly arises
a presumption that the employer failed to exercise the
due diligence of a good father of the family in the
selection or supervision of its employees. The liability of
the employer is direct or immediate. It is not conditioned
upon prior recourse against the negligent employee and a
prior showing of insolvency of such employee. Moreover,
under Article 2184 of the Civil Code, if the causative
factor was the drivers negligence, the owner of the
vehicle who was present is likewise held liable if he could
have prevented the mishap by the exercise of due
diligence.

Petitioner failed to show that she exercised the level of

diligence required in supervising her driver in order to
prevent the accident. She admitted that de Castro had
only been her driver for one year and she had no
knowledge of his driving experience or record of previous
accidents. She also admitted that it was de Castro who
maintained the vehicle and would even remind her to pay
the installment of the car. Petitioner also admitted that, at
the time of the accident, she did not know what was
happening and only knew they bumped into another
vehicle when the driver shouted. She then closed her
eyes and a moment later felt something heavy fall on the
roof of the car. When the vehicle stopped, petitioner left
the scene purportedly to ask help from her brother,
leaving the other passengers to come to the aid of her
injured driver. Paulita Edith Serra vs. Nelfa T. Mumar;
G.R. No. 193861. March 14, 2012

Interest on the judgment; 12% per annum to be

computed from default, which is from judicial or
extrajudicial demand. Applying Lunaria v. People, the
Court of Appeals modified the appealed judgment holding
petitioner liable for the amount of the dishonored check,
with 12% interest per annum from the date of judicial
demand until the finality of this Decision. We find the need
to modify the ruling of the CA with regard to the
imposition of interest on the judgment. It has been
established that in the absence of stipulation, the rate of
interest shall be 12% per annum to be computed from
default, that is, from judicial or extrajudicial demand under
and subject to the provisions of Article 1169of the Civil
Code. In Ongson v. People, we held that interest began to
run from the time of the extrajudicial demand, as duly
proved by the creditor. Thus, petitioner should also be
held liable for the amount of the dishonored check, which
is 1,500,000, plus 12% legal interest covering the period
from the date of the receipt of the demand letter on 14
May 1999 to the finality of this Decision. The total amount
due in the dispositive portion of the CAs Decision,
inclusive of interest, shall further earn 12% interest per
annum from the finality of this Decision until fully paid.
Eleanor De Leon Llenado vs. People of the Philippines
and Editha Villaflores. G.R. No. 193279. March 14, 2012
Nuisance per se vs. nuisance per accidens; only nuisance
per se may be summarily abated without judicial
intervention. If petitioner indeed found respondents fence
to have encroached on the sidewalk, his remedy is not to
demolish the same summarily after respondents failed to
heed his request to remove it. Instead, he should go to
court and prove respondents supposed violations in the
construction of the concrete fence. Indeed, unless a thing
is a nuisance per se, it may not be abated summarily
without judicial intervention.

Respondents fence is not a nuisance per se. By its

nature, it is not injurious to the health or comfort of the
community. It was built primarily to secure the property of
respondents and prevent intruders from entering it. And
as correctly pointed out by respondents, the sidewalk still
exists. If petitioner believes that respondents fence
indeed encroaches on the sidewalk, it may be so proven
in a hearing conducted for that purpose. Not being a
nuisance per se, but at most a nuisance per accidens, its
summary abatement without judicial intervention is
unwarranted. Jaime S. Perez, both in his personal and
official capacity as Chief, Marikina Demolition Office vs.
Spouses Fortunito L. Madrona and Yolanda B. Pante;
G.R. No. 184478. March 21, 2012

Special Laws
Act No. 1120 See digest of Serverino M. Manotok IV, et al.
vs. Heirs of Homer L. Barque, represented by Teresita
Barque Hernandez; G.R. Nos. 162335 & 162605. March 6,
2012, under heading of Contracts.

February 2012 Philippine Supreme Court Decisions on

CivilLaw

Here are select February 2012 rulings of the Supreme

Court of the Philippines on civil law:

Agency; Accounting. Article 1891 of the Civil Code

contains a few of the obligations owed by an agent to his
principal Every agent is bound to render an account of
his transactions and to deliver to the principal whatever
he may have received by virtue of the agency, even
though it may not be owing to the principal. Every
stipulation exempting the agent from the obligation to
render an account shall be void.

It is evident that the reason behind the failure of petitioner

to render an accounting to respondent is immaterial. What
is important is that the former fulfill her duty to render an
account of the relevant transactions she entered into as
respondents agent. Caridad Segarra Sazon vs. Letecia
Vasquez-Menancio, G.R. No. 192085.February 22, 2012.

Agency; Fruits. Every agent is bound to deliver to the

principal whatever the former may have received by virtue
of the agency, even though that amount may not be owed
to the principal. Caridad Segarra Sazon vs. Letecia
Vasquez-Menancio, G.R. No. 192085.February 22, 2012.

Attorneys fees; When payable. With respect to attorneys

fees, it is proper on the ground that petitioners act of
denying respondent and itsemployeesaccess to the
leased premises has compelled respondent to litigate and
incur expenses to protect its interest. Also, under the
circumstances prevailing in the present case, attorneys
fees may be granted on grounds of justice and equity.
Manila International Airport vs. Avia Filipinas International,
Inc., G.R. No. 180168.February 27, 2012

Civil Code; Moral damages; Exemplary damages;

Attorneys fees. Article 2219 of the Civil Code of the
Philippines provides for recovery of moral damages in
certain cases:

Art. 2219. Moral damages may be recovered in the

following and analogous cases:

(1) A criminal offense resulting in physical injuries;

(2) Quasi-delicts causing physical injuries;

(3) Seduction, abduction, rape, or other lascivious acts;

(4) Adultery or concubinage;

(5) Illegal or arbitrary detention or arrest;

(6) Illegal search;

(7) Libel, slander or any other form of defamation;

(8) Malicious prosecution;

(9) Acts mentioned in Article 309;

(10) Acts and actions referred to in Articles 21, 26, 27, 28,
29, 30, 32, 34, and 35.

The parents of the female seduced, abducted, raped, or

abused, referred to in No. 3 of this article, may also
recover moral damages.

The spouse, descendants, ascendants, and brothers and

sisters may bring the action mentioned in No. 9 of this
article, in the order named.

Article 2229 of the Civil Code, on the other hand, provides

for recovery of exemplary damages:

Art. 2229. Exemplary or corrective damages are imposed,

by way of example or correction for the public good, in
addition to the moral, temperate, liquidated or
compensatory damages.

In this case, we agree with the CA in not awarding moral

and exemplary damages for lack of factual basis.

Lastly, Article 2208 of the Civil Code provides for recovery

of attorneys fees and expenses of litigation:

Art. 2208. In the absence of stipulation, attorneys fees

and expenses of litigation, other than judicial costs,
cannot be recovered, except:

(1) When exemplary damages are awarded;

(2) When the defendants act or omission has compelled

the plaintiff to litigate with third persons or to incur
expenses to protect his interest;

(3) In criminal cases of malicious prosecution against the

plaintiff;

(4) In case of a clearly unfounded civil action or

proceeding against the plaintiff;

(5) Where the defendant acted in gross and evident bad

faith in refusing to satisfy the plaintiffs plainly valid, just
and demandable claim;
(6) In actions for legal support;

(7) In actions for the recovery of wages of household

helpers, laborers and skilled workers;

(8) In actions for indemnity under workmens

compensation and employers liability laws;

(9) In a separate civil action to recover civil liability arising

from a crime;

(10) When at least double judicial costs are awarded;

(11) In any other case where the court deems it just and
equitable that attorneys fees and expenses of litigation
should be recovered.

In all cases, the attorneys fees and expenses of litigation

must be reasonable.

Article 111 of the Labor Code provides for a maximum

award of attorneys fees in cases of recovery of wages:

Art. 111. Attorneys fees.

a. In cases of unlawful withholding of wages, the

culpable party may be assessed attorneys fees
equivalent to ten percent of the amount of wages
recovered.

b. It shall be unlawful for any person to demand or

accept, in any judicial or administrative proceedings for
the recovery of wages, attorneys fees which exceed ten
percent of the amount of wages recovered.

Since De Gracia, et al. had to secure the services of the

lawyer to recover their unpaid salaries and protect their
interest, we agree with the CAs imposition of attorneys
fees in the amount of ten percent (10%) of the total
claims. Skippers United Pacific, Inc. and Skippers
Maritime Services, Inc. Ltd.vs Nathaniel Doza, et al., G.R.
No. 175558. February 8, 2012.

Contract; Simulation. Article 1345 of the Civil Code

provides that the simulation of a contract may either be
absolute or relative. In absolute simulation, there is a
colorable contract but it has no substance as the parties
have no intention to be bound by it. The main
characteristic of an absolute simulation is that the
apparent contract is not really desired or intended to
produce legal effect or in any way alter the juridical
situation of the parties. As a result, an absolutely
simulated or fictitious contract is void, and the parties
may recover from each other what they may have given
under the contract. However, if the parties state a false
cause in the contract to conceal their real agreement, the
contract is only relatively simulated and the parties are
still bound by their real agreement. Hence, where the
essential requisites of a contract are present and the
simulation refers only to the content or terms of the
contract, the agreement is absolutely binding and
enforceable between the parties and their successors in
interest. The primary consideration in determining the true
nature of a contract is the intention of the parties. If the
words of a contract appear to contravene the evident
intention of the parties, the latter shall prevail. Such
intention is determined not only from the express terms of
their agreement, but also from the contemporaneous and
subsequent acts of the parties. Spouses Jose and
Milagros Villaceran vs. Josephine De Guzman, G.R. No.
169055. February 22, 2012.

Contract; Subrogation. Subrogation is the substitution of

one person by another with reference to a lawful claim or
right, so that he who is substituted succeeds to the rights
of the other in relation to a debt or claim, including its
remedies or securities. The principle covers a situation
wherein an insurer has paid a loss under an insurance
policy is entitled to all the rights and remedies belonging
to the insured against a third party with respect to any
loss covered by the policy. It contemplates full
substitution such that it places the party subrogated in
the shoes of the creditor, and he may use all means that
the creditor could employ to enforce payment. Malayan
Insurance Co., Inc. vs. Rodelio Alberto and Enrico Alberto
Reyes, G.R. No. 194320. February 1, 2012.

Damages; Torrens system; Laches and prescription.

Article 434 of the Civil Code provides that [i]n an action
to recover, the property must be identified, and the
plaintiff must rely on the strength of his title and not on
the weakness of the defendants claim. In other words,
in order to recover possession, a person must prove (1)
the identity of the land claimed, and (2) his title.

Jurisprudence consistently holds that prescription and

laches can not apply to registered land covered by the
Torrens system because under 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. Rogelio J. Jakolsalem, et al. vs.
Roberto S. Barangan, G.R. No. 175025. February 15,
2012.

Free patent; Fradulently secured. A Free Patent may be

issued where the applicant is a natural-born citizen of the
Philippines; is not the owner of more than twelve (12)
hectares of land; has continuously occupied and
cultivated, either by himself or through his predecessors-
in-interest, a tract or tracts of agricultural public land
subject to disposition, for at least 30 years prior to the
effectivity of Republic Act No. 6940; and has paid the real
taxes thereon while the same has not been occupied by
any person. Once a patent is registered and the
corresponding certificate of title is issued, the land
covered thereby ceases to be part of 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 such issuance.

However, a title emanating from a free patent which was

secured through fraud does not become indefeasible,
precisely because the patent from whence the title sprung
is itself void and of no effect whatsoever. Well-settled is
the doctrine that the registration of a patent under the
Torrens System does not by itself vest title; it merely
confirms the registrants already existing one. Verily,
registration under the Torrens System is not a mode of
acquiring ownership.

Nonetheless, a free patent that was fraudulently acquired,

and the certificate of title issued pursuant to the same,
may only be assailed by the government in an action for
reversion pursuant to Section 101 of the Public Land Act.
Since it was the Director of Lands who processed and
approved the applications of the appellants and who
ordered the issuance of the corresponding free patents in
their favor in his capacity as administrator of the
disposable lands of the public domain, the action for
annulment should have been initiated by him, or at least
with his prior authority and consent. Nancy T. Lorzano vs.
Juan Tabayag, Jr., G.R. No. 189647.February 6, 2012.
Lease; Failure to maintain lessee in peaceful possession.
It is clear that petitioner failed to maintain respondent in
the peaceful and adequate enjoyment of the leased
premises by unjustifiably preventing the latter access
thereto. Consequently, in accordance with Article 1658 of
the Civil Code, respondent had no duty to make rent
payments.Manila International Airport vs. Avia Filipinas
International, Inc., G.R. No. 180168.February 27, 2012.

Lease; Increase in rental. Article 1374 of the Civil Code

clearly provides that [t]he 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. It is true that Article II, Paragraph 2.04
of the Contract of Lease states that [a]nysubsequent
amendment to Administrative Order No. 4, Series of 1982,
which will effect a decrease or escalation of the monthly
rental or impose new and additional fees and charges,
including but not limited to government/MIAA circulars,
rules and regulation to this effect, shall be deemed
incorporated herein and shall automatically amend this
Contract insofar as the monthly rental is
concerned.However, theabove quotedprovision of the
lease contract should not be read in isolation. Rather, it
should be read together with the provisions of Article VIII,
Paragraph 8.13, which provide that [a]nyamendment,
alteration or modification ofth[e] Contract shall not be
valid and binding, unless and until made in writing and
signed by the parties thereto.It is clear from the
foregoing that the intention of the parties is to subject
such amendment to the conformity of both petitioner and
respondent. Manila International Airport vs. Avia Filipinas
International, Inc., G.R. No. 180168.February 27, 2012

Legal pre-emption; Notice requirement. Article 1623 of the

Civil Code provides that the right of legal pre-emption or
redemption shall not be exercised except within thirty
days from the notice in writing by the prospective vendor,
or by the vendor, as the case may be. The written notice
of sale is mandatory.This Court has long established the
rule that notwithstanding actual knowledge of a co-owner,
the latter is still entitled to a written notice from the selling
co-owner in order to remove all uncertainties about the
sale, its terms and conditions, as well as its efficacy and
status. Sps. Roman Pascual and Mercedita R. Pascual,et
al. vs. Sps. Antonio Ballesteros and Lorenza Melchor-
Balles, G.R. No. 186269. February 15, 2012.

Marriage; Divorce not allowed in the Philippines;

Exception based onprinciples of comity; Divorce must be
proven as a fact. The Supreme Court had already ruled
that under the principles of comity, our jurisdiction
recognizes a valid divorce obtained by a spouse of foreign
nationality. This doctrine was established as early as 1985
in Van Dorn v. Romillo, Jr. wherein the SC said: It is true
that owing to the nationality principle embodied in Article
15 of the Civil Code, only Philippine nationals are covered
by the policy against absolute divorces, the same being
considered contrary to our concept of public policy and
morality. However, aliens may obtain divorces abroad,
which may be recognized in the Philippines, provided they
are valid according to their national law. In this case, the
divorce in Nevada released private respondent from the
marriage from the standards of American law, under
which divorce dissolves the marriage.

Nonetheless, the fact of divorce must still first be proven

as the Supreme Court has enunciated in Garcia v. Recio,
to wit: Before a foreign judgment is given presumptive
evidentiary value, the document must first be presented
and admitted in evidence. A divorce obtained abroad is
proven by the divorce decree itself. Indeed the best
evidence of a judgment is the judgment itself. The decree
purports to be a written act or record of an act of an
official body or tribunal of a foreign country. Merope
Enriquez Vda De Catalan vs Louella A. Catalan-Lee, G.R.
No. 183622. February 8, 2012.

Marriage; Presumption of conjugality of property;

Married to is merelydescriptive of the status of the
owner. Pursuant to Article 160 of the Civil Code of the
Philippines, 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.
Although it is not necessary to prove that the property
was acquired with funds of the partnership, proof of
acquisition during the marriage is an essential condition
for the operation of the presumption in favor of the
conjugal partnership. Not having established the time of
acquisition of the property, the Dela Peas insist that the
registration thereof in the name of Antonia R. Dela Pea,
of legal age, Filipino, married to Antegono A. Dela Pea
should have already sufficiently established its conjugal
nature. Confronted with the same issue in the case Ruiz
vs. Court of Appeals, the Supreme Court ruled, however,
that the phrase married to is merely descriptive of the
civil status of the wife and cannot be interpreted to mean
that the husband is also a registered owner. Because it is
likewise possible that the property was acquired by the
wife while she was still single and registered only after her
marriage, neither would registration thereof in said
manner constitute proof that the same was acquired
during the marriage and, for said reason, to be presumed
conjugal in nature. Since there is no showing as to when
the property in question was acquired, the fact that the
title is in the name of the wife alone is determinative of its
nature as paraphernal, i.e., belonging exclusively to said
spouse. Antonia R. Dela Pea, et al. vs Gemma Remilyn
C. Avila and FarEast Bank & Trust Co., G.R. No. 187490.,
February 8, 2012.

Mortgage; Foreclosure of Mortgage; Necessary

consequence of non-payment. Since foreclosure of the
mortgage is but the necessary consequence of non-
payment of the mortgage debt, FEBTC-BPI was, likewise,
acting well within its rights as mortgagee when it
foreclosed the real estate mortgage on the property upon
Gemmas failure to pay the loans secured thereby.
Executed on 26 November 1997, the mortgage predated
Antonias filing of an Affidavit of Adverse Claim with the
Register of Deeds of Marikina on 3 March 1998 and the
annotation of a Notice of Lis Pendens on TCT No. 337834
on 10 December 1999. The mortgage directly and
immediately subjects the property upon which it is
imposed, whoever the possessor may be, to the fulfilment
of the obligation for whose security it was constituted.
When the principal obligation is not paid when due, the
mortgagee consequently has the right to foreclose the
mortgage, sell the property, and apply the proceeds of the
sale to the satisfaction of the unpaid loan. Antonia R. Dela
Pea, et al. vs Gemma Remilyn C. Avila and FarEast
Bank & Trust Co., G.R. No. 187490., February 8, 2012.

Mortgage; Third party mortgagor. Third persons who are

not parties to the principal obligation may secure the
latter by pledging or mortgaging their own property. The
fact that the loans were solely for the benefit of TFRC
would not invalidate the mortgage with respect to
respondents property as long as valid consent was given.
Thus, when respondent executed the real estate
mortgage over its properties, such properties thereby
secured the performance of the principal obligation
notwithstanding the fact that respondent itself had not
assumed any liability for the debt of TFRC.China Banking
Corporation vs. QBRO Fishing Enterprises, Inc., G.R. No.
184556, February 22, 2012.

Negligence; Contributory negligence. Contributory

negligence is conduct on the part of the injured party,
contributing as a legal cause to the harm he has suffered,
which falls below the standard which he is required to
conform for his own protection. It is an act or omission
amounting to want of ordinary care on the part of the
person injured which, concurring with the defendants
negligence, is the proximate cause of the injury.

Here, we cannot see how the respondents could have

contributed to their injury when they were not even aware
of the forthcoming danger. It was established during the
trial that the jeepney carrying the respondents was
following a ten-wheeler truck which was only about three
to five meters ahead. When the truck proceeded to
traverse the railroad track, Reynaldo, the driver of the
jeepney, simply followed through. He did so under the
impression that it was safe to proceed. It bears noting
that the prevailing circumstances immediately before the
collision did not manifest even the slightest indication of
an imminent harm. To begin with, the truck they were
trailing was able to safely cross the track. Likewise, there
was no crossing bar to prevent them from proceeding or,
at least, a stoplight or signage to forewarn them of the
approaching peril. Thus, relying on his faculties of sight
and hearing, Reynaldo had no reason to anticipate the
impending danger.He proceeded to cross the track and,
all of a sudden, his jeepney was rammed by the train
being operated by the petitioners. Even then, the
circumstances before the collision negate the imputation
of contributory negligence on the part of the respondents.
What clearly appears is that the accident would not have
happened had the petitioners installed reliable and
adequate safety devices along the crossing to ensure the
safety of all those who may utilize the same. Philippine
National Railways Corporation, et al. vs. Purificacion
Vizcara, et al., G.R. No. 190022.February 15, 2012

Negligence; Proximate cause. The petitioners negligence

in maintaining adequate and necessary public safety
devices in the area of the accident was the proximate
cause of the mishap. Thus, there is no other party to
blame but the petitioners for their failure to ensure that
adequate warning devices are installed along the railroad
crossing. Philippine National Railways Corporation, et al.
vs. Purificacion Vizcara, et al., G.R. No. 190022.February
15, 2012

Obligations; Delay. The civil law concept of delay or

default commences from the time the obligor demands,
judicially or extrajudicially, the fulfillment of the obligation
from the obligee.In legal parlance, demand is the
assertion of a legal or procedural right. Philippine Charter
Insurance Corporation vs. Central Colleges of the
Philippines and Dynamic Planners and Construction
Corporation, G.R. No. 180631-33.February 22, 2012.

Obligation, Extinguishment thereof; Dation in payment.

Indeed, pursuant to Article 1232 of the Civil Code, an
obligation is extinguished by payment or performance.
There is payment when there is delivery of money or
performance of an obligation. Article 1245 of the Civil
Code provides for a special mode of payment called
dation in payment (dacin en pago). There is dation in
payment when property is alienated to the creditor in
satisfaction of a debt in money. Here, the debtor delivers
and transmits to the creditor the formers ownership over
a thing as an accepted equivalent of the payment or
performance of an outstanding debt. In such cases,
Article 1245 provides that the law on sales shall apply,
since the undertaking really partakes in one sense of
the nature of sale; that is, the creditor is really buying the
thing or property of the debtor, the payment for which is
to be charged against the debtors obligation. Dation in
payment extinguishes the obligation to the extent of the
value of the thing delivered, either as agreed upon by the
parties or as may be proved, unless the parties by
agreement express or implied, or by their silence
consider the thing as equivalent to the obligation, in which
case the obligation is totally extinguished. Tan Shuy
vsSpouses Guillermo Maulawin, et al., G.R. No. 190375.
February 8, 2012.
Obligations; Surety. A surety underArticle 2047 of the
New Civil Codesolidarily binds itself with the principal
debtor to assure the fulfillment of the obligation. As
provided in Article 2047, the surety undertakes to be
bound solidarily with the principal obligor. That
undertaking makes a surety agreement an ancillary
contract as it presupposes the existence of a principal
contract.Althoughthe contract of a surety is in essence
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.The
suretys 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 bedirect, primary and absolute; in
other words, he isdirectly and equally bound with the
principal.

Suretyship, in essence, contains two types of relationship

the principal relationship between the obligee and the
obligor,and the accessory surety relationship between the
principaland the surety.In this arrangement, the obligee
accepts the suretys solidary undertaking to pay if the
obligor does not pay.Such acceptance, however, does
not change in any material way the obligees relationship
with the principal obligor. Neither does it make the surety
an active party to the principal obligee-obligor
relationship.Thus, the acceptance does not give the
surety the right to intervene in the principal contract.The
suretys role arises only upon the obligors default, at
which time, it can be directly held liable by the obligee for
payment as a solidary obligor. Philippine Charter
Insurance Corporation vs. Central Colleges of the
Philippines and Dynamic Planners and Construction
Corporation, G.R. No. 180631-33.February 22, 2012.

Possession; Recovery of possession; Implied vs.

constructive trust;Prescription; Acquisitive vs. extinctive
prescription; Ordinary vs. extraordinary prescription. 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 relation of trustee and cestui que
trust does not in fact exist, and the holding of a
constructive trust is for the trustee himself, and therefore,
at all times adverse. Prescription may supervene even if
the trustee does not repudiate the relationship.

Prescription, as a mode of acquiring ownership and other

real rights over immovable property, is concerned with
lapse of time in the manner and under conditions laid
down by law, namely, that the possession should be in
the concept of an owner, public, peaceful, uninterrupted,
and adverse. Acquisitive prescription of real rights may
be ordinary or extraordinary.

The CA correctly dismissed petitioners complaint as an

action for reconveyance based on an implied or
constructive trust prescribes in 10 years from the time the
right of action accrues. This is the other kind of
prescription under the Civil Code, called extinctive
prescription, where rights and actions are lost by the
lapse of time. Petitioners action for recovery of
possession having been filed 55 years after Macario
occupied Dionisias share, it is also barred by extinctive
prescription.

Ordinary acquisitive prescription requires possession in

good faith and with just title for 10 years. In extraordinary
prescription, ownership and other real rights over
immovable property are acquired through uninterrupted
adverse possession for 30 years without need of title or of
good faith. Celerino E. Mercado vsBelen Espinocilla and
Ferdinand Espinocilla., G.R. No. 184109, February 1,
2012.

Public Document; Effect of notarization; Presumption of

regularity. With the material contradictions in the Dela
Peas evidence, the CA cannot be faulted for upholding
the validity of the impugned 4 November 1997 Deed of
Absolute Sale. Having been duly notarized, said deed is a
public document which carries the evidentiary weight
conferred upon it with respect to its due execution.
Regarded as evidence of the facts therein expressed in a
clear, unequivocal manner, public documents enjoy a
presumption of regularity which may only be rebutted by
evidence so clear, strong and convincing as to exclude all
controversy as to falsity. The burden of proof to overcome
said presumptions lies with the party contesting the
notarial document like the Dela Peas who, unfortunately,
failed to discharge said onus. Absent clear and
convincing evidence to contradict the same, we find that
the CA correctly pronounced the Deed of Absolute Sale
was valid and binding between Antonia and Gemma.
Antonia R. Dela Pea, et al. vs Gemma Remilyn C. Avila
and FarEast Bank & Trust Co., G.R. No. 187490.February
8, 2012 .

Quasi delict; Negligence. Negligence is the want of care

required by the circumstances.It is aconduct that
involves an unreasonably great risk of causing
damage;or, more fully, a conduct that falls below the
standard established by law for the protection of others
against unreasonably great risk of harm. Not all omissions
can be considered as negligent.

The test of negligence is as follows Could a prudent

man, in the case under consideration, foresee harm as a
result of the course actually pursued? If so, it was the
duty of the actor to take precautions to guard against that
harm. Reasonable foresight of harm, followed by ignoring
of the suggestion born of this prevision, is always
necessary before negligence can be held to exist. Philam
Insurance Company, Inc., et al. vs. Court of Appeals and
D.M. Consunji, Inc., G.R. No. 165413.February 22, 2012.

Real Estate Mortgage; Extrajudicial foreclosure sale;

Recovery of unpaidbalance or deficiency; Inadequacy of
sale price. Citing BPI Family Savings Bank, Inc. v.
Avenido, the Supreme Court reiterated the well-
entrenched rule that a creditor is not precluded from
recovering any unpaid balance on the principal obligation
if the extrajudicial foreclosure sale of the property subject
of the real estate mortgage results in a deficiency, to wit:
It is settled that if the proceeds of the sale are
insufficient to cover the debt in an extrajudicial
foreclosure of mortgage, the mortgagee is entitled to
claim the deficiency from the debtor. While Act No. 3135,
as amended, does not discuss the mortgagees right to
recover the deficiency, neither does it contain any
provision expressly or impliedly prohibiting recovery. If the
legislature had intended to deny the creditor the right to
sue for any deficiency resulting from the foreclosure of a
security given to guarantee an obligation, the law would
expressly so provide. Absent such a provision in Act No.
3135, as amended, the creditor is not precluded from
taking action to recover any unpaid balance on the
principal obligation simply because he chose to
extrajudicially foreclose the real estate mortgage.
The Supreme Court ruled in Suico Rattan & Buri Interiors,
Inc. v. Court of Appeals that, in deference to the rule that
a mortgage is simply a security and cannot be considered
payment of an outstanding obligation, the creditor is not
barred from recovering the deficiency even if it bought the
mortgaged property at the extrajudicial foreclosure sale at
a lower price than its market value notwithstanding the
fact that said value is more than or equal to the total
amount of the debtors obligation. Thus, it is wrong for
petitioners to conclude that when respondent bank
supposedly bought the foreclosed properties at a very low
price, the latter effectively prevented the former from
satisfying their whole obligation. Petitioners still had the
option of either redeeming the properties and, thereafter,
selling the same for a price which corresponds to what
they claim as the properties actual market value or by
simply selling their right to redeem for a price which is
equivalent to the difference between the supposed
market value of the said properties and the price obtained
during the foreclosure sale. In either case, petitioners will
be able to recoup the loss they claim to have suffered by
reason of the inadequate price obtained at the auction
sale and, thus, enable them to settle their obligation with
respondent bank. Moreover, petitioners are not justified in
concluding that they should be considered as having paid
their obligations in full since respondent bank was the one
who acquired the mortgaged properties and that the price
it paid was very inadequate. The fact that it is respondent
bank, as the mortgagee, which eventually acquired the
mortgaged properties and that the bid price was low is
not a valid reason for petitioners to refuse to pay the
remaining balance of their obligation. Settled is the rule
that a mortgage is simply a security and not a satisfaction
of indebtedness. Bank of the Philippine Islands, as
successor-in-Interest of Far Far EastBank & Trust
Company vsCythia L. Reyes, G.R. No. 182769. February
1, 2012.

Res ipsa loquitur; Simple negligence; Elements of

negligence; Damages. The doctrine of res ipsa loquitur as
a rule of evidence is unusual to the law of negligence
which recognizes that prima facie negligence may be
established without direct proof and furnishes a substitute
for specific proof of negligence. The doctrine, however, is
not a rule of substantive law, but merely a mode of proof
or a mere procedural convenience. The rule, when
applicable to the facts and circumstances of a given case,
is not meant to and does not dispense with the
requirement of proof of culpable negligence on the party
charged. It merely determines and regulates what shall
be prima facie evidence thereof and helps the plaintiff in
proving a breach of the duty. The doctrine can be
invoked when and only when, under the circumstances
involved, direct evidence is absent and not readily
available. The requisites for the application of the doctrine
of res ipsa loquitur are: (1) the accident was of a kind
which does not ordinarily occur unless someone is
negligent; (2) the instrumentality or agency which caused
the injury was under the exclusive control of the person in
charge; and (3) the injury suffered must not have been due
to any voluntary action or contribution of the person
injured.

Negligence is defined as the failure to observe for the

protection of the interests of another person that degree
of care, precaution, and vigilance, which the
circumstances justly demand, whereby such other person
suffers injury. The elements of simple negligence are: (1)
that there is lack of precaution on the part of the offender,
and (2) that the damage impending to be caused is not
immediate or the danger is not clearly manifest

Moral damages are not punitive in nature, but are

designed to compensate and alleviate in some way the
physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock,
social humiliation, and similar injury unjustly inflicted on a
person.Intended for the restoration of the psychological
or emotional status quo ante, the award of moral
damages is designed to compensate emotional injury
suffered, not to impose a penalty on the wrongdoer. Dr.
Emmanuel Jarcia, Jr. and Dr. Marilou Bastan vs. People of
the Philippines, G.R. No. 187926. February 15, 2012.

Succession; Hereditary estate transmitted to heirs

immediately afterdeath of decedent. Under the rules of
succession, the heirs instantaneously became co-owners
of the Marcos properties upon the death of the President.
The property rights and obligations to the extent of the
value of the inheritance of a person are transmitted to
another through the decedents death. In this concept,
nothing prevents the heirs from exercising their right to
transfer or dispose of the properties that constitute their
legitimes, even absent their declaration or absent the
partition or the distribution of the estate. In Jakosalem v.
Rafols, the Supreme Court said: Article 440 of the Civil
Code provides that the possession of hereditary property
is deemed to be transmitted to the heir without
interruption from the instant of the death of the decedent,
in case the inheritance be accepted. And Manresa with
reason states that upon the death of a person, each of his
heirs becomes the undivided owner of the whole estate
left with respect to the part or portion which might be
adjudicated to him, a community of ownership being thus
formed among the coowners of the estate while it remains
undivided. (3 Manresa, 357; Alcala vs. Alcala, 35 Phil.
679.) And according to article 399 of the Civil Code, every
part owner may assign or mortgage his part in the
common property, and the effect of such assignment or
mortgage shall be limited to the portion which may be
allotted him in the partition upon the dissolution of the
community. Republic of the Philippines vsMa. Imelda
Imee R.Marcos-Manotoc, et al., G.R. No. 171701.
February 8, 2012.
Temperate damages. Under Article 2224 of the Civil
Code, temperate or moderate damages are more than
nominal but less than compensatory, and may be
recovered when the court finds that some pecuniary loss
has been suffered, but the amount cannot, from the
nature of the case, be proved with certainty. The CA
found that respondent paid for the doctors professional
fees and incurred other hospital expenses; however, the
records failed to show that he presented proof of the
actual amount of expenses therein, which served as the
basis for the CA to award temperate damages in the
amount of P100,000.00.Wuerth Philippines, Inc. vs.
Rodante Ynson, G.R. No. 175932, February 15, 2012.

Torrens Title; Doctrine of indefeasibility; Conclusiveness of

title;Burden of proof; Direct attack vs. collateral attack.
Prohibition against collateral attack does not apply to
spurious or non-existent titles, since such titles do not
enjoy indefeasibility. Well-settled is the rule that the
indefeasibility of a title does not attach to titles secured by
fraud and misrepresentation. In view of these
circumstances, it was as if no title was ever issued in this
case to the petitioner and therefore this is hardly the
occasion to talk of collateral attack against a title.

An action or proceeding is deemed an attack on a title

when the object of the action is to nullify the title, and
thus challenge the judgment pursuant to which the title
was decreed. The attack is direct when the object of the
action is to annul or set aside such judgment, or to enjoin
its enforcement. On the other hand, it is indirect or
collateral when, in an action or proceeding to obtain a
different relief, an attack on the judgment is nevertheless
made as an incident thereof. Heirs of Leoncio C.
Oliveros, represented by Aurora B. Oliveros, et al.vs San
Miguel Corporation, et al., G.R. No. 173531. February 1,
2012.

Void government contract; Payment for services;

Quantum meruit. It has been settled in several cases that
payment for services done on account of the government,
but based on a void contract, cannot be avoided. The
government is unjustified in denying what it owes to
contractors and in leaving them uncompensated after it
has benefitted from the already completed work.
Jurisprudence recognizes the principle of quantum
meruit. Our courts are courts of both law and equity.
Given these, this Court will remain true to the rule of
substantial justice and direct the payment of
compensation to the contractors, who have completed
their services for the governments Mt. Pinatubo
Rehabilitation Project. Otherwise, urgent actions for
emergency work in the future would be discouraged.
Department of Public Works and Highways vs. Ronaldo E.
Quiwa, doing business under the name R.E.Q.
Construction, et al., G.R. No. 183444. February 8, 2012.
January 2012 Philippine Supreme Court Decisions on
CivilLaw

CIVIL CODE

Agency; principal-agent relationship. The relationship of

agency is one where one party called the principal
(mandante), authorizes another, called the agent
(mandatario), to act for and in his behalf in transactions
with third persons. The essential elements of agency are:
(1) there is consent, express or implied of the parties to
establish the relationship; (2) the object is the execution of
a juridical act in relation to a third person; (3) the agent
acts as a representative and not for himself, and (4) the
agent acts within the scope of his authority.

Agency is basicallypersonal, representative,

andderivativein nature. The authority of the agent to act
emanates from the powers granted to him by his
principal; his act is the act of the principal if done within
the scope of the authority.Qui facit per alium facit se. He
who acts through another acts himself.

As provided under Article 1869 of the Civil Code, agency

may be express, or implied from the acts of the principal,
from his silence or lack of action, or his failure to
repudiate the agency, knowing that another person is
acting on his behalf without authority.
The guidelines that would aid in differentiating sale and an
agency has been formulated by the Court since 1970. The
primordial differentiating consideration between the two
(2) contracts is the transfer of ownership or title over the
property subject of the contract. In an agency, the
principal retains ownership and control over the property
and the agent merely acts on the principals behalf and
under his instructions in furtherance of the objectives for
which the agency was established. On the other hand, the
contract is clearly a sale if the parties intended that the
delivery of the property will effect a relinquishment of title,
control and ownership in such a way that the recipient
may do with the property as he pleases. Sps. Fernando
and Lourdes Viloria vs. Continental Airlines, Inc.,G.R. No.
188288. January 16, 2012.

Compromise agreement; contracts; novation.In order for

novation to extinguish an obligation, it must be shown
that there is incompatibility between the compromise
agreement and the terms of the counter-bond, as required
by Article 1292 of the Civil Code. Nothing in the
compromise agreement indicates, or even hints at,
releasing Acropolis from its obligation as a surety to pay
United Pulp and Paper Co. Inc. after the latter has
obtained a favorable judgment. Clearly, there is no
incompatibility between the compromise agreement and
the counter-bond. Neither can novation be presumed.
Novation by presumption has never been favored. To be
sustained, it need be established that the old and new
contracts are incompatible in all points, or that the will to
novate appears by express agreement of the parties or in
acts of similar import. United Pulp and Paper Co., Inc. vs.
Acropolis Central Guaranty Corporation; G.R. No. 171750.
January 25, 2012.

Compromise agreement; rescission. An amicable

settlement reached at the barangay conciliation
proceedings is binding between the contracting parties
and, upon its perfection, is immediately executory insofar
as it is not contrary to law, good morals, good customs,
public order and public policy. Being a by-product of
mutual concessions and good faith of the parties, an
amicable settlement has the force and effect of res
judicata even if not judicially approved. It is akin to a
judgment subject to execution in accordance with the
Rules. However, the enforcement by execution of the
amicable settlement by the Barangay Lupon within six
months from the date of settlement, or by filing an action
to enforce such settlement in the appropriate city or
municipal court, if beyond the six-month period, is only
applicable if the contracting parties have not repudiated
such settlement within ten days from the date thereof in
accordance with Section 416 of the Local Government
Code. If the amicable settlement is repudiated by one
party, either expressly or impliedly, the other party has
two options: (1) to enforce the compromise in accordance
with the Local Government Code or Rules of Court as the
case may be, or (2) to consider it rescinded and insist
upon his original demand. This is in accord with Article
2041 of the Civil Code, which qualifies the broad
application of Article 2037.

Article 2041 does not require an action for rescission, and

the aggrieved party, by the breach of the compromise
agreement, may just consider it already rescinded. A
partys noncompliance with the amicable settlement pave
the way for the application of Article 2041 under which
the other party may either enforce the compromise,
following the procedure laid out in the Revised
Katarungang Pambarangay Law, or consider it as
rescinded and insist upon his original demand. The
respondents non-compliance with the terms and
conditions of the Kasunduang Pag-aayos, may be
construed as repudiation because it denotes that the
respondent did not intend to be bound by the terms
thereof, thereby negating the very purpose for which it
was executed. Thus, the petitioner has the option either
to enforce the Kasunduang Pag-aayos, or to regard it as
rescinded and insist upon his original demand, in
accordance with Article 2041 of the Civil Code. Having
instituted an action for collection of sum of money, the
petitioner obviously chose to rescind the Kasunduang
Pag-aayos. It was error on the part of the Court of
Appeals to rule that the enforcement by execution of said
agreement is the appropriate remedy under the
circumstances. Crisanta Alcaraz Miguel vs. Jerry D.
Montanez,G.R. No. 191336. January 25, 2012.
Contracts; annulment. There is fraud when one party is
induced by the other to enter into a contract, through and
solely because of the latters insidious words or
machinations. But not all forms of fraud can vitiate
consent. Under Article 1330 of the Civil Code, this fraud
refers to dolo causante or causal fraud, in which, prior to
or simultaneous with the execution of a contract, one
party secures the consent of the other by using
deception, without which such consent would not have
been given. The fraud must be the determining cause of
the contract, or must have caused the consent to be
given.

One who alleges fraud or mistake in a transaction must

substantiate his allegation since the presumption is that a
person takes ordinary care for his concerns and private
dealings have been entered into fairly and regularly. Thus,
one who alleges defect or lack of valid consent to a
contract by reason of fraud or undue influence must
establish by full, clear and convincing evidence such
specific acts that vitiated a partys consent; otherwise the
presumed consent to the contract prevails. In this case,
the Tan spouses failed to prove how fraud was employed
to induce them to buy the FRCCI shares. There was no
showing that insidious words or machinations were used
by the petitioners, without which, the spouses would not
have bought the shares.
The right to rescind a contract arises once the other party
defaults in the performance of his obligation. However,
rescission will not be permitted for a slight or casual
breach, but only for substantial and fundamental breach
as would defeat the very object of the parties in making
the agreement. Like fraud, the burden of establishing the
default lies upon the party who alleges that default was
committed. There was no evidence presented that
petitioners defaulted on any of their obligations.
Therefore, although the Complaint in this case sufficiently
alleged a cause of action for the annulment or rescission
of the contract of sale of FRCCI shares, however, there
was failure on the part of the Tan spouses to establish by
preponderance of evidence that they are entitled to the
said annulment or rescission. Fontana Resort and Country
Club, Inc. and RN Development Corporation vs. Spouses
Roy S. Tan and Susan C. Tan; G.R. No. 154670. January
30, 2012.

Contracts; fraud. Article 1390, in relation to Article 1391

of the Civil Code, provides that if the consent of the
contracting parties was obtained through fraud, the
contract is considered voidable and may be annulled
within four (4) years from the time of the discovery of the
fraud. Once a contract is annulled, the parties are obliged
under Article 1398 of the same Code to restore to each
other the things subject matter of the contract, including
their fruits and interest.
Under Article 1338 of the Civil Code, there is 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. In order that fraud may vitiate consent, it must be the
causal (dolo causante), not merely the incidental (dolo
incidente), inducement to the making of the
contract.Causal fraud has been defined as a deception
employed by one party prior to or simultaneous to the
contract in order to secure the consent of the other. Fraud
must be serious and its existence must be established by
clear and convincing evidence, mere preponderance of
evidence is not adequate. Quoting Tolentino, the Court
ruled that the misrepresentation constituting the fraud
must be established by full, clear, and convincing
evidence, and not merely by a preponderance thereof.
The deceit must be serious. The fraud is serious when it is
sufficient to impress, or to lead an ordinarily prudent
person into error; that which cannot deceive a prudent
person cannot be a ground for nullity. The circumstances
of each case should be considered, taking into account
the personal conditions of the victim. Sps. Fernando and
Lourdes Viloria vs. Continental Airlines, Inc.,G.R. No.
188288. January 16, 2012.

Contracts; novation. Novation is the extinguishment of an

obligation by the substitution or change of the obligation
by a subsequent one which extinguishes or modifies the
first, either by changing the object or principal conditions,
or, by substituting another in place of the debtor, or by
subrogating a third person in the rights of the creditor. In
order for novation to take place, the concurrence of the
following requisites is indispensable:

1. There must be a previous valid obligation,

2. There must be an agreement of the parties concerned

to a new contract,

3. There must be the extinguishment of the old contract,

and

4. There must be the validity of the new contract.

A contract is a meeting of minds between two persons

whereby one binds himself, with respect to the other, to
give something or to render some service.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. Parties are
bound not only to the fulfillment of what has been
expressly stipulated but also to all the consequences
which, according to their nature, may be in keeping with
good faith, usage and law.
Distinction must be made between the perfection of the
employment contract and the commencement of the
employer-employee relationship. The perfection of the
contract, which in this case coincided with the date of
execution thereof, occurred when petitioner and
respondent agreed on the object and the cause, as well
as the rest of the terms and conditions therein. The
commencement of the employer-employee relationship,
would have taken place had petitioner been actually
deployed from the point of hire. Thus, even before the
start of any employer-employee relationship,
contemporaneous with the perfection of the employment
contract was the birth of certain rights and obligations,
the breach of which may give rise to a cause of action
against the erring party. Thus, if the reverse had
happened, that is the seafarer failed or refused to be
deployed as agreed upon, he would be liable for
damages. Stolt-Nielsen Transportation Group, Inc., et al.
vs. Sulpecio ModequilloG.R. No. 177498. January 18,
2012.

Contracts; novation; extinguishment of criminal liability.

The principle of novation cannot apply as to extinguish
criminal liability in this case. The mere payment of an
obligation before the institution of a criminal complaint
does not, on its own, constitute novation that may prevent
criminal liability. The Court citing the case of People v.
Nery ruled that novation is not one of the means
recognized by the Penal Code whereby criminal liability
can be extinguished and that the role of novation may
only be either to prevent the rise of criminal liability or to
cast doubt on the true nature of the original petition,
whether or not it was such that its breach would not give
rise to penal responsibility as when money loaned is
made to appear as a deposit, or other similar disguise is
resorted to. It further ratiocinated, citing the case of
Quinto v. People, that the gravamen of the offense of
estafa is the appropriation or conversion of money or
property received to the prejudice of the owner and
neither the theory of delay in the fulfilment of commission
nor that of novation can avoid the incipient criminal
liability. The criminal liability for estafa already committed
is then not affected by the subsequent novation of
contract, for it is a public offense which must be
prosecuted and punished by the State in its own
conation.

In this case, the acceptance by MPI of the Equitable PCI

checks tendered by Milla could not have novated the
original transaction, as the checks were only intended to
secure the return of the P2 Million the former had already
given to him these checks even bounced and were thus
unable to satisfy his liability. The estafa involved here was
not for simple misappropriation or conversion, but
committed through Falsification of public documents, the
liability for which cannot be extinguished by mere
novation. Cresencio C. Milla vs. People of the Philippines
et al.; G.R. No. 188726. January 25, 2012.
Contracts; perfection For a contract to be perfected, three
elements are needed to create a perfected contract: 1) the
consent of the contracting parties; (2) an object certain
which is the subject matter of the contract; and (3) the
cause of the obligation which is established. Under the
law on sales, a contract of sale is perfected when the
seller, obligates himself, for a price certain, to deliver and
to transfer ownership of a thing or right to the buyer, over
which the latter agrees. From that moment, the parties
may demand reciprocal performance. Starbright Sales
Eterprises, Inc. vs. Philippine Realty Corporation, Msgr.
Domingo A. Cirilos, et al., G.R. No. 177936. January 18,
2012.

Contracts; ratification. Article 1392 of the Civil Code

states that ratification extinguishes the action to annul a
voidable contract. Ratification of a voidable contract,
under Article 1393, may be effected expressly or tacitly. It
is understood that there is a tacit ratification if, with
knowledge of the reason which renders the contract
voidable and such reason having ceased, the person who
has a right to invoke it should execute an act which
necessarily implies an intention to waive his right.

Implied ratification may take diverse forms, such as by

silence or acquiescence; by acts showing approval or
adoption of the contract; or by acceptance and retention
of benefits flowing therefrom. Sps. Fernando and Lourdes
Viloria vs. Continental Airlines, Inc.,G.R. No. 188288.
January 16, 2012.

Contracts; rescission. Annulment under Article 1390 of

the Civil Code and rescission under Article 1191 are two
inconsistent remedies. In resolution, all the elements to
make the contract valid are present; in annulment, one of
the essential elements to a formation of a contract, which
is consent, is absent. In resolution, the defect is in the
consummation stage of the contract when the parties are
in the process of performing their respective obligations;
in annulment, the defect is already present at the time of
the negotiation and perfection stages of the contract.
Accordingly, by pursuing the remedy of rescission under
Article 1191, there was implied admission of the validity of
the subject contracts, forfeiting their right to demand their
annulment. A party cannot rely on the contract and claim
rights or obligations under it and at the same time impugn
its existence or validity. Indeed, litigants are enjoined from
taking inconsistent positions.

The right to rescind a contract for non-performance of its

stipulations is not absolute. 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. Whether a breach is
substantial is largely determined by the attendant
circumstances.
Under Article 1192, in case both parties have committed a
breach of the obligation, the liability of the first infractor
shall be equitably tempered by the courts. If it cannot be
determined which of the parties first violated the contract,
the same shall be deemed extinguished, and each shall
bear his own damages. Sps. Fernando and Lourdes
Viloria vs. Continental Airlines, Inc.,G.R. No. 188288.
January 16, 2012.

Dealership contract; liability. The petitioner as importer

and the dealer executed an exclusive dealership
agreement for mutual benefit and gain. On one hand,
petitioner benefits from the sale of its products, as well as
the advertisement it gains when it broadens its
geographical coverage in contracting with independent
dealers in different areas. The products sold and the
services rendered by the dealer also contribute to its
goodwill. Thus, despite the transfer of ownership upon
the sale and delivery of its products, petitioner still
imposes the obligation on the dealer to exclusively carry
its products. The dealer, on the other hand, also benefits
from the dealership agreement, not only from the resale of
the products of petitioner, but also from the latters
goodwill.

However, with the use of its trade name and trademark,

petitioner and the dealer inform and guarantee to the
public that the products and services are of a particular
standard or quality. The public, which is not privy to the
dealership contract, assumes that the gasoline station is
owned or operated by petitioner. Thus, respondents, who
suffered damages from the act or omission that occurred
in the gasoline station and that caused the fire, may file an
action against petitioner based on the representations it
made to the public. As far as the public is concerned, it is
enough that the establishment carries exclusively the
name and products of petitioner to assume that the latter
is liable for acts done within the premises.

The expiration or nonexistence of a dealership contract

did notipso factotransform the relationship of the dealer
and petitioner into one of agency. As far as the parties to
the dealership contract were concerned, the rights and
obligations as to them still subsisted, since they
continued to mutually benefit from the agreement. Thus,
neither party can claim that it is no longer bound by the
terms of the contract and the expiration thereof. Petron
Corporation vs. Sps. Cesar Jovero and Erma F. Cudilla, et
al., G.R. No. 151038. January 18, 2012.

Interest; judgments. TheEastern Shipping case provides

that in the absence of a written stipulation, the applicable
interest rate to be imposed in judgments involving a
forbearance of credit shall be 12% per annum in
accordance with Central Bank (CB) Circular No. 416. On
the other hand, if the judgment refers to payment of
indemnities in the concept of damages arising from a
breach or a delay in the performance of obligations in
general, the applicable interest rate shall be 6% per
annum, in accordance with Article 2206 of the Civil Code.
Both interest rates apply from the time of judicial or
extrajudicial demand until the finality of the judgment.
However, from the time the judgment of the court
awarding a sum of money becomes final until it is
satisfied, the award it granted shall be considered a
forbearance of credit, whether or not the judgment award
actually pertained to one. Accordingly, during this interim
period, the interest rate of 12% per annum for
forbearance of money shall apply.

An award of a sum of money shall be considered as a

forbearance of credit once it becomes final, whether or
not the award actually pertained to one. Hence, from its
finality until its satisfaction, the judgment award of moral
and exemplary damages, as well as attorneys fees, shall
be subject to the interest rate of 12% per annum. Bibiano
Reynoso IV vs. Penta Capital Finance CorporationG.R.
No. 162100 & G.R. No. 162395. January 18, 2012.

Interest; lawful interest. Citing Eastern Shipping Lines v.

Court of Appeals, enunciated inPCI Leasing & Finance
Inc. v. Trojan Metal Industries, Inc.,the Court laid down
the rules for the imposition of legal interest 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.

II. With regard particularly to an award of interest in the

concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as
follows:

1. When the obligation is breached, and it consists in the

payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have
been stipulated in writing. Furthermore, the interest due
shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of
interest shall be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under
and subject to the provisions of Article 1169 of the Civil
Code.

2. When an obligation, not constituting a loan or

forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at
thediscretion of the courtat 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.

3. When the judgment of the court awarding a sum of

money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of
credit. Petron Corporation vs. Sps. Cesar Jovero and
Erma F. Cudilla, et al., G.R. No. 151038. January 18, 2012.

Obligations; Solidary obligation. According to Article 1217

of the Civil Code, payment made by one of the solidary
debtors extinguishes the obligation. If two or more
solidary debtors offer to pay, the creditor may choose
which offer to accept. The debtor who made the payment
may claim from his co-debtors only the share which
corresponds to each, with the interest for the payment
already made. If the payment is made before the debt is
due however, no interest for the intervening period may be
demanded.
Article 1208 provides for the share of solidary debtors
which states that if from the law, or the nature of the
wording of the obligations to which the preceding article
refers the contrary does not appear,the credit of debt
shall bepresumed to be divided into as many equal
shares as there are creditors or debtors, the credits or
debts being considered distinct from one another, subject
to the Rules of Court governing the multiplicity of suits.
Petron Corporation vs. Sps. Cesar Jovero and Erma F.
Cudilla, et al., G.R. No. 151038. January 18, 2012.

Quasi-Delict; Damages. With regard to actual damages,

one is entitled to an adequate compensation only for such
pecuniary loss suffered by him as he has duly proved. In
addition, as indemnity for the death of the deceased as a
result of a quasi-delict, actual damages shall likewise
include the loss of the earning capacity of the deceased.

Moral damages, are not intended to enrich plaintiff at the

expense of the defendant. They are awarded to enable
the injured party to obtain means, diversions, or
amusements that will serve to alleviate the moral suffering
he/she had undergone due to the other partys culpable
action and must, perforce, be proportional to the suffering
inflicted.

Inquasi-delicts, exemplary damages may be granted if

the defendant acted with gross negligence. It is given by
way of example or correction for the public good.Before
the court may consider such award, the plaintiff must
show his entitlement first to moral, temperate, or
compensatory damages, which the respondents have.

Because exemplary damages are awarded and the found

it equitable that expenses of litigation should be
recovered, attorneys fees were also awarded by the
Court.Crix Metro Leasing and Finance Corporation
(Formerly Consolidated Orix Leasing and Finance) vs.
Minors Dennis, Mylene, Melanie and Marikris,
Mangalinao y Dizon, et al..G.R. Nos. 174089. January 25,
2012.

Quasi-Delict; liability of principal for acts of agent. In

actions based on quasi-delict, a principal can only be
held liable for the tort committed by its agents employees
if it has been established by preponderance of evidence
that the principal was also at fault or negligent or that the
principal exercise control and supervision over them.

A prior determination of the nature of the passengers

cause of action is necessary. If the passengers cause of
action against the airline company is premised onculpa
aquilianaor quasi-delict for a tort committed by the
employee of the airline companys agent, there must be
an independent showing that the airline company was at
fault or negligent or has contributed to the negligence or
tortuous conduct committed by the employee of its agent.
The mere fact that the employee of the airline companys
agent has committed a tort is not sufficient to hold the
airline company liable. There is novinculum jurisbetween
the airline company and its agents employees and the
contractual relationship between the airline company and
its agent does not operate to create a juridical tie between
the airline company and its agents employees.

Article 2180 of the Civil Code does not make the principal
vicariously liable for the tort committed by its agents
employees and the principal-agency relationshipper
sedoes not make the principal a party to such tort;
hence, the need to prove the principals own fault or
negligence.

On the other hand, if the passengers cause of action for

damages against the airline company is based on
contractual breach or culpa contractual, it is not
necessary that there be evidence of the airline companys
fault or negligence. In an action based on a breach of
contract of carriage, the aggrieved party does not have to
prove that the common carrier was at fault or was
negligent. All that he has to prove is the existence of the
contract and the fact of its non-performance by the
carrier.

A persons vicarious liability is anchored on his

possession of control, whether absolute or limited, on the
tortfeasor. Without such control, there is nothing which
could justify extending the liability to a person other than
the one who committed the tort.

The Court cited the case of Cangco v. Manila Railroad Co.

stated that with respect to extra-contractual obligation
arising from negligence, whether of act or omission the
legislature has limited such liability to cases in which the
person upon whom such an obligation is imposed is
morally culpable or, on the contrary, for reasons of public
policy, to extend that liability without regard to the lack of
moral culpability, so as to includeresponsibility for the
negligence of those persons whose acts or omissions are
imputable, by a legal fiction,to others who are in a
position to exercise an absolute or limited control over
them.The legislature which adopted our Civil Code has
elected to limit extra-contractual liability with certain
well-defined exceptions to cases in which moral
culpability can be directly imputed to the persons to be
charged. This moral responsibility may consist in having
failed to exercise due care in ones own acts, or in having
failed to exercise due care in the selection and control of
ones agent or servants, or in the control of persons who,
by reasons of their status, occupy a position of
dependency with respect to the person made liable for
their conduct. Sps. Fernando and Lourdes Viloria vs.
Continental Airlines, Inc.,G.R. No. 188288. January 16,
2012.
Quasi-Delict; Vicarious Liability. The registered owner
cannot point fingers at the alleged real owner to exculpate
itself from vicarious liability under Article 2180of the Civil
Code. Regardless of whoever is claimed to be the actual
owner of a vehicle by reason of a contract of sale, the
registered owner is nevertheless primarily liable for the
damages or injury the truck registered under it have
caused. It has been explained that if a registered owner is
allowed to evade responsibility by proving who the
supposed transferee or owner is, it would be easy for him,
by collusion with others or otherwise, to escape said
responsibility and transfer the same to an indefinite
person, or to one who possesses no property with which
to respond financially for the damage or injury done. A
victim of recklessness on the public highways is usually
without means to discover or identify the person actually
causing the injury or damage. He has no means other
than by a recourse to the registration in the Motor
Vehicles Office to determine who is the owner. The
protection that the law aims to extend to him would
become illusory were the registered owner given the
opportunity to escape liability by disproving his
ownership.

The registered owners, in turn, have a right to be

indemnified by the real or actual owner of the amount that
they may be required to pay as damage for the injury
caused to the plaintiff. They can file a third-party
complaint against the actual or real owner of the vehicle.
Crix Metro Leasing and Finance Corporation (Formerly
Consolidated Orix Leasing and Finance) vs. Minors
Dennis, Mylene, Melanie and Marikris, Mangalinao y
Dizon, et al..G.R. Nos. 174089. January 25, 2012.

Surety; Liability to Insurance Company. Section 175 of

theInsurance Codedefines a suretyship as a contract or
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 a third
party, called the obligee. It includes official recognizances,
stipulations, bonds or undertakings issued under Act 536,
as amended.Suretyship arises upon the solidary binding
of a person (surety) with the principal debtor, for the
purpose of fulfilling an obligation. Suchundertaking
makes a surety agreement an ancillary contract as it
presupposes the existence of a principal
contract.Althoughthe contract of a surety is in essence
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.And
notwithstanding the fact that the surety contract is
secondary to the principal obligation, the surety assumes
liability as a regular party to the undertaking.

The extent of a suretys liability is determined by the

language of the suretyship contract or bond itself.It
cannot be extended by implication, beyond the terms of
the contract. Thus, to determine whether petitioner is
liable to respondent under the surety bond, it becomes
necessary to examine the terms of the contract itself.

A surety contract should be read and interpreted together

with the contract entered into between the creditor and
the principal.Since a surety contract is merely a
collateral one, its basis is the principal contract or
undertaking which it secures.Necessarily, the stipulations
in such principal agreement must at least be
communicated or made known to the surety.

Moreover, being an onerous undertaking, a surety

agreement is strictly construed against the creditor, and
every doubt is resolved in favor of the solidary debtor.The
contract of suretyship imports entire good faith and
confidence between the parties in regard to the whole
transaction, although it has been said that the creditor
does not stand as a fiduciary in his relation to the surety.
The creditor is generally held bound to a faithful
observance of the rights of the surety and to the
performance of every duty necessary for the protection of
those rights. Moreover, obligations arising from contracts
have the force of law between the parties and should be
complied with in good faith. First Lepanto-Taisho
Insurance Corporation (now known as FLT Prime
Insurance Corporation) vs. Chevron Philippines, inc.
(formerly known as Caltex Philippines, Inc.), G.R. No.
177839. January 18, 2012.
Special Laws

P.D. No. 1529; Registration; When entry is deemed

registered. The entry of instruments in the Primary Entry
Book is equivalent to registration despite the failure to
annotate said instruments in the corresponding
certificates of title. However, for the entry of instruments
in the Primary Entry Book to be considered to be
equivalent to registration and to have the effect of
registration, certain requirements have to be met. There is
still a need to comply with all that is required for entry and
registration, including the payment of prescribed fees. In
this case, since there was still no compliance of all that is
required for purposes of entry and annotation of the Deed
of Sale as of June 25, 2004, the registration of the Notice
of Levy on Attachment on June 17, 2004 should take
precedence over the former. Considering that the Notice
of Levy of Attachment was deemed registered earlier than
the Deed of Sale, the TCT issued pursuant to the latter
should contain the annotation of the
Attachment.Durawood Construction and Lumber Supply,
Inc. vs. Candice S. Bona.G.R. No. 179884. January 25,
2011

November 2011 Philippine Supreme Court Decisions on

CivilLaw

Civil Code
Contracts; interpretation. Article 1332. When one of the
parties is unable to read, or if the contract is in a language
not understood by him, and mistake or fraud is alleged,
the person enforcing the contract must show that the
terms thereof have been fully explained to the former.

We cannot accede to the petitioners plea. It is quite

notable that the petitioner did not specify which of the
stipulations of the deed of conditional sale she had
difficulty or deficiency in understanding. Her generalized
averment of having been misled should, therefore, be
brushed aside as nothing but a last attempt to salvage a
hopeless position. Our impression is that the stipulations
of the deed of conditional sale were simply worded and
plain enough for even one with a slight knowledge of
English to easily understand.

The petitioner was not illiterate. She had appeared to the

trial court to be educated, its cogent observation of her as
lettered (supra, at p. 7 hereof) being based on how she
had composed her correspondences to DBP. Her
testimony also revealed that she had no difficulty
understanding English.

Nor was the petitioners ignorance of the true nature of

the deed of conditional sale probably true. By her own
admission, she had asked the bank officer why she had
been made to sign a deed of conditional sale instead of
an absolute sale, which in itself reflected her full
discernment of the matters subject of her dealings with
DBP.

Clearly, Article 1332 of the Civil Code does not apply to

the petitioner. According to Lim v. Court of Appeals, the
provision came into being because a sizeable percentage
of the countrys populace had comprised of illiterates, and
the documents at the time had been written either in
English or Spanish, viz:

In calibrating the credibility of the witnesses on this issue,

we take our mandate from Article 1332 of the Civil Code
which provides: When one of the parties is unable to
read, or if the contract is in a language not understood by
him, and mistake or fraud is alleged, the person enforcing
the contract must show that the terms thereof have been
fully explained to the former. This substantive law came
into being due to the finding of the Code Commission that
there is still a fairly large number of illiterates in this
country, and documents are usually drawn up in English
or Spanish. It is also in accord with our state policy of
promoting social justice. It also supplements Article 24 of
the Civil Code which calls on court to be vigilant in the
protection of the rights of those who are disadvantaged in
life. (Emphasis supplied)

Lina Calilap-Asmeron vs. Development Bank of the

Philippines, et al.;G.R. No. 157330. November 23, 2011.
Contracts; rescission. Article 1191 of the Civil Code did
not prohibit the parties from entering into an agreement
whereby a violation of the terms of the contract would
result to its cancellation. In Pangilinan v. Court of Appeals,
the Court upheld the vendors right in a contract to sell to
extrajudicially cancel the contract upon failure of the
vendee to pay the installments and even to retain the
sums already paid, holding:

[Article 1191 of the Civil Code] makes it available to the

injured party alternative remedies such as the power to
rescind or enforce fulfillment of the contract, with
damages in either case if the obligor does not comply
with what is incumbent upon him. There is nothing in this
law which prohibits the parties from entering into an
agreement that a violation of the terms of the contract
would cause its cancellation even without court
intervention. The rationale for the foregoing is that in
contracts providing for automatic revocation, judicial
intervention is necessary not for purposes of obtaining a
judicial declaration rescinding a contract already deemed
rescinded by virtue of an agreement providing for
rescission even without judicial intervention, but in order
to determine whether or not the rescission was proper.
Where such propriety is sustained, the decision of the
court will be merely declaratory of the revocation, but it is
not itself the revocatory act. Moreover, the vendors right
in contracts to sell with reserved title to extrajudicially
cancel the sale upon failure of the vendee to pay the
stipulated installments and retain the sums and
installments already received has long been recognized
by the well-established doctrine of 39 years standing. The
validity of the stipulation in the contract providing for
automatic rescission upon non-payment cannot be
doubted. It is in the nature of an agreement granting a
party the right to rescind a contract unilaterally in case of
breach without need of going to court. Thus, rescission
under Article 1191 was inevitable due to petitioners
failure to pay the stipulated price within the original period
fixed in the agreement.

Lina Calilap-Asmeron vs. Development Bank of the

Philippines, et al.; G.R. No. 157330. November 23, 2011.

Special Laws

National Building Code; nuisances. It is unquestionable

that the Building Official has the authority to order the
condemnation and demolition of buildings which are
found to be in a dangerous or ruinous condition. This
authority emanates from Sections 214 and 215 of the
National Building Code (Presidential Decree [P.D.] No.
1096) which provides:

Section 214. Dangerous and Ruinous Buildings or

Structures
Dangerous buildings are those which are herein declared
as such or are structurally unsafe or not provided with
safe egress, or which constitute a fire hazard, or are
otherwise dangerous to human life, or which in relation to
existing use, constitute a hazard to safety or health or
public welfare because of inadequate maintenance,
dilapidation, obsolescence, or abandonment; or which
otherwise contribute to the pollution of the site or the
community to an intolerable degree.

Section 215. Abatement of Dangerous Buildings

When any building or structure is found or declared to be

dangerous or ruinous, the Building Official shall order its
repair, vacation or demolition depending upon the degree
of danger to life, health, or safety. This is without
prejudice to further action that may be taken under the
provisions of Articles 482 and 694 to 707 of the Civil Code
of the Philippines.

As found by the CA, the records show that the OBO

issued the resolution and Demolition Order only after
ocular inspections and hearings were conducted. Notably,
the Inspectorate Team of the DPWH came up with the
same conclusion as the OBO when it conducted its own
ocular inspection of the premises, that is both Buildings 1
and 2 had structural, sanitary, plumbing and electrical
defects of up to 80%.
What is more, contrary to the position of the petitioners
that the provisions of the Civil Code on abatement of
nuisances should have been applied in their case, the fact
that the buildings in question could also constitute
nuisances under the Civil Code does not preclude the
Building Official from issuing the assailed Demolition
Order. As provided by P.D. No. 1096, the authority of the
Building Official to order the repair, vacation or demolition,
as the case may be, is without prejudice to further action
that may be undertaken under the relevant provisions of
the Civil Code. Spouses Ricardo Hipolito, Jr. and Liza
Hipolito vs. Atty. Carlos Cinco, et al.; G.R. No. 174143.
November 28, 2011.

P.D. No. 1529; amendment of title. The proceeding for the

amendment and alteration of a certificate of title under
Section 108 of P.D. No. 1529 is applicable in 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.

In this case, the petitioner was in reality seeking the

reconveyance of the property covered by OCT No. 684,
not the cancellation of a certificate of title as
contemplated by Section 108 of P.D. No. 1529. Thus, his
petition did not fall under any of the situations covered by
Section 108, and was for that reason rightly dismissed.

Moreover, the filing of the petition would have the effect of

reopening the decree of registration, and could thereby
impair the rights of innocent purchasers in good faith and
for value. To reopen the decree of registration was no
longer permissible, considering that the one-year period
to do so had long ago lapsed, and the properties covered
by OCT No. 684 had already been subdivided into smaller
lots whose ownership had passed to third persons.

Nor is it subject to dispute that the petition was not a

mere continuation of a previous registration proceeding.
Shorn of the thin disguise the petitioner gave to it, the
petition was exposed as a distinct and independent
action to seek the reconveyance of realty and to recover
damages. Accordingly, he should perform jurisdictional
acts, like paying the correct amount of docket fees for the
filing of an initiatory pleading, causing the service of
summons on the adverse parties in order to vest personal
jurisdiction over them in the trial court, and attaching a
certification against forum shopping (as required for all
initiatory pleadings). He ought to know that his taking
such required acts for granted was immediately fatal to
his petition, warranting the granting of the respondents
motion to dismiss. Luciano P. Paz vs. Republic of the
Philippines, et al.; G.R. No. 157367. November 23, 2011.

P.D. No. 1529; cancellation of title. The RD claimed that

it cannot execute the order to cancel the GSISs titles over
Lot 10, Block 2 and Lot 8, Block 8 because it has no
record of GSISs title over these two lots. The RD
theorized that these lots are included in a mother title in
GSISs possession and would still have to be segregated
therefrom. To effectuate such segregation, the RD needed
the technical descriptions of the two lots and the mother
title. Thus, petitioners ask that the GSIS be compelled to
surrender its title over, as well as the technical
descriptions of, Lot 10, Block 2 and Lot 8, Block 8.

GSIS refused to turn over the needed documents and

information, claiming that these acts go beyond what
were ordered in the Decision in G.R. No. 140398. GSISs
protestations ring hollow.

The order contained in the Decision in G.R. No. 140398 is

for the RD to cancel GSISs titles over Lot 10, Block 2 and
Lot 8, Block 8, inter alia. Whether these titles are
individual or contained in a mother title is of no
consequence. The RD has to cause their cancellation. If
the cancellation can only be carried out by requiring GSIS
or the Bureau of Lands to provide the necessary
information, then they can be compelled to do so.
Otherwise, the Courts decision would be rendered
inefficacious, and GSIS would retain ostensible ownership
over the lots by the simple expedience that they are
included in a mother title, instead of individual titles. That
result is manifestly contrary to the Courts ruling and
would subvert the very purpose of bringing this case for a
complete resolution. Col. Francisco Dela Merced,
substituted by his heirs, namely Blanquita E. Dela
Merced, et al. vs. Government Service Insurance System,
et al.; G.R. No. 167140. November 23, 2011.

P.D. No. 1529; notice of lis pendens. A notice of lis

pendens is an announcement to the whole world that a
particular real property is in litigation, serving as a warning
that one who acquires an interest over said property does
so at his own risk, or that he gambles on the result of the
litigation over the said property. Once a notice of lis
pendens has been duly registered, any cancellation or
issuance of the title of the land involved as well as any
subsequent transaction affecting the same, would have to
be subject to the outcome of the litigation. In other words,
upon the termination of the litigation there can be no risk
of losing the property or any part thereof as a result of any
conveyance of the land or any encumbrance that may be
made thereon posterior to the filing of the notice of lis
pendens. Col. Francisco Dela Merced, substituted by his
heirs, namely Blanquita E. Dela Merced, et al. vs.
Government Service Insurance System, et al.; G.R. No.
167140. November 23, 2011.

P.D. No. 1529; registration of title over land of the public

domain. Under the Regalian doctrine, which is embodied
in our Constitution, all lands of the public domain belong
to the State, which is the source of any asserted right to
any ownership of land. All lands not appearing to be
clearly within private ownership are presumed to belong
to the State. Accordingly, public lands not shown to have
been reclassified or released as alienable agricultural land
or alienated to a private person by the State remain part
of the inalienable public domain. Unless public land is
shown to have been reclassified as alienable or
disposable to a private person by the State, it remains
part of the inalienable public domain. Property of the
public domain is beyond the commerce of man and not
susceptible of private appropriation and acquisitive
prescription. Occupation thereof in the concept of owner
no matter how long cannot ripen into ownership and be
registered as a title. 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
(or claiming ownership), who must prove that the land
subject of the application is alienable or disposable. To
overcome this presumption, incontrovertible evidence
must be established that the land subject of the
application (or claim) is alienable or disposable.

There must be a positive act declaring land of the public

domain as alienable and disposable. To prove that the
land subject of an application for registration is alienable,
the 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 a statute. The
applicant may also secure a certification from the
government that the land claimed to have been
possessed for the required number of years is alienable
and disposable.

No such evidence was offered by the petitioners to show

that the land in question has been classified as alienable
and disposable land of the public domain. In the absence
of incontrovertible evidence to prove that the subject
property is already classified as alienable and disposable,
we must consider the same as still inalienable public
domain. Verily, the rules on the confirmation of imperfect
title do not apply unless and until the land subject thereof
is released in an official proclamation to that effect so that
it may form part of the disposable agricultural lands of the
public domain. Pacifico M. Valiao, et al. vs. Republic of
the Philippines, et al.; G.R. No. 170757. November 28,
2011.
October 2011 Philippine Supreme Court Decisions on
CivilLaw

Civil Code

Contracts; consequences of breach. Having breached the

contract it entered with petitioner, respondent ABB is
liable for damages pursuant to Articles 1167, 1170, and
2201 of the Civil Code. Accordingly, a repairman who fails
to perform his obligation is liable to pay for the cost of the
execution of the obligation plus damages. Though
entitled, petitioner in this case is not claiming
reimbursement for the repair allegedly done by Newton
Contractor, but is instead asking for damages for the
delay caused by respondent ABB.

As per Purchase Order Nos. 17136-37, petitioner is

entitled to penalties in the amount of P987.25 per day
from the time of delay, August 30, 1990, up to the time the
Kiln Drive Motor was finally returned to petitioner. Records
show that although the testing of Kiln Drive Motor was
done on March 13, 1991, the said motor was actually
delivered to petitioner as early as January 7, 1991. The
installation and testing was done only on March 13, 1991
upon the request of petitioner because the Kiln was under
repair at the time the motor was delivered; hence, the
load testing had to be postponed.
Under Article 1226 of the Civil Code, the penalty clause
takes the place of indemnity for damages and the
payment of interests in case of non-compliance with the
obligation, unless there is a stipulation to the contrary. In
this case, since there is no stipulation to the contrary, the
penalty in the amount of P987.25 per day of delay covers
all other damages (i.e. production loss, labor cost, and
rental of the crane) claimed by petitioner.

Article 1226 of the Civil Code further provides that if the

obligor refuses to pay the penalty, such as in the instant
case,damages and interests may still be recovered on top
of the penalty. Damages claimed must be the natural and
probable consequences of the breach, which the parties
have foreseen or could have reasonably foreseen at the
time the obligation was constituted. Thus, in addition to
the penalties, petitioner seeks to recover as damages
production loss, labor cost and the rental of the crane.
The petitioner, however, was not able to prove with
reasonable certainty that it indeed incurred production
losses during the relevant period. It may not be amiss to
say that competent proof and a reasonable degree of
certainty are needed to justify a grant of actual or
compensatory damages; speculations, conjectures,
assertions or guesswork are not sufficient. Besides,
consequential damages, such as loss of profits on
account of delay or failure of delivery, may be recovered
only if such damages were reasonably foreseen or have
been brought within the contemplation of the parties as
the probable result of a breach at the time of or prior to
contracting. Considering the nature of the obligation in
the instant case, respondent ABB, at the time it agreed to
repair petitioners Kiln Drive Motor, could not have
reasonably foreseen that it would be made liable for
production loss, labor cost and rental of the crane in case
it fails to repair the motor or incurs delay in delivering the
same, especially since the motor under repair was a spare
motor. For the foregoing reasons, petitioner is not entitled
to recover production loss, labor cost and the rental of the
crane. Continental Cement Corporation vs. Asea Brown
Boveri, et al.;G.R. No. 171660. October 17, 2011.

Contracts; public documents; forms. The necessity of a

public document for contracts which transmit or
extinguish real rights over immovable property, as
mandated by Article 1358 of the Civil Code, is only for
convenience; it is not essential for validity or
enforceability. As notarized documents, Deeds of
Absolute Sale carry evidentiary weight conferred upon
them with respect to their due execution and enjoy the
presumption of regularity which may only be rebutted by
evidence so clear, strong and convincing as to exclude all
controversy as to falsity. The presumptions that attach to
notarized documents can be affirmed only so long as it is
beyond dispute that the notarization was regular. A
defective notarization will strip the document of its public
character and reduce it to a private instrument.
Consequently, when there is a defect in the notarization of
a document, the clear and convincing evidentiary
standard normally attached to a duly-notarized document
is dispensed with, and the measure to test the validity of
such document is preponderance of evidence. Adelaida
Meneses (deceased), substituted by her heir Marilyn M.
Carbonel-Garcia vs. Rosario G. Venturozo; G.R. No.
172196. October 19, 2011.

Damages; actual, temperate; moral; exemplary and

attorneys fees. In determining actual damages,
onecannot rely on mere assertions, speculations,
conjectures or guesswork, but must depend on
competent proof and on the best evidence obtainable
regarding specific facts that could afford some basis for
measuring compensatory or actual damages.

Nevertheless, De Guzman is indeed entitled to temperate

damages as provided under Article 2224 of the Civil Code
for the loss she suffered. 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 may be 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.

As to the CIACs award of 100,000.00 as moral

damages, this Court is one with the CA that De Guzman
is not entitled to such an award. The record is bereft of
any proof that she actually suffered moral damages. The
award of moral damages must be anchored on a clear
showing that she actually experienced mental anguish,
besmirched reputation, sleepless nights, wounded
feelings, or similar injury.

De Guzman cannot be awarded exemplary damages

either, in the absence of any evidence showing that the
Contractor acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner as provided in Article
2232 of the Civil Code. The ruling in the case of Nakpil
and Sons v. Court of Appeals, relied upon by De Guzman,
where it was emphasized that the wanton negligence in
effecting the plans, designs, specifications, and
construction of a building is equivalent to bad faith in the
performance of the assigned task, finds no application in
the case at bench. As already pointed out, there is
negligence on the part of Contractor, but it is neither
wanton, fraudulent, reckless, oppressive, nor malevolent.

As regards the award of attorneys fees, the Court

upholds De Guzmans entitlement to reasonable
attorneys fees, although it recognizes that it is a sound
policy not to set a premium on the right to litigate. Emerita
M. De Guzman vs. Antonio M. Tumolva; G.R. No. 188072.
October 19, 2011.
Damages; attorneys fees. One of the issues in this case is
whether the CA erred in ruling that Alcatel is not entitled
to an award of attorneys fees.

Although attorneys fees are not allowed in the absence of

stipulation, the court can award the same when the
defendants act or omission has compelled the plaintiff to
incur expenses to protect his interest or where the
defendant acted in gross and evident bad faith in refusing
to satisfy the plaintiffs plainly valid, just, and demandable
claim.

Still, the award of attorneys fees to the winning party lies

within the discretion of the court, taking into account the
circumstances of each case. This means that such an
award should have factual, legal, and equitable basis, not
founded on pure speculation and conjecture. Further, the
court should state the reason for the award of attorneys
fees in the body of the decision. Its unheralded
appearance in the dispositive portion is, as a rule, not
allowed.

Here, however, although the RTC did not specifically

discuss in the body of its decision its basis for awarding
attorneys fees, its findings of fact clearly support such an
award. For instance, the RTC found, based on the record,
that Bongar persistently and clearly violated the terms of
its contract with Alcatel. It failed to finish the works by
October 29, 1991, the stipulated date. It sought on
December 1, 1991, more than a month after it was in
violation, to finish its job by May 31, 1992, an extra seven
months for just a three-month project. Worse, when
Alcatel had to take over the job to save its own
undertaking to PLDT, Bongar refused to return to Alcatel
the uninstalled materials that it provided for the works.
Alcatel was forced to litigate to protect its interest. Alcatel
Philippines, Inc. vs. I.M. Bongar & Co., Inc., et al.; G.R.
No. 182946. October 5, 2011.

Damages; attorneys fees. The petitioner is not entitled to

the award of attorneys fees. Jurisprudence requires that
the factual basis for the award of attorneys fees must be
set forth in the body of the decision and not in the
dispositive portion only. In this case, no explanation was
given by the RTC in awarding attorneys fees in favor of
petitioner. In fact, the award of attorneys fees was
mentioned only in the dispositive portion of the decision.
Continental Cement Corporation vs. Asea Brown Boveri,
et al.; G.R. No. 171660. October 17, 2011.

Lease; rights of a lessee as to improvements. At this

juncture, it would not be amiss to reiterate that the rights
of a lessee, like petitioners in the present case, are
governed by Article 1678 of the Civil Code.

Under Article 1678, the lessor has the option of paying

one-half of the value of the improvements that the lessee
made in good faith, which are suitable to the use for
which the lease is intended, and which have not altered
the form and substance of the land. On the other hand,
the lessee may remove the improvements should the
lessor refuse to reimburse.

It appears, nonetheless, that in her Complaint, private

respondent prayed for the demolition of petitioners
residential house constructed on the subject lot. It is,
thus, clear that private respondent does not want to
appropriate the improvements. As such, petitioners
cannot compel her to reimburse to them one-half of the
value of their house. The sole right of petitioners under
Article 1678 then is to remove the improvements without
causing any more damage upon the property leased than
is necessary. Heirs of Antonio Feraren, rep. by Antonio
Feraren, Jr. vs. Court of Appeals and Cecilia Tadiar; G.R.
No. 159328. October 5, 2011.

Nuisance; what constitutes it. The MMDA claims that the

portion of the building in question is a nuisance per se.
We disagree.

The fact that in 1966 the City Council gave Justice

Gancayco an exemption from constructing an arcade is
an indication that the wing walls of the building are not
nuisances per se. The wing walls do not per se
immediately and adversely affect the safety of persons
and property. The fact that an ordinance may declare a
structure illegal does not necessarily make that structure
a nuisance.

Article 694 of the Civil Code defines nuisance as any act,

omission, establishment, business, condition or property,
or anything else that (1) injures or endangers the health or
safety of others; (2) annoys or offends the senses; (3)
shocks, defies or disregards decency or morality; (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. A nuisance may be per se or
per accidens. A nuisance per se is that which affects the
immediate safety of persons and property and may
summarily be abated under the undefined law of
necessity.

Clearly, when Justice Gancayco was given a permit to

construct the building, the city council or the city engineer
did not consider the building, or its demolished portion, to
be a threat to the safety of persons and property. This fact
alone should have warned the MMDA against summarily
demolishing the structure. Neither does the MMDA have
the power to declare a thing a nuisance. Only courts of
law have the power to determine whether a thing is a
nuisance. Emilio Gancayco vs. Cito Government of
Quezon City and Metro Manila Development Authority/
Metro Manila Development Authority vs. Justice Emilio A.
Gancayco (Retired); G.R. No. 177807/G.R. No. 177933.
October 11, 2011.
Subrogation. Subrogation is either legal or
conventional. Legal subrogation is an equitable doctrine
and arises by operation of the law, without any agreement
to that effect executed between the parties; conventional
subrogation rests on a contract, arising where an
agreement is made that the person paying the debt shall
be subrogated to the rights and remedies of the original
creditor. The case at bar is an example of legal
subrogation, the petitioner and respondent having no
express agreement on the right of subrogation. Thus, it is
of no moment that the Contracts of Sale did not expressly
state that demurrage shall be paid to respondent. By
operation of law, respondent has become the real party-
in-interest to pursue the payment of demurrage. Republic
Flour Mills Corporation vs. Forbes Factors, Inc. etc.; G.R.
No. 152313. October 19, 2011.

Trust; action for reconveyance based on trust;

prescription. An action for reconveyance can indeed be
barred by prescription. In a long line of cases decided by
this Court, we ruled that an action for reconveyance
based on implied or constructive trust must perforce
prescribe in ten years from the issuance of the Torrens
title over the property.

However, there is an exception to this rule. In the case of

Heirs of Pomposa Saludares v. Court of Appeals, the
Court reiterating the ruling in Millena v. Court of
Appeals,heldthat there is but one instance when
prescription cannot be invoked in an action for
reconveyance, that is, when the plaintiff is in possession
of the land to be reconveyed. In Heirs of Pomposa
Saludares, this Court explained that the Court in a series
of cases, has permitted the filing of an action for
reconveyance despite the lapse of more than ten years
from the issuance of title to the land and declared that
said action, when based on fraud, is imprescriptible as
long as the land has not passed to an innocent buyer for
value. But in all those cases, the common factual
backdrop was that the registered owners were never in
possession of the disputed property. The exception was
based on the theory that registration proceedings could
not be used as a shield for fraud or for enriching a person
at the expense of another.

In this case, petitioners possession was disturbed in

1983 when respondent Jose filed a case for recovery of
possession. The RTC of Iloilo City ruled in respondent
Joses favor but the CA on November 28, 1991, during
the pendency of the present controversy with the court a
quo, ruled in favor of petitioner. Petitioner never lost
possession of the said properties, and as such, she is in a
position to file the complaint with the court a quo to
protect her rights and clear whatever doubts has been
cast on her title by the issuance of TCTs in respondent
Joses name.
In the case of Sandoval v. Court of Appeals, the Court
defined an innocent purchaser for value as one who buys
property of another, without notice that some other
person has a right to, or interest in, such property and
pays a full and fair price for the same, at the time of such
purchase, or before he has notice of the claim or interest
of some other persons in the property. He is one who
buys the property with the belief that the person from
whom he receives the thing was the owner and could
convey title to the property. A purchaser cannot close his
eyes to facts which should put a reasonable man on his
guard and still claim that he acted in good faith.

And while it is settled that every person dealing with a

property registered under the Torrens title need not inquire
further but only has to rely on the title, this rule has an
exception. The exception is when the party has actual
knowledge of facts and circumstances that would impel a
reasonably cautious man to make such inquiry or when
the purchaser has some knowledge of a defect or the lack
of title in his vendor or of sufficient facts to induce a
reasonably prudent man to inquire into the status of the
title of the property in litigation. The presence of anything
which excites or arouses suspicion should then prompt
the vendee to look beyond the certificate and investigate
the title of the vendor appearing on the face of said
certificate. One who falls within the exception can neither
be denominated an innocent purchaser for value nor a
purchaser in good faith and hence does not merit the
protection of the law.

In this case, when the subject properties were sold to

Catalino Torre and subsequently to Doronila, respondent
Jose was not in possession of the said properties. Such
fact should have put the vendees on guard and should
have inquired on the interest of the respondent Jose
regarding the subject properties. But regardless of such
defect on transfer to third persons, the properties again
reverted back to respondent Jose. Respondent Jose
cannot claim lack of knowledge of the defects
surrounding the cancellation of the OCTs over the
properties and benefit from his fraudulent actions. The
subsequent sale of the properties to Catalino Torre and
Doronila will not cure the nullity of the certificates of title
obtained by respondent Jose on the basis of the false and
fraudulent Affidavit of Adjudication. Estrella Tiongco
Yared, etc. vs. Jose B. Tiongco, et al.; G.R. No. 161360.
October 19, 2011.

September 2011 Philippine Supreme Court Decisions on

CivilLaw

Civil Code

Contracts; both parties at fault; rule not applicable to

simulated contract. The Heirs of Policronio contended
that even assuming that the contract was simulated, the
Heirs of Alfonso would still be barred from recovering the
properties by reason of Article 1412 of the Civil Code,
which provides that if the act in which the unlawful or
forbidden cause does not constitute a criminal offense,
and the fault is both on the contracting parties, neither
may recover what he has given by virtue of the contract or
demand the performance of the others undertaking. As
the Heirs of Alfonso alleged that the purpose of the sale
was to avoid the payment of inheritance taxes, they
cannot take from the Heirs of Policronio what had been
given to their father.

On this point, the Court again disagrees. Article 1412 of

the Civil Code is as follows:

Art. 1412. If the act in which the unlawful or forbidden

cause consists does not constitute a criminal offense, the
following rules shall be observed:

(1) When the fault is on the part of both contracting

parties, neither may recover what he has given by virtue
of the contract, or demand the performance of the others
undertaking;

(2) When only one of the contracting parties is at fault,

he cannot recover what he has given by reason of the
contract, or ask for the fulfillment of what has been
promised him. The other, who is not at fault, may demand
the return of what he has given without any obligation to
comply with his promise.

Article 1412 is not applicable to fictitious or simulated

contracts, because they refer to contracts with an illegal
cause or subject-matter. This article presupposes the
existence of a cause, it cannot refer to fictitious or
simulated contracts which are in reality non-existent. As it
has been determined that the Deed of Sale is a simulated
contract, the provision cannot apply to it.

Granting that the Deed of Sale was not simulated, the

provision would still not apply. Since the subject
properties were included as properties of Alfonso in the
Deed of Extra-Judicial Partition, they are covered by
corresponding inheritance and estate taxes. Therefore,
tax evasion, if at all present, would not arise, and Article
1412 would again be inapplicable. Heirs of Policronio M.
Ureta, Sr., namely: Conrado B. Ureta, et al. vs. Heirs of
Liberato M. Ureta, namely: Teresa F. Ureta, et al./Heirs of
Liberato M. Ureta, namely: Teresa F. Ureta, et al. vs. Heirs
of Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et
al.; G.R. No. 165748/G.R. No. 165930, September 14,
2011.

Contracts; denominated in foreign currency. Such

stipulation of payment in dollars is not prohibited by any
prevailing law or jurisprudence at the time the loans were
taken. In this regard, Article 1249 of the Civil Code
provides:

Art. 1249. The payment of debts in money shall be made

in the currency stipulated, and if it is not possible to
deliver such currency, then in the currency which is legal
tender in the Philippines.

Although the Civil Code took effect on August 30, 1950,

jurisprudence had upheld the continued effectivity of
Republic Act No. 529, which took effect earlier on June
16, 1950. Pursuant to Section 1 of Republic Act No. 529,
any agreement to pay an obligation in a currency other
than the Philippine currency is void; the most that could
be demanded is to pay said obligation in Philippine
currency to be measured in the prevailing rate of
exchange at the time the obligation was incurred. On
June 19, 1964, Republic Act No. 4100 took effect,
modifying Republic Act No. 529 by providing for several
exceptions to the nullity of agreements to pay in foreign
currency.

On April 13, 1993, Central Bank Circular No. 1389 was

issued, lifting foreign exchange restrictions and
liberalizing trade in foreign currency. In cases of foreign
borrowings and foreign currency loans, however, prior
Bangko Sentral approval was required. On July 5, 1996,
Republic Act No. 8183 took effect, expressly repealing
Republic Act No. 529 in Section 2 thereof. The same
statute also explicitly provided that parties may agree that
the obligation or transaction shall be settled in a currency
other than Philippine currency at the time of payment.

Although the Credit Line Agreement between the spouses

Tiu and Union Bank was entered into on November 21,
1995, when the agreement to pay in foreign currency was
still considered void under Republic Act No. 529, the
actual loans, as shown in the promissory notes, were
taken out from September 22, 1997 to March 26, 1998,
during which time Republic Act No. 8183 was already in
effect. In United Coconut Planters Bank v. Beluso, we
held that:

[O]pening a credit line does not create a credit transaction

of loan or mutuum, since the former is merely a
preparatory contract to the contract of loan or mutuum.
Under such credit line, the bank is merely obliged, for the
considerations specified therefor, to lend to the other
party amounts not exceeding the limit provided. The
credit transaction thus occurred not when the credit line
was opened, but rather when the credit line was availed
of. x x x.

Having established that Union Bank and the spouses Tiu

validly entered into dollar loans, the conclusion of the
Court of Appeals that there were no dollar loans to novate
into peso loans must necessarily fail. Union Bank of the
Philippines vs. Spouses Rodolfo T. Tiu and Victoria N. Tiu;
G.R. Nos. 173090-91. September 7, 2011.

Contracts; issue is lack of consideration and gross

inadequacy is not relevant. It is well-settled in a long line
of cases that where a deed of sale states that the
purchase price has been paid but in fact has never been
paid, the deed of sale is null and void for lack of
consideration. Thus, although the contract states that the
purchase price of 2,000.00 was paid by Policronio to
Alfonso for the subject properties, it has been proven that
such was never in fact paid as there was no money
involved. It must, therefore, follow that the Deed of Sale is
void for lack of consideration. Given that the Deed of Sale
is void, it is unnecessary to discuss the issue on the
inadequacy of consideration. Heirs of Policronio M. Ureta,
Sr., namely: Conrado B. Ureta, et al. vs. Heirs of Liberato
M. Ureta, namely: Teresa F. Ureta, et al./Heirs of Liberato
M. Ureta, namely: Teresa F. Ureta, et al. vs. Heirs of
Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et al.;
G.R. No. 165748/G.R. No. 165930, September 14, 2011.

Contracts; partition not a conveyance of real property; no

need for special power of attorney. This Court finds that
Article 1878 (5) and (15) is inapplicable to the case at
bench. It has been held in several cases that partition
among heirs is not legally deemed a conveyance of real
property resulting in change of ownership. It is not a
transfer of property from one to the other, but rather, it is a
confirmation or ratification of title or right of property that
an heir is renouncing in favor of another heir who accepts
and receives the inheritance. It is merely a designation
and segregation of that part which belongs to each heir.
The Deed of Extra-Judicial Partition cannot, therefore, be
considered as an act of strict dominion. Hence, a special
power of attorney is not necessary.

In fact, as between the parties, even an oral partition by

the heirs is valid if no creditors are affected. The
requirement of a written memorandum under the statute
of frauds does not apply to partitions effected by the heirs
where no creditors are involved considering that such
transaction is not a conveyance of property resulting in
change of ownership but merely a designation and
segregation of that part which belongs to each heir. Heirs
of Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et
al. vs. Heirs of Liberato M. Ureta, namely: Teresa F. Ureta,
et al./Heirs of Liberato M. Ureta, namely: Teresa F. Ureta,
et al. vs. Heirs of Policronio M. Ureta, Sr., namely:
Conrado B. Ureta, et al.; G.R. No. 165748/G.R. No.
165930, September 14, 2011.

Contracts; simulation; lack of consent because of a lack

of intention to be bound; contract is therefore void. Where
a person, in order to place his property beyond the reach
of his creditors, simulates a transfer of it to another, he
does not really intend to divest himself of his title and
control of the property; hence, the deed of transfer is but
a sham. Similarly, in this case, Alfonso simulated a
transfer to Policronio purely for taxation purposes, without
intending to transfer ownership over the subject lands.

The most protuberant index of simulation of contract is

the complete absence of an attempt in any manner on the
part of the ostensible buyer to assert rights of ownership
over the subject properties. Policronios failure to take
exclusive possession of the subject properties or, in the
alternative, to collect rentals, is contrary to the principle of
ownership. Such failure is a clear badge of simulation that
renders the whole transaction void.Heirs of Policronio M.
Ureta, Sr., namely: Conrado B. Ureta, et al. vs. Heirs of
Liberato M. Ureta, namely: Teresa F. Ureta, et al./Heirs of
Liberato M. Ureta, namely: Teresa F. Ureta, et al. vs. Heirs
of Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et
al.; G.R. No. 165748/G.R. No. 165930, September 14,
2011.

Damages; attorneys fees. Article 2208 of the Civil Code

enumerates the legal grounds which justify or warrant the
grant of attorneys fees and expenses of litigation, among
which is when the defendants act or omission has
compelled the plaintiff to incur expenses to protect his
interest. The reason for the award of attorneys fees and
litigation expenses, however, must be set forth in the
decision of the court and not in the dispositive portion
only. In this case, the factual and legal bases for the
award were set forth in the body of the MTCC Decision
dated June 2, 2003, to wit:

x x x As the defendant refused to satisfy plaintiffs just

and valid claim, the latter was compelled to litigate and
engage the services of counsel to protect his interest and
in the process, incurred litigation expenses.

The award of attorneys fees in the amount of P5,000.00

is also reasonable and not excessive considering that this
case, a simple collection of a measly sum of P7,000.00,
has dragged for almost a decade and even had to reach
this Court only because petitioner refused to pay. The fact
that it is 70% of the principal amount claimed is of no
moment as the amount of attorneys fees is discretionary
upon the court as long as it is reasonable. Elena Jane
Duarte vs. Miguel Samuel A.E. Duran; G.R. No. 173038.
September 14, 2011.

Damages; moral and exemplary. Although PCIBs act of

freezing and debiting Ramos account is unlawful, we
cannot hold PCIB liable for moral and exemplary
damages. Since a contractual relationship existed
between Ramos and PCIB as the depositor and the
depositary bank, respectively, the award of moral
damages depends on the applicability of Article 2220 of
the Civil Code, which provides:
Article 2220. Willful injury to property may be a legal
ground for awarding moral damages if the court should
find that, under the circumstances, such damages are
justly due. The same rule applies to breaches of contract
where the defendant acted fraudulently or in bad faith.
[emphasis ours]

Bad faith does not simply connote bad judgment or

negligence; it imports a dishonest purpose or some moral
obliquity and conscious commission of a wrong; it
partakes of the nature of fraud.

As the facts of this case bear out, PCIB did not act out of
malice or bad faith when it froze Ramos bank account
and subsequently debited the amount of P251,910.96
therefrom. While PCIB may have acted hastily and without
regard to its primary duty to treat the accounts of its
depositors with meticulous care and utmost fidelity, we
find that its actions were propelled more by the need to
protect itself, and not out of malevolence or ill will. One
may err, but error alone is not a ground for granting moral
damages.

We also disallow the award of exemplary damages. Article

2234 of the Civil Code requires a party to first prove that
he is entitled to moral, temperate or compensatory
damages before he can be awarded exemplary damages.
Since no reason exists to award moral damages, so too
can there be no reason to award exemplary damages.
Philippine Commercial Bank vs. Antonio B. Balmaceda
and Rolando N. Ramos; G.R. No. 158143, September 21,
2011.

Human relations; unjust enrichment. To have a cause of

action based on unjust enrichment, we explained in
University of the Philippines v. Philab Industries, Inc. that:

Unjust enrichment claims do not lie simply because one

party benefits from the efforts or obligations of others, but
instead it must be shown that a party was unjustly
enriched in the sense that the term unjustly could mean
illegally or unlawfully.

Moreover, to substantiate a claim for unjust enrichment,

the claimant must unequivocally prove that another party
knowingly received something of value to which he was
not entitled and that the state of affairs are such that it
would be unjust for the person to keep the benefit. Unjust
enrichment is a term used to depict result or effect of
failure to make remuneration of or for property or benefits
received under circumstances that give rise to legal or
equitable obligation to account for them; to be entitled to
remuneration, one must confer benefit by mistake, fraud,
coercion, or request. Unjust enrichment is not itself a
theory of reconvey. Rather, it is a prerequisite for the
enforcement of the doctrine of restitution. (emphasis ours)
Ramos cannot be held liable to PCIB on account of unjust
enrichment simply because he received payments out of
money secured by fraud from PCIB. To hold Ramos
accountable, it is necessary to prove that he received the
money from Balmaceda, knowing that he (Ramos) was
not entitled to it. PCIB must also prove that Ramos, at the
time that he received the money from Balmaceda, knew
that the money was acquired through fraud. Knowledge of
the fraud is the link between Ramos and PCIB that would
obligate Ramos to return the money based on the
principle of unjust enrichment.

However, as the evidence on record indicates, Ramos

accepted the deposits that Balmaceda made directly into
his bank account, believing that these deposits were
payments for the fighting cocks that Balmaceda had
purchased. Significantly, PCIB has not presented any
evidence proving that Ramos participated in, or that he
even knew of, the fraudulent sources of Balmacedas
funds. Philippine Commercial Bank vs. Antonio B.
Balmaceda and Rolando N. Ramos; G.R. No. 158143,
September 21, 2011.

Marriage; annulment; psychological incapacity.

Psychological incapacity is the downright incapacity or
inability to take cognizance of and to assume the basic
marital obligations. The burden of proving psychological
incapacity is on the plaintiff. The plaintiff must prove that
the incapacitated party, based on his or her actions or
behavior, suffers a serious psychological disorder that
completely disables him or her from understanding and
discharging the essential obligations of the marital state.
The psychological problem must be grave, must have
existed at the time of marriage, and must be incurable.

In the case at bar, petitioner failed to prove that his wife

(respondent) suffers from psychological incapacity. He
presented the testimonies of two supposed expert
witnesses who concluded that respondent is
psychologically incapacitated, but the conclusions of
these witnesses were premised on the alleged acts or
behavior of respondent which had not been sufficiently
proven. Petitioners experts heavily relied on petitioners
allegations of respondents constant mahjong sessions,
visits to the beauty parlor, going out with friends, adultery,
and neglect of their children. Petitioners experts opined
that respondents alleged habits, when performed
constantly to the detriment of quality and quantity of time
devoted to her duties as mother and wife, constitute a
psychological incapacity in the form of NPD.

But petitioners allegations, which served as the bases or

underlying premises of the conclusions of his experts,
were not actually proven. In fact, respondent presented
contrary evidence refuting these allegations of the
petitioner.
What transpired between the parties is acrimony and,
perhaps, infidelity, which may have constrained them from
dedicating the best of themselves to each other and to
their children. There may be grounds for legal separation,
but certainly not psychological incapacity that voids a
marriage. Valerio E. Kalaw vs. Ma. Elena Fernandez;G.R.
No. 166357. September 19, 2011.

Marriage; property relations; conjugal partnership of

gains. It is clear that conjugal partnership of gains
established before and after the effectivity of the Family
Code are governed by the rules found in Chapter 4
(Conjugal Partnership of Gains) of Title IV (Property
Relations Between Husband And Wife) of the Family
Code. Hence, any disposition of the conjugal property
after the dissolution of the conjugal partnership must be
made only after the liquidation; otherwise, the disposition
is void.

Before applying such rules, however, the conjugal

partnership of gains must be subsisting at the time of the
effectivity of the Family Code. There being no dispute that
Protacio, Sr. and Marta were married prior to the
effectivity of the Family Code on August 3, 1988, their
property relation was properly characterized as one of
conjugal partnership governed by the Civil Code. Upon
Martas death in 1987, the conjugal partnership was
dissolved, pursuant to Article 175 (1) of the Civil Code,
and an implied ordinary co-ownership ensued among
Protacio, Sr. and the other heirs of Marta with respect to
her share in the assets of the conjugal partnership
pending a liquidation following its liquidation. The ensuing
implied ordinary co-ownership was governed by Article
493 of the Civil Code, to wit:

Article 493. Each co-owner shall have the full ownership

of his part and of the fruits and benefits pertaining
thereto, and he may therefore alienate, assign or
mortgage it, and even substitute another person in its
enjoyment, except when personal rights are involved. But
the effect of the alienation or the mortgage, with respect
to the co-owners, shall be limited to the portion which
may be allotted to him in the division upon the termination
of the co-ownership. (399)

Protacio, Sr., although becoming a co-owner with his

children in respect of Martas share in the conjugal
partnership, could not yet assert or claim title to any
specific portion of Martas share without an actual
partition of the property being first done either by
agreement or by judicial decree. Until then, all that he had
was an ideal or abstract quota in Martas share.
Nonetheless, a co-owner could sell his undivided share;
hence, Protacio, Sr. had the right to freely sell and
dispose of his undivided interest, but not the interest of
his co-owners. Consequently, the sale by Protacio, Sr.
and Rito as co-owners without the consent of the other
co-owners was not necessarily void, for the rights of the
selling co-owners were thereby effectively transferred,
making the buyer (Servacio) a co-owner of Martas share.
This result conforms to the well-established principle that
the binding force of a contract must be recognized as far
as it is legally possible to do so (quando res non valet ut
ago, valeat quantum valere potest).

Article 105 of the Family Code, supra, expressly provides

that the applicability of the rules on dissolution of the
conjugal partnership is without prejudice to vested rights
already acquired in accordance with the Civil Code or
other laws. This provision gives another reason not to
declare the sale as entirely void. Indeed, such a
declaration prejudices the rights of Servacio who had
already acquired the shares of Protacio, Sr. and Rito in the
property subject of the sale. Heirs of Protacio Go and
Marta Barola, namely: Leonor Go, et al. vs.Ester L.
Servacio and Rito B. Go;G.R. No. 157537. September 7,
2011.

Partnership; joint venture. Generally understood to mean

an organization formed for some temporary purpose, a
joint venture is likened to a particular partnership or one
which has for its object determinate things, their use or
fruits, or a specific undertaking, or the exercise of a
profession or vocation. The rule is settled that joint
ventures are governed by the law on partnerships which
are, in turn, based on mutual agency or delectus
personae. Insofar as a partners conveyance of the
entirety of his interest in the partnership is concerned,
Article 1813 of the Civil Code provides as follows:

Art. 1813. A conveyance by a partner of his whole interest

in the partnership does not itself dissolve the partnership,
or, as against the other partners in the absence of
agreement, entitle the assignee, during the continuance of
the partnership, to interfere in the management or
administration of the partnership business or affairs, or to
require any information or account of partnership
transactions, or to inspect the partnership books; but it
merely entitles the assignee to receive in accordance with
his contracts the profits to which the assigning partners
would otherwise be entitled. However, in case of fraud in
the management of the partnership, the assignee may
avail himself of the usual remedies.

In the case of a dissolution of the partnership, the

assignee is entitled to receive his assignors interest and
may require an account from the date only of the last
account agreed to by all the partners.

From the foregoing provision, it is evident that (t)he

transfer by a partner of his partnership interest does not
make the assignee of such interest a partner of the firm,
nor entitle the assignee to interfere in the management of
the partnership business or to receive anything except the
assignees profits. The assignment does not purport to
transfer an interest in the partnership, but only a future
contingent right to a portion of the ultimate residue as the
assignor may become entitled to receive by virtue of his
proportionate interest in the capital. Since a partners
interest in the partnership includes his share in the profits,
we find that the CA committed no reversible error in ruling
that the Spouses Jaso are entitled to Biondos share in
the profits, despite Juanitas lack of consent to the
assignment of said Frenchmans interest in the joint
venture. Although Eden did not, moreover, become a
partner as a consequence of the assignment and/or
acquire the right to require an accounting of the
partnership business, the CA correctly granted her prayer
for dissolution of the joint venture conformably with the
right granted to the purchaser of a partners interest under
Article 1831 of the Civil Code. Josefina P. Realubit vs.
Prosencio D. Jaso and Eden G. Jaso; G.R. No. 178782,
September 21, 2011.

Prescription. As the Deed of Sale is a void contract, the

action for the declaration of its nullity, even if filed 21
years after its execution, cannot be barred by prescription
for it is imprescriptible. Furthermore, the right to set up
the defense of inexistence or absolute nullity cannot be
waived or renounced. Therefore, the Heirs of Alfonso
cannot be precluded from setting up the defense of its
inexistence. Heirs of Policronio M. Ureta, Sr., namely:
Conrado B. Ureta, et al. vs. Heirs of Liberato M. Ureta,
namely: Teresa F. Ureta, et al./Heirs of Liberato M. Ureta,
namely: Teresa F. Ureta, et al. vs. Heirs of Policronio M.
Ureta, Sr., namely: Conrado B. Ureta, et al.; G.R. No.
165748/G.R. No. 165930, September 14, 2011.

Property; builder in good faith. Article 448 of the Civil

Code contemplates a person building, or sowing, or
planting in good faith on land owned by another. The law
presupposes that the land and the building or plants are
owned by different persons, like here. The RTC and CA
found and declared Angeles to be a builder in good faith.
We cannot veer away from their unanimous conclusion,
which can easily be drawn from the fact that Angeles
insists until now that he built his house entirely on his own
lot. Good faith consists in the belief of the builder that the
land he is building on is his and in his ignorance of a
defect or flaw in his title.

With the unassailable finding that Angeles house

straddled the lot of Pascual, and that Angeles had built
his house in good faith, Article 448 of the Civil Code,
which spells out the rights and obligations of the owner of
the land as well as of the builder, is unquestionably
applicable. Consequently, the land being the principal and
the building the accessory, preference is given to Pascual
as the owner of the land to make the choice as between
appropriating the building or obliging Angeles as the
builder to pay the value of the land. Contrary to the
insistence of Angeles, therefore, no inconsistency exists
between the finding of good faith in his favor and the
grant of the reliefs set forth in Article 448 of the Civil
Code. Pedro Angeles, represented by Adelina T. Angeles,
attorney-in-fact vs. Estelita B. Pascual, et al.; G.R. No.
157150. September 21, 2011.

Property; principle of accretion; public dominion lands. As

for the issue of the ownership of Sapang Bayan, we
sustain the appellate court insofar as it ruled that
petitioners failed to substantiate their ownership over said
area. However, we find that the Court of Appeals erred in
ruling that the principle of accretion is applicable. The
said principle is embodied in Article 457 of the Civil Code
which states that [t]o the owners of lands adjoining the
banks of rivers belong the accretion which they gradually
receive from the effects of the current of the waters. We
have held that for Article 457 to apply the following
requisites must concur: (1) that the deposit be gradual
and imperceptible; (2) that it be made through the effects
of the current of the water; and (3) that the land where
accretion takes place is adjacent to the banks of rivers.
The character of the Sapang Bayan property was not
shown to be of the nature that is being referred to in the
provision which is an accretion known as alluvion as no
evidence had been presented to support this assertion.

In fact from the transcripts of the proceedings, the parties

could not agree how Sapang Bayan came about. Whether
it was a gradual deposit received from the river current or
a dried-up creek bed connected to the main river could
not be ascertained.
Even assuming that Sapang Bayan was a dried-up creek
bed, under Article 420, paragraph 1 and Article 502,
paragraph 1 of the Civil Code, rivers and their natural
beds are property of public dominion. In the absence of
any provision of law vesting ownership of the dried-up
river bed in some other person, it must continue to belong
to the State. Jose Fernando, Jr. et al. vs. Leon Acua, et
al.;G.R. No. 161030. September 14, 2011.

Quasi-delict; standard of due diligence of a disabled

person. Standard of conduct is the level of expected
conduct that is required by the nature of the obligation
and corresponding to the circumstances of the person,
time and place. The most common standard of conduct is
that of a good father of a family or that of a reasonably
prudent person. To determine the diligence which must be
required of all persons, we use as basis the abstract
average standard corresponding to a normal orderly
person.

However, one who is physically disabled is required to use

the same degree of care that a reasonably careful person
who has the same physical disability would use. Physical
handicaps and infirmities, such as blindness or deafness,
are treated as part of the circumstances under which a
reasonable person must act. Thus, the standard of
conduct for a blind person becomes that of a reasonable
person who is blind.
We note that Francisco, despite being blind, had been
managing and operating the Caltex station for 15 years
and this was not a hindrance for him to transact business
until this time. In this instance, however, we rule that
Francisco failed to exercise the standard of conduct
expected of a reasonable person who is blind. First,
Francisco merely relied on the identification card of Bacsa
to determine if he was authorized by CBCI. Francisco did
not do any other background check on the identity and
authority of Bacsa. Second, Francisco already expressed
his misgivings about the diesel fuel, fearing that they
might be stolen property, yet he did not verify with CBCI
the authority of Bacsa to sell the diesel fuel. Third,
Francisco relied on the receipts issued by Bacsa which
were typewritten on a half sheet of plain bond paper. If
Francisco exercised reasonable diligence, he should have
asked for an official receipt issued by CBCI. Fourth, the
delivery to Francisco, as indicated in Petrons invoice,
does not show that CBCI authorized Bacsa to sell the
diesel fuel to Francisco. Clearly, Francisco failed to
exercise the standard of conduct expected of a
reasonable person who is blind. Antonio Francisco,
substituted by his heirs, Nelia E.S. Francisco, et al.
vs.Chemical Bulk Carriers, Inc.; G.R. No. 193577.
September 7, 2011.

Sale; right of redemption. There is a requirement of notice

under Art. 1623 of the New Civil Code. Nothing in the
records and pleadings submitted by the parties shows
that there was a written notice sent to the respondents.
Without a written notice, the period of thirty days within
which the right of legal pre-emption may be exercised,
does not start. Armando Barcellano vs. Dolores Baas,
represented by her son and Attorney-in-fact Crispino
Bermillo; G.R. No. 165287. September 14, 2011.

Sale; right to transfer title; right to recover; exception

under estoppel principle. The general principle is that a
seller without title cannot transfer a better title than he
has. Only the owner of the goods or one authorized by
the owner to sell can transfer title to the buyer. Therefore,
a person can sell only what he owns or is authorized to
sell and the buyer can, as a consequence, acquire no
more than what the seller can legally transfer.

Moreover, the owner of the goods who has been

unlawfully deprived of it may recover it even from a
purchaser in good faith. Thus, the purchaser of property
which has been stolen from the owner has been held to
acquire no title to it even though he purchased for value
and in good faith.

The exception from the general principle is the doctrine of

estoppel where the owner of the goods is precluded from
denying the sellers authority to sell. But in order that
there may be estoppel, the owner must, by word or
conduct, have caused or allowed it to appear that title or
authority to sell is with the seller and the buyer must have
been misled to his damage.

In this case, it is clear that Bacsa was not the owner of

the diesel fuel. Francisco was aware of this but he
claimed that Bacsa was authorized by CBCI to sell the
diesel fuel. However, Franciscos claim that Bacsa was
authorized is not supported by any evidence except his
self-serving testimony. First, Francisco did not even
confirm with CBCI if it was indeed selling its diesel fuel
since it is not one of the oil companies known in the
market to be selling petroleum products. This fact alone
should have put Francisco on guard. Second, it does not
appear that CBCI, by some direct and equivocal act, has
clothed Bacsa with the indicia of ownership or apparent
authority to sell CBCIs diesel fuel. Francisco did not state
if the identification card presented by Bacsa indicated
that he was CBCIs agent or a mere employee. Third, the
receipt issued by Bacsa was typewritten on a half sheet
of plain bond paper. There was no letterhead or any
indication that it came from CBCI. We agree with the
Court of Appeals that this was a personal receipt issued
by Bacsa and not an official receipt issued by CBCI.
Consequently, CBCI is not precluded by its conduct from
denying Bacsas authority to sell. CBCI did not hold out
Bacsa or allow Bacsa to appear as the owner or one with
apparent authority to dispose of the diesel fuel.
Clearly, Bacsa cannot transfer title to Francisco as Bacsa
was not the owner of the diesel fuel nor was he
authorized by CBCI to sell its diesel fuel. CBCI did not
commit any act to clothe Bacsa with apparent authority to
sell the diesel fuel that would have misled Francisco.
Francisco, therefore, did not acquire any title over the
diesel fuel. Since CBCI was unlawfully deprived of its
property, it may recover from Francisco, even if Francisco
pleads good faith. Antonio Francisco, substituted by his
heirs, Nelia E.S. Francisco, et al. vs.Chemical Bulk
Carriers, Inc.; G.R. No. 193577. September 7, 2011.

Succession. The Heirs of Policronio argued that even

assuming that the Heirs of Alfonso have an interest in the
Deed of Sale, they would still be precluded from
questioning its validity. They posited that the Heirs of
Alfonso must first prove that the sale of Alfonsos
properties to Policronio substantially diminished their
successional rights or that their legitimes would be unduly
prejudiced, considering that under Article 842 of the Civil
Code, one who has compulsory heirs may dispose of his
estate provided that he does not contravene the
provisions of the Civil Code with regard to the legitime of
said heirs. Having failed to do so, they argued that the
Heirs of Alfonso should be precluded from questioning
the validity of the Deed of Sale.

The Court disagrees. Article 842 of the Civil Code

provides:
Art. 842. One who has no compulsory heirs may dispose
by will of all his estate or any part of it in favor of any
person having capacity to succeed.

One who has compulsory heirs may dispose of his estate

provided he does not contravene the provisions of this
Code with regard to the legitime of said heirs.

This article refers to the principle of freedom of

disposition by will. What is involved in the case at bench
is not a disposition by will but by Deed of Sale. Hence,
the Heirs of Alfonso need not first prove that the
disposition substantially diminished their successional
rights or unduly prejudiced their legitimes. Heirs of
Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et al.
vs. Heirs of Liberato M. Ureta, namely: Teresa F. Ureta, et
al./Heirs of Liberato M. Ureta, namely: Teresa F. Ureta, et
al. vs. Heirs of Policronio M. Ureta, Sr., namely: Conrado
B. Ureta, et al.; G.R. No. 165748/G.R. No. 165930,
September 14, 2011.

Succession; preterition. Preterition under Article 854 of

the Civil Code is as follows:

Art. 854. The preterition or omission of one, some, or all of

the compulsory heirs in the direct line, whether living at
the time of the execution of the will or born after the death
of the testator, shall annul the institution of heir; but the
devises and legacies shall be valid insofar as they are not
inofficious.

If the omitted compulsory heirs should die before the

testator, the institution shall be effectual, without prejudice
to the right of representation.

Preterition has been defined as the total omission of a

compulsory heir from the inheritance. It consists in the
silence of the testator with regard to a compulsory heir,
omitting him in the testament, either by not mentioning
him at all, or by not giving him anything in the hereditary
property but without expressly disinheriting him, even if
he is mentioned in the will in the latter case. Preterition is
thus a concept of testamentary succession and requires a
will. In the case at bench, there is no will involved.
Therefore, preterition cannot apply. Heirs of Policronio M.
Ureta, Sr., namely: Conrado B. Ureta, et al. vs. Heirs of
Liberato M. Ureta, namely: Teresa F. Ureta, et al./Heirs of
Liberato M. Ureta, namely: Teresa F. Ureta, et al. vs. Heirs
of Policronio M. Ureta, Sr., namely: Conrado B. Ureta, et
al.; G.R. No. 165748/G.R. No. 165930, September 14,
2011.

Special Laws

P.D. No. 1529; action to recover registered lands cab be

barred because of laches. Section 47 of Presidential
Decree No. 1529, otherwise known as the Property
Registration Decree, states that [n]o title to registered
land in derogation of the title of the registered owner shall
be acquired by prescription or adverse possession.
Thus, the Court has held that the right to recover
possession of registered land is imprescriptible because
possession is a mere consequence of ownership.

However, in Heirs of Anacleto B. Nieto v. Municipality of

Meycauayan, Bulacan, the Court had recognized the
jurisprudential thread regarding the exception to the
foregoing doctrine that while it is true that a Torrens title is
indefeasible and imprescriptible, the registered landowner
may lose his right to recover possession of his registered
property by reason of laches.

Thus, in Heirs of Batiog Lacamen v. Heirs of Laruan, the

Court had held that while a person may not acquire title to
the registered property through continuous adverse
possession, in derogation of the title of the original
registered owner, the heir of the latter, however, may lose
his right to recover back the possession of such property
and the title thereto, by reason of laches.

In the more recent case of Bartola M. Vda. De Tirona v.

Encarnacion, we similarly held that while jurisprudence is
settled on the imprescriptibility and indefeasibility of a
Torrens title, there is equally an abundance of cases
where we unequivocally ruled that registered owners may
lose their right to recover possession of property through
the equitable principle of laches.

Laches means the failure or neglect for an unreasonable

and unexplained length of time to do that which, by
observance of due diligence, could or should have been
done earlier. It is negligence or omission to assert a right
within a reasonable time, warranting the presumption that
the party entitled to assert his right either has abandoned
or declined to assert it. Laches thus operates as a bar in
equity. The essential elements of laches are: (a) conduct
on the part of the defendant, or of one under whom he
claims, giving rise to the situation complained of; (b) delay
in asserting complainants rights after he had knowledge
of defendants acts and after he has had the opportunity
to sue; (c) lack of knowledge or notice by defendant that
the complainant will assert the right on which he bases
his suit; and (d) injury or prejudice to the defendant in the
event the relief is accorded to the complainant.

In view of respondents decades long possession and/or

ownership of their respective lots by virtue of a court
judgment and the erstwhile registered owners inaction
and neglect for an unreasonable and unexplained length
of time in pursuing the recovery of the land, assuming
they retained any right to recover the same, it is clear that
respondents possession may no longer be disturbed. The
right of the registered owners as well as their successors-
in-interest to recover possession of the property is already
a stale demand and, thus, is barred by laches. Jose
Fernando, Jr. et al. vs. Leon Acua, et al.; G.R. No.
161030. September 14, 2011,

P.D. No. 1529; sale of unregistered lands not binding on

third parties. The general rule in dealing with registered
land is set forth in Section 51 of P.D. No. 1529:

Section 51. Conveyance and other dealings by registered

owner. An owner of registered land may convey,
mortgage, lease, charge or otherwise deal with the same
in accordance with existing laws. He may use such forms
of deeds, mortgages, leases or other voluntary
instruments as are sufficient in law. But no deed,
mortgage, lease, or other voluntary instrument, except a
will purporting to convey or affect registered land shall
take effect as a conveyance or bind the land, but shall
operate only as a contract between the parties and as
evidence of authority to the Register of Deeds to make
registration.

The act of registration shall be the operative act to convey

or affect the land insofar as third persons are concerned,
and in all cases under this Decree, the registration shall
be made in the office of the Register of Deeds for the
province or city where the land lies. [emphases ours]

From the standpoint of third parties, a property registered

under the Torrens system remains, for all legal purposes,
the property of the person in whose name it is registered,
notwithstanding the execution of any deed of
conveyance, unless the corresponding deed is registered.
Simply put, if a sale is not registered, it is binding only
between the seller and the buyer, but it does not affect
innocent third persons.

Undoubtedly, Veronicas claim on the properties is rooted

in the unregistered Deed of Absolute Sale between
Regina and her parents. The Bulaongs do not appear to
have had any knowledge that this sale ever took place. To
recall, Regina gave the Bulaongs the owners duplicate
certificates of the properties, which showed that the
properties were registered in the names of her parents,
Fortunato and Bertha Limpo. It thus appears that the
Bulaongs first learned about the sale between Regina and
her parents when they received the newly issued titles in
Reginas name which contained the annotation of the levy
in Veronicas favor.

One of the principal features of the Torrens system of

registration is that all encumbrances on the land shall be
shown, or at least intimated upon the certificate of title
and a person dealing with the owner of the registered land
is not bound to go behind the certificate and inquire into
transactions, the existence of which is not there
intimated. Since the Bulaongs had no knowledge of the
unregistered sale between Regina and her parents, the
Bulaongs can neither be bound by it, nor can they be
prejudiced by its consequences. This is but the logical
corollary to the rule set forth in Section 51 of P.D. No.
1529, in keeping with the basic legal maxim that what
cannot be done directly cannot be done indirectly.
Spouses Anselmo and Priscilla Bulaong vs. Veronica
Gonzales; G.R. No. 156318. September 5, 2011.

August 2011 Philippine Supreme Court Decisions on

CivilLaw

Civil Code

Contracts; rescission; accion pauliana. Under Article 1381

of the Civil Code, an accion pauliana is an action to
rescind contracts in fraud of creditors. However,
jurisprudence is clear that the following successive
measures must be taken by a creditor before he may
bring an action for rescission of an allegedly fraudulent
contract: (1) exhaust the properties of the debtor through
levying by attachment and execution upon all the property
of the debtor, except such as are exempt by law from
execution; (2) exercise all the rights and actions of the
debtor, save those personal to him (accion subrogatoria);
and (3) seek rescission of the contracts executed by the
debtor in fraud of their rights (accion pauliana). It is thus
apparent that an action to rescind, or an accion pauliana,
must be of last resort, availed of only after the creditor
has exhausted all the properties of the debtor not exempt
from execution or after all other legal remedies have been
exhausted and have been proven futile.

It does not appear that Metrobank sought other

properties of SSC other than the subject lots alleged to
have been transferred in fraud of creditors. Neither is
there any showing that Metrobank subrogated itself in
SSCs transmissible rights and actions. Without availing of
the first and second remedies, Metrobank simply
undertook the third measure and filed an action for
annulment of the chattel mortgages. This cannot be done.
Article 1383 of the New Civil Code is very explicit that the
right or remedy of the creditor to impugn the acts which
the debtor may have done to defraud them is subsidiary
in nature. It can only be availed of in the absence of any
other legal remedy to obtain reparation for the injury. This
fact is not present in this case. No evidence was
presented nor even an allegation was offered to show that
Metrobank had availed of the abovementioned remedies
before it tried to question the validity of the contracts of
chattel mortgage between IEB and SSC. Metropolitan
Bank and Trust Company, substituted by Meridian
Corporation vs. International Exchange Bank/Chuayuco
Steel Manufacturing vs. International Exchange Bank;
G.R. No. 176008/G.R. No. 176131, August 10, 2011.

Co-ownership. Article 484 of the Civil Code which defines

co-ownership, states:
Art. 484. There is co-ownership whenever the ownership
of an undivided thing or right belongs to different
persons. . .

In the present case, petitioners insist that their

predecessor-in-interest Lun co-owned the Gubat and
Barcelona properties with his brother Fieng. To prove co-
ownership over the Gubat property, petitioners presented:
(1) tax declarations from 1929 to 1983 under the name of
Fieng but paid by Lun; (2) the renewal certificate from
Malayan Insurance Company Inc.; (3) the insurance
contract; and (4) the statements of account from Supreme
Insurance Underwriters which named Lun as
administrator of the property. Likewise, to prove their right
over the Barcelona property as legal heirs under intestate
succession, petitioners presented a Deed of Sale dated
24 August 1923 between Chaco, as buyer, and Gabriel
Gredona and Engracia Legata, as sellers, involving a price
consideration of P1,200.

On the other hand, respondents presented notarized

documents: (1) Deed of Sale dated 13 October 1935, and
(2) Sale of Real Property dated 6 August 1936 showing
that the former owners of the Gubat property entered into
a sale transaction with Fieng, as buyer and Lun, as a
witness to the sale. They also presented tax declarations
in the name of Fieng from 1937 to 1958. After Fiengs
death, Co declared the Gubat property in his name in the
succeeding tax declarations. Likewise, the respondents
presented documents proving the declaration of the
Barcelona property in the name of Co.

After a careful scrutiny of the records, we hold that the

evidence of petitioners were insufficient or immaterial to
warrant a positive finding of co-ownership over the Gubat
and Barcelona properties. The CA correctly observed that
petitioners failed to substantiate with reasonable certainty
that (1) Chaco gave Fieng a start-up capital of P8,000 to
be used by Lun and Fieng in setting up a business, (2)
that the Philippine Honest and Company was a
partnership between Lun and Fieng, and (3) that the Deed
of Sale dated 24 August 1923 involving the Barcelona
property is sufficient to establish co-ownership. Also,
petitioners were not able to prove the existence of the
alleged Chinese custom of placing properties in the name
of the eldest child as provided under Article 12 of the Civil
Code.

In contrast, respondents were able to show documents of

sale from the original owners of the Gubat property
rendering the claim of custom as immaterial.Also,
respondents sufficiently established that Fieng was the
registered owner of the Gubat and Barcelona properties
while Lun was merely an administrator. Co Giok Lun vs.
Jose Co; G.R. No. 184454, August 3, 2011.

Interest; on final judgment. The Resolution of the National

Labor RelationsCommission is modified by including in
the award, aside from the principal amount of
P4,366,954.80, interest at the legal rate of 12% per
annum from the date the Decision in the present case
became final and executory, until the principal amount is
fully paid. Agripino V. Molina vs. Pacific Plans, Inc.; G.R.
No. 165476. August 15, 2011.

Interest; usury law. Petitioners contend that the interest

rate of 24% per annum stipulated in the mortgage
contract, which they executed in favor of respondent
Bank, is usurious. This Court has consistently held that for
some time now, usury has been legally non-existent and
that interest can now be charged as lender and borrower
may agree upon. In fact, Section 1 of Central Bank
Circular No. 905, Series of 1982, which took effect on
January 1, 1983, expressly provides that [t]he rate of
interest, including commissions, premiums, fees and
other charges, on a loan or forbearance of any money,
goods, or credits, regardless of maturity and whether
secured or unsecured, that may be charged or collected
by any person, whether natural or juridical, shall not be
subject to any ceiling prescribed under or pursuant to the
Usury Law, as amended.

Nonetheless, this Court has also held in a number of

cases, that nothing in the circular grants lenders carte
blanche authority to raise interest rates to levels which will
either enslave their borrowers or lead to a hemorrhaging
of their assets. Thus, the stipulated interest rates are
illegal if they are unconscionable.

The question now is whether the 24% per annum interest

rate is unreasonable under the circumstances obtaining in
the present case. The Court rules in the negative.

In Spouses Zacarias Bacolor and Catherine Bacolor v.

Banco Filipino Savings and Mortgage Bank, Dagupan City
Branch, this Court held that the interest rate of 24% per
annum on a loan of P244,000.00, agreed upon by the
parties, may not be considered as unconscionable and
excessive. As such, the Court ruled that the borrowers
cannot renege on their obligation to comply with what is
incumbent upon them under the contract of loan as the
said contract is the law between the parties and they are
bound by its stipulations.

Also, in Garcia v. Court of Appeals, this Court sustained

the agreement of the parties to a 24% per annum interest
on an P8,649,250.00 loan finding the same to be
reasonable and clearly evidenced by the amended credit
line agreement entered into by the parties as well as two
promissory notes executed by the borrower in favor of the
lender.

Based on the above jurisprudence, the Court finds that

the 24% per annum interest rate, provided for in the
subject mortgage contracts for a loan of P225,000.00,
may not be considered unconscionable. Moreover,
considering that the mortgage agreement was freely
entered into by both parties, the same is the law between
them and they are bound to comply with the provisions
contained therein. Spouses Nelson and Myra Villanueva
vs.Court of Appeals, et al.;G.R. No. 163433. August 22,
2011.

Laches; as between relatives. Laches, being rooted in

equity, is not always to be applied strictly in a way that
would obliterate an otherwise valid claim especially
between blood relatives. The existence of a confidential
relationship based upon consanguinity is an important
circumstance for consideration; hence, the doctrine is not
to be applied mechanically as between near relatives.
Adaza v. Court of Appeals held that the relationship
between the parties therein, who were siblings, was
sufficient to explain and excuse what would otherwise
have been a long delay in enforcing the claim and the
delay in such situation should not be as strictly construed
as where the parties are complete strangers vis-a-vis
each other; thus, reliance by one party upon his blood
relationship with the other and the trust and confidence
normally connoted in our culture by that relationship
should not be taken against him. Too, Sotto v. Teves ruled
that the doctrine of laches is not strictly applied between
near relatives, and the fact that the parties are connected
by ties of blood or marriage tends to excuse an otherwise
unreasonable delay. Estate of Margarita D. Cabacungan,
represented by Luz Laigo-Ali vs. Marilou Laigo, et al. ;G.R.
No. 175073. August 15, 2011.

Pledge; lesser transmission of rights. We cannot sustain

the finding of the CA that: The machineries were ceded
to THIRD PARTY NONWOVEN by way of dacion en pago,
a contract later entered into by WINWOOD/WINGYAN and
THIRD PARTY NONWOVEN. As aptly pointed out by
petitioner, no evidence was presented by Nonwoven to
show that the attached properties were subsequently sold
to it by way of a dacion en pago. Also, there is nothing in
the Agreement dated May 9, 1992 to indicate that the
motorized sewing machines, snap machines and boilers
were ceded to Nonwoven as payment for the Wingyans
and Winwoods obligation. It bears stressing that there
can be no transfer of ownership if the delivery of the
property to the creditor is by way of security. In fact, in
case of doubt as to whether a transaction is one of
pledge or dacion en pago, the presumption is that it is a
pledge as this involves a lesser transmission of rights and
interests. Union Bank of the Philippines vs. Alain Juniat, et
al.; G.R. No. 171569, August 1, 2011.

Quasi-delict; elements. According to Article 2176 of the

Civil Code, whoever by act or omission causes damage to
another, there being fault or negligence, is obliged to pay
for the damage done. To sustain a claim based on quasi-
delict, the following requisites must concur: (a) damage
suffered by the plaintiff; (b) fault or negligence of
defendant; and (c) connection of cause and effect
between the fault or negligence of defendant and the
damage incurred by the plaintiff. These requisites must be
proved by a preponderance of evidence. The claimants,
respondents in this case, must, therefore, establish their
claim or cause of action by preponderance of evidence,
evidence which is of greater weight, or more convincing
than that which is offered in opposition to it. Albert Tison
and Claudio L. Jabon vs.Sps. Gregorio Pomasin and
Consorcia Ponce Pomasin, et al.; G.R. No. 173180.
August 24, 2011.

Quasi-delict; liability of employer for negligence of

employee; bases. Standard may hold RCJ liable for two
reasons, both of which rely upon facts uncontroverted by
RCJ. One, RCJ is the registered owner of the bus driven
by Mangoba. Two, RCJ is Mangobas employer.

Standards allegation in its amended complaint that RCJ

is the registered owner of the passenger bus with plate
number NYG 363 was sufficient to state a cause of action
against RCJ. The registered owner of a vehicle should be
primarily responsible to the public for injuries caused
while the vehicle is in use. The main aim of motor vehicle
registration is to identify the owner so that if any accident
happens, or that any damage or injury is caused by the
vehicle on the public highways, responsibility therefor can
be fixed on a definite individual, the registered owner.
Moreover, when the employee causes damage due to his
own negligence while performing his own duties, there
arises the juris tantum presumption that the employer is
negligent, rebuttable only by proof of observance of the
diligence of a good father of a family. For failure to rebut
such legal presumption of negligence in the selection and
supervision of employees, the employer is likewise
responsible for damages, the basis of the liability being
the relationship of pater familias or on the employers own
negligence. RCJ Bus Lines, Inc. vs. Standard Insurance
Company Incorporated; G.R. No. 193629, August 17,
2011.

Quasi-delict; negligence; violation of law is negligence;

causal connection. Driving without a proper license is a
violation of traffic regulation. Under Article 2185 of the
Civil Code, the legal presumption of negligence arises if at
the time of the mishap, a person was violating any traffic
regulation. However, in Sanitary Steam Laundry, Inc. v.
Court of Appeals, we held that a causal connection must
exist between the injury received and the violation of the
traffic regulation. It must be proven that the violation of
the traffic regulation was the proximate or legal cause of
the injury or that it substantially contributed thereto.
Negligence, consisting in whole or in part, of violation of
law, like any other negligence, is without legal
consequence unless it is a contributing cause of the
injury. Likewise controlling is our ruling in Aonuevo v.
Court of Appeals where we reiterated that negligence per
se, arising from the mere violation of a traffic statute, need
not be sufficient in itself in establishing liability for
damages. In said case, Aonuevo, who was driving a car,
did not attempt to establish a causal connection
between the safety violations imputed to the injured
cyclist, and the accident itself. Instead, he relied on a
putative presumption that these violations in themselves
sufficiently established negligence appreciable against the
cyclist. Since the onus on Aonuevo is to conclusively
prove the link between the violations and the accident, we
can deem him as having failed to discharge his necessary
burden of proving the cyclists own liability. We took the
occasion to state that:

The rule on negligence per se must admit qualifications

that may arise from the logical consequences of the facts
leading to the mishap. The doctrine (and Article 2185, for
that matter) is undeniably useful as a judicial guide in
adjudging liability, for it seeks to impute culpability arising
from the failure of the actor to perform up to a standard
established by a legal fiat. But the doctrine should not be
rendered inflexible so as to deny relief when in fact there
is no causal relation between the statutory violation and
the injury sustained. Presumptions in law, while
convenient, are not intractable so as to forbid rebuttal
rooted in fact. After all, tort law is remunerative in spirit,
aiming to provide compensation for the harm suffered by
those whose interests have been invaded owing to the
conduct of other.
In the instant case, no causal connection was established
between the tractor-trailer drivers restrictions on his
license to the vehicular collision. Furthermore, Jabon was
able to sufficiently explain that the Land Transportation
Office merely erred in not including restriction code 8 in
his license. Albert Tison and Claudio L. Jabon vs.Sps.
Gregorio Pomasin and Consorcia Ponce Pomasin, et al.;
G.R. No. 173180. August 24, 2011.

Quieting of title; direct attack on title. The RCA likewise

asserts that the case for quieting of title is a collateral
attack on its title which is prohibited by law. However, we
agree with the CA in holding that the complaint against
the RCA does not amount to a collateral attack because
the action for the declaration of nullity of OCT No. 17629
is a clear and direct attack on its title.

An action is deemed an attack on a title when its objective

is to nullify the title, thereby challenging the judgment
pursuant to which the title was decreed. The attack is
direct when the objective is to annul or set aside such
judgment, or enjoin its enforcement. On the other hand,
the attack is indirect or collateral when, in an action to
obtain a different relief, an attack on the judgment is
nevertheless made as an incident thereof.

The complaint filed with the RTC pertinently alleged that

the claim of ownership by the RCA is spurious as its title,
denominated as OCT No. 17629, is fake for the following
reasons: (1) that the erasures are very apparent and the
title itself is fake; (2) it was made to appear under
Memorandum of Encumbrance Entry No. 1007 that the
title is a reconstituted title when in truth, it is not; and (3)
the verification reveals that there was no petition filed
before any court where an order was issued for the
reconstitution and re-issuance of an owners duplicate
copy. It is thus clear from the foregoing that the case filed
questioning the genuineness of OCT No. 17629 is a direct
attack on the title of the RCA. Roman Catholic
Archbishop of San Fernando, Pampanga, represented
herein by the incumbent Archbishop vs. Eduardo Soriano,
et al./Marcial and Victoria Balagtas, et al. vs. Roman
Catholic Archbishop of San Fernando, Pampanga, etc.;
G.R. No. 153829/G.R. No. 160909. August 17, 2011.

Subrogation. Subrogation is the substitution of one

person by another with reference to a lawful claim or right,
so that he who substitutes another succeeds to the rights
of the other in relation to a debt or claim, including its
remedies or securities. The principle covers a situation
wherein an insurer who has paid a loss under an
insurance policy is entitled to all the rights and remedies
belonging to the insured against a third party with respect
to any loss covered by the policy. RCJ Bus Lines, Inc. vs.
Standard Insurance Company Incorporated; G.R. No.
193629, August 17, 2011.
Trusts. [Digesters Note: Here, the Supreme Court
provides us with a taxonomy of trust!] A trust is the legal
relationship between one person having an equitable
ownership of 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.

Trusts are either express or implied. Express or direct

trusts are created by the direct and positive acts of the
parties, by some writing or deed, or will, or by oral
declaration in words evincing an intention to create a
trust. Implied trusts also called trusts by operation of
law, indirect trusts and involuntary trusts arise by
legal implication based on the presumed intention of the
parties or on equitable principles independent of the
particular intention of the parties. They are those which,
without being expressed, are deducible from the nature of
the transaction as matters of intent or, independently of
the particular intention of the parties, as being inferred
from the transaction by operation of law basically by
reason of equity.

Implied trusts are further classified into constructive trusts

and resulting trusts.

Constructive trusts, on the one hand, come about in the

main by operation of law and not by agreement or
intention. They arise not by any word or phrase, either
expressly or impliedly, evincing a direct intention to create
a trust, but one which arises in order to satisfy the
demands of justice. Also known as trusts ex maleficio,
trusts ex delicto and trusts de son tort, they are construed
against one who by actual or constructive fraud, duress,
abuse of confidence, commission of a wrong or any form
of unconscionable conduct, artifice, concealment of
questionable means, or who in any way against equity
and good conscience has obtained or holds the legal right
to property which he ought not, in equity and good
conscience, hold and enjoy. They are aptly characterized
as fraud-rectifying trust, imposed by equity to satisfy
the demands of justice and to defeat or prevent the
wrongful act of one of the parties. Constructive trusts are
illustrated in Articles 1450, 1454, 1455 and 1456.

On the other hand, resulting trusts arise from the nature or

circumstances of the consideration involved in a
transaction whereby one person becomes invested with
legal title but is obligated in equity to hold his title for the
benefit of another. This is based on the equitable doctrine
that valuable consideration and not legal title is
determinative of equitable title or interest and is always
presumed to have been contemplated by the parties.
Such intent is presumed as it is not expressed in the
instrument or deed of conveyance and is to be found in
the nature of their transaction. Implied trusts of this nature
are hence describable as intention-enforcing trusts.
Specific examples of resulting trusts may be found in the
Civil Code, particularly Articles 1448, 1449, 1451, 1452
and 1453.

Articles 1448 to 1456 of the Civil Code enumerate cases

of implied trust, but the list according to Article 1447 is
not exclusive of others which may be established by the
general law on trusts so long as the limitations laid down
in Article 1442 are observed, that is, that they be not in
conflict with the New Civil Code, the Code of Commerce,
the Rules of Court and special laws.

While resulting trusts generally arise on failure of an

express trust or of the purpose thereof, or on a
conveyance to one person upon a consideration from
another (sometimes referred to as a purchase-money
resulting trust), they may also be imposed in other
circumstances such that the court, shaping judgment in
its most efficient form and preventing a failure of justice,
must decree the existence of such a trust. A resulting
trust, for instance, arises where, there being no fraud or
violation of the trust, the circumstances indicate intent of
the parties that legal title in one be held for the benefit of
another. It also arises in some instances where the
underlying transaction is without consideration, such as
that contemplated in Article 1449 of the Civil Code. Where
property, for example, is gratuitously conveyed for a
particular purpose and that purpose is either fulfilled or
frustrated, the court may affirm the resulting trust in favor
of the grantor or transferor, where the beneficial interest in
property was not intended to vest in the grantee.

Intention although only presumed, implied or supposed

by law from the nature of the transaction or from the facts
and circumstances accompanying the transaction,
particularly the source of the consideration is always an
element of a resulting trust and may be inferred from the
acts or conduct of the parties rather than from direct
expression of conduct. Certainly, intent as an
indispensable element, is a matter that necessarily lies in
the evidence, that is, by evidence, even circumstantial, of
statements made by the parties at or before the time title
passes. Because an implied trust is neither dependent
upon an express agreement nor required to be evidenced
by writing, Article 1457 of our Civil Code authorizes the
admission of parole evidence to prove their existence.
Parole evidence that is required to establish the existence
of an implied trust necessarily has to be trustworthy and it
cannot rest on loose, equivocal or indefinite declarations.

Thus, contrary to the Court of Appeals finding that there

was no evidence on record showing that an implied trust
relation arose between Margarita and Roberto, we find
that petitioner before the trial court, had actually adduced
evidence to prove the intention of Margarita to transfer to
Roberto only the legal title to the properties in question,
with attendant expectation that Roberto would return the
same to her on accomplishment of that specific purpose
for which the transaction was entered into. The evidence
of course is not documentary, but rather testimonial.

As a trustee of a resulting trust, therefore, Roberto, like

the trustee of an express passive trust, is merely a
depositary of legal title having no duties as to the
management, control or disposition of the property
except to make a conveyance when called upon by the
cestui que trust. Hence, the sales he entered into with
respondents are a wrongful conversion of the trust
property and a breach of the trust. Estate of Margarita D.
Cabacungan, represented by Luz Laigo-Ali vs. Marilou
Laigo, et al. ;G.R. No. 175073. August 15, 2011.

Trusts; agency; trust pursuit rule; when prescription

begins to run. There is a fundamental principle in agency
that where certain property entrusted to an agent and
impressed by law with a trust in favor of the principal is
wrongfully diverted, such trust follows the property in the
hands of a third person and the principal is ordinarily
entitled to pursue and recover it so long as the property
can be traced and identified, and no superior equities
have intervened. This principle is actually one of trusts,
since the wrongful conversion gives rise to a constructive
trust which pursues the property, its product or proceeds,
and permits the beneficiary to recover the property or
obtain damages for the wrongful conversion of the
property. Aptly called the trust pursuit rule, it applies
when a constructive or resulting trust has once affixed
itself to property in a certain state or form.

Hence, a trust will follow the property through all

changes in its state and form as long as such property, its
products or its proceeds, are capable of identification,
even into the hands of a transferee other than a bona fide
purchaser for value, or restitution will be enforced at the
election of the beneficiary through recourse against the
trustee or the transferee personally. This is grounded on
the principle in property law that ownership continues and
can be asserted by the true owner against any
withholding of the object to which the ownership pertains,
whether such object of the ownership is found in the
hands of an original owner or a transferee, or in a different
form, as long as it can be identified. Accordingly, the
person to whom is made a transfer of trust property
constituting a wrongful conversion of the trust property
and a breach of the trust, when not protected as a bona
fide purchaser for value, is himself liable and accountable
as a constructive trustee. The liability attaches at the
moment of the transfer of trust property and continues
until there is full restoration to the beneficiary. Thus, the
transferee is charged with, and can be held to the
performance of the trust, equally with the original trustee,
and he can be compelled to execute a reconveyance.

This scenario is characteristic of a constructive trust

imposed by Article 1456 of the Civil Code, which
impresses upon a person obtaining property through
mistake or fraud the status of an implied trustee for the
benefit of the person from whom the property comes.
Petitioner, in laying claim against respondents who are
concededly transferees who professed having validly
derived their ownership from Roberto, is in effect
enforcing against respondents a constructive trust relation
that arose by virtue of the wrongful and fraudulent transfer
to them of the subject properties by Roberto.

It is settled that an action for reconveyance based on a

constructive implied trust prescribes in 10 years likewise
in accordance with Article 1144 of the Civil Code. Yet not
like in the case of a resulting implied trust and an express
trust, prescription supervenes in a constructive implied
trust even if the trustee does not repudiate the
relationship. In other words, repudiation of said trust is
not a condition precedent to the running of the
prescriptive period.

As to when the prescriptive period commences to run,

Crisostomo v. Garcia elucidated as follows:

When property is registered in anothers name, an implied

or constructive trust is created by law in favor of the true
owner. The action for reconveyance of the title to the
rightful owner prescribes in 10 years from the issuance of
the title. An action for reconveyance based on implied or
constructive trust prescribes in ten years from the alleged
fraudulent registration or date of issuance of the
certificate of title over the property.

It is now well settled that the prescriptive period to

recover property obtained by fraud or mistake, giving rise
to an implied trust under Art. 1456 of the Civil Code, is 10
years pursuant to Art. 1144. This ten-year prescriptive
period begins to run from the date the adverse party
repudiates the implied trust, which repudiation takes
place when the adverse party registers the land.

From the foregoing, it is clear that an action for

reconveyance under a constructive implied trust in
accordance with Article 1456 does not prescribe unless
and until the land is registered or the instrument affecting
the same is inscribed in accordance with law, inasmuch
as it is what binds the land and operates constructive
notice to the world. In the present case, however, the
lands involved are concededly unregistered lands; hence,
there is no way by which Margarita, during her lifetime,
could be notified of the furtive and fraudulent sales made
in 1992 by Roberto in favor of respondents, except by
actual notice from Pedro himself in August 1995. Hence, it
is from that date that prescription began to toll. The filing
of the complaint in February 1996 is well within the
prescriptive period. Finally, such delay of only six months
in instituting the present action hardly suffices to justify a
finding of inexcusable delay or to create an inference that
Margarita has allowed her claim to stale by laches. Estate
of Margarita D. Cabacungan, represented by Luz Laigo-Ali
vs. Marilou Laigo, et al.; G.R. No. 175073. August 15,
2011.

Trusts; implied trust; action for reconveyance;

prescription; laches. The invocation of the rules on
limitation of actions relative to a resulting trust is not in
point because the resulting trust relation between
Margarita and Roberto had been extinguished by the
latters death. A trust, it is said, terminates upon the death
of the trustee, particularly where the trust is personal to
him. Besides, prescription and laches, in respect of this
resulting trust relation, hardly can impair petitioners
cause of action. On the one hand, in accordance with
Article 1144 of the Civil Code, an action for reconveyance
to enforce an implied trust in ones favor prescribes in ten
years from the time the right of action accrues, as it is
based upon an obligation created by law. It sets in from
the time the trustee performs unequivocal acts of
repudiation amounting to an ouster of the cestui que trust
which are made known to the latter. In this case, it was
the 1992 sale of the properties to respondents that
comprised the act of repudiation which, however, was
made known to Margarita only in 1995 but nevertheless
impelled her to institute the action in 1996 still well
within the prescriptive period. Hardly can be considered
as act of repudiation Robertos open court declaration
which he made in the 1979 adoption proceedings
involving respondents to the effect that he owned the
subject properties, nor even the fact that he in 1977 had
entered into a lease contract on one of the disputed
properties which contract had been subject of a 1996
decision of the Court of Appeals. These do not suffice to
constitute unequivocal acts in repudiation of the trust.
Estate of Margarita D. Cabacungan, represented by Luz
Laigo-Ali vs. Marilou Laigo, et al. ;G.R. No. 175073.
August 15, 2011.

Trusts; implied trust; action for reconveyance;

prescription; when claimant is in actual possession. If
property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an
implied trust for the benefit of the person from whom the
property comes. An action for reconveyance based on
implied trust prescribes in 10 years as it is an obligation
created by law, to be counted from the date of issuance
of the Torrens title over the property. This rule, however,
applies only when the plaintiff or the person enforcing the
trust is not in possession of the property.

In Vda. de Cabrera v. Court of Appeals, we said that there

is no prescription when in an action for reconveyance, the
claimant is in actual possession of the property because
this in effect is an action for quieting of title:

[S]ince if a person claiming to be the owner thereof is in

actual possession of the property, as the defendants are
in the instant case, the right to seek reconveyance, which
in effect seeks to quiet title to the property, does not
prescribe. The reason for this is that one who is in actual
possession of a piece of land claiming to be the owner
thereof may wait until his possession is disturbed or his
title is attacked before taking steps to vindicate his right,
the reason for the rule being, that his undisturbed
possession gives him a continuing right to seek the aid of
a court of equity to ascertain and determine the nature of
the adverse claim of a third party and its effect on his own
title, which right can be claimed only by one who is in
possession.

In Ciriacos case, as it has been judicially established that

he is in actual possession of the property he claims as his
and that he has a better right to the disputed portion, his
suit for reconveyance is in effect an action for quieting of
title. Hence, petitioners defense of prescription against
Ciriaco does not lie. Philippine National Bank vs. Ciriaco
Jumamoy and Heirs of Antonio Go Pace, represented by
Rosalia Pace; G.R. No. 169901, August 3, 2011.

Special Laws

P.D. No, 1529; land registration; buyer in good faith.

Fundamental is the rule in land registration law that the
issue of whether the buyer of realty is in good or bad faith
is relevant only where the subject of the sale is registered
land and the purchase was made from the registered
owner whose title to the land is clean, in which case the
purchaser who relies on the clean title of the registered
owner is protected if he is a purchaser in good faith and
for value. Since the properties in question are
unregistered lands, respondents purchased the same at
their own peril. Their claim of having bought the
properties in good faith, i.e., without notice that there is
some other person with a right to or interest therein,
would not protect them should it turn out, as it in fact did
in this case, that their seller, Roberto, had no right to sell
them. Estate of Margarita D. Cabacungan, represented by
Luz Laigo-Ali vs. Marilou Laigo, et al. ;G.R. No. 175073.
August 15, 2011.

P.D. No. 1529; land registration; buyer in good faith;

higher diligence standards for banks. Undoubtedly, our
land registration statute extends its protection to an
innocent purchaser for value, defined as one who buys
the property of another, without notice that some other
person has a right or interest in such property and pays
the full price for the same, at the time of such purchase or
before he has notice of the claims or interest of some
other person in the property. An innocent purchaser for
value includes an innocent lessee, mortgagee, or other
encumbrancer for value.

Here, we agree with the disposition of the RTC and the

CA that PNB is not an innocent purchaser for value. As
we have already declared:
A banking institution is expected to exercise due diligence
before entering into a mortgage contract. The
ascertainment of the status or condition of a property
offered to it as security for a loan must be a standard and
indispensable part of its operations. (Emphasis ours.)

PNBs contention that Ciriaco failed to allege in his

complaint that PNB failed to take the necessary
precautions before accepting the mortgage is of no
moment. It is undisputed that the 2.5002-hectare portion
of the mortgaged property has been adjudged in favor of
Ciriacos predecessor-in-interest in Civil Case No. 2514.
Hence, PNB has the burden of evidence that it acted in
good faith from the time the land was offered as collateral.

However, PNB miserably failed to overcome this burden.

There was no showing at all that it conducted an
investigation; that it observed due diligence and prudence
by checking for flaws in the title; that it verified the identity
of the true owner and possessor of the land; and, that it
visited subject premises to determine its actual condition
before accepting the same as collateral.

Both the CA and the trial court correctly observed that

PNB could not validly raise the defense that it relied on
Antonios clean title. The land, when it was first
mortgaged, was then unregistered under our Torrens
system. The first mortgage was on February 25, 1971
while OCT No. P-4952 was issued on July 19, 1971. Since
the Paces offered as collateral an unregistered land, with
more reason PNB should have proven before the RTC
that it had verified the status of the property by
conducting an ocular inspection before granting Antonio
his first loan. Good faith which is a question of fact could
have been proven in the proceedings before the RTC, but
PNB dispensed with the trial proper and let its opportunity
to dispute factual allegations pass. Had PNB really taken
the necessary precautions, it would have discovered that
a large portion of Lot 13521 is occupied by Ciriaco.
Philippine National Bank vs. Ciriaco Jumamoy and Heirs
of Antonio Go Pace, represented by Rosalia Pace; G.R.
No. 169901, August 3, 2011.

Value of Torrens Title. The incontrovertibility of a title does

not preclude a rightful claimant to a property from seeking
other remedies because it was never the intention of the
Torrens system to perpetuate fraud. As explained in Vda.
de Recinto v. Inciong, the mere possession of a certificate
of title under the Torrens system does not necessarily
make the possessor a true owner of all the property
described therein for he does not by virtue of said
certificate alone become the owner of the land illegally
included. It is evident from the records that the petitioner
owns the portion in question and therefore the area
should be conveyed to her. The remedy of the land owner
whose property has been wrongfully or erroneously
registered in anothers name is, after one year from the
date of the decree, not to set aside the decree, but,
respecting the decree as incontrovertible and no longer
open to review, to bring an ordinary action in the ordinary
court of justice for reconveyance or, if the property has
passed into the hands of an innocent purchaser for value,
for damages. Philippine National Bank vs. Ciriaco
Jumamoy and Heirs of Antonio Go Pace, represented by
Rosalia Pace; G.R. No. 169901, August 3, 2011.

July 2011 Philippine Supreme Court Decisions on

CivilLaw

Compensation. For legal compensation to take place, the

requirements set forth in Articles 1278 and 1279 of the
Civil Code, quoted below, must be present.

ARTICLE 1278. Compensation shall take place when two

persons, in their own right, are creditors and debtors of
each other.

ARTICLE 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.

A debt is liquidated when its existence and amount are

determined. It is not necessary that it be admitted by the
debtor. Nor is it necessary that the credit appear in a final
judgment in order that it can be considered as liquidated;
it is enough that its exact amount is known. And a debt is
considered liquidated, not only when it is expressed
already in definite figures which do not require verification,
but also when the determination of the exact amount
depends only on a simple arithmetical operation.

In the instant case, both obligations are liquidated.

Vicente has the obligation to pay his debt due to Jesus in
the amount of P300,000.00 with interest at the rate of
12% per annum counted from the filing of the instant
complaint on August 17, 1993 until fully paid. Jesus, on
the other hand, has the obligation to pay attorneys fees
which the RTC had already determined to be equivalent to
whatever amount recoverable from Vicente. The said
attorneys fees were awarded by the RTC on the
counterclaim of Vicente on the basis of quantum meruit
for the legal services he previously rendered to Jesus.
Jesus M. Montemayor vs. Vicente D. Millora; G.R. No.
168251. July 27, 2011.

Contracts; novation. Novation is the extinguishment of an

obligation by the substitution or change of the obligation
by a subsequent one which extinguishes or modifies the
first, either by changing the object or principal conditions,
or by substituting another in place of the debtor, or by
subrogating a third person in the rights of the creditor. For
novation to take place, the following requisites must
concur: 1) There must be a previous valid obligation; 2)
The parties concerned must agree to a new contract; 3)
The old contract must be extinguished; and 4) There must
be a valid new contract.

In this case, only the first element of novation exists.

Indeed, there is a previous valid obligation, i.e., the 1989
Bonds. There is however neither a valid new contract nor
a clear agreement between the parties to a new contract
since the very existence of the 1990 Bond has been
rendered dubious. Without the new contract, the old
contract is not extinguished.

Implied novation necessitates a new obligation with which

the old is in total incompatibility such that the old
obligation is completely superseded by the new one.
Quite obviously, neither can there be implied novation. In
this case, there is no new obligation. Country Bankers
Insurance Corporation v. Antonio Lagman; G.R. No.
165487. July 13, 2011.

Contracts; rescission under Article 1191 or Article 1389.

The Lalicons claim that under Article 1389 of the Civil
Code the action to claim rescission must be commenced
within four years from the time of the commission of the
cause for it.

But an action for rescission can proceed from either

Article 1191 or Article 1381. It has been held that Article
1191 speaks of rescission in reciprocal obligations within
the context of Article 1124 of the Old Civil Code which
uses the term resolution. Resolution applies only to
reciprocal obligation such that a breach on the part of one
party constitutes an implied resolutory condition which
entitles the other party to rescission. Resolution grants
the injured party the option to pursue, as principal
actions, either a rescission or specific performance of the
obligation, with payment of damages in either case.

Rescission under Article 1381, on the other hand, was

taken from Article 1291 of the Old Civil Code, which is a
subsidiary action, not based on a partys breach of
obligation. The four-year prescriptive period provided in
Article 1389 applies to rescissions under Article 1381.

Here, the NHA sought annulment of the Alfaros sale to

Victor because they violated the five-year restriction
against such sale provided in their contract. Thus, the CA
correctly ruled that such violation comes under Article
1191 where the applicable prescriptive period is that
provided in Article 1144 which is 10 years from the time
the right of action accrues. The NHAs right of action
accrued on February 18, 1992 when it learned of the
Alfaros forbidden sale of the property to Victor. Since the
NHA filed its action for annulment of sale on April 10,
1998, it did so well within the 10-year prescriptive period.
Vicelet Lelicon and Vicelen Lalicon v. National Housing
Authority; G.R. No. 185440. July 13, 2011.

Damages; moral, exemplary and attorneys fees.

Paragraph 10, Article 2219 of the Civil Code provides that
moral damages may be recovered in case of acts and
actions referred to in Article 21 of the same Code. Article
21 reads:

ART. 21 Any person who willfully causes loss or injury to

another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for
the damage.

As previously discussed, DRBIs act of maliciously

including two additional properties in the Sheriffs
Certificate of Sale even if they were not included in the
foreclosed properties caused the Dys and Maxinos
pecuniary loss. Hence, DRBI is liable to pay moral
damages.
The award of exemplary damages is similarly proper.
Exemplary or corrective damages are imposed, by way of
example or correction for the public good, in addition to
the moral, temperate, liquidated or compensatory
damages. We cannot agree more with the following ratio
of the appellate court in granting the same:

Additionally, what is alarming to the sensibilities of the

Court is the deception employed by the bank in adding
other properties in the certificate of sale under public
auction without them being included in the public auction
conducted. It cannot be overemphasized that being a
lending institution, prudence dictates that it should
employ good faith and due diligence with the properties
entrusted to it. It was the bank which submitted the
properties ought to be foreclosed to the sheriff. It only
submitted five properties for foreclosure. Yet, it caused
the registration of the Certificate of Sale under public
auction which listed more properties than what was
foreclosed. On this aspect, exemplary damages in the
amount of P200,000.00 are in order.

There being an award of exemplary damages, the award

of attorneys fees is likewise proper as provided in
paragraph 1, Article 2208 of the Civil Code. Spouses
Francisco D. Yap and whelma Yap vs. Spouses Zosimo
Dy, Sr. and Natividad Chiu Dy, et al./Dumaguete Rural
Bank Inc. (DRBI) herein represented by Mr. William D.S.
Dichoso vs.. Spouses Zosimo Dy, Sr. and Natividad Chiu
Dy, et al.; G.R. Nos. 171868 & 171991. July 27, 2011.

Damages; negligence; contributory negligence; higher

diligence standard for banks. We find no reversible error
in the findings of the appellate court that PNB was
negligent in the handling of FFCCIs combo account,
specifically, with respect to PNBs failure to detect the
forgeries in the subject applications for managers check
which could have prevented the loss. As we have often
ruled, the banking business is impressed with public trust.
A higher degree of diligence is imposed on banks relative
to the handling of their affairs than that of an ordinary
business enterprise. Thus, the degree of responsibility,
care and trustworthiness expected of their officials and
employees is far greater than those of ordinary officers
and employees in other enterprises. In the case at bar,
PNB failed to meet the high standard of diligence required
by the circumstances to prevent the fraud. In Philippine
Bank of Commerce v. Court of Appeals and The
Consolidated Bank & Trust Corporation v. Court of
Appeals, where the banks negligence is the proximate
cause of the loss and the depositor is guilty of
contributory negligence, we allocated the damages
between the bank and the depositor on a 60-40 ratio. We
apply the same ruling in this case considering that, as
shown above, PNBs negligence is the proximate cause of
the loss while the issue as to FFCCIs contributory
negligence has been settled with finality in G.R. No.
173278. Thus, the appellate court properly adjudged PNB
to bear the greater part of the loss consistent with these
rulings. Philippine National Bank vs. F.F. Cruz and Co.,
Inc.; G.R. No. 173259. July 25, 2011.

Damages; quasi-delict; employer liability. Whenever an

employees negligence causes damage or injury to
another, there instantly arises a presumption juris tantum
that the employer failed to exercise diligentissimi patris
families in the selection or supervision of his employee.
Thus, in the selection of prospective employees,
employers are required to examine them as to their
qualification, experience and service record. With respect
to the supervision of employees, employers must
formulate standard operating procedures, monitor their
implementation, and impose disciplinary measures for
breaches thereof. These facts must be shown by concrete
proof, including documentary evidence. Thus, the RTC
committed no error in finding that the evidence presented
by respondent Guballa was wanting. It ruled:

x x x. As expected, defendant Jose Guballa, attempted to

overthrow this presumption of negligence by showing that
he had exercised the due diligence required of him by
seeing to it that the driver must check the vital parts of
the vehicle he is assigned to before he leaves the
compound like the oil, water, brakes, gasoline, horn (9
tsn, July 17, 1986); and that Geronimo had been driving
for him sometime in 1976 until the collision in litigation
came about (5-6 tsn, ibid); that whenever his trucks gets
out of the compound to make deliveries, it is always
accompanied with two (2) helpers (16-17 tsn, ibid). This
was all which he considered as selection and supervision
in compliance with the law to free himself from any
responsibility. This Court then cannot consider the
foregoing as equivalent to an exercise of all the care of a
good father of a family in the selection and supervision of
his driver Mariano Geronimo.

The Heirs of the late Ruben Reinoso, Sr., et al. vs. Court
of Appeals, et al.; G.R. No. 116121. July 18, 2011.

Mortgage; piecemeal redemption. The Yaps argue that

P40,000.00 cannot be a valid tender of redemption since
the amount of the auction sale was P216,040.93. They
further contend that the mortgage is indivisible so in order
for the tender to be valid and effectual, it must be for the
entire auction price plus legal interest.

We cannot subscribe to the Yaps argument on the

indivisibility of the mortgage. As held in the case of
Philippine National Bank v. De los Reyes, the doctrine of
indivisibility of mortgage does not apply once the
mortgage is extinguished by a complete foreclosure
thereof as in the instant case. The Court held:

The parties were accordingly embroiled in a hermeneutic

disparity on their aforesaid contending positions. Yet, the
rule on the indivisibility of mortgage finds no application
to the case at bar. x x x

From the foregoing, it is apparent that what the law

proscribes is the foreclosure of only a portion of the
property or a number of the several properties mortgaged
corresponding to the unpaid portion of the debt where
before foreclosure proceedings partial payment was made
by the debtor on his total outstanding loan or obligation.
This also means that the debtor cannot ask for the release
of any portion of the mortgaged property or of one or
some of the several lots mortgaged unless and until the
loan thus secured has been fully paid, notwithstanding
the fact that there has been a partial fulfillment of the
obligation. Hence, it is provided that the debtor who has
paid a part of the debt cannot ask for the proportionate
extinguishment of the mortgage as long as the debt is not
completely satisfied.

That the situation obtaining in the case at bar is not within

the purview of the aforesaid rule on indivisibility is obvious
since the aggregate number of the lots which comprise
the collaterals for the mortgage had already been
foreclosed and sold at public auction. There is no partial
payment nor partial extinguishment of the obligation to
speak of. The aforesaid doctrine, which is actually
intended for the protection of the mortgagee, specifically
refers to the release of the mortgage which secures the
satisfaction of the indebtedness and naturally
presupposes that the mortgage is existing. Once the
mortgage is extinguished by a complete foreclosure
thereof, said doctrine of indivisibility ceases to apply
since, with the full payment of the debt, there is nothing
more to secure. (Emphasis supplied.)

Nothing in the law prohibits the piecemeal redemption of

properties sold at one foreclosure proceeding. In fact, in
several early cases decided by this Court, the right of the
mortgagor or redemptioner to redeem one or some of the
foreclosed properties was recognized. Spouses Francisco
D. Yap and whelma Yap vs.. Spouses Zosimo Dy, Sr. and
Natividad Chiu Dy, et al./Dumaguete Rural Bank Inc.
(DRBI) herein represented by Mr. William D.S. Dichoso vs..
Spouses Zosimo Dy, Sr. and Natividad Chiu Dy, et al.;
G.R. Nos. 171868 & 171991. July 27, 2011.

Obligations; delay. There are three requisites necessary

for a finding of default. First, the obligation is demandable
and liquidated; second, the debtor delays performance;
and third, the creditor judicially or extrajudicially requires
the debtors performance.

According to the CA, GMC did not make a demand on

Spouses Ramos but merely requested them to go to
GMCs office to discuss the settlement of their account. In
spite of the lack of demand made on the spouses,
however, GMC proceeded with the foreclosure
proceedings. Neither was there any provision in the Deed
of Real Estate Mortgage allowing GMC to extrajudicially
foreclose the mortgage without need of demand.

Indeed, Article 1169 of the Civil Code on delay requires

the following:

Those obliged to deliver or to do something incur in delay

from the time the obligee judicially or extrajudicially
demands from them the fulfilment of their obligation.

However, the demand by the creditor shall not be

necessary in order that delay may exist:

(1) When the obligation or the law expressly so declares; x

xx

As the contract in the instant case carries no such

provision on demand not being necessary for delay to
exist, We agree with the appellate court that GMC should
have first made a demand on the spouses before
proceeding to foreclose the real estate mortgage. General
Milling Corporation vs. Sps. Librado Ramos and
Remedios Ramos; G.R. No. 193723. July 20, 2011.

Property; action for reconveyance. Under Article 434 of

the Civil Code, to successfully maintain an action to
recover the ownership of a real property, the person who
claims a better right to it must prove two (2) things: first,
the identity of the land claimed; and second, his title
thereto.

In regard to the first requisite, in an accion

reinvindicatoria, the person who claims that he has a
better right to the property must first fix the identity of the
land he is claiming by describing the location, area and
boundaries thereof.

In this case, petitioner claims that the property in dispute

is part of his larger property. However, petitioner failed to
identify his larger property by providing evidence of the
metes and bounds thereof, so that the same may be
compared with the technical description contained in the
title of respondent, which would have shown whether the
disputed property really formed part of petitioners larger
property.

In regard to the second requisite of title to property, both

petitioner and respondent separately claim that they are
entitled to ownership of the property by virtue of open,
public, continuous and exclusive possession of the same
in the concept of owner. Respondent has OCT No. P-658
to prove his title to the subject property, while petitioner
merely claims that the property is already his private land
by virtue of his open, public, continuous possession of
the same in the concept of owner.
The Court holds that petitioner failed to prove the
requisites of reconveyance as he failed to prove the
identity of his larger property in relation to the disputed
property, and his claim of title by virtue of open, public
and continuous possession of the disputed property in
the concept of owner is nebulous in the light of a similar
claim by respondent who holds a free patent title over the
subject property. Datu Kiram Sampaco, substituted by
Hadji Soraya S. Macabando vs. Hadji Serad Mingca
Lantud; G.R. No. 163551. July 18, 2011.

Sale; double sale. All the parties to this case trace their
ownership to either of the two persons that Ouano sold
the properties to either to Cobarde, who allegedly
purchased the land in 1948, or to the National Airports
Corporation, which bought the land in 1952. Undoubtedly,
the National Airports Corporation was the only party that
registered the sale with the Registry of Deeds. For this
registration to be binding, we now have to determine
whether the National Airports Corporation acted with
good faith when it registered the properties, in
accordance with Article 1544 of the Civil Code, which
provides:

Article 1544. If the same thing should have been sold to

different vendees, the ownership shall be transferred to
the person who may have first taken 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 the
possession; and, in the absence thereof, to the person
who presents the oldest title, provided there is good faith.

Based on this provision, the overriding consideration to

determine ownership of an immovable property is the
good or bad faith not of the seller, but of the buyer;
specifically, we are tasked to determine who first
registered the sale with the Registry of Property (Registry
of Deeds) in good faith.

As accurately observed by the RTC, the petitioners, in

their submissions to the lower court, never imputed bad
faith on the part of the National Airports Corporation in
registering the lots in its name. Since the petitioners never
alleged that the National Airports Corporation acted with
bad faith when it registered the lots in its name, the
presumption of good faith prevails. Consequently, the
National Airports Corporation, being a registrant in good
faith, is recognized as the rightful owner of the lots in
question, and the registration of the properties in its name
cut off any and all prior liens, interests and
encumbrances, including the alleged prior sale to
Cobarde, that were not recorded on the titles. Cobarde,
thus, had no legal rights over the property that he could
have transferred to the Cabigas spouses. The Heirs of
Nicolas S. Cabigas, namely, Lolita Zabate Cabigas, et al.
vs. Melba L. Limbaco, et al.; G.R. No. 175291. July 27,
2011.

Sale; purchaser in good faith. A purchaser 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, and pays a full and fair price for the same at the
time of such purchase or before he has notice of the claim
of another person.It is a well-settled rule that a purchaser
cannot close his eyes to facts which should put a
reasonable man upon his guard, and then claim that he
acted in good faith under the belief that there was no
defect in the title of the vendor. His mere refusal to believe
that such defect exists, or his willful closing of his eyes to
the possibility of the existence of a defect in his vendors
title, will not make him an innocent purchaser for value, if
it afterwards develops that the title was in fact defective,
and it appears that he had such notice of the defect as
would have led to its discovery had he acted with that
measure of precaution which may reasonably be required
of a prudent man in a like situation.

We are dealing with registered land, a fact known to the

Cabigas spouses since they received the duplicate
owners certificate of title from Cobarde when they
purchased the land. At the time of the sale to the Cabigas
spouses, however, the land was registered not in
Cobardes name, but in Ouanos name. By itself, this fact
should have put the Cabigas spouses on guard and
prompted them to check with the Registry of Deeds as to
the most recent certificates of title to discover if there
were any liens, encumbrances, or other attachments
covering the lots in question.

Instead, the Cabigas spouses relied completely on

Cobardes representation that he owned the properties in
question, and did not even bother to perform the most
perfunctory of investigations by checking the properties
titles with the Registry of Deeds. Had the Cabigas
spouses only done so, they would easily have learned
that Cobarde had no legal right to the properties they
were acquiring since the lots had already been registered
in the name of the National Airports Corporation in 1952.
Their failure to exercise the plain common sense
expected of real estate buyers bound them to the
consequences of their own inaction. The Heirs of Nicolas
S. Cabigas, namely, Lolita Zabate Cabigas, et al. vs.
Melba L. Limbaco, et al.; G.R. No. 175291. July 27, 2011.

June 2011 Philippine Supreme Court Decisions on

CivilLaw

Civil Code
Agency; agency by estoppel. The doctrine of estoppel is
based upon 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 thereon. The doctrine
of estoppel springs from equitable principles and the
equities in the case. It is designed to aid the law in the
administration of justice where without its aid injustice
might result. It has been applied by this Court wherever
and whenever special circumstances of a case so
demand.

Based on the events and circumstances surrounding the

issuance of the assailed orders, this Court rules that
MEGAN is estopped from assailing both the authority of
Atty. Sabig and the jurisdiction of the RTC. While it is true,
as claimed by MEGAN, that Atty. Sabig said in court that
he was only appearing for the hearing of Passi Sugars
motion for intervention and not for the case itself, his
subsequent acts, coupled with MEGANs inaction and
negligence to repudiate his authority, effectively bars
MEGAN from assailing the validity of the RTC
proceedings under the principle of estoppel. Megan
Sugar Corporation v. Regional Trial Court of Iloilo, Br. 68,
Dumangas, Iloilo; New Frontier Sugar Corp., et al., G.R.
No. 170352. June 1, 2011
Agency; doctrine of apparent authority. The Court finds
that the signature of Abcede is sufficient to bind PRHC.
As its construction manager, his very act of signing a
letter embodying the P 36 million escalation agreement
produced legal effect, even if there was a blank space for
a higher officer of PHRC to indicate approval thereof. At
the very least, he indicated authority to make such
representation on behalf of PRHC. On direct examination,
Abcede admitted that, as the construction manager, he
represented PRHC in running its affairs with regard to the
execution of the aforesaid projects. Abcede had signed,
on behalf of PRHC, other documents that were almost
identical to the questioned letter-agreement. PRHC does
not question the validity of these agreements; it thereby
effectively admits that this individual had actual authority
to sign on its behalf with respect to these construction
projects. Philippine Realty and Holding Corp. vs. Ley
Const. and Dev. Corp./Ley Cons. and Dev. Corp. vs.
Philippine Realty and Holding Corp., G.R. No. 165548/
G.R. No. 167879. June 13, 2011

Damages. Respondents are not entitled to moral

damages because contracts are not referred to in Article
2219 of the Civil Code, which enumerates the cases when
moral damages may be recovered. Article 2220 of the
Civil Code allows the recovery of moral damages in
breaches of contract where the defendant acted
fraudulently or in bad faith. However, this case involves a
contract to sell, wherein full payment of the purchase
price is a positive suspensive condition, the non-
fulfillment of which is not a breach of contract, but merely
an event that prevents the seller from conveying title to
the purchaser. Since there is no breach of contract in this
case, respondents are not entitled to moral damages.

In the absence of moral, temperate, liquidated or

compensatory damages, exemplary damages cannot be
granted for they are allowed only in addition to any of the
four kinds of damages mentioned. Mila A. Reyes v.
Victoria T. Tuparan, G.R. No. 188064. June 1, 2011

Force Majeure. Article 1174 of the Civil Code provides:

Except in cases expressly specified by the law, or when
it is otherwise declared by stipulation or when the nature
of the obligation requires the assumption of risk, no
person shall be responsible for those events which could
not be foreseen, or which though foreseen, were
inevitable. A perusal of the construction agreements
shows that the parties never agreed to make LCDC liable
even in cases of force majeure. Neither was the
assumption of risk required. Thus, in the occurrence of
events that could not be foreseen, or though foreseen
were inevitable, neither party should be held responsible.

Under Article 1174 of the Civil Code, to exempt the

obligor from liability for a breach of an obligation due to
an act of God or force majeure, the following must
concur:
(a) the cause of the breach of the obligation must be
independent of the will of the debtor; (b) the event must
be either unforseeable or unavoidable; (c) the event must
be such as to render it impossible for the debtor to fulfill
his obligation in a normal manner; and (d) the debtor must
be free from any participation in, or aggravation of the
injury to the creditor.

The shortage in supplies and cement may be

characterized as force majeure. In the present case,
hardware stores did not have enough cement available in
their supplies or stocks at the time of the construction in
the 1990s. Likewise, typhoons, power failures and
interruptions of water supply all clearly fall under force
majeure. Since LCDC could not possibly continue
constructing the building under the circumstances
prevailing, it cannot be held liable for any delay that
resulted from the causes aforementioned. Philippine
Realty and Holding Corp. vs. Ley Const. and Dev. Corp./
Ley Cons. and Dev. Corp. vs. Philippine Realty and
Holding Corp., G.R. No. 165548/G.R. No. 167879. June
13, 2011

Laches. Laches is the failure or neglect, for an

unreasonable and unexplained length of time, to do that
which, by exercising due diligence, could or should have
been done earlier; it is negligence or omission to assert a
right within a reasonable time, warranting the presumption
that the party entitled to assert it either has abandoned or
declined to assert it. There is no absolute rule as to what
constitutes laches or staleness of demand; each case is
to be determined according to its particular
circumstances, with the question of laches addressed to
the sound discretion of the court. Because laches is an
equitable doctrine, its application is controlled by
equitable considerations and should not be used to
defeat justice or to perpetuate fraud or injustice.

From the records, it appears that Macgraphics first

learned of the assignment when Sime Darby sent its
letter-notice dated May 3, 1996. From the letters sent by
Macgraphics to Goodyear, it is apparent that Macgraphics
had to study and determine both the legal and practical
implications of entertaining Goodyear as a client. After
review, Macgraphics found that consenting to the
assignment would entail the commitment of manpower
and resources that it did not foresee at the inception of
the lease. It thereafter communicated its non-conformity
to the assignment. To the mind of the Court, there was
never a delay. Simedarby Pilipinas, Inc. vs. Goodyear
Philippines, Inc., et al./Goodyear Philippines, Inc. vs. Sime
Darby Pilipinas, Inc. et al.; G.R. No. 182148/G.R. No.
183210. June 8, 2011.

Lease; assignment of lease; need for consent. Article

1649 of the New Civil Code provides:
Art. 1649. The lessee cannot assign the lease without the
consent of the lessor, unless there is a stipulation to the
contrary. (n)

In an assignment of a lease, 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. Thereafter, a new juridical
relation arises between the two persons who remain the
lessor and the assignee who is converted into the new
lessee. The objective of the law in prohibiting the
assignment of the lease without the lessors consent is to
protect the owner or lessor of the leased property.

The consent of the lessor to an assignment of lease may

indeed be given expressly or impliedly. It need not be
given simultaneously with that of the lessee and of the
assignee. Neither is it required to be in any specific or
particular form. It must, however, be clearly given. In this
case, it cannot be said that Macgraphics gave its implied
consent to the assignment of lease. Simedarby Pilipinas,
Inc. vs. Goodyear Philippines, Inc., et al./Goodyear
Philippines, Inc. vs. Sime Darby Pilipinas, Inc. et al., G.R.
No. 182148/G.R. No. 183210. June 8, 2011

Legal Interest. Since the obligation herein is for the

payment of a sum of money, the legal interest rate to be
imposed, under Article 2209 of the Civil Code is 6% per
annum:
Art. 2209. 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,
which is six per cent per annum.

Following the guidelines above, the legal interest of 6%

per annum is to be imposed from November 16, 1997, the
date of the last demand, and 12% in lieu of 6% from the
date this decision becomes final until fully paid. Republic
of the Philippines, represented by the chief, Philippine
National Police vs. Thi Thu Thuy De Guzman,G.R. No.
175021. June 15, 2011.

Loan; perfection. Under Article 1934 of the Civil Code, a

loan contract is perfected only upon the delivery of the
object of the contract. In this case, although petitioners
applied for a P3 million loan, only the amount of P1 million
was approved by the bank because petitioners became
collaterally deficient when they failed to purchase TCT No.
T-227331 which had an appraised value of P1,944,000.00.
Hence, on March 17, 1997, only the amount of P1 million
was released by the bank to petitioners.

Upon receipt of the approved loan on March 17, 1997,

petitioners executed a promissory note for the amount of
P1 million. As security for the P1 million loan, petitioners
on the same day executed in favor of the bank a real
estate mortgage over the properties covered by TCT Nos.
T-237695, T-237696, T-237698, T-143683, T-143729,
T-225131 and T-225132. Clearly, contrary to the findings
of the RTC, the loan contract was perfected on March 17,
1997 when petitioners received the P1 million loan, which
was the object of both the promissory note and the real
estate mortgage executed by petitioners in favor of the
bank. Spouses Wilfredo and Brigida Palada vs. Solidbank
Corporation, et al., G.R. No. 172227. June 29, 2011

Marriage; annulment by reason of psychological

incapacity. The Court held that the lower court did not
commit grave abuse when it dismissed the petition for
annulment of marriage, so the case really turned on a
procedural issue. Danilo A. Aurelio vs. Vida Ma. Corazon
P. Aurelio, G.R. No. 175367. June 6, 2011

Medical malpractice. An integral part of physicians overall

obligation to patient is the duty of reasonable disclosure
of available choices with respect to proposed therapy and
of dangers inherently and potentially involved in each.
However, the physician is not obliged to discuss relatively
minor risks inherent in common procedures when it is
common knowledge that such risks inherent in procedure
of very low incidence. Cited as exceptions to the rule that
the patient should not be denied the opportunity to weigh
the risks of surgery or treatment are emergency cases
where it is evident he cannot evaluate data, and where the
patient is a child or incompetent. The court thus
concluded that the patients right of self-decision can only
be effectively exercised if the patient possesses adequate
information to enable him in making an intelligent choice.
The scope of the physicians communications to the
patient, then must be measured by the patients need,
and that need is whatever information is material to the
decision. The test therefore for determining whether a
potential peril must be divulged is its materiality to the
patients decision.

Cobbs v. Grant reiterated the pronouncement in

Canterbury v. Spence that for liability of the physician for
failure to inform patient, there must be causal relationship
between physicians failure to inform and the injury to
patient and such connection arises only if it is established
that, had revelation been made, consent to treatment
would not have been given.

There are four essential elements a plaintiff must prove in

a malpractice action based upon the doctrine of informed
consent: (1) the physician had a duty to disclose material
risks; (2) he failed to disclose or inadequately disclosed
those risks; (3) as a direct and proximate result of the
failure to disclose, the patient consented to treatment she
otherwise would not have consented to; and (4) plaintiff
was injured by the proposed treatment. The gravamen in
an informed consent case requires the plaintiff to point to
significant undisclosed information relating to the
treatment which would have altered her decision to
undergo it.

The element of ethical duty to disclose material risks in

the proposed medical treatment cannot thus be reduced
to one simplistic formula applicable in all instances.
Further, in a medical malpractice action based on lack of
informed consent, the plaintiff must prove both the duty
and the breach of that duty through expert testimony. Dr.
Rubi Li vs. Spouses Reynaldo and Lina Soliman as
parents/heirs of deceased Angelica Soliman, G.R. No.
165279. June 7, 2011

Ownership, co-ownership. The portions belonging to the

co-owners in the co-ownership shall be presumed equal,
unless the contrary is proved. Aurora L. Tecson, et al. v.
Minverva, Maria, et al. all surnamed Fausto and Isabel
Vda. De Fausto; G.R. No. 180683. June 1, 2011

Ownership; possession. Possession is an essential

attribute of ownership. Necessarily, whoever owns the
property has the right to possess it. Here, between the
Almerias registered title of ownership and Gaiteros
verbal claim to the same, the formers title is far superior.

As the MCTC, the RTC, and the CA found, the disputed

area forms part of the Almerias registered title. Upon
examination, this fact is also confirmed by the subdivision
plan which partitioned Tomagans original Lot 9960. The
evidence shows that the Almerias bought Lot 9964, which
includes the disputed area, from the Asenjo heirs in
whose names the land was originally registered. Since
Gaitero was unable to prove that fraud attended the titling
of the disputed area, the Almerias right over the same
became indefeasible and incontrovertible a year from
registration.

The Court cannot consider Gaiteros claim of ownership

of the disputed area, based on his alleged continuous
possession of the same, without running afoul of the rule
that bars collateral attacks of registered titles. Gaiteros
action before the MCTC is one for recovery of possession
of the disputed area. An adjudication of his claim of
ownership over the same would be out of place in such
kind of action. A registered title cannot be impugned,
altered, changed, modified, enlarged, or diminished,
except in a direct proceeding permitted by law.
Otherwise, reliance on registered titles would be lost.
Gaiteros action is prohibited by law and should be
dismissed.

Gaiteros theory of laches cannot vest on him the

ownership of the disputed area. To begin with, laches is a
consideration in equity and therefore, anyone who
invokes it must come to court with clean hands, for he
who has done inequity shall not have equity. Here,
Gaiteros claim of laches against the Almerias can be
hurled against him. When the lot that the Almerias
acquired (Lot 9964) was registered in 1979, Gaitero had
constructive, if not actual, notice that the cadastral survey
included the disputed area as part of the land that Leon
Asenjo claimed. Yet, neither Gaitero nor his mother
complained or objected to such inclusion.

Worse, when Gaitero saw the subdivision plan covering

Tomagans original Lot 9960 in 1993, it showed that the
disputed area fell outside the boundaries of Lot 9960-A
which he claimed. Still, Gaitero did nothing to correct the
alleged mistake. He is by his inaction clearly estopped
from claiming ownership of the disputed area. He cannot
avail himself of the law of equity. Feliciano Gaitero and
Nelia Gaitero vs. Generoso Almeria and Teresita Almeria,
G.R. No. 181812. June 8, 2011

Payment; extinguishment of obligation. The RTC and the

Court of Appeals correctly ruled that the petitioners
obligation has not been extinguished. The petitioners
obligation consists of payment of a sum of money. In
order for petitioners payment to be effective in
extinguishing its obligation, it must be made to the proper
person. Article 1240 of the Civil Code states:

Art. 1240. Payment shall be made to the person in whose

favor the obligation has been constituted, or his
successor in interest, or any person authorized to receive
it.
In Cembrano v. City of Butuan, this Court elucidated on
how payment will effectively extinguish an obligation, to
wit:

Payment made by the debtor to the person of the creditor

or to one authorized by him or by the law to receive it
extinguishes the obligation. When payment is made to the
wrong party, however, the obligation is not extinguished
as to the creditor who is without fault or negligence even
if the debtor acted in utmost good faith and by mistake as
to the person of the creditor or through error induced by
fraud of a third person.

In general, a payment in order to be effective to discharge

an obligation, must be made to the proper person. Thus,
payment must be made to the obligee himself or to an
agent having authority, express or implied, to receive the
particular payment. Payment made to one having
apparent authority to receive the money will, as a rule, be
treated as though actual authority had been given for its
receipt. Likewise, if payment is made to one who by law is
authorized to act for the creditor, it will work a discharge.
The receipt of money due on a judgment by an officer
authorized by law to accept it will, therefore, satisfy the
debt.

The respondent was able to establish that the LBP check

was not received by her or by her authorized personnel.
The PNPs own records show that it was claimed and
signed for by Cruz, who is openly known as being
connected to Highland Enterprises, another contractor.
Hence, absent any showing that the respondent agreed to
the payment of the contract price to another person, or
that she authorized Cruz to claim the check on her behalf,
the payment, to be effective must be made to her.
Republic of the Philippines, represented by the chief,
Philippine National Police vs. Thi Thu Thuy De Guzman;
G.R. No. 175021. June 15, 2011

Rescission. Granting that a rescission can be permitted

under Article 1191, the Court still cannot allow it for the
reason that, considering the circumstances, there was
only a slight or casual breach in the fulfillment of the
obligation. Unless the parties stipulated it, rescission is
allowed only when the breach of the contract is
substantial and fundamental to the fulfillment of the
obligation. Whether the breach is slight or substantial is
largely determined by the attendant circumstances. Mila
A. Reyes v. Victoria T. Tuparan, G.R. No. 188064. June 1,
2011

Sale; contract of sale vs. contract to sell; no rescission in

contract to sell. The subject Deed of Conditional Sale with
Assumption of Mortgage entered into by and among the
two parties and FSL Bank onNovember 26, 1990 is a
contract to sell and not a contract of sale. The subject
contract was correctly classified as a contract to sell
based on the following pertinent stipulations:
8. That the title and ownership of the subject real
properties shall remain with the First Party until the full
payment of the Second Party of the balance of the
purchase price and liquidation of the mortgage obligation
of 2,000,000.00. Pending payment of the balance of the
purchase price and liquidation of the mortgage obligation
that was assumed by the Second Party, the Second Party
shall not sell, transfer and convey and otherwise
encumber the subject real properties without the written
consent of the First and Third Party.

9. That upon full payment by the Second Party of the full

balance of the purchase price and the assumed mortgage
obligation herein mentioned the Third Party shall issue the
corresponding Deed of Cancellation of Mortgage and the
First Party shall execute the corresponding Deed of
Absolute Sale in favor of the Second Party.

Based on the above provisions, the title and ownership of

the subject properties remains with the petitioner until the
respondent fully pays the balance of the purchase price
and the assumed mortgage obligation. Thereafter, FSL
Bank shall then issue the corresponding deed of
cancellation of mortgage and the petitioner shall execute
the corresponding deed of absolute sale in favor of the
respondent.

Accordingly, the petitioners obligation to sell the subject

properties becomes demandable only upon the
happening of the positive suspensive condition, which is
the respondents full payment of the purchase price.
Without respondents full payment, there can be no
breach of contract to speak of because petitioner has no
obligation yet to turn over the title. Respondents failure to
pay in full the purchase price is not the breach of contract
contemplated under Article 1191 of the New Civil Code
but rather just an event that prevents the petitioner from
being bound to convey title to the respondent. Mila A.
Reyes v. Victoria T. Tuparan, G.R. No. 188064. June 1,
2011

Sale; innocent purchaser for value. The remaining bar to

the recovery by the respondents of the excess area held
by Atty. Tecson is the principle of an innocent purchaser
for value of land under the Torrens System of Registration.

The petitioners claim that they are bona fide purchasers

of the entire nine hundred sixty-four (964) square meters
of land covered by Lot 2189-Bwith Aurora merely
relying on the strength of TCT No. T-4,336 in the name of
Waldetrudes, while Atty. Tecson placing confidence in
TCT No. T-4,338 in the name of Aurora. Both TCT Nos.
T-4,336 and T-4,338 define the area of Lot 2189-B as nine
hundred sixty-four (964) square meters. The petitioners
allege that at the time they made their respective
purchase, they did not know of the existing partition of
Lot 2189 per the First Plan and the First Partition
Agreement.
But the proven facts indicate that Atty. Tecson knew or, at
the very least, should have known that Atty. Fausto and
Waldetrudes were co-owners in equal share of Lot 2189.
The Court noted the following circumstances:

1. Atty. Tecson was a long-time friend and neighbor of

the Faustos. Atty. Tecson himself testified that he
considered Atty. Fausto as a good friend and even
admitted that he would sometimes visit the latter in
his house to play mahjong. By this, Atty. Tecson knew
that Atty. Fausto has an actual interest in Lot 2189.
2. Atty. Tecson was the one who presented the Second
Partition Agreement to Waldetrudes and the respondents;

3. Waldetrudes and the respondents were not involved in

the preparation of the Second Partition Agreement and, at
the time they signed the said agreement, had no
knowledge of the existence of the Second Plan; and

4. The Second Partition Agreement failed to state the

specific areas allotted for each component of Lot 2189
and made no mention of the division proposed by the
Second Plan. Aurora L. Tecson, et al. v. Minverva, Maria,
et al. all surnamed Fausto and Isabel Vda. De Fausto;
G.R. No. 180683. June 1, 2011

Unjust enrichment. Unjust enrichment exists 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. Under Art. 22 of the Civil Code, there
is unjust enrichment when (1) a person is unjustly
benefited, and (2) such benefit is derived at the expense
of or with damages to another. The term is further used to
depict result or effect of failure to make remuneration of or
for property or benefits received under circumstances that
give rise to legal or equitable obligation to account for
them; to be entitled to remuneration, one must confer
benefit by mistake, fraud, coercion, or request.

In order for an unjust enrichment claim to prosper, one

must not only prove that the other party benefited from
ones efforts or the obligations of others; it must also be
shown that the other party was unjustly enriched in the
sense that the term unjustly could mean illegally or
unlawfully. LCDC was aware that the escalation
agreement was limited to P36 million. It is not entitled to
remuneration of the excess, since it did not confer this
benefit by mistake, fraud, coercion, or request. Rather, it
voluntarily infused the excess amount with full knowledge
that PRHC had no obligation to reimburse it. Philippine
Realty and Holding Corp. vs. Ley Const. and Dev. Corp./
Ley Cons. and Dev. Corp. vs. Philippine Realty and
Holding Corp., G.R. No. 165548/G.R. No. 167879. June
13, 2011

Special Laws
Land registration. Section 14(1) of the Property
Registration Decree has three requisites for registration of
title: (a) that the property in question is alienable and
disposable land of the public domain; (b) that the
applicants by themselves or through their predecessors-
in-interest have been in open, continuous, exclusive and
notorious possession and occupation; and (c) that such
possession is under a bona fide claim of ownership since
June 12, 1945 or earlier.

A similar right is granted under Sec. 48(b) of the Public

Land Act. There are no material differences between Sec.
14(1) of the Property Registration Decree and Sec. 48(b)
of the Public Land Act. Sec. 14(1) operationalizes the
registration of such lands of the public domain.

Here, the only reason the CA gave in reversing the

decision of the MeTC is that Victoria failed to submit the
November 6, 2006 Certification issued by the DENR,
verifying the subject property as within the alienable and
disposable land of the public domain, during the hearing
before the MeTC. She belatedly submitted it on appeal.

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 pubic 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.

In Llanes v. Republic, the Court allowed consideration of a

CENRO Certification though it was only presented during
appeal to the CA to avoid a patent unfairness. The rules
of procedure being mere tools designed to facilitate the
attainment of justice, the Court is empowered to suspend
their application to a particular case when its rigid
application tends to frustrate rather than promote the
ends of justice. Denying the application for registration
now on the ground of failure to present proof of the status
of the land before the trial court and allowing Victoria to
re-file her application would merely unnecessarily
duplicate the entire process, cause additional expense
and add to the number of cases that courts must resolve.
It would be more prudent to recognize the DENR
Certification and resolve the matter now.
Besides, the record shows that the subject property was
covered by a cadastral survey of Taguig conducted by the
government at its expense. Such surveys are carried out
precisely to encourage landowners and help them get
titles to the lands covered by such survey. It does not
make sense to raise an objection after such a survey that
the lands covered by it are inalienable land of the public
domain, like a public forest. This is the City of Taguig in
the middle of the metropolis.

The CA also erred in not affirming the decision of the

MeTC especially since Victoria has, contrary to the
Solicitor Generals allegation, proved that she and her
predecessors-in-interest had been in possession of the
subject lot continuously, uninterruptedly, openly, publicly,
adversely and in the concept of owners since the early
1940s. In fact, she has submitted tax declarations
covering the land way back in 1948 that appeared in her
fathers name. Natividad Sts. Ana Victoria v. Republic of
the Philippines, G.R. No. 179673. June 8, 2011

Lease; financial lease; liability of registered owner. In

accordance with the law on compulsory motor vehicle
registration, this Court has consistently ruled that, with
respect to the public and third persons, the registered
owner of a motor vehicle is directly and primarily
responsible for the consequences of its operation
regardless of who the actual vehicle owner might be.
Well-settled is the rule that the registered owner of the
vehicle is liable for quasi-delicts resulting from its use.
Thus, even if the vehicle has already been sold, leased, or
transferred to another person at the time the vehicle
figured in an accident, the registered vehicle owner would
still be liable for damages caused by the accident. The
sale, transfer or lease of the vehicle, which is not
registered with the Land Transportation Office, will not
bind third persons aggrieved in an accident involving the
vehicle. The compulsory motor vehicle registration
underscores the importance of registering the vehicle in
the name of the actual owner. FEB Leasing and Finance
Corporation (now BPI Leasing Corp.) vs. Sps. Sergio P.
Baylon and Maritess Villena Baylon, et al.; G.R. No.
181398. June 29, 2011

P.D. No. 1083; Muslim personal laws. If both parties are

Muslims, there is a presumption that the Muslim Code or
Muslim law is complied with. If together with it or in
addition to it, the marriage is likewise solemnized in
accordance with the Civil Code of the Philippines, in a so-
called combined Muslim-Civil marriage rites whichever
comes first is the validating rite and the second rite is
merely ceremonial one. But, in this case, as long as both
parties are Muslims, this Muslim Code will apply. In effect,
two situations will arise, in the application of this Muslim
Code or Muslim law, that is, when both parties are
Muslims and when the male party is a Muslim and the
marriage is solemnized in accordance with Muslim Code
or Muslim law. A third situation occur[s] when the Civil
Code of the Philippines will govern the marriage and
divorce of the parties, if the male party is a Muslim and
the marriage is solemnized in accordance with the Civil
Code.

Moreover, the two experts, in the same book,

unequivocally state that one of the effects of irrevocable
talaq, as well as other kinds of divorce, refers to
severance of matrimonial bond, entitling one to remarry.

It stands to reason therefore that Zamoranos divorce

from De Guzman, as confirmed by an Ustadz and Judge
Jainul of the Sharia Circuit Court, and attested to by
Judge Usman, was valid, and, thus, entitled her to
remarry Pacasum in 1989. Consequently, the RTC,
Branch 6, Iligan City, is without jurisdiction to try
Zamoranos for the crime of Bigamy. Atty. Marietta D.
Zamoranos v. People of the Philippines and Samson R.
Pacasum, Sr./Atty. Marietta D. Zamoranos v. Samson R.
Pacasum, Sr./Samson R. Pacasum, Sr. v. Atty. Marietta D.
Zamoranos, G.R. No. 193902/G.R. No. 193908 and G.R.
No. 194075. June 1, 2011

R.A. No. 26; reconstitution of title. The non-compliance

with the requirements prescribed in Sections 12 and 13 of
R.A. No. 26 is fatal. Hence, the trial court did not acquire
jurisdiction over the petition for reconstitution. The
Supreme Court, as early as 1982, ruled that Republic Act
No. 26 entitled An act providing a special procedure for
the reconstitution of Torrens Certificates of Title lost or
destroyed approved on September 25, 1946 confers
jurisdiction or authority to the Court of First Instance to
hear and decide petitions for judicial reconstitution. The
Act specifically provides the special requirements and
mode of procedure that must be followed before the court
can properly act, assume and acquire jurisdiction or
authority over the petition and grant the reconstitution
prayed for. These requirements and procedure are
mandatory. The Petition for Reconstitution must allege
certain specific jurisdictional facts; the notice of hearing
must be published in the Official Gazette and posted in
particular places and the same sent or notified to
specified persons. Sections 12 and 13 of the Act provide
specifically the mandatory requirements and procedure to
be followed.

These defects are not just technical. Liberal

construction of the Rules of Court does not apply to land
registration cases. Indeed, to further underscore the
mandatory character of these jurisdictional requirements,
the Rules of Court do not apply to land registration cases.
In all cases where the authority of the courts to proceed is
conferred by a statute, and when the manner of obtaining
jurisdiction is prescribed by a statute, the mode of
proceeding is mandatory, and must be strictly complied
with, or the proceeding will be utterly void When the trial
court lacks jurisdiction to take cognizance of a case, it
lacks authority over the whole case and all its aspects. All
the proceedings before the trial court, including its order
granting the petition for reconstitution, are void for lack of
jurisdiction. Bienbenido Castillo vs. Republic of the
Philippines, G.R. No. 182980. June 22, 2011

April 2011 Philippine Supreme Court Decisions on

CivilLaw

Civil Code

Conjugal partnership property; mortgage; consent of

spouse. The husband cannot alienate or encumber any
conjugal real property without the consent, express or
implied, of the wife. Should the husband do so, then the
contract is voidable. Article 173 of the Civil Code allows
Aguete to question Ros encumbrance of the subject
property. However, the same article does not guarantee
that the courts will declare the annulment of the contract.
Annulment will be declared only upon a finding that the
wife did not give her consent. In the present case, we
follow the conclusion of the appellate court and rule that
Aguete gave her consent to Ros encumbrance of the
subject property.

The application for loan shows that the loan would be

used exclusively for additional working [capital] of buy &
sell of garlic & virginia tobacco. In her testimony, Aguete
confirmed that Ros engaged in such business, but
claimed to be unaware whether it prospered. Aguete was
also aware of loans contracted by Ros, but did not know
where he wasted the money. Debts contracted by the
husband for and in the exercise of the industry or
profession by which he contributes to the support of the
family cannot be deemed to be his exclusive and private
debts. Joe A. Ros and Estrella Aguetev. Philippine
National Bank, Laoag Branch, G.R. No. 170166.April 6,
2011.

Contract; determinacy of object. That the kasunduan did

not specify the technical boundaries of the property did
not render the sale a nullity. The requirement that a sale
must have for its object a determinate thing is satisfied as
long as, at the time the contract is entered into, the object
of the sale is capable of being made determinate without
the necessity of a new or further agreement between the
parties. As portion of the kasunduan shows, there is no
doubt that the object of the sale is determinate. Domingo
Carabeo v.Spouses Dingco, G.R. No. 190823,April 4,
2011.

Loan; remedies of mortgage-creditor; unjust enrichment

defeats rule prohibiting multiplicity of suits. In Chieng v.
Santos, this Court ruled that a mortgage-creditor may
institute against the mortgage-debtor either a personal
action for debt or a real action to foreclose the mortgage.
The Court ruled that the remedies are alternative and not
cumulative and held that the filing of a criminal action for
violation of Batas Pambansa Blg. 22 was in effect a
collection suit or a suit for the recovery of the mortgage-
debt. In that case, however, this Court pro hac vice, ruled
that respondents could still be held liable for the balance
of the loan, applying the principle that no person may
unjustly enrich himself at the expense of another.

The principle of unjust enrichment is provided under

Article 22 of the Civil Code which provides:

Art. 22. Every 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 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.

The main objective of the principle against unjust

enrichment is to prevent one from enriching himself at the
expense of another without just cause or consideration.
The principle is applicable in this case considering that
Edna admitted obtaining a loan from petitioners, and the
same has not been fully paid without just cause. The
Deed was declared void erroneously at the instance of
Edna, first when she raised it as a defense before the
RTC, Branch 33 and second, when she filed an action for
declaratory relief before the RTC, Branch 93. Petitioner
could not be expected to ask the RTC, Branch 33 for an
alternative remedy, as what the Court of Appeals ruled
that he should have done, because the RTC, Branch 33
already stated that it had no jurisdiction over any personal
action that petitioner might have against Edna.

Considering the circumstances of this case, the principle

against unjust enrichment, being a substantive law,
should prevail over the procedural rule on multiplicity of
suits. The Court of Appeals, in the assailed decision,
found that Edna admitted the loan, except that she
claimed it only amounted to P340,000. Edna should not
be allowed to unjustly enrich herself because of the
erroneous decisions of the two trial courts when she
questioned the validity of the Deed. Moreover, Edna still
has an opportunity to submit her defenses before the
RTC, Branch 42 on her claim as to the amount of her
indebtedness. Arturo Sarte Floresv. Spouses Enrico L.
Lindo, Jr. and Edna C. Lindo, G.R. No. 183984.April 13,
2011

Moral damages; pre-requisites for an award. In prayers for

moral damages, recovery is more an exception rather
than the rule. Moral damages are not meant to be
punitive but are designed to compensate and alleviate the
physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock,
social humiliation, and similar harm unjustly caused to a
person. To be entitled to such an award, the claimant
must satisfactorily prove that he has suffered damages
and that the injury causing it has sprung from any of the
cases listed in Articles 2219 and 2220 of the Civil Code.
Moreover, the damages must be shown to be the
proximate result of a wrongful act or omission. The
claimant must thus establish the factual basis of the
damages and its causal tie with the acts of the defendant.

In fine, an award of moral damages calls for the

presentation of 1) evidence of besmirched reputation or
physical, mental or psychological suffering sustained by
the claimant; 2) a culpable act or omission factually
established; 3) proof that the wrongful act or omission of
the defendant is the proximate cause of the damages
sustained by the claimant; and 4) the proof that the act is
predicated on any of the instances expressed or
envisioned by Article 2219 and Article 2220 of the Civil
Code.

In the present case, respondent failed to establish by

clear and convincing evidence that the injuries he
sustained were the proximate effect of petitioners act or
omission. It thus becomes necessary to instead look into
the manner by which petitioner carried out his renovations
to determine whether this was directly responsible for any
distress respondent may have suffered since the law
requires that a wrongful or illegal act or omission must
have preceded the damages sustained by the claimant.

It bears noting that petitioner was engaged in the lawful

exercise of his property rights to introduce renovations to
his abode. While he initially did not have a building permit
and may have misrepresented his real intent when he
initially sought respondents consent, the lack of the
permit was inconsequential since it only rendered
petitioner liable to administrative sanctions or penalties.

The testimony of petitioner and his witnesses, specifically

Architect Punzalan, demonstrates that they had actually
taken measures to prevent, or at the very least, minimize
the damage to respondents property occasioned by the
construction work. Architect Punzalan details how upon
reaching an agreement with petitioner for the construction
of the second floor, he (Punzalan) surveyed petitioners
property based on the Transfer Certificate of Title (TCT)
and Tax Declarations and found that the perimeter wall
was within the confines of petitioners property; that he,
together with petitioner, secured the consent of the
neighbors (including respondent) prior to the start of the
renovation as reflected in a Neighbors Consent dated
June 12, 1998; before the construction began, he
undertook measures to prevent debris from falling into
respondents property such as the installation of GI sheet
strainers, the construction of scaffoldings on respondents
property, the instructions to his workers to clean the area
before leaving at 5:00 p.m; and that the workers
conducted daily clean-up of respondents property with
his consent, until animosity developed between the
parties.

Malice or bad faith implies a conscious and intentional

design to do a wrongful act for a dishonest purpose or
moral obliquity; it is different from the negative idea of
negligence in that malice or bad faith contemplates a
state of mind affirmatively operating with furtive design or
ill will. While the Court harbors no doubt that the incidents
which gave rise to this dispute have brought anxiety and
anguish to respondent, it is unconvinced that the damage
inflicted upon respondents property was malicious or
willful, an element crucial to merit an award of moral
damages under Article 2220 of the Civil Code. Rodolfo N.
Regalav. Federico P. Carin, G.R. No. 188715,April 6,
2011.

Sale; purchaser in good faith. A purchaser 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, and pays the full and fair price for it at the time
of such purchase or before he has notice of the claim or
interest of some other persons in the property. He buys
the property with the belief that the person from whom he
receives the thing was the owner and could convey title to
the property. He cannot close his eyes to facts that
should put a reasonable man on his guard and still claim
he acted in good faith. It is undisputed that respondents
were neighbors of petitioners and even co-owners of land
under TCT No. 8582. Respondents have also dealt with
the Tamanis in the past, having mortgaged their property
together when respondents availed of a loan from the
Government Service Insurance System. Thus, it is
inconceivable for respondents not to know that
petitioners had been exercising open, continuous and
notorious possession over the property. Like Cruz,
respondents should have ascertained the lands identity
and character given that houses were standing on the
land in dispute and petitioners had been leasing the same
to tenants. Maria Lourdes Tamani, et al.v. Ramon
Salvador, et al., G.R. No. 171497.April 4, 2011

Trust; fiduciary obligation. In seeking to establish a

fiduciary obliation on the part of Cojuangco, the Republic
invokes the following provisions of the Civil Code:

Article 1455. When any trustee, guardian or other person

holding a fiduciary relationship uses trust funds for the
purchase of property and causes the conveyance to be
made to him or to a third person, a trust is established by
operation of law in favor of the person to whom the funds
belong.

Article 1456. If property is acquired through mistake or

fraud, the person obtaining its by force of law, considered
a trustee of an implied trust for the benefit of the person
from whom the property comes.

and the Corporation Code, as follows:

Section 31. Liability of directors, trustees or officers.

Directors or trustees who willfully and knowingly vote for
or assent to patently unlawful acts of the corporation or
who are guilty of gross negligence or bad faith in directing
the affairs of the corporation or acquire any personal or
pecuniary interest in conflict with their duty as such
directors, or trustees shall be liable jointly and severally
for all damages resulting therefrom suffered by the
corporation, its stockholders or members and other
persons.

When a director, trustee or officer attempts to acquire or

acquires, in violation of his duty, any interest adverse to
the corporation in respect of any matter which has been
reposed in him in confidence, as to which equity imposes
a disability upon him to deal in his own behalf, he shall be
liable as a trustee for the corporation and must account
for the profits which otherwise would have accrued to the
corporation.

Did Cojuangco breach his fiduciary duties as an officer

and member of the Board of Directors of the UCPB? Did
his acquisition and holding of the contested SMC shares
come under a constructive trust in favor of the Republic?
The answers to these queries are in the negative.

The conditions for the application of Articles 1455 and

1456 of the Civil Code (like the trustee using trust funds to
purchase, or a person acquiring property through mistake
or fraud), and Section 31 of the Corporation Code (like a
director or trustee willfully and knowingly voting for or
assenting to patently unlawful acts of the corporation,
among others) require factual foundations to be first laid
out in appropriate judicial proceedings. Concluding that
Cojuangco breached fiduciary duties as an officer and
member of the Board of Directors of the UCPB without
competent evidence thereon would be unwarranted and
unreasonable.

For one, the Amended Complaint contained no clear

factual allegation on which to predicate the application of
Articles 1455 and 1456 of the Civil Code, and Section 31
of the Corporation Code. Although the trust relationship
supposedly arose from Cojuangcos being an officer and
member of the Board of Directors of the UCPB, the link
between this alleged fact and the borrowings or advances
was not established. Nor was there evidence on the
loans or borrowings, their amounts, the approving
authority, etc.

The thrust of the Republic that the funds were borrowed

or lent might even preclude any consequent trust
implication. In a contract of loan, one of the parties
(creditor) delivers money or other consumable thing to
another (debtor) on the condition that the same amount of
the same kind and quality shall be paid. Owing to the
consumable nature of the thing loaned, the resulting duty
of the borrower in a contract of loan is to pay, not to
return, to the creditor or lender the very thing loaned. This
explains why the ownership of the thing loaned is
transferred to the debtor upon perfection of the contract.
Ownership of the thing loaned having transferred, the
debtor enjoys all the rights conferred to an owner of
property, including the right to use and enjoy (jus utendi),
to consume the thing by its use (jus abutendi), and to
dispose (jus disponendi), subject to such limitations as
may be provided by law. Evidently, the resulting
relationship between a creditor and debtor in a contract of
loan cannot be characterized as fiduciary.

To say that a relationship is fiduciary when existing laws

do not provide for such requires evidence that confidence
is reposed by one party in another who exercises
dominion and influence. Absent any special facts and
circumstances proving a higher degree of responsibility,
any dealings between a lender and borrower are not
fiduciary in nature. This explains why, for example, a trust
receipt transaction is not classified as a simple loan and is
characterized as fiduciary, because the Trust Receipts
Law (P.D. No. 115) punishes the dishonesty and abuse of
confidence in the handling of money or goods to the
prejudice of another regardless of whether the latter is the
owner.

Based on the foregoing, a debtor can appropriate the

thing loaned without any responsibility or duty to his
creditor to return the very thing that was loaned or to
report how the proceeds were used. Nor can he be
compelled to return the proceeds and fruits of the loan,
for there is nothing under our laws that compel a debtor in
a contract of loan to do so. As owner, the debtor can
dispose of the thing borrowed and his act will not be
considered misappropriation of the thing. The only liability
on his part is to pay the loan together with the interest
that is either stipulated or provided under existing laws.
Republic of the Philippinesv. Sandiganbayan, Eduardo M.
Cojuangco, et al., G.R. No. 166859, G.R. No. 169203,
G.R. No. 180702.April 12, 2011

March 2011 Philippine Supreme Court Decisions on

CivilLaw

Civil Code

Common carrier; breach of contract of carriage. There

existed a contract of carriage between G & S, as the
owner and operator of the Avis taxicab, and Jose Marcial,
as the passenger of said vehicle. As a common carrier, G
& S is bound to carry [Jose Marcial] safely as far as
human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all
the circumstances. However, Jose Marcial was not able
to reach his destination safely as he died during the
course of the travel. In a contract of carriage, it is
presumed that the common carrier is at fault or is
negligent when a passenger dies or is injured. In fact,
there is even no need for the court to make an express
finding of fault or negligence on the part of the common
carrier. This statutory presumption may only be overcome
by evidence that the carrier exercised extraordinary
diligence. Unfortunately, G & S miserably failed to
overcome this presumption. Both the trial court and the
CA found that the accident which led to Jose Marcials
death was due to the reckless driving and gross
negligence of G & S driver, Padilla, thereby holding G & S
liable to the heirs of Jose Marcial for breach of contract of
carriage.

That the driver was acquitted in the criminal case for

reckless imprudence is immaterial. Article 31 of the Civil
Code provides, viz:

When the civil action is based on an obligation not arising

from the act or omission complained of as a felony, such
civil action may proceed independently of the criminal
proceedings and regardless of the result of the latter.

In this case, the action filed by the heirs is primarily for the
recovery of damages arising from breach of contract of
carriage allegedly committed by G & S. Clearly, it is an
independent civil action arising from contract which is
separate and distinct from the criminal action for reckless
imprudence resulting in homicide filed by the heirs against
Padilla by reason of the same incident. Hence, regardless
of Padillas acquittal or conviction in said criminal case,
same has no bearing in the resolution of the present case.
Heirs of Jose Marcial K. Ochoa, namely: Ruby B. Ochoa,
et al. v. G & S Transport Corporation/G & S Transport
Corporation v. Heirs of Jose Marcial K. Ochoa, namely:
Ruby B. Ochoa, et al., G.R. No. 170071 & G.R. No.
170125,March 9, 2011.

Contract; voidable. A contract where consent is given

through mistake, violence, intimidation, undue influence,
or fraud is voidable. In determining whether consent is
vitiated by any of the circumstances mentioned, courts
are given a wide latitude in weighing the facts or
circumstances in a given case and in deciding in their
favor what they believe to have actually occurred,
considering the age, physical infirmity, intelligence,
relationship, and the conduct of the parties at the time of
the making of the contract and subsequent thereto,
irrespective of whether the contract is in public or private
writing. And, in order that mistake may invalidate
consent, it should refer to the substance of the thing
which is the object of the contract, or those conditions
which have principally moved one or both parties to enter
the contract. Cornelia M. Hernandez, substituted by
Lourdes H. Castillo v. Cecilio F. Hernandez, G.R. No.
158576,March 9, 2011.

Damages; loss of earning capacity. Clearly, the CA erred

in deleting the award for lost income on the ground that
the USAID Certification supporting such claim is self-
serving and unreliable. On the contrary, we find said
certification sufficient basis for the court to make a fair
and reasonable estimate of Jose Marcials loss of earning
capacity just like in Tamayo v. Seora where we based the
victims gross annual income on his pay slip from the
Philippine National Police. Hence, we uphold the trial
courts award for Jose Marcials loss of earning capacity.
Heirs of Jose Marcial K. Ochoa, namely: Ruby B. Ochoa,
et al. v. G & S Transport Corporation/G & S Transport
Corporation v. Heirs of Jose Marcial K. Ochoa, namely:
Ruby B. Ochoa, et al., G.R. No. 170071 & G.R. No.
170125,March 9, 2011

Damages; moral. While we deemed it proper to modify

the amount of moral damages awarded by the trial court
as discussed below, we nevertheless agree with the heirs
that the CA should not have pegged said award in
proportion to the award of exemplary damages. Moral
and exemplary damages are based on different jural
foundations. They are different in nature and require
separate determination. The amount of one cannot be
made to depend on the other. In Victory Liner Inc. v.
Gammad we awarded P100,000.00 by way of moral
damages to the husband and three children of the
deceased, a 39-year old Section Chief of the Bureau of
Internal Revenue, to compensate said heirs for the grief
caused by her death. This is pursuant to the provisions of
Articles 1764 and 2206(3) which provide:

Art. 1764. Damages in cases comprised in this Section

shall be awarded in accordance with Title XVIII of this
Book, concerning Damages. Articles 2206 shall also
apply to the death of a passenger caused by the breach
of contract by a common carrier.

Art. 2206. x x x

(3) The spouse, legitimate and illegitimate descendants

and the ascendants of the deceased may demand moral
damages for mental anguish by reason of the death of the
deceased.

Here, there is no question that the heirs are likewise

entitled to moral damages pursuant to the above
provisions, considering the mental anguish suffered by
them by reason of Jose Marcials untimely death. Heirs of
Jose Marcial K. Ochoa, namely: Ruby B. Ochoa, et al. v. G
& S Transport Corporation/G & S Transport Corporation v.
Heirs of Jose Marcial K. Ochoa, namely: Ruby B. Ochoa,
et al., G.R. No. 170071 & G.R. No. 170125,March 9, 2011
Damages; vicarious liability. Under Article 2180 of the
New Civil Code, when an injury is caused by the
negligence of the employee, there instantly arises a
presumption of law that there was negligence on the part
of the master or employer either in the selection of the
servant or employee, or in supervision over him after
selection or both. The liability of the employer under
Article 2180 is direct and immediate; it is not conditioned
upon prior recourse against the negligent employee and a
prior showing of the insolvency of such employee.
Therefore, it is incumbent upon the private respondents
(in this case, the petitioner) to prove that they exercised
the diligence of a good father of a family in the selection
and supervision of their employee. Filipinas Synthetic
Fiber Corporation v. Wilfredo De Los Santos, et al., G.R.
No. 152033.March 16, 2011

Land; alienable and disposable character; sufficient

evidence. The Advance Plans and Consolidated Plans are
hardly the competent pieces of evidence that the law
requires. The notation by a geodetic engineer on the
survey plans that properties are alienable and disposable
does not suffice to prove these lands classification.
Republic v. T.A.N. Properties, Inc. directs that:

[T]he applicant for 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. Respondent
failed to do so because the certifications presented by
respondent do not, by themselves, prove that the land is
alienable and disposable. (emphasis and underscoring
supplied)

Union Leaf Tobacco Corp., Rep. its Pres. Mr. Hilarion P.

Uy v. Republic of the Philippines, G.R. No. 185683.March
16, 2011

Loan; valid provision on interest rate. The Court has

previously upheld as valid the proviso in loans that the
interest rate would be made to depend on the prevailing
market rate. Such provision does not signify an
automatic increase in the interest. It simply means that
the bank may adjust the interest according to the
prevailing market rate. This may result to either an
increase or a decrease in the interest. Lotto Restaurant
Corporation, represented by SUAT KIM GO, v. BPI Family
Savings Bank, Inc.; G.R. No. 177260.March 30, 2011

Mortgage; foreclosure. As to BPIs right to foreclose,

the records show that Lotto defaulted in its obligation
when it unjustifiably stopped paying its amortizations after
the first year. Consequently, there is no question that BPI
(which succeeded DBS) had a clear right to foreclose on
Lottos collateral. The Court held in Equitable PCI Bank,
Inc. v. OJ-Mark Trading, Inc. that foreclosure is but a
necessary consequence of non-payment of mortgage
indebtedness. The creditor-mortgagee has the right to
foreclose the mortgage, sell the property, and apply the
proceeds of the sale to the satisfaction of the unpaid loan.
Lotto Restaurant Corporation, represented by SUAT KIM
GO, v. BPI Family Savings Bank, Inc.; G.R. No. 177260,
March 30, 2011

Mortgage; implied trust. An implied trust arising from

mortgage contracts is not among the trust relationships
the Civil Code enumerates. The Code itself provides,
however, that such listing does not exclude others
established by the general law on trust x x x. Under the
general principles on trust, equity converts the holder of
property right as trustee for the benefit of another if the
circumstances of its acquisition makes the holder
ineligible in x x x good conscience [to] hold and enjoy
[it]. As implied trusts are remedies against unjust
enrichment, the only problem of great importance in the
field of constructive trusts is whether in the numerous and
varying factual situations presented x x x there is a
wrongful holding of property and hence, a threatened
unjust enrichment of the defendant.

Applying these principles, this Court recognized

unconventional implied trusts in contracts involving the
purchase of housing units by officers of tenants
associations in breach of their obligations, the partitioning
of realty contrary to the terms of a compromise
agreement, and the execution of a sales contract
indicating a buyer distinct from the provider of the
purchase money. In all these cases, the formal holders of
title were deemed trustees obliged to transfer title to the
beneficiaries in whose favor the trusts were deemed
created. We see no reason to bar the recognition of the
same obligation in a mortgage contract meeting the
standards for the creation of an implied trust. Richard
Juan v. Gabriel Yap, Sr., G.R. No. 182177.March 30, 2011

Mortgage; pactum commissorium. 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. The elements
of pactum commissorium, which enable the mortgagee to
acquire ownership of the mortgaged property without the
need of any foreclosure proceedings, are: (1) there should
be a property mortgaged by way of security for the
payment of the principal obligation, and (2) there should
be a stipulation for automatic appropriation by the
creditor of the thing mortgaged in case of non-payment of
the principal obligation within the stipulated period.

The second element is missing to characterize the Deed

of Sale as a form of pactum commissorium. Veterans
Bank did not, upon the petitioners default, automatically
acquire or appropriate the mortgaged property for itself.
On the contrary, the Veterans Bank resorted to
extrajudicial foreclosure and was issued a Certificate of
Sale by the sheriff as proof of its purchase of the subject
property during the foreclosure sale. That Veterans Bank
went through all the stages of extrajudicial foreclosure
indicates that there was no pactum commissorium.
Spouses Fernando and Angelina Edralin v. Philippine
Veterans Bank, G.R. No. 168523, March 9, 2011.

Sale; execution of public instrument equivalent to delivery.

Article 1498 of the Civil Code provides that when the sale
is made through a public instrument, the execution
thereof shall be equivalent to the delivery of the thing
which is the object of the contract, if from the deed the
contrary does not appear or cannot clearly be inferred. In
the instant case, petitioners failed to present any evidence
to show that they had no intention of delivering the
subject lots to respondent when they executed the said
deed of sale. Hence, petitioners execution of the deed of
sale is tantamount to a delivery of the subject lots to
respondent. The fact that petitioners remained in
possession of the disputed properties does not prove that
there was no delivery, because as found by the lower
courts, such possession is only by respondents mere
tolerance. Anita Monasterio-Pe, et al. v. Jose Juan Tong,
herein represented by his Attorney-in-fact, Jose Y. Ong,
G.R. No. 151369.March 23, 2011

Surety. 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. The surety agreement is an accessory
contract; and the surety becomes directly, primarily, and
equally bound with the principal as the original promissor
although the former possesses no direct or personal
interest over the latters obligations and does not receive
any benefit therefrom. Star Two (SPV-AMC), Inc. v.
Howard Ko, et al., G.R. No. 185454.March 23, 2011

Special laws

P.D. No. 1529; alterations to titles. Petitioner is seeking

relief under the provisions of Section 108 of PD No. 1529,
otherwise known as the Property Registration Decree
(formerly Section 112 of Act No. 496, otherwise known as
the Land Registration Act) which provides as follows:

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 or inchoate appearing on the certificate, have
terminated and ceased; or that new interest not appearing
upon the certificate have arisen or been created; or that
an omission or error was made in entering a certificate or
any memorandum thereon, or, on any duplicate
certificate; or that the same or any person on the
certificate has been changed; or that the registered owner
has married, or, if registered as married, that the marriage
has been terminated and no right or interests of heirs or
creditors will thereby be affected; or that a corporation
which owned registered land and has been dissolved has
not convened the same within three years after its
dissolution; 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; Provided,
however, That this section shall not be construed to give
the court authority to reopen the judgment or decree of
registration, and that nothing shall be done or ordered by
the court which shall impair the title or other interest of a
purchaser holding a certificate for value and in good faith,
or his heirs and assigns, without his or their written
consent. Where the owners duplicate certificate is not
presented, a similar petition may be filed as provided in
the preceding section.
All petitions or motions filed under this Section as well as
under any other provision of this Decree after original
registration shall be filed and entitled in the original case
in which the decree or registration was entered.

While the abovequoted section, among other things,

authorizes a person in interest to ask the court for any
erasure, alteration, or amendment of a certificate of title or
of any memorandum appearing therein, the prevailing rule
is that proceedings thereunder are summary in nature,
contemplating corrections or insertions of mistakes which
are only clerical but certainly not controversial
issues.Relief under the said legal provision can only be
granted if there is unanimity among the parties, or that
there is no adverse claim or serious objection on the part
of any party in interest.

In the present case, there is no question that there is a

serious objection and an adverse claim on the part of an
interested party as shown by respondents opposition and
motion to dismiss the petition for correction of entry filed
by petitioner. The absence of unanimity among the parties
is also evidenced by respondents action for damages
and annulment of petitioners title over the subject parcel
of land docketed as Civil Case No. 414-M-97. In fact, the
RTC, in its decision in Civil Case No. 414-M-97, found
partial merit in respondents action so much so that it
ordered the cancellation of the TCT covering the subject
property in the name of petitioner. The RTC made a
categorical finding that the subject Certificate of Sale was
not registered with the Register of Deeds of Bulacan
leading to the conclusion that the one-year period within
which respondent may exercise his right of redemption
shall begin to run only after the said Certificate of Sale
has been registered. Thus, petitioner may not avail of the
remedy provided for under Section 108 of P.D. No. 1529.

In view of the established fact that the Certificate of Sale

covering the subject property was not registered, and
considering that there is nothing which prohibits petitioner
from registering the said Certificate of Sale, its most
logical and expedient recourse then is to register the
same with the Register of Deeds of Bulacan. Philippine
Veterans Bank v. Ramon Valenzuela, G.R. No.
163530,March 9, 2011.

P.D. No. 1529; requisites of registration of title. Based on

these legal parameters, 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 it is under a bona fide claim of
ownership since June 12, 1945, or earlier. These the
respondents must prove by no less than clear, positive
and convincing evidence. Republic of the Philippines vs.
Juanito Manimtim, et al., G.R. No. 169599, March 16,
2011

P.D. No. 1529; requisites for registration of title. Existing

law and jurisprudence provides that an applicant for
judicial confirmation of imperfect title must prove
compliance with Section 14 of Presidential Decree (P.D.)
No. 1529 or the Property Registration Decree. The
pertinent portions of Section 14 provide:

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 provisions of existing laws. x x x
x

Under Section 14 (1), applicants forregistrationof 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 abona fideclaim of ownership since
June 12, 1945, or earlier. Republic of the Philippines v.
Teodoro P. Rizalvo, Jr., G.R. No. 172011,March 7, 2011.

February 2011 Philippine Supreme Court Decisions on

CivilLaw

Civil Code

Contract; damages arising from breach of contract. The

Court finds that since petitioners complaint arose from a
contract, the doctrine of proximate cause, which is
relevant only in actions for quasi-delicts, finds no
application to it. What applies in the present case is
Article 1170 of the Civil Code which reads: [T]hose 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.
Breach of contract is defined as the failure without legal
reason to comply with the terms of a contract. It is also
defined as the failure, without legal excuse, to perform
any promise which forms the whole or part of the
contract. As for petitioners claim that respondent
departed from its verbal agreement with petitioners, the
same fails, given that the written contract which the
parties entered into the day before the event, being the
law between them. Spouses Luigi Guanio and Anna
Guanio v. Makati Shangri-la Hotel and Resort, Inc.; G.R.
No. 190601.February 7, 2011.

Contract; novation. There are two ways which could

indicate, in fine, the presence of novation and thereby
produce the effect of extinguishing an obligation by
another which substitutes the same. The first is when
novation has been explicitly stated and declared in
unequivocal terms. The second is when the old and the
new obligations are incompatible on every point. The test
of incompatibility is whether 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. Carolina
Hernandez-Nievera, et al. v. Wilfredo Hernandez, et al.;
G.R. No. 171165.February 14, 2011.
Contracts; rescissible; presumption of fraud in sale by
debtor; application to mortgage of property. The
presumption of fraud established under Art. 1387 does
not apply to registered lands IF the judgment or
attachment made is not also registered. In this case,
prior to the annotation of the REM on February 23, 1998,
SBC was able to successfully acquire a writ of preliminary
attachment in its favor against the spouses Lee on
January 30, 1998 in a case for a sum of money for
nonpayment of its obligation. Bangkok Bank alleges that
because of this, the presumption of fraud under Art. 1387
of the Civil Code applies. But while a judgment was
made against the spouses Lee in favor of SBC on January
30, 1998, this, however, was not annotated on the titles of
the subject properties. In fact, there is no showing that
the judgment has ever been annotated on the titles of the
subject properties. Considering that the earlier SBC
judgment or attachment was not, and in fact never was,
annotated on the titles of the subject Antipolo properties,
prior to the execution of the REM, the presumption of
fraud under Art. 1387 of the Code clearly cannot apply.

Also, even assuming Article 1387 of the Civil Code

applies, fraud is presumed only in alienations by onerous
title of a person against whom a judgment or attachment
has been issued. The term, alienation, connotes the
transfer of the property and possession of lands,
tenements, or other things, from one person to another.
This term is particularly applied to absolute conveyances
of real property and must involve a complete transfer
from one person to another. A mortgage does not
contemplate a transfer or an absolute conveyance of a
real property. It is an interest in land created by a written
instrument providing security for the performance of a
duty or the payment of a debt. When a debtor mortgages
his property, he merely subjects it to a lien but ownership
thereof is not parted with. It is merely a lien that neither
creates a title nor an estate. It is, therefore, certainly not
the alienation by onerous title that is contemplated in Art.
1387 where fraud is to be presumed.

Finally, a careful reading of Art. 1387 of the Code vis--vis

its Art. 1385 would plainly show that the presumption of
fraud in case of alienations by onerous title only applies to
the person who made such alienation, and against whom
some judgment has been rendered in any instance or
some writ of attachment has been issued. A third person
is not and should not be automatically presumed to be in
fraud or in collusion with the judgment debtor. In allowing
rescission in case of an alienation by onerous title, the
third person who received the property conveyed should
likewise be a party to the fraud. As clarified by Art. 1385
(2) of the Code, so long as the person who is in legal
possession of the property did not act in bad faith,
rescission cannot take place. Thus, in all instances, as to
the third person in legal possession of the questioned
property, good faith is presumed. Accordingly, it is upon
the person who alleges bad faith or fraud that rests the
burden of proof. Asiatrust, being a third person in good
faith, should not be automatically presumed to have acted
fraudulently by the mere execution of the REM over the
subject Antipolo properties, there being no evidence of
fraud or bad faith. Samuel U. Lee, et al. v. Bangkok Bank
Public Company, Limited; G.R. No. 173349.February 9,
2011.

Contract; validity of bidding rules. In joining the bid for

sugar importation, the sugar corporations are deemed to
have assented to the Bidding Rules, including the
forfeiture provision under paragraph G.1. The Bidding
Rules bind the sugar corporations. The latter cannot rely
on the lame excuse that they are not aware of the
forfeiture provision. At the trial, Teresita Tan testified that
the Bidding Rules were duly published in a newspaper of
general circulation. Vicente Cenzon, a sugar importer who
participated in the bidding for the 3rd tranche, testified
that he attended the pre-bid conference where the
Bidding Rules were discussed and copies of the same
were distributed to all the bidders.

The Bidding Rules passed through a consultative process

actively participated by various government agencies and
their counterpart in the private sector: the Department of
Agriculture, the National Economic Development
Authority, the Department of Trade and Industry, the
Department of Finance, the Sugar Regulatory
Administration, and a representative each from the sugar
planters group and the sugar millers group.

We find nothing in the forfeiture provision of the Bidding

Rules that is contrary to law, morals, good customs,
public order, or public policy. On the contrary, the
forfeiture provision fully supports government efforts to
aid the countrys ailing sugar industry. Conversion fees,
including those that are forfeited under paragraph G.1 of
the Bidding Rules, are automatically remitted to the
Bureau of Treasury and go directly to the Agricultural
Competitiveness Enhancement Fund. South Pacific
Sugar Corporation, et al. v. Court of Appeals and Sugar
Regulatory Administration G.R. No. 180462.February 9,
2011.

Damages; attorneys fees. It is well accepted in this

jurisdiction that no premium should be placed on the right
to litigate and that not every winning party is entitled to an
automatic grant of attorneys fees. Indeed, before the
effectivity of the new Civil Code, such fees could not be
recovered in the absence of a stipulation. It was only with
the advent of the new Civil Code that the right to collect
attorneys fees in the instances mentioned in Article 2208
was recognized, and such fees are now included in the
concept of actual damages. One such instance is where
the defendant is guilty of gross and evident bad faith in
refusing to satisfy the plaintiffs plainly valid, just and
demandable claim. This is a corollary of the general
principle expressed in Article 19 of the Civil Code that
everyone must, in the performance of his duties, observe
honesty and good faith and the rule embodied in Article
1170 that anyone guilty of fraud (bad faith) in the
performance of his obligation shall be liable for damages.

But, as noted by the Court in Morales v. Court of Appeals,

the award of attorneys fees is the exception rather than
the rule. The power of a court to award attorneys fees
under Article 2208 of the Civil Code demands factual,
legal, and equitable justification; its basis cannot be left to
speculation and conjecture. 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.

Herein, the element of bad faith on the part of Pilhino in

commencing and prosecuting Civil Case No. 21,898-93,
which was necessary to predicate the lawful grant of
attorneys fees based on Article 2208 (4) of the Civil Code,
was not established. Accordingly, the petitioners demand
for attorneys fees must fail. Spouses Moises and
Clemencia Andrada v. Pilhino Sales Corporation,
represented by its Branch Manager, Jojo S. Saet; G.R.
No. 156448.February 23, 2011.

Dishonor of check. This case involved certain loans for

which petitioner was an accommodation party. The
borrowers under the loans had defaulted triggering the
solidary liability of the accommodation party, and the
cancellation of the petitioners credit line with that bank
under a certain agreement. Consequently, one of the
petitioners checks was dishonored. The Supreme Court
held that the bank improperly dishonored the check of the
petitioner since it had failed to formally notify the
petitioner as accommodation party of the default under
the loan. Eusebio Gonzales v. Philippine Commercial &
International Bank, et al.; G.R. No. 180257.February 23,
2011.

Easement. An easement or servitude is an encumbrance

imposed upon an immovable for the benefit of another
immovable belonging to a different owner. There are two
kinds of easements according to source. An easement is
established either by law or by will of the owners. The
courts cannot impose or constitute any servitude where
none existed. They can only declare its existence if in
reality it exists by law or by the will of the owners. There
are therefore no judicial easements.

Article 684 of the Civil Code provides that no proprietor

shall make such excavations upon his land as to deprive
any adjacent land or building of sufficient lateral or
subjacent support. An owner, by virtue of his surface
right, may make excavations on his land, but his right is
subject to the limitation that he shall not deprive any
adjacent land or building of sufficient lateral or subjacent
support. Between two adjacent landowners, each has an
absolute property right to have his land laterally
supported by the soil of his neighbor, and if either, in
excavating on his own premises, he so disturbs the lateral
support of his neighbors land as to cause it, or, in its
natural state, by the pressure of its own weight, to fall
away or slide from its position, the one so excavating is
liable.]

In the instant case, an easement of subjacent and lateral

support exists in favor of respondent. It was established
that the properties of petitioner and respondent adjoin
each other. The residential house and lot of respondent is
located on an elevated plateau of fifteen (15) feet above
the level of petitioners property. The embankment and
the riprapped stones have been in existence even before
petitioner became the owner of the property. It was
proven that petitioner has been making excavations and
diggings on the subject embankment and, unless
restrained, the continued excavation of the embankment
could cause the foundation of the rear portion of the
house of respondent to collapse, resulting in the
destruction of a huge part of the family dwelling.
Margarita F. Castro v. Napoleon A. Monsod ; G.R. No.
183719.February 2, 2011.

Estoppel. Estoppel, an equitable principle rooted in

natural justice, prevents persons from going back on their
own acts and representations, to the prejudice of others
who have relied on them. The principle is codified in
Article 1431 of the Civil Code. Estoppel can also be found
in Rule 131, Section 2 (a) of the Rules of Court. The
elements of estoppel are: first, the actor who usually must
have knowledge, notice or suspicion of the true facts,
communicates something to another in a misleading way,
either by words, conduct or silence; second, the other in
fact relies, and relies reasonably or justifiably, upon that
communication; third, the other would be harmed
materially if the actor is later permitted to assert any claim
inconsistent with his earlier conduct; and fourth, the actor
knows, expects or foresees that the other would act upon
the information given or that a reasonable person in the
actors position would expect or foresee such action.
F.A.T. Kee Computer Systems, Inc. v. Online Networks
International, Inc.; G.R. No. 171238.February 2, 2011.

Estoppel. The inequity resulting from the abrogation of the

whole proceedings at the late stage when the decision
subsequently rendered was adverse to the persons
raising the issue of inadequacy of docket fee payment is
the evil being avoided by the equitable principle of
estoppel. David Lu v. Paterno Lu Ym, Sr., et al./Paterno
Lu Ym, Sr., et al. v. David Lu/John Lu Ym, et al. v. The
Hon. Court of Appeals of Ceby City, et al.; G.R. No.
153690/G.R. No. 157381/G.R. No. 170889.February 15,
2011.

Laches. The essence of laches or stale demands is the

failure or neglect for an unreasonable and unexplained
length of time to do that which, by exercising due
diligence, could or should have been done earlier, thus,
giving rise to a presumption that the party entitled to
assert it either has abandoned or declined to assert it. It is
not concerned with mere lapse of time; the fact of delay,
standing alone, being insufficient to constitute laches.

In addition, it is a rule of equity and applied not to

penalize neglect or sleeping on ones rights, but rather to
avoid recognizing a right when to do so would result in a
clearly unfair situation. There is no absolute rule as to
what constitutes laches or staleness of demand; each
case is to be determined according to its particular
circumstances. Ultimately, the question of laches is
addressed to the sound discretion of the court and, being
an equitable doctrine, its application is controlled by
equitable considerations. It cannot be used to defeat
justice or perpetrate fraud and injustice.It is the 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 be so, a manifest wrong or
injustice would result.

It is significant to point out at this juncture that the

overriding consideration in the instant case is that
petitioner was deprived of the subject properties which it
should have rightly owned were it not for the fraud
committed by respondents. Hence, it would be the height
of injustice if respondents would be allowed to go scot-
free simply because petitioner relied in good faith on the
formers false representations. Besides, as earlier
discussed, even in the exercise of due diligence,
petitioner could not have been expected to immediately
discover respondents fraudulent scheme. Insurance of
the Philippine Islands Corporation v. Spouses Vidal S.
Gregorio and Julita Gregorio; G.R. No. 174104.February
14, 2011.

Lease. True, the quoted provision of the lease contract

requires ICA to undertake major repairs affecting the
structural condition of the building and those due to
fortuitous events. But AMAs outright rescission of the
lease contract and demand that ICA return the deposit
and advance rentals it got within 24 hours from such
demand precluded ICA, first, from contesting the findings
of the local building official or getting some structural
specialists to verify such findings or, second, from making
the required repair. Clearly, AMAs hasty rescission of the
contract gave ICA no chance to exercise its options.

AMA belatedly invokes Article 1660 of the Civil Code

which reads:

Art. 1660. If a dwelling place or any other building

intended for human habitation is in such a condition that
its use brings imminent and serious danger to life or
health, the lessee may terminate the lease at once by
notifying the lessor, even if at the time the contract was
perfected the former knew of the dangerous condition or
waived the right to rescind the lease on account of this
condition.

AMA is actually changing its theory of the case. It

claimed in its complaint that it was entitled to rescind the
contract of lease because ICA fraudulently hid from it the
structural defects of its building. The CA did not agree
with this theory but held that AMA was nonetheless
entitled to rescind the contract for failure of ICA to make
the repairs mentioned in the contract. Now, AMA claims
that it has a statutory right to rescind the lease contract
on the ground mentioned in Article 1660, even if it may be
deemed to have initially waived such right.

Article 1660 is evidently intended to protect human lives.

If ICAs building was structurally defective and in danger
of crashing down during an earthquake or after it is made
to bear the load of a crowd of students, AMA had no right
to waive those defects. It can rescind the lease contract
under Article 1660. But this assumes that the defects
were irremediable and that the parties had no agreement
for rectifying them. As pointed out above, the lease
contract implicitly gave ICA the option to repair structural
defects at its expense. If that had been done as the
contract provides, the risk to human lives would have
been removed and the right to rescind, rendered
irrelevant.
In any event, the fact is that the local building official
found ICAs building structurally defective and unsafe.
Such finding is presumably true. For this reason, ICA has
no justification for keeping AMAs deposit and advance
rentals. Still, the Court holds that AMA is not entitled to
recover more than the return of its deposit and advance
rental considering that, contrary to AMAs claim, ICA
acted in good faith and did not mislead it about the
condition of the building. Immaculate Conception
Academy, et al. v. AMA Computer College, Inc.; G.R. No.
173575.February 2, 2011.

Legitimacy; change in status cannot be done through

change of name. The present petition must be
differentiated from Alfon v. Republic of the Philippines. In
Alfon, the Court allowed the therein petitioner, Estrella
Alfon, to use the name that she had been known since
childhood in order to avoid confusion. Alfon did not deny
her legitimacy, however. She merely sought to use the
surname of her mother which she had been using since
childhood. Ruling in her favor, the Court held that she
was lawfully entitled to use her mothers surname, adding
that the avoidance of confusion was justification enough
to allow her to do so. In the present case, however,
respondent denies his legitimacy.

The change being sought in respondents petition goes so

far as to affect his legal status in relation to his parents. It
seeks to change his legitimacy to that of illegitimacy.
Rule 103 then would not suffice to grant respondents
supplication.

Labayo-Rowe v. Republic categorically holds that

changes which may affect the civil status from legitimate
to illegitimate . . . are substantial and controversial
alterations which can only be allowed after appropriate
adversary proceedings . . . Republic of the Philippines v.
Julian Edward Emerson Coseteng-Magpayo; G.R. No.
189476.February 2, 2011.

Loan; accommodation party. The fact that the loans were

undertaken by Gonzales when he signed as borrower or
co-borrower for the benefit of the spouses Panlilioas
shown by the fact that the proceeds went to the spouses
Panlilio who were servicing or paying the monthly dues
is beside the point. For signing as borrower and co-
borrower on the promissory notes with the proceeds of
the loans going to the spouses Panlilio, Gonzales has
extended an accommodation to said spouses.

As an accommodation party, Gonzales is solidarily liable

with the spouses Panlilio for the loans. In Ang v.
Associated Bank, quoting the definition of an
accommodation party under Section 29 of the Negotiable
Instruments Law, the Court cited that an accommodation
party is a person who has signed the instrument as
maker, drawer, acceptor, or indorser, without receiving
value therefor, and for the purpose of lending his name to
some other person. The Court further explained:

[A]n accommodation party is one who meets all the three

requisites, viz: (1) he must be a party to the instrument,
signing as maker, drawer, acceptor, or indorser; (2) he
must not receive value therefor; and (3) he must sign for
the purpose of lending his name or credit to some other
person. An accommodation party lends his name to
enable the accommodated party to obtain credit or to
raise money; he receives no part of the consideration for
the instrument but assumes liability to the other party/ies
thereto. The accommodation party is liable on the
instrument to a holder for value even though the holder, at
the time of taking the instrument, knew him or her to be
merely an accommodation party, as if the contract was
not for accommodation.

As petitioner acknowledged it to be, the relation between

an accommodation party and the accommodated party is
one of principal and suretythe accommodation party
being the surety. As such, he is deemed an original
promisor and debtor from the beginning; he is considered
in law as the same party as the debtor in relation to
whatever is adjudged touching the obligation of the latter
since their liabilities are interwoven as to be inseparable.
Although a contract of suretyship is in essence accessory
or collateral to a valid principal obligation, the suretys
liability to the creditor is immediate, primary and absolute;
he is directly and equally bound with the principal. As an
equivalent of a regular party to the undertaking, a surety
becomes liable to the debt and duty of the principal
obligor even without possessing a direct or personal
interest in the obligations nor does he receive any benefit
therefrom.

Thus, the knowledge, acquiescence, or even demand by

Ocampo for an accommodation by Gonzales in order to
extend the credit or loan of PhP 1,800,000 to the spouses
Panlilio does not exonerate Gonzales from liability on the
three promissory notes. Eusebio Gonzales v. Philippine
Commercial & International Bank, et al.; G.R. No.
180257.February 23, 2011.

Mortgage; Redemption price; should not include CGT.

Considering that herein petitioners-mortgagors exercised
their right of redemption before the expiration of the
statutory one-year period, petitioner bank is not liable to
pay the capital gains tax due on the extrajudicial
foreclosure sale. There was no actual transfer of title from
the owners-mortgagors to the foreclosing bank. Hence,
the inclusion of the said charge in the total redemption
price was unwarranted and the corresponding amount
paid by the petitioners-mortgagors should be returned to
them. Supreme Transliner, Inc., Moises C. Alvarez and
Paulita S. Alvarez v. BPI Family Savings Bank, Inc./BPI
Family Savings Bank, Inc. v. Supreme Transliner Inc.,
Moises C. Alvarez and Paulita S. Alvares; G.R. No.
165617/G.R. No. 165837.February 25, 2011;

Obligation; write-off not an extinguishment of obligation.

The Court rules that writing-off a loan does not equate to
a condonation or release of a debt by the creditor. As an
accounting strategy, the use of write-off is a task that can
help a company maintain a more accurate inventory of the
worth of its current assets. In general banking practice,
the write-off method is used when an account is
determined to be uncollectible and an uncollectible
expense is recorded in the books of account. If in the
future, the debt appears to be collectible, as when the
debtor becomes solvent, then the books will be adjusted
to reflect the amount to be collected as an asset. In turn,
income will be credited by the same amount of increase in
the accounts receivable.

Write-off is not one of the legal grounds for extinguishing

an obligation under the Civil Code. It is not a compromise
of liability. Neither is it a condonation, since in
condonation gratuity on the part of the obligee and
acceptance by the obligor are required. In making the
write-off, only the creditor takes action by removing the
uncollectible account from its books even without the
approval or participation of the debtor.

Furthermore, write-off cannot be likened to a novation,

since the obligations of both parties have not been
modified. When a write-off occurs, the actual worth of
the asset is reflected in the books of accounts of the
creditor, but the legal relationship between the creditor
and the debtor still remains the same the debtor
continues to be liable to the creditor for the full extent of
the unpaid debt. Ruben Reyna, et al. v. Commission on
Audit; G.R. No. 167219.February 8, 2011.

Prescription; discovery of fraud. Petitioner filed an action

for damages on the ground of fraud committed against it
by respondents. Under the provisions of Article 1146 of
the Civil Code, actions upon an injury to the rights of the
plaintiff or upon a quasi-delict must be instituted within
four years from the time the cause of action accrued,
which is when plaintiff discovered the alleged fraud
committed by respondents. However, the Court does not
agree with the CA in its ruling that the discovery of the
fraud should be reckoned from the time of registration of
the titles covering the subject properties.

The Court notes that what has been given by respondents

to petitioner as evidence of their ownership of the subject
properties at the time that they mortgaged the same are
not certificates of title but tax declarations, in the guise
that the said properties are unregistered. On the basis of
the tax declarations alone and by reason of respondents
misrepresentations, petitioner could not have been
reasonably expected to acquire knowledge of the fact
that the said properties were already titled. As a
consequence, petitioner may not be charged with any
knowledge of any subsequent entry of an encumbrance
which may have been annotated on the said titles, much
less any change of ownership of the properties covered
thereby. As such, the Court agrees with petitioner that the
reckoning period for prescription of petitioners action
should be from the time of actual discovery of the fraud in
1995. Hence, petitioners suit for damages, filed on
February 20, 1996, is well within the four-year prescriptive
period. Insurance of the Philippine Islands Corporation v.
Spouses Vidal S. Gregorio and Julita Gregorio; G.R. No.
174104.February 14, 2011.

Sale; lack of consideration. It is a well-entrenched rule

that where the deed of sale states that the purchase price
has been paid but in fact has never been paid, the deed
of sale is null and void ab initio for lack of consideration.
Moreover, Article 1471 of the Civil Code, provides that if
the price is simulated, the sale is void, which applies to
the instant case, since the price purportedly paid as
indicated in the contract of sale was simulated for no
payment was actually made. Manuel Catindig,
represented by his legal representative Emiliano Cantidig-
Rodrigo v. Aurora Irene Vda. De Meneses/Silvino Roxas,
Sr., represented by Felicisima Villafuerte Roxas v. Court of
Appeals, et al.; G.R. No. 165851/G.R. No.
168875.February 2, 2011.
Sale; double sale. The present controversy is a clear case
of double sale, where the seller sold one property to
different buyers, first to petitioner and later to respondent.
In determining who has a better right, the guidelines set
forth in Article 1544 of the Civil Code apply. Article 1544
states:

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 taken 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.

Admittedly, the two sales were not registered with the

Registry of Property. Since there was no inscription, the
next question is who, between petitioner and respondent,
first took possession of the subject property in good faith.
As aptly held by the trial court, it was respondent who
took possession of the subject property and, therefore,
has a better right.
Petitioner insists that, upon the execution of the public
instrument (the notarized deed of sale), she already
acquired possession thereof, and thus, considering that
the execution thereof took place ahead of the actual
possession by respondent of the subject property, she
has a better right. This is incorrect. Indeed, the execution
of a public instrument shall be equivalent to the delivery
of the thing that is the object of the contract. However,
the Court has held that the execution of a public
instrument gives rise only to a prima facie presumption of
delivery. It is deemed negated by the failure of the vendee
to take actual possession of the land sold. Dolorita C.
Beatingo v. Lilia Bu Gasis; G.R. No. 179641.February 9,
2011.

Sale; perfection of contract. As a rule, a contract is

perfected upon the meeting of the minds of the two
parties. Under Article 1475 of the Civil Code, a contract
of sale is perfected the moment there is a meeting of the
minds on the thing which is the object of the contract and
on the price. In the present case, Medranos offer to sell
the shares of the minority stockholders at the price of
65% of the par value was not absolutely and
unconditionally accepted by DBP. DBP imposed several
conditions to its acceptance and it is clear that Medrano
indeed tried in good faith to comply with the conditions
given by DBP but unfortunately failed to do so. Hence,
there was no birth of a perfected contract of sale between
the parties. Development Bank of the Philippines v. Ben
P. Medrano and Privatization Management Office; G.R.
No. 167004.February 7, 2011.

Statute of Frauds. Under the rule on the Statute of

Frauds, as expressed in Article 1403 of the Civil Code, a
contract for the sale or acquisition of real property shall
be unenforceable unless the same or some note of the
contract be in writing and subscribed by the party
charged. Subject to defined exceptions, evidence of the
agreement cannot be received without the writing, or
secondary evidence of its contents.

MCIAAs invocation of the Statute of Frauds is misplaced

primarily because the statute applies only to executory
and not to completed, executed, or partially
consummated contracts.

Analyzing the situation of the cases at bar, there can be

no serious objection to the proposition that the agreement
package between the government and the private lot
owners was already partially performed by the
government through the acquisition of the lots for the
expansion of the Lahug airport. The parties, however,
failed to accomplish the more important condition in the
CFI decision decreeing the expropriation of the lots
litigated upon: the expansion of the Lahug Airport. The
projectthe public purpose behind the forced property
takingwas, in fact, never pursued and, as a
consequence, the lots expropriated were abandoned. Be
that as it may, the two groups of landowners can, in an
action to compel MCIAA to make good its oral
undertaking to allow repurchase, adduce parol evidence
to prove the transaction.

At any rate, the objection on the admissibility of evidence

on the basis of the Statute of Frauds may be waived if not
timely raised. Records tend to support the conclusion that
MCIAA did not, as the Ouanos and the Inocians posit,
object to the introduction of parol evidence to prove its
commitment to allow the former landowners to
repurchase their respective properties upon the
occurrence of certain events. Anunciacion Vda. De
Ouano, et al. v. Republic of the Philippines, et al./Mactan-
Cebu International Airport [MCIAA] v. Ricardo L. Inocian,
in his personal capacity and as Attorney-in-Fact of
Olympia E. Esteves, et al. and Aletha Suico Magat in her
personal capacity and as Attorney-in-Fact of Philip M.
Suico, et al.; G.R. Nos. 168770 & 168812.February 9,
2011.

Special Laws

Condominium Act; responsibility to repair common

property. In a multi-occupancy dwelling such as
apartments, limitations are imposed under R.A. 4726 in
accordance with the common interest and safety of the
occupants therein which at times may curtail the exercise
of ownership. To maintain safe, harmonious and secured
living conditions, certain stipulations are embodied in the
duly registered deed of restrictions, in this case the
Master Deed, and in house rules which the condominium
corporation, like respondent, is mandated to implement.
Upon acquisition of a unit, the owner not only affixes his
conformity to the sale; he also binds himself to a contract
with other unit owners.

Unquestionably, the fuse box controls the supply of

electricity into the unit. Power is sourced through jumper
cables attached to the main switch which connects the
units electrical line to the Apartments common electrical
line. It is an integral component of a power utility
installation. Respondent cannot disclaim responsibility for
the maintenance of the Apartments electrical supply
system solely because a component thereof is placed
inside a unit.

As earlier stated, both the law and the Master Deed refer
to utility installations as forming part of the common
areas, which reference is justified by practical
considerations. Repairs to correct any defects in the
electrical wiring should be under the control and
supervision of respondent to ensure safety and
compliance with the Philippine Electrical Code, not to
mention security and peace of mind of the unit owners.
Revelina Limson v. Wack Wack Condominium
Corporation; G.R. No. 188802.February 14, 2011.
Public Land Act. Under Section 48(b) of the Public Land
Act, as amended by P.D. 1073, in order that petitioners
application for registration of title may be granted, they
must first establish the following: (1) that the subject land
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.Applicants
must overcome the presumption that the land they are
applying for is part of the public domain and that they
have an interest therein sufficient to warrant registration in
their names arising from an imperfect title. Vicente Yu
Chang and Soledad Yu Chang v. Republic of the
Philippines; G.R. No. 171726.February 23, 2011.

Reconstitution of title, Republic Act No. 26. The

reconstitution of a certificate of title denotes restoration in
the original form and condition of a lost or destroyed
instrument attesting the title of a person to a piece of
land. The purpose of the reconstitution of title is to have,
after observing the procedures prescribed by law, the title
reproduced in exactly the same way it has been when the
loss or destruction occurred.

The lost or destroyed document referred to is the one that

is in the custody of the Register of Deeds. When
reconstitution is ordered, this document is replaced with a
new onethe reconstituted titlethat basically
reproduces the original. After the reconstitution, the
owner is issued a duplicate copy of the reconstituted title.
This is specifically provided under Section 16 of Republic
Act No. 26, An Act Providing a Special Procedure for the
Reconstitution of Torrens Certificates of Title Lost or
Destroyed, which states:

Sec. 16. After the reconstitution of a certificate of title

under the provisions of this Act, the register of deeds shall
issue the corresponding owners duplicate and the
additional copies of said certificates of title, if any had
been previously issued, where such owners duplicate
and/or additional copies have been destroyed or lost. This
fact shall be noted on the reconstituted certificate of title.

Petitioner went to great lengths to convince the CA that

the order for the issuance of a duplicate title to
respondents was included in its appeal. We find such
exercise unnecessary. The CA should not have been
quick in declaring that such order had already become
final and executory.

It really does not matter if petitioner did not specifically

question the order for the issuance of a new owners
duplicate title. The fact that petitioner prayed for the
dismissal of the petition for reconstitution meant that it
was questioning the order for reconstitution and all orders
corollary thereto. The trial courts order for the Register of
Deeds to issue a new duplicate certificate of title was only
an offshoot of its having granted the petition for
reconstitution of title. Without the order for reconstitution,
the order to issue a new owners duplicate title had no leg
to stand on.

More importantly, it would have been impossible for the

Register of Deeds to comply with such order. The
Register of Deeds cannot issue a duplicate of a document
that it does not have. The original copy of the certificate
of title was burned, and the Register of Deeds does not
have a reconstituted title. Thus, it does not have a
certificate of title that it can reproduce as the new owners
duplicate title. Republic of the Philippines v. Candido
Vergel de Dios, et al.; G.R. No. 170459.February 9, 2011.

January 2011 Philippine Supreme Court Decisions on

CivilLaw

Civil Code

Common carriers; standard of diligence. Under Article

1732 of the Civil Code, common carriers are persons,
corporations, firms, or associations engaged in the
business of carrying or transporting passenger or goods,
or both by land, water or air for compensation, offering
their services to the public. A common carrier is
distinguished from a private carrier wherein the carriage is
generally undertaken by special agreement and it does
not hold itself out to carry goods for the general public.
The distinction is significant in the sense that the rights
and obligations of the parties to a contract of private
carriage are governed principally by their stipulations, not
by the law on common carriers.

Loadmasters and Glodel, being both common carriers,

are mandated from the nature of their business and for
reasons of public policy, to observe the extraordinary
diligence in the vigilance over the goods transported by
them according to all the circumstances of such case, as
required by Article 1733 of the Civil Code. When the
Court speaks of extraordinary diligence, it is that extreme
measure of care and caution which persons of unusual
prudence and circumspection observe for securing and
preserving their own property or rights. This exacting
standard imposed on common carriers in a contract of
carriage of goods is intended to tilt the scales in favor of
the shipper who is at the mercy of the common carrier
once the goods have been lodged for shipment. Thus, in
case of loss of the goods, the common carrier is
presumed to have been at fault or to have acted
negligently. This presumption of fault or negligence,
however, may be rebutted by proof that the common
carrier has observed extraordinary diligence over the
goods.

With respect to the time frame of this extraordinary

responsibility, the Civil Code provides that the exercise of
extraordinary diligence 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. Loadmasters Customs Services, Inc. vs. Glodel
Brokerage Corporation and R & B Insurance Corporation;
G.R. No. 179446, January 10, 2011.

Consignation. There must be full compliance with the

requisites of consignation for consignation to be valid.
Substantial compliance is not enough. In Insular Life
Assurance Company, Ltd. v. Toyota Bel-Air, Inc., the Court
enumerated the requisites of a valid consignation: (1) a
debt due; (2) the creditor to whom tender of payment was
made refused without just cause to accept the payment,
or the creditor was absent, unknown or incapacitated, or
several persons claimed the same right to collect, or the
title of the obligation was lost; (3) the person interested in
the performance of the obligation was given notice before
consignation was made; (4) the amount was placed at the
disposal of the court; and (5) the person interested in the
performance of the obligation was given notice after the
consignation was made.

The giving of notice to the persons interested in the

performance of the obligation is mandatory. Failure to
notify the persons interested in the performance of the
obligation will render the consignation void. Soledad
Dalton vs. FGR Fealty and Development Corporation, et
al.; G.R. No. 172577, January 19, 2011.

Contracts; quantum meruit. Under the principle of

quantum meruit, 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. To deny payment for
a building almost completed and already occupied would
be to permit unjust enrichment at the expense of the
contractor. Heirs of Ramon C. Gaite, et al. vs. The Plaza,
Inc. and FGU Insurance Corporation; G.R. No. 177685,
January 26, 2011.

Contracts; stages. Every contract has the elements of (1)

consent of the contracting parties; (2) object certain which
is the subject matter of the contract; and (3) cause of the
obligation which is established. A contract is perfected by
mere consent, which is manifested by the meeting of the
offer and the acceptance upon the thing and the cause
which are to constitute the contract. Generally, contracts
undergo three distinct stages: (1) preparation or
negotiation; (2) perfection; and (3) consummation.
Negotiation begins from the time the prospective
contracting parties manifest their interest in the contract
and ends at the moment of agreement of the parties. The
perfection or birth of the contract takes place when the
parties agree upon the essential elements of the contract.
The last stage is the consummation of the contract where
the parties fulfill or perform the terms they agreed on,
culminating in its extinguishment. International Freeport
Traders, Inc. vs. Danzas Intercontinental, Inc.; G.R. No.
181833, January 26, 2011.

Contracts; rescission. Reciprocal obligations are those

which arise from the same cause, and in which each party
is a debtor and a creditor of the other, such that the
obligation of one is dependent upon the obligation of the
other. They are to be performed simultaneously such that
the performance of one is conditioned upon the
simultaneous fulfillment of the other. Respondent The
Plaza predicated its action on Article 1191 of the Civil
Code, which provides for the remedy of rescission or
more properly resolution, a principal action based on
breach of faith by the other party who violates the
reciprocity between them. The breach contemplated in
the provision is the obligors failure to comply with an
existing obligation. Thus, the power to rescind is given
only to the injured party. The injured party is the party
who has faithfully fulfilled his obligation or is ready and
willing to perform his obligation.

Petitioners may not justify Rhogens termination of the

contract upon grounds of non-payment of progress billing
and uncooperative attitude of respondent The Plaza and
its employees in rectifying the violations which were the
basis for issuance of the stoppage order. Having
breached the contractual obligation it had expressly
assumed, i.e., to comply with all laws, rules and
regulations of the local authorities, Rhogen was already at
fault. Respondent The Plaza, on the other hand, was
justified in withholding payment on Rhogens first
progress billing, on account of the stoppage order and
additionally due to disappearance of owner-furnished
materials at the jobsite. Heirs of Ramon C. Gaite, et al. vs.
The Plaza, Inc. and FGU Insurance Corporation; G.R. No.
177685, January 26, 2011.

Dacion en pago. A dacion en pago is governed by the law

of sales. Contracts of sale come with warranties, either
express (if explicitly stipulated by the parties) or implied
(under Article 1547 et seq. of the Civil Code). Luzon
Development Bank vs. Angeles Catherine Enriquez / Delta
Development and Management Services, Inc. vs. Angeles
Catherine Enriquez, et al.; G.R. Nos. 168646 & G.R. No.
168666. January 12, 2011.

Damages; attorneys fees. While it is a sound policy not to

set a premium on the right to litigate, we find that
respondent is entitled to reasonable attorneys fees.
Attorneys fees may be awarded when a party is
compelled to litigate or incur expenses to protect its
interest, or when the court deems it just and equitable. In
this case, petitioner refused to answer for the loss of
Sees vehicle, which was deposited with it for
safekeeping. This refusal constrained respondent, the
insurer of See, and subrogated to the latters right, to
litigate and incur expenses. Durban Apartments Corp.,
etc. vs. Pioneer Insurance and Surety Corp.; G.R. No.
179419. January 12, 2011.

Damages; exemplary. Exemplary or corrective damages

are imposed by way of example or correction for the
public good, in addition to moral, temperate, liquidated or
compensatory damages. In quasi-delicts, exemplary
damages may be granted if the defendant acted with
gross negligence. Celedonio Tans death and the
destruction of the petitioners home and tailoring shop
were unquestionably caused by the respondents gross
negligence. The law allows the grant of exemplary
damages in cases such as this to serve as a warning to
the public and as a deterrent against the repetition of this
kind of deleterious actions. The grant, however, should be
tempered, as it is not intended to enrich one party or to
impoverish another. Leticia Tan, et al. vs. OMC Carriers,
Inc. and Bonifacio Arambala;G.R. No. 190521, January
12, 2011.

Damages; negligence. Negligence is defined as the

omission to do something which a reasonable man,
guided upon those considerations which ordinarily
regulate the conduct of human affairs, would do, or the
doing of something which a prudent man and reasonable
man could not do. As a consequence of its negligence,
FEBTC must be held liable for damages pursuant to
Article 2176 of the Civil Code which states whoever by
act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage
done. Indisputably, had the insurance premium been
paid, through the automatic debit arrangement with
FEBTC, Maxilites fire loss claim would have been
approved. Hence, Maxilite suffered damage to the extent
of the face value of the insurance policy or the sum of
P2.1 million. Jose Marques, et al. vs. Far East Bank and
Trust Company, et al. / Far East Ban and Trust Company,
et al. vs. Jose Marques, et al.; G.R. No. 171379/G.R. No.
171419, January 10, 2011.

Damages; solidary liability. The Supreme Court found that

Aquinas School was not solidarily liable for actions of
person (Yamyamin) who was not its employee. The Court
has consistently applied the four-fold test to determine
the existence of an employer-employee relationship: the
employer (a) selects and engages the employee; (b) pays
his wages; (c) has power to dismiss him; and (d) has
control over his work. Of these, the most crucial is the
element of control. Control refers to the right of the
employer, whether actually exercised or reserved, to
control the work of the employee as well as the means
and methods by which he accomplishes the same.

In this case, the school directress testified that Aquinas

had an agreement with a congregation of sisters under
which, in order to fulfill its ministry, the congregation
would send religion teachers to Aquinas to provide
catechesis to its students. Aquinas insists that it was not
the school but Yamyamins religious congregation that
chose her for the task of catechizing the schools grade
three students, much like the way bishops designate the
catechists who would teach religion in public schools.
Under the circumstances, it was quite evident that
Aquinas did not have control over Yamyamins teaching
methods.

Of course, Aquinas still had the responsibility of taking

steps to ensure that only qualified outside catechists are
allowed to teach its young students. In this regard, it
cannot be said that Aquinas took no steps to avoid the
occurrence of improper conduct towards the students by
their religion teacher. It had reviewed the qualifications of
Yamyamin, determined that the congregation that
recommended her was legitimate and in order, provided
her with teacher orientation and a Faculty Manual, and
reviewed the course outline of the subjects that the
teacher would be handling. Aquinas School vs. Sps. Jose
Inton and Ma. Victoria S. Inton, etc., et al.; G.R. No.
184202, January 26, 2011.

Damages; recovery of temperate damages allowed where

there is no competent proof of actual damages or loss of
earning capacity. Absent competent proof on the actual
damages suffered, a party still has the option of claiming
temperate damages, which may be 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.

As a rule, documentary evidence should be presented to

substantiate the claim 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, in which case, judicial notice may be taken of the
fact that in the deceaseds line of work, no documentary
evidence is available; or (2) the deceased is employed as
a daily wage worker earning less than the minimum wage
under current labor laws. Leticia Tan, et al. vs. OMC
Carriers, Inc. and Bonifacio Arambala; G.R. No. 190521,
January 12, 2011.

Deposit. Article 1962, in relation to Article 1998, of the

Civil Code defines a contract of deposit and a necessary
deposit made by persons in hotels or inns:

Art. 1962. A deposit is constituted from the moment a

person receives a thing belonging to another, with the
obligation of safely keeping it and returning the same. If
the safekeeping of the thing delivered is not the principal
purpose of the contract, there is no deposit but some
other contract.

Art. 1998. The deposit of effects made by travelers in

hotels or inns shall also be regarded as necessary. The
keepers of hotels or inns shall be responsible for them as
depositaries, provided that notice was given to them, or
to their employees, of the effects brought by the guests
and that, on the part of the latter, they take the
precautions which said hotel-keepers or their substitutes
advised relative to the care and vigilance of their effects.

Plainly, from the facts found by the lower courts, the

insured See deposited his vehicle for safekeeping with
petitioner, through the latters employee, Justimbaste. In
turn, Justimbaste issued a claim stub to See. Thus, the
contract of deposit was perfected from Sees delivery,
when he handed over to Justimbaste the keys to his
vehicle, which Justimbaste received with the obligation of
safely keeping and returning it. Ultimately, petitioner is
liable for the loss of Sees vehicle. Durban Apartments
Corp., etc. vs. Pioneer Insurance and Surety Corp.; G.R.
No. 179419. January 12, 2011.

Donation. It is immediately apparent that Rodrigo passed

naked title to Rodriguez under a perfected donation inter
vivos. First. Rodrigo stipulated that if the herein Donee
predeceases me, the [Property] will not be reverted to the
Donor, but will be inherited by the heirs of x x x
Rodriguez, signaling the irrevocability of the passage of
title to Rodriguezs estate, waiving Rodrigos right to
reclaim title. This transfer of title was perfected the
moment Rodrigo learned of Rodriguezs acceptance of
the disposition which, being reflected in the Deed, took
place on the day of its execution on 3 May 1965.
Rodrigos acceptance of the transfer underscores its
essence as a gift in presenti, not in futuro, as only
donations inter vivos need acceptance by the recipient.
Indeed, had Rodrigo wished to retain full title over the
Property, she could have easily stipulated, as the testator
did in another case, that the donor, may transfer, sell, or
encumber to any person or entity the properties here
donated x x x or used words to that effect. Instead,
Rodrigo expressly waived title over the Property in case
Rodriguez predeceases her. Gonzalo Villanueva,
represented by his heirs vs. Spouses Froilan and Leonila
Branoco; G.R. No. 172804, January 24, 2011.

Estoppel; by silence. In estoppel, a party creating an

appearance of fact, which is false, is bound by that
appearance as against another person who acted in good
faith on it. Estoppel is based on public policy, fair dealing,
good faith and justice. Its purpose is to forbid one to
speak against his own act, representations, or
commitments to the injury of one who reasonably relied
thereon. It springs from equity, and is designed to aid the
law in the administration of justice where without its aid
injustice might result.
Estoppel by silence arises where a person, who by force
of circumstances is obliged to another to speak, refrains
from doing so and thereby induces the other to believe in
the existence of a state of facts in reliance on which he
acts to his prejudice. Silence may support an estoppel
whether the failure to speak is intentional or negligent.

Both trial and appellate courts basically agree that FEBTC

is estopped from claiming that the insurance premium has
been unpaid. That FEBTC induced Maxilite and Marques
to believe that the insurance premium has in fact been
debited from Maxilites account is grounded on the the
following facts: (1) FEBTC represented and committed to
handle Maxilites financing and capital requirements,
including the related transactions such as the insurance
of the trust receipted merchandise; (2) prior to the subject
Insurance Policy No. 1024439, the premiums for the three
separate fire insurance policies had been paid through
automatic debit arrangement; (3) FEBIBI sent FEBTC, not
Maxilite nor Marques, written reminders dated 19 October
1994, 24 January 1995, and 6 March 1995 to debit
Maxilites account, establishing FEBTCs obligation to
automatically debit Maxilites account for the premium
amount; (4) there was no written demand from FEBTC or
Makati Insurance Company for Maxilite or Marques to pay
the insurance premium; (5) the subject insurance policy
was released to Maxilite on 19 August 1994; and (6) the
subject insurance policy remained uncancelled despite
the alleged non-payment of the premium, making it
appear that the insurance policy remained in force and
binding. Jose Marques, et al. vs. Far East Bank and Trust
Company, et al. / Far East Ban and Trust Company, et al.
vs. Jose Marques, et al.; G.R. No. 171379/G.R. No.
171419, January 10, 2011.

Government contracts; obligation to pay supplier or

contractor even under an illegal contract on basis of
quantum meruit. In ordering the payment of the
obligation due respondent on a quantum meruit basis, the
Court of Appeals correctly relied on Royal Trust
Corporation v. COA, Eslao v. COA, Melchor v. COA, EPG
Construction Company v. Vigilar, and Department of
Health v. C.V. Canchela & Associates, Architects. All these
cases involved government projects undertaken in
violation of the relevant laws, rules and regulations
covering public bidding, budget appropriations, and
release of funds for the projects. Consistently in these
cases, this Court has held that the contracts were void for
failing to meet the requirements mandated by law; public
interest and equity, however, dictate that the contractor
should be compensated for services rendered and work
done. Specifically, C.V. Canchela & Associates is similar
to the case at bar, in that the contracts involved in both
cases failed to comply with the relevant provisions of
Presidential Decree No. 1445 and the Revised
Administrative Code of 1987. Nevertheless, the illegality
of the subject Agreements proceeds, it bears emphasis,
from an express declaration or prohibition by law, not
from any intrinsic illegality. As such, the Agreements are
not illegal per se, and the party claiming thereunder may
recover what had been paid or delivered.

Neither can petitioners escape the obligation to

compensate respondent for services rendered and work
done by invoking the states immunity from suit. This
Court has long established that the doctrine of
governmental immunity from suit cannot serve as an
instrument for perpetrating an injustice to a citizen.
Gregorio R. Vigilar, et al. vs. Arnulfo D. Aquino; G.R. No.
180388, January 18, 2011.

Interest; legal interest. The Court reiterated the guidelines

on the rate of legal interest as laid out in Eastern Shipping
Lines, Inc. v. Court of Appeals:

I. When an obligation, regardless of its source, i.e., law,

contracts, quasi-contracts, delicts or quasi-delicts is
breached, the contravenor can be held liable for
damages. The provisions under Title XVIII on Damages
of the Civil Code govern in determining the measure of
recoverable damages.

II. With regard particularly to an award of interest in the

concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as
follows:
1. When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have
been stipulated in writing. Furthermore, the interest due
shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of
interest shall be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under
and subject to the provisions of Article 1169 of the Civil
Code.

2. When an obligation, not constituting a loan or

forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No
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 . . . the amount finally
adjudged.
3. When the judgment of the court awarding a sum of
money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being
deemed to be by then an equivalent to forbearance of
credit.(Emphasis supplied)

Jose Marques, et al. vs. Far East Bank and Trust

Company, et al. / Far East Ban and Trust Company, et al.
vs. Jose Marques, et al.; G.R. No. 171379/G.R. No.
171419, January 10, 2011.

Marriage; annulment; psychological incapacity. Quarrels,

financial difficulties, womanizing of petitioner sorry, no
psychological incapacity. The Supreme Court found the
testimony of the psychiatrist to be general, not in-depth,
does not establish link between actions of party and his
supposed psychological incapacity. No matter that the
OSG did not present its own expert; it does not have the
burden of proof in an annulment case. Rosalino L.
Marable vs. Myrna F. Marable; G.R. No. 178741, January
17, 2011.

Marriage; annulment; psychological incapacity. The

Supreme Court reiterates its Santos and Molina rulings,
backtracks on the Te case, and finds that persistent
sexual infidelity (the wife cuckolds a military officer) and
abandonment are not badges of psychological incapacity
particularly in absence of proof that these can be traced
to roots prior to the marriage. Read it for the treatment of
the key cases of Santos, Molina and Te, and to see how
another psychiatrists testimony bites the dust. Jose
Reynaldo B. Ochosa vs. Bona J. Alano and Republic of
the Philippines; G.R. No. 167459, January 26, 2011.

Marriage; annulment; psychological incapacity. For

psychological incapacity of a spouse to serve as ground
for annulling a marriage, the incapacity must consist of
the following: (a) a true inability to commit oneself to the
essentials of marriage; (b) this inability to commit oneself
must refer to the essential obligations of marriage: the
conjugal act, the community of life and love, the rendering
of mutual help, the procreation and education of offspring;
and (c) the inability must be tantamount to a
psychological abnormality. It is not enough to prove that a
spouse failed to meet his responsibility and duty as a
married person; it is essential that he must be shown to
be incapable of doing so due to some psychological
illness.

That respondent, according to petitioner, lack[ed]

effective sense of rational judgment and responsibility
does not mean he is incapable to meet his marital
obligations. His refusal to help care for the children, his
neglect for his business ventures, and his alleged
unbearable jealousy may indicate some emotional turmoil
or mental difficulty, but none have been shown to amount
to a psychological abnormality. Moreover, even assuming
that respondents faults amount to psychological
incapacity, it has not been established that the same
existed at the time of the celebration of the marriage.

In his psychological report, the psychologist merely said,

[b]ecause ones personality or character is formed early
in life, it has a clear ANTECEDENT and it has an enduring
pattern of inner experience that deviates from the
expectations of the individuals culture, without
explaining this antecedent. Even petitioner, in her
allegations, never explained how the alleged
psychological incapacity manifested itself prior to or at
the time of the celebration of their marriage.

Likewise militating against petitioners cause is the finding

of the trial court, and the same was affirmed by the CA,
that respondent never committed infidelity or physically
abused petitioner or their children. In fact, considering
that the children lived with both parents, it is safe to
assume that both made an impact in the childrens
upbringing. And still, as found by the RTC and the CA, the
parties were able to raise three children into adulthood
without any major parenting problems. Such fact could
hardly support a proposition that the parties marriage is a
nullity. Cynthia E. Yambao vs. Republic of the Philippines
and Patricio E. Yambao; G.R. No. 184063, January 24,
2011.
Marriage; liquidation of property not necessary before
declaration of nullity. For Article 147 of the Family Code to
apply, the following elements must be present:

1. The man and the woman must be capacitated to

marry each other;
2. They live exclusively with each other as husband and
wife; and
3. Their union is without the benefit of marriage, or their
marriage is void.
All these elements are present in this case and there is no
question that Article 147 of the Family Code applies to the
property relations between petitioner and respondent. We
agree with petitioner that the trial court erred in ordering
that a decree of absolute nullity of marriage shall be
issued only after liquidation, partition and distribution of
the parties properties under Article 147 of the Family
Code. The ruling has no basis because Section 19(1) of
the Rule does not apply to cases governed under Articles
147 and 148 of the Family Code. It is clear from Article 50
of the Family Code that Section 19(1) of the Rule applies
only to marriages which are declared void ab initio or
annulled by final judgment under Articles 40 and 45 of the
Family Code. In short, Article 50 of the Family Code does
not apply to marriages which are declared void ab initio
under Article 36 of the Family Code, which should be
declared void without waiting for the liquidation of the
properties of the parties. Alain M. Dio vs. Ma. Caridad L.
Dio; G.R. No. 178044, January 19, 2011.
Mortgage; HLURB. As the HLURB Arbiter and Board of
Commissioners both found, DELTA violated Section 18 of
PD 957 in mortgaging the properties in Delta Homes I
(including Lot 4) to the BANK without prior clearance from
the HLURB. This violation of Section 18 renders the
mortgage executed by DELTA void. Luzon Development
Bank vs. Angeles Catherine Enriquez / Delta Development
and Management Services, Inc. vs. Angeles Catherine
Enriquez, et al.; G.R. Nos. 168646 & G.R. No. 168666.
January 12, 2011.

Possession in good faith. The ten year ordinary

prescriptive period to acquire title through possession of
real property in the concept of an owner requires
uninterrupted possession coupled with just title and good
faith. There is just title when the adverse claimant came
into possession of the property through one of the modes
recognized by law for the acquisition of ownership or
other real rights, but the grantor was not the owner or
could not transmit any right. Good faith, on the other
hand, consists in the reasonable belief that the person
from whom the possessor received the thing was the
owner thereof, and could transmit his ownership.
Gonzalo Villanueva, represented by his heirs vs. Spouses
Froilan and Leonila Branoco; G.R. No. 172804, January
24, 2011.

Quasi-delict; solidary liability. Loadmasters claim that it

was never privy to the contract entered into by Glodel
with the consignee Columbia or R&B Insurance as
subrogee, is not a valid defense. It may not have a direct
contractual relation with Columbia, but it is liable for tort
under the provisions of Article 2176 of the Civil Code on
quasi-delicts. Pertinent is the ruling enunciated in the
case of Mindanao Terminal and Brokerage Service, Inc. v.
Phoenix Assurance Company of New York,/McGee & Co.,
Inc. where this Court held that a tort may arise despite the
absence of a contractual relationship.

In connection therewith, Article 2180 provides:

ART. 2180. The obligation imposed by Article 2176 is

demandable not only for ones own acts or omissions, but
also for those of persons for whom one is responsible.

xxxx

Employers shall be liable for the damages caused by their

employees and household helpers acting within the scope
of their assigned tasks, even though the former are not
engaged in any business or industry.

It is not disputed that the subject cargo was lost while in

the custody of Loadmasters whose employees (truck
driver and helper) were instrumental in the hijacking or
robbery of the shipment. As employer, Loadmasters
should be made answerable for the damages caused by
its employees who acted within the scope of their
assigned task of delivering the goods safely to the
warehouse.

Whenever an employees negligence causes damage or

injury to another, there instantly arises a presumption juris
tantum that the employer failed to exercise diligentissimi
patris families in the selection (culpa in eligiendo) or
supervision (culpa in vigilando) of its employees. To avoid
liability for a quasi-delict committed by its employee, an
employer must overcome the presumption by presenting
convincing proof that he exercised the care and diligence
of a good father of a family in the selection and
supervision of his employee. In this regard, Loadmasters
failed. Loadmasters Customs Services, Inc. vs. Glodel
Brokerage Corporation and R & B Insurance Corporation;
G.R. No. 179446, January 10, 2011.

Sale; contract to sell does not transfer ownership; rights

under contract to sell. A contract to sell is one where the
prospective seller reserves the transfer of title to the
prospective buyer until the happening of an event, such
as full payment of the purchase price. What the seller
obliges himself to do is to sell the subject property only
when the entire amount of the purchase price has already
been delivered to him. In other words, the full payment of
the purchase price partakes of a suspensive condition,
the non-fulfillment of which prevents the obligation to sell
from arising and thus, ownership is retained by the
prospective seller without further remedies by the
prospective buyer. It does not, by itself, transfer
ownership to the buyer.

Nevertheless, rights given under a Contract to Sell must

still be respected. A Contract to Sell, involving a
subdivision lot, is covered and protected by PD 957. One
of the protections afforded by PD 957 to buyers is the
right to have his contract to sell registered with the
Register of Deeds in order to make it binding on third
parties.

The purpose of registration is to protect the buyers from

any future unscrupulous transactions involving the object
of the sale or contract to sell, whether the purchase price
therefor has been fully paid or not. Registration of the
sale or contract to sell makes it binding on third parties; it
serves as a notice to the whole world that the property is
subject to the prior right of the buyer of the property
(under a contract to sell or an absolute sale), and anyone
who wishes to deal with the said property will be held
bound by such prior right.

While DELTA, in the instant case, failed to register

Enriquezs Contract to Sell with the Register of Deeds,
this failure will not prejudice Enriquez or relieve the BANK
from its obligation to respect Enriquezs Contract to Sell.
Despite the non-registration, the BANK cannot be
considered, under the circumstances, an innocent
purchaser for value of Lot 4 when it accepted the latter
(together with other assigned properties) as payment for
DELTAs obligation. The BANK was well aware that the
assigned properties, including Lot 4, were subdivision lots
and therefore within the purview of PD 957. It knew that
the loaned amounts were to be used for the development
of DELTAs subdivision project, for this was indicated in
the corresponding promissory notes. The technical
description of Lot 4 indicates its location, which can
easily be determined as included within the subdivision
development. Under these circumstances, the BANK
knew or should have known of the possibility and risk that
the assigned properties were already covered by existing
contracts to sell in favor of subdivision lot buyers. Luzon
Development Bank vs. Angeles Catherine Enriquez / Delta
Development and Management Services, Inc. vs. Angeles
Catherine Enriquez, et al.; G.R. Nos. 168646 & G.R. No.
168666. January 12, 2011.

Subrogation. Subrogation is the substitution of one

person in the place of another with reference to a lawful
claim or right, so that he who is substituted succeeds to
the rights of the other in relation to a debt or claim,
including its remedies or securities. Doubtless, R&B
Insurance is subrogated to the rights of the insured to the
extent of the amount it paid the consignee under the
marine insurance, as provided under Article 2207 of the
Civil Code, which reads:
ART. 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 wrong-doer 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.

As subrogee of the rights and interest of the consignee,

R&B Insurance has the right to seek reimbursement from
either Loadmasters or Glodel or both for breach of
contract and/or tort. Loadmasters Customs Services, Inc.
vs. Glodel Brokerage Corporation and R & B Insurance
Corporation; G.R. No. 179446, January 10, 2011.

November 2010 Philippine Supreme Court Decisions on

CivilLaw

Civil Code

Damages; attorneys fees. On the award of attorneys

fees, attorneys fees and expenses of litigation were
awarded because Alfredo was compelled to litigate due to
the unjust refusal of Land Bank to refund the amount he
paid. There are instances when it is just and equitable to
award attorneys fees and expenses of litigation. Art.
2208 of the Civil Code pertinently states:

In the absence of stipulation, attorneys fees and

expenses of litigation, other than judicial costs, cannot be
recovered, except:

xxxx

(2) When the defendants act or omission has compelled

the plaintiff to litigate with third persons or to incur
expenses to protect his interest.

Given that Alfredo was indeed compelled to litigate

against Land Bank and incur expenses to protect his
interest, we find that the award falls under the exception
above and is, thus, proper given the circumstances. Land
Bank of the Philippines vs. Alfredo Ong, G.R. No. 190755,
November 24, 2010.

Damages; attorneys fees. Regarding the grant of

attorneys fees, the Court agrees with the RTC that said
award is justified. Losin refused to pay Vitarich despite the
latters repeated demands. It was left with no recourse
but to litigate and protect its interest. We, however, opt to
reduce the same to P10,000.00 from P20,000.00. Vitarich
Corporation vs. Chona Locsin, G.R. No. 181560,
November 15, 2010.
Damages; for loss of earning capacity. The award of
damages for loss of earning capacity is concerned with
the determination of losses or damages sustained by
respondents, as dependents and intestate heirs of the
deceased. This consists not of the full amount of his
earnings, but of the support which they received or would
have received from him had he not died as a
consequence of the negligent act. Thus, the amount
recoverable is not the loss of the victims entire earnings,
but rather the loss of that portion of the earnings which
the beneficiary would have received.

Indemnity for loss of earning capacity is determined by

computing the net earning capacity of the victim as
follows:

Net Earning Capacity = life expectancy x (gross annual

income -reasonable and necessary living expenses).

Life expectancy shall be computed by applying the

formula (2/3 x [80 - age at death]) adopted from the
American Expectancy Table of Mortality or the Actuarial of
Combined Experience Table of Mortality. On the other
hand, gross annual income requires the presentation of
documentary evidence for the purpose of proving the
victims annual income. The victims heirs presented in
evidence Seoras pay slip from the PNP, showing him to
have had a gross monthly salary of P12,754.00.
Meanwhile, the victims net income was correctly pegged
at 50% of his gross income in the absence of proof as
regards the victims living expenses. Constancia G.
Tamayo, et al. vs. Rosalia Abad Seora, et al., G.R. No.
176946, November 15, 2010.

Damages; moral and exemplary; standard of diligence

applicable to a bank. The award of moral damages
should be granted in reasonable amounts depending on
the facts and circumstances of the case. 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.

As to the award of exemplary damages, the law allows it

by way of example for the public good. The business of
banking is impressed with public interest and great
reliance is made on the banks sworn profession of
diligence and meticulousness in giving irreproachable
service. Thus, the Court affirms the award as a way of
setting an example for the public good. In addition, it also
provided for attorneys fees. Both are subject to legal
interest.

In any event, Citibank should have been more cautious in

dealing with its clients since its business is imbued with
public interest. Banks must always act in good faith and
must win the confidence of clients and people in general.
It is irrelevant whether the client is a lawyer or not.
Citibank, N.A. vs. Atty. Ernesto S. Dinopol, G.R. No.
188412, November 22, 2010.

Filiation; cannot be collaterally attacked. It is settled law

that filiation cannot be collaterally attacked. Well-known
civilista Dr. Arturo M. Tolentino, in his book Civil Code of
the Philippines, Commentaries and Jurisprudence, noted
that the aforecited doctrine is rooted from the provisions
of the Civil Code of the Philippines. He explained thus:

The legitimacy of the child cannot be contested by way of

defense or as a collateral issue in another action for a
different purpose. The necessity of an independent
action directly impugning the legitimacy is more clearly
expressed in the Mexican code (article 335) which
provides: The contest of the legitimacy of a child by the
husband or his heirs must be made by proper complaint
before the competent court; any contest made in any
other way is void. This principle applies under our
Family Code. Articles 170 and 171 of the code confirm
this view, because they refer to the action to impugn the
legitimacy. This action can be brought only by the
husband or his heirs and within the periods fixed in the
present articles. Eugenio R. Reyes, joined by Timothy
Joseph M. Reyes, et al. vs. Librada F. Maurico and
Leonida F. Mauricio, G.R. No. 175080, November 24,
2010
Lease; term; month-to-month basis. The well-entrenched
principle is that a lease from month-to-month is with a
definite period and expires at the end of each month upon
the demand to vacate by the lessor. As held by the Court
of Appeals in the assailed Amended Decision, the above-
mentioned lease contract was duly terminated by DBP by
virtue of its letter dated June 18, 1987. We reiterate that
the letter explicitly directed the petitioners to come to the
office of the DBP if they wished to enter into a new lease
agreement with the said bank. Otherwise, if no contract
of lease was executed within 30 days from the date of the
letter, petitioners were to be considered uninterested in
entering into a new contract and were thereby ordered to
vacate the property. As no new contract was in fact
executed between petitioners and DBP within the 30-day
period, the directive to vacate, thus, took effect. DBPs
letter dated June 18, 1987, therefore, constituted the
written notice that was required to terminate the lease
agreement between petitioners and Rudy Robles. From
then on, the petitioners continued possession of the
subject property could be deemed to be without the
consent of DBP.

Thusly, petitioners assertion that Article 1670 of the Civil

Code is not applicable to the instant case is correct. The
reason, however, is not that the existing contract was
continued by DBP, but because the lease was terminated
by DBP, which termination was accompanied by a
demand to petitioners to vacate the premises of the
subject property.

Article 1670 states that [i]f at the end of the contract the
lessee should continue enjoying the thing leased for
fifteen days with the acquiescence of the lessor, and
unless a notice to the contrary by either party has
previously been given, it is understood that there is an
implied new lease, not for the period of the original
contract, but for the time established in Articles 1682 and
1687. The other terms of the original contract shall be
revived.

In view of the order to vacate embodied in the letter of

DBP dated June 18, 1987 in the event that no new lease
contract is entered into, the petitioners continued
possession of the subject properties was without the
acquiescence of DBP, thereby negating the constitution of
an implied lease. Cebu Bionic Builders Supply, Inc. and
Lydia Sia vs. Development Bank of the Philippines, et al.,
G.R. No. 154366, November 17, 2010.

Legal interest. With regard particularly to an award of

interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual
thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in

the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that
which may have been stipulated in writing. Furthermore,
the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of
stipulation, the rate of interest shall be 12% per annum to
be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions
of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or

forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No
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.
3. When the judgment of the court awarding a sum of
money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of
credit. Land Bank of the Philippines vs. Alfredo Ong, G.R.
No. 190755, November 24, 2010.

Legal interest. Inasmuch as the case at bar involves an

obligation not arising from a loan or forbearance of
money, but consists in the payment of a sum of money,
the legal rate of interest is 6% per annum of the amount
demanded. Interest shall continue to run from February
12, 1997, the date when Vitarich demanded payment of
the sum amounting to P921,083.10 from Locsin (and not
from the time of the filing of the Complaint) until finality of
the Decision (not until fully paid). The rate of interest shall
increase to 12% per annum only from such finality until its
satisfaction, the interim period being deemed to be
equivalent to a forbearance of credit. Vitarich Corporation
vs. Chona Locsin, G.R. No. 181560, November 15, 2010.

Loan; no period for payment. There is no date of payment

in the promissory notes. Accordingly, the creditor has the
right to demand immediate payment. Article 1178 of the
Civil Code applies. The fact that the creditor was content
with the prior monthly check-off from the debtors salary
is of no moment. Once the debot defaulted, the creditor
could make a demand to enforce a pure obligation.
Hongkong and Shanghai Banking Corp., Ltd. Staff
Retirement Plan vs. Sps. Bienvenido and Editha
Broqueza, G.R. No. 178610, November 17, 2010.

Novation. Novation must be expressly consented to.

Moreover, the conflicting intention and acts of the parties
underscore the absence of any express disclosure or
circumstances with which to deduce a clear and
unequivocal intent by the parties to novate the old
agreement. Land Bank of the Philippines vs. Alfredo Ong,
G.R. No. 190755, November 24, 2010.

Payment; from a third person. Land Bank contends that

Art. 1236 of the Civil Code backs their claim that Alfredo
should have sought recourse against the Spouses Sy
instead of Land Bank. Art. 1236 provides:

The creditor is not bound to accept payment or

performance by a third person who has no interest in the
fulfillment of the obligation, unless there is a stipulation to
the contrary.

Whoever pays for another may demand from the debtor

what he has paid, except that if he paid without the
knowledge or against the will of the debtor, he can
recover only insofar as the payment has been beneficial
to the debtor.
We agree with Land Bank on this point as to the first part
of paragraph 1 of Art. 1236. Land Bank was not bound to
accept Alfredos payment, since as far as the former was
concerned, he did not have an interest in the payment of
the loan of the Spouses Sy. However, in the context of
the second part of said paragraph, Alfredo was not
making payment to fulfill the obligation of the Spouses Sy.
Alfredo made a conditional payment so that the properties
subject of the Deed of Sale with Assumption of Mortgage
would be titled in his name. It is clear from the records
that Land Bank required Alfredo to make payment before
his assumption of mortgage would be approved. He was
informed that the certificate of title would be transferred
accordingly. He, thus, made payment not as a debtor but
as a prospective mortgagor. But the trial court stated:

[T]he contract was not perfected or consummated

because of the adverse finding in the credit investigation
which led to the disapproval of the proposed assumption.
There was no evidence presented that plaintiff was
informed of the disapproval. What he received was a
letter dated May 22, 1997 informing him that the account
of spouses Sy had matured but there [were] no payments.
This was sent even before the conduct of the credit
investigation on June 20, 1997 which led to the
disapproval of the proposed assumption of the loans of
spouses Sy.
Alfredo, as a third person, did not, therefore, have an
interest in the fulfillment of the obligation of the Spouses
Sy, since his interest hinged on Land Banks approval of
his application, which was denied. The circumstances of
the instant case show that the second paragraph of Art.
1236 does not apply. As Alfredo made the payment for
his own interest and not on behalf of the Spouses Sy,
recourse is not against the latter. And as Alfredo was not
paying for another, he cannot demand from the debtors,
the Spouses Sy, what he has paid. Land Bank of the
Philippines vs. Alfredo Ong, G.R. No. 190755, November
24, 2010.

Payment; promissory note. Article 1249, paragraph 2 of

the Civil Code provides [T] he delivery of promissory
notes payable to order, or bills of exchange or other
mercantile documents shall produce the effect of
payment only when they have been cashed, or when
through the fault of the creditor they have been impaired.
[Emphasis supplied]

In the case at bar, no cash payment was proved. It was

neither confirmed that the checks issued by Losin were
actually encashed by Vitarich. Thus, the Court cannot
consider that payment, much less overpayment, made by
Locsin. Vitarich Corporation vs. Chona Locsin, G.R. No.
181560, November 15, 2010.
Property of the marriage; presumed conjugal. All property
of the marriage is presumed to be conjugal. However, for
this presumption to apply, the party who invokes it must
first prove that the property was acquired during the
marriage. Proof of acquisition during the coverture is a
condition sine qua non to the operation of the
presumption in favor of the conjugal partnership. Thus,
the time when the property was acquired is material.
Evangeline D. Imani vs. Metropolitan Bank and Trust
Company, G.R. No. 187023, November 17, 2010.

Property registration; proof of alienable character; proof of

possession. Under the Regalian doctrine, all lands of the
public domain belong to the State. All lands not appearing
to be clearly within private ownership are presumed to
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
(or claiming ownership). To overcome this presumption,
incontrovertible evidence must be established that the
land subject of the application (or claim) is alienable or
disposable.

To support its contention that the land subject of the

application for registration is alienable, respondents
presented the survey plan with the following annotation:
This survey is inside L.C. Map No. 2623 Proj. No. 27-B
clasified as alienable/disposable by the Bureau of Forest
Development, Quezon City on Jan. 03, 1968.

The surveyors annotation presented by respondents is

not the kind of proof required by law to prove that the
subject land falls within the alienable and disposable
zone. Respondents failed to submit a certification from
the proper government agency to establish that the
subject land are part of the alienable and disposable
portion of the public domain. In the absence of
incontrovertible evidence to prove that the subject
property is already classified as alienable and disposable,
we must consider the same as still inalienable public
domain.

Anent respondents possession and occupation of the

subject property, a reading of the records failed to show
that the respondents by themselves or through their
predecessors-in-interest possessed and occupied the
subject land since June 12, 1945 or earlier. The evidence
submitted by respondents to prove their possession and
occupation over the subject property consists of the
testimonies of Jose and Amado Geronimo (Amado), the
tenant of the adjacent lot. However, their testimonies
failed to establish respondents predecessors-in-interest
possession and occupation of subject property since
June 12, 1945 or earlier. But Jose and Amados
testimonies consist merely of general statements with no
specific details as to when respondents predecessors-in-
interest began actual occupancy of the land subject of
this case. 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.

Respondents earliest evidence can be traced back to a

tax declaration issued in the name of their predecessors-
in-interest only in the year 1949. At best, respondents can
only prove possession since said date. What is required is
open, exclusive, continuous and notorious possession by
respondents and their predecessors-in-interest, under a
bona fide claim of ownership, since June 12, 1945 or
earlier. Well settled is the rule that tax declarations and
receipts are not conclusive evidence of ownership or of
the right to possess land when not supported by any
other evidence. Vitarich Corporation vs. Chona Locsin,
G.R. No. 171631, November 15, 2010.

Property; buyer in good faith. To prove good faith, the rule

is that the buyer of registered land needs only show that
he relied on the title that covers the property. But this is
true only when, at the time of the sale, the buyer was
unaware of any adverse claim to the property. Otherwise,
the law requires the buyer to exercise a higher degree of
diligence before proceeding with his purchase. He must
examine not only the certificate of title, but also the
sellers right and capacity to transfer any interest in the
property. In such a situation, the buyer must show that he
exercised reasonable precaution by inquiring beyond the
four corners of the title. Failing in these, he may be
deemed a buyer in bad faith. Filinvest Development
Corporation vs. Golden Haven Memorial Park, Inc. /
Golden Haven Memorial Park, Inc. vs. Filinvest
Development Corporation, G.R. No. 187824 / G.R. No.
188265. November 17, 2010.

Succession. Considering that Roman died on August 9,

1976, the provisions of the Civil Code on succession, then
the law in force, should apply, particularly Articles 979 and
980, viz.

Art. 979. Legitimate children and their descendants

succeed the parents and other ascendants, without
distinction as to sex or age, and even if they should come
from different marriages. x x x.

Art. 980. The children of the deceased shall always inherit

from him in their own right, dividing the inheritance in
equal shares.

Thus, the RTC correctly ruled that Lot No. 1-P rightfully
belongs to the 11 children of Roman, seven from his first
marriage with Flavia and four from his second marriage
with Ceferina, in equal shares. As there was no partition
among Romans children, the lot was owned by them in
common. And inasmuch as Flavia did not successfully
repudiate her sale of her aliquot share to Cresencia, the
transfer stands as valid and effective. Consequently,
what Cresencia sold to petitioner spouses was her own
share and Flavias share in the property that she acquired
by virtue of the notarized deed of sale, which is only 2/11
of Lot No. 1-P. Therefore, the restitution of the property in
excess of that portion by petitioner spouses is clearly
warranted. Sps. Mariano and Emma Bolaos vs. Roscef
Zuga Bernarte, et al., G.R. No. 180997, November 17,
2010.

Unjust enrichment. Land Bank maintains that the trial

court erroneously applied the principle of equity and
justice in ordering it to return the PhP 750,000 paid by
Alfredo. Alfredo was allegedly in bad faith and in estoppel.
Land Bank contends that it enjoyed the presumption of
regularity and was in good faith when it accepted
Alfredos tender of PhP 750,000. It reasons that it did not
unduly enrich itself at Alfredos expense during the
foreclosure of the mortgaged properties, since it tendered
its bid by subtracting PhP 750,000 from the Spouses Sys
outstanding loan obligation. Alfredos recourse then,
according to Land Bank, is to have his payment
reimbursed by the Spouses Sy.
We rule that Land Bank is still liable for the return of the
PhP 750,000 based on the principle of unjust enrichment.
Land Bank is correct in arguing that it has no obligation as
creditor to recognize Alfredo as a person with interest in
the fulfillment of the obligation. But while Land Bank is not
bound to accept the substitution of debtors in the subject
real estate mortgage, it is estopped by its action of
accepting Alfredos payment from arguing that it does not
have to recognize Alfredo as the new debtor. By
accepting Alfredos payment and keeping silent on the
status of Alfredos application, Land Bank misled Alfredo
to believe that he had for all intents and purposes
stepped into the shoes of the Spouses Sy.

We turn then on the principle upon which Land Bank must

return Alfredos payment. Unjust enrichment exists 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. There is unjust enrichment under Art.
22 of the Civil Code when (1) a person is unjustly
benefited, and (2) such benefit is derived at the expense
of or with damages to another.

Additionally, unjust enrichment has been applied to

actions called accion in rem verso. In order that the
accion in rem verso may prosper, the following conditions
must concur: (1) that the defendant has been enriched; (2)
that the plaintiff has suffered a loss; (3) that the
enrichment of the defendant is without just or legal
ground; and (4) that the plaintiff has no other action based
on contract, quasi-contract, crime, or quasi-delict. The
principle of unjust enrichment essentially contemplates
payment when there is no duty to pay, and the person
who receives the payment has no right to receive it.

The principle applies to the parties in the instant case, as,

Alfredo, having been deemed disqualified from assuming
the loan, had no duty to pay petitioner bank and the latter
had no right to receive it.

Moreover, the Civil Code likewise requires under Art. 19

that [e]very 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.
Land Bank, however, did not even bother to inform
Alfredo that it was no longer approving his assumption of
the Spouses Sys mortgage. Yet it acknowledged his
interest in the loan when the branch head of the bank
wrote to tell him that his daughters loan had not been
paid. Land Bank made Alfredo believe that with the
payment of PhP 750,000, he would be able to assume the
mortgage of the Spouses Sy. The act of receiving
payment without returning it when demanded is contrary
to the adage of giving someone what is due to him. The
outcome of the application would have been different had
Land Bank first conducted the credit investigation before
accepting Alfredos payment. He would have been
notified that his assumption of mortgage had been
disapproved; and he would not have taken the futile
action of paying PhP 750,000. The procedure Land Bank
took in acting on Alfredos application cannot be said to
have been fair and proper.

As to the claim that the trial court erred in applying equity

to Alfredos case, we hold that Alfredo had no other
remedy to recover from Land Bank and the lower court
properly exercised its equity jurisdiction in resolving the
collection suit. As we have held in one case:

Equity, as the complement of legal jurisdiction, seeks to

reach and complete justice where courts of law, through
the inflexibility of their rules and want of power to adapt
their judgments to the special circumstances of cases, are
incompetent to do so. Equity regards the spirit and not
the letter, the intent and not the form, the substance
rather than the circumstance, as it is variously expressed
by different courts.

Land Bank of the Philippines vs. Alfredo Ong, G.R. No.

190755, November 24, 2010

Special Laws

Agricultural Tenancy Act; tenancy. We agree with the

Court of Appeals that a tenancy relationship cannot be
extinguished by mere expiration of term or period in a
leasehold contract; or by the sale, alienation or the
transfer of legal possession of the landholding. Section 9
of Republic Act No. 1199 or the Agricultural Tenancy Act
provides:

SECTION 9. Severance of Relationship. The tenancy

relationship is extinguished by the voluntary surrender of
the land by, or the death or incapacity of, the tenant, but
his heirs or the members of his immediate farm household
may continue to work the land until the close of the
agricultural year. The expiration of the period of the
contract as fixed by the parties, and the sale or alienation
of the land does not of themselves extinguish the
relationship. In the latter case, the purchaser or transferee
shall assume the rights and obligations of the former
landholder in relation to the tenant. In case of death of the
landholder, his heir or heirs shall likewise assume his
rights and obligations. (Emphasis supplied)

Moreover, Section 10 of Republic Act No. 3844 (Code of

Agrarian Reforms of the Philippines) likewise provides:

SEC. 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.
(Emphasis supplied)

December 2009 Philippine Supreme Court Decisions on

CivilLaw

Agency; agency by estoppel. An agency by estoppel,

which is similar to the doctrine of apparent authority
requires proof of reliance upon the representations, and
that, in turn, needs proof that the representations
predated the action taken in reliance.

There can be no apparent authority of an agent without

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. Such proof is lacking in this case. Yun Kwan
Byung vs. Philippine Amusement Gaming Corporation,
G.R. No. 163553, December 11, 2009.

Agency; implied agency. Article 1869 of the Civil Code

states that implied agency is derived from the acts of the
principal, from his silence or lack of action, or his failure to
repudiate the agency, knowing that another person is
acting on his behalf without authority. Implied agency,
being an actual agency, is a fact to be proved by
deductions or inferences from other facts.

On the other hand, apparent authority is based on

estoppel and can arise from two instances. First, the
principal may knowingly permit the agent to hold himself
out as having such authority, and the principal becomes
estopped to claim that the agent does not have such
authority. Second, the principal may clothe the agent with
the indicia of authority as to lead a reasonably prudent
person to believe that the agent actually has such
authority. In an agency by estoppel, there is no agency at
all, but the one assuming to act as agent has apparent or
ostensible, although not real, authority to represent
another.

The law makes no presumption of agency and proving its

existence, nature and extent is incumbent upon the
person alleging it. Whether or not an agency has been
created is a question to be determined by the fact that
one represents and is acting for another.Yun Kwan Byung
vs. Philippine Amusement Gaming Corporation, G.R. No.
163553, December 11, 2009.

Agency; implied agency. The basis for agency is

representation, that is, the agent acts for and on behalf of
the principal on matters within the scope of his authority
and said acts have the same legal effect as if they were
personally executed by the principal. On the part of the
principal, there must be an actual intention to appoint or
an intention naturally inferable from his words or actions,
while on the part of the agent, there must be an intention
to accept the appointment and act on it. Absent such
mutual intent, there is generally no agency.

There is no implied agency in this case because PAGCOR

did not hold out to the public as the principal of ABS
Corporation. PAGCORs actions did not mislead the
public into believing that an agency can be implied from
the arrangement with the junket operators, nor did it hold
out ABS Corporation with any apparent authority to
represent it in any capacity. The Junket Agreement was
merely a contract of lease of facilities and services. Yun
Kwan Byung vs. Philippine Amusement Gaming
Corporation, G.R. No. 163553, December 11, 2009.

Contract; binding effect. A consignee, although not a

signatory to the contract of carriage between the shipper
and the carrier, becomes a party to the contract by reason
of either (1) the relationship of agency between the
consignee and the shipper/ consignor; (2) the unequivocal
acceptance of the bill of lading delivered to the
consignee, with full knowledge of its contents or (3)
availment of the stipulation pour autrui, i.e., when the
consignee, a third person, demands before the carrier the
fulfillment of the stipulation made by the consignor/
shipper in the consignees favor, specifically the delivery
of the goods/cargoes shipped.MoF Company, Inc. vs.
Shin Brokerage Corporation, G.R. No. 172822, December
18, 2009.

Contract; interpretation. A compromise is a contract

whereby the parties, by making reciprocal concessions,
avoid a litigation or put an end to one already
commenced. It is an agreement intended to terminate a
pending suit by making reciprocal concessions.

In the construction or interpretation of a compromise

agreement, the Court is guided by the fundamental and
cardinal rule that the intention of the parties is to be
ascertained from the contract and effect should be given
to that intention. Likewise, it must be construed so as to
give effect to all the provisions of the contract. In
essence, the contract must be read as a whole.Adriatico
Consortium, Inc. Primary Realty Corp., and Benito Cu-Uy-
Gam vs. Land Bank of the Philippines,G.R. No. 187838,
December 23, 2009.

Contract; novation. Novation is the extinguishment of an

obligation by the substitution or change of the obligation
by a subsequent one which extinguishes or modifies the
first, either by changing the object or principal conditions,
or by substituting another in place of the debtor, or by
subrogating a third person in the rights of the creditor.
Novation may be extinctive or modificatory. It is extinctive
when an old obligation is terminated by the creation of a
new one that takes the place of the former; it is merely
modificatory when the old obligation subsists to the
extent that it remains compatible with the amendatory
agreement.

Novation may either be express, when the new obligation

declares in unequivocal terms that the old obligation is
extinguished; or implied, when the new obligation is on
every point incompatible with the old one. The test of
incompatibility is whether the two obligations can stand
together, each one with its own independent existence.

In the instant case, the Court finds that the Partial

Compromise Agreement entered into by petitioners and
Land Bank constitutes as an implied modificatory
novation or amendment to the Loan/Line Agreement. As
such, any provision in the Loan/Line Agreement
inconsistent with the provisions of the Partial Compromise
Agreement is deemed amended or waived by the parties.

In other words, by entering into the Partial Compromise

Agreement and agreeing to suspend all actions, Land
Bank effectively waived all its rights regarding MPC Nos.
0002 and 0004. This necessarily includes its right to
assign under the Loan/Line Agreement.Adriatico
Consortium, Inc. Primary Realty Corp., and Benito Cu-Uy-
Gam vs. Land Bank of the Philippines,G.R. No. 187838,
December 23, 2009.

Contract; rescission. The remedy of rescission is not

confined to the rescissible contracts enumerated under
Article 1381. Article 1191 of the Civil Code gives the
injured party in reciprocal obligations, such as what
contracts are about, the option to choose between
fulfillment and rescission. Arturo M. Tolentino, a well-
known authority in civil law, is quick to note, however, that
the equivalent of Article 1191 in the old code actually
uses the term resolution rather than the present
rescission. The calibrated meanings of these terms are
distinct.

Rescission is a subsidiary action based on injury to the

plaintiffs economic interests as described in Articles 1380
and 1381. Resolution, the action referred to in Article
1191, on the other hand, is based on the defendants
breach of faith, a violation of the reciprocity between the
parties. As an action based on the binding force of a
written contract, therefore, rescission (resolution) under
Article 1191 prescribes in 10 years. Ten years is the
period of prescription of actions based on a written
contract under Article 1144.

The distinction makes sense. Article 1191 gives the

injured party an option to choose between, first, fulfillment
of the contract and, second, its rescission. An action to
enforce a written contract (fulfillment) is definitely an
action upon a written contract, which prescribes in 10
years (Article 1144). It will not be logical to make the
remedy of fulfillment prescribe in 10 years while the
alternative remedy of rescission (or resolution) is made to
prescribe after only four years as provided in Article 1389
when the injury from which the two kinds of actions derive
is the same. Heirs of Sofia Quirong, etc. vs. Development
Bank of the Philippines,G.R. No. 173441, December 3,
2009.

Contract; void contract. A contract is void if one of the

essential requisites of contracts under Article 1318 of the
New Civil Code is lacking.

All these elements must be present to constitute a valid

contract. Consent is essential to the existence of a
contract; and where it is wanting, the contract is non-
existent. In a contract of sale, its perfection is
consummated at the moment there is a meeting of the
minds upon the thing that is the object of the contract and
upon the price. Consent is manifested by the meeting of
the offer and the acceptance of the thing and the cause,
which are to constitute the contract. To enter into a valid
contract of sale, the parties must have the capacity to do
so. Every person is presumed to be capacitated to enter
into a contract until satisfactory proof to the contrary is
presented. The burden of proof is on the individual
asserting a lack of capacity to contract, and this burden
has been characterized as requiring for its satisfaction
clear and convincing evidence.

While a corporation is a juridical person, it cannot act

except through its board of directors as a collective body,
which is vested with the power and responsibility to
decide whether the corporation should enter into a
contract that will bind the corporation, subject to the
articles of incorporation, by-laws, or relevant provisions of
law. This grant to the board of all corporate powers is
explicit under Section 23 of the Corporation Code,
stating: All corporate powers shall be exercised, and all
corporate business shall be conducted by the board of
directors.

In the case under consideration, the dispute centers on

the element of consent, which FPHC claimed to be
lacking since the supposed board of directors that
composed the FPHC was allegedly a dummy board of
Benjamin Romualdez, the members of which were
allegedly installed after the management and control of
FPHC were supposedly fraudulently wrested from its true
owners. The Sandiganbayan, however, differed. It stood
pat in its ruling that the consent by the board of directors,
who had the legal capacity to enter into said contract with
a third person, was duly obtained. This Court finds no
reason to diverge from the disquisition of the anti-graft
court on this matter. First Philippine Holding Corporation
vs. Trans Middle East (Phils.) Equities Inc.,G.R. No.
179505. December 4, 2009.

Contract; void contract; prescription. The sale of subject

properties to petitioners are null and void. Under Article
1410 of the Civil Code, an action or defense for the
declaration of the inexistence of a contract is
imprescriptible. Hence, petitioners contention that
respondents cause of action is already barred by
prescription is without legal basis. Jesus Campos and
Rosemarie Campos-Bautista vs. Nenita Buevinida
Pastrana, et al.,G.R. No. 175994, December 8, 2009.

Contract; void contract; rescission. Petitioners argument

that the applicable law in this case is Article 1381(3) of the
Civil Code on rescissible contracts and not Article 1409
on void contracts is not a question of first impression.
This issue had already been settled several decades ago
when we held that an action to rescind is founded upon
and presupposes the existence of a contract. A contract
which is null and void is no contract at all and hence
could not be the subject of rescission.

In the instant case, the Deeds of Absolute Sale are

fictitious and inexistent for being absolutely simulated
contracts. It is true that the CA cited instances that may
constitute badges of fraud under Article 1387 of the Civil
Code on rescissible contracts. But there is nothing else in
the appealed decision to indicate that rescission was
contemplated under the said provision of the Civil Code.
The aforementioned badges must have been considered
merely as grounds for holding that the sale is fictitious.
Consequently, we find that the CA properly applied the
governing law over the matter under consideration which
is Article 1409 of the Civil Code on void or inexistent
contracts. Jesus Campos and Rosemarie Campos-
Bautista vs. Nenita Buevinida Pastrana, et al.,G.R. No.
175994, December 8, 2009.

Contract; void contract; gambling. Gambling is prohibited

by the laws of the Philippines as specifically provided in
Articles 195 to 199 of the Revised Penal Code, as
amended. Gambling is an act beyond the pale of good
morals, and is thus prohibited and punished to repress an
evil that undermines the social, moral, and economic
growth of the nation. Presidential Decree No. 1602 (PD
1602), which modified Articles 195-199 of the Revised
Penal Code and repealed inconsistent provisions,
prescribed stiffer penalties on illegal gambling.

As a rule, all forms of gambling are illegal. The only form

of gambling allowed by law is that stipulated under
Presidential Decree No. 1869, which gave PAGCOR its
franchise to maintain and operate gambling casinos. The
issue then turns on whether PAGCOR can validly share its
franchise with junket operators to operate gambling
casinos in the country.
The Junket Agreement would be valid if under Section 3
(h) of PAGCORs charter, PAGCOR could share its
gambling franchise with another entity. In this case,
PAGCOR, by taking only a percentage of the earnings of
ABS Corporation from its foreign currency collection,
allowed ABS Corporation to operate gaming tables in the
dollar pit. The Junket Agreement is in direct violation of
PAGCORs charter and is therefore void.

Since the Junket Agreement violates PAGCORs charter,

gambling between the junket player and the junket
operator under such agreement is illegal and may not be
enforced by the courts. Article 2014 of the Civil Code,
which refers to illegal gambling, states that no action can
be maintained by the winner for the collection of what he
has won in a game of chance. Yun Kwan Byung vs.
Philippine Amusement Gaming Corporation, G.R. No.
163553, December 11, 2009.

Contract; voidable. Contracts where consent is given

through fraud, are voidable or annullable. These are not
voidab initio since voidable or anullable contracts are
existent, valid, and binding, although they can be annulled
because of want of capacity or the vitiated consent of one
of the parties. However, before such annulment, they are
considered effective and obligatory between parties.
As the complaint-in-intervention substantially alleged that
the contract was voidable, the four-year prescriptive
period under Art. 1391 of the New Civil Code will apply.
FPHC, however, contends that the four-year prescriptive
period should be reckoned from 24 February 1986, the
date when former President Marcos left the country, as it
was only then that the threat and intimidation against the
Lopezes ceased.

This argument is unconvincing. Based on FPHCs Petition

for Review and its Complaint-in-Intervention, the ground
relied upon by petitioner is fraud. Here, from the time the
questioned sale transaction on 24 May 1984 took place,
FPHC did not deny that it had actual knowledge of the
same. Simply, petitioner was fully aware of the sale of the
PCIB shares to TMEE. Despite all this knowledge,
petitioner did not question the said sale from its inception
and some time thereafter. It was only after four years and
seven months had lapsed following the knowledge or
discovery of the alleged fraudulent sale that petitioner
assailed the same. By then, it was too late for petitioner to
beset the same transaction, since the prescriptive period
had already come into play. First Philippine Holding
Corporation vs. Trans Middle East (Phils.) Equities
Inc.,G.R. No. 179505. December 4, 2009.

Damages; exemplary damages. Petitioner argues that

assuming arguendo that compensatory damages had
been awarded, the same contravened Article 2232 of the
Civil Code which provides that in contracts or quasi-
contracts, the court may award exemplary damages only
if the defendant acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner. Since, so petitioner
concludes, there was no finding that it acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner, it
is not liable for exemplary damages.

The argument fails. To reiterate, petitioners liability is

based not on contract or quasi-contract but on quasi-
delict since there is no pre-existing contractual relation
between the parties. Article 2231 of the Civil Code, which
provides that in quasi-delict, exemplary damages may be
granted if the defendant acted with gross negligence,
thus applies. For gross negligence implies a want or
absence of or failure to exercise even slight care or
diligence, or the entire absence of care, evincing a
thoughtless disregard of consequences without exerting
any effort to avoid them. Metropolitan Bank and Trust
Company, etc. vs. BA Finance Corporation and Malayan
Insurance Co, Inc.,G.R. No. 179952, December 4, 2009.

Laws; retroactive application. A perusal of RA 9302 shows

that nothing indeed therein authorizes its retroactive
application. In fact, its effectivity clause indicates a clear
legislative intent to the contrary: Section 28. Effectivity
Clause. This Act shall take effect fifteen (15) days
following the completion of its publication in the Official
Gazette or in two (2) newspapers of general circulation.

Statutes are prospective and not retroactive in their

operation, they being the formulation of rules for the
future, not the past. Hence, the legal maxim lex de futuro,
judex de praeterito the law provides for the future, the
judge for the past, which is articulated in Article 4 of the
Civil Code: Laws shall have no retroactive effect, unless
the contrary is provided. The reason for the rule is the
tendency of retroactive legislation to be unjust and
oppressive on account of its liability to unsettle vested
rights or disturb the legal effect of prior transactions. In
Re: Petition for Assistance in the Liquidation of Intercity
Savings and Loan Bank, Inc., Philippine Deposit
Insurance Corporation vs. Stockholders of Intercity
Savings and Loan Bank, Inc., G.R. No. 181556, December
14, 2009.

Marriage; disposition of conjugal property. The husbands

first act of disposition of the subject property occurred in
1963 when he executed the SPA and the Deed of Transfer
of Rights in favor of Dolores Camisura. Thus, the right of
action of the petitioners accrued in 1963, as Article 173 of
the Civil Code provides that the wife may file for
annulment of a contract entered into by the husband
without her consent within ten (10) years from the
transaction questioned. Petitioners filed the action for
reconveyance in 1995. Even if we were to consider that
their right of action arose when they learned of the
cancellation of TCT No. 107534 and the issuance of TCT
No. 290121 in Melanie Mingoas name in 1993, still,
twelve (12) years have lapsed since such discovery, and
they filed the petition beyond the period allowed by law.
Moreover, when Sergia Hernandez, together with her
children, filed the action for reconveyance, the conjugal
partnership of property with Hernandez, Sr. had already
been terminated by virtue of the latters death on April 16,
1983. Clearly, therefore, petitioners action has
prescribed.

The failure of Sergia Hernandez to file with the courts an

action for annulment of the contract during the marriage
and within ten (10) years from the transaction necessarily
barred her from questioning the sale of the subject
property to third persons. Heirs of Domingo Hernandez
Sr., et al. vs. Plaridel Mingoa, Sr., et al., G.R. No. 146548,
December 18, 2009.

Mortgage; foreclosure. Foreclosure is valid where the

debtor is in default in the payment of an obligation. The
essence of a contract of mortgage indebtedness is that a
property has been identified or set apart from the mass of
the property of the debtor-mortgagor as security for the
payment of money or the fulfillment of an obligation to
answer the amount of indebtedness, in case of default in
payment. Foreclosure is but a necessary consequence of
non-payment of the mortgage indebtedness. In a real
estate mortgage when the principal obligation is not paid
when due, the mortgagee has the right to foreclose the
mortgage and to have the property seized and sold with
the view of applying the proceeds to the payment of the
obligation.
On the face of respondents clear admission that they
were unable to settle their obligations which were secured
by the mortgages, EPCIB has a clear right to foreclose the
mortgages.Equitable PCI Bank, Inc. vs. Maria Letecia
Fernandez, et al.,G.R. No. 163117, December 18, 2009.

Obligations; corporations. A corporation is vested by law

with a personality separate and distinct from the people
comprising it. Ownership by a single or small group of
stockholders of nearly all of the capital stock of the
corporation is not by itself a sufficient ground to disregard
the separate corporate personality. Thus, obligations
incurred by corporate officers, acting as corporate
agents, are direct accountabilities of the corporation they
represent.

In this case, none of these exceptional circumstances is

present. In its decision, the trial court failed to provide a
clear ground why Eugene Lim was held solidarily liable
with Shrimp Specialists. The trial court merely stated that
Eugene Lim signed on behalf of the Shrimp Specialists as
President without explaining the need to disregard the
separate corporate personality. The CA correctly ruled
that the evidence to hold Eugene Lim solidarily liable
should be more than just signing on behalf of the
corporation because artificial entities can only act through
natural persons. Thus, the CA was correct in dismissing
the case against Eugene Lim. Shrimp Specialist, Inc. vs.
Fuji-Triumph Agri-Industrial Corporation/Fuji-Trimph Agri-
Industrial Corporation vs. Shrimp Specialist, Inc. et
al.,G.R. No. 168756/G.R. No. 171476, December 7,
2009.

Obligations; interest. Not being a loan or forbearance of

money, the interest should be 6% per annum computed
from the date of extrajudicial demand on September 25,
1992 until finality of judgment; and 12% per annum from
finality of judgment until payment, conformably with
Eastern Shipping Lines, Inc. v. Court of Appeals.
Metropolitan Bank and Trust Company, etc. vs. BA
Finance Corporation and Malayan Insurance Co,
Inc.,G.R. No. 179952, December 4, 2009.

Obligations; laches. Petitioners cannot find refuge in the

principle of laches. It is not just the lapse of time or delay
that constitutes laches. The essence of laches is the
failure or neglect, for an unreasonable and unexplained
length of time, to do that which, through due diligence,
could or should have been done earlier, thus giving rise to
a presumption that the party entitled to assert it had
earlier abandoned or declined to assert it.
The essential elements of laches are: (a) conduct on the
part of the defendant, or of one under whom he claims,
giving rise to the situation complained of; (b) delay in
asserting complainants rights after he had knowledge of
defendants acts and after he has had the opportunity to
sue; (c) lack of knowledge or notice by defendant that the
complainant will assert the right on which he bases his
suit and (d) injury or prejudice to the defendant in the
event the relief is accorded to the complainant.

In the instant case, the second and third elements are

missing. Arsenio F. Olegario, et al. vs. Pedro C. Mari,
represented by Lilia C. Mari-Camba,G.R. No. 147951,
December 14, 2009.

Property; possession. Respondents predecessor, Juan

Mari, had declared the disputed realty for tax purposes as
early as 1916. The tax declarations show that he had a
two storey house on the realty. He also planted fruit
bearing trees and bamboos thereon. The records also
show that the 897-square meter property had a bamboo
fence along its perimeter. All these circumstances clearly
show that Juan Mari was in possession of subject realty in
the concept of owner, publicly and peacefully since 1916
or long before petitioners entered the disputed realty
sometime in 1965.

Based on Article 538 of the Civil Code, the respondent is

the preferred possessor because, benefiting from his
fathers tax declaration of the subject realty since 1916,
he has been in possession thereof for a longer period. On
the other hand, petitioners acquired joint possession only
sometime in 1965.Arsenio F. Olegario, et al. vs. Pedro C.
Mari, represented by Lilia C. Mari-Camba,G.R. No.
147951, December 14, 2009.
Sale; contract to sell. A distinction between a contract to
sell and a contract of sale is helpful in order to determine
the true intention of the parties. In a contract of sale, the
title to the property passes to the vendee upon the
delivery of the thing sold; while in a contract to sell,
ownership is, by agreement, reserved for the vendor and
is not to pass to the vendee until full payment of the
purchase price. In a contract of sale, non-payment of the
price is a negative resolutory condition. In a contract to
sell, full payment is a positive suspensive condition. In a
contract of sale, the vendor loses and cannot recover
ownership of the thing sold until and unless the contract
of sale is itself resolved and set aside. In a contract to
sell, the title remains with the vendor if the vendee does
not comply with the condition precedent of making
payment at the time specified in the contract. In a
contract to sell, the payment of the purchase price is a
positive suspensive condition, the failure of which is not a
breach, casual or serious, but a situation which prevents
the obligation of the vendor to convey title from acquiring
an obligatory force.

In the instant case, ownership of the general purpose

polystyrene products was retained by SMP, Incorporated
(SMP) until after the checks given as payment by
Clothespak Manufacturing Philippines (Clothespak)
cleared. This was evidenced by a provisional receipt
issued by SMP to Clothespak. The agreement between
SMP and Clothespak involved a contract to sell defined
under Article 1478 of the Civil Code.

On the other hand, the stipulation that the loss or

destruction of the products during transit is on the
account of Clothespak, as buyer of the products, is of no
moment. This does not alter the nature of the contract as
a contract to sell. The free on board stipulation on the
contract can coexist with the contract to sell. Otherwise
stated, the provisions or stipulations in the contract for
the reservation of the ownership of a thing until full
payment of the purchase price and for the loss or
destruction of the thing would be on account of the buyer
are valid and can exist in conjunction with the
other.Bank of the Philippine Islands as successor-in-
interest of Far East Bank and Trust Company vs. SMP,
Inc.,G.R. No. 175466, December 23, 2009.

Special laws

Innocent purchaser for value; financial institutions. While

we agree with petitioners that GSIS, as a financial
institution, is bound to exercise more than just ordinary
diligence in the conduct of its financial dealings, we
nevertheless find no law or jurisprudence supporting
petitioners claim that financial institutions are not
protected when they are innocent purchasers for value.
When financial institutions exercise extraordinary
diligence in determining the validity of the certificates of
title to properties being sold or mortgaged to them and
still fail to find any defect or encumbrance upon the
subject properties after said inquiry, such financial
institutions should be protected like any other innocent
purchaser for value if they paid a full and fair price at the
time of the purchase or before having notice of some
other persons claim on or interest in the property.
Alejandro B. Ty and International Realty Corporation vs.
Queens Row Subdivision, Inc., et al., G.R. No. 173158,
December 4, 2009.

Land registration; possession. In Director, Land

Management Bureau v. Court of Appeals, we explained
that x x x The phrase adverse, continuous, open,
public, peaceful and in concept of owner, by which
characteristics private respondent describes his
possession and that of his parents, are mere conclusions
of law requiring evidentiary support and substantiation.
The burden of proof is on the private respondent, as
applicant, to prove by clear, positive and convincing
evidence that the alleged possession of his parents was
of the nature and duration required by law. His bare
allegations without more, do not amount to preponderant
evidence that would shift the burden of proof to the
oppositor.

Here, we find that petitioners possession of the lot has

not been of the character and length of time required by
lawJosephine Wee vs. Republic of the Philippines,G.R.
No. 177384, December 8, 2009.

Registered land; buyer in good faith. While every person

dealing with registered land can 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, one
will not be permitted to benefit from this general rule if
there exist important facts which create suspicion to call
for an investigation of the real condition of the land. One
who deliberately ignores a significant fact which would
naturally generate wariness is not an innocent purchaser
for value.Vicente N. Luna, Jr. vs. Nario Cabales, Oscar
Pabalan, et al.,G.R. No. 173533, December 14, 2009.

Registered land; non-owner. The registration of a

property in ones name, whether by mistake or fraud, the
real owner being another, impresses upon the title so
acquired the character of a constructive trust for the real
owner. The person in whose name the land is registered
holds it as a mere trustee, and the real owner is entitled to
file an action for reconveyance of the property. The
Torrens system does not protect a usurper from the true
owner. Vicente N. Luna, Jr. vs. Nario Cabales, Oscar
Pabalan, et al.,G.R. No. 173533, December 14, 2009.

Registered owner; laches. This Court has, on several

occasions, already ruled that even a registered owner of a
property may be barred from recovering possession of the
same by virtue of laches. Laches is the failure or neglect,
for an unreasonable and unexplained length of time, to do
that which by exerting due diligence could or should have
been done earlier. The law serves those who are vigilant
and diligent, and not those who sleep when the law
requires them to act. Alejandro B. Ty and International
Realty Corporation vs. Queens Row Subdivision, Inc., et
al., G.R. No. 173158, December 4, 2009.

Torrens title; registration by non-owner. The fact that

petitioners were able to secure titles in their names did
not operate to vest upon them ownership over the subject
properties. That act has never been recognized as a
mode of acquiring ownership. The Torrens system does
not create or vest title. It only confirms and records title
already existing and vested. It does not protect a usurper
from the tr

November 2009 Philippine Supreme Court Decisions on

CivilLaw

Here are selected November 2009 Philippine Supreme

Court decisions on civil law and related laws:

Civil Code

Contract; contract of adhesion. A contract of adhesion

is defined as one in which one of the parties imposes a
ready-made form of contract, which the other party may
accept or reject, but which the latter cannot modify. One
party prepares the stipulation in the contract, while the
other party merely affixes his signature or his adhesion
thereto, giving no room for negotiation and depriving the
latter of the opportunity to bargain on equal
footing.Contracts of adhesion are not invalidper
se.Contracts of adhesion, where one party imposes a
ready-made form of contract on the other, are not entirely
prohibited. The one who adheres to the contract is, in
reality, free to reject it entirely; if he adheres, he gives his
consent. Norton Resources and Development
Corporation vs. All Asia Bank Corporation,G.R. No.
162523. November 25, 2009

Contract; freedom of contract. Petitioners allege that the

Kasulatan was entered into by the parties freely and
voluntarily. They maintain that there was already a
meeting of the minds between the parties as regards the
principal amount of the loan, the interest thereon and the
property given as security for the payment of the loan,
which must be complied with in good faith. Hence, they
assert that the Court of Appeals should have given due
respect to the provisions of the Kasulatan. They also
stress that it is a settled principle that the law will not
relieve a party from the effects of an unwise, foolish or
disastrous contract, entered into with all the required
formalities and with full awareness of what he was doing.
Petitioners contentions deserve scant consideration. In
Abe v. Foster Wheeler Corporation, we held that the
freedom of contract is not absolute. The same is
understood to be subject to reasonable legislative
regulation aimed at the promotion of public health,
morals, safety and welfare. One such legislative regulation
is found in Article 1306 of the Civil Code which allows the
contracting parties to 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.

To reiterate, we fully agree with the Court of Appeals in

holding that the compounded interest rate of 5% per
month, is iniquitous and unconscionable. Being a void
stipulation, it is deemed inexistent from the beginning.
The debt is to be considered without the stipulation of the
iniquitous and unconscionable interest rate. Accordingly,
the legal interest of 12% per annum must be imposed in
lieu of the excessive interest stipulated in the agreement,
in line with our ruling in Ruiz v. Court of Appeals. Sps.
Isagani & Diosdada Castro vs. Angelina de Leon Tan,G.R.
No. 168940, November 24, 2009.

Contract; laches. The essence of laches is the failure or

neglect, for an unreasonable and unexplained length of
time, to do that which, through due diligence, could have
been done earlier, thus giving rise to a presumption that
the party entitled to assert it had either abandoned or
declined to assert it.

Respondent discovered in 1991 that a new owners copy

of OCT No. 535 was issued to the Eniceo heirs.
Respondent filed a criminal case against the Eniceo heirs
for false testimony. When respondent learned that the
Eniceo heirs were planning to sell the Antipolo property,
respondent caused the annotation of an adverse claim.
On 16 January 1996, when respondent learned that OCT
No. 535 was cancelled and new TCTs were issued,
respondent filed a civil complaint with the trial court
against the Eniceo heirs and petitioner. Respondents
actions negate petitioners argument that respondent is
guilty of laches. Kings Properties Corporation, Inc. vs.
Canuto A. Galido,G.R. No. 170023. November 27, 2009

Contract; liquidated damage. In its June 11, 2002

Decision, the trial court granted an additional 1% per
month penalty as liquidated damages beginning February
17, 1994 up to June 21, 2000.

Article 2226 of the Civil Code provides that [L]iquidated

damages are those agreed upon by the parties to a
contract, to be paid in case of breach thereof.
In the instant case, a cursory reading of the Kasulatan
would show that it is devoid of any stipulation with
respect to liquidated damages. Neither did any of the
parties allege or prove the existence of any agreement on
liquidated damages. Hence, for want of any stipulation on
liquidated damages in the Kasulatan entered into by the
parties, we hold that the liquidated damages awarded by
the trial court and affirmed by the Court of Appeals to be
without legal basis and must be deleted. Sps. Isagani &
Diosdada Castro vs. Angelina de Leon Tan,G.R. No.
168940, November 24, 2009.

Contract; voidable contract. Pending approval or

disapproval by the Provincial Governor of a contract
entered into by a municipality which falls under the
provisions of Section 2196 of the Revised Administrative
Code, such contract is considered voidable. In the instant
case, there is no showing that the contract of sale entered
into between Pedro and the Municipality of Marikina was
ever acted upon by the Provincial Governor. Hence, the
subject contract should be considered voidable. Voidable
or annullable contracts, before they are set aside, are
existent, valid, and binding, and are effective and
obligatory between the parties.

In the present case, since the contract was never annulled

or set aside, it had the effect of transferring ownership of
the subject property to Pedro. Having lawfully acquired
ownership of Lots A and C, Pedro, in turn, had the full
capacity to transfer ownership of these parcels of land or
parts thereof, including the subject property which
comprises a portion of Lot C. The Estate of Pedro C.
Gonzales and Heirs of Pedro C. Gonzales vs. The Heirs of
Marcos Perez, G.R. No. 169681, November 5, 2009.

Damages attorneys fees. As a rule, an award of

attorneys fees should be deleted where the award of
moral and exemplary damages is not granted.
Nonetheless, attorneys fees may be awarded where the
court deems it just and equitable even if moral and
exemplary damages are unavailing. In the instant case,
we find no reversible error in the grant of attorneys fees
by the CA. Prosource International, Inc. vs. Horphag
Research Management SA, G.R. No. 180073. November
25, 2009

Interest; attorneys fees. The imposition of any interest,

as prayed for in this instant petition, on any amount
payable to petitioners is, however, unwarranted.
Contracts for attorneys services are unlike any other
contracts for the payment of compensation for any other
services which allow the imposition of interest in case of
delay under the provisions of the Civil Code. The practice
of law is a profession, not a moneymaking venture.Jose
Feliciano Loy, et al. vs. San Miguel Corporation
Employees Union-Philippine Transport and General
Workers Organization (SMCEU-PTGWO), et al., G.R. No.
164886. November 24, 2009

Lease; implied new lease. Under Article 1670, an

implied new lease will set in if it is shown that: (a) the term
of the original contract of lease has expired; (b) the lessor
has not given the lessee a notice to vacate; and (c) the
lessee continued enjoying the thing leased for 15 days
with the acquiescence of the lessor. This acquiescence
may be inferred from the failure of the lessor to serve
notice to vacate upon the lessee. Joven Yuki, Jr. vs.
Wellington Co,G.R. No. 178527. November 27, 2009

Lease; right to buy. The right of first refusal, also referred

to as the preferential right to buy, is available to lessees
only if there is a stipulation thereto in the contract of lease
or where there is a law granting such right to them (i.e.,
Presidential Decree No. 1517 (1978), which vests upon
urban poor dwellers who merely lease the house where
they have been residing for at least ten years, preferential
right to buy the property located within an area
proclaimed as an urban land reform zone). Unlike co-
owners and adjacent lot owners, there is no provision in
the Civil Code which grants to lessees preemptive rights.
Nonetheless, the parties to a contract of lease may
provide in their contract that the lessee has the right of
first refusal.

In this case, there is nothing in the Contract of Lease

which grants petitioner preferential right to buy the
subject premises. We are likewise unaware of any
applicable law which vests upon him priority right to buy
the commercial building subject matter of this case.
Joven Yuki, Jr. vs. Wellington Co,G.R. No. 178527.
November 27, 2009

Loan; interest. While we agree with petitioners that

parties to a loan agreement have wide latitude to stipulate
on any interest rate in view of the Central Bank Circular
No. 905 s. 1982 which suspended the Usury Law ceiling
on interest effective January 1, 1983, it is also worth
stressing that interest rates whenever unconscionable
may still be declared illegal. There is certainly nothing in
said circular which grants lenders carte blanche authority
to raise interest rates to levels which will either enslave
their borrowers or lead to a hemorrhaging of their assets.

In several cases, we have ruled that stipulations

authorizing iniquitous or unconscionable interests are
contrary to morals, if not against the law. In Medel v.
Court of Appeals, we annulled a stipulated 5.5% per
month or 66% per annum interest on a P500,000.00 loan
and a 6% per month or 72% per annum interest on
aP60,000.00 loan, respectively, for being excessive,
iniquitous, unconscionable and exorbitant. In Ruiz v.
Court of Appeals, we declared a 3% monthly interest
imposed on four separate loans to be excessive. In both
cases, the interest rates were reduced to 12% per annum.

In this case, the 5% monthly interest rate, or 60% per

annum, compounded monthly, stipulated in the Kasulatan
is even higher than the 3% monthly interest rate imposed
in the Ruiz case. Thus, we similarly hold the 5% monthly
interest to be excessive, iniquitous, unconscionable and
exorbitant, contrary to morals, and the law. It is therefore
void ab initio for being violative of Article 1306 of the Civil
Code. With this, and in accord with the Medel and Ruiz
cases, we hold that the Court of Appeals correctly
imposed the legal interest of 12% per annum in place of
the excessive interest stipulated in the Kasulatan.Sps.
Isagani & Diosdada Castro vs. Angelina de Leon Tan,G.R.
No. 168940, November 24, 2009.

Marriage; conjugal property. The registration of the trade

name in the name of one person a woman does not
necessarily lead to the conclusion that the trade name as
a property is hers alone, particularly when the woman is
married. By law, all property acquired during the marriage,
whether the acquisition appears to have been made,
contracted or registered in the name of one or both
spouses, is presumed to be conjugal unless the contrary
is proved. Our examination of the records of the case
does not show any proof that Kargo Enterprises and the
properties or contracts in its name are conjugal. If at all,
only the bare allegation of Navarro to this effect exists in
the records of the case.

Thus, for purposes solely of this case and of resolving the

issue of whether Kargo Enterprises as a sole
proprietorship is conjugal or paraphernal property, we
hold that it is conjugal property.Roger V. Navarro Vs. Hon.
Jose L. Escobido, Presiding Judge, RTC, Branch 37,
Cagayan de Oro City, and Karen T. Go, doing business
under the name Kargo Enterprises, G.R. No. 153788,
November 27, 2009.

Marriage; conjugal propety. Artilce 124 od the Family

Code, by its terms, allows either Karen or Glenn Go to
speak and act with authority in managing their conjugal
property, i.e., Kargo Enterprises. No need exists,
therefore, for one to obtain the consent of the other
before performing an act of administration or any act that
does not dispose of or encumber their conjugal property.

Under Article 108 of the Family Code, the conjugal

partnership is governed by the rules on the contract of
partnership in all that is not in conflict with what is
expressly determined in this Chapter or by the spouses in
their marriage settlements. In other words, the property
relations of the husband and wife shall be governed
primarily by Chapter 4 on Conjugal Partnership of Gains
of the Family Code and, suppletorily, by the spouses
marriage settlement and by the rules on partnership under
the Civil Code. In the absence of any evidence of a
marriage settlement between the spouses Go, we look at
the Civil Code provision on partnership for guidance.

Under Article 1181 of the Civil Code, Glenn and Karen Go

are effectively co-owners of Kargo Enterprises and the
properties registered under this name; hence, both have
an equal right to seek possession of these properties.
Applying Article 484 of the Civil Code, which states that
in default of contracts, or special provisions, co-
ownership shall be governed by the provisions of this
Title, we find further support in Article 487 of the Civil
Code that allows any of the co-owners to bring an action
in ejectment with respect to the co-owned property.
Roger V. Navarro Vs. Hon. Jose L. Escobido, Presiding
Judge, RTC, Branch 37, Cagayan de Oro City, and Karen
T. Go, doing business under the name Kargo Enterprises,
G.R. No. 153788, November 27, 2009.

Mortgage; foreclosure proceedings. It is undisputed that

sometime after the maturity of the loan, respondent Tan
attempted to pay the mortgage debt of P30,000.00 as
principal and some interest. Said offer was refused by
petitioners because they demanded payment of the total
accumulated amount of P359,000.00. Moreover, the trial
court also mentioned an offer by respondent Tan of the
amount of P200,000.00 to petitioners in order for her to
redeem or re-acquire the property in litis.

From these, it is evident that despite considerable effort

on her part, respondent Tan failed to redeem the
mortgaged property because she was unable to raise the
total amount of P359,000.00, an amount grossly inflated
by the excessive interest imposed. Thus, it is only proper
that respondents be given the opportunity to repay the
real amount of their indebtedness.
On this basis, we nullify the foreclosure proceedings held
on March 3, 1999 since the amount demanded as the
outstanding loan was overstated. Consequently, it has not
been shown that the respondents have failed to pay the
correct amount of their outstanding obligation.
Accordingly, we declare the registration of the foreclosure
sale invalid and cannot vest title over the mortgaged
property. Sps. Isagani & Diosdada Castro vs. Angelina
de Leon Tan,G.R. No. 168940, November 24, 2009.

Sale; buyer in bad faith. In Agricultural and Home

Extension Development Group v. Court of Appeals, a
buyer in good faith is defined as one who buys the
property of another without notice that some other person
has a right to or interest in such property and pays a full
and fair price for the same at the time of such purchase or
before he has notice of the claim or interest of some other
person in the property.

In Balatbat v. Court of Appeals, the Court held that in the

realm of double sales, the registration of an adverse claim
places any subsequent buyer of the registered land in bad
faith because such annotation was made in the title of the
property before the Register of Deeds and he could have
discovered that the subject property was already sold.
The Court explained further, thus:

A purchaser of a valued piece of property cannot just

close his eyes to facts which should put a reasonable
man upon his guard and then claim that he acted in good
faith and under the belief that there were no defect in the
title of the vendor. One who purchases real estate with
knowledge of a defect or lack of title in his vendor cannot
claim that he has acquired title thereto in good faith as
against the true owner of the land or of an interest therein;
and the same rule must be applied to one who has
knowledge of facts which should have put him upon such
inquiry and investigation as be necessary to acquaint him
with the defects in the title of his vendor.

Petitioner does not dispute that respondent registered his

adverse claim with the Registry of Deeds on 14 March
1995. The registration of the adverse claim constituted, by
operation of law, notice to the whole world. From that
date onwards, subsequent buyers were deemed to have
constructive notice of respondents adverse claim. Kings
Properties Corporation, Inc. vs. Canuto A. Galido,G.R.
No. 170023. November 27, 2009
Sale; equitable mortgage. An equitable mortgage is 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, and contains nothing
impossible or contrary to law. The essential requisites of
an equitable mortgage are:

1. The parties entered into a contract denominated as a

contract of sale; and
2. Their intention was to secure existing debt by way of a
mortgage.

In Lim v. Calaguas, the Court held that in order for the

presumption of equitable mortgage to apply, there must
be: (1) something in the language of the contract; or (2) in
the conduct of the parties which shows clearly and
beyond doubt that they intended the contract to be a
mortgage and not a pacto de retro sale. Proof by parol
evidence should be presented in court. Parol evidence is
admissible to support the allegation that an instrument in
writing, purporting on its face to transfer the absolute title
to property, was in truth and in fact given merely as
security for the payment of a loan. The presumption of
equitable mortgage under Article 1602 of the Civil Code is
not conclusive. It may be rebutted by competent and
satisfactory proof of the contrary. Kings Properties
Corporation, Inc. vs. Canuto A. Galido,G.R. No. 170023.
November 27, 2009

Sale; obligations. It is said that when the buyer enters into

a contract of sale, he assumes two obligations, first, the
payment of the consideration and, second, the
performance of such first obligation in good faith, an
implied obligation but just as binding and as important as
the first. Good faith is of course a matter of intent. It
means giving what one owes to the other without
concealment and evasion. Since intent is a state of mind,
however, good faith needs a face that one can see. The
steps that a party takes in fulfilling his obligation usually
constitute the face that expresses good faith or lack of
it.Ricardo C. Siverio vs. Eufemia Almeda and Ponciano
Almeda, et al., G.R. No. 178255, November 24, 2009.

Sale; real property. Under Article 1403(2), the sale of real

property should be in writing and subscribed by the party
charged for it to be enforceable. In the case before the
Court, the Deed of Sale between Pedro and Marcos is in
writing and subscribed by Pedro and his wife Francisca;
hence, it is enforceable under the Statute of Frauds.

However, not having been subscribed and sworn to

before a notary public, the Deed of Sale is not a public
document and, therefore, does not comply with Article
1358 of the Civil Code.

Nonetheless, it is a settled rule that the failure to observe

the proper form prescribed by Article 1358 does not
render the acts or contracts enumerated therein invalid. It
has been uniformly held that the form required under the
said Article is not essential to the validity or enforceability
of the transaction, but merely for convenience. The Court
agrees with the CA in holding that a sale of real property,
though not consigned in a public instrument or formal
writing, is, nevertheless, valid and binding among the
parties, for the time-honored rule is that even a verbal
contract of sale of real estate produces legal effects
between the parties. Stated differently, although a
conveyance of land is not made in a public document, it
does not affect the validity of such conveyance. Article
1358 does not require the accomplishment of the acts or
contracts in a public instrument in order to validate the
act or contract but only to insure its efficacy. Thus, based
on the foregoing, the Court finds that the CA did not err in
ruling that the contract of sale between Pedro and Marcos
is valid and binding. The Estate of Pedro C. Gonzales
and Heirs of Pedro C. Gonzales vs. The Heirs of Marcos
Perez, G.R. No. 169681, November 5, 2009.

Sale; simulated sale. The primary consideration in

determining the true nature of a contract is the intention
of the parties. Such intention is determined not only from
the express terms of their agreement, but also from the
contemporaneous and subsequent acts of the parties.

Simulation takes place when the parties do not really

want the contract they have executed to produce the
legal effects expressed by its wordings.[20] This Courts
pronouncement in Valerio v. Refresca is instructive
Article 1345 of the Civil Code provides that the
simulation of a contract may either be absolute or relative.
In absolute simulation, there is a colorable contract but it
has no substance as the parties have no intention to be
bound by it. The main characteristic of an absolute
simulation is that the apparent contract is not really
desired or intended to produce legal effect or in any way
alter the juridical situation of the parties. As a result, an
absolutely simulated or fictitious contract is void, and the
parties may recover from each other what they may have
given under the contract. However, if the parties state a
false cause in the contract to conceal their real
agreement, the contract is relatively simulated and the
parties are still bound by their real agreement. Hence,
where the essential requisites of a contract are present
and the simulation refers only to the content or terms of
the contract, the agreement is absolutely binding and
enforceable between the parties and their successors in
interest.

Based on the foregoing, the subject deed of sale can

hardly be considered simulated. There is no showing that
the parties did not intend to be bound by the contract and
to comply with its terms. In fact, Villadares surrendered to
petitioners any right he had over the property. He caused
the titling of the property and the transfer of the tax
declaration in petitioners names, and thereafter, delivered
the certificate of title and the tax declaration to petitioners
and accepted the purchase price from them. To recall,
Villadares admitted that he was swayed by petitioners
claim that they had a right over the property and thus, he
agreed to sell it to them. Such motivation for entering into
the contract would not negate the efficacy of the contract.
In the same way, petitioners opposition in the land
registration case does not necessarily mean that
petitioners did not really intend to purchase the property.
Petitioners could have accepted or acquiesced to
Villadares title and entered into the agreement to finally
settle their claim over the property. Spouses Exequiel
Lopez and Eusebia Lopez vs. Spouses Eduardo Lopez,
et al.,G.R. No. 161925. November 25, 2009.

Sale; validity. The contract between the Eniceo heirs and

respondent executed on 10 September 1973 was a
perfected contract of sale. A contract is perfected once
there is consent of the contracting parties on the object
certain and on the cause of the obligation. In the present
case, the object of the sale is the Antipolo property and
the price certain is P250,000.

The contract of sale has also been consummated

because the vendors and vendee have performed their
respective obligations under the contract. In a contract of
sale, the seller obligates himself to transfer the ownership
of the determinate thing sold, and to deliver the same to
the buyer, who obligates himself to pay a price certain to
the seller. The execution of the notarized deed of sale and
the delivery of the owners duplicate copy of OCT No. 535
to respondent is tantamount to a constructive delivery of
the object of the sale. In Navera v. Court of Appeals, the
Court ruled that since the sale was made in a public
instrument, it was clearly tantamount to a delivery of the
land resulting in the symbolic possession thereof being
transferred to the buyer.
Petitioner alleges that the deed of sale is a forgery. The
Eniceo heirs also claimed in their answer that the deed of
sale is fake and spurious. However, as correctly held by
the CA, forgery can never be presumed. The party
alleging forgery is mandated to prove it with clear and
convincing evidence. Whoever alleges forgery has the
burden of proving it. In this case, petitioner and the
Eniceo heirs failed to discharge this burden.Kings
Properties Corporation, Inc. vs. Canuto A. Galido,G.R.
No. 170023. November 27, 2009

Tort; negligence. Under Art. 2185 of the Civil Code, unless

there is proof to the contrary, it is presumed that a person
driving a motor vehicle has been negligent if at the time of
the mishap, he was violating any traffic regulation.

The Civil Code characterizes negligence as the omission

of that diligence required by the nature of the obligation
and corresponds with the circumstances of the persons,
of the time and of the place. Negligence, as it is
commonly understood, is conduct that creates an undue
risk of harm to others. It is the failure to observe that
degree of care, precaution and vigilance that the
circumstances justly demand. It is the omission to do
something which a reasonable man, guided by
considerations that ordinarily regulate the conduct of
human affairs, would do, or doing something that a
prudent and reasonable man would not do.
To determine whether there is negligence in a given
situation, this Court laid down this test: Did 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, the person is
guilty of negligence.

Based on the foregoing test, we can conclude that

Saycon was negligent. In the first place, he should not
have been driving alone. The law clearly requires that the
holder of a student-drivers permit should be
accompanied by a duly licensed driver when operating a
motor vehicle. Further, there is the matter of not wearing a
helmet and the fact that he was speeding. All these prove
that he was negligent.Art. 2185. Unless there is proof to
the contrary, it is presumed that a person driving a motor
vehicle has been negligent if at the time of the mishap, he
was violating any traffic regulation.

The Civil Code characterizes negligence as the omission

of that diligence required by the nature of the obligation
and corresponds with the circumstances of the persons,
of the time and of the place. Negligence, as it is
commonly understood, is conduct that creates an undue
risk of harm to others. It is the failure to observe that
degree of care, precaution and vigilance that the
circumstances justly demand. It is the omission to do
something which a reasonable man, guided by
considerations that ordinarily regulate the conduct of
human affairs, would do, or doing something that a
prudent and reasonable man would not do.

To determine whether there is negligence in a given

situation, this Court laid down this test: Did 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, the person is
guilty of negligence.

Based on the foregoing test, we can conclude that

Saycon was negligent. In the first place, he should not
have been driving alone. The law clearly requires that the
holder of a student-drivers permit should be
accompanied by a duly licensed driver when operating a
motor vehicle. Further, there is the matter of not wearing a
helmet and the fact that he was speeding. All these prove
that he was negligent. Stephen Cang and George Nardo
y Josol vs. Herminia Cullen,G.R. No. 163078, November
25, 2009.

Tort; negligence. Under Article 2179 of the Civil Code, [w]

hen the plaintiffs own negligence was the immediate and
proximate cause of his injury, he cannot recover
damages. But if his negligence was only contributory, the
immediate and proximate cause of the injury being the
defendants lack of due care, the plaintiff may recover
damages, but the courts shall mitigate the damages to be
awarded.
Considering that Saycon was the negligent party, he
would not have been entitled to recover damages from
petitioners had he instituted his own action.
Consequently, respondent, as his employer, would
likewise not be entitled to claim for damages. Stephen
Cang and George Nardo y Josol vs. Herminia
Cullen,G.R. No. 163078, November 25, 2009.

Tort; negligence. When an employee causes damage due

to his own negligence while performing his own duties,
there arises the juris tantum presumption that his
employer is negligent, rebuttable only by proof of
observance of the diligence of a good father of a family.
Thus, in the selection of prospective employees,
employers are required to examine them as to their
qualifications, experience and service records. With
respect to the supervision of employees, employers must
formulate standard operating procedures, monitor their
implementation and impose disciplinary measures for
breaches thereof. These facts must be shown by concrete
proof, including documentary evidence.

The fact that Saycon was driving alone with only a

students permit is, to our minds, proof enough that
Cullen was negligent either she did not know that he
only had a students permit or she allowed him to drive
alone knowing this deficiency. Whichever way we look at
it, we arrive at the same conclusion: that she failed to
exercise the due diligence required of her as an employer
in supervising her employee. Thus, the trial court properly
denied her claim for damages. One who seeks equity and
justice must come to this Court with clean hands.
Stephen Cang and George Nardo y Josol vs. Herminia
Cullen,G.R. No. 163078, November 25, 2009.

Tort; 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
which the circumstances justly demand, by reason of
which such other person suffers injury. The test to
determine the existence of negligence in a particular case
may be stated as follows: Did the defendant in the
performance of the alleged negligent act use reasonable
care and caution which an ordinary person would have
used in the same situation? If not, then he is guilty of
negligence. The existence of negligence in a given case is
not determined by reference to the personal judgment of
the actor in the situation before him. The law considers
what would be reckless, blameworthy, or negligent in the
man of ordinary intelligence and prudence and
determines liability by that norm.

ANECOs act of leaving unprotected and uninsulated the

main distribution line over Balens residence was the
proximate cause of the incident which claimed
Exclamados life and injured respondents Balen and
Lariosa. Proximate cause is defined as any cause that
produces injury in a natural and continuous sequence,
unbroken by any efficient intervening cause, such that the
result would not have occurred otherwise.Agusan Del
Norte Electric Cooperative, Inc. (ANECO), etc. vs.
Angelina Balen, et al.,G.R. No. 173146, November 25,
2009.

Special laws

Homestead; alienation. A grantee or homesteader is

prohibited from alienating to a private individual a land
grant within five years from the time that the patent or
grant is issued. A violation of this prohibition renders a
sale void. This, however, expires on the fifth year. From
then on until the next 20 years, the land grant may be
alienated provided the Secretary of Agriculture and
Natural Resources approves the alienation. The Secretary
is required to approve the alienation unless there are
constitutional and legal grounds to deny the approval. In
this case, there are no apparent or legal grounds for the
Secretary to disapprove the sale of the Subject Land.

The failure to secure the approval of the Secretary does

not ipso factomake a sale void. The absence of approval
by the Secretary does not a sale made after the expiration
of the 5-year period, for in such event the requirement of
Section 118 of the Public Land Act becomes merely
directory or a formality. The approval may be secured
later, producing the effect of ratifying and adopting the
transaction as if the sale had been previously authorized.
Kings Properties Corporation, Inc. vs. Canuto A.
Galido,G.R. No. 170023. November 27, 2009

Unrecorded sale; effect. Unrecorded sales of land

brought under Presidential Decree No. 1529 or the
Property Registration Decree (PD 1529) are effective
between and binding only upon the immediate parties.
The registration required in Section 51 of PD 1529 is
intended to protect innocent third persons, that is,
persons who, without knowledge of the sale and in good
faith, acquire rights to the property. Kings Properties
Corporation, Inc. vs. Canuto A. Galido,G.R. No. 170023.
November 27, 2009

October 2009 Philippine Supreme Court Decisions on

CivilLaw

Civil Code

Contract; binding effect. Article 1311 of the New Civil

Code states 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. In this case, the rights and obligations
between petitioner and Alfonso are transmissible. There
was no mention of a contractual stipulation or provision of
law that makes the rights and obligations under the
original sales contract for Lot 3, Block 4, Phase
IIintransmissible . Hence, Alfonso can transfer her
ownership over the said lot to respondents and petitioner
is bound to honor its corresponding obligations to the
transferee or new lot owner in its subdivision project.

Having transferred all rights and obligations over Lot 3,

Block 4, Phase II to respondents, Alfonso could no longer
be considered as an indispensable party. An
indispensable party is one who has such an interest in the
controversy or subject matter that a final adjudication
cannot be made in his absence, without injuring or
affecting that interest. Contrary to petitioners claim,
Alfonso no longer has an interest on the subject matter or
the present controversy, having already sold her rights
and interests on Lot 3, Block 4, Phase II to herein
respondents. Sta. Lucia Realty & Development, Inc. vs.
Spouses Francisco & Emelia Buenaventura, as
represented by Ricardo Segismundo, G.R. No. 177113,
October 2, 2009.

Contract; compromise agreement. A compromise

agreement is a contract whereby the parties, by making
reciprocal concessions, avoid a litigation or put an end to
one already commenced. It contemplates mutual
concessions and mutual gains to avoid the expenses of
litigation; or when litigation has already begun, to end it
because of the uncertainty of the result.
The validity of a compromise agreement is dependent
upon its fulfillment of the requisites and principles of
contracts dictated by law; and its terms and conditions
must not be contrary to law, morals, good customs,
public policy and public order.Gov. Antonio P. Calingin vs.
Civil Service Commission and Grace L. Anayron,G.R. No.
183322, October 30, 2009.

Contract; contract to sell. The very essence of a contract

of sale is the transfer of ownership in exchange for a price
paid or promised.

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,i.e., 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 asuspensive 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.Delfin Tan vs. Erlinda C. Benolirao, Andrew C.
Benolirao, Romano C. Benolirao, Dion C. Benolirao, Sps.
Reynaldo Taningco and Norma D. Benolirao, Evelyn T.
Monreal and Ann Karina Taningco,G.R. No. 153820,
October 16, 2009.

Contract; equitable mortgage. 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.

For the presumption of an equitable mortgage to arise

under Article 1602, two (2) requisites must concur: (a) that
the parties entered into a contract denominated as a
contract of sale; and, (b) that their intention was to secure
an existing debt by way of a mortgage. Any of the
circumstances laid out in Article 1602, not the
concurrence nor an overwhelming number of the
enumerated circumstances, is sufficient to support the
conclusion that a contract of sale is in fact an equitable
mortgage. In several cases, we have not hesitated to
declare a purported contract of sale to be an equitable
mortgage based solely on one of the enumerated
circumstances under Article 1602. This approach follows
the rule that when doubt exists on the nature of the
parties transaction, the law favors the least transmission
of property rights. Rockville Excel International Exim
Corporation vs. Spouses Oligario Culla and Bernardita
Miranda, G.R. No. 155716, October 2, 2009.
Contract; prescription. It is true that an action for
reconveyance of real property resulting from fraud may be
barred by the statute of limitations, which requires that
the action shall be filed within four (4) years from the
discovery of the fraud. TheRTC, however, seemed to have
overlooked the fact that the basis of respondents
complaint for reconveyance is not fraud but threat, duress
and intimidation, allegedly employed by Marcos cronies
upon the relatives of the Montanos while the latter were
on self-exile. In fact, fraud was neither specifically alleged
nor remotely implied in the complaint.

Article 1391 of the Civil Code provides: Art. 1391. An

action for annulment shall be brought within four years.
This period shall begin: In case of intimidation, violence or
undue influence, from the time the defect of the consent
ceases. In case of mistake or fraud, from the time of the
discovery of the same. And when the action refers to
contracts entered into by minors or other incapacitated
persons, from the time the guardianship ceases.

In the circumstances prevailing in this case, the threat or

intimidation upon respondents is deemed to have ceased
only upon the ouster of then President Marcos from
power on February 21, 1986. The four-year prescriptive
period must, therefore, be reckoned from the said date.
Thus, when respondents filed their complaint
forreconveyance on September 15, 1989, the period
provided for by law had not yet prescribed. Therefore,
petitioners motion to dismiss should be denied.
Associated Bank vs. Spouses Justiniano S. Montano, Sr.
and Ligaya Montano, et al.G.R. No. 166383. October 16,
2009

Contract; rescission. The remedy of rescission under

Article 1191 cannot apply to mere contracts to sell. Delfin
Tan vs. Erlinda C. Benolirao, Andrew C. Benolirao,
Romano C. Benolirao, Dion C. Benolirao, Sps. Reynaldo
Taningco and Norma D. Benolirao, Evelyn T. Monreal and
Ann Karina Taningco,G.R. No. 153820, October 16, 2009.

Contract; void contract. There can be no doubt that the

contract of sale or Kasulatan lacked the essential element
of consideration. It is a well-entrenched rule that where
the deed of sale states that the purchase price has been
paid but in fact has never been paid, the deed of sale is
null and void abinitio for lack of consideration. Moreover,
Art. 1471 of the Civil Code, which provides that if the
price is simulated, the sale is void, also applies to the
instant case, since the price purportedly paid as indicated
in the contract of sale was simulated for no payment was
actually made.

Consideration and consent are essential elements in a

contract of sale. Where a partys consent to a contract of
sale is vitiated or where there is lack of consideration due
to a simulated price, the contract is null and void abinitio.
Sps. Ramon Lequin and Virgina Lequin vs. Sps.
Raymundo Vizconde, et al.,G.R. No. 177710, October
12, 2009.

Contract; voidable contract. A contract, as defined in the

Civil Code, is a meeting of minds, with respect to the
other, to give something or to render some service. For a
contract to be valid, it must have three essential elements:
(1) consent of the contracting parties; (2) object certain
which is the subject matter of the contract; and (3) cause
of the obligation which is established.

The requisites of consent are (1) it should be intelligent or

with an exact notion of the matter to which it refers; (2) it
should be free; and (3) it should be spontaneous. In De
Jesus v. Intermediate Appellate Court, it was explained
that intelligence in consent is vitiated by error, freedom by
violence, intimidation or undue influence, and spontaneity
by fraud.

Article (Art.) 1330 of the Civil Code provides that when

consent is given through fraud, the contract is voidable.

Tolentino defines fraud as every kind of deception

whether in the form of insidious machinations,
manipulations, concealments or misrepresentations, for
the purpose of leading another party into error and thus
execute a particular act. Fraud has a determining
influence on the consent of the prejudiced party, as he is
misled by a false appearance of facts, thereby producing
error on his part in deciding whether or not to agree to the
offer.

One form of fraud is misrepresentation through insidious

words or machinations. Under Art. 1338 of the Civil Code,
there is 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. Insidious words or
machinations constituting deceit are those that ensnare,
entrap, trick, or mislead the other party who was induced
to give consent which he or she would not otherwise have
given.

Deceit is also present when one party, by means of

concealing or omitting to state material facts, with intent
to deceive, obtains consent of the other party without
which, consent could not have been given. Art. 1339 of
the Civil Code is explicit that failure to disclose facts when
there is a duty to reveal them, as when the parties are
bound by confidential relations, constitutes fraud. Sps.
Ramon Lequin and Virgina Lequin vs. Sps. Raymundo
Vizconde, et al.,G.R. No. 177710, October 12, 2009.

Damages; attorneys fees. Tan had a valid reason for

refusing to pay the balance of the purchase price for the
property. Consequently, there is no basis for the award of
attorneys fees in favor of the respondents.
On the other hand, we award attorneys fees in favor of
Tan, since he was compelled to litigate due to the
respondents refusal to return his down payment despite
the fact that they could no longer comply with their
obligation under the contract to sell, i.e., to convey a
clean title. Given the facts of this case, we find the award
of P50,000.00 as attorneys fees proper. Delfin Tan vs.
Erlinda C. Benolirao, Andrew C. Benolirao, Romano C.
Benolirao, Dion C. Benolirao, Sps. Reynaldo Taningco and
Norma D. Benolirao, Evelyn T. Monreal and Ann Karina
Taningco,G.R. No. 153820, October 16, 2009.

Damages; attorneys fees. Article 2208 of the Civil Code

provides that in the absence of stipulation, attorneys fees
and expenses of litigation, other than judicial costs,
cannot be recovered. In this case, however, the charge
invoice provides that 25% of the amount due is further
charged for attorneys fees and cost of collection in case
of suit. Thus, we agree that respondent is also entitled to
25% of P108,032 or P27,008 as attorneys fees.

Damages; interest. Undoubtedly, Tan made a clear and

unequivocal demand on the vendors to return his down
payment as early as May 28, 1993. Pursuant to

Our definitive ruling in Eastern Shipping Lines, Inc. v.

Court of Appeals, we hold that the vendors should return
the P200,000.00 down payment to Tan, subject to the
legal interest of 6% perannum computed from May 28,
1993, the date of the first demand letter. Angelito
Colmenares vs. Hand Tractor Parts and Agro-Industrial
Corp., G.R. No. 170790, October 23, 2009.

Damages; interest. After a judgment has become final

and executory, the rate of legal interest, whether the
obligation was in the form of a loan or forbearance of
money or otherwise, shall be 12% perannum from such
finality until its satisfaction. Accordingly, the principal
obligation of P200,000.00 shall bear 6% interest from the
date of first demand or from May 28, 1993. From the date
the liability for the principal obligation and attorneys fees
has become final andexecutory , an annual interest of
12% shall be imposed on these obligations until their final
satisfaction, this interim period being deemed to be by
then an equivalent to a forbearance of credit. Delfin Tan
vs. Erlinda C. Benolirao, Andrew C. Benolirao, Romano C.
Benolirao, Dion C. Benolirao, Sps. Reynaldo Taningco and
Norma D. Benolirao, Evelyn T. Monreal and Ann Karina
Taningco,G.R. No. 153820, October 16, 2009.

Damages; moral. The award of moral and exemplary

damages must be reinstated in view of the fraud or
fraudulent machinations employed by respondents on
petitioners. The grant of damages in the concept of
attorneys fees in the amount ofPhP 10,000 must be
maintained considering that petitioners have to incur
litigation expenses to protect their interest in conformity
to Art. 2208(2) of the Civil Code. Sps. Ramon Lequin and
Virgina Lequin vs. Sps. Raymundo Vizconde, et al.,G.R.
No. 177710, October 12, 2009

Obligation; dacion. Dacion en pago is the delivery and

transmission of ownership of a thing by the debtor to the
creditor as an accepted equivalent of the performance of
an existing obligation. It is a special mode of payment
where the debtor offers another thing to the creditor who
accepts it as equivalent to the payment of an outstanding
debt. Fordacion en pago to exist, the following elements
must concur: (a) existence of a money obligation; (b) the
alienation to the creditor of a property by the debtor with
the consent of the former; and (c) satisfaction of the
money obligation of the debtor. Rockville Excel
International Exim Corporation vs. Spouses Oligario Culla
and Bernardita Miranda, G.R. No. 155716, October 2,
2009.

Obligation; dacion. Dacion en pago is the delivery and

transmission of ownership of another thing by the debtor
to the creditor as an accepted equivalent of performance
of an obligation. It partakes of the nature of a contract of
sale, where the thing offered by the debtor is the object of
the contract, while the debt is the consideration or
purchase price.

The pivotal issue is thus whether respondent Sychinghos

had the right to sell or convey title to the subject property
at the time of the dacion en pago. The Court finds in the
affirmative.

There having been no previous foreclosure of the Real

Estate Mortgage on the subject property, respondent
Sychinghos ownership thereof remained intact. Indeed, a
mortgage does not affect the ownership of the property
as it is nothing more than a lien thereon serving as
security for a debt. The mortgagee does not acquire title
to the mortgaged real estate unless he purchases it at a
public auction, and it is not redeemed within the period
provided for by the Rules of Court. This applies afortiori to
the present case where only 1/3, not the whole, of the
subject property was actually encumbered to FEBTC.
Joseph Typingco vs. Lina Lim, Jerry Sychingco, et al.,
G.R. No. 181232, October 23, 2009.

Obligation; estoppel. By its own act of acknowledging

the rights of respondent (in their June 7, 1991 Kasunduan)
as a member of MUMI and his entitlement to not less than
2,880 sq m lot in the resettlement area and the
corresponding disturbance compensation, petitioner is
now estopped from claiming that he is not qualified to
avail himself of the benefits in the contract. The Court
further notes that it was because of petitioners
representations that respondent was impelled to
peacefully vacate the portion of the estate he was tilling.
Moreover, petitioners subsequent act of granting the
same contractual benefits to another member of MUMI,
who was also a caretaker, defeats any interpretation of
the February 14, 1991 Kasunduan that only occupants of
the estate in the concept of an owner may avail of such
benefits. Antipolo Properties, Inc. (now Prime East
Properties, Inc.) vs. Cesar Nuyda, G.R. No. 171832,
October 12, 2009.

Obligation; extinguishment. Obligations are extinguished,

among others, by payment or performance, the mode
most relevant to the factual situation in the present case.
Under Article 1232 of the Civil Code, payment means not
only the delivery of money but also the performance, in
any other manner, of an obligation. Article 1233 of the
Civil Code states that a debt shall not be understood to
have been paid unless the thing or service in which the
obligation consists has been completely delivered or
rendered, as the case may be. In contracts of loan, the
debtor is expected to deliver the sum of money due the
creditor. These provisions must be read in relation with
the other rules on payment under the Civil Code, which
rules impliedly require acceptance by the creditor of the
payment in order to extinguish an obligation.

In the present case, Manuel sought to pay Ester by

authorizing her, through an SPA, to collect the proceeds
of the PNB loan an act that would have led to payment
if Ester had collected the loan proceeds as authorized.
Admittedly, the delivery of the SPA was not, strictly
speaking, a delivery of the sum of money due toMTLC ,
and Ester could not be compelled to accept it as payment
based on Article 1233. Nonetheless, the SPA stood as an
authority to collect the proceeds of the already-
approvedPNB loan that, upon receipt by Ester, would
have constituted as payment of the MTLC loan. Had Ester
presented the SPA to the bank and signed the deed of
release/cancellation of mortgage, the delivery of the sum
of money would have been effected and the obligation
extinguished. As the records show, Ester refused to
collect and allow the cancellation of the mortgage.

Under these facts, Manuel posits two things: first, that

Esters refusal was based on completely unjustifiable
grounds; and second, that the refusal was equivalent to
payment that led to the extinguishment of the obligation.
Manuel Go Cinco and Araceli S. Go Cinco vs. Court of
Appeals, et al.,G.R. No. 151903, October 9, 2009.

Obligation; force majeure. The Court cannot generalize

the 1997 Asian financial crisis to be unforeseeable and
beyond the control of a business corporation. A real
estate enterprise engaged in thepre-selling of
condominium units is concededly a master in projections
on commodities and currency movements, as well as
business risks. The fluctuating movement of the Philippine
peso in the foreign exchange market is an everyday
occurrence, hence, not an instance of caso fortuito.
Megaworlds excuse for its delay does not thus lie .
Megaworld Globus Asia, Inc. vs. Mila S. Tanseco,G.R.
No. 181206, October 9, 2009.

Obligations; interest. The applicable interest rate for the

amount to be reimbursed to respondents is 6% per
annum, reckoned from the time of the filing of the
complaint, because the case at bar involves a breach of
obligation and not a loan or forbearance of money. Sta.
Lucia Realty & Development, Inc. vs. Spouses Francisco
& Emelia Buenaventura, as represented by Ricardo
Segismundo, G.R. No. 177113, October 2, 2009.

Obligation; interest. Under the circumstances, the

spouses Go Cinco have undertaken, at the very least, the
equivalent of a tender of payment that cannot but have
legal effect. Since payment was available and was
unjustifiably refused, justice and equity demand that the
spouses Go Cinco be freed from the obligation to pay
interest on the outstanding amount from the time the
unjust refusal took place; they would not have been liable
for any interest from the time tender of payment was
made if the payment had only been accepted. Under
Article 19 of the Civil Code, they should likewise be
entitled to damages, as the unjust refusal was effectively
an abusive act contrary to the duty to act with honesty
and good faith in the exercise of rights and the fulfillment
of duty.Manuel Go Cinco and Araceli S. Go Cinco vs.
Court of Appeals, et al.,G.R. No. 151903, October 9,
2009.

Obligation; interest. The legal interest is 6% p.a. and it

shall be reckoned from April 25, 2007 when the RTC
rendered its judgment, not from the time of respondents
extrajudicial demand. This must be so as it was at the
time the RTC rendered its judgment that the quantification
of damages may be deemed to have been reasonably
ascertained. Then, from the time this decision becomes
final andexecutory, the interest rate shall be 12% p.a. until
full satisfaction. Air France Philippines/KLM Air France
vs. John Anthony De Camilis,G.R. No. 188961, October
13, 2009.

Obligation; laches. There is no absolute rule on what

constitutes laches. It is a rule of equity and applied not to
penalize neglect or sleeping on ones rights, but rather to
avoid recognizing a right when to do so would result in a
clearly unfair situation. The question of laches is
addressed to the sound discretion of the court and each
case must be decided according to its particular
circumstances. It is the better rule that courts, under the
principle of equity, should not be guided or bound strictly
by the statute of limitations or the doctrine of laches if
wrong or injustice will result. Bicol Agro-Industrial
Producers Cooperative, inc. (BAPCI) vs. Edmundo O.
Obias, et al.G.R. No. 172077. October 9, 2009
Obligation; reciprocal obligations. The Contract to Buy
and Sell of the parties contains reciprocal obligations, i.e.,
to complete and deliver the condominium unit on October
31, 1998 or six months thereafter on the part of
Megaworld, and to pay the balance of the purchase price
at or about the time of delivery on the part of Tanseco.
Compliance by Megaworld with its obligation is
determinative of compliance by Tanseco with her
obligation to pay the balance of the purchase price.
Megaworld having failed to comply with its obligation
under the contract, it is liable therefor.

That Megaworlds sending of a notice of turnover

preceded Tansecos demand for refund does not abate
her cause. For demand would have been useless under
Article 1169, Megaworld admittedly having failed in its
obligation to deliver the unit on the agreed
date.Megaworld Globus Asia, Inc. vs. Mila S.
Tanseco,G.R. No. 181206, October 9, 2009.

Obligation; tender. While Esters refusal was unjustified

and unreasonable, we cannot agree with Manuels
position that this refusal had the effect of payment that
extinguished his obligation to MTLC. Article 1256 is clear
and unequivocal on this point. In short, a refusal without
just cause is not equivalent to payment; 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.
Tender of payment, as defined in Far East Bank and Trust
Company v. Diaz Realty, Inc., is the definitive act of
offering the creditor what is due him or her, together with
the demand that the creditor accept the same. When a
creditor refuses the debtors tender of payment, the law
allows the consignation of the thing or the sum due.
Tender and consignation have the effect of payment, as
by consignation, the thing due is deposited and placed at
the disposal of the judicial authorities for the creditor to
collect. Manuel Go Cinco and Araceli S. Go Cinco vs.
Court of Appeals, et al.,G.R. No. 151903, October 9,
2009.

Persons; annulment of marriage. Article 45(5) of the

Family Code refers to lack of power to copulate.
Incapacity to consummate denotes the permanent
inability on the part of the spouses to perform the
complete act of sexual intercourse. Non-consummation of
a marriage may be on the part of the husband or of the
wife and may be caused by a physical or structural defect
in the anatomy of one of the parties or it may be due to
chronic illness and inhibitions or fears arising in whole or
in part from psychophysical conditions. It may be caused
by psychogenic causes, where such mental block or
disturbance has the result of making the spouse
physically incapable of performing the marriage act.

No evidence was presented in the case at bar to establish

that respondent was in any way physically incapable to
consummate his marriage with petitioner. Petitioner even
admitted during her cross-examination that she and
respondent had sexual intercourse after their wedding
and before respondent left for abroad. There obviously
being no physical incapacity on respondents part, then,
there is no ground for annulling petitioners marriage to
respondent. Petitioners Complaint was, therefore,
rightfully dismissed. Veronica Cabacungan Alcazar vs.
Rey C. Alcazar,G.R. No. 174451, October 13, 2009.

Persons; conjugal property. Article 160 of the New Civil

Code provides, 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.

There is no issue with regard to the lot covered by TCT

No. T-26471, which was an exclusive property of Pedro,
having been acquired by him before his marriage to Mary
Ann. However, the lot covered byTCT No. T-88674 was
acquired in 1982 during the marriage of Pedro and Mary
Ann. No evidence was adduced to show that the subject
property was acquired through exchange or barter. The
presumption of the conjugal nature of the property
subsists in the absence of clear, satisfactory and
convincing evidence to overcome said presumption or to
prove that the subject property is exclusively owned by
Pedro. Petitioners bare assertion would not suffice to
overcome the presumption thatTCT No. T-88674,
acquired during the marriage of Pedro and Mary Ann, is
conjugal. Likewise, the house built thereon is conjugal
property, having been constructed through the joint
efforts of the spouses, who had even obtained a loan
fromDBP to construct the house.

Significantly, a sale or encumbrance of conjugal property

concluded after the effectivity of the Family Code on
August 3, 1988, is governed by Article 124 of the same
Code that now treats such a disposition to be void if done
(a) without the consent of both the husband and the wife,
or (b) in case of one spouses inability, the authority of the
court.Patronica Ravina and Wilfredo Ravina Vs. Mary Ann
P. Villa Abrille, for behalf of Ingrid DLyn P. Villa Abrille, et
al., G.R. No. 160708, October 16, 2009.

Persons; human relations. Firmly established in our civil

law is the doctrine 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. When a right is exercised in a
manner that does not conform with such norms and
results in damages to another, a legal wrong is thereby
committed for which the wrong doer must be held
responsible. Similarly, any person who willfully causes
loss or injury to another in a manner that is contrary to
morals, good customs or public policy shall compensate
the latter for the damages caused. It is patent in this case
that petitioners alleged acts fall short of these
established civil law standards. Patronica Ravina and
Wilfredo Ravina vs. Mary Ann P. Villa Abrille, for behalf of
Ingrid DLyn P. Villa Abrille, et al.,G.R. No. 160708,
October 16, 2009.

Persons; psychological incapacity. In Santos v. Court of

Appeals, the Court declared that psychological
incapacity under Article 36 of the Family Code is not
meant to comprehend all possible cases of psychoses. It
should refer, rather, to no less than a mental (not 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.
Psychological incapacity must be characterized by (a)
gravity, (b) juridical antecedence, and (c)incurability.
Veronica Cabacungan Alcazar vs. Rey C. Alcazar,G.R.
No. 174451, October 13, 2009.

Persons; psychological incapacity. It must be stressed

that psychological incapacity must be more than just a
difficulty, refusal or neglect in the performance of
some marital obligations. The intention of the law is 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.

Noteworthy, as aptly pointed out by the appellate court,

Rodolfo and Aurora initially had a blissful marital union for
several years. They married in 1982, and later affirmed the
ceremony in church rites in 1983, showing love and
contentment with one another after a year of marriage.
The letter of petitioner dated April 1, 1990addressed to
respondent revealed the harmonious relationship of the
couple continued during their marriage for about eight
years from the time they married each other. From this, it
can be inferred that they were able to faithfully comply
with their obligations to each other and to their children.
Aurora was shown to have taken care of her children and
remained faithful to her husband while he was away. She
even joined sales activities to augment the family income.
She appeared to be a very capable woman who traveled
a lot and pursued studies here and abroad. It was only
when Rodolfos acts of infidelity were discovered that the
marriage started to fail. Rodolfo A. Aspillaga vs. Aurora
A. Aspillaga,G.R. No. 170925, October 26, 2009.

Persons; support. Petitioners partial concurrent

obligation extends only to their descendants as this word
is commonly understood to refer to relatives, by blood of
lower degree. As petitioners grandchildren by blood, only
respondents Lester Edward, Candice Grace and Mariano
III belong to this category. Indeed, Cheryls right to receive
support from theLim family extends only to her husband
Edward, arising from their marital bond. Spouses
Prudencio and Filomena Lim vs. Ma. Cheryl S. Lim, for
herself and on behalf of her minor children Lester Edward
S. Lim, Candice Grace S. Lim, and Mariano S. Lim,
III,G.R. No. 163209, October 30, 2009.
Property; builder in bad faith. If a voidable contract is
annulled, the restoration of what has been given is proper.
The relationship between the parties in any contract even
if subsequently annulled must always be characterized
and punctuated by good faith and fair dealing. Hence, in
consonance with justice and equity and the salutary
principle of non-enrichment atanothers expense, we
sustain the appellate courts order directing Pedro to
return to petitioner spouses the value of the consideration
for the lot covered byTCT No. T-88674 and the house
thereon.

However, this court rules that petitioners cannot claim

reimbursements for improvements they introduced after
their good faith had ceased. As correctly found by the
Court of Appeals, petitionerPatrocinia Ravina made
improvements and renovations on the house and lot at
the time when the complaint against them was filed.
Ravina continued introducing improvements during the
pendency of the action.

Thus, Article 449 of the New Civil Code is applicable. It

provides that, (h)e who builds, plants or sows in bad faith
on the land of another, loses what is built, planted or
sown without right to indemnity.Patronica Ravina and
Wilfredo Ravina vs. Mary Ann P. Villa Abrille, for behalf of
Ingrid DLyn P. Villa Abrille, et al.,G.R. No. 160708,
October 16, 2009.
Property; builder in bad faith. The rule that the choice
under Article 448 of the Civil Code belongs to the owner
of the land is in accord with the principle of accession,
i.e., that the accessory follows the principal and not the
other way around. Even as the option lies with the
landowner, the grant to him, nevertheless, ispreclusive.
The landowner cannot refuse to exercise either option and
compel instead the owner of the building to remove it
from the land.

The raison detre for this provision has been enunciated

thus: Where the builder, planter or sower has acted in
good faith, a conflict of rights arises between the owners,
and it becomes necessary to protect the owner of the
improvements without causing injustice to the owner of
the land. In view of the impracticability of creating a state
of forced co-ownership, the law has provided a just
solution by giving the owner of the land the option to
acquire the improvements after payment of the proper
indemnity, or to oblige the builder or planter to pay for the
land and the sower the proper rent. He cannot refuse to
exercise either option. It is the owner of the land who is
authorized to exercise the option, because his right is
older, and because, by the principle of accession, he is
entitled to the ownership of the accessory thing.Ophelia
L. Tuatis vs. Spouses Eliseo Escol and Visminda Escol, et
al.,G.R. No. 175399, October 27, 2009.
Property; builder in good faith. When the co-ownership
is terminated by a partition, and it appears that the house
of an erstwhile co-owner has encroached upon a portion
pertaining to another co-owner, but the encroachment
was in good faith, then the provisions of Article 448
should apply to determine the respective rights of the
parties. In this case, the co-ownership was terminated
due to the transfer of the title of the whole property in
favor of JoaquinLimense.

Under the foregoing provision, petitioners have the right

to appropriate said portion of the house of respondents
upon payment of indemnity to respondents, as provided
for in Article 546 of the Civil Code. Otherwise, petitioners
may oblige respondents to pay the price of the land
occupied by their house. However, if the price asked for is
considerably much more than the value of the portion of
the house of respondents built thereon, then the latter
cannot be obliged to buy the land. Respondents shall
then pay the reasonable rent to petitioners upon such
terms and conditions that they may agree. In case of
disagreement, the trial court shall fix the terms thereof. Of
course, respondents may demolish or remove the said
portion of their house, at their own expense, if they so
decide.

The choice belongs to the owner of the land, a rule that

accords with the principle of accession that the accessory
follows the principal and not the other way around. Even
as the option lies with the landowner, the grant to him,
nevertheless, ispreclusive. He must choose one. He
cannot, for instance, compel the owner of the building to
instead remove it from the land.

The obvious benefit to the builder under this article is that,

instead of being outrightly ejected from the land, he can
compel the landowner to make a choice between two
options: (1) to appropriate the building by paying the
indemnity required by law, or (2) to sell the land to the
builder.Heirs of the late Joaquin Limense vs. Rita vda. De
Ramos, et al.,G.R. No. 152319, October 28, 2009.

Property; easement. Article 622 of the New Civil Code

provides: Art. 622. Continuous non-apparent easements,
and discontinuous ones, whether apparent or not, may be
acquired only by virtue of a title. Based on the foregoing,
in order for petitioner to acquire the disputed road as an
easement of right-of-way, it was incumbent upon
petitioner to show its right by title or by an agreement with
the owners of the lands that said road traversed.Bicol
Agro-Industrial Producers Cooperative, inc. (BAPCI) vs.
Edmundo O. Obias, et al.G.R. No. 172077. October 9,
2009

Property; easement. Petitioner would have this Court re-

examine Costabella Corporation v. Court of Appeals
(Costabella) where the Court held that, It is already well-
established that a right of way is discontinuous and, as
such, cannot be acquired by prescription. Petitioner
contends that some recognized authorities share its view
that an easement of right of way may be acquired by
prescription.

Be that as it may, this Court finds no reason to re-examine

Costabella. This Court is guided by Bogo-Medellin Milling
Co., Inc. v. Court of Appeals (Bogo-Medellin), involving
the construction of a railroad track to a sugar mill. In
Bogo-Medellin, this Court discussed the discontinuous
nature of an easement of right of way and the rule that the
same cannot be acquired by prescription.

Applying Bogo-Medellin to the case at bar, the conclusion

is inevitable that the road in dispute is a discontinuous
easement notwithstanding that the same may be
apparent. To reiterate, easements are either continuous or
discontinuous according to the manner they are
exercised, not according to the presence of apparent
signs or physical indications of the existence of such
easements. Hence, even if the road in dispute has been
improved and maintained over a number of years, it will
not change its discontinuous nature but simply make the
same apparent. To stress, Article 622 of the New Civil
Code states that discontinuous easements, whether
apparent or not, may be acquired only by virtue of a title.
Bicol Agro-Industrial Producers Cooperative, inc. (BAPCI)
vs. Edmundo O. Obias, et al.G.R. No. 172077. October 9,
2009
Property; easement. Petitioner manifested in the RTC its
desire, in the alternative, to avail of a compulsory
easement of right of way as provided for under Article 649
the New Civil Code. Said relief was granted by the RTC
because of the unavailability of another adequate outlet
from the sugar mill to the highway. Despite the grant of a
compulsory easement of right of way, petitioner, however,
assails both the RTC and CA Decision with regard to the
amount of indemnity due respondents.

Petitioner likens the proceedings at bar to an

expropriation proceeding where just compensation must
be based on the value of the land at the time of taking.
[ Petitioner thus maintains that the compensation due to
respondents should have been computed in 1974 when
the road was constructed.

This Court does not agree. Under Article 649 of the Civil
Code, it is clear that the law does not provide for a
specific formula for the valuation of the land. Neither does
the same state that the value of the land must be
computed at the time of taking. The only primordial
consideration is that the same should consist of the value
of the land and the amount of damage caused to the
servient estate. Hence, the same is a question of fact
which should be left to the sound discretion of the RTC.
Bicol Agro-Industrial Producers Cooperative, inc. (BAPCI)
vs. Edmundo O. Obias, et al.G.R. No. 172077. October 9,
2009
Property; easement. Easements may be continuous or
discontinuous, apparent or non-apparent.

Continuous easements are those the use of which is or

may be incessant, without the intervention of any act of
man. Discontinuous easements are those which are used
at intervals and depend upon the acts of man. Apparent
easements are those which are made known and are
continually kept in view by external signs that reveal the
use and enjoyment of the same. Non-apparent easements
are those which show no external indication of their
existence.

In the present case, the easement of right of way is

discontinuous and apparent. It is discontinuous, as the
use depends upon the acts of respondents and other
persons passing through the property. Being an alley that
shows a permanent path going to and from Beata Street,
the same is apparent.

Being a discontinuous and apparent easement, the same

can be acquired only by virtue of a title.Heirs of the late
Joaquin Limense vs. Rita vda. De Ramos, et al.,G.R. No.
152319, October 28, 2009.

Property; purchaser in good faith. A purchaser 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 and pays a full and fair price for the same
at the time of such purchase, or before he has notice of
the claim or interest of some other person in the property.
To establish his status as a buyer for value in good faith, a
person dealing with land registered in the name of and
occupied by the seller need only show that he relied on
the face of the sellers certificate of title. But for a person
dealing with land registered in the name of and occupied
by the seller whose capacity to sell is restricted, such as
by Articles 166 and 173 of the Civil Code or Article 124 of
the Family Code, he must show that he inquired into
thelatters capacity to sell in order to establish himself as
a buyer for value in good faith. Patronica Ravina and
Wilfredo Ravina vs.. Mary Ann P. Villa Abrille, for behalf of
Ingrid DLyn P. Villa Abrille, et al.,G.R. No. 160708,
October 16, 2009.

Special Laws

Property Registration Decree; buyer in good faith. Every

buyer of a registered land who takes a certificate of title
for value and in good faith shall hold the same free of all
encumbrances except those noted on said certificate. It
has been held, however, that where the party has
knowledge of a prior existing interest that was
unregistered at the time he acquired a right to the same
land, his knowledge of that prior unregistered interest has
the effect of registration as to him.
Good faith is an intangible and abstract quality with no
technical meaning or statutory definition; and it
encompasses, among other things, an honest belief, the
absence of malice and the absence of a design to defraud
or to seek an unconscionable advantage. Anindividuals
personal good faith is a concept of his own mind and,
therefore, may not conclusively be determined by his
protestations alone. It implies honesty of intention, and
freedom from knowledge of circumstances which ought
to put the holder upon inquiry. The essence of good faith
lies in an honest belief in the validity of ones right,
ignorance of a superior claim, and absence of intention to
overreach another. Applied to possession, one is
considered in good faith if he is not aware that there
exists in his title or mode of acquisition any flaw which
invalidates it.

Good faith is always presumed, and upon him who

alleges bad faith on the part of the possessor rests the
burden of proof. Heirs of the late Joaquin Limense vs.
Rita vda. De Ramos, et al.,G.R. No. 152319, October 28,
2009.

Property Registration Decree; emancipation patent.

Petitioners argue that the Emancipation Patents and
Transfer Certificates of Title issued to them which were
already registered with the Register of Deeds have already
become indefeasible and can no longer be cancelled.
We do not adhere to petitioners view. This Court has
already ruled that the mere issuance of an emancipation
patent does not put the ownership of the agrarian reform
beneficiary beyond attack and scrutiny. Emancipation
patents issued to agrarian reform beneficiaries may be
corrected and cancelled for violations of agrarian laws,
rules and regulations. In fact, DAR Administrative Order
No. 02, series of 1994, which was issued in March 1994,
enumerates the grounds for cancellation of registered
Emancipation Patents or Certificates of Landownership
Award.Pedro Mago (deceased), represented by his
spouse Soledad Mago, et al. vs. Juana Z. Barbin,G.R.
No. 173923, October 12, 2009.

Property Registration Decree; registration. In any case,

the Court finds no error in the findings of both the RTC
and the CA that PNB is indeed an innocent mortgagee for
value. When the lots were mortgaged to PNB by Lim, the
titles thereto were in the latters name, and they showed
neither vice nor infirmity. In accepting the mortgage, PNB
was not required to make any further investigation of the
titles to the properties being given as security, and could
rely entirely on what was stated in the aforesaid title. The
public interest in upholding theindefeasibility of a
certificate of title, as evidence of the lawful ownership of
the land or of any encumbrance thereon, protects a buyer
or mortgagee who, in good faith, relies upon what
appears on the face of the certificate of title.
It is settled that registration in the public registry is notice
to the whole world. Every conveyance, mortgage, lease,
lien, attachment, order, judgment, instrument or entry
affecting registered land shall, if registered, filed or
entered in the Office of the Register of Deeds of the
province or city where the land to which it relates lies, be
constructive notice to all persons from the time of such
registering, filing or entering. Under the rule of notice, it is
presumed that the purchaser has examined every
instrument of record affecting the title. Such presumption
may not be rebutted. He is charged with notice of every
fact shown by the record and is presumed to know every
fact shown by the record and to know every fact which an
examination of the record would have disclosed. This
presumption cannot be overcome by any claim of
innocence or good faith. Otherwise, the very purpose and
object of the law requiring a record would be destroyed.
Such presumption cannot be defeated by proof of want of
knowledge of what the record contains any more than one
may be permitted to show that he was ignorant of the
provisions of the law.

The rule that all persons must take notice of the facts
which the public record contains is a rule of law. The rule
must be absolute; any variation would lead to endless
confusion and useless litigation. In the present case, since
the mortgage contract was registered, petitioner may not
claim lack of knowledge thereof as a valid defense. The
subsequent sale of the property to petitioners husband
cannot defeat the rights ofPNB as the mortgagee and,
subsequently, the purchaser at the auction sale whose
rights were derived from a prior mortgage validly
registered. Eufemia vda. De Agatep vs. Roberta L.
Rodriguez, et al.,G.R. No. 170540, October 28, 2009.

Property Registration Decree; Torrens title. A title, once

registered, cannot be defeated, even by adverse, open
and notorious possession. The title, once registered, is
notice to the world. All persons must take notice. No one
can plead ignorance of the registration.
Hence, while the Picos may have been in open,
notorious, and continuous possession of the second lot
from the time it was purchased in 1977 until the present
time, such possession no matter how long could not ripen
into ownership as the second lot is part of registered land.

Even the Picos admit the indefeasible nature of Torrens

titles; however, they argue that since the second lot was
fraudulently included in the survey and registration of
Catalinas land, they may still question the title, pursuant
to Section 55 of the Land Registration Act.

We note that the Picos have not shown any evidence to

support their claim of fraudulent registration. Also telling is
the Picos inaction to correct this alleged fraudulent
registration. As we observed earlier, OCT No. 5930 was
issued in Catalinas name and transcribed in the
Registration Book for the Province ofSurigao del Sur on
January 13, 1969. Since then, the Picos have not filed any
action to correct the alleged fraudulent inclusion of their
property in the land registered in Catalinas name. In fact,
the present case arose from the complaint filed by
theSalcedos, not the Picos, to quiet their title over the
second lot. Montano Pico and Rosita Pico vs. Catalina
Adalim-Salcedo and Urbano Salcedo,G.R. No. 152006,
October 2, 2009.

Property Registration Decree; Torrens title. Under the

Torrens system, registration is the operative act which
gives validity to the transfer or creates a lien upon the
land. Further, entrenched in our jurisdiction is the doctrine
that registration in a public registry creates constructive
notice to the whole world.

But, there is nothing in Act No. 496, as amended by P.D.

No. 1529, that imposes a period within which to register
annotations of conveyance, mortgage, lease, lien,
attachment, order, judgment, instrument or entry affecting
registered land. If liens were not so registered, then it
shall operate only as a contract between the parties and
as evidence of authority to the Registry of Deeds to make
registration. If registered, it shall be the operative act to
convey or affect the land insofar as third persons are
concerned. The mere lapse of time from the execution of
the mortgage document to the moment of its registration
does not affect the rights of a mortgagee. G Holdings,
Inc. vs. National Mines and Allied Workers Union Locan
103 (NAMAWU), Sheriffs Richard H. Aprosta and Alberto
Munoz, all acting sheriffs, Department of Labor and
Employment, Region VI, Bacolod District Office, Bacolod
City,G.R. No. 160236. October 16, 2009

September 2009 Philippine Supreme Court Decisions on

CivilLaw

Civil Law

Common carrier; liability. Common carriers are bound to

observe extraordinary diligence over the goods they
transport, according to all the circumstances of each
case.

In the event of loss, destruction, or deterioration of the

insured goods, common carriers are responsible, unless
they can prove that such loss, destruction, or
deterioration was brought about by, among others, flood,
storm, earthquake, lightning, or other natural disaster or
calamity.

In all other cases not specified under Article 1734 of the

Civil Code, common carriers are presumed to have been
at fault or to have acted negligently, unless they observed
extraordinary diligence.Regional Container Lines (RCL) of
Singapore and Shipping Agency vs. The Netherlands
Insurance Co. (Philippines) Inc., G.R. No. 168151,
September 4, 2009.
Common carrier; liability. Petitioner, through its bus
driver, failed to observe extraordinary diligence, and was,
therefore, negligent in transporting the passengers of the
bus safely to Gapan, Nueva Ecija on January 27, 1995,
since the bus bumped a tree and a house, and caused
physical injuries to respondent. Article 1759 of the Civil
Code explicitly states that the common carrier is liable for
the death or injury to passengers through the negligence
or willful acts of its employees, and that such liability does
not cease upon proof that the common carrier exercised
all the diligence of a good father of a family in the
selection and supervision of its employees. Hence, even if
petitioner was able to prove that it exercised the diligence
of a good father of the family in the selection and
supervision of its bus driver, it is still liable to respondent
for the physical injuries he sustained due to the vehicular
accident. R Transport Corporation vs. Eduardo
Pante,G.R. No. 162104, September 15, 2009.

Common carrier; presumption of negligence. A common

carrier is presumed to have been negligent if it fails to
prove that it exercised extraordinary vigilance over the
goods it transported. When the goods shipped are either
lost or arrived in damaged condition, a presumption
arises against the carrier of its failure to observe that
diligence, and there need not be an express finding of
negligence to hold it liable.
To overcome the presumption of negligence, the common
carrier must establish by adequate proof that it exercised
extraordinary diligence over the goods. It must do more
than merely show that some other party could be
responsible for the damage.

In the present case, RCL and EDSA Shipping failed to

prove that they did exercise that degree of diligence
required by law over the goods they transported. There is
is sufficient evidence showing that the fluctuation of the
temperature in the refrigerated container van, as recorded
in the temperature chart, occurred after the cargo had
been discharged from the vessel and was already under
the custody of the arrastre operator, ICTSI. This evidence,
however, does not disprove that the condenser fan
which caused the fluctuation of the temperature in the
refrigerated container was not damaged while the cargo
was being unloaded from the ship. It is settled in maritime
law jurisprudence that cargoes while being unloaded
generally remain under the custody of the carrier; RCL
and EDSA Shipping failed to dispute this. Regional
Container Lines (RCL) of Singapore and Shipping Agency
vs. The Netherlands Insurance Co. (Philippines) Inc., G.R.
No. 168151, September 4, 2009.

Contract; binding effect. It is basic that a contract is the

law between the parties, and the stipulations therein
provided that they are not contrary to law, morals, good
customs, public order or public policy shall be binding
as between the parties. In contractual relations, the law
allows the parties much leeway and considers their
agreement to be the law between them. This is because
courts cannot follow one every step of his life and
extricate him from bad bargains x x x relieve him from
one-sided contracts, or annul the effects of foolish acts.
The courts are obliged to give effect to the agreement and
enforce the contract to the letter. In the case at bar, the
parties entered into a contract for the hauling and delivery
of wood poles. By reason of a change in one of the
delivery points, they executed a supplemental contract
that embodied said change. The terms and conditions
were clear. In both contracts, the parties voluntarily and
freely affixed their signatures thereto without objection.
Thus, the terms contained therein are the law between
them.

Premier failed to anticipate all expenses that may be

incurred in the hauling and the delivery of the wood poles.
The bid Premier submitted was sufficient for it to be
declared the winner. However, when it incurred expenses
it failed to foresee, Premier began charging NAPOCOR for
the additional expenses that were part and parcel of the
service it contracted to provide. The contract it entered
into turned out to be a disastrous deal or an unwise
investment. This Court will not allow Premier to recover
from NAPOCOR the expenses Premier sustained for an
undertaking it was bound to perform. There is no one to
blame but Premier for plunging into an undertaking
without fully studying it in its entirety. Concomitantly, there
can be no unjust enrichment on the part of NAPOCOR,
because the services rendered in its favor are included in
the contract it entered into with Premier. National Power
Corporation vs. Premier Shipping Lines, Inc./Premier
Shipping LInes, Inc. vs. National Power Corporation,G.R.
No. 179103/G.R. No. 180209, September 17, 2009.

Compromise agreement; breach. The non-fulfillment of

the terms and conditions of a compromise agreement
approved by the court justifies execution thereof, and the
issuance of a writ for the said purpose is the courts
ministerial duty enforceable by mandamus. In this
particular case, since the Compromise Agreements
enforceability depends on the maturity of the subject
SPPI shares, the RTC could not compel SPPI to deliver
the cash value of the said investment accounts, simply
because the latter was not a party to the Compromise
Agreement. Hence, the RTC did not commit any grave
abuse of discretion amounting to lack of or excess of
jurisdiction when it granted petitioner Valdezs motion for
execution in its Decision dated May 22, 2000.

In short, as the stipulations in the Compromise Agreement

remain unfulfilled, respondent Financiera is still obligated
to pay its original indebtedness. Simeon M. Valdez vs.
Financiera Manila Inc.,G.R. No. 183387, September 29,
2009.
Compromise agreement; status of child. It is settled in law
and jurisprudence, that the status and filiation of a child
cannot be compromised. Public policy demands that
there be no compromise on the status and filiation of a
child. Paternity and filiation or the lack of the same, is a
relationship that must be judicially established, and it is
for the court to declare its existence or absence. It cannot
be left to the will or agreement of the parties.

Being contrary to law and public policy, the Compromise

Agreement dated 18 February 2000 between petitioner
and respondent is void ab initio and vests no rights and
creates no obligations. It produces no legal effect at all.
The void agreement cannot be rendered operative even
by the parties alleged performance (partial or full) of their
respective prestations. Joanie Surposa Uy vs. Jose Ngo
Chua,G.R. No. 183965, September 18, 2009.

Contracts; lease. Under Art. 1687, it is settled that if the

rent is paid monthly, the lease is on a month-to-month
basis and may be terminated at the end of each month. In
the case at bar, it is undisputed that the lease was verbal,
that the period for the lease had not been fixed, that the
rentals were paid monthly, and that proper demand and
notice by the lessor to vacate were given. A lease on a
month-to-month basis provides for a definite period and
may be terminated at the end of any month, hence, by the
failure of the lessees to pay the rents due for a particular
month, the lease contract is deemed terminated as of the
end of that month. Applying this principle, the lease
contract in the instant case was deemed terminated at
the end of the month when the petitioner, as lessee, failed
to pay the rents due.Salvador A. Fernandez vs. Cristina
D. Amagna,G.R. No. 152614, September 30, 2009.

Damages; attorneys fees. The award of attorneys fees is

also in order because private respondent acted in gross
and evident bad faith in refusing to satisfy petitioners
plainly valid, just and demandable claim. Given the time
spent on the present case, which lasted for more than 15
years, the extent of services rendered by petitioners
lawyers, the benefits resulting in favor of the client, as well
as said lawyers professional standing, the award of
P100,000.00 is proper. Emma Ver Reyes and Ramon
Reyes vs. The Register of Deeds of Cavite, et al. G.R. No.
166516, September 3, 2009.

Damages; exemplary. The Melencios are entitled to

exemplary damages. Exemplary or corrective damages
are imposed by way of example or correction for the
public good, in addition to the moral, temperate,
liquidated, or compensatory damages. Article 2229 of the
Civil Code grants the award of exemplary or corrective
damages in order to deter the commission of similar acts
in the future and to allow the courts to mould behavior
that can have grave and deleterious consequences to
society. In the instant case, the gross negligence of the
City of Tagaytay in erroneously exacting taxes and selling
properties outside its jurisdiction, despite the clear
mandate of statutory law, must be rectified. City
Government of Tagaytay vs. Hon. Eleuterio F. Guerrero,
etc. et al./Ameurfina Melencio-Herrera, et al. vs. Hon.
Eleuterio F. Guerrero, etc., et al.,G.R. Nos. 140743 &
G.R. No. 140745/G.R. No. 141451-52, September 17,
2009.

Damages; moral damages. The gross negligence of the

City of Tagaytay in levying taxes and auctioning properties
to answer for real property tax deficiencies outside its
territorial jurisdiction amounts to bad faith that calls for
the award of moral damages. 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. Although
incapable of pecuniary estimation, the amount must
somehow be proportional to and in approximation of the
suffering inflicted.

Moral damages are awarded to enable the injured party to

obtain means, diversions or amusements that will serve to
alleviate the moral suffering the person has undergone, by
reason of defendants culpable action. The award is
aimed at restoration, as much as possible, of the spiritual
status quo ante. Thus, it must be proportionate to the
suffering inflicted. Since each case must be governed by
its own peculiar circumstances, there is no hard and fast
rule in determining the proper amount.

The social standing of the aggrieved party is essential to

the determination of the proper amount of the award.
Otherwise, the goal of enabling him to obtain means,
diversions, or amusements to restore him to the status
quo ante would not be achieved.City Government of
Tagaytay vs. Hon. Eleuterio F. Guerrero, etc. et al./
Ameurfina Melencio-Herrera, et al. vs. Hon. Eleuterio F.
Guerrero, etc., et al.,G.R. Nos. 140743 & G.R. No.
140745/G.R. No. 141451-52, September 17, 2009.

Damages; moral damages. Moral damages are not

recoverable simply because a contract has been
breached. They are recoverable only if the defendant
acted fraudulently or in bad faith or in wanton disregard of
his contractual obligations. The breach must be wanton,
reckless, malicious or in bad faith, and oppressive or
abusive. Likewise, a breach of contract may give rise to
exemplary damages only if the guilty party acted in a
wanton, fraudulent, reckless, oppressive or malevolent
manner.

The court is not sufficiently convinced that PNB acted

fraudulently, in bad faith, or in wanton disregard of its
contractual obligations, simply because it increased the
interest rates and delayed the foreclosure of the
mortgages. Bad faith cannot be imputed simply because
the defendant acted with bad judgment or with attendant
negligence. Bad faith is more than these; it pertains to a
dishonest purpose, to some moral obliquity, or to the
conscious doing of a wrong, a breach of a known duty
attributable to a motive, interest or ill will that partakes of
the nature of fraud. Proof of actions of this character is
undisputably lacking in this case. Consequently, we do
not find the spouses Rocamora entitled to an award of
moral and exemplary damages. Under these
circumstances, neither should they recover attorneys
fees and litigation expense. These awards are accordingly
deleted. Philippine National Bank vs. Spouses Agustin
and Pilar Rocamora,G.R. No. 164549, September 18,
2009.

Damages; nominal damages. Since private respondents

fraudulent registration of the subject property in her name
violated petitioners right to remain in peaceful possession
of the subject property, petitioners are entitled to nominal
damages under Article 2221 of the Civil Code.Emma Ver
Reyes and Ramon Reyes vs. The Register of Deeds of
Cavite, et al. G.R. No. 166516, September 3, 2009.

Interest; amount. The imposition of 6% interest per

annum is thus to be computed from the time the trial
court rendered judgment on September 27, 2004, and not
from July 21, 1997 (the date of the auction sale) as held
by the trial court, nor from the filing of the complaint on
March 19, 2001 since it was respondent which filed the
complaint (for collection of deficiency of mortgage
obligation). And after the finality of this Decision, the
judgment award inclusive of interest shall bear interest of
12% per annum until full satisfaction thereof.Virgilio C.
Crystal and Glynna F. Cystal vs. Bank of the Philippines
Islands,G.R. No. 180274, September 4, 2009.

Interest; escalation clause. Escalation clauses are valid

and do not contravene public policy. These clauses are
common in credit agreements as means of maintaining
fiscal stability and retaining the value of money on long-
term contracts. To avoid any resulting one-sided situation
that escalation clauses may bring, the Supreme Court
required in Banco Filipino, the inclusion in the parties
agreement of a de-escalation clause that would authorize
a reduction in the interest rates corresponding to
downward changes made by law or by the Monetary
Board.

The validity of escalation clauses notwithstanding, these

clauses do not give creditors the unbridled right to adjust
interest rates unilaterally. As the Supreme Court said in
the same Banco Filipino case, any increase in the rate of
interest made pursuant to an escalation clause must be
the result of an agreement between the parties. The
minds of all the parties must meet on the proposed
modification as this modification affects an important
aspect of the agreement. There can be no contract in the
true sense in the absence of the element of an agreement,
i.e., the parties mutual consent. Thus, any change must
be mutually agreed upon, otherwise, the change carries
no binding effect. A stipulation on the validity or
compliance with the contract that is left solely to the will
of one of the parties is void; the stipulation goes against
the principle of mutuality of contract under Article 1308 of
the Civil Code. As correctly found by the appellate court,
even with a de-escalation clause, no matter how
elaborately worded, an unconsented increase in interest
rates is ineffective if it transgresses the principle of
mutuality of contracts.Philippine National Bank vs.
Spouses Agustin and Pilar Rocamora,G.R. No. 164549,
September 18, 2009.

Interest; failure to commence action. Under PD 385,

government financial institutions which was PNBs
status prior to its full privatization in 1996 are mandated
to immediately foreclose the securities given for any loan
when the arrearages amount to at least 20% of the total
outstanding obligation.

As stated in the narrated facts, PNB commenced

foreclosure proceedings in 1990 or three years after the
spouses defaulted on their obligation in 1987. On this
factual premise, the PNB now insists as a legal argument
that its right to foreclose should not be affected by the
mandatory tenor of PD 385, since it exercised its right still
within the 10-year prescription period allowed under
Articles 1142 and 1144 (1) of the Civil Code.
PNBs argument completely misses the point. The issue is
the effect of the delay in commencing foreclosure
proceedings on PNBs right to recover the deficiency, not
on its right to foreclose. The delay in commencing
foreclosure proceedings bears a significant function in the
deficiency amount being claimed, as the amount
undoubtedly includes interest and penalty charges which
accrued during the period covered by the delay. The
depreciation of the mortgaged properties during the
period of delay must also be factored in, as this affects
the proceeds that the mortgagee can recover in the
foreclosure sale, which in turn affects its deficiency claim.
There was also, in this case, the four-year gap between
the foreclosure proceedings and the filing of the
complaint for deficiency judgment during which time
interest, whether at the 12% per annum rate or higher,
and penalty charges also accrued. For the Court to grant
the PNBs deficiency claim would be to award it for its
delay and its undisputed disregard of PD 385. Philippine
National Bank vs. Spouses Agustin and Pilar
Rocamora,G.R. No. 164549, September 18, 2009.

Marriage; presumption of death. A petition for judicial

declaration that petitioners husband is presumed to be
dead cannot be entertained because it is not authorized
by law.
Under the Civil Code, the presumption of death is
established by law and no court declaration is needed for
the presumption to arise. Since death is presumed to
have taken place by the seventh year of absence, Sofio is
to be presumed dead starting October 1982.

Consequently, at the time of petitioners marriage to

Virgilio, there existed no impediment to petitioners
capacity to marry, and the marriage is valid under
paragraph 2 of Article 83 of the Civil Code. Further,
considering that it is the Civil Code that applies, proof of
well-founded belief is not required. Petitioner could not
have been expected to comply with this requirement
since the Family Code was not yet in effect at the time of
her marriage to Virgilio. The enactment of the Family Code
in 1988 does not change this conclusion.Angelita Valdez
vs. Republic of the Philippines,G.R. No. 180863,
September 8, 2009.

Mortgage; foreclosure. It is a settled doctrine that

foreclosure is proper when the debtors are in default of
the payment of their obligation. The conditions essential
for that foreclosure would be to show, firstly, the existence
of the chattel mortgage; and, secondly, the default of the
mortgagor.Orix Metro Leasing and Finance Corporation
vs. M/V PILAR-I and Spouses Ernesto Dy and Lourdes
Dy,G.R. No. 157901, September 11, 2009.

Mortgage; foreclosure notice. Statutory provisions

governing publication of notice of mortgage foreclosure
sales must be strictly complied with, and that even slight
deviations therefrom will invalidate the notice and render
the sale at least voidable. Indeed, one of the most
important requirements of Act No. 3135 is that the notice
of the time and place of sale shall be given. If the sheriff
acts without notice, or at a time and place other than that
designated in the notice, the sheriff acts without warrant
of law. Publication is required to give the extrajudicial
foreclosure sale a reasonably wide publicity such that
those interested might attend the public sale. To allow the
parties to waive this jurisdictional requirement would
result in converting into a private sale what ought to be a
public auction.Philippine National Bank vs. Gregorio B.
Maraya, Jr. and Wenefrida Maraya,G.R. No. 164104,
September 11, 2009.

Mortgage; foreclosure notice. The requirements for

posting and publication in extrajudicial foreclosure are set
out in Act No. 3135, as amended.

Jurisprudence, however, has decreed that the publication

of the notice of sale in a newspaper of general circulation
alone is more than sufficient compliance with the notice-
posting requirements of the law.

Presidential Decree 1079, the governing law at the time of

the subject foreclosure, requires that notices shall be
published in newspapers or publications published,
edited and circulated in the same city and/or province
where the requirement of general circulation applies.
Presidential Decree 1079 requires a newspaper of general
circulation. A newspaper of general circulation is
published for the dissemination of local news and general
information; it has a bona fide subscription list of paying
subscribers; and it is published at regular intervals. The
newspaper must not also be devoted to the interest or
published for the entertainment of a particular class,
profession, trade, calling, race or religious denomination.
The newspaper need not have the largest circulation so
long as it is of general circulation.

Presidential Decree 1079, however, does not require

accreditation. The requirement of accreditation was
imposed by the Court only in 2001, through A.M. No.
01-1-07-SC or the Guidelines in the Accreditation of
Newspapers and Periodicals Seeking to Publish Judicial
and Legal Notices and Other Similar Announcements and
in the Raffle Thereof. This circular cannot be applied
retroactively to the case at bar as it will impair petitioners
rights.

Moreover, as held in Metrobank v. Peafiel, the

accreditation by the presiding judge is not conclusive that
a newspaper is of general circulation, as each case must
be decided on its own merits and evidence.

In the instant case, the Affidavit of Publication executed

by the account executive of Sun Star General Santos
expressly provided that the said newspaper is of general
circulation and is published in the City of General Santos.
This is prima facie proof that Sun Star General Santos is
generally circulated in General Santos City, the place
where the properties are located. Notably, respondents
did not claim that the subject newspaper was not
generally circulated in the city, but only that it was not
accredited by the court. Hence, there was valid
publication and consequently, the extrajudicial foreclosure
and sale are valid.China Banking Corporation vs. Sps.
Wenceslao & Marcelina Martir,G.R. No. 184252,
September 11, 2009.

Mortgage; redemption. The general rule in redemption is

that it is not sufficient that a person offering to redeem
manifests his desire to do so. The statement of intention
must be accompanied by an actual and simultaneous
tender of payment. This constitutes the exercise of the
right to repurchase.

In several cases decided by the Supreme Court where the

right to repurchase was held to have been properly
exercised, there was an unequivocal tender of payment
for the full amount of the repurchase price. Otherwise, the
offer to redeem is ineffectual. Bona fide redemption
necessarily implies a reasonable and valid tender of the
entire repurchase price, otherwise the rule on the
redemption period fixed by law can easily be
circumvented.
Moreover, jurisprudence also characterizes a valid tender
of payment as one where the full redemption price is
tendered. China Banking Corporation vs. Sps. Wenceslao
& Marcelina Martir,G.R. No. 184252, September 11,
2009.

Obligations; interest. The Supreme Court reduced the

interest rate pegged by the CA at 1.5% monthly to 1%
monthly and penalty charge fixed by the CA at 1.5%
monthly to 1% monthly or a total of 2% per month or
24% per annum in line with the prevailing jurisprudence
and in accordance with Art. 1229 of the Civil Code. Ileana
Dr. Macalino vs. Bank of the Philippines Islands,G.R. No.
175490, September 17, 2009.

Property; laches. Laches is defined as the failure to

assert a right for an unreasonable and unexplained length
of time, warranting a presumption that the party entitled
to assert it has either abandoned or declined to assert it.
This equitable defense is based upon grounds of public
policy, which requires the discouragement of stale claims
for the peace of society.

Juana sold the property to the Spouses Cereno in 1970

and since then have possessed the property peacefully
and publicly without any opposition from petitioners.
While petitioners claim that they knew about the sale only
in 1980 yet they did not take any action to recover the
same and waited until 1999 to file a suit without offering
any excuse for such delay. Records do not show any
justifiable reason for petitioners inaction for a long time in
asserting whatever rights they have over the property
given the publicity of respondents conduct as owners of
the property. Julita V. Imuan, et al. vs. Juanito Cereno, et
al.,G.R. No. 167995, September 11, 2009.

Property; prescription. Prescription is another mode of

acquiring ownership and other real rights over immovable
property. It is concerned with lapse of time in the manner
and under conditions laid down by law, namely, that the
possession should be in the concept of an owner, public,
peaceful, uninterrupted and adverse. 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. The party
who asserts ownership by adverse possession must
prove the presence of the essential elements of
acquisitive prescription.
Acquisitive prescription of real rights may be ordinary or
extraordinary. Ordinary acquisitive prescription requires
possession in good faith and with just title for ten years. In
extraordinary prescription, ownership and other real rights
over immovable property are acquired through
uninterrupted adverse possession for thirty years without
need of title or of good faith.

The good faith of the possessor consists in the

reasonable belief that the person from whom he received
the thing was the owner thereof, and could transmit his
ownership. For purposes of prescription, there is just title
when the adverse claimant came into possession of the
property through one of the modes recognized by law for
the acquisition of ownership or other real rights, but the
grantor was not the owner or could not transmit any
right.Julita V. Imuan, et al. vs. Juanito Cereno, et al.,G.R.
No. 167995, September 11, 2009.

Property; public property. Plaza Rizal partakes of the

nature of a public park or promenade. As such, Plaza
Rizal is classified as a property for public use.

In Municipality of San Carlos, Pangasinan v. Morfe, the

Court recognized that a public plaza is a public land
belonging to, and, subject to the administration and
control of, the Republic of the Philippines. Absent an
express grant by the Spanish Government or that of the
Philippines, the local government unit where the plaza
was situated, which in that case was the Municipality of
San Carlos, had no right to claim it as its patrimonial
property. The Court further held that whatever right of
administration the Municipality of San Carlos may have
exercised over said plaza was not proprietary, but
governmental in nature. The same did not exclude the
national government. On the contrary, it was possessed
on behalf and in representation thereof, the municipal
government of San Carlos being in the performance of
its political functions a mere agency of the Republic,
acting for its benefit.

Applying the above pronouncements to the instant case,

Camarines Sur had the right to administer and possess
Plaza Rizal prior to the conversion of the then Municipality
of Naga into the independent City of Naga, as the plaza
was then part of the territorial jurisdiction of the said
province. Said right of administration by Camarines Sur
was governmental in nature, and its possession was on
behalf of and in representation of the Republic of the
Philippines, in the performance of its political functions.

Thereafter, by virtue of the enactment of Republic Act No.

305 and as specified in Section 2, Article I thereof, the
City of Naga was created out of the territory of the old
Municipality of Naga. Plaza Rizal, which was located in
the said municipality, thereby ceased to be part of the
territorial jurisdiction of Camarines Sur and was, instead
transferred to the territorial jurisdiction of the City of
Naga. Theretofore, the local government unit that is the
proper agent of the Republic of the Philippines that
should administer and possess Plaza Rizal is the City of
Naga.
Camarines Sur cannot claim that Plaza Rizal is part of its
patrimonial property. The basis for the claim of ownership
of Camarines Sur, i.e., the tax declaration covering Plaza
Rizal in the name of the province, hardly convinces this
Court. Well-settled is the rule that a tax declaration is not
conclusive evidence of ownership or of the right to
possess land, when not supported by any other evidence.
The same is merely an indicia of a claim of ownership.[40]
In the same manner, the Certification dated 14 June 1996
issued by the Department of Environment and Natural
ResourcesCommunity Environment and Natural
Resources Office (DENR-CENRO) in favor of Camarines
Sur, merely stating that the parcel of land described
therein, purportedly Plaza Rizal, was being claimed solely
by Camarines Sur, hardly constitutes categorical proof of
the alleged ownership of the said property by the
province.

Thus, being a property for public use within the territorial

jurisdiction of the City of Naga, Plaza Rizal should be
under the administrative control and supervision of the
said city. Province of Camarines Sur, represented by
Governor Luis Raymund F. Villafuerte, Jr. vs. Hon. Court of
Appeals and City of Naga, represented by Mayor Jesse
M. Robredo,G.R. No. 175064, September 18, 2009.

Quasi-delict; last clear chance. The doctrine of last clear

chance applies to a situation where the plaintiff was guilty
of prior or antecedent negligence, but the defendant
who had the last fair chance to avoid the impending harm
and failed to do so is made liable for all the
consequences of the accident, notwithstanding the prior
negligence of the plaintiff. However, the doctrine does not
apply where the party charged is required to act
instantaneously, and the injury cannot be avoided by the
application of all means at hand after the peril is or should
have been discovered.

The doctrine of last clear chance does not apply to this

case, because even if it can be said that it was Benigno
Valdez who had the last chance to avoid the mishap when
the owner-type jeep encroached on the western lane of
the passenger jeep, Valdez no longer had the opportunity
to avoid the collision. The Answer of petitioners stated
that when the owner-type jeep encroached on the lane of
the passenger jeep, Benigno Valdez maneuvered his
vehicle towards the western shoulder of the road to avoid
a collision, but the owner-type jeep driven by Ramos
continued to move to the western lane and bumped the
left side of the passenger jeep. Thus, petitioners assert in
their Petition that considering that the time the owner-
type jeep encroached on the lane of Valdez to the time of
impact was only a matter of seconds, he no longer had
the opportunity to avoid the collision. Although the
records are bereft of evidence showing the exact distance
between the two vehicles when the owner-type jeep
encroached on the lane of the passenger jeep, it must
have been near enough, because the passenger jeep
driven by Valdez was unable to avoid the collision. Hence,
the doctrine of last clear chance does not apply to this
case. Cresencia Achevara, Alfredo Achevara and
Benigno Valdez vs. Elvira Ramos, John Arnel Ramos and
Kristine Camille Ramos, G.R. No. 175172, September 29,
2009.

Quasi-delict; negligence. Foreseeability is the

fundamental test of negligence. To be negligent, a
defendant must have acted or failed to act in such a way
that an ordinary reasonable man would have realized that
certain interests of certain persons were unreasonably
subjected to a general but definite class of risks.
Cresencia Achevara, Alfredo Achevara and Benigno
Valdez vs. Elvira Ramos, John Arnel Ramos and Kristine
Camille Ramos, G.R. No. 175172, September 29, 2009.

Quasi-delict; negligence. Under the doctrine of

respondeat superior, the principal is liable for the
negligence of its agents acting within the scope of their
assigned tasks. The City of Tagaytay is liable for all the
necessary and natural consequences of the negligent
acts of its city officials. It is liable for the tortious acts
committed by its agents who sold the subject lots to the
Melencios despite the clear mandate of R.A. No. 1418,
separating Barrio Birinayan from its jurisdiction and
transferring the same to the Province of Batangas. The
negligence of the officers of the City of Tagaytay in the
performance of their official functions gives rise to an
action ex contractu and quasi ex-delictu. However, the
Melencios cannot recover twice for the same act or
omission of the City of Tagaytay.

Negligence is the failure to observe protection of the

interests of another person, that degree of care,
precaution, and vigilance which the circumstances justly
demand, whereby such other person suffers injury. Thus,
negligence is the want of care required under
circumstances.

In this case, it is basic that before the City of Tagaytay

may levy a certain property for sale due to tax
delinquency, the subject property should be under its
territorial jurisdiction. The city officials are expected to
know such basic principle of law. The failure of the city
officials of Tagaytay to verify if the property is within its
jurisdiction before levying taxes on the same constitutes
gross negligence. City Government of Tagaytay vs. Hon.
Eleuterio F. Guerrero, etc. et al./Ameurfina Melencio-
Herrera, et al. vs. Hon. Eleuterio F. Guerrero, etc., et al.,
G.R. Nos. 140743 & G.R. No. 140745/G.R. No.
141451-52, September 17, 2009.

Quasi-delict; requisites. In every tort case filed under

Article 2176 of the Civil Code, the plaintiff has to prove by
a preponderance of evidence: (1) the damages suffered
by him; (2) the fault or negligence of the defendant or
some other person to whose act he must respond; (3) the
connection of cause and effect between the fault or
negligence and the damages incurred; and (4) that there
must be no preexisting contractual relation between the
parties.

On the other hand, Article 26 of the Civil Code grants a

cause of action for damages, prevention, and other relief
in cases of breach, though not necessarily constituting a
criminal offense, of the following rights: (1) right to
personal dignity; (2) right to personal security; (3) right to
family relations; (4) right to social intercourse; (5) right to
privacy; and (6) right to peace of mind.Zenaida R.
Gregorio vs. Court of Appeals, et al.,G.R. No. 179799,
September 11, 2009.

Sale; auction sale. Nothing is more settled than that a

judgment creditor (or more accurately, the purchaser at an
auction sale) only acquires at an execution sale the
identical interest possessed by the judgment debtor in the
auctioned property; in other words, the purchaser takes
the property subject to all existing equities applicable to
the property in the hands of the debtor. The fact, too, that
the judgment debtor is in possession of the land to be
sold at public auction, and that the purchaser did not
know that a third-party had acquired ownership thereof,
does not protect the purchaser, because he is not
considered a third-party, and the rule of caveat emptor
applies to him. Thus, if it turns out that the judgment
debtor has no interest in the property, the purchaser at an
auction sale also acquires no interest therein. Juan
Balbuena and Teodulfo Retuya vs. Leona Aparicio Sabay,
et al., G.R. No. 154720, September 4, 2009.

Sales; double sales. The spouses Cuevas only sold the

subject property to them in 1976, and did not sell it a
second time to private respondent in 1992. As a
consequence, the rules on the double sale of registered
property are not relevant herein.Emma Ver Reyes and
Ramon Reyes vs. The Register of Deeds of Cavite, et al.
G.R. No. 166516, September 3, 2009.

Sale; inexistent. As the Deed of Absolute Sale in

Milagrosas favor is not genuine, it transmitted no rights to
her. Consequently, the subject land part of Cebreros
estate which was allotted to Secundina was validly sold
by her to petitioner.Progressive Trade & Service
Enterprises vs. Maria Milagrosa Antonio,G.R. No.
179502, September 18, 2009.

Property Registration Decree and related laws

Land; alienable and disposable. While the subject lots

were verified to be alienable or disposable lands since
March 15, 1982, there is no sufficient proof that open,
continuous and adverse possession over them by
petitioner and her predecessors-in-interest commenced
on June 12, 1945 or earlier. Petitioners applications
cannot thus be granted.
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 declared alienable or

disposable on March 15, 1982, there is no competent
evidence that they are no longer intended for public use
or for public service. The classification of the lots as
alienable and disposable lands of the public domain does
not change its status as properties of the public dominion.
Petitioner cannot thus acquire title to them by prescription
as yet.Joyce Y. Lim, represented by her attorney-in-fact
Bernardo M. Nicolas/Joyce Y. Lim, represented by her
attorney-in-fact Bernardo M. Nicolas, G.R. No. 158630/
G.R. No. 162047, September 4, 2009.

Land; registration. Any person, by himself or through his

predecessor-in-interest, who has 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, may file in the proper trial court
an application for registration of title to land, whether
personally or through his duly authorized representative.

Being the applicant for confirmation of imperfect title,

petitioner bears the burden of proving that: 1) the land
forms part of the alienable and disposable land of the
public domain; and 2) she has 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. These the petitioner must
prove by no less than clear, positive and convincing
evidence.Peregina Mistica vs. Republic of the
Philippines,G.R. No. 165141, September 11, 2009.

Land; registration. The Property Registration Decree

involves original registration through ordinary registration
proceedings. Under Section 14 (1) of said law, the
requisites for the filing of an application for registration of
title are: that the property in question is alienable and
disposable land of the public domain; 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.Joyce Y. Lim, represented by her attorney-in-
fact Bernardo M. Nicolas/Joyce Y. Lim, represented by
her attorney-in-fact Bernardo M. Nicolas, G.R. No.
158630/G.R. No. 162047, September 4, 2009.

Sale; non-registration. The reliance of the Dadizons on

the unnotarized and unregistered deed of absolute sale of
real property executed by Bernadas in their favor was
misplaced and unwarranted, for the non-registration of
the deed meant that the sale could not bind third parties
like the respondents. The transaction affecting
unregistered lands covered by an unrecorded contract, if
legal, might be valid and binding on the parties
themselves, but not on third parties. In the case of third
parties, it was necessary for the contract to be registered.

Bernadas execution on March 10, 1976 of the deed of

absolute sale of real property in favor of the Dadizons,
standing alone, did not suffice to bind and conclude the
Mocorros. Pursuant to Sec. 113, Presidential Decree No.
1529, the recording of the sale was necessary. Besides,
the deed, being the unilateral act of Bernadas, did not
adversely affect the Mocorros, who were not her privies.
Otherwise stated, the deed was res inter alios acta as far
as they were concerned.

Neither would the affidavit of adjoining owners support

the Dadizons cause, considering that such affidavit,
aside from its being self-serving and unilateral, had been
executed only for the purpose of facilitating Felicidad
Dadizons application for the low cost housing loan from
the Development Bank of the Philippines.Sps. Nestor and
Felicidad Dadizon vs. Hon. Court of Appeals and Sps.
Dominador and Elsa Mocorro, G.R. No. 159116,
September 30, 2009.

Torrens title; fraudulent title. Insofar as a person who

fraudulently obtained a property is concerned, the
registration of the property in said persons name would
not be sufficient to vest in him or her the title to the
property. A certificate of title merely confirms or records
title already existing and vested. The indefeasibility of the
Torrens title should not be used as a means to perpetrate
fraud against the rightful owner of real property. Good
faith must concur with registration because, otherwise,
registration would be an exercise in futility. A Torrens title
does not furnish a shield for fraud, notwithstanding the
long-standing rule that registration is a constructive notice
of title binding upon the whole world. The legal principle is
that if the registration of the land is fraudulent, the person
in whose name the land is registered holds it as a mere
trustee.

It has long been established that the sole remedy of the

landowner whose property has been wrongfully or
erroneously registered in anothers name is to bring an
ordinary action in an ordinary court of justice for
reconveyance or, if the property has passed into the
hands of an innocent purchaser for value, for damages. It
is one thing to protect an innocent third party; it is entirely
a different matter and one devoid of justification if deceit
would be rewarded by allowing the perpetrator to enjoy
the fruits of his nefarious deed. Reconveyance is all
about the transfer of the property, in this case the title
thereto, which has been wrongfully or erroneously
registered in another persons name, to its rightful and
legal owner, or to one with a better right. Evidently,
petitioners, being the rightful owners of the subject
property, are entitled to the reconveyance of the title over
the same.Emma Ver Reyes and Ramon Reyes vs. The
Register of Deeds of Cavite, et al. G.R. No. 166516,
September 3, 2009.

Other laws

ZIP. The following requisites must concur for one to be

considered an absentee structure owner: one, the person
must own a structure or dwelling unit within the ZIP zone;
and two, the person has not occupied the structure or
dwelling unit prior to the official closure of the census.

The petitioner did not meet the second requisite because

it was the respondents, not her, who were living in or
occupying Structure No. 86-313 at the time of the official
ZIP census and until they vacated the premises on
November 17, 1996.

In the award of the ZIP lot allocation, the primary bases

for determining the potential program beneficiaries and
structures or dwelling units in the project area were the
official ZIP census and tagging conducted in 1987. It was,
therefore, the primordial requisite that the intended
beneficiary must be the occupant of the tagged structure
at the time of the official ZIP census or at the closure
thereof. Otherwise, the person was considered an
absentee structure owner for being absent from his usual
residence or domicile. At any rate, the Code of Policies
made it clear that the issuance of a ZIP tag number to a
structure did not guarantee ZIP lot allocation to the owner
of the tagged structure. Such interpretation of the Code of
Policies was in harmony with the objectives and principles
underlying the program to provide adequate shelter and
place of abode to the legally qualified beneficiaries. That
the petitioner was the person who built Structure No.
86-313 did not necessarily mean that the lot on which the
structure stood would be automatically awarded to her.
Like any other beneficiary, she must first comply with the
requirements imposed by the Government before being
deemed entitled to the lot allocation. Unfortunately, she
was not using Structure No. 86-313 as a dwelling or living
quarters, but as a source of income, which only signified
that she was not a homeless person whom the ZIP
intended to benefit. To consider her a homelot beneficiary
would be contrary to the spirit of the Code of Policies and
would defeat the very object of the ZIP.Carmen A. Blas
vs. Spouses Eduardo and Salud Galapon, G.R. No.
159710, September 30, 2009.
August 2009 Philippine Supreme Court Decisions on
CivilLaw

Contracts; binding effect. As a general rule, obligations

derived from a contract are transmissible (see Article
1311, par.1 of the Civil Code). The loan in this case was
contracted by respondent. He died while the case was
pending before the Court of Appeals. While he may no
longer be compelled to pay the loan, the debt subsists
against his estate. No property or portion of the
inheritance may be transmitted to his heirs unless the
debt has first been satisfied. William Ong Genato
vs.Benjamin Bayhon, et al.,G.R. No. 171035, August 24,
2009.

Contracts; breach. CCC defaulted in the payment of its

obligation to FILSYSTEMS under the Compromise
Agreement. On the other hand, FILSYSTEMS was not in
default; however, considering that it failed to perform the
obligation incumbent upon it under the Compromise
Agreement, it must be held liable for the cost of
completion of the unfinished portion of the project.
Continental Cement Corp., vs. Filipinas (PREFAB)
Systems, Inc./Filipinas (PREFAB) Systems, inc. vs.
Continental Cement Corp.,G.R. No. 176917/G.R. No.
176919, August 4, 2009.

Contracts; due and demandable obligations. Petitioner

does not deny that she obtained a loan from respondent.
She, however, contends that the loan is not yet due and
demandable because the suspensive condition the
completion of the renovation of the apartment units has
not yet been fulfilled. She also assails the award of
attorneys fees to respondent as baseless.

For his part, respondent admits that initially, they agreed

that payment of the loan shall be made upon completion
of the renovations. However, respondent claims that
during their meeting with some family members in the
house of their brother Genaro sometime in the second
quarter of 1997, he and petitioner entered into a new
agreement whereby petitioner was to start making
monthly payments on her loan, which she did from June
to October of 1997.

Evidently, by virtue of the subsequent agreement, the

parties mutually dispensed with the condition that
petitioner shall only begin paying after the completion of
all renovations. There was, in effect, a modificatory or
partial novation, of petitioners obligation under Article
1291 of the Civil Code.Maria Soledad Tomimbang
vs.Atty. Jose Tomimbang,G.R. No. 165116, August 4,
2009.

Contracts; extrajudicial settlement. The Extrajudicial

Settlement of Estate with Absolute Sale executed by
Corazon and Epitacio through the latters attorney-in-fact,
Vicente Angeles, partakes of the nature of a contract. To
be precise, the said document contains two contracts, to
wit: the extrajudicial adjudication of the estate of Julian
Angeles between Corazon and Epitacio as Julians
compulsory heirs, and the absolute sale of the
adjudicated properties to Cornelia. While contained in one
document, the two are severable and each can stand on
its own. Hence, for its validity, each must comply with the
requisites prescribed in Article 1318 of the Civil Code,
namely (1) consent of the contracting parties; (2) object
certain, which is the subject matter of the contract; and
(3) cause of the obligation which is established. Cornelia
Baladad (Represented by Heinrich M. Angeles and Rex
Aaron A. Baladad) vs. Sergio A. Rublico and Spouses
Laureano E. Yupano,G.R. No. 160743. August 4, 2009

Contracts; loan. Since the obligation in this case involves

a loan and there is no stipulation in writing as to interest
due, the rate of interest shall be 12% per annum
computed from the date of extrajudicial demand. Maria
Soledad Tomimbang vs.Atty. Jose Tomimbang,G.R. No.
165116, August 4, 2009.

Contract; perfection. Article 1318 of the Civil Code

declares that no contract exists unless the following
requisites concur: (1) consent of the contracting parties;
(2) object certain which is the subject matter of the
contract; and (3) cause of the obligation established.
Since the object of the parties agreement involves
properties co-owned by Consuelo and her children, the
petitioners-heirs insist that their approval of the sale
initiated by their mother, Consuelo, was essential to its
perfection. Accordingly, their refusal amounted to the
absence of the required element of consent.

That a thing is sold without the consent of all the co-

owners does not invalidate the sale or render it void.
Article 493 of the Civil Code recognizes the absolute right
of a co-owner to freely dispose of his pro indiviso share
as well as the fruits and other benefits arising from that
share, independently of the other co-owners. Thus, when
Consuelo agreed to sell to the respondents the subject
properties, what she in fact sold was her undivided
interest that, as quantified by the RTC, consisted of one-
half interest, representing her conjugal share, and one-
sixth interest, representing her hereditary share.

The petitioners-heirs nevertheless argue that Consuelos

consent was predicated on their consent to the sale, and
that their disapproval resulted in the withdrawal of
Consuelos consent. Yet, we find nothing in the parties
agreement or even conduct save Consuelos self-
serving testimony that would indicate or from which we
can infer that Consuelos consent depended on her
childrens approval of the sale. The explicit terms of the
June 8, 1989 receipt provide no occasion for any reading
that the agreement is subject to the petitioners-heirs
favorable consent to the sale.
The presence of Consuelos consent and, corollarily, the
existence of a perfected contract between the parties are
further evidenced by the payment and receipt of
P20,000.00, an earnest money by the contracting parties
common usage. The law on sales, specifically Article
1482 of the Civil Code, provides that whenever earnest
money is given in a contract of sale, it shall be considered
as part of the price and proof of the perfection of the
contract. Although the presumption is not conclusive, as
the parties may treat the earnest money differently, there
is nothing alleged in the present case that would give rise
to a contrary presumption. In cases where the Court
reached a conclusion contrary to the presumption
declared in Article 1482, we found that the money initially
paid was given to guarantee that the buyer would not
back out from the sale, considering that the parties to the
sale have yet to arrive at a definite agreement as to its
terms that is, a situation where the contract has not yet
been perfected. These situations do not obtain in the
present case, as neither of the parties claimed that the
P20,000.00 was given merely as guarantee by the
respondents, as vendees, that they would not back out
from the sale. As we have pointed out, the terms of the
parties agreement are clear and explicit; indeed, all the
essential elements of a perfected contract are present in
this case. While the respondents required that the
occupants vacate the subject properties prior to the
payment of the second installment, the stipulation does
not affect the perfection of the contract, but only its
execution.

In sum, the case contains no element, factual or legal,

that negates the existence of a perfected contract
between the parties. Heirs of Cayetano Pangan and
Consuelo Pangan vs.Spouses Rogelio Perreras and
Priscilla G. Perreras,G.R. No. 157374, August 27, 2009

Contract; Maceda Law. As in the rescission of a contract

of sale for nonpayment of the price, the defaulting vendee
in a contract to sell may defeat the vendors right to
cancel by invoking therights granted to him under
Republic Act No. 6552 or the Realty Installment Buyer
Protection Act (also known as the Maceda Law); this law
provides for a 60-day grace period within which the
defaulting vendee (who has paid less than two years of
installments) may still pay the installments due. Only after
the lapse of the grace period with continued nonpayment
of the amounts due can the actual cancellation of the
contract take place.

Significantly, the Court has consistently held that the

Maceda Law covers not only sales on installments of real
estate, but also financing of such acquisition; its Section 3
is comprehensive enough to include both contracts of
sale and contracts to sell, provided that the terms on
payment of the price require at least two installments. The
contract entered into by the parties herein can very well
fall under the Maceda Law.

Based on the above discussion, we conclude that the

respondents payment on June 15, 1989 of the installment
due on June 14, 1989 effectively defeated the petitioners-
heirs right to have the contract rescinded or cancelled.
Whether the parties agreement is characterized as one of
sale or to sell is not relevant in light of the respondents
payment within the grace period provided under Article
1592 of the Civil Code and Section 4 of the Maceda Law.
The petitioners-heirs obligation to accept the payment of
the price and to convey Consuelos conjugal and
hereditary shares in the subject properties subsists. Heirs
of Cayetano Pangan and Consuelo Pangan vs.Spouses
Rogelio Perreras and Priscilla G. Perreras,G.R. No.
157374, August 27, 2009

Contract; novation. The obligation to pay a sum of money

is not novated by an instrument that expressly recognizes
the old, changes only the terms of payment, adds other
obligations not incompatible with the old ones or the new
contract merely supplements the old one.
The grant by Betonval to FSI of a 45-day credit extension
did not novate the contracts so as to extinguish the latter.
There was no incompatibility between them. There was no
intention by the parties to supersede the obligations
under the contracts. In fact, the intention of the 45-day
credit extension was precisely to revive the old obligation
after the original period expired with the obligation
unfulfilled. The grant of a 45-day credit period merely
modified the contracts by extending the period within
which FSI was allowed to settle its obligation. Since the
contracts remained the source of FSIs obligation to
Betonval, the stipulation to pay 30% p.a. interest likewise
remained.Foundation Specialist, Inc. vs.Betonval Ready
Concrete, Inc., et al.,G.R. No. 170674, August 24, 2009.

Contracts; void contract. The subject dacion en pago is a

simulated or fictitious contract, and hence void. The
evidence shows that at the time it was allegedly signed by
the wife of the respondent, his wife was already dead.
This finding of fact cannot be reversed.William Ong
Genato vs.Benjamin Bayhon, et al.,G.R. No. 171035,
August 24, 2009.

Contracts; waiver. Neither did Betonval waive the

stipulated interest rate of 30% p.a., as FSI erroneously
claims. A waiver is a voluntary and intentional
relinquishment or abandonment of a known legal right or
privilege. A waiver must be couched in clear and
unequivocal terms which leave no doubt as to the
intention of a party to give up a right or benefit which
legally pertains to him. FSI did not adduce proof that a
valid waiver was made by Betonval. FSIs claim is
therefore baseless.
On the other hand, there can be no other conclusion but
that Betonval had reduced the imposable interest rate
from 30% to 24% p.a. and this reduced interest rate was
accepted, albeit impliedly, by FSI when it proposed a new
schedule of payments and, in fact, actually made
payments to Betonval with 24% p.a. interest. By its own
actions, therefore, FSI is estopped from questioning the
imposable rate of interest. Foundation Specialist, Inc.
vs.Betonval Ready Concrete, Inc., et al.,G.R. No.
170674, August 24, 2009.

Damages; attorneys fees. As to attorneys fees, award

therefor cannot be allowed by the Court. It is an oft-
repeated rule that the trial court is required to state the
factual, legal or equitable justification for awarding
attorneys fees. In the present case, where it is
understandable that some misunderstanding could arise
as to when the obligation was indeed due and
demandable, the Court must likewise disallow the award
of attorneys fees. Maria Soledad Tomimbang vs.Atty.
Jose Tomimbang,G.R. No. 165116, August 4, 2009.

Damages; attorneys fees. Article 2208 of the Civil Code

enumerates the instances justifying the grant of attorneys
fees; in all cases, the award must be reasonable, just and
equitable. Attorneys fees as part of damages are not
meant to enrich the winning party at the expense of the
losing litigant. They 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. The award of
attorneys fees is the exception rather than the general
rule. Thus, findings reflecting the conditions imposed by
Article 2208 are necessary to justify an award; attorneys
fees mentioned only in the dispositive portion of the
decision without any prior justification in the body of the
decision is a baseless award that must be struck down.
Francisco Madrid and Edgardo Bernardo vs. Spouses
Bonifacio Mapoy and Felicidad Martinez,G.R. No.
150887, August 14, 2009.

Damages; attorneys fees. No premium should be placed

on the right to litigate. Attorneys fees are not to be
awarded every time a party wins a suit. Even when a
claimant is compelled to litigate or to incur expenses to
protect his rights, still attorneys fees may not be awarded
where there is no sufficient showing of bad faith in a
partys persistence in a case other than an erroneous
conviction of the righteousness of his cause. Dart
Philippines, Inc. vs. Spouses Francisco and Erlinda
Calogcog,G.R. No. 149241, August 24, 2009.

Damages; crime. 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. People
of the Philippines vs.Ismael Diaz @ Maeng and Rodolfo
Diaz @ Nanding,G.R .No. 185841, August 4, 2009.
Damages; interest. The interest has been pegged at 5%
per month, or 60% per annum. This is unconscionable,
hence cannot be enforced. In light of this, the rate of
interest for this kind of loan transaction has been fixed in
the case of Eastern Shipping Lines v. Court of Appeals, at
12% per annum, calculated from October 3, 1989, the
date of extrajudicial demand. William Ong Genato
vs.Benjamin Bayhon, et al.,G.R. No. 171035, August 24,
2009. SeeMaria Soledad Tomimbang vs.Atty. Jose
Tomimbang,G.R. No. 165116, August 4, 2009.

Damages; liquidated damages. In the present case, the

factors considered by the Court of Appeals were the
absence of bad faith on the part of Urban and the fact
that the project was 97% complete at the time it was
turned over to Insular. In addition, we noted that Insular is
likewise not entirely blameless considering that it failed to
pay Urban P1,144,030.94 representing the balance of
unpaid change orders and to return the retention money
in the amount of P2,134,908.80, or a total of
P3,578,939.74. Had Insular released said amount upon
demand, the same could have been used by Urban to
comply with its obligation to purchase the needed
construction materials and to expedite the completion of
the project. Under the circumstances, we find that this
omission on the part of Insular justifies a further reduction
of the liquidated damages decreed against Urban from
P2,940,000.00 to P1,940,000.00.
As a general rule, courts are not at liberty to ignore the
freedom of the parties to agree on such terms and
conditions as they see fit as long as they are not contrary
to law, morals, and good custom, public policy or public
order. Nevertheless courts may equitably reduce a
stipulated penalty in the contract where, as in the instant
case, the principal obligation has been partly performed
(97%) and where the penalty is iniquitous.Urban
Consolidated Constructors Philippines, Inc. vs. The
Insular Life Assurance Co., Inc.,G.R. No. 180824, August
28, 2009.

Damages; proximate cause. Proximate cause is defined

as that cause, which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the
injury, and without which the result would not have
occurred. And more comprehensively, the proximate legal
cause is that acting first and producing the injury, either
immediately or by setting other events in motion, all
constituting a natural and continuous chain of events,
each having a close causal connection with its immediate
predecessor, the final event in the chain immediately
effecting the injury as a natural and probable result of the
cause which first acted, under such circumstances that
the person responsible for the first event should, as an
ordinary prudent and intelligent person, have reasonable
ground to expect at the moment of his act or default that
an injury to some person might probably result therefrom.
If Aquilino heeded the MMDA prohibition against crossing
Katipunan Avenue from Rajah Matanda, the accident
would not have happened. This specific untoward event is
exactly what the MMDA prohibition was intended for.
Thus, a prudent and intelligent person who resides within
the vicinity where the accident occurred, Aquilino had
reasonable ground to expect that the accident would be a
natural and probable result if he crossed Katipunan
Avenue since such crossing is considered dangerous on
account of the busy nature of the thoroughfare and the
ongoing construction of the Katipunan-Boni Avenue
underpass. It was manifest error for the Court of Appeals
to have overlooked the principle embodied in Article 2179
of the Civil Code, that when the plaintiffs own negligence
was the immediate and proximate cause of his injury, he
cannot recover damages. Lambert S. Ramos vs. C.O.L.
Realty Corporation,G.R. No. 184905, August 28, 2009

Tort; abuse of right. We find that bad faith cannot be

attributed to the acts of petitioner. Petitioners exercise of
its rights under the agreement to conduct an audit, to vary
the manner of processing purchase orders, and to refuse
the renewal of the agreement was supported by legitimate
reasons, principally, to protect its own business. The
exercise of its rights was not impelled by any evil motive
designed, whimsically and capriciously, to injure or
prejudice respondents. The rights exercised were all in
accord with the terms and conditions of the
distributorship agreement, which has the force of law
between them. Clearly, petitioner could not be said to
have committed an abuse of its rights. It may not be
amiss to state at this juncture that a complaint based on
Article 19 of the Civil Code must necessarily fail if it has
nothing to support it but innuendos and conjectures.
Given that petitioner has not abused its rights, it should
not be held liable for any of the damages sustained by
respondents. The law affords no remedy for damages
resulting from an act which does not amount to a legal
wrong. Situations like this have been appropriately
denominateddamnum absque injuria. Dart Philippines,
Inc. vs. Spouses Francisco and Erlinda Calogcog,G.R.
No. 149241, August 24, 2009.

Property Registration Decree and related laws

Free patent. A Free Patent may be issued where the

applicant is a natural-born citizen of the Philippines; is not
the owner of more than twelve (12) hectares of land; has
continuously occupied and cultivated, either by himself or
through his predecessors-in-interest, a tract or tracts of
agricultural public land subject to disposition, for at least
30 years prior to the effectivity of Republic Act No. 6940;
and has paid the real taxes thereon while the same has
not been occupied by any other person.

Once a patent is registered and the corresponding

certificate of title is issued, the land covered thereby
ceases to be part of public domain, becomes private
property, and the Torrens Title issued pursuant to the
patent becomes indefeasible upon the expiration of one
year from the date of such issuance. However, a title
emanating from a free patent which was secured through
fraud does not become indefeasible, precisely because
the patent from whence the title sprung is itself void and
of no effect whatsoever.

No actual and extrinsic fraud existed in this case; at least,

no convincing proof of such fraud was adduced. Other
than his bare allegations, petitioner failed to prove that
there was fraud in the application, processing and grant
of the Free Patent, as well as in the issuance of OCT No.
P-23505. Neither was it proven that respondent actually
took part in the alleged fraud. Eugenio Encinares vs.
Dominga Achero,G.R. No. 161419, August 25, 2009.

Torrens system; collateral attack on title. Registration of

land under the Torrens system, aside from perfecting the
title and rendering it indefeasible after the lapse of the
period allowed by law, also renders the title immune from
collateral attack. A collateral attack transpires when, in
another action to obtain a different relief and as an
incident of the present action, an attack is made against
the judgment granting the title. This manner of attack is to
be distinguished from a direct attack against a judgment
granting the title, through an action whose main objective
is to annul, set aside, or enjoin the enforcement of such
judgment if not yet implemented, or to seek recovery if
the property titled under the judgment had been disposed
of. To permit a collateral attack on respondents-plaintiffs
title is to water down the integrity and guaranteed legal
indefeasibility of a Torrens title.

The petitioners-defendants attack on the validity of

respondents-plaintiffs title, by claiming that fraud
attended its acquisition, is a collateral attack on the title. It
is an attack incidental to their quest to defend their
possession of the properties in an accion publiciana,
not in a direct action whose main objective is to impugn
the validity of the judgment granting the title. This is the
attack that possession of a Torrens Title specifically
guards against; hence, we cannot entertain, much less
accord credit to, the petitioners-defendants claim of
fraud to impugn the validity of the respondents-plaintiffs
title to their property. Francisco Madrid and Edgardo
Bernardo vs. Spouses Bonifacio Mapoy and Felicidad
Martinez,G.R. No. 150887, August 14, 2009.

Torrens system; registration of title. Section 14(1) of the

Property Registration Decree lays down the following
requisites for registration of title thereunder: (1) that the
property in question is alienable and disposable land of
the public domain; (2) that the applicants by themselves
or through their predecessors-in-interest have been in
open, continuous, exclusive and notorious possession
and occupation; and (3) that such possession is under a
bona fide claim of ownership since 12 June 1945 or
earlier. Javier was able to comply with all these
requirements.
To prove that the land subject of an 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.
Republic of the Philippines vs.Neptuna G. Javier,G.R.
No. 179905, August 19, 2009.

Torrens system; Torrens title. Indubitably, 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. The real purpose of the
Torrens System of land registration is to quiet title to land
and put stop forever to any question as to the legality of
the title.

It is true that both trial and appellate courts actually

maintained the indefeasibility of the certificate of title and
desisted from annulling or modifying the same. But by
declaring that the property is not located in Antipolo City,
the location stated in the certificate of title, they, in effect,
modified the same to the prejudice of the petitioner.
Worse, they did so based on incomplete information.
Notably, in Odsigue v. Court of Appeals, this Court,
indeed, held that a certificate of title is conclusive
evidence not only of ownership but also the location of
the property. Pioneer Insurance and Surety Corporation
vs. Heirs of Vicente Coronado, et al.,G.R. No. 180357,
August 4, 2009.

Torrens system; Torrens title. As a matter of law, a

Torrens Certificate of Title is evidence of indefeasible title
of property in favor of the person in whose name the title
appears. The title holder is entitled to all the attributes of
ownership of the property, including possession, subject
only to limits imposed by law. In the present case, the
respondents-plaintiffs are indisputably the holders of a
certificate of title against which the petitioners-
defendants claim of oral sale cannot prevail. As
registered titleholders, they are entitled to possession of
the properties.Francisco Madrid and Edgardo Bernardo
vs. Spouses Bonifacio Mapoy and Felicidad
Martinez,G.R. No. 150887, August 14, 2009.

July 2009 Philippine Supreme Court Decisions on

CivilLaw

Contracts; agency. It is true that a person dealing with an

agent is not authorized, under any circumstances, to trust
blindly the agents statements as to the extent of his
powers. Such person must not act negligently but must
use reasonable diligence and prudence to ascertain
whether the agent acts within the scope of his authority.
The settled rule is that persons dealing with an assumed
agent are bound at their peril; and if they would hold the
principal liable, they must 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 prove it. Soriamont Steamship Agencies, Inc., et
al. vs. Sprint Transport Services, Inc. etc., G.R. No.
174610, July 14, 2009.

Contracts; compromise agreement. Compromise

agreements are contracts, whereby the parties undertake
reciprocal obligations to resolve their differences, thus,
avoiding litigation, or put an end to one already
commenced. As a contract, when the terms of the
agreement are clear and explicit that they do not justify an
attempt to read into it any alleged intention of the parties;
the terms are to be understood literally, just as they
appear on the face of the contract. Considering that
Caruff never intended to transfer the subject property to
PMO, burdened by the generating set and sump pumps,
respondent should remove them from the subject
property. Privatization Management Office vs. Legaspi
Towers 300, Inc.,G.R. No. 147957, July 22, 2009.

Contracts; dacion en pago.Dacion en pago is the delivery

and transmission of ownership of a thing by the debtor to
the creditor as an accepted equivalent of the performance
of the obligation. Thus, it is a special mode of payment
where the debtor offers another thing to the creditor, who
accepts it as equivalent of payment of an outstanding
debt, which undertaking, in one sense, amounts to a sale.
As such, the essential elements are consent, object
certain, and cause or consideration. In its modern
concept, what actually takes place indacion en pago is
an objective novation of the obligation where the thing
offered as an accepted equivalent of the performance of
an obligation is considered as the object of the contract
of sale, while the debt is considered as the purchase
price. In any case, common consent is an essential
prerequisite, be it sale or novation, to have the effect of
totally extinguishing the debt or obligation. The requisite
consent is not present in this case.Gloria Ocampo, et al.
vs. Land Bank of the Philippines, et al., G.R. No. 164968,
July 3, 2009.

Contracts; delay. Under the law on contracts,mora

solvendi or debtors default is defined as a delay in the
fulfillment of an obligation, by reason of a cause
imputable to the debtor. There are three requisites
necessary for a finding of default. First, the obligation is
demandable and liquidated; second, the debtor delays
performance; and third, the creditor judicially or
extrajudicially requires the debtors performance.

In the present petition, PSE insists that Finvests liability

for fines, penalties and charges has been established,
determined and substantiated, hence, liquidated. A debt
is liquidated when the amount is known or is determinable
by inspection of the terms and conditions of relevant
documents. Under the attendant circumstances, it cannot
be said that Finvests debt is liquidated. At the time PSE
left the negotiating table, the exact amount of Finvests
fines, penalties and charges was still in dispute and as yet
undetermined. Consequently, Finvest cannot be deemed
to have incurred in delay in the payment of its obligations
to PSE. It cannot be made to pay an obligation the
amount of which was not fully explained to it. The public
sale of the pledged seat would, thus, be premature.
Armand O. Raquel-Santos, et al. vs. Court of Appeals, et
al./Philippine Stock Exchange, Inc. vs. Finvest Securities
Co., Inc./Finvest Securities, Co., Inc. vs. Trans-Phil Marine
Ent., Inc., et al., G.R. No. 174986/G.R. No. 175071/G.R.
No. 181415, July 7, 2009.

Contracts; earnest money. Considering that there was no

perfected contract of sale, the concept of earnest money
is certainly not applicable to this case. Article 1482 of the
Civil Code states that: Whenever earnest money is given
in a contract of sale, it shall be considered as part of the
price and as proof of the perfection of the contract. The
earnest money forms part of the consideration only if the
sale is consummated upon full payment of the purchase
price. Hence, there must first be a perfected contract of
sale before we can speak of earnest money. As found by
the trial court, the P15,500 paid by Lopez is merely a
deposit for the exclusion of the subject property from the
list of the properties to be auctioned off by GSIS.
Government Service Insurance System vs. Abraham
Lopez,G.R. No. 165568, July 13, 2009.

Contracts; fraud. Fraud under Article 1338 of the Civil

Code refers to all kinds of deception whether through
insidious machination, manipulation, concealment or
misrepresentation that would lead an ordinarily prudent
person into error after taking the circumstances into
account. The deceit employed must be serious. It must be
sufficient to impress or lead an ordinarily prudent person
into error, taking into account the circumstances of each
case. Gloria Ocampo, et al. vs. Land Bank of the
Philippines, et al.,G.R. No. 164968, July 3, 2009.

Contracts; perfection. The stages of a contract of sale

are: (1) negotiation, starting from the time the prospective
contracting parties indicate interest in the contract to the
time the contract is perfected; (2) perfection, which takes
place upon the concurrence of the essential elements of
the sale; and (3) consummation, which commences when
the parties perform their respective undertakings under
the contract of sale, culminating in the extinguishment of
the contract.

In the present case, the parties never got past the

negotiation stage. Nothing shows that the parties had
agreed on any final arrangement containing the essential
elements of a contract of sale, namely, (1) consent or the
meeting of the minds of the parties; (2) object or subject
matter of the contract ; and (3) price or consideration of
the sale.

The 2 August 1988 letter of the GSIS cannot be classified

as a perfected contract of sale which binds the parties.
The letter was in reply to Lopezs offer to repurchase the
property. Both the trial and appellate courts found that
Lopezs offer to repurchase the property was subject to
the approval of the Board of Trustees of the GSIS, as
explicitly stated in the 2 August 1988 GSIS letter. No
such approval appears in the records. When there is
merely an offer by one party without acceptance by the
other, there is no contract of sale. Since there was no
acceptance by GSIS, which can validly act only through
its Board of Trustees, of Lopezs offer to repurchase the
property, there was no perfected contract of
sale.Government Service Insurance System vs. Abraham
Lopez,G.R. No. 165568, July 13, 2009.

Contracts; prescription. Cecillevilles cause of action

against the Acua spouses is one created by law; hence,
the action prescribes in ten years. Prescription accrues
from the date of payment by Cecilleville to Prudential of
the Acua spouses debt on 5 April 1994. Cecillevilles
present complaint against the Acua spouses was filed
on 20 June 1996, which was almost two months from the
extrajudicial demands to pay on 9 and 23 April 1996.
Whether we use the date of payment, the date of the last
written demand for payment, or the date of judicial
demand, it is clear that Cecillevilles cause of action has
not yet prescribed. Cecilleville Realty and Service
Corporation vs. Spouses Tito Acua, et al.,G.R. No.
162074, July 13, 2009.

Contracts; rescission. The right of a party to rescission

under Article 1191 of the Civil Code is predicated on a
breach of faith by the other party who violates the
reciprocity between them. In a contract of sale, the seller
obligates itself to transfer the ownership of and deliver a
determinate thing, and the buyer to pay therefor a price
certain in money or its equivalent. In some contracts of
sale, such as the sale of real property, prior physical
delivery of the thing sold or its representation is not legally
required, as the execution of the Deed of Sale effectively
transfers ownership of the property to the buyer through
constructive delivery. Hence, delivery of the certificate of
title covering the real property is not necessary to transfer
ownership. Armand O. Raquel-Santos, et al. vs. Court of
Appeals, et al./Philippine Stock Exchange, Inc. vs. Finvest
Securities Co., Inc./Finvest Securities, Co., Inc. vs. Trans-
Phil Marine Ent., Inc., et al., G.R. No. 174986/G.R. No.
175071/G.R. No. 181415, July 7, 2009.

Contracts; subrogation. When an interested party pays

the obligation, he is subrogated in the rights of the
creditor. Because of its payment of the Acua spouses
loan, Cecilleville actually steps into the shoes of
Prudential and becomes entitled, not only to recover what
it has paid, but also to exercise all the rights which
Prudential could have exercised. There is, in such cases,
not a real extinguishment of the obligation, but a change
in the active subject. Cecilleville Realty and Service
Corporation vs. Spouses Tito Acua, et al.,G.R. No.
162074, July 13, 2009.

Marriage; annulment. Psychological incapacity must be

characterized by (1) gravity (2) juridical antecedence, and
(3) incurability. The foregoing guidelines do not require
that a physician examine the person to be declared
psychologically incapacitated. In fact, the root cause may
be medically or clinically identified. What is important is
the presence of evidence that can adequately establish
the partys psychological condition. For indeed, if the
totality of evidence presented is enough to sustain a
finding of psychological incapacity, then actual medical
examination of the person concerned need not be
resorted to.

In this case, the Supreme Court agreed with the Court of

Appeals that the totality of the evidence submitted by
petitioner failed to satisfactorily prove that respondent
was psychologically incapacitated to comply with the
essential obligations of marriage. The root cause of
respondents alleged psychological incapacity was not
sufficiently proven by experts or shown to be medically or
clinically permanent or incurable. Digna A. Najera vs.
Eduardo J. Najera, G.R. No. 164817, July 3, 2009.
Marriage; conjugal property. Marital consent is required
for the sale by a husband of property he purchased under
a conditional contract to sell executed while he was still
single but title of which was transferred when he was
already married.Sps. Lita De Leon, et al. vs. Anita B. De
Leon, et al.,G.R. No. 185063, July 23, 2009.

Mortgage; equity of redemption. The term equity of

redemption has a settled meaning. It refers to the right of
the mortgagor in case of judicial foreclosure to redeem
the mortgaged property after his default in the
performance of the conditions of the mortgage but before
the confirmation of the sale of the mortgaged property.

In the present case, the 1,650-square meter portion of the

subject property was foreclosed extrajudicially through
the Office of the Provincial Sheriff as reflected by the
Certificate of Sale. In extrajudicial foreclosure, what is
extant is the right of redemption, or the right of the
mortgagor to redeem the property within one year from
and after the date of sale. The remaining 5,625-square
meter portion was sold to the bank through levy on
execution. A similar right of redemption exists with
respect to such purchase, pursuant to Rule 39, Section
30 of the then applicable Rules of Civil Procedure. There
is no equity of redemption in either case because neither
one of these acquisitions by the San Fernando Rural Bank
was done through judicial foreclosure.
Thus, at the time the parties predecessors-in-interest
died, the bank was already the absolute owner of the
properties. There is no basis for the petitioners to claim a
co-ownership between them and the respondents
because no right as to the subject property could have
been transmitted to them by the death of their
predecessors-in-interest, the Spouses Ignacio Dela Pea
and Engracia Rivera.Victoriano Dela Pea, et al. vs.
Spouses Vicente Alonzo, et al., G.R. No. 172640, July 3,
2009.

Property cancellation of land patent. Abandonment or

neglect, as a ground for the cancellation of an
emancipation patent or certificate of land award,
according toCastellano v. Spouses Francisco, requires a
clear and absolute intention to renounce a right or a
claim, or to abandon a right or property coupled with an
external act by which that intention is expressed or
carried into effect. Intention to abandon, as held
inCorpuz v. Grospe, implies a departure, with the avowed
intent of never returning, resuming or claiming the right
and the interest that have been abandoned. It consists in
any one of these conditions: (1) failure to cultivate the lot
due to reasons other than the non-suitability of the land to
agricultural purposes, for at least two (2) calendar years,
and to pay the amortizations for the same period; (2)
permanent transfer of residence by the beneficiary and his
family, which has rendered him incapable of cultivating
the lot; or (3) relinquishment of possession of the lot for at
least two (2) calendar years and failure to pay the
amortization for the same period. None of the instances
cited above obtains in this case. Petronila Maylem vs.
Carmelita Ellano and Antonia Morciento,G.R. No.
162721, July 13, 2009.

Property; easement. An easement or servitude is a real

right constituted on anothers property, corporeal and
immovable, by virtue of which the owner of the same has
to abstain from doing or to allow somebody else to do
something on his property for the benefit of another thing
or person. There are two sources of easements: by law or
by the will of the owners. In the present case, neither type
of easement was constituted over the subject property.

In its allegations, respondent claims that Caruff

constituted a voluntary easement when it constructed the
generating set and sump pumps over the disputed
portion of the subject property for its benefit. However, it
should be noted that when the appurtenances were
constructed on the subject property, the lands where the
condominium was being erected and the subject property
where the generating set and sump pumps were
constructed belonged to Caruff. Therefore, Article 613 of
the Civil Code does not apply, since no true easement
was constituted or existed, because both properties were
owned by Caruff.
Also, Article 624 of the Civil Code is controlling, as it
contemplates a situation where there exists an apparent
sign of easement between two estates established or
maintained by the owner of both. It can be inferred that
when the owner of two properties alienates one of them
and an apparent sign of easement exists between the two
estates, entitlement to it continues, unless there is a
contrary agreement, or the indication that the easement
exists is removed before the execution of the deed.
Privatization Management Office vs. Legaspi Towers 300,
Inc.,G.R. No. 147957, July 22, 2009.

Property; easement. An easement is a real right on

anothers 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
property, for the benefit of another person or tenement.
Easements are established either by law or by the will of
the owner. The former are called legal, and the latter,
voluntary easements.

In this case, petitioner itself admitted that a voluntary

easement of right of way exists in favor of respondents.
Having made such an admission, petitioner cannot now
claim that what exists is a legal easement and that the
same should be cancelled since the dominant estate is
not an enclosed estate as it has an adequate access to a
public road which is Callejon Matienza Street. The
opening of an adequate outlet to a highway can
extinguish only legal or compulsory easements, not
voluntary easements like in the case at bar. The fact that
an easement by grant may have also qualified as an
easement of necessity does not detract from its
permanency as a property right, which survives the
termination of the necessity. A voluntary easement of right
of way, like any other contract, could be extinguished only
by mutual agreement or by renunciation of the owner of
the dominant estate.

Neither can petitioner claim that the easement is personal

only to Hidalgo since the annotation merely mentioned
Sandico and Hidalgo without equally binding their heirs or
assigns. That the heirs or assigns of the parties were not
mentioned in the annotation does not mean that it is not
binding on them. Again, a voluntary easement of right of
way is like any other contract. As such, it is generally
effective between the parties, their heirs and assigns,
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. Petitioner cites City
of Manila v. Entote in justifying that the easement should
bind only the parties mentioned therein and exclude those
not so mentioned. However, that case is inapplicable
since the issue therein was whether the easement was
intended not only for the benefit of the owners of the
dominant estate but of the community and the public at
large. In interpreting the easement, the Court ruled that
the clause any and all other persons whomsoever in the
easement embraces only those who are privy to the
owners of the dominant estate, Lots 1 and 2 Plan
Pcs-2672 and excludes the indiscriminate public from
the enjoyment of the right-of-way easement.

Although the easement does not appear in respondents

title over the dominant estate, the same subsists. It is
settled that the registration of the dominant estate under
the Torrens system without the annotation of the voluntary
easement in its favor does not extinguish the easement.
On the contrary, it is the registration of the servient estate
as free, that is, without the annotation of the voluntary
easement, which extinguishes the easement.

Finally, the mere fact that respondents subdivided the

property does not extinguish the easement. Article 618 of
the Civil Code provides that if the dominant estate is
divided between two or more persons, each of them may
use the easement in its entirety, without changing the
place of its use, or making it more burdensome in any
other way.Unisource Commercial and Development
Corporation vs. Joseph Chung, et al.,G.R. No. 173252,
July 17, 2009.

Property; emancipation patent. As holder of an

emancipation patent, Abad is bound by the proscription
against transfers of land awards to third persons, which is
prohibited by law.
Hence, even if Abad for a consideration had waived his
rights to the property when he surrendered possession
thereof to petitioner, such waiver is nevertheless
ineffective and void, because it amounts to a prohibited
transfer of the land award. As the Court held in Lapanday
Agricultural & Development Corp. v. Estita, the waiver of
rights and interests over landholdings awarded by the
government is invalid for being violative of agrarian reform
laws. And in Torres v. Ventura, the Court declared that the
object of agrarian reform is to vest in the farmer-
beneficiary, to the exclusion of others, the rights to
possess, cultivate and enjoy the landholding for himself;
hence, to insure his continued possession and enjoyment
thereof, he is prohibited by law to make any form of
transfer except only to the government or by hereditary
succession. Petronila Maylem vs. Carmelita Ellano and
Antonia Morciento,G.R. No. 162721, July 13, 2009.

Property; Torrens sytem. A Homestead Patent, once

registered under the Land Registration Act, becomes as
indefeasible as a Torrens Title.

The Torrens system is not a mode of acquiring titles to

lands; it is merely a system of registration of titles to
lands. However, justice and equity demand that the
titleholder should not be made to bear the unfavorable
effect of the mistake or negligence of the States agents,
in the absence of proof of his complicity in a fraud or of
manifest damage to third persons. The real purpose of the
Torrens system is to quiet title to land and put a stop
forever to any question as to the legality of the title,
except claims that were noted in the certificate at the time
of the registration or that may arise subsequent thereto.
Otherwise, the integrity of the Torrens system shall forever
be sullied by the ineptitude and inefficiency of land
registration officials, who are ordinarily presumed to have
regularly performed their duties.

The general rule that the direct result of a previous void

contract cannot be valid will not apply in this case as it
will directly contravene the Torrens system of registration.
Where innocent third persons, relying on the correctness
of the certificate of title thus issued, acquire rights over
the property, this Court cannot disregard such rights and
order the cancellation of the certificate. The effect of such
outright cancellation will be to impair public confidence in
the certificate of title. The sanctity of the Torrens system
must be preserved; otherwise, everyone dealing with the
property registered under the system will have to inquire
in every instance as to whether the title had been regularly
or irregularly issued, contrary to the evident purpose of
the law. Every person dealing with the 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 behind the certificate to determine the condition of the
property.
Respondents transfer certificate of title, having been
derived from the Homestead Patent which was registered
under the Torrens system on May 27, 1966, was thus
vested with the habiliments of indefeasibility. Rabaja
Ranch and Development Corporation vs. AFP Retirement
and Separation Benefits System,G.R. No. 177181, July 7,
2009.

Unjust enrichment. 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. Article 22 of the Civil Code provides
that [e]very person who, through an act or 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.
The principle of unjust enrichment under Article 22 of the
Civil Code requires two conditions: (1) that a person is
benefited without a valid basis or justification, and (2) that
such benefit is derived at anothers expense or damage.
Privatization Management Office vs. Legaspi Towers 300,
Inc.,G.R. No. 147957, July 22, 2009.

June 2009 Philippine Supreme Court Decisions on

CivilLaw

Contract; novation. Article 1292 of the Civil Code provides

that [i]n order that an obligation may be extinguished by
another which substitutes the same, it is imperative that it
be so declared in unequivocal terms, or that the old and
the new obligations be on every point incompatible with
each other. Novation is never presumed. Parties to a
contract must expressly agree that they are abrogating
their old contract in favor of a new one. In the absence of
an express agreement, novation takes place only when
the old and the new obligations are incompatible on every
point. The test of incompatibility is whether or not the two
obligations can stand together, each one having its
independent existence. If they cannot, they are
incompatible and the latter obligation novates the first.

In the instant case, none of the requisites are present.

There is only one existing and binding contract between
the parties, because Kalayaan never agreed to the
creation of a new contract between them or Juliet. True,
petitioners may have offered that they be substituted by
Juliet as the new debtor to pay for the remaining
obligation. Nonetheless, Kalayaan did not acquiesce to
the proposal. Spouses Jose T. Valenzuela & Gloria
Valenzuela vs. Kalayaan Development and Industrial
Corporation,G.R. No. 163244, June 22, 2009.

Contract; perfection. Under the law, a contract is

perfected by mere consent, that is, from the moment that
there is a meeting of the offer and the acceptance upon
the thing and the cause that constitute the contract. The
law requires that the offer must be certain and the
acceptance absolute and unqualified. An acceptance of
an offer may be express and implied; a qualified offer
constitutes a counter-offer. Case law holds that an offer,
to be considered certain, must be definite, while an
acceptance is considered absolute and unqualified when
it is identical in all respects with that of the offer so as to
produce consent or a meeting of the minds. We have also
previously held that the ascertainment of whether there is
a meeting of minds on the offer and acceptance depends
on the circumstances surrounding the case.Traders
Royal Bank vs. Cuison Lumber Co., Inc., Josefa Jerodias
Vda. Cuison,G.R. No. 174286, June 5, 2009.

Contract; simulated contracts. Given the factual

antecedents of this case, it is obvious that the sugar crop
loans were relatively simulated contracts and that both
parties intended to be bound thereby. There are two
juridical acts involved in relative simulation the
ostensible act and the hidden act. The ostensible act is
the contract that the parties pretend to have executed
while the hidden act is the true agreement between the
parties. To determine the enforceability of the actual
agreement between the parties, we must discern whether
the concealed or hidden act is lawful and the essential
requisites of a valid contract are present.

In this case, the juridical act which binds the parties are
the loan and mortgage contracts, i.e., petitioners
procurement of a loan from respondent. Although these
loan and mortgage contracts were concealed and made
to appear as sugar crop loans to make them fall within the
purview of the Rural Banks Act, all the essential requisites
of a contract were present. However, the purpose thereof
is illicit, intended to circumvent the Rural Banks Act
requirement in the procurement of loans. Consequently,
while the parties intended to be bound thereby, the
agreement is void and inexistent under Article 1409 of the
Civil Code.

The parties, being in pari delicto, cannot recover what

they each has given by virtue of the contract. Neither can
the parties demand performance of the contract. No
remedy or affirmative relief can be afforded the parties
because of their presumptive knowledge that the
transaction was tainted with illegality. The courts will not
aid either party to an illegal agreement and will instead
leave the parties where they find them.

Consequently, the parties having no cause of action

against the other based on a void contract, and
possession and ownership of the subject property being
ultimately vested in respondent, the latter can enter into a
separate and distinct contract for its alienation.
Petitioners recognized respondents ownership of the
subject property by entering into a Promise to Sell, which
expressly designates respondent as the vendor and
petitioners as the vendees. At this point, petitioners,
originally co-owners and mortgagors of the subject
property, unequivocally acquiesced to their new status as
buyers thereof. In fact, the Promise to Sell makes no
reference whatsoever to petitioners previous ownership
of the subject property and to the void loan and mortgage
contracts. On the whole, the Promise to Sell, an
independent contract, did not purport to ratify the void
loan and mortgage contracts. Joaquin Villegas, et al. vs.
Rural Bank of Tanay, Inc., G.R. No. 161407, June 5, 2009.

Damages; liquidated damages. The three percent (3%)

penalty interest appearing in the contract is patently
iniquitous and unconscionable. Article 2227 of the Civil
Code provides that [l]iquidated damages, whether
intended as an indemnity or a penalty, shall be equitably
reduced if they are iniquitous or unconscionable. A
perusal of the Contract to Sell reveals that the three
percent (3%) penalty interest on unpaid monthly
installments (per condition No. 3) would translate to a
yearly penalty interest of thirty-six percent (36%).

Although this Court on various occasions has eliminated

altogether the three percent (3%) penalty interest for
being unconscionable, We are not inclined to do the same
in the present case. A reduction is more consistent with
fairness and equity. We should not lose sight of the fact
that Kalayaan remains an unpaid seller and that it has
suffered, one way or another, from petitioners non-
performance of its contractual obligations. In view of such
glaring reality, We invoke the authority granted to us by
Article 1229 of the Civil Code, and as equity dictates, the
penalty interest is accordingly reimposed at a reduced
rate of one percent (1%) interest per month, or twelve
percent (12%) per annum, to be deducted from the partial
payments made by the petitioners.Spouses Jose T.
Valenzuela & Gloria Valenzuela vs. Kalayaan Development
and Industrial Corporation, G.R. No. 163244, June 22,
2009.

Damages; moral. Moral damages are awarded if the

following elements exist in the case: (1) an injury clearly
sustained by the claimant; (2) a culpable act or omission
factually established; (3) a wrongful act or omission by the
defendant as the proximate cause of the injury sustained
by the claimant; and (4) the award of damages predicated
on any of the cases stated Article 2219 of the Civil Code.
In addition, the person claiming moral damages must
prove the existence of bad faith by clear and convincing
evidence for the law always presumes good faith. It is not
enough that one merely suffered sleepless nights, mental
anguish, and serious anxiety as the result of the
actuations of the other party. Invariably such action must
be shown to have been willfully done in bad faith or with ill
motive. Bad faith, under the law, 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 a known duty through some motive
or interest or ill will that partakes of the nature of fraud.
Petitioners enucleate that Mayor Perdices act of
announcing during the flag ceremony at the City Hall on 2
July 2001 that he will not honor the mass appointments
made by his predecessor, former Mayor Remollo, even
before CSC-FO Director Abucejo invalidated and revoked
petitioners appointments in a letter dated 1 August 2001,
evidenced bad faith, especially since Mayor Perdices
himself made 36 appointments at the end of his term in
1998. Mayor Perdices subsequent appointments to fill
four of the contested positions sometime in 2001 to 2006
likewise amounted to bad faith. As a result of these acts,
petitioners purportedly endured economic difficulties and
humiliation among their peers. These arguments are
untenable.

The announcement made by Mayor Perdices on 2 July

2001 cannot be deemed the proximate cause for
petitioners financial and emotional suffering. The validity
of petitioners appointments did not depend on Mayor
Perdices honoring or rejecting said appointments but on
the CSC approving or disapproving of the same. CSC-FO
Director Abucejo did release a letter dated 1 August 2001
invalidating and revoking petitioners appointments on the
ground that they were mass appointments in violation of
CSC Resolution No. 010988 dated 4 June 2001. Said
letter was subsequently affirmed by the CSC-RO and the
CSC Proper. Therefore, the invalidation and revocation of
petitioners appointments, as well as the non-payment of
their salaries, salary adjustments, and emoluments, did
not result from Mayor Perdices announcement, but from
the official acts of the CSC on petitioners
appointments.Leah M. Nazareno, et al. vs. City of
Dumaguete, represented by City Mayor Agustin Percides,
et al.,G.R. No. 177795, June 19, 2009.

Damages; moral. Petitioner is entitled to moral damages

but not in the amount of P500,000 awarded by the RTC,
which the Court finds to be excessive. While trial courts
are given discretion to determine` the amount of moral
damages, it should not be palpably and scandalously
excessive. Moral damages are not meant to enrich a
person at the expense of the other but are awarded only
to allow the former to obtain means, diversion or
amusements that will serve to alleviate the moral suffering
he has undergone due to the other persons culpable
action. It must always reasonably approximate the extent
of injury and be proportional to the wrong committed. The
award of P100,000 as moral damages is sufficient and
reasonable under the circumstances.

The award of P100,000 as exemplary damages is likewise

excessive. 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. We think P50,000 is
reasonable in this case.Serafin Cheng Vs. Spouses
Vittorio and Ma. Helen Donini,G.R. No. 167017, June 22,
2009.
Land registration; free patent. As clearly provided by Sec.
44 of the Public Land Act, the requirements for the
issuance of a free patent include, among others, that: (1)
the applicant has continuously occupied and cultivated,
either by himself or through his predecessors-in-interest,
the tract or tracts of agricultural public lands; (2) he shall
have paid the real estate tax thereon; and (3) the land has
not been occupied by any person. Lynn Maagad and
Director of Lands vs. Juanito Maagad,G.R. No. 171762,
June 5, 2009.

Land registration; free patent. Petitioner Lynn Maagad

committed fraud and gross misrepresentation in his free
patent application. Actual or positive fraud proceeds from
an intentional deception practiced by means of
misrepresentation of material facts, which in this case
was the conscious misrepresentation by petitioner that he
was a fully qualified applicant possessing all the
requirements provided by law. Moreover, failure and
intentional omission of the petitioner-applicant to disclose
the fact of actual physical possession by the respondent
constitutes an allegation of actual fraud. It is likewise
fraud to knowingly omit or conceal a fact, upon which
benefit is obtained to the prejudice of a third
person.Lynn Maagad and Director of Lands vs. Juanito
Maagad,G.R. No. 171762, June 5, 2009.

Land registration; registration of title. There are three

requisites for the filing of an application for registration of
title under Section 14(1) of PD 1529: (1) that the property
in question is alienable and disposable land of the public
domain; (2) that the applicant by himself or through his
predecessors-in-interest have been in open, continuous,
exclusive and notorious possession and occupation; and
(3) that such possession is under a bona fide claim of
ownership since 12 June 1945 or earlier. The right to file
the application for registration derives from a bona fide
claim of ownership going back to 12 June 1945 or earlier,
by reason of the claimants open, continuous, exclusive
and notorious possession of alienable and disposable
land of the public domain.

In this case, respondent failed to comply with the period

of possession and occupation of the subject property, as
required by both PD 1529 and CA 141. We agree with the
Republic that respondents evidence was not enough to
prove that her possession of the subject property started
since 12 June 1945 or earlier because respondents
earliest evidence can be traced back to a tax declaration
issued in the name of her predecessors-in-interest only in
the year 1948. In view of the lack of sufficient showing
that respondent and her predecessors-in-interest
possessed the subject property under a bona fide claim
of ownership since 12 June 1945 or earlier, respondents
application for confirmation and registration of the subject
property under PD 1529 and CA 141 should be
denied.Republic of the Philippines Vs. Ruby Lee Tsai,
G.R. No. 168184, June 22, 2009.
Land registration; registration of title. In the case at bar,
the appellate court gave credence to the certified true
copy of OCT No. 380 as proof of ownership of
respondents predecessor. Yet, it is readily apparent from
a cursory reading of said copy that OCT No. 380 was
supposedly signed, not by the Secretary of Agriculture
and Natural Resources, as mandated by law, but by the
Secretary of Agriculture and Commerce. Hence, it is plain
to see that to give OCT No. 380 probative value in court
would be to allow variance or an evasion or circumvention
of the requirement laid down in Section 105 of Act No.
2874. We are thus warned that any title sourced from the
flawed OCT No. 380 could be void. On this basis, we are
justified to consider with great care any claims derived
therefrom.Conrado O. Lasquite and Teodora I. Andrade
vs. Victory Hills, Inc.,G.R. No. 175375, June 23, 2009.

Land registration; Torrens system. Under the established

principles of land registration, a person dealing with
registered land may generally rely on the correctness of a
certificate of title and the law will in no way oblige him to
go beyond it to determine the legal status of the property,
except when the party concerned has actual knowledge
of facts and circumstances that would impel a reasonably
cautious man to make such inquiry. Applying this
standard to the facts of this case, we rule that
respondents exercised the required diligence in
ascertaining the legal condition of the title to the subject
property as to be considered innocent purchasers for
value and in good faith. Mactan-Cebu International
Airport Authority vs. Sps. Edito and Merian Tirol and Sps.
Alejandro and Mirando Ngo,G.R. No. 171535, June 5,
2009.

Land registration; Torrens system. Well-settled is the rule

that registration of instruments must be done in the
proper registry in order to effect and bind the land. Prior
to the Property Registration Decree of 1978, Act No. 496
(or the Land Registration Act) governed the recording of
transactions involving registered land, i.e., land with a
Torrens title. On the other hand, Act No. 3344, as
amended, provided for the system of recording of
transactions over unregistered real estate without
prejudice to a third party with a better right. Accordingly, if
a parcel of land covered by a Torrens title is sold, but the
sale is registered under Act No. 3344 and not under the
Land Registration Act, the sale is not considered
registered and the registration of the deed does not
operate as constructive notice to the whole world.

Consequently, the fact that petitioner MCIAA was able to

register its Deed of Absolute Sale under Act No. 3344 is
of no moment, as the property subject of the sale is
indisputably registered land. Section 50 of Act No. 496 in
fact categorically states that it is the act of registration
that shall operate to convey and affect the land; absent
any such registration, the instrument executed by the
parties remains only as a contract between them and as
evidence of authority to the clerk or register of deeds to
make registration. Mactan-Cebu International Airport
Authority vs. Sps. Edito and Merian Tirol and Sps.
Alejandro and Mirando Ngo,G.R. No. 171535, June 5,
2009.

Lease; improvements. Under Article 1678 of the Civil

Code, the lessor has the primary right (or the first move)
to reimburse the lessee for 50% of the value of the
improvements at the end of the lease. If the lessor refuses
to make the reimbursement, the subsidiary right of the
lessee to remove the improvements, even though the
principal thing suffers damage, arises. Consequently, on
petitioner rests the primary option to pay for one-half of
the value of the useful improvements. It is only when
petitioner as lessor refuses to make the reimbursement
that respondents, as lessees, may remove the
improvements. Should petitioner refuse to exercise the
option of paying for one-half of the value of the
improvements, he cannot be compelled to do so. It then
lies on respondents to insist on their subsidiary right to
remove the improvements even though the principal thing
suffers damage but without causing any more impairment
on the property leased than is necessary.

As regards the ornamental expenses, respondents are not

entitled to reimbursement. Article 1678 gives respondents
the right to remove the ornaments without damage to the
principal thing. But if petitioner appropriates and retains
said ornaments, he shall pay for their value upon the
termination of the lease. Serafin Cheng vs. Spouses
Vittorio and Ma. Helen Donini, G.R. No. 167017, June 22,
2009.

Marriage; psychological incapacity. It has been sufficiently

established that petitioner had a psychological condition
that was grave and incurable and had a deeply rooted
cause. This Court, in the same Te case, recognized that
individuals with diagnosable personality disorders usually
have long-term concerns, and thus therapy may be long-
term.Particularly, personality disorders are long-standing,
inflexible ways of behaving that are not so much severe
mental disorders as dysfunctional styles of living. These
disorders affect all areas of functioning and, beginning in
childhood or adolescence, create problems for those who
display them and for others.

From the foregoing, it has been shown that petitioner is

indeed suffering from psychological incapacity that
effectively renders him unable to perform the essential
obligations of marriage. Accordingly, the marriage
between petitioner and respondent is declared null and
void.Lester Benjamin S. Halili Vs. Chona M. Santos-Halili
and the Republic of the Philippines,G.R. No. 165424,
June 9, 2009.

Marriage; psychological incapacity. The psychologists

testimony and conclusions leads us to conclude that they
are not sufficiently in-depth and comprehensive to
warrant the conclusion that a psychological incapacity
existed that prevented the respondent from complying
with the essential marital obligations of marriage.Renato
Reyes So vs. Lorna Valera,G.R. No. 150677, June 5,
2009,

Mortgage; foreclosure. Personal notice to the mortgagor

in extrajudicial foreclosure proceedings is not necessary,
unless stipulated.Global Holiday Ownership Corporation
vs. Metropolitan Bank & Trust Company,G.R. No. 184081,
June 19, 2009.

Mortgage; redemption. From these premises, we ruled

that [P]etitioner-heirs have not lost their right to redeem,
for in the absence of a written notification of the sale by
the vendors, the 30-day period has not even begun to
run. These premises and conclusion leave no doubt
about the thrust of Mariano: The right of the petitioner-
heirs to exercise their right of legal redemption exists, and
the running of the period for its exercise has not even
been triggered because they have not been notified in
writing of the fact of sale.

We hold that the computation of the 30-day period to

exercise the legal right of redemption did not start to run
from the finality of the Mariano Decision, and that the
petitioner-heirs seasonably filed, via a writ of execution,
their notice of redemption, although they applied for the
issuance of the writ some eight (8) months after the
finality of the Decision. In seeking the execution of a final
and executory decision of this Court, what controls is
Section 11, Rule 51, in relation to Section 2, Rule 56, of
the Rules of Court. Before the trial court executing the
decision, Section 6, Rule 39, on the question of timeliness
of the execution, governs. Eight (8) months after the
finality of the judgment to be executed is still a
seasonable time for execution by motion pursuant to this
provision. The writ, notice of redemption, and the tender
of payment were all duly served, so that it was legally in
order for the Sheriff to issue a Certificate of Redemption
when the respondent-buyers failed to comply with the writ
and to accept the notice and the tender of
payment.Grace Gosiengfiao Guillen, etc. Vs. The Court
of Appeals, et al.,G.R. No. 159755, June 18, 2009.

Sale; double sales. The requisites that must concur for

Article 1544 to apply, viz.:

(a) The two (or more) sales transactions must

constitute valid sales;

(b) The two (or more) sales transactions must pertain to

exactly the same subject matter;

(c) The two (or more) buyers at odds over the rightful
ownership of the subject matter must each represent
conflicting interests; and
(d) The two (or more) buyers at odds over the rightful
ownership of the subject matter must each have bought
from the very same seller.

Obviously, said provision has no application in cases

where the sales involved were initiated not by just one
vendor but by several successive vendors. In the instant
case, respondents and petitioner had acquired the
subject property from different transferors. Petitioner,
through its predecessor-in-interest (CAA), acquired the
entire Lot No. 4763 from its original owners, spouses
Julian Cuison and Marcosa Cosef, on March 23, 1958. On
the other hand, respondents acquired the subject parcel
of land, a portion of Lot No. 4763, from Mrs. Elma
Jenkins, another transferee, some thirty-five years later.
The immediate transferors of Elma Jenkins were the
spouses Moises Cuizon and Beatriz Patalinghug who, in
turn, obtained the subject property from spouses Julian
Cuison and Marcosa Cosef. Therefore, the instant
controversy cannot be governed by Article 1544 since
petitioner and respondents do not have the same
immediate seller. Mactan-Cebu International Airport
Authority vs. Sps. Edito and Merian Tirol and Sps.
Alejandro and Mirando Ngo,G.R. No. 171535, June 5,
2009

Sale; legal redemption. Interpreting Article 1623, we have

enumerated the requisites for the exercise of legal
redemption, as follows: (1) there must be co-ownership;
(2) one of the co-owners sold his right to a stranger; (3)
the sale was made before the partition of the co-owned
property; (4) the right of redemption must be exercised by
one or more co-owners within a period of thirty days to be
counted from the time he or they were notified in writing
by the co-owner vendor; and (5) the vendee must be
reimbursed the price of the sale. With respect to the
written notice, the exception is when a co-owner has
actual notice of the sale.Francisco G. Calma Vs. Arsenio
Santos, et al.,G.R. No. 161027, June 22, 2009.

Sale; rescission. Under a contract to sell, the seller retains

title to the thing to be sold until the purchaser fully pays
the agreed purchase price. The full payment is a positive
suspensive condition, the non-fulfillment of which is not a
breach of contract, but merely an event that prevents the
seller from conveying title to the purchaser. The non-
payment of the purchase price renders the contract to sell
ineffective and without force and effect. Unlike a contract
of sale, where the title to the property passes to the
vendee upon the delivery of the thing sold, in a contract
to sell, ownership is, by agreement, reserved to the
vendor and is not to pass to the vendee until full payment
of the purchase price. Otherwise stated, in a contract of
sale, the vendor loses ownership over the property and
cannot recover it until and unless the contract is resolved
or rescinded; whereas, in a contract to sell, title is retained
by the vendor until full payment of the purchase price. In
the latter contract, payment of the price is a positive
suspensive condition, failure of which is not a breach but
an event that prevents the obligation of the vendor to
convey title from becoming effective.

Since the obligation of respondent did not arise because

of the failure of petitioners to fully pay the purchase price,
Article 1191 of the Civil Code would have no application.
Spouses Jose T. Valenzuela & Gloria Valenzuela Vs.
Kalayaan Development and Industrial Corporation, G.R.
No. 163244, June 22, 2009.

Surety; change in principal contract. Indeed, a surety is

released from its obligation when there is a material
alteration of the principal contract in connection with
which the bond is given, such as a change which imposes
a new obligation on the promising party, or which takes
away some obligation already imposed, or one which
changes the legal effect of the original contract and not
merely its form. However, a surety is not released by a
change in the contract, which does not have the effect of
making its obligation more onerous.

In the instant case, the revision of the subcontract

agreement did not in any way make the obligations of
both the principal and the surety more onerous. To be
sure, petitioner never assumed added obligations, nor
were there any additional obligations imposed, due to the
modification of the terms of the contract. Failure to
receive any notice of such change did not, therefore,
exonerate petitioner from its liabilities as
surety.Stronghold Insurance, Company, Inc. Vs. Tokyu
Construction Company, Ltd.,G.R. No. 158820-21, June
5, 2009.

Trust. The trust created by the decedent in her will must

be dissolved after 20 years.Hilarion, Jr. and Enrico
Orendain, represented by Fe Orendain Vs. Trusteeship of
the Estate of Doa Margarita Rodriquez,G.R. No. 168660,
June 30, 2009.

May 2009 Philippine Supreme Court Decisions on

CivilLaw

Contracts; forcemajeure. The matter of fortuitous events

is governed by Art. 1174 of the Civil Code which provides
that except in cases expressly specified by the law, or
when it is otherwise declared by stipulation, or when the
nature of the obligation requires assumption of risk, no
person shall be responsible for those events which could
not be foreseen, or which though foreseen, were
inevitable. The elements of a fortuitous event are: (a) the
cause of the unforeseen and unexpected occurrence,
must have been independent of human will; (b) the event
that constituted thecasofortuitomust have been
impossible to foresee or, if foreseeable, impossible to
avoid; (c) the occurrence must have been such as to
render it impossible for the debtors to fulfill their
obligation in a normal manner, and; (d) theobligormust
have been free from any participation in the aggravation
of the resulting injury to the creditor.

A fortuitous event may either be an act of God, or natural

occurrences such as floods or typhoons, or an act of man
such as riots, strikes or wars. However, when the loss is
found to be partly the result of a persons participation
whether by active intervention, neglect or failure to act
the whole occurrence is humanized and removed from the
rules applicable to a fortuitous
event.AssetPrivitizationTrust vs. T.J. Enterprises,G.R.
No. 167195, May 8, 2009.

Contracts; voidable contract. In order that mistake may

invalidate consent and constitute a ground for annulment
of contract based on Article 1331, the mistake must be
material as to go to the essence of the contract; that
without such mistake, the agreement would not have
been made. The effect of error must be determined largely
by its influence upon the party. If the party would have
entered into the contract even if he had knowledge of the
true fact, then the error does not vitiate consent.

In the case at bar, the relief sought by respondent was for

a refund and he continued to occupy the subject
properties after he found out that the same were smaller
in area. All these show that respondent did not consider
the error in size significant enough to vitiate the contract.
Hence, the Court of Appeals erred in affirming the Boards
decision to grant rescission based on Articles 1330 and
1331 of the Civil Code. CebuWindlandDevelopment
Corporation vs. OngSiaoHua, G.R. No. 173215, May 21,
2009.

Contracts; novation. Novationis 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 bysubrogatinga third person to the rights of
the creditor. In order fornovationto take place, the
concurrence of the following requisites are indispensable:

1. There must be a previous valid obligation;

2. There must be an agreement of the parties

concerned to a new contract;

3. There must be theextinguishmentof the old

contract; and

4. There must be the validity of the new contract.

Novationis never presumed, and the animusnovandi,

whether totally or partially, must appear by express
agreement of the parties, or by their acts that are too
clear and unmistakable. Theextinguishmentof the old
obligation by the new one is a necessary element
ofnovation, which may be effected either expressly or
impliedly. The contracting parties must incontrovertibly
disclose that their object in executing the new contract is
to extinguish the old one. Upon the other hand, no
specific form is required for an impliednovation, and all
that is prescribed by law would be an incompatibility
between the two contracts.

The test of incompatibility is whether the two obligations

can stand together, each one having its independent
existence. If they cannot, they are incompatible and the
latter obligationnovatesthe 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 merelymodificatoryin nature and
insufficient to extinguish the original
obligation.Transpacific Battery Corp.,etal. vs. Security
Bank and Trust Company /MelchorG. Say and Josephine
G. Say vs. Security Bank and Trust Company, G.R. No.
173565/G.R. No. 173607. May 8, 2009

Contracts; obligatory force. An agreement entered into

between the Republic of the Philippines and the Kingdom
of Kuwait does not have the effect of terminating an
agreement between Philippine Airlines and Kuwaiti
Airlines. Philippine Airlines is no longer a government
owned and controlled corporation. An agreement
executed by the executive branch of government cannot
ipso facto render legal rights of private persons
obviated.Kuwait Airways Corporation vs. Philippine
Airlines, Inc.,G.R. No. 156087, May 8, 2009.

Contracts; rescission. Rescission creates the obligation to

return the object of the contract. It can be carried out only
when the one who demands rescission can return
whatever he may be obliged to restore. Rescission
abrogates the contract from its inception and requires a
mutual restitution of the benefits received. Thus,
respondentsCasal, Salvador andCRSRealty must return
the benefits received from the contract to sell if they
cannot comply with their obligation to deliver the
corresponding certificates of title to petitioners.

In the event that respondentsCasal, Salvador

andCRSRealty cannot deliver clean certificates of title to
petitioners, the latter must be reimbursed not only of the
purchase price of the subdivision lots sold to them but
also of the incremental value arising from the appreciation
of the lots. Thus, petitioners are entitled to actual
damages equivalent to the current market value of the
subdivision lots.

In Solid Homes, Inc. v. Spouses Tan, the Court ordered

instead the payment of the current market value of the
subdivision lot after it was established that the
subdivision owner could no longer comply with its
obligation to develop the subdivision property in
accordance with the approved plans and advertisements.
VicentaCantempratevs.CRSRealty Development Corp.,
etal.,G.R. No. 171399, May 8, 2009.

Damages; attorneys fees.The award of attorneys fees is

the exception rather than the general rule, and counsels
fees are not to be awarded every time a party wins a suit.
The discretion of the court to award attorneys fees under
Article 2208 of the Civil Code demands factual, legal, and
equitable justification, without which the award is a
conclusion without a premise, its basis being improperly
left to speculation and conjecture. In all events, the court
must state the reason for the award of attorneys fees.
None of the circumstances justifying an award of
attorneys fees enumerated under Art. 2008 of the Civil
Code are present, or have been proven in this case.
ZacariasDelosSantos vs. Consuelo B. Papa and Maria C.
Mate, G.R. No. 154427, May 8, 2009.
Damages; death and physical injuries caused by quasi-
delict. Civil indemnity for death caused by a quasi-
delictis pegged at P50,000. Moral damages in the
amount of P50,000 is also awarded to the heirs of the
deceased taking into consideration the pain and anguish
they suffered. As to funeral and burial expenses, the court
can only award such amount as are supported by proper
receipts. As to hospitalization expenses, only
substantiated and proven expenses, or those that appear
to have been genuinely incurred in connection with the
hospitalization of the victims will be recognized in court.
Moral damages may be recovered in quasi-
delictscausing physical injuries. However, in accordance
with prevailing jurisprudence, the Supreme Court reduced
the award of moral damages from P50,000 to P30,000
each since they only suffered physical injuries brought
about by the collision.

In quasi-delicts, exemplary damages may be granted if

the defendant acted with gross negligence. While the
amount of exemplary damages need not be proved, the
plaintiff must show that he is entitled to moral, temperate
or compensatory damages before the court may consider
the question of whether or not exemplary damages
should be awarded.

Under Article 2208 of the Civil Code, attorneys fees may

be recovered when, as in this case, exemplary damages
are awarded. SofiaGuillangrepresented by
SusanGuillang-Cabatbat,etal. vs.
RodolfoBedania,etal.,G.R. No. 162987, May 21, 2009.

Damages; delay in approval or disapproval of credit card

purchase. Moral damages avail in cases of breach of
contract where the defendant acted fraudulently or in bad
faith, and the court should find that under the
circumstances, such damages are due. The findings of
the trial court are ample in establishing the bad faith and
unjustified neglect of respondent, attributable in particular
to the dilly-dallying of respondents Manila
creditauthorizer, EdgardoJaurique.

It should be emphasized that the reason why petitioner is

entitled to damages is not simply because respondent
incurred delay, but because the delay, for which
culpability lies under Article 1170, led to the particular
injuries under Article 2217 of the Civil Code for which
moral damages are remunerative. Moral damages do not
avail to soothe the plaints of the simply impatient, so this
decision should not be cause for relief for those who time
the length of their credit card transactions with a
stopwatch. There is no hard-and-fast rule in determining
what would be a fair and reasonable amount of moral
damages, since each case must be governed by its own
peculiar facts, however, it must be commensurate to the
loss or injury suffered.Polo S.Pantaleonvs. American
Express International, Inc.,G.R. No. 174269, May 8, 2009.

Damages; exemplary damages. The award of moral

damages is proper when the following circumstances
concur: (1) there is an injury, whether physical, mental or
psychological, clearly sustained by the claimant; (2) there
is a culpable act or omission factually established; (3) the
wrongful act or omission of the defendant is the
proximate cause of the injury sustained by the claimant;
and (4) the award of damages is predicated on any of the
cases stated in Article 2219.
Here, the Supreme Court ruled that it cannot be
concluded that the suit for annulment of sale that the
petitioner filed was completely without basis and one that
was filed simply to vex or harass the respondents. On the
contrary, from the surrounding factual and legal
circumstances, it appears that the petitioner was at the
point of losing his home and was motivated by the desire
to prevent the loss, rather than by any intent to vex or
harass the respondents; he had a legal basis, although a
disputable one, to back up his claim. If he failed at all to
pursue his case, it was not due to lack of merit; the case
was lost because nobody pursued the case after his son
and attorney-in-fact, who was handling the case for him,
died. ZacariasDelosSantos vs. Consuelo B. Papa and
Maria C. Mate,G.R. No. 154427, May 8, 2009.

Damages; moral damages. Moral damages are only

awarded if the basis therefor is duly established. In the
present case, the ground the respondents invoked and
failed to establish is malicious prosecution. Crystal v.
Bank of the Philippine Islands is instructive on this point,
as it tells us that the law never intended to impose a
penalty on the right to litigate so that the filing of an
unfounded suit does not automatically entitle the
defendant to moral damages.ZacariasDelosSantos vs.
Consuelo B. Papa and Maria C. Mate,G.R. No. 154427,
May 8, 2009.
Damages; quasi-delict. Article 2176 of the Civil Code
provides that whoever 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 nopre-existing contractual relations between the
parties, is called a quasi-delict. To sustain a claim based
on quasi-delict, the following requisites must concur: (a)
damage suffered by the plaintiff; (b) fault or negligence of
defendant; and (c) connection of cause and effect
between the fault or negligence of defendant and the
damage incurred by the
plaintiff.SofiaGuillangrepresented by SusanGuillang-
Cabatbat,etal. vs. RodolfoBedania,etal.,G.R. No.
162987, May 21, 2009.

Diligence; standard. Article 1173 of the Civil Code is very

clear that if the law or contract does not state the degree
of diligence which is to be observed in the performance of
an obligation then that which is expected of a good father
of a family or ordinary diligence shall be required.

Mindanao Terminal, astevedoringcompany which was

charged with the loading and stowing the cargoes of Del
Monte Produce aboard M/VMistrau, had acted merely as
a labor provider in the case at bar. There is no specific
provision of law that imposes a higher degree of diligence
than ordinary diligence for astevedoringcompany or one
who is charged only with the loading and stowing of
cargoes. It was neither alleged nor proven by Phoenix and
McGee that Mindanao Terminal was bound by contractual
stipulation to observe a higher degree of diligence than
that required of a good father of a family. Hence, the
Supreme Court concluded that following Article 1173,
Mindanao Terminal was required to observe ordinary
diligence only in loading and stowing the cargoes of Del
Monte Produce aboard M/VMistrau. Mindanao Terminal
and Brokerage Service, Inc. vs. Phoenix Assurance
Company of New York/MCGEE & Co., Inc., G.R. No.
162467, May 8, 2009.

Due diligence; stevedore. There is a distinction between

anarrastreand a stevedore.Arrastre, a Spanish word
which refers to hauling of cargo, comprehends the
handling of cargo on the wharf or between the
establishment of the consignee or shipper and the ships
tackle. The responsibility of thearrastreoperator lasts
until the delivery of the cargo to the consignee. The
service is usually performed by longshoremen. On the
other hand,stevedoringrefers to the handling of the
cargo in the holds of the vessel or between the ships
tackle and the holds of the vessel. The responsibility of
the stevedore ends upon the loading and stowing of the
cargo in the vessel. It is not disputed that Mindanao
Terminal was performing purelystevedoringfunction while
the private respondent intheSummacase was
performingarrastrefunction.Mindanao Terminal and
Brokerage Service, Inc. vs. Phoenix Assurance Company
of New York/MCGEE & Co., Inc., G.R. No. 162467, May
8, 2009.

Persons; adoption. As a rule, the husband and the wife

must jointly adopt. Mere consent of the husband to the
wifes petition to adopt it not sufficient.

Petitioner, being married at the time the petitions for

adoption were filed, should have jointly filed the petitions
with her husband. The filing of a case for dissolution of
the marriage between petitioner and her husband is of no
moment. It is not equivalent to a decree of dissolution of
marriage. Until and unless there is a judicial decree for the
dissolution of the marriage between petitioner and her
husband, the marriage still subsists. That being the case,
joint adoption by the husband and the wife is required.
The Supreme Court reiterated its ruling that since, at the
time the petitions for adoption were filed, petitioner was
married, joint adoption is mandatory. In Re: Petition for
adoption of Michelle P.Lim,MoninaP.Lim/ In Re: Petition
for adoption of Michael Jude P.Lim,MoninaP.Lim,G.R.
Nos. 168992-93, May 21, 2009.

Persons; effects of adoption. Adoption has the following

effects: (1) sever all legal ties between the biological
parent(s) and theadoptee, except when the biological
parent is the spouse of the adopter; (2) deem
theadopteeas a legitimate child of the adopter; and (3)
give adopter andadopteereciprocal rights and
obligations arising from the relationship of parent and
child, including but not limited to: (i) the right of the
adopter to choose the name the child is to be known; and
(ii) the right of the adopter andadopteeto be legal and
compulsory heirs of each other. Therefore, even if
emancipation terminates parental authority, theadopteeis
still considered a legitimate child of the adopter with all
the rights of a legitimate child such as: (1) to bear the
surname of the father and the mother; (2) to receive
support from their parents; and (3) to be entitled to
thelegitimeand othersuccessionalrights. Conversely, the
adoptive parents shall, with respect to the adopted child,
enjoy all the benefits to which biological parents are
entitled such as support andsuccessionalrights. In Re:
Petition for adoption of Michelle P.Lim,MoninaP.Lim/ In
Re: Petition for adoption of Michael Jude
P.Lim,MoninaP.Lim,G.R. Nos. 168992-93, May 21,
2009.

Persons; psychological incapacity. The Supreme Court

laid down in Republic of the Philippines v. Court of
Appeals and Molina stringent guidelines in the
interpretation and application of Article 36 of the Family
Code, to wit:

(1) The burden of proof to show the nullity of the

marriage belongs to the plaintiff. Any doubt should be
resolved in favor of the existence and continuation of the
marriage and against its dissolution and nullity. This is
rooted in the fact that both our Constitution and our laws
cherish the validity of marriage and unity of the family.
Thus, our Constitution devotes an entire Article on the
Family, recognizing it as the foundation of the nation. It
decrees marriage as legally inviolable, thereby
protecting it from dissolution at the whim of the parties.
Both the family and marriage are to be protected by the
state.

The Family Code echoes this constitutional edict on

marriage and the family and emphasizes their
permanence, inviolability and solidarity.

(2) The root cause of the psychological incapacity

must be: (a) medically or clinically identified, (b) alleged in
the complaint, (c) sufficiently proven by experts and (d)
clearly explained in the decision. Article 36 of the Family
Code requires that the incapacity must be psychological
not physical, although its manifestations and/or
symptoms may be physical. The evidence must convince
the court that the parties, or one of them, was mentally or
psychically ill to such an extent that the person could not
have known the obligations he was assuming, or knowing
them, could not have given valid assumption thereof.
Although no example of such incapacity need be given
here so as not to limit the application of the provision
under the principle ofejusdemgeneris(Salitav.Magtolis,
233SCRA100, 108), nevertheless such root cause must
be identified as a psychological illness and its
incapacitating nature fully explained. Expert evidence may
be given by qualified psychiatrists and clinical
psychologists.

(3) The incapacity must be proven to be existing at

the time of the celebration of the marriage. The
evidence must show that the illness was existing when
the parties exchanged their Idos. The manifestation of
the illness need not be perceivable at such time, but the
illness itself must have attached at such moment, or prior
thereto.

(4) Such incapacity must also be shown to be medically

or clinically permanent or incurable. Suchincurabilitymay
be absolute or even relative only in regard to the other
spouse, not necessarily absolutely against everyone of
the same sex. Furthermore, such incapacity must be
relevant to the assumption of marriage obligations, not
necessarily to those not related to marriage, like the
exercise of a profession or employment in a job. Hence, a
pediatrician may be effective in diagnosing illnesses of
children and prescribing medicine to cure them but may
not be psychologicallycapacitatedto procreate, bear and
raise his/her own children as an essential obligation of
marriage.

(5) Such illness must be grave enough to bring about

the disability of the party to assume the essential
obligations of marriage. Thus,
mildcharacteriologicalpeculiarities, mood changes,
occasional emotional outbursts cannot be accepted as
root causes. The illness must be shown as downright
incapacity or inability, not a refusal, neglect or difficulty,
much less ill will. In other words, there is a natal or
supervening disabling factor in the person, an adverse
integral element in the personality structure that
effectively incapacitates the person from really accepting
and thereby complying with the obligations essential to
marriage.

(6) The essential marital obligations must be those

embraced by Articles 68 up to 71 of the Family Code as
regards the husband and wife as well as Articles 220, 221
and 225 of the same Code in regard to parents and their
children. Such non-complied marital obligation(s) must
also be stated in the petition, proven by evidence and
included in the text of the decision.

(7) Interpretations given by the National Appellate

Matrimonial Tribunal of the Catholic Church in the
Philippines, while not controlling or decisive, should be
given great respect by our courts.

In Santos v. Court of Appeals, the Court declared that

psychological incapacity must be characterized by (a)
gravity, (b) juridical antecedence, and (c)incurability. It
should refer to no less than a mental, not physical,
incapacity that causes a party to be trulyincognitiveof
the basic marital covenants that concomitantly must be
assumed and discharged by the parties to the marriage.
Theintendmentof 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.

However, in more recent jurisprudence, the Supreme

Court observed that notwithstanding the guidelines laid
down in Molina, there is a need to emphasize other
perspectives as well which should govern the disposition
of petitions for declaration of nullity under Article 36. Each
case must be judged, not on the basis of
aprioriassumptions, predilections or generalizations but
according to its own facts. In regard to psychological
incapacity as a ground for annulment of marriage, it is
trite to say that no case is on all fours with another
case. The trial judge must take pains in examining the
factual milieu and the appellate court must, as much as
possible, avoid substituting its own judgment for that of
the trial court. With the advent of Te v. Te, the Supreme
Court encourages a reexamination of jurisprudential
trends on the interpretation of Article 36 although there
has been no major deviation or paradigm shift from the
Molina doctrine.Marietta C.Azcuetavs. Republic of the
Philippines and the CA,G.R. No. 180668, May 26, 2009.
Prescription; express trust. Prescription andlacheswill
run only from the time the express trust is repudiated. The
Supreme Court has held that for acquisitive prescription
to bar the action of the beneficiary against the trustee in
an express trust for the recovery of the property held in
trust it must be shown that: (a) the trustee has performed
unequivocal acts of repudiation amounting to an ouster of
thecestuiquetrust; (b) such positive acts of repudiation
have been made known to thecestuiquetrust, and (c) the
evidence thereon is clear and conclusive.

Respondents cannot rely on the fact that the Torrens title

was issued in the name ofEpifanioand the other heirs of
Jose. It has been held that a trustee who obtains a
Torrens title over property held in trust by him for another
cannot repudiate the trust by relying on the registration.
The rule requires a clear repudiation of the trust duly
communicated to the beneficiary. The only act that can be
construed as repudiation was when respondents filed the
petition for reconstitution in October 1993. And since
petitioners filed their complaint in January 1995, their
cause of action has not yet prescribed,lachescannot be
attributed to them.

It ishornbookdoctrine thatlachesis a creation of equity

and its application is controlled by equitable
considerations.Lachescannotbe used to defeat justice or
perpetrate fraud and injustice. Neither should its
application be used to prevent the rightful owners of a
property from recovering what has been fraudulently
registered in the name of another. The equitable remedy
oflachesis, therefore, unavailing in this case. Heirs
ofTranquilinoLabiste,etal. vs. Heirs of
JoseLabiste,etal., G.R. No. 162033, May 8, 2009.

Quasi-delict; negligence. Negligence is defined as the

failure to observe for the protection of the interest of
another person that degree of care, precaution, and
vigilance which the circumstances justly demand,
whereby such other person suffers injury. InPicartv.
Smith, we held that the test of negligence is whether the
defendant in doing the alleged negligent act used that
reasonable care and caution which an ordinary person
would have used in the same situation.
SofiaGuillangrepresented by SusanGuillang-
Cabatbat,etal. vs. RodolfoBedania,etal., G.R. No.
162987, May 21, 2009.

Quasi-delict; presumption of negligence. Under Article

2185 of the Civil Code, unless there is proof to the
contrary, a person driving a vehicle is presumed negligent
if at the time of the mishap, he was violating any traffic
regulation.

In this case, the report showed that the truck, while

making the U-turn, failed to signal, a violation of traffic
rules. The police records also stated that, after the
collision,Bedaniaescaped and abandoned the petitioners
and his truck. This is another violation of a traffic
regulation. Therefore, the presumption arises
thatBedaniawas negligent at the time of the mishap.
SofiaGuillangrepresented by SusanGuillang-
Cabatbat,etal. vs. RodolfoBedania,etal.,G.R. No.
162987, May 21, 2009.

Quasi-delict; proximate cause. Proximate cause is that

which, in the natural and continuous sequence, unbroken
by any efficient, intervening cause, produces the injury,
and without which the result would not have occurred.
The cause of the collision is traceable to the negligent act
ofBedaniafor if the U-turn was executed with the proper
precaution, the mishap in all probability would not have
happened. The sudden U-turn of the truck without signal
lights posed a serious risk to oncoming
motorists.Bedaniafailed to prevent or minimize that risk.
The trucks sudden U-turn triggered a series of events
that led to the collision and, ultimately, to the death
ofAnteroand the injuries of petitioners.
SofiaGuillangrepresented by SusanGuillang-
Cabatbat,etal. vs. RodolfoBedania,etal.,G.R. No.
162987, May 21, 2009.

Sales; as is where is. The phrase as-is where-is basis

pertains solely to the physical condition of the thing sold,
not to its legal situation. It is merely descriptive of the
state of the thing sold. Thus, the as-is where-is basis
merely describes the actual state and location of the
machinery and equipment sold by petitioner to
respondent. The depiction does not alter petitioners
responsibility to deliver the property to
respondent.AssetPrivatizationTrust vs. T.J.
Enterprises,G.R. No. 167195, May 8, 2009.

Sales; contracts to sell. The only requisite for a contract of

sale or contract to sell to exist in law is the meeting of
minds upon the thing which is the object of the contract
and the price, including the manner the price is to be paid
by thevendee. Under Article 1458 of the New Civil Code,
in a contract of sale, whether absolute or conditional, one
of the contracting parties obliges himself to transfer the
ownership of and deliver a determinate thing, and the
other to pay therefor a price certain in money or its
equivalent.

In the instant case, the failure by respondentCRSRealty

to obtain a license to sell the subdivision lots does not
render the sales void on that ground alone especially that
the parties have impliedly admitted that there was already
a meeting of the minds as to the subject of the sale and
price of the contract. The absence of the license to sell
only subjects respondentCRSRealty and its officers
civilly and criminally liable for the said violation under
Presidential Decree (P.D.) No. 957 and related rules and
regulations. The absence of the license to sell does not
affect the validity of the already perfected contract of sale
between petitioners and
respondentCRSRealty.VicentaCantempratevs.CRSRe
alty Development Corp., etal.,G.R. No. 171399, May 8,
2009.

Sales; constructive delivery. The ownership of a thing sold

is transferred to thevendeeupon the actual or
constructive delivery thereof. The thing sold shall be
understood as delivered when it is placed in the control
and possession of thevendee.

As a general rule, when the sale is made through a public

instrument, the execution thereof shall be equivalent to
the delivery of the thing which is the object of the
contract, if from the deed the contrary does not appear or
cannot clearly be inferred. With regard to movable
property, its delivery may also be made by the delivery of
the keys of the place or depository where it is stored or
kept. In order for the execution of a public instrument to
effect tradition, the purchaser must be placed in control of
the thing sold.

However, the execution of a public instrument only gives

rise to aprimafaciepresumption of delivery. Such
presumption is destroyed when the delivery is not
effected because of a legal impediment. It is necessary
that the vendor shall have control over the thing sold that,
at the moment of sale, its material delivery could have
been made. Thus, a person who does not have actual
possession of the thing sold cannot transfer constructive
possession by the execution and delivery of a public
instrument.

In this case, there was no constructive delivery of the

machinery and equipment upon the execution of the deed
of absolute sale or upon the issuance of the gate pass
since it was not petitioner but Creative Lines which had
actual possession of the property. The presumption of
constructive delivery is not applicable as it has to yield to
the reality that the purchaser was not placed in
possession and control of the
property.AssetPrivatizationTrust vs. T.J.
Enterprises,G.R. No. 167195, May 8, 2009.

Sales; delivery. Delivery as used in the Law on Sales

refers to the concurrent transfer of two things: (1)
possession and (2) ownership. This is the rationale behind
the jurisprudential doctrine that presumptive delivery via
execution of a public instrument is negated by the reality
that thevendeeactually failed to obtain material
possession of the land subject of the sale. In the same
vein, if thevendeeis placed in actual possession of the
property, but by agreement of the parties ownership of
the same is retained by the vendor until thevendeehas
fully paid the price, the mere transfer of the possession of
the property subject of the sale is not the delivery
contemplated in the Law on Sales or as used in Article
1543 of the Civil Code.
In the case at bar, it appears that respondent was already
placed in possession of the subject properties. However,
it is crystal clear that the deeds of absolute sale were still
to be executed by the parties upon payment of the last
installment. This fact shows that ownership of the said
properties was withheld by petitioner. Following case law,
it is evident that the parties did not intend to immediately
transfer ownership of the subject properties until full
payment and the execution of the deeds of absolute sale.
Consequently, there is no delivery to speak of in this
case since what was transferred was possession only and
not ownership of the subject properties.
CebuWindlandDevelopment Corporation vs.
OngSiaoHua, G.R. No. 173215, May 21, 2009.

Sales; prescription. The transfer of possession of the

subject properties on October 10, 1996 to respondent
cannot be considered as delivery within the purview of
Article 1543 of the Civil Code. It follows that since there
has been no transfer of ownership of the subject
properties since the deeds of absolute sale have not yet
been executed by the parties, the action filed by
respondent has not prescribed.
CebuWindlandDevelopment Corporation
vs.OngSiaoHua,G.R. No. 173215, May 21, 2009.

Sales; double sale. Where it is an immovable property

that is the subject of a double sale, ownership 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.

In this case there was a first sale by Eugenia Reyes

toAgatonPagaduanand a second sale by Eugenia Reyes
to the respondents. For a second buyer like the
respondents to successfully invoke the second
paragraph, Article 1544 of the Civil Code, it must possess
good faith from the time of the sale in its favor until the
registration of the same. Respondents sorely failed to
meet this requirement of good faith since they had actual
knowledge of Eugenias prior sale of the southern portion
property to the petitioners, a fact antithetical to good
faith. This cannot be denied by respondents since in the
same deed of sale that Eugenia sold them the northern
portion to the respondents for P1,500.00, Eugenia also
sold the southern portion of the land
toAgatonPagaduanfor P500.00.Angel M.Pagaduanvs.
SpousesEstanislao& FePosadasOcuma, G.R. No.
176308, May 8, 2009.

Sales; immovable. Article 1539 governs a sale of

immovable by the unit, that is, at a stated rate per unit
area. In a unit price contract, the statement of area of
immovable is not conclusive and the price may be
reduced or increased depending on the area actually
delivered. If the vendor delivers less than the area agreed
upon, thevendeemay oblige the vendor to deliver all that
may be stated in the contract or demand for the
proportionate reduction of the purchase price if delivery is
not possible. If the vendor delivers more than the area
stated in the contract, thevendeehas the option to
accept only the amount agreed upon or to accept the
whole area, provided he pays for the additional area at the
contract rate.

In some instances, a sale of an immovable may be made

for a lump sum and not at a rate per unit. The parties
agree on a stated purchase price for an immovable the
area of which may be declared based on an estimate or
where both the area and boundaries are stated.

In the case where the area of the immovable is stated in

the contract based on an estimate, the actual area
delivered may not measure up exactly with the area
stated in the contract. According to Article 1542 of the
Civil Code, in the sale of real estate, made for a lump sum
and not at the rate of a certain sum for a unit of measure
or number, there shall be no increase or decrease of the
price although there be a greater or lesser area or number
than that stated in the contract. However, the discrepancy
must not be substantial. Avendeeof land, when sold in
gross or with the description more or less with reference
to its area, does not thereby ipso facto take all risk of
quantity in the land. The use of more or less or similar
words in designating quantity covers only a reasonable
excess or deficiency.

Where both the area and the boundaries of the

immovable are declared, the area covered within the
boundaries of the immovable prevails over the stated
area. In cases of conflict between areas and boundaries,
it is the latter which should prevail. What really defines a
piece of ground is not the area, calculated with more or
less certainty, mentioned in its description, but the
boundaries therein laid down, as enclosing the land and
indicating its limits. In a contract of sale of land in a mass,
it is well established that the specific boundaries stated in
the contract must control over any statement with respect
to the area contained within its boundaries. It is not of
vital consequence that a deed or contract of sale of land
should disclose the area with mathematical accuracy. It is
sufficient if its extent is objectively indicated with
sufficient precision to enable one to identify it. An error as
to the superficial area is immaterial. Thus, the obligation
of the vendor is to deliver everything within the
boundaries, inasmuch as it is the entirety thereof that
distinguishes the determinate object.
CebuWindlandDevelopment Corporation vs.
OngSiaoHua, G.R. No. 173215, May 21, 2009.

Sales; warranty. The vendor is bound to transfer the

ownership of and deliver, as well as warrant the thing
which is the object of the sale. Ownership of the thing
sold is acquired by thevendeefrom the moment it its
delivered to him in any of the ways specified in articles
1497 to 1501, or in any other manner signifying an
agreement that the possession is transferred from the
vendor to thevendee. A perusal of the deed of absolute
sale shows that both the vendor and
thevendeerepresented and warranted to each other that
each had all the requisite power and authority to enter
into the deed of absolute sale and that they shall perform
each of their respective obligations under the deed of
absolute in accordance with the terms
thereof.AssetPrivatizationTrust vs. T.J. Enterprises,G.R.
No. 167195, May 8, 2009.

April 2009 Decisions on CivilLaw

Accretion. Article 457 of the Civil Code requires the

concurrence of the following requisites for accretion: (1)
that the deposition of soil or sediment be gradual and
imperceptible; (2) that it be the result of the action of the
waters of the river; and (3) that the land where accretion
takes place is adjacent to the banks of rivers. Thus, it is
not enough to be a riparian owner in order to enjoy the
benefits of accretion. One who claims the right of
accretion must show by preponderant evidence that he
has met all the conditions provided by law.New Regent
Sources, Inc. vs. Teofilo Victor Tanjuatco, Jr. and Vicente
Cuevas,G.R. No. 168800, April 16, 2009.
Compensation; requisites. Under Article 1279 (1), it is
necessary for compensation that the obligors be bound
principally, and that he be at the same time a principal
creditor of the other. There is, concededly, no mutual
creditor-debtor relation between APT and UPSUMCO.
However, we recognize the concept of conventional
compensation, defined as occurring when the parties
agree to compensate their mutual obligations even if
some requisite is lacking, such as that provided in Article
1282. It is intended to eliminate or overcome obstacles
which preventipso jure extinguishment of their
obligations.

Legal compensation takes place by operation of law when

all the requisites are present, as opposed to conventional
compensation which takes place when the parties agree
to compensate their mutual obligations even in the
absence of some requisites. The only requisites of
conventional compensation are (1) that each of the parties
can dispose of the credit he seeks to compensate, and (2)
that they agree to the mutual extinguishment of their
credits.United Planters Sugar Milling Co., Inc.
(UPSUMCO) vs. The Honorable Court of Appeals, et
al.,G.R. No. 126890, April 2, 2009.

Compromise agreement; binding effect. A compromise

agreement, as a contract, is binding only upon the parties
to the compromise, and not upon non-parties. This is the
doctrine of relativity of contracts. Consistent with this
principle, a judgment based entirely on a compromise
agreement is binding only on the parties to the
compromise the court approved, and not upon the parties
who did not take part in the compromise agreement and
in the proceedings leading to its submission and approval
by the court. Otherwise stated, a court judgment made
solely on the basis of a compromise agreement binds only
the parties to the compromise, and cannot bind a party
litigant who did not take part in the compromise
agreement.Philippine National Bank Vs. Marcelino
Banatao, et al. and Marciano Carag, et al., G.R. No.
149221, April 7, 2009.

Compromise agreement; validity.The Compromise

Agreement is in order and is not contrary to law, morals,
good customs and public policy. Judicial approval thereof
is in order.Guillermo Perciano vs. Heirs of Procopio
Tumbali represented by Lydia Tumbali,G.R. No. 177346,
April 21, 2009.

Contracts; consideration. The Deed of Sale which states

receipt of which in full I hereby acknowledge to my entire
satisfaction is an acknowledgment receipt in itself.
Moreover, the presumption that a contract has sufficient
consideration cannot be overthrown by a mere assertion
that it has no consideration.Serafin Naranja, et al. vs. The
Honorable Court of Appeals, et al.,G.R. No. 160132, April
17, 2009.

Contracts; simulated contract. The late registration of the

Deed of Sale and Roques execution of the second deed
of sale in favor of Dema-ala did not mean that the
contract was simulated. We are convinced with the
explanation given by respondents witnesses that the
deed of sale was not immediately registered because
Belardo did not have the money to pay for the fees. This
explanation is, in fact, plausible considering that Belardo
could barely support herself and her brother, Roque. As
for the second deed of sale, Dema-ala, herself, attested
before the trial court that she let Roque sign the second
deed of sale because the title to the properties were still
in his name.Serafin Naranja, et al. vs. The Honorable
Court of Appeals, et al., G.R. No. 160132, April 17, 2009.

Contracts; undue influence. Petitioners allege that

Belardo unduly influenced Roque, who was already
physically weak and senile at that time, into executing the
deed of sale. Belardo allegedly took advantage of the fact
that Roque was living in her house and was dependent on
her for support.

There is undue influence when a person takes improper

advantage of his power over the will of another, depriving
the latter of a reasonable freedom of choice. One who
alleges any defect, or the lack of consent to a contract by
reason of fraud or undue influence, must establish by full,
clear and convincing evidence, such specific acts that
vitiated the partys consent; otherwise, the latters
presumed consent to the contract prevails. For undue
influence to be present, the influence exerted must have
so overpowered or subjugated the mind ofa contracting
party as to destroy his free agency, making him express
the will of another rather than his own.

Petitioners adduced no proof that Roque had lost control

of his mental faculties at the time of the sale. Undue
influence is not to be inferred from age, sickness, or
debility of body, if sufficient intelligence remains. The
evidence presented pertained more to Roques physical
condition rather than his mental condition. On the
contrary, Atty. Sanicas, the notary public, attested that
Roque was very healthy and mentally sound and sharp at
the time of the execution of the deed of sale. Atty.
Sanicas said that Roque also told him that he was a Law
graduate.Serafin Naranja, et al. vs. The Honorable Court
of Appeals, et al., G.R. No. 160132, April 17, 2009.

Damages; actual damages. Article 2206 of the Civil

Code provides that in addition to the indemnity for death
caused by a crime or quasi-delict, the defendant shall be
liable for the loss of the earning capacity of the deceased,
and the indemnity shall be paid to the heirs of the latter, x
x x. Compensation of this nature is awarded not for loss
of earnings but for loss of capacity to earn money.
Hence, it is proper that compensation for loss of earning
capacity should be awarded to the petitioners in
accordance with the formula established in decided cases
for computing net earning capacity, to wit:

The formula for the computation of unearned income is:

Net Earning Capacity = life expectancy x (gross annual

income -reasonable and necessary living expenses).

Life expectancy is determined in accordance with the

formula:

2 / 3 x [80 - age of deceased at the time of death]

Jurisprudence provides that the first factor,i.e., life

expectancy, shall be computed by applying the formula
(2/3 x [80 - age at death]) adopted in the American
Expectancy Table of Mortality or the Actuarial of
Combined Experience Table of Mortality.The Heirs of
George Y. Poe Vs. Malayan Insurance Co. Inc.,G.R. No.
156302, April 7, 2009.

Damages; actual damages. Settled is the rule that only

receipted expenses can be the basis of actual damages
arising from funeral expenditures. All the prosecution
presented was a receipt from the funeral parlor amounting
toP15,000. Since the receipted expenses of the victims
family was less thanP25,000, temperate damages in the
said amount can be awarded in lieu of actual damages.
Accordingly, the heirs of the victim are not entitled to
actual damages but to temperate damages in the amount
ofP25,000.as moral damages are mandatory in cases of
murder (without need to allege and prove such damages),
appellant is likewise ordered to indemnify the heirs of the
victimP50,000.People of the Philippines vs. Alejo
Obligado y Magdaraog,G.R. No. 171735, April 16, 2009.

Damages; exemplary. Exemplary or corrective damages

are imposed by way of example or correction for the
public good in addition to the moral, temperate, liquidated
or compensatory damages. While the amount of
exemplary damages need not be proved, respondent
must show proof of entitlement to moral, temperate or
compensatory damages before the Court may consider
awarding exemplary damages. No such damages were
prayed for, however, hence, the Court finds no basis to
grant the prayer for exemplary damages.De La Salle
University, et al. Vs. De La Salle University Employees
Association (DLSUEA-NAFTEU),G.R. No. 177283, April
7, 2009.

Damages; moral damages. Petitioners testimonies

reveal the intense suffering which they continue to
experience as a result of Georges death. It is not difficult
to comprehend that the sudden and unexpected loss of a
husband and father would cause mental anguish and
serious anxiety in the wife and children he left behind.
Moral damages in the amount ofP100,000.00 are proper
for Georges death. The Heirs of George Y. Poe Vs.
Malayan Insurance Co. Inc., G.R. No. 156302, April 7,
2009.

Damages; moral damages. 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. Article 21 of the Code states that any person
who wilfully causes loss or injury to another in a manner
that is contrary to morals, good customs or public policy
shall compensate the latter for the damage. And, lastly,
Article 24 requires that in all contractual, property or other
relations, when one of the parties is at a disadvantage on
account of his moral dependence, ignorance, indigence,
mental weakness, tender age or other handicap, the
courts must be vigilant for his protection.

Clearly, Rajab, Becmen and White Falcons acts and

omissions are against public policy because they
undermine and subvert the interest and general welfare of
our OFWs abroad, who are entitled to full protection
under the law. They set an awful example of how foreign
employers and recruitment agencies should treat and act
with respect to their distressed employees and workers
abroad. Their shabby and callous treatment of Jasmins
case; their uncaring attitude; their unjustified failure and
refusal to assist in the determination of the true
circumstances surrounding her mysterious death, and
instead finding satisfaction in the unreasonable insistence
that she committed suicide just so they can conveniently
avoid pecuniary liability; placing their own corporate
interests above of the welfare of their employees all
these are contrary to morals, good customs and public
policy, and constitute taking advantage of the poor
employee and her familys ignorance, helplessness,
indigence and lack of power and resources to seek the
truth and obtain justice for the death of a loved one..

The grant of moral damages to the employee by reason of

misconduct on the part of the employer is sanctioned by
Article 2219 of the Civil Code, which allows recovery of
such damages in actions referred to in Article
21.Becmen Services Exporter and Promotion, Inc. vs.
Sps. Simplicio and Mila Cuaresma, et al./Sps. Simplicio
and Mila Cuaresma Vs. White Falcon Services, Inc., et
al.,G.R. No. 182978-79/G.R. No. 174298-99, April 7,
2009.

Damages; murder. When death occurs due to a crime, the

following damages may be awarded: (1) civil indemnityex
delicto for the death of the victim; (2) actual or
compensatory damages; (3) moral damages; (4)
exemplary damages; and (5) temperate damages.
Civil indemnity is mandatory and granted to the heirs of
the victim without need of proof other than the
commission of the crime.]Under the prevailing
jurisprudence, the award ofP50,000.00 as civil indemnity
for each count of murder, to be paid to the heirs of the
victims, is proper. As to actual damages, the heirs of the
victims of murder are not entitled thereto because said
damages were not duly proved with a reasonable degree
of certainty. The award ofP25,000.00 as temperate
damages in homicide or murder cases is proper when no
evidence of burial and funeral expenses is presented in
the trial court. Under Article 2224 of the Civil Code,
temperate damages may be recovered, as it cannot be
denied that the heirs of the victims suffered pecuniary
loss although the exact amount was not proved. Thus,
this Court awardsP25,000.00 as temperate damages for
each count of murder. Anent moral damages, the same
are mandatory in cases of murder and homicide, without
need of allegation and proof other than the death of the
victim. The award by the Court of Appeals ofP50,000.00
as moral damages for each count of murder, is proper.
The Court of Appeals awarded exemplary damages in the
amount ofP75,000.00 for each count of murder. Such
award, following current jurisprudence, must be reduced
toP25,000.00 since the qualifying circumstance of
treachery was firmly established.People of the Philippines
vs. Rolly Gidoc @ Bayeng, G.R. No. 185162. April 24,
2009
Deed of sale; technical description. The Court does not
agree with petitioners contention that a deed of sale must
contain a technical description of the subject property in
order to be valid. Petitioners anchor their theory on
Section 127 of Act No. 496, which provides a sample
form of a deed of sale that includes, in particular, a
technical description of the subject property.

To be valid, a contract of sale need not contain a

technical description of the subject property. Contracts of
sale of real property have no prescribed form for their
validity; they follow the general rule on contracts that they
may be entered into in whatever form, provided all the
essential requisites for their validity are present.The
requisites of a valid contract of sale under Article 1458 of
the Civil Code are: (1) consent or meeting of the minds; (2)
determinate subject matter; and (3) price certain in money
or its equivalent.

The failure of the parties to specify with absolute clarity

the object of a contract by including its technical
description is of no moment. What is important is that
there is, in fact, an object that is determinate or at least
determinable, as subject of the contract of sale. The form
of a deed of sale provided in Section 127 of Act No. 496
is only a suggested form. It is not a mandatory form that
must be strictly followed by the parties to a contract.
In the instant case, the deed of sale clearly identifies the
subject properties by indicating their respective lot
numbers, lot areas, and the certificate of title covering
them. Resort can always be made to the technical
description as stated in the certificates of title covering
the two properties.Serafin Naranja, et al. vs. The
Honorable Court of Appeals, et al., G.R. No. 160132,
April 17, 2009.

Easement. The owner of the dominant estate cannot

violate any of the following prescribed restrictions on its
rights on the servient estate, to wit: (1) it can only
exercise rights necessary for the use of the easement; (2)
it cannot use the easement except for the benefit of the
immovable originally contemplated; (3) it cannot exercise
the easement in any other manner than that previously
established; (4) it cannot construct anything on it which is
not necessary for the use and preservation of the
easement; (5) it cannot alter or make the easement more
burdensome; (6) it must notify the servient estate owner of
its intention to make necessary works on the servient
estate; and (7) it should choose the most convenient time
and manner to build said works so as to cause the least
convenience to the owner of the servient estate. Any
violation of the above constitutes impairment of the
easement.Golderes Realty Corp. Vs. Cypress Gardens
etc., G.R. No. 171072, April 7, 2009.
Interest; legal rate. The claim in this case is one for
reimbursement of the sum of money paid by FGU
Insurance Corporation to RAGC. This is not one for
forbearance of money, goods or credit.Forbearance in
the context of the usury law is a contractual obligation of
lender or creditor to refrain, during a given period of time,
from requiring the borrower or debtor to repay a loan or
debt then due and payable. Thus the interest rate should
be as it is hereby fixed at 6%. Moreover, the interest rate
of 6% shall be computed from the date of filing of the
complaint,i.e., April 10, 1995. This is in accordance with
the ruling that where the demand cannot be established
with reasonable certainty, 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.International Container
Terminal Services, Inc. vs. FGU Insurance Corporation, et
al., G.R. No. 161539, April 24, 2009.

Laches. Laches has been defined as the failure of 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, or to assert a right
within reasonable time, warranting a presumption that the
party entitled thereto has either abandoned it or declined
to assert it. Thus, the doctrine of laches presumes that
the party guilty of negligence had the opportunity to do
what should have been done, but failed to do so.

In the instant case, when Esquivel and Talens filed with

the RTC their application for registration of the subject
property on 5 March 1993,28 years had passed since the
execution by Hermogenes of the Quitclaim covering the
subject property in favor of Hizon on 29 November 1965;
and25 years elapsed from the execution by Hizon of the
Deed of Absolute Sale of the subject property in favor of
Esquivel and Talens on 26 August 1968. During these
periods, without providing any reasons therefor, neither
Hizon nor Esquivel and Talens took possession of the
subject property or exercised in any other way their rights
over the same.Marcelino Lopez, et al. vs. Hon. Court of
Appeals, et al./ Noel Rubber and Development Corp, et al.
vs. Jose Esquivel, Jr., et al., G.R. No. 168734/G.R. No.
170621, April 24, 2009.

Mortgage; homestead patent. The mortgages cannot but

be voidab initio. . . The rationale for the prohibition,
reiterated in a line of cases, first laid down inPascua v.
Talens states that x x x homestead laws were designed
to distribute disposable agricultural lots of the State to
land-destitute citizens for their home and cultivation.
Pursuant to such benevolent intention the State prohibits
the sale or encumbrance of the homestead (Section 116,
now Section 118) within five years after the grant of the
patent. x x x. It aims to preserve and keep in the family of
the homesteader that portion of public land which the
State had gratuitously given to him. In the present case,
the annotation of the mortgage liens occurred only
months after the date of the issuance of the homestead
patents.

Property; prescription. In complying with Section 14(2) of

the Property Registration Decree, consider that under the
Civil Code, prescription is recognized as a mode of
acquiring ownership of patrimonial property. However,
public domain lands become only patrimonial property
not only with a declaration that these are alienable or
disposable. There must also be an express government
manifestation that the property is already patrimonial or
no longer retained for public service or the development
of national wealth, under Article 422 of the Civil Code.
And only when the property has become patrimonial can
the prescriptive period for the acquisition of property of
the public dominion begin to run.

(a) Patrimonial property is private property of the

government. The person acquires ownership of
patrimonial property by prescription under the Civil Code
is entitled to secure registration thereof under Section 14
(2) of the Property Registration Decree.

(b) There are two kinds of prescription by which

patrimonial property may be acquired, one ordinary and
other extraordinary. Under ordinary acquisitive
prescription, a person acquires ownership of a patrimonial
property through possession for at least ten (10) years, in
good faith and with just title. Under extraordinary
acquisitive prescription, a persons uninterrupted adverse
possession of patrimonial property for at least thirty (30)
years, regardless of good faith or just title, ripens into
ownership.Heirs of Malabanan vs. Republic of the
Philippines, G.R. No. 179987, April 29, 2009.

Negligence; medical malpractice suits. For lack of a

specific law geared towards the type of negligence
committed by members of the medical profession, such
claim for damages is almost always anchored on the
alleged violation of Article 2176 of the Civil Code.

In medical negligence cases, also called medical

malpractice suits, there exist a physician-patient
relationship between the doctor and the victim. But just
like any other proceeding for damages, four essential (4)
elementsi.e., (1) duty; (2) breach; (3) injury; and (4)
proximate causation, must be established by the plaintiff/
s. All the four (4) elements must co-exist in order to find
the physician negligent and, thus, liable for damages.

When a patient engages the services of a physician, a

physician-patient relationship is generated. And in
accepting a case, the physician, for all intents and
purposes, represents that he has the needed training and
skill possessed by physicians and surgeons practicing in
the same field; and that he will employ such training, care,
and skill in the treatment of the patient.Thus, in treating
his patient, a physician is under aduty to [the former] to
exercise that degree of care, skill and diligence which
physicians in the same general neighborhood and in the
same general line of practice ordinarily possess and
exercise in like cases. Stated otherwise, the physician has
the duty to use at least the same level of care that any
other reasonably competent physician would use to treat
the condition under similar circumstances.

This standard level of care, skill and diligence is a matter

best addressed by expert medical testimony, because the
standard of care in a medical malpractice case is a matter
peculiarly within the knowledge of experts in the field.

There is breach of duty of care, skill and diligence, or the

improper performance of such duty, by the attending
physician when the patient is injured in body or in health
[and this] constitutes the actionable malpractice.

Proof of such breach must likewise rest upon the

testimony of an expert witness that the treatment
accorded to the patient failed to meet the standard level
of care, skill and diligence which physicians in the same
general neighborhood and in the same general line of
practice ordinarily possess and exercise in like cases.
Even so, proof of breach of duty on the part of the
attending physician is insufficient, for there must be a
causal connection between said breach and the resulting
injury sustained by the patient. Put in another way, in
order that there may be a recovery for an injury, it must be
shown that the injury for which recovery is sought must
be the legitimate consequence of the wrong done; the
connection between the negligence and the injury must
be a direct and natural sequence of events, unbroken by
intervening efficient causes; that is, the negligence must
be theproximate causeof the injury. And the proximate
cause of an injury is that cause, which, in the natural and
continuous sequence, unbroken by any efficient
intervening cause, produces the injury, and without which
the result would not have occurred.

Just as with the elements of duty and breach of the same,

in order to establish the proximate cause [of the injury] by
a preponderance of the evidence in a medical malpractice
action, [the patient] must similarly use expert testimony,
because the question of whether the alleged professional
negligence caused [the patients] injury is generally one
for specialized expert knowledge beyond the ken of the
average layperson; using the specialized knowledge and
training of his field, the experts role is to present to the
[court] a realistic assessment of the likelihood that [the
physicians] alleged negligence caused [the patients]
injury.Peter Paul Patrick Lucas, et al. vs. Dr. Prospero Ma.
C. Tuao, G.R. No. 178763, April 21, 2009.
Property; lis pendens. A notice oflis pendens is an
announcement to the whole world that a particular real
property is in litigation, serving as a warning that one who
acquires an interest over said property does so at his own
risk, or that he gambles on the result of the litigation over
the said property. The filing of a notice oflis pendens
charges all strangers with a notice of the particular
litigation referred to therein and, therefore, any right they
may thereafter acquire on the property is subject to the
eventuality of the suit. Such announcement is founded
upon public policy and necessity, the purpose of which is
to keep the properties in litigation within the power of the
court until the litigation is terminated and to prevent the
defeat of the judgment or decree by subsequent
alienation.

Under Section 77 of Presidential Decree (P.D.) No. 1529,a

notice oflis pendens shall be deemed cancelled only
upon the registration of a certificate of the clerk of court in
which the action or proceeding was pending stating the
manner of disposal thereof if there was a final judgment in
favor of the defendant or the action was disposed of
terminating finally all rights of the plaintiff over the
property in litigation.Isabelita Cunanan, Carolyn Cunanan
and Carmencita F. Nemoto vs. Jumping Jap Trading
Corporation, represented by Reuben M. Protacio, G.R.
No. 173834, April 24, 2009.
Property; possession. In connection with Section 14(1)
of the Property Registration Decree, Section 48(b) of the
Public Land Act recognizes and confirms that 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 have
acquired ownership of, and registrable title to, such lands
based on the length and quality of their possession.

(a) Since Section 48(b) merely requires possession

since 12 June 1945 and does not require that the lands
should have been alienable and disposable during the
entire period of possession, the possessor is entitled to
secure judicial confirmation of his title thereto as soon as
it is declared alienable and disposable, subject to the
timeframe imposed by Section 47 of the Public Land Act.

(b) The right to register granted under Section 48(b) of

the Public Land Act is further confirmed by Section 14(1)
of the Property Registration Decree. Heirs of Malabanan
vs. Republic of the Philippines, G.R. No. 179987, April
29, 2009.

Reconstitution. The following must be present for an order

for reconstitution to issue: (a) that the certificate of title
had been lost or destroyed; (b) that the documents
presented by petitioner are sufficient and proper to
warrant reconstitution of the lost or destroyed certificate
of title; (c) that the petitioner is the registered owner of the
property or had an interest therein; (d) that the certificate
of title was in force at the time it was lost and destroyed;
and (e) that the description, area and boundaries of the
property are substantially the same as those contained in
the lost or destroyed certificate of title.Repubic of the
Philippines vs. Macaria L. Tuastumban, G.R. No. 173210,
April 24, 2009.

Sale; innocent purchaser for value. 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 that same property, and who pays a full
and fair price at the time of the purchase or before
receiving any notice of another persons claim.Philippine
National Bank Vs. Marcelino Banatao, et al. and Marciano
Carag, et al., G.R. No. 149221, April 7, 2009.

Sale; innocent purchaser for value. The honesty of

intention that constitutes good faith implies freedom from
knowledge of circumstances that ought to put a prudent
person on inquiry. Good faith consists in the belief of the
possessors that the persons from whom they received the
thing are its rightful owners who could convey their title.
Good faith, while always presumed in the absence of
proof to the contrary, requires this well-founded belief.
Spouses Juanito R. Villamil etc. et al. Vs. Lazaro Cruz-
Villarosa, G.R. No. 177187, April 7, 2009.
Sale; Torrens title. Well-settled is the rule that every
person dealing with a 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.

This principle does not apply when the party has actual
knowledge of facts and circumstances that would impel a
reasonably cautious man to make such inquiry or when
the purchaser has knowledge of a defect or the lack of
title in his vendor or of sufficient facts to induce a
reasonably prudent man to inquire into the status of the
title of the property in litigation. One who falls within the
exception can neither be denominated an innocent
purchaser for value nor a purchaser in good
faith.Spouses Juanito R. Villamil etc. et al. Vs. Lazaro
Cruz-Villarosa, G.R. No. 177187, April 7, 2009.

Sale; Torrens title. A forged or fraudulent document may

become the root of a valid title if the property has already
been transferred from the name of the owner to that of the
forger. This doctrine serves to emphasize that a person
who deals with registered property in good faith will
acquire good title from a forger and be absolutely
protected by a Torrens title. Having made the necessary
inquiries and having found the title to be authentic,
Villarosa need not go beyond the certificate of title. When
dealing with land that is registered and titled, as in this
case, buyers are not required by the law to inquire further
than what the Torrens certificate of title indicates on its
face. He examined the transferors title, which was then
under the name of Spouses Tolentino. He did not have to
scrutinize each and every title and previous owners of the
property preceding Tolentino.Spouses Juanito R. Villamil
etc. et al. Vs. Lazaro Cruz-Villarosa, G.R. No. 177187,
April 7, 2009.

Sale; Torrens title. It is true that one who deals with

property registered under the Torrens system need not go
beyond the same, but only has to rely on the face of the
title. He is charged with notice only of such burdens and
claims as are annotated on the title. However, this
principle does not apply when the party has actual
knowledge of facts and circumstances that would impel a
reasonably cautious man to make such inquiry or when
the purchaser or mortgagee has knowledge of a defect or
the lack of title in his vendor or mortgagor or of sufficient
facts to induce a reasonably prudent man to inquire into
the status of the title of the property in litigation. One who
falls within the exception can neither be denominated an
innocent purchaser or mortgagee for value nor a
purchaser or mortgagee in good faith.
In the present case, the fact that the orders dismissing the
case and directing the cancellation of the notice oflis
pendens was not yet final and executory should have
impelled the Cunanans to be wary of further
developments, as in fact plaintiff filed a motion for
reconsideration and the RTC granted the same. In short,
the Cunanans knowledge of the existence of a pending
litigation involving the disputed property makes them
mortgagees in bad faith. Hence, respondent could still
recover the property from the Cunanans. Isabelita
Cunanan, Carolyn Cunanan and Carmencita F. Nemoto
vs.Jumping Jap Trading Corporation, represented by
Reuben M. Protacio,G.R. No. 173834, April 24, 2009.

March 2009 Decisions on Civil Law

Civil Law

Family home. A family home is generally exempt from

execution, provided it was duly constituted as such. It is
likewise a given that the family home must be constituted
on property owned by the persons constituting it. As
pointed out in Kelley, Jr. v. Planters Products, Inc.: [T]he
family home must be part of the properties of the absolute
community or the conjugal partnership, or of the exclusive
properties of either spouse with the latters consent, or on
the property of the unmarried head of the family. In
other words, the family home must be established on the
properties of (a) the absolute community, or (b) the
conjugal partnership, or (c) the exclusive property of either
spouse with the consent of the other. It cannot be
established on property held in co-ownership with third
persons. However, it can be established partly on
community property, or conjugal property and partly on
the exclusive property of either spouse with the consent
of the latter. If constituted by an unmarried head of a
family, where there is no communal or conjugal property
existing, it can be constituted only on his or her own
property. Therein lies the fatal flaw in the postulate of
petitioners. For all their arguments to the contrary, the
stark and immutable fact is that the property on which
their alleged family home stands is owned by respondents
and the question of ownership had been long laid to rest
with the finality of the appellate courts judgment in CA-
G.R. CV No. 55207. Thus, petitioners continued stay on
the subject land is only by mere tolerance of respondents.
Simeon Cabang, et al. vs. Mr. & Mrs. Guillermo
Basay,G.R. No. 180587, March 20, 2009.

Mortgage; ownership of mortgaged property. For a

person to validly constitute a mortgage on real estate, he
must be the absolute owner thereof as required by Article
2085 of the New Civil Code. In other words, the
mortgagor must be the owner; otherwise, the mortgage is
void. Del Rosario was NOT the owner of the 5,546-sq.-
meter portion of the 6,368-sq.-meter lot, so she could not
have mortgaged the same to PCIB. There being no valid
mortgage of the said portion to PCIB, it could not be
subjected to foreclosure; it could not be sold at the public
auction; it could not be bought by PCIB as the highest
bidder at the public auction; and it could not be assigned
by PCIB to NIDC. National Investment and Development
Corp. vs. Sps. Francisco and Basilisa Bautista,G.R. No.
150388. March 13, 2009.

Mortgage; redemption period. The one-year redemption

period should be counted not from the date of foreclosure
sale, but from the time the certificate of sale was
registered with the Register of Deeds. In this case,
therefore, the one-year redemption period should be
reckoned from the time the certificate of sale was
registered on 27 October 1971. The law speaks of one
year period within which to exercise redemption. Under
Article 13 of the New Civil Code, a year is understood to
be of three hundred sixty-five (365) days. Applying said
article, the period of one year within which to redeem the
properties mortgaged to Banco Filipino by the Spouses
Bautista shall be 365 days from 27 October 1971. Thus,
excluding the first day and counting from 28 October
1971, and bearing in mind that 1972 was a leap year, the
redemption of the properties in question from Banco
Filipino could only be made until 26 October 1972.
National Investment and Development Corp. vs.Sps.
Francisco and Basilisa Bautista,G.R. No. 150388. March
13, 2009.
Mortgage; possession after foreclosure. A stipulation
allowing the mortgagee to take actual or constructive
possession of a mortgaged property upon foreclosure is
valid. In Agricultural and Industrial Bank v. Tambunting,
the Supreme Court explained: A stipulation
authorizing the mortgagee, for the purpose stated therein
specified, to take possession of the mortgaged premises
upon the foreclosure of a mortgage is not repugnant [to
either Article 2088 or Article 2137]. On the contrary, such
a stipulation is in consonance or analogous to the
provisions of Article [2132], et seq. of the Civil Code
regarding antichresis and the provision of the Rules of
Court regarding the appointment of a receiver as a
convenient and feasible means of preserving and
administering the property in litigation. Development
Bank of the Philippines vs. Spouses Jesus and Anacorita
Doyon,G.R. No. 167238. March 25, 2009.

Common carriers; liability. 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. For marine
vessels, Article 619 of the Code of Commerce provides
that the ship captain is liable for the cargo from the time it
is turned over to him at the dock or afloat alongside the
vessel at the port of loading, until he delivers it on the
shore or on the discharging wharf at the port of unloading,
unless agreed otherwise. In Standard Oil Co. of New York
v. Lopez Castelo, the Court interpreted the ship captains
liability as ultimately that of the shipowner by regarding
the captain as the representative of the ship owner. Lastly,
Section 2 of the COGSA provides that under every
contract of carriage of goods by sea, the carrier in relation
to the loading, handling, stowage, carriage, custody, care,
and discharge of such goods, shall be subject to the
responsibilities and liabilities and entitled to the rights and
immunities set forth in the Act. Section 3 (2) thereof then
states that among the carriers responsibilities are to
properly and carefully load, handle, stow, carry, keep, care
for, and discharge the goods carried. Philippines First
Insurance Co., Inc. vs.Wallem Phils. Shipping, Inc., et
al.,G.R. No. 165647, March 26, 2009.