SUMMARY OF DOCTRINES

I. PERSONS AND FAMILY RELATIONS

Art. 26, NCC

The philosophy behind Art. 26, NCC underscores the necessity for
its inclusion in our Civil Law. The Code Commission stressed in no
uncertain terms that the human personality be exalted. Thus, under this
article, the rights of a person are amply protected, and damages are
provided for violations of a person’s dignity, personality, privacy and
peace of mind. Further, the violations mentioned in this codal provision
are not exclusive but merely examples and do not preclude other similar
or analogous acts such as the one involved in this
case. (CONCEPCION vs. COURT OF APPEALS, G.R. No. 120706,
January 31, 2000)

Prejudicial Question

A prejudicial question is one that arises in a case the resolution of

which is a logical antecedent of the issue involved therein, and the
cognizance of which pertains to another tribunal. The prejudicial
question must be determinative of the case before the court but the
jurisdiction to try and resolve the question must be lodged in another
court or tribunal.
More simply, for the court to appreciate the pendency of a
prejudicial question, the law requires the concurrence of two essential
requisites, to wit:
a) The civil action involves an issue similar or intimately related to the
issue raised in the criminal action; and
b) The resolution of such issue determines whether or not the criminal
action may proceed. (CHING vs. COURT OF APPEALS, G.R. No.
110844, April 27, 2000)

Pendency of a civil action for nullity of marriage does not pose a

prejudicial question in a criminal case for concubinage. The rationale
behind the principle of prejudicial question is to avoid two conflicting
decisions. For a civil case to be considered prejudicial to a criminal
action as to cause the suspension of the latter pending the final
determination of the civil case, it must appear not only that the said civil
case involves the same facts upon which the criminal prosecution would
be based, but also that in the resolution of the issue or issues raised in
the aforesaid civil action, the guilt or innocence of the accused would
necessarily be determined. (BELTRAN vs. PEOPLE, G.R. No.
137567, June 20, 2000)

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

Support; Retroactive Application of the Family Code

Actual contribution is required by Art. 148 of the Family Code, in

contrast to Art. 147 . which states that efforts in the care and
maintenance of the family and household are regarded as contributions
to the acquisition of common property by one who has no salary or
income or work or industry. The care given by one party [to] the home,
children, and household, or spiritual or moral inspiration provided to the
other, is not included in Art.148. Hence, if actual contribution of the
party is not proved, there will be no co-ownership and no presumption of
equal shares
The right to support (for shelter) of illegitimate children does not prevail
over the right of the spouses to eject them. Article 203 of the Family
Code expressly provides that the obligation to give support shall be
demandable from the time the person who has the right to receive the
same needs it for maintenance, but it shall not be paid except from the
date of the judicial or extra-judicial demand. (TUMLOS vs.
FERNANDEZ, G.R. No. 137650, April 12, 2000)

Judicial Declaration of Presumptive Death of a Spouse

Since the marriage was contracted in 1958, the applicable

provision is Art. 83, NCC which provides that a subsequent marriage
contracted during the lifetime of the first spouse is illegal and void ab
initio unless the prior marriage is first annulled or dissolved, except when
the first spouse (1) has been absent for seven consecutive years at the
time of the second marriage without the spouse present having news of
the absentee being alive, or (2) if absent for less than seven years, is
generally considered as dead and believed to be so by the spouse
present at the time of contracting such subsequent marriage, or (3) is
presumed dead according to Articles 390 and 391 of the Civil Code. For
the exception to apply, the subsequent marriage must have been made
in good faith. A judicial declaration of absence of the absentee spouse
is not necessary as long as the prescribed period of absence is met.
The marriage under these exceptional cases is deemed to be valid “until
declared null and void by a competent court.” In contrast, under the
1988 Family Code, in order that a subsequent bigamous marriage may
exceptionally be considered valid, the following conditions must concur:
(a) the prior spouse of the contracting party must have been absent for
four consecutive years, or two years where the danger of death under
the circumstances in Article 391 of the Civil Code at the time of
disappearance; (b) the spouse present has a well founded belief that the
absent spouse is already dead; and (c) there is, unlike the old rule, a
judicial declaration of presumptive death of the absentee for which
purpose the spouse present can institute a summary proceeding in court
to ask for that declaration. (ARMAS vs. CALISTERIO, G. R. No.
136467, April 6, 2000)

Validity of Marriage; Marriage License Required

A marriage license is a formal requirement, its absence renders

the marriage void ab initio. Absence any claim of an exceptional
character, the purported marriage between the parties could not be
classified among those exempt from the marriage license requirement.
(SY vs. COURT OF APPEALS , G.R. No. 127263, April 12, 2000)

Exemption from Marriage License; Declaration of Nullity of a

Void Marriage

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

spouses from securing a marriage license should be computed on the
basis of a cohabitation as "husband and wife" where the only missing
factor is the special contract of marriage to validate the union. In other
words, the five-year common-law cohabitation period, which is counted
back from the date of celebration of marriage, should be a period of legal
union had it not been for the absence of the marriage. This 5-year period
should be the years immediately before the day of the marriage and it
should be a period of cohabitation characterized by exclusivity —
meaning no third party was involved at any time within the 5 years and
continuity — that is unbroken. Otherwise, if that continuous 5-year
cohabitation is computed without any distinction as to whether the
parties were capacitated to marry each other during the entire five years,
then the law would be sanctioning immorality and encouraging parties to
have common law relationships and placing them on the same footing
with those who lived faithfully with their spouse.
The Family Code is silent as to who can file a petition to declare
the nullity of a marriage. A void marriage can be attacked collaterally and
can be questioned even after the death of either party. That is why the
action or defense for nullity is imprescriptible. Any proper interested
party may attack a void marriage. (NIÑAL vs. BAYADOG, G.R. No.
133778, March 14, 2000)

Property Relations of Unions Without Marriage

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

II. PROPERTY

Property of Public Dominion

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

Builder in Good Faith

Both Article 448 and Article 546, NCC which allow full
reimbursement of useful improvements and retention of the premises
until reimbursement is made, apply only to a possessor in good faith,
i.e., one who builds on land with the belief that he is the owner thereof.
Verily, persons whose occupation of a realty is by sheer tolerance of its
owners are not possessors in good faith. Neither did the promise of the
alleged owners that they were going to donate the premises to
petitioners convert them into builders in good faith for at the time the
improvements were built on the premises, such promise was not yet
fulfilled, i.e., it was a mere expectancy of ownership that may or may not
be realized. (VERONA PADA-KILARIO vs. COURT OF APPEALS,
G.R. No. 134329, January 19, 2000)

Quieting of Title; Termination of Co-ownership by Prescription

An action to quiet title, under Art. 476, NCC, is a common-law

remedy for the removal of any cloud or doubt or uncertainty on the title
to real property. It is essential for the plaintiff or complainant to have a
legal or an equitable title to or interest in the real property which is the
subject matter of the action. Also, the deed, claim, encumbrance or
proceeding that is being alleged as a cloud on plaintiff's title must be
shown to be in fact invalid or inoperative despite its prima facie
appearance of validity or legal efficacy.
It is a fundamental principle that a co-owner cannot acquire by
prescription the share of the other co-owners, absent any clear
repudiation of the co-ownership. In order that the title may prescribe in
favor of a co-owner, the following requisites must concur: (1) the co-
owner has performed unequivocal acts of repudiation amounting to an
ouster of the other co-owners; (2) such positive acts of repudiation have
been made known to the other co-owners; and (3) the evidence thereof
is clear and convincing. (ROBLES vs. COURT OF APPEALS, G.R. No.
123509, March 14, 2000)

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

Waiver of Rights

Persons having legal as well as equitable title to or interest in a

real property may bring an action for quieting of title and "title" here does
not necessarily denote a certificate of title issued in favor of the person
filing the suit.
Moreover, if the plaintiff in an action for quieting of title is in
possession of the property being litigated, such action is imprescriptible.
One who is in actual possession of a land, claiming to be the owner
thereof may wait until his possession is disturbed or his title is attacked
before taking steps to vindicate his right because his undisturbed
possession gives him a continuing right to seek the aid of the courts to
ascertain the nature of the adverse claim and its effects on his title.
Although prescription and laches are distinct concepts, nonetheless in
some instances, the doctrine of laches is inapplicable where the action
was filed within the prescriptive period provided by law. Moreover, since
laches is a creation of equity, acts or conduct alleged to constitute the
same must be intentional and unequivocal so as to avoid injustice.
Laches operates not really to penalize neglect or sleeping on one's
rights, but rather to avoid recognizing a right when to do so would result
in a clearly inequitable situation.
The act of registration of a voluntary instrument is the operative act
which conveys or affects registered land insofar as third persons are
concerned. Hence, even without registration, the contract (oral partition)
is still valid as between the parties. Neither a Transfer Certificate of Title
nor a subdivision plan is essential to the validity of an oral partition.
Quitclaims are valid contracts of waiver of property rights. The
freedom to enter into contracts, such as the quitclaims, is protected by
law and the courts are not quick to interfere with such freedom unless
the contract is contrary to law, morals, good customs, public policy or
public order. Quitclaims, being contracts of waiver, involve the
relinquishment of rights, with knowledge of their existence and
intent to relinquish them. The intent to waive rights must be clearly
and convincingly shown. Moreover, when the only proof of intent is the
act of a party, such act should be manifestly consistent and indicative of
an intent to voluntarily relinquish a particular right such that no other
reasonable explanation of his conduct is possible. ( MAESTRADO vs.
COURT OF APPEALS, G.R. No. 133345 & 133324, March 9, 2000)

Preference of Possession; Ownership

Between the claimants, ownership shall be vested to the one who

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

There are 3 essential elements of a donation: (a) the reduction of

the patrimony of the donor; (b) the increase in the patrimony of the
donee; and (c) the intent to do an act of liberality or animus donandi.
When applied to a donation of an immovable property, the law further
requires that the donation be made in a public document and that
there should be an acceptance thereof made in the same deed of
donation or in a separate public document. In cases where the
acceptance is made in a separate instrument, it is mandated that the
donor should be notified thereof in an authentic form, to be noted in both
instruments.
The inexistence of a donation does not render the repudiation of
the inheritance valid. There is no valid repudiation of inheritance as
there was already an acceptance and where there is no showing that
such acceptance was made thru any of the causes which vitiate consent
or there is no proof of the existence of an unknown will. Art. 1056 of the
Civil Code provides – “The acceptance or repudiation of an inheritance
is irrevocable and cannot be impugned except when it was made thru
any of the causes that vitiate consent or when and unknown will
appears.”
Nevertheless, the nullity of the repudiation does not ipso facto
operate to convert the parcels of land into res nullius to be escheated in
favor of the Government. The repudiation, being of no effect
whatsoever, the parcels of land should revert to their private owner, who
although being an American citizen is qualified by hereditary succession
to own the property subject of the litigation. (REPUBLIC vs.
GUZMAN, G.R. No.132964, Feb. 18,2000)

Donation Inter Vivos

A donation as a mode of acquiring ownership results in an

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

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

Prescription in Action for Reconveyance

Prescription cannot be invoked in an action for reconveyance

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

Ownership Through Acquisitive Presciption

Together with actual possession of the land, tax declarations

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

III. SUCCESSION

Successional Rights; Transmission of; Scope

It is a general rule under the law on succession that successional

rights are transmitted from the moment of death of the decedent and
compulsory heirs are called to succeed by operation of law. Under
Article 776 NCC, inheritance includes all the property, rights and
obligations of a person, not extinguished by his death.
In a modal institution, the testator states (1) the object of the
institution, (2) the purpose or application of the property left by the
testator, or (3) the charge imposed by the testator upon the heir. A
"mode" imposes an obligation upon the heir or legatee but it does not
affect the efficacy of his rights to the succession. On the other hand, in a
conditional testamentary disposition, the condition must happen or be
fulfilled in order for the heir to be entitled to succeed the testator. The
condition suspends but does not obligate; and the mode obligates but
does not suspend. To some extent, it is similar to a resolutory condition.
Substitution is the designation by the testator of a person or persons to
take the place of the heir or heirs first instituted. Under substitutions in
general, the testator may either (1) provide for the designation of another
heir to whom the property shall pass in case the original heir should die
before him/her, renounce the inheritance or be incapacitated to inherit,
as in a simple substitution, or (2) leave his/her property to one person
with the express charge that it be transmitted subsequently to another or
others, as in a fideicommissary substitution.
A Will is a personal, solemn, revocable and free act by which a
person disposes of his property, to take effect after his death. Since
the Will expresses the manner in which a person intends how his
properties be disposed, the wishes and desires of the testator must be
strictly followed. Thus, a Will cannot be the subject of a compromise
agreement which would thereby defeat the very purpose of making a
Will. (RABADILLA vs. COURT OF APPEALS, G.R. No. 129471. April
28, 2000.)
Partition; Preterition

Every act intended to put an end to indivision among co-heirs and

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

Formal Requirements of a Valid Partition

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

IV. OBLIGATIONS AND CONTRACTS

Novation

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

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

Relativity of Contracts

The general rule under Article 1311, NCC is that heirs are bound
by contracts entered into by their predecessors-in-interest except when
the rights and obligations arising therefrom are not transmissible by (1)
their nature, (2) stipulation or (3) provision of law.
A good measure for determining whether a contract terminates upon
the death of one of the parties is whether it is of such character that it
may be performed by the promissor’s personal representative.
Furthermore, the subject matter of the contract is a lease, which is a
property right. The death of a party does not excuse nonperformance of
a contract which involves a property right, and the rights and obligations
thereunder pass to the personal representatives of the deceased.
Similarly, nonperformance is not excused by the death of the party when
the other party has a property interest in the subject matter of the
contract. (DKC HOLDINGS CORP. vs. COURT OF APPEALS, G. R.
No. 118248, April 5, 2000)

Onerous Contract

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

Power to Rescind in Reciprocal Obligations

The power to rescind or resolve is given to the injured party. More,

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

The right to rescind a contract involving reciprocal obligations is

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

Contract to Sell; Rescission

Article 1191,NCC on rescission, speaks of obligations already

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

Interpretation of Contracts; Rescission

The various stipulations in a contract should be interpreted

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

Badges of Fraud

Under Article 1381(3) of the Civil Code, contracts which are

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

Void and Voidable Contracts

Under Art. 1409 (2),NCC, one type of contract which can be declared
void and inexistent is that which is absolutely simulated or fictitious, as
when there are several badges of simulation proving that the sale
between the parties was not intended to have any legal effect between
them..
Nonetheless, a sale of the entire property by a co-heir is
unenforceable having been entered into in behalf of the co-heirs who
gave no authority or legal representation. However, such a contract is
susceptible of ratification. Where there is a ratification, then the sale is
considered valid and binding. (SEN PO EK MARKETING CORP.
vs. MARTINEZ, G.R. No. 134117, February 9, 2000)

Capacity to Enter into Contract

A person is not incapacitated to contract merely because of

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

Unenforceable Contract

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

Simulation of Contracts

Simulation is the declaration of a fictitious will deliberately made by

agreement of the parties, in order to produce, for the purposes of
deception, the appearances of a juridical act which does not exist or is
different what that which does not exist or is different what that which
was really executed.” Characteristic of simulation is that the apparent
contract is not really desired or intended to produce legal effect or in any
way alter the judicial situation of the parties. The requisites for
simulation are: (a) an outward declaration of will different from the will of
the parties; (b) the false appearance must have been intended by mutual
agreement; and (c) the purpose is to deceive third persons. (LOYOLA
vs. COURT OF APPEALS, G.R. No. 115734, February 23, 2000)

Laches; Prescription

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

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

The essence of laches is the failure, or neglect, for an

unreasonable and unexplained length of time to do that which, by
exercising due diligence, could or should have been done earlier; it is
the negligence or omission to assert a right within a reasonable time,
warranting a presumption that the party entitled to assert it either has
abandoned it or declined to assert it. (GASTON vs. COURT OF
APPEALS, G.R. No. 116340 June 29, 2000)

TRUST

Express Trust

Trust is the right to the beneficial enjoyment of property, the legal

title to which is vested in another. It is a fiduciary relationship that
obliges the trustee to deal with the property for the benefit of the
beneficiary. Trust relations between parties may either be express or
implied. An express trust is created by the intention of the trustor or of
the parties. An implied trust comes into being by operation of law.
Under Art. 1444, NCC ‘no particular words are required for the creation
of an express trust, it being sufficient that a trust is clearly intended.’
While no time limit is imposed for the enforcement of rights under
express trusts, prescription may, however, bar a beneficiary’s action for
recovery, if a repudiation of the trust is proven by clear and convincing
evidence and made known to the beneficiary. (SECUYA vs. VDA.
DE SELMA, G.R. No. 136021, February 22, 2000)

SALES AND LEASE

Elements of a Contract of Sale

Since the lot subsequently sold is said to adjoin the "previously

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

Option Money vs. Earnest Money

An option contract is a preparatory contract in which one party grants to

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

Delivery in Contract of Sale

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

Under Article 1497, NCC, a thing sold shall be understood as

delivered when it is placed in the control or possession of the vendee.
Delivery is generally evidenced by a written acknowledgment of a person
that he or she has actually received the thing or the goods, as in delivery
receipts. A bill of lading cannot substitute for a delivery receipt. This is
because it is a written acknowledgment of the receipt of the goods by
the carrier and an agreement to transport and deliver them at a specific
place to a person named or upon his order. It does not evidence receipt
of the goods by the consignee or the person named in the bill of lading;
rather, it is evidence of receipt by the carrier of the goods from the
shipper for transportation and delivery. Likewise, a factory consignment
invoice is not evidence of actual delivery of the goods. An invoice is
nothing more than a detailed statement of the nature, quantity and cost
of the thing sold. It is not proof that the thing or goods were actually
delivered to the vendee or the consignee. (LAO vs. COURT OF
APPEALS, G.R. No. 47013, 60647 & 60958-59, February 17, 2000)

Sale with Right of Repurchase

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

Consolidation of Title in Pacto de Retro Sale

 Art. 1607, NCC requiring a judicial order for the consolidation of
the ownership in the vendee a retro to be recorded in the Registry of
Property is intended to minimize the evils which the pacto de retro sale
has caused in the hands of usurers. A judicial order is necessary in order
to determine the true nature of the transaction and to prevent the
interposition of buyers in good faith while the determination is being
made. Notwithstanding Art. 1607, the recording in the Registry of
Property of the consolidation of ownership of the vendee is not a
condition sine qua non to the transfer of ownership. The essence of the
pacto de retro sale is that title and ownership of the property sold are
immediately vested in the vendee a retro, subject to the resolutory
condition of repurchase by the vendor a retro within the stipulated
period. Failure thus of the vendor a retro to perform said resolutory
condition vests upon the vendee by operation of law absolute title and
ownership over the property sold. As title is already vested in the vendee
a retro, his failure to consolidate his title under Article 1607, NCC does
not impair such title or ownership for the method prescribed thereunder
is merely for the purpose of registering the consolidated title. (CRUZ vs.
LEIS, G.R. No. 125233, March 9, 2000)

DOUBLE SALE

The prior registration of the disputed property by the second buyer

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

Under Article 1544 of the Civil Code before the second buyer can
obtain priority over the first, he must show that he acted in good
faith throughout (i.e., in ignorance of the first sale and of the first
buyer's rights) — from the time of acquisition until title is
transferred to him by registration or failing registration, by delivery
of possession. Knowledge gained by the second buyer of the first
sale defeats his rights even if he is first to register the second sale,
since such knowledge taints his prior registration with bad
faith. (ANGEL BAUTISTA vs. COURT OF APPEALS,
G.R. No. 123655, January 19, 2000)

Legal Redemption

A letter given by the vendee notifying the co-owner of the sale of

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

Validity of Stipulations in a Lease Contract

Jurisprudence supports the view that when parties to a contract

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

Nature of Lease of Chattels

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

Right of First Refusal of a Lessee

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

Pursuant to Art. 1196, NCC, the period of the lease contract is

deemed to have been set for the benefit of both parties. Renewal of the
contract may be had only upon their mutual agreement or at the will of
both of them. It is the owner-lessor’s prerogative to terminate the lease
at its expiration. The continuance, effectivity and fulfillment of a contract
of lease cannot be made to depend exclusively upon the free and
uncontrolled choice of the lessee between continuing the payment of the
rentals or not, completely depriving the owner of any say in the matter.
Mutuality does not obtain in such a contract of lease and no equality
exists between the lessor and the lessee since the life of the contract
would be dictated solely by the lessee.(BUCE vs. COURT OF
APPEALS, G.R. No. 136913, May 12, 2000)

Extension of Lease

The provisions of a contract should not be read in isolation from

the rest of the instrument but, on the contrary, interpreted in the light of
the other related provisions in order to fix the meaning of any of its
parts. Furthermore, in a reciprocal contract like a lease, the period of the
lease must be deemed to have been agreed upon for the benefit of both
parties, absent language showing that the term was deliberately set for
the benefit of the lessee or lessor alone. (UNIVERSITY PHYSICIANS
SERVICES, INC. vs. CA, G.R. No. 115045, January 31, 2000)

Concept of Implied New Lease

The prescriptive period for an action of reformation should be

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

V. TORTS AND DAMAGES

Damages

In seeking recovery for actual damages it is necessary that the

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

The award authorized by criminal law as civil indemnity (ex delicto)

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

As a general rule, moral damages are not recoverable in actions for

damages predicated on a breach of contract for it is not one of the items
enumerated under Art. 2219 of the Civil Code. As an exception, such
damages are recoverable: (1) in cases in which the mishap results in the
death of a passenger, as provided in Art. 1764, in relation to Art. 2206(3)
of the Civil Code; and (2) in the cases in which the carrier is guilty of
fraud or bad faith, as provided in Art. 2220. (CALALAS vs. COURT OF
APPEALS, G.R. No. 122039, May 31, 2000)
 Indemnity for death is presently fixed at P50,000.00. As to actual
damages. Art. 2199,NCC provides that "except as provided by law or by
stipulation, one is entitled to an adequate compensation only for such
pecuniary loss suffered by him as he has duly proved."
The civil liability of accused for indemnity for death and actual and
moral damages is solidary
Under Art. 2230,NCC, "exemplary damages as a part of the civil
liability may be imposed when the crime was committed with one or
more aggravating circumstances." (PEOPLE vs. BAUTISTA, G.R. No.
131840, April 27, 2000)

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

The amount of indemnity for loss of earning capacity is based on

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

Any person who seeks to be awarded actual or compensatory damages

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

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

The heirs are also entitled to receive a compensation for the loss
of earning capacity of the victim. The formula for computing the same as
established in decided cases is as follows:
Gross Necessary
Net Earning = Life x Annual - Living
Capacity Expectancy Income Expenses.
(PEOPLE vs. DANDO, G.R. No. 120646, February 14, 2000)

Attorney's fees may be awarded if one who claims it is compelled

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

The requisites for an action for damages based on malicious

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

The adverse result of an action does not make the prosecution

thereof wrongful neither does it subject the action to payment of
damages. The law does not impose a penalty to the right to litigate.
Resort to judicial processes, by itself, is not an evidence of ill will. As the
mere act of filing criminal complaint does not make the complainant
liable for malicious prosecution. There must be proof that the suit was
performed by legal malice, an inexcusable intent to oppress, vex, annoy
or humiliate. A contrary rule would discourage peaceful resources to the
court and unjustly penalize the exercise of a citizen’s right to litigate.
Where the action is filed in good faith, no penalty should be imposed
thereon. (VILLANUEVA vs. UNITED COCONUT PLANTERS BANK,
G.R. No. 138291, March 7, 2000)

Recovery of Damages in Negligent Acts

In quasi-delict, the negligence or fault should be clearly

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

Negligence; Easement

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

Rule Against Double Recovery in Negligence Cases

In negligence cases, the aggrieved party has the choice between

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

Liability of an Educational Institution

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

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

VI. CREDIT TRANSACTIONS

Escalation Clause; Interest

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

Real Estate Mortgage

In a real estate mortgage contract, it is essential that the

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

Rights of a Mortgagee

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

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

Legal Redemption; Mortgage

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

Concurrence and Preference of Credit

Art. 2242, NCC provides that the claims of contractors engaged in

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

VII. LAND TITLES AND DEEDS/AGRICULTURAL TENANCY LAWS

Registration of Land Under the TorrensSystem

Registration has never been a mode of acquiring ownership over

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

Proof required in Land Registration Proceedings

The burden of proof in land registration cases is incumbent on the

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

Evidence of Ownership

A Torrens Certificate of Title covers only the land described therein

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

Grant of Title/Confirmation of Imperfect Title on Lands

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

Remedies Available to Aggrieved Party in Registration

Proceedings

In land registration proceedings, the rule is that whoever first

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

Grant/Transfer of Friar Lands

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

Free Patent

In the light of their open, continuous and notorious possession and

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

Presumptive Conclusiveness of Torrens Title

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

conclusiveness of such title should be given due weight, and in the
absence of strong compelling evidence to the contrary, the holder
thereof should be considered as the owner of the property in controversy
until his title is nullified or modified in an appropriate ordinary action,
particularly, when possession of the property itself is in the persons
named in the title. (LIM vs. COURT OF APPEALS, G.R. No. 124715,
January 24, 2000)

Tenancy

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

A tenant is defined under Section 5 (a) of Republic Act No. 1199 as a

person who himself and with the aid available from within his immediate
farm household cultivates the land belonging to or possessed by
another, with the latter's consent, for purposes of production, sharing the
produce with the landholder under the share tenancy system, or paying
to the landholder a price certain or ascertainable in produce or in money
or both under the leasehold tenancy system. Briefly stated, for this
relationship to exist, it is necessary that:
1. The parties are the landowner and the tenant;
2. The subject is agricultural land;
3. There is consent;
 4. The purpose is agricultural production;
5. There is personal cultivation; and
6. There is sharing of harvests.
Upon proof of the existence of the tenancy relationship, a tenant
could avail of the right of redemption under RA 3844. This right of
redemption is validly exercised upon compliance with the following
requirements: a) the redemptioner must be an agricultural lessee or
share tenant; b) the land must have been sold by the owner to a third
party without prior written notice of the sale given to the lessee or
lessees and the DAR in accordance with Sec. 11, RA 3844, as
amended; c) only the area cultivated by the agricultural lessee may be
redeemed; d) the right of redemption must be exercised within 180 days
from notice; and e) there must be an actual tender or valid consignation
of the entire amount which is the reasonable price of the land sought to
be redeemed.(RUPA, SR. vs. COURT OF APPEALS, G.R. No. 80129,
January 25, 2000)

The right of tenancy attaches to the landholding by operation of

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

RA 3844 allows only one heir to succeed to the tenancy of the

deceased tenant in the order of preference prescribed by Section 9 of
the said law. However, where the land is not cultivated by one tenant
alone (predecessor of the present claimants) but with other tenants who
are likewise qualified and who are related to him, this provision does not
apply. Thus, it can be said that the entitlement of the other possessors
is not by virtue of succession to the rights of a predecessor-in-interest,
but in their individual capacity as tenants therein simultaneously with an
ascendant.
Under Section 22 of RA 6657, the Comprehensive Agrarian
Reform Law, those entitled to the award of the land are: “Section 22.
Qualified Beneficiaries – the lands covered by the CARP shall be
distributed as much as possible to landless residents of the same
barangay or in the absence thereof, landless residents of the same
municipality in the following order of priority:
a.) agricultural lessees and share tenants
b.) regular farm workers
c.) seasonal farmworkers
d.) other farmworkers
e.) actual tillers or occupants of public lands
f.) collective or cooperatives of the above beneficiaries
g.) others directly working on the land.
(GREENFIELD REALTY CORP. vs. CARDAMA, G.R. No. 129246,
January 25, 2000)

Preferential Rights of Tenants under P.D. 1517

Sale to one tenant alone, among the many tenants, is sufficient

compliance with P.D. 1517 where the landowner had offered his tenants
the chance to buy the land which they respectively occupied. (DEEv.
COURT OF APPEALS, G.R. No.108205, February 15, 2000)

Jurisdictional Requirements for Reconstitution of Title

The requirements for reconstitution of title, under R.A. 26, Secs. 12

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

I. PERSONS AND FAMILY RELATIONS

ART. 26, NCC

CONCEPCION vs. COURT OF APPEALS

G.R. No. 120706, January 31, 2000
Facts: Spouses Nestor and Allem Nicolas reside in an apartment
leased to them by Florence Concepcion. The spouses engage in a joint
venture by supplying government agencies with office supplies and
equipment. Sometime in July 1985, petitioner Rodrigo, brother of the
deceased husband of Florenceaccosted Nestor and accused him of
conducting an adulterous relationship with Florence. As a result of the
incident, Nestor felt extreme embarrassment and shame that he could
no longer face his neighbors. Consequently, Nestor demanded public
apology and payment of damages. Rodrigo ignored the demand for
which reason, the Spouses Nicolas filed a civil suit. The RTC ordered
Rodrigo to pay for moral and exemplary damages. CA affirmed the
award.

Issue: Is there a legal basis for the award of damages?

Held: Yes. The incident charged of Rodrigo was no less than an

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

Prejudicial Question

CHING vs. COURT OF APPEALS

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

Facts: On 04 February 1992, petitioner Ching was charged before

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

Issue: Does the pendency of a civil action for damages and

declaration of nullity of documents constitute a prejudicial question as to
warrant the suspension of criminal proceedings?

Held: NO. As defined, a prejudicial question is one that arises in a

case the resolution of which is a logical antecedent of the issue involved
therein, and the cognizance of which pertains to another tribunal. The
prejudicial question must be determinative of the case before the court
but the jurisdiction to try and resolve the question must be lodged in
another court or tribunal. It is a question based on a fact distinct and
separate from the crime but so intimately connected with it that it
determines the guilt or innocence of the accused, and for it to suspend
the criminal action, it must appear not only that said case involves facts
intimately related to those upon which the criminal prosecution would be
based but also that in the resolution of the issue or issues raised in the
civil case, the guilt or innocence of the accused would necessarily be
determined. It comes into play generally in a situation where a civil
action and a criminal action are both pending and there exists in the
former an issue which must be preemptively resolved before the criminal
action may proceed, because howsoever the issue raised in the civil
action is resolved would be determinative juris et de jure of the guilt or
innocence of the accused in the criminal case.
More simply, for the court to appreciate the pendency of a
prejudicial question, the law requires the concurrence of two essential
requisites, to wit:
a) The civil action involves an issue similar or intimately related to the
issue raised in the criminal action; and
b) The resolution of such issue determines whether or not the criminal
action may proceed.
Verily, under the prevailing circumstances, the alleged prejudicial
question in the civil case for declaration of nullity of documents and for
damages, does not juris et de jure determine the guilt or innocence of
the accused in the criminal action for estafa. Assuming arguendo that
the court hearing the civil aspect of the case adjudicates that the
transaction entered into between the parties was not a trust receipt
agreement, nonetheless the guilt of the accused could still be
established and his culpability under penal laws determined by other
evidence. To put it differently, even on the assumption that the
documents are declared null, it does not ipso facto follow that such
declaration of nullity shall exonerate the accused from criminal
prosecution and liability.
Therefore, the civil action for declaration of nullity of documents
and for damages does not constitute a prejudicial question to the
criminal cases for estafa filed against petitioner.

BELTRAN vs. PEOPLE

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

Facts: Petitioner Meynardo Beltran sought a declaration of nullity of

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

Issue: Does a pending petition for declaration of nullity of marriage

constitute a prejudicial question that should merit the suspension of the
criminal case for concubinage?

Held: NO. Pendency of a civil action for nullity of marriage does not
pose a prejudicial question in a criminal case for concubinage.
The rationale behind the principle of prejudicial question is to avoid
two conflicting decisions. It has two essential elements: (a) the civil
action involves an issue similar or intimately related to the issue raised in
the criminal action; and (b) the resolution of such issue determines
whether or not the criminal action may proceed. For a civil case to be
considered prejudicial to a criminal action as to cause the suspension of
the latter pending the final determination of the civil case, it must appear
not only that the said civil case involves the same facts upon which the
criminal prosecution would be based, but also that in the resolution of
the issue or issues raised in the aforesaid civil action, the guilt or
innocence of the accused would necessarily be determined.
 In a case for concubinage, the accused, like the herein petitioner
need not present a final judgment declaring his marriage void for he can
adduce evidence in the criminal case of the nullity of his marriage other
than proof of a final judgment declaring his marriage void. Article 40 of
the Family Code provides:
"The absolute nullity of a previous marriage may be invoked for
purposes of remarriage on the basis solely of a final judgment declaring
such previous marriage void."
In Domingo vs. CA, this Court ruled that the import of said provision is
that for purposes of remarriage, the only legally acceptable basis for
declaring a previous marriage an absolute nullity is a final judgment
declaring such previous marriage void, whereas, for purposes of other
than remarriage, other evidence is acceptable.
With regard to petitioner's argument that he could be acquitted of the
charge of concubinage should his marriage be declared null and void,
suffice it to state that even a subsequent pronouncement that his
marriage is void from the beginning is not a defense. Parties to the
marriage should not be permitted to judge for themselves its nullity, for
the same must be submitted to the judgment of the competent courts
and only when the nullity of the marriage is so declared can it be held as
void, and so long as there is no such declaration the presumption is that
the marriage exists for all intents and purposes. Therefore, he who
cohabits with a woman not his wife before the judicial declaration of
nullity of the marriage assumes the risk of being prosecuted for
concubinage.

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

Support; Retroactive Application of the Family Code

TUMLOS vs. FERNANDEZ

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

Facts: Respondent-spouses Mario and Lourdes Fernandez filed an

action for ejectment against petitioner Guillerma Tumlos and her two
children. In her Answer, Guillerma averred that the Fernandez spouses
had no cause of action against her, since she is a co-owner of the
subject premises as evidenced by a Contract to Sell wherein it was
stated that she is a co-vendee of the property in question together with
Mario. The MTC ruled for the spouses Fernandez. Upon appeal to the
RTC, Guillerma alleged that Mario and Guillerma had an amorous
relationship, and that they acquired the property in question as their love
nest, that they lived together in the apartment building subject of the
ejectment suit with their 2 children for around 10 years, and that
Guillerma administered the property by collecting rentals from the
lessees of the other apartments, until she discovered that Mario
deceived her as to the annulment of his marriage. The RTC ruled that
Guillerma and Mario acquired the property during their cohabitation as
husband and wife, although without the benefit of marriage, it concluded
that Guillerma Tumlos was a co-owner of the subject property and could
not be ejected therefrom.

Issues: 1. Did Guillerma have the right of co-ownership over the

property in question?
2. Does the right to support (for shelter) of illegitimate children
prevail over the right of the spouses to eject them?

Held: 1. NO. There was no proof of actual contribution by Guillerma

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

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

ARMAS vs. CALISTERIO

G. R. No. 136467, April 6, 2000

Facts: On April 24, 1992, Teodorico Calisterio died intestate, leaving

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

Issue: Was the subsequent marriage between Teodorico

and Marietta invalid due to Marietta’s failure to secure the judicial
declaration of the presumptive death of James?

Held: NO. The subsequent marriage was valid. When the marriage
between Teodorico and Mariettawas solemnized on May 8, 1958, the
law in force at that time was the Civil Code, not the Family Code which
took effect only on August 3, 1988. Article 256 of the Family Code itself
limited its retroactive application only to cases where it thereby would not
prejudice or impair vested or acquired rights in accordance with the Civil
Code or other laws.
Hence, the applicable provision is Art. 83, NCC which provides that
a subsequent marriage contracted during the lifetime of the first spouse
is illegal and void ab initio unless the prior marriage is first annulled or
dissolved, except when the first spouse (1) has been absent for seven
consecutive years at the time of the second marriage without the spouse
present having news of the absentee being alive, or (2) if absent for less
than seven years, is generally considered as dead and believed to be so
by the spouse present at the time of contracting such subsequent
marriage, or (3) is presumed dead according to Articles 390 and 391of
the Civil Code. For the exception to apply, the subsequent marriage
must have been made in good faith. A judicial declaration of absence of
the absentee spouse is not necessary as long as the prescribed period
of absence is met. The marriage under these exceptional cases is
deemed to be valid “until declared null and void by a competent court.”
In contrast, under the 1988 Family Code, in order that a subsequent
bigamous marriage may exceptionally be considered valid, the following
conditions must concur: (a) the prior spouse of the contracting party
must have been absent for four consecutive years, or two years where
the danger of death under the circumstances in Article 391 of the Civil
Code at the time of disappearance; (b) the spouse present has a well
founded belief that the absent spouse is already dead; and (c) there is,
unlike the old rule, a judicial declaration of presumptive death of the
absentee for which purpose the spouse present can institute a summary
proceeding in court to ask for that declaration.
In the case at bar, Marietta’s first husband, James Bounds, has
been absent or had disappeared for more than eleven years before she
entered into a second marriage with Teodorico. This second marriage,
having been contracted during the regime of the Civil Code, should thus
be deemed valid notwithstanding the absence of a judicial declaration of
presumptive death of James Bound. Moreover, there is no finding that
the said second marriage was contracted in bad faith.

Validity of Marriage; Marriage License Required

SY vs. COURT OF APPEALS

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

Facts: Filipina Sy filed a petition for the declaration of absolute nullity

of her marriage to Fernando Sy on the ground of psychological
incapacity. To show the manifestations of her husband’s psychological
incapacity, she presented the following proofs: 1) final judgment
rendered in her favor, in her previous petitions for separation of property
and legal separation; 2) Fernando's infliction of physical violence on her
which led to the previous conviction of her husband for slight physical
injuries; 3) habitual alcoholism; 4) refusal to live with her without fault on
her part, choosing to live with his mistress instead; and 5) refusal to have
sex with her, performing the marital act only to satisfy himself. The
petition was denied.
 Hence the present petition whereby Filipina raises for the first time
the nullity of their marriage on the ground of the lack of marriage license
at the time of the celebration of the marriage.

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

Held: The documents (marriage certificate, photocopies of birth

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

Exemption from Marriage License; Declaration of Nullity of a

Void Marriage

Niñal vs. Bayadog

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

Facts: Pepito Niñal was married to Teodulfa Bellones on September

26, 1974. Out of their marriage were born herein petitioners. Teodulfa
was shot by Pepito resulting in her death on April 24, 1985. One year
and eight months thereafter Pepito and Norma Badayog got married
without any marriage license. In line thereof, Pepito and Norma
executed an affidavit stating that they have lived together at least five
years and more thus exempt for securing a marriage license. Pepito died
in a car accident. After their father’s death, petitioners filed a petition for
declaration of nullity of the marriage of Pepito and Norma alleging that
said marriage was void for lack of marriage license. Norma filed a motion
to dismiss on the ground that the petitioners have no cause of action
since they are not among the persons who can file action for annulment
of marriage under Article 47 of the Family Code.
Issues: 1. What nature of cohabitation is contemplated by law to
warrant the counting of the five-year period in order to exempt the future
spouses from securing a marriage license?
2. Do the petitioners have the personality to file a petition to
declare their father’s marriage void ab initio after his death?

Held: The 5-year period should be computed on the basis of a

cohabitation as “husband and wife” where the only missing factor is the
special contract of marriage to validate the union.
The two marriages involved herein having been solemnized prior
to the effectivity of the Family Code (FC), the applicable law to determine
their validity is the Civil Code which was the law in effect at the time of
their celebration. A valid marriage license is a requisite of marriage
under Art. 53 of the Civil Code, the absence of which renders the
marriage void ab initio. However there are several instances recognized
by the Civil Code wherein a marriage license is dispensed with, one of
which is that provided in Art. 76, referring to the marriage of a man and a
woman who have lived together and exclusively with each other as
husband and wife for a continuous and unbroken period of at least five
years before the marriage. There is no dispute that the marriage of
petitioners' father to respondent Norma was celebrated without any
marriage license. In lieu thereof, they executed an affidavit stating that
"they have attained the age of majority, and, being unmarried, have lived
together as husband and wife for at least five years, and that we now
desire to marry each other." Working on the assumption that Pepito and
Norma have lived together as husband and wife for five years without
the benefit of marriage, that five-year period should be computed on the
basis of a cohabitation as "husband and wife" where the only missing
factor is the special contract of marriage to validate the union. In other
words, the five-year common-law cohabitation period, which is counted
back from the date of celebration of marriage, should be a period of legal
union had it not been for the absence of the marriage. This 5-year period
should be the years immediately before the day of the marriage and it
should be a period of cohabitation characterized by exclusivity —
meaning no third party was involved at any time within the 5 years and
continuity — that is unbroken. Otherwise, if that continuous 5-year
cohabitation is computed without any distinction as to whether the
parties were capacitated to marry each other during the entire five years,
then the law would be sanctioning immorality and encouraging parties to
have common law relationships and placing them on the same footing
with those who lived faithfully with their spouse.
 2. YES. Petitioners have the personality to file the petition.
Having determined that the second marriage involved in this case is not
covered by the exception to the requirement of a marriage license, it is
void ab initio because of the absence of such element. The Family Code
is silent as to who can file a petition to declare the nullity of a marriage. A
void marriage can be attacked collaterally and can be questioned even
after the death of either party. That is why the action or defense for
nullity is imprescriptible. Any proper interested party may attack a void
marriage. Contrary to the trial court's ruling, the death of petitioner's
father extinguished the alleged marital bond between him and
respondent. The conclusion is erroneous and proceeds from a wrong
premise that there was a marriage bond that was dissolved between the
two. It should be noted that their marriage was void hence it is deemed
as if it never existed at all and the death of either extinguished nothing.

Property Relations of Unions Without Marriage

ADRIANO vs. COURT OF APPEALS

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

Facts: The testator Lucio Adriano, married Gliceria Dorado in 1933

and they had 3 children, herein private respondents. Sometime in 1942
or prior thereto, Lucio cohabited with Vicenta Villa, with whom he had 8
children. All his children by Vicenta are the named petitioners in the
instant case, with the exception of Jose Vergel, who died before the
inception of the proceedings.
After the death of Gliceria in 1968, Lucio married Vicenta. In 1980,
Lucio executed a will disposing of all his properties to his second wife
Vicenta and all his children by his first and second marriages. While
estate settlement proceedings were pending before the RTC, petitioners
instituted an action for annulment of Lucio’s will. In the complaint,
petitioners alleged that before the marriage of Lucio and their mother,
Vicenta, the two lived together as husband and wife and as such,
acquired properties which became the subject of inventory and
administration in the petition for probate of the will. Petitioners claimed
that the properties bequeathed in Lucio's will are undivided "civil
partnership and/or conjugal properties of Lucio and Vicenta ", and thus,
the will sought to be probated should be declared void and ineffective
insofar as it disposes of the rightful share or properties of Vicenta.
The trial court favored the evidence of private respondents, which
indicated that the purchase money for the contested properties came
from the earnings of Lucio during the subsistence of his marriage to
Gliceria.

Issue: Is Vicenta a co-owner with respect to ½ of the properties in

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

Held: NO. Petitioners' insistence that a co-ownership of properties

existed between Lucio and Vicenta during their period of cohabitation
before their marriage in 1968 is without lawful basis considering that
Lucio's marriage with Gliceria was then subsisting. The co-ownership in
Article 144 of the Civil Code requires that the man and woman living
together as husband and wife without the benefit of marriage must not in
any way be incapacitated to marry. Considering that the property was
acquired in 1964, or while Lucio's marriage with Gliceria subsisted, such
property is presumed to be conjugal unless it be proved that it pertains
exclusively to the husband or to the wife.
In Belcodero vs. CA, the SC held that property acquired by a man
while living with a common-law wife during the subsistence of his
marriage is conjugal property, even when the property was titled in the
name of the common-law wife. In such cases, a constructive trust is
deemed to have been created by operation of Article 1456 of the Civil
Code over the property which lawfully pertains to the conjugal
partnership of the subsisting marriage.
In Vicenta's case, it is clear that her designation as a co-owner of
the property in the TCT is a mistake which needs to be rectified by the
application of the foregoing provisions of Article 1456 and the ruling in
Belcodero. The principle that a trustee who takes aTorrens title in his or
her name cannot repudiate the trust by relying on the registration, is a
well-known exception to the principle of conclusiveness of a certificate of
title.
PROPERTY

Property of Public Dominion

LANSANG vs. COURT OF APPEALS

G.R. No. 102667, February 23, 2000
Facts: Private respondents General Assembly of the Blind, Inc.
(GABI) and Jose Iglesias were allegedly given office and library space
as well as kiosks area for sale of food and drinks in Rizal Park through
an alleged “verbal contract of lease” awarded in 1970 by the National
Parks Development Committee (NPDC).
To clean up Rizal Park, the new chairman of the NPDC sent a
written notice to GABI and Iglesias of the termination of the so-called
verbal agreement and the demand for the latter to vacate the premises
and the kiosks.

Issue: Did petitioner Amado Lansang abuse his authority in ordering

the ejectment of private respondents GABI and Iglesias?

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

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

Builder in Good Faith

VERONA PADA-KILARIO vs. COURT OF APPEALS

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

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

Issue: Are the petitioner spouses Pada-Kilario builders in good faith

as to be entitled to reimbursement for improvements made on the
property?

Held: No. Petitioner spouses explicitly admitted in their Answer that

they had been occupying the subject property since 1960 without ever
paying any rental as they only relied on the liberality and tolerance of the
Pada family. Considering that they were in possession of the subject
property by sheer tolerance of its owners, they knew that their
occupation of the premises may be terminated any time. Thus, they
cannot be considered possessors nor builders in good faith. It is well-
settled that both Article 448 and Article 546, NCC which allow full
reimbursement of useful improvements and retention of the premises
until reimbursement is made, apply only to a possessor in good faith,
i.e., one who builds on land with the belief that he is the owner thereof.
Verily, persons whose occupation of a realty is by sheer tolerance of its
owners are not possessors in good faith. Neither did the promise of the
alleged owners that they were going to donate the premises to
petitioners convert them into builders in good faith for at the time the
improvements were built on the premises, such promise was not yet
fulfilled, i.e., it was a mere expectancy of ownership that may or may not
be realized. As such, petitioner spouses cannot be said to be entitled to
the value of the improvements that they built on the said lot.

Builder in Bad Faith

ISAGUIRRE vs. DE LARA
G.R. No. 138053, May 31, 2000

Facts: Petitioner Isaguirre and respondent De Lara were parties in a

case involving a parcel of land wherein there was dispute as to its
ownership as well as the nature of the transaction they entered into
regarding the disputed land. The case was resolved by the Supreme
Court which declared that De Lara was the lawful owner of the land and
held that the contract they entered into was an equitable mortgage and
not a sale.
On the basis of the Court’s decision, De Lara filed a motion for
execution with the trial court for the delivery of possession of the land.
Isaguirre opposed the motion, asserting that, as mortgagee, he had the
right of retention over the property until payment of the value of the
improvements, arguing that he is builder in good faith with respect to the
said improvements he made before the transaction was declared to be
an equitable mortgage.

Issue: Can Isaguirre be considered a builder in good faith?

HELD: NO. ISAGUIRRE IS NOT A BUILDER IN GOOD FAITH. HE

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

Quieting of Title; Termination of Co-ownership by Prescription

ROBLES vs. COURT OF APPEALS

G.R. No. 123509, March 14, 2000
Facts: The property subject of this case is originally owned by Leon
Robles. When he died, it passed to his son Silvino who declared the
property in his name and paid the taxes thereon. Upon the latter’s
death, his widow and children inherited the property. Petitioners Lucio
Robles, et al. were the children of Silvino, and Hilario Robles is their half-
brother. The task of cultivating was assigned to Lucio while the payment
of the land taxes was entrusted to Hilario. For unknown reason, the tax
declaration of the parcel of land in the name of Silvino was cancelled
and transferred to Exequiel Ballena. Ballena secured a loan from
Antipolo Rural Bank using the tax declaration as security. Somehow the
tax declaration was transferred to the name of Antipolo Rural Bank and
later was transferred to the name of respondent- spouses Hilario and
Andrea Robles. Andrea secured a loan from Cardona Rural Bank using
the tax declaration as security. For failure to pay the mortgage debt, the
property was foreclosed with Cardona Rural Bank emerging as the
highest bidder. The bank sold the property to spouses Vergel and Ruth
Santos. In Sept. 1987, petitioners discovered the mortgage and
attempted to redeem the property but was unsuccessful. In 1988, the
spouses Santostook possession of the propertry and was able to secure
a Free Patent. Petitioners then filed an action for quieting of title.
Respondents questioned their standing to sue for quieting of title,
contending that petitioners no longer have any interest to the property in
question due to the mortgage effected by Hilario and the consequent
foreclosure thereof by the Bank. Respondents argued that Hilario had
become the absolute owner of the property at the time he mortgaged the
same. The CA ruled that the several transfers of the tax declaration of
the property in question from Silvino until to the spouses Santos had the
effect of divesting petitioners of their title by prescription to Hilario.

Issues: 1. Do the petitioners have appropriate title that will entitle

them to the remedy of the quieting of title?
2. Did Hilario acquire the share of his co-owners in the
disputed property by prescription?

Held: 1. YES. An action to quiet title, under Art. 476, NCC, is a

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

2. NO. Hilario effected no clear and evident repudiation of the co-

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

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

Waiver of Rights

MAESTRADO vs. COURT OF APPEALS

G.R. No. 133345 & 133324, March 9, 2000.
Facts: The spouses Ramon and Rosario Chaves died intestate
leaving several properties. They were survived by their six children who
later entered into a project of partition which was approved by the court.
Accordingly, the estate was divided and distributed to the
heirs. Lot 5872, for some reason however, was not included in the
project of partition, nor in the inventory. During the actual partition in
1956, Lot5872 was delivered to petitioners Josefa Maestrado and her
children, one of the heirs. The non-inclusion of said lot was discovered
only in 1976. In an effort to set things right, petitioners prepared a
quitclaim in their favor to confirm to the alleged oral agreement, which
notarized quitclaim was signed by the other heirs. Six years after the
execution of said quitclaim, or in 1983, respondents, children of the other
heirs, discovered that Lot 5872 is still in the name of the deceased
spouses Chaves. They requested that the property be divided and
distributed to the heirs. In response, petitioners filed an action for
quieting of title. Respondents argued, among others, that petitioners
have no standing to sue for the quieting of title and that their action is
barred by laches. They likewise assailed the validity and due execution
of the quitclaim. The trial court declared that Lot 5872 is still common
property and ordered its division among the heirs.

Issues: 1. Do the petitioners have the legal standing to sue for

quieting of title? If so, is such action barred by laches?
2. Is Lot No. 5872 still a common property?

Held: 1. YES. Petitioners are proper parties to bring an action for

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

2. NO. Lot No. 5872 is no longer common property of the heirs of

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

CEQUENA vs. BOLANTE

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

Facts: Since 1926, a parcel of land was declared in the name of

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

Issue: As between the claimants, who is the preferred possessor and

the lawful owner of the subject parcel of land?

Held: Respondent is the preferred possessor and lawful owner of the

disputed land. Despite their dispossession in 1985, the petitioners did
not lose legal possession because possession cannot be acquired
through force or violence. A possessor, even if physically ousted, is still
deemed the legal possessor. However, possession by the petitioners
does not prevail over that of the respondent. Their possession before
1985 was not exclusive, as the latter also acquired it before 1985.
Petitioner’s father and brother, as well as the respondent and her mother
were simultaneously in adverse possession of the land. Based on Article
538 of the Civil Code, respondent is the preferred possessor because,
benefiting from her father’s tax declaration of the subject lot since 1926,
respondent has been in possession thereof for a longer period. On the
other hand, petitioners’ father acquired joint possession only in 1952.
As to the issue of ownership, respondent argues that she was legally
presumed to possess the subject land with a just title since she
possessed it in the concept of owner. Under Article 541 of the Civil
Code, she could not be obliged to show or prove such title. This is
untenable since the presumption in Article 541 is merely disputable.
Article 538 settles only the question of possession, and possession is
different from ownership. Ownership in this case should be established
in one of the ways provided by law.
Between the claimants, ownership shall be vested to the one who
has proven acquisitive prescription. Respondent’s possession was not
disturbed until 1953 when petitioners’ father claimed the land. But by
then, her possession, which was in the concept of owner – public,
peaceful, and uninterrupted – had already ripened into ownership.
Furthermore she herself declared and paid realty taxes for the disputed
land. Tax receipts and declarations of ownership for taxation, when
coupled with proof of actual possession of the property, can be the basis
of a claim for ownership through prescription. In contrast, petitioners did
not acquire ownership despite 32 years (1953-1985) of farming the
subject land. It is settled that ownership cannot be acquired by mere
occupation. Unless it is hostile, occupation and use, however long, will
not confer title by prescription or adverse possession. Moreover, the
petitioners cannot claim that their possession was public, peaceful and
uninterrupted. Although their father and brother arguably acquired
ownership through extraordinary prescription because of their adverse
possession of 32 years, this supposed ownership can not extend to the
entire disputed lot, but must be limited to the portion that they actually
farmed. The tax declarations and receipts of petitioners are only prima
facie, not conclusive, evidence of ownership in the absence of actual
public and adverse possession.

Donation Inter Vivos; Repudiation Of Inheritance; Escheat

REPUBLIC vs. GUZMAN

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

Facts: Respondent David Rey Guzman, a natural born American

citizen is the son of spouses Simeon Guzman , naturalized American
citizen and Helen Meyers Guzman, American citizen. In 1968, Simeon
died living to his sole heirs Helen and David an estate consisting of
several parcels of land located in Bulacan. Thereafter, Helen and David
executed a Deed of Extrajudicial settlement dividing and adjudicating to
themselves the property belonging to the estate of Simeon. The
document was registered in the Register of Deeds and the parcels of
land were accordingly registered in the name of Helen and David in
undivided equal shares. In 1981, Helen executed a Quitclaim Deed
conveying to David her undivided ½ interest on said lands. On Aug. 9,
1989, she executed another Deed of Quitclaim confirming the earlier
quitclaim in 1981 as well as modifying the document to encompass all
her other property in the Philippines. More than a week later, David
executed a Special Power of Attorney (SPA) where he acknowledged
that he became the owner of the parcels of land subject of the Aug. 9,
1989 Deed of Quitclaim and empowering Atty. Abella to sell or otherwise
dispose of the lot. On Feb. 1, 1990, Atty. Abella, upon instruction of
Helen, paid donor’s taxes to facilitate the registry of the parcels of land in
the name of David.
In 1994, upon information furnished by a certain Atty. Batongbacal,
showing that David’s ownership of ½ of Simeon’s estate was defective,
the Government filed before the RTC of Bulacan a petition for escheat
praying that ½ of David’s interest in each of the subject parcels of land
be forfeited in its favor. Petitioner anchors its argument on Art. XII,
Secs. 7 & 8 of the Constitution, which sets the rule that only Filipino
citizen can acquire private lands in thePhilippines. The exceptions are in
the case of hereditary succession and if he was formerly a natural-born
Filipino citizen who lost his Filipino citizenship. Since David’s acquisition
of said lands does not fall under any of these exceptions, David could
not validly acquire ½ interest in each of the subject parcels of land in
dispute by way of the two Deed of Quitclaims as they are in reality
donation inter vivos. David maintains, on the other hand, that he
acquired the property by right of accretion and not by way of donation.

Issue: Should respondent’s ½ interest of the disputed parcels of land

be escheated in favor of the government?

Held: NO. Escheat is not proper under the circumstances.

In the first place, there is no valid donation. There are 3 essential
elements of a donation: (a) the reduction of the patrimony of the donor;
(b) the increase in the patrimony of the donee; and (c) the intent to do an
act of liberality or animus donandi. When applied to a donation of an
immovable property, the law further requires that the donation be made
in a public document and that there should be an acceptance thereof
made in the same deed of donation or in a separate public document. In
cases where the acceptance is made in a separate instrument, it is
mandated that the donor should be notified thereof in an authentic form,
to be noted in both instruments. Not all the elements of a donation of an
immovable property are present in the instant case. The transfer of the
property by virtue of the Deed of Quitclaim executed by Helen resulted in
the reduction of her patrimony as donor and the consequent increase in
the patrimony of David as donee. However, Helen’s intention to perform
an act of liberality in favor of David was not sufficiently established. A
perusal of the Deeds of Quitclaim reveals that Helen intended to convey
to her son David certain parcels of land located in thePhilippines, and to
re-affirm the quitclaim she executed in 1981 which likewise declared a
waiver and renunciation of her rights over the parcels of land . The
language of the Deed is clear that Helen merely contemplated a waiver
of her rights, title and interest over the land in favor of David, and not a
donation. The element of animus donandi, therefore, was missing.
Likewise the two Deeds of Quitclaim may have been in the nature of a
public document but they lacked the essential element of acceptance in
the proper form required by law to make the donation valid. The SPA
does not qualify as an implied acceptance by David of the alleged
donation but merely acknowledges that David owns the property referred
to and that he authorizes Atty. Abella to sell the same in his name.
There is no intimation, expressly or impliedly, that David’s acquisition of
the parcels of land is by virtue of Helen’s possible donation to him and
we cannot look beyond the language of the document to make a
contrary construction. Moreover, it is mandated that if an acceptance is
made in a separate public writing the notice of acceptance must be
noted not only in the document containing the acceptance but also in the
Deed of Donation. These requisites have not been complied with and no
proof of compliance appears in the record. .The 2 Quitclaims set out the
conveyance of the parcels of land by Helen in favor of David but its
acceptance by David does not appear in the Deeds, nor in the SPA.
However, the inexistence of a donation does not render the
repudiation made by Helen in favor of David valid. There is no valid
repudiation of inheritance as Helen had already accepted her share of
the inheritance when she together with David executed a Deed of
Extrajudicial Settlement of the Estate of Simeon. By virtue of such
extrajudicial settlement, the parcels of land were registered in her and
her son’s name in undivided equal share and for 11 years they
possessed the lands in the concept of owner. Art. 1056 of the Civil
Code provides – “The acceptance or repudiation of an inheritance is
irrevocable and cannot be impugned except when it was made thru any
of the causes that vitiate consent or when and unknown will appears.”
Nothing on record shows that Helen’s acceptance of her inheritance
from Simeon was made thru any of the causes which vitiated her
consent nor is there any proof of the existence of an unknown will
executed by Simeon. Thus, Helen cannot belatedly execute an
instrument which has the effect of revoking or impugning her previous
acceptance of her ½ share. Hence, the 2 Quitclaims which she executed
11 years after her acceptance have no legal force and effect.
Nevertheless, the nullity of the repudiation does not ipso facto
operate to convert the parcels of land into res nullius to be escheated in
favor of the Government. The repudiation, being of no effect
whatsoever, the parcels of land should revert to their private owner,
Helen, who although being an American citizen is qualified by hereditary
succession to own the property subject of the litigation.

Donation Inter Vivos

VELASQUEZ vs. COURT OF APPEALS

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

Facts: The spouses Cornelio Aquino and Leoncia de Guzman

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

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

Held: YES. The heirs of Cesario have acquired absolute and

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

PRESCRIPTION

SERASPI vs. COURT OF APPEALS

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

Facts: Marcelino Recasa was the owner of two parcels of land.

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

Issues: 1. Is the action for recovery of possession ( accion publiciana)

barred by extinctive prescription?
2. Has Simeon acquired the ownership of the land by
prescription?

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

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

Prescription in Action for Reconveyance

MILLENA vs. COURT OF APPEALS

G.R. NO. 127797, JANUARY 31, 2000
Facts: In 1926, a parcel of land in Daraga, Albay (Lot 1874) was
divided between Gregoria Listana and Potenciana Maramba: ¼ was
given to Gregoria and ¾ to Potenciana. The portion owned by Gregoria
was sold to Gaudencia Jacob who entered the same and started
harvesting the coconuts found therein. In 1966, the land was passed on
to Gaudencia’s daughter, Felisa Jacob by virtue of an extrajudicial
settlement. Sometime in 1981, Felisa discovered that Potenciana’s son
(Florencio) was able to acquire a free patent over the entire lot including
the portion adjudicated to her. Notwithstanding Felisa’s protest filed
before the Bureau of Lands, the heirs of Florencio sold the entire lot to
Alejandro Millena. In 1992, Felisa filed a complaint against Alejandro for
annulment of title and reconveyance of the portion owned by the former.
RTC ordered the reconveyance of the ¼ portion of the land. CA
affirmed the TC.

Issue: Is the action for reconveyance barred by prescription?

Held: NO. Prescription cannot be invoked in an action for

reconveyance when the claimant is in possession of the land to be
reconveyed. Apparently, Felisa Jacob met the requisite elements of
possession. She exercised control over the parcel of land in litigation
through her caretaker. Moreover, her declaration that the land was her
property and the payment of real property taxes manifested clearly that
she was in possession of the land. Consequently, Alejandro may not
validly invoke prescription as defense against Felisa.

Ownership Through Acquisitive Presciption

DBP vs. COURT OF APPEALS

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

Facts: The land in dispute consisting of 19.4 hectares was originally

owned by Ulipiano Mumar, whose ownership since 1917 was evidenced
by Tax Declaration No. 3840. In 1950, Mumar sold the land to
respondent Cajes who was issued Tax Declaration No. R-1475 that
same year. Cajes occupied and cultivated the said land. In 1969,
unknown to Cajes, Jose Alvarez succeeded in obtaining the registration
of a parcel of land with an area of 1,512, 468.00 square meters, in his
name for which he was issued OCT No. 546 on June 16, 1969. The
parcel of land included the 19.4 hectares occupied by respondent.
Alvarez never occupied nor introduced improvements on said land.
In 1972, Alvarez sold the land to the spouses Gaudencio and Rosario
Beduya to whom TCT No. 10101 was issued. That same year, the
spouses Beduya obtained a loan from petitioner DBP for P526,000.00
and, as security, mortgaged the land covered by TCT No. 10101 to the
bank. In 1978, the SAAD Investment Corp., and the SAAD Agro-
Industries, Inc., represented by Gaudencio Beduya, and the spouses
Beduya personally executed another mortgage over the land in favor of
DBP to secure a loan of P1,430,000.00. The spouses Beduya later
failed to pay their loans, as a result of which, the mortgage on the
property was foreclosed and sold to DBP as the highest bidder. As the
spouses Beduya failed to redeem the property, DBP consolidated its
ownership. It appears that Cajes had also applied for a loan from DBP
in 1978, offering his 19.4 hectare property under Tax Declaration No. D-
2247 as security for the loan. Cajes’ loan application was later approved.
However, it was found that the land mortgaged by Cajes was included in
the land covered by TCT No. 10101 in the name of the spouses Beduya.
DBP, therefore, cancelled the loan and demanded immediate payment
of the amount. Cajes paid the loan to DBP for which the former was
issued a Cancellation of Mortgage releasing the property in question
from encumbrance. DBP asked Cajes to vacate the property. As the
latter refused to do so, DBP filed a complaint for recovery of possession
with damages against him. The RTC of Tagbilaran City declared DBP
the lawful owner of the entire land covered by TCT No. 10101 on the
ground that the decree of registration was binding upon the land.

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

Held: Cajes has better right. In the present case, Cajes has been in
actual, open, peaceful and continuous possession of the property since
1950. His claim based on actual occupation of the land is bolstered by
the Tax Declarations issued in his name. Together with his actual
possession of the land, these tax declarations constitute strong evidence
of ownership of the land occupied by him. More importantly, it was
established that respondent, having been in possession of the land since
1950, was the owner of the property when it was registered by Jose
Alvarez in 1969, his possession tacked to that of his predecessor-in-
interest, Mumar, which dates back to 1917. Clearly, more than 30 year
had elapsed before a decree of registration was issued in favor of
Alvarez. This uninterrupted adverse possession of the land for more
than 30 years could only ripen into ownership of the land through
acquisitive prescription which is a mode of acquiring ownership and
other real rights over immovable property. Prescription requires public,
peaceful, uninterrupted and adverse possession of the property in the
concept of an owner for ten (10) years, in case the possession is in good
faith and with a just title. Accordingly, the land in question must be
reconveyed in favor of Cajes, the true and actual owner thereof,
reconveyance being clearly the proper remedy in this case.

II. SUCCESSION

Successional Rights; Transmission of; Scope

RABADILLA vs. COURT OF APPEALS

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

Facts: In a Codicil appended to the will of testatrix Aleja Belleza, Dr.

Jorge Rabadilla was instituted as a devisee of a parcel of land
in Bacolod City with the obligation to deliver 100 piculs of sugar yearly to
private respondent Marlena Belleza. Such obligation is likewise imposed
upon the heirs of Dr. Rabadilla and their buyer, lessee, or mortgagee
should they sell, lease, mortgage or otherwise negotiate the property
involved. The Codicil further provides that in case of failure to comply
with such obligation, private respondent shall seize the subject property
and shall turn it over to the near descendants of the testatrix. The
Codicil allows the alienation of the property but only to the testatrix’s
near descendants and sister.
The lot was transferred to Dr. Rabadilla, who died in 1983 and was
survived by his wife and children, one of which is petitioner herein. In
1989, private respondent sought before the RTC of Bacolod City, the
reconveyance of the property to the surviving heirs of the testatrix.
During pre-trial, parties admitted that in 1998, the private respondent
and a certain Alan Azurin, a lessee of the property, arrived at an
amicable settlement and assumed the obligation to deliver one hundred
piculs of sugar. There was no compliance with the agreement.
In 1991, the RTC dismissed the complaint for lack of cause action.
On appeal, the CA reversed the decision of the TC. The CA ordered
reconveyance of the lot to the estate of Aleja Belleza on the ground of
non-compliance of petitioner, as heirs of the modal heir Rabadilla, of the
obligation under the codicil, since 1985. Hence this petition.
Issue: Does the private respondent have a cause of action to institute
the present case for reconveyance of the land in controversy against
petititoner?

Held: YES. Private respondent has a cause of action against

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

Modal Institution vs. Conditional institution; Substitution

Issue: Is the testamentary institution of Dr. Rabadilla a modal

institution?

Held: YES. The institution of Dr. Rabadilla under subject Codicil is in

the nature of a modal institution.
In a modal institution, the testator states (1) the object of the
institution, (2) the purpose or application of the property left by the
testator, or (3) the charge imposed by the testator upon the heir. A
"mode" imposes an obligation upon the heir or legatee but it does not
affect the efficacy of his rights to the succession. On the other hand, in a
conditional testamentary disposition, the condition must happen or be
fulfilled in order for the heir to be entitled to succeed the testator. The
condition suspends but does not obligate; and the mode obligates but
does not suspend. To some extent, it is similar to a resolutory condition.
The manner of institution of Dr. Rabadilla under subject Codicil is
evidently modal in nature because it imposes a charge upon the
instituted heir without, however, affecting the efficacy of such institution.
Further, since testamentary dispositions are generally acts of liberality,
an obligation imposed upon the heir should not be considered a
condition unless it clearly appears from the Will itself that such was the
intention of the testator. In case of doubt, the institution should be
considered as modal and not conditional.

The Codicil sued upon does not contemplate a substitution. Substitution

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

Wills

Issue: Can the provisions of a Codicil be a valid subject of an

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

Partition; Preterition

VIADO NON VS. COURT OF APPEALS

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

Facts: During their lifetime, spouses Julian and Virginia Viado owned
a house and lot in Quezon City.Virginia died in 1982, while Julian died in
1985. Surviving them were their four children – Nilo, Leah, Rebecca, and
Delia. Nilo and Leah both died in 1987. The property was occupied and
shared by Rebecca, Delia and the heirs of Nilo. In 1988, petitioners
Rebecca and Delia filed a case for partition against the heirs of Nilo. The
latter claimed absolute ownership based on two documents, (1) a deed
of donation executed by Julian covering his one-half conjugal share of
the property in favor of Nilo and (2) a deed of extrajudicial settlement in
which Julian, Leah and Rebecca waived in favor of Nilo their rights and
interests over their share of the property inherited from Virginia, which
documents were the basis of the cancellation of OCT and the issuance
of a TCT in the their name. Petitioners attacked the validity of the
foregoing instruments, contending that Nilo employed forgery and undue
influence to coerce Julian to execute the deed of donation. Rebecca
averred that Nilo employed fraud to procure her signature to the deed of
extrajudicial settlement. She added that the exclusion of her retardate
sister, Delia, in the extrajudicial settlement, resulted in the latter's
preterition that should warrant its annulment.

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

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

2. The exclusion of Delia Viado from the deed of extrajudicial

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

Formal requirements of a valid partition

VERONA PADA-KILARIO vs. COURT OF APPEALS

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

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

Issue: Is it necessary for the validity of the extrajudicial partition that

the same be embodied in a public instrument?

Held: No. The intrinsic validity of partition not executed in a public

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

III. OBLIGATIONS AND CONTRACTS

Novation

ESPINA vs. COURT OF APPEALS

G.R. No. 116805, June 22, 2000
Facts: Petitioner Mario Espina is the registered owner of a
Condominium Unit in Antipolo, Rizal. In 1987, the condominium unit in
question was leased to respondent Rene Diaz. In 1991 while Diaz
occupied the premises as lessee, Mario executed a Provisional Deed of
Sale whereby he agreed to sell the condominium unit to respondent for
the initial downpayment of P100,000.00 to be paid upon the execution
of the contract and the balance to be paid in 6 installments through PCI
Bank postdated checks. Diaz’s checks all bounced and were dishonored
upon presentment for the reason that the bank account was closed.
Consequently, on July 26, 1992, Mario terminated the provisional deed
of sale by a notarial notice of cancellation. Nonetheless, Diaz continued
to occupy the premises, as lessee, but failed to pay the rentals due. On
October 28, 1992, Diaz made a payment of P100,000.00 which was
accepted by Mario. On February 24, 1993, Mario filed with the MTC-
Antipolo Rizal, an action for unlawful detainer against Diaz. The TC
ordered Diaz to vacate the premises and to pay back & current rentals,
attorneys fees and costs. On appeal to the RTC, the latter court affirmed
the decision of the MTC. Diaz filed with the CA a petition for review. The
CA reversed the appealed decision and dismissed the complaint for
unlawful detainer. MFR filed by Mario was denied. Hence, this appeal
via petition for review on certiorari.

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

Held: NO. The provisional deed of sale that was subsequently

executed by the parties did not novate the original existing contract of
lease.
Novation is never presumed; it must be proven as a fact either by
express stipulation of the parties or by implication derived from an
irreconcilable incompatibility between old and new obligations or
contracts. Otherwise, the original contract remains in force.

Relativity of Contracts
 DKC HOLDINGS CORP. vs. COURT OF APPEALS
G. R. No. 118248, April 5, 2000

Facts: On March 16, 1988, petitioner corporation entered into a

Contract of Lease with Option to Buy with Encarnacion Bartolome,
whereby petitioner was given the option to lease or lease with purchase
the subject land. Petitioner regularly paid the monthly P3,000.00
reservation fee until the death of Encarnation in January 1990.
Thereafter, petitioner coursed its payment to private respondent Victor
Bartolome, the sole heir of Encarnacion. Victor, however, refused to
accept. On March 14, 1990, petitioner served upon Victor a written
notice that it was exercising its option to lease the property. Again,
Victor refused to accept the rental fee and to surrender possession of
the property to petitioner. Petitioner thus opened a savings account with
a bank in the name of Victor Bartolome and deposited therein the
aforesaid rental fee as well as P6,000.00 reservation fees. Petitioner
then filed a Complaint for specific performance and damages against
Victor.
The trial court dismissed the complaint, holding that the subject
contract was terminated upon the death of Encarnacion Bartolome and
did not bind Victor because he was not a party thereto.

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

Held: NO. The contract was not terminated upon Encarnacion’s

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

Onerous Contract

GOLDEN DIAMOND vs. COURT OF APPEALS

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

Facts: Petitioner Golden Diamond, Inc. (GDI) entered into a Dealer

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

Issue: Is Cheng obliged to pay the royalty fee to GDI even after the
expiration of GDI’s area franchise?
Held: NO. Cheng is no longer obliged to pay the royalty fee. The fact
that no renewal was granted removed the basis for the continued
payment of the monthly royalty fee. It is the essence of a royalty fee that
it is paid in consideration of an existing right. In its ordinary acceptation,
royalties refer to payments made to the owner for permitting another to
use his property. Royalties are similar to the rents payable for the use
or right to use an invention and after the right to use it has terminated
there is no obligation to make further royalty payments.
The MOA is an onerous contract, wherein the contracting parties
are obliged to render reciprocal prestations. GDI is entitled to receive the
royalty fee in return for Cheng’s use of its (GDI) exclusive right to the
Shakey's outlet at the Gotesco Grand Central. Indelibly, the very reason
which impelled Cheng to assume the obligation to pay the royalty fee
was that of GDI’s representation that it has the exclusive right to operate
the outlet. To expect Cheng to continue paying the royalty fee after
February 1991, or until August 1993, when what GDI assigned no longer
exists — is legally untenable. GDI’s entitlement to the royalty fee is
wholly dependent upon the existence and subsistence of the right for
which the royalty was granted. If the reason which gave rise to the
contract has ceased to exist, the result is that the obligation too, has
ceased to exist.

Power to Rescind in Reciprocal Obligations

RELIANCE COMMODITIES INC. vs. INTERMEDIATE APPELLATE

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

Facts: Respondent Marvin Paez entered into contract with Reliance

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

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

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

CENTRAL BANK OF THE PHILIPPINES vs. BICHARA

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

Facts: On July 19, 1983, respondents Spouses Alfonso and Anacleta

Bichara sold 2 lots in LegazpiCity, with an aggregate area of 811 sq. m.
to petitioner CENTRAL BANK OF THE PHILIPPINES (CBP). The deed
of sale contained the following pertinent stipulations: that the purchase
price shall be paid only after the Deed of Sale has been duly registered
and a clean title issued in the name of the vendee and; that the vendors
shall undertake to fill the parcels of land with an escombro free from
waste materials compacted to the street level upon the signing of the
Deed to suit the ground for the construction of the regional office of
CBP.
 Title over the property was issued in CBP's name on September 6,
1983. Despite the issuance of the title, CBP failed to pay the spouses.
The latter did not fill up the lot with escombro despite several demands
made by the former. CBP was thus constrained to undertake the filling
up of the said lots, by contracting the services of BGV Construction. The
filling up of the lots cost CBP P45,000.00, which amount was deducted
from the purchase price payable to the spouses.
CBP, however, still did not pay the spouses. Consequently, on
September 7, 1992, the spouses filed an action for rescission or specific
performance with damages, against CBP before the RTC of Legazpi
City, alleging that CBP failed to pay the purchase price despite demand.

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

to the Spouses?

Held: No. The right to rescind a contract involving reciprocal

obligations is provided for in Article 1191 of the Civil Code. The law
speaks of the right of the "injured party" to choose between rescission or
fulfillment of the obligation, with the payment of damages in either case.
Here, the spouses claim to be the injured party and they aver that they
are entitled to cancel the obligation altogether in view of CBP's failure to
pay the purchase price when the same became due. CBP disputes the
spouses’ stand, claiming that it was entitled to withhold payment of the
purchase price because of the latter’s failure to comply with their
contractual obligations.
By law, "[t]he vendee is bound to accept the delivery and to pay
the price of the thing sold at the time and place stipulated in the
contract." In the case at bench, CBP's obligation to pay arose as soon
as the deed of sale was registered and a clean title was issued. CBP
justifies non-payment on the spouses' breach of several stipulations in
the contract, such as: non-payment of tax and the occupation by
squatters of the premises. However, CBP’s obligation to pay was not
subject to the foregoing "conditions," only that its demandability is
suspended until the opportune time. That arrived upon the registration of
the deed of sale and the issuance of a clean title in its favor.
The Spouses should not be allowed to rescind the contract where
they themselves did not perform their essential obligation
thereunder. Evidently, the spouses were guilty of non-performance of
an essential contractual obligation. The deed of sale expressly stipulated
that the vendors were to undertake, at their expense, the filling up of the
lots with escombro free from waste material compacted to the street
level. This was required in order to make the site suitable for the
construction of a substantial edifice which will house the regional office
of CBP. This was to be accomplished upon the signing of the contract
and insofar as CBP was concerned, the spouses obligation was
demandable at once.
It should be emphasized that a contract of sale involves
reciprocity between the parties. Since the spouses were in bad faith,
they may not seek the rescission of the agreement they themselves
breached.

Contract to Sell; Rescission

PADILLA vs. PAREDES

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

Facts: Petitioner Albert Padilla and private respondents Floresco and

Adelina Paredes entered into a contract to sell a parcel of land in San
Juan, La Union. The land was untitled although the Spouses Paredes
were paying taxes thereon. Under the contract, Padilla undertook to
secure title to the property in Spouses Paredes’ names. Of the
P312,840.00 purchase price, petitioner was to pay a downpayment of
P50,000.00 upon signing of the contract, and the balance was to be paid
within 10 days from the issuance of a court order directing issuance of a
decree of registration for the property. Padilla failed to pay the balance
of the purchase price within the period set. Later Spouses Paredes
offered to sell to Padilla ½ of the property for all the payments the latter
had made, subject to the condition that if Padilla will not agree, they
would enforce the automatic rescission of the contract. Padilla did not
accept the proposal. Instead, he offered to pay the balance in full for the
entire property, plus interest and attorney's fees, which the spouses
refused. Padilla then instituted an action for specific performance
against the spouses, alleging that he had already substantially complied
with his obligation under the contract to sell.
Issue: Are the Spouses Paredes entitled to rescind their "contract to
sell" the land to Padilla?

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

Interpretation of Contracts; Rescission

PHIL. NATIONAL CONSTRUCTION CORP. vs. MARS

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

Facts: Mars Construction Enterprises, Inc. (Mars) entered into a

contract with the Phil. National Construction Corp. (PNCC) for the supply
of approximately 70,000 cubic meters of aggregates but with out
specification as to the volume of each of the items mentioned therein.
The two parties subsequently amended the contract by specifying the
volume for three of the items, totaling the originally agreed 70,000 cubic
meters of aggregate, except the fourth item, the volume of which was not
specified.
Because the delivery of aggregates was delayed for 8 months,
PNCC was constrained to obtain necessary materials from other
sources, incurring additional costs representing the difference between
the agreed price in the contract and the pricing of outside sources, which
was reimbursed by Mars in accordance with the default clause under the
contract. When Mars delivered 17,000 cubic meters of washed gravel,
PNCC refused to accept, on the following grounds:
1. Mars has already delivered aggregates 45% over and above the
required volume in the amended contract and PNCC had no more need
for the same;
2. PNCC has already informed Mars in a letter of the final quantities of
concrete aggregates to be delivered and that it would not accept any
further deliveries from Mars;
3. Mars has defaulted on its contractual obligations.

Issue: May PNCC be compelled to accept the delivery of the 17,000

cu. m. of washed gravel?

Held: YES. PNCC may be compelled to accept.

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

Badges of Fraud

China Banking Corp. vs. Court of Appeals

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

Facts: In connection with a civil case filed by Metropolitan Bank

against Alfonso Roxas Chua , a notice of levy affecting the
residential land of Alfonsoand his wife was issued. Meanwile, in 1985,
the trial court rendered another decision in favor of China Banking
Corporation against Alfonso in a collection case. A certificate of sale
covering ½ of the undivided portion of the property was executed in
favor of Metro Bank. In 1988, Alfonso executed “Assignment of Right to
Redeem” to his son Paulino who redeemed the said property on the
same day. On the other hand, another levy on execution in favor of
China Bank was issued on the same property. Thereafter, a certificate
of sale on execution was issued to China Bank in 1992. Paulino
instituted a civil case arguing that he has a better right over the title of
China Bank, the property having been redeemed by him in 1988 while
China Bank acquired its right in 1991. The trial court ruled that the
assignment was made for a valuable consideration and was executed
two years before China Bank levied the conjugal share of Chua. China
Bank argued that the assignment of right of redemption made by Alfonso
to Paulino was done in fraud of creditors and may be rescinded under
Article 1387, NCC.

Issue: Was the assignment by Alfonso to Paulino of the right of

redemption done to defraud his creditors and may be rescinded under
Art. 1387, NCC?

Held: YES. The assignment was done in fraud of creditors. China

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

SEN PO EK MARKETING CORP. vs. MARTINEZ

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

Facts: Sofia Martinez was the registered owner of 2 parcels of land

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

Issue: Were the two disputed sale transactions valid?

Held: The first sale is void. The second sale, however, is valid and
binding. The first sale between Sofia and Teodora was void for being
fictitious. Under Art. 1409 (2),NCC, one type of contract which can be
declared void and inexistent is that which is absolutely simulated or
fictitious, and this was established by several badges of simulation
proving that the sale between Sofia and Teodora was not intended to
have any legal effect between them.The combination of all of these
events leads one to the inescapable conclusion that the first sale
transaction was absolutely simulated, hence void.
Nonetheless, the sale between Teodora and the Tiu Uyping, is
valid. Teodora, as only one of the co-heirs of Sofia, had no authority to
sell the entire lot to the Tiu Uyping. She can only sell her undivided
portion of the property. Thus, when she sold the leased premises to Tiu
Uyping, the sale is unenforceable having been entered into by Teodora
in behalf of her co-heirs who, however, gave no authority or legal
representation. However, such a contract is susceptible of ratification. In
this case, the ratification came in the form of "Confirmation of Sale of
Land and Improvements" executed by the other heirs of Sofia. Since
the sale by Teodora of the leased premises to Tiu Uyping was ratified by
her co-heirs, then the sale is considered valid and binding

Capacity to Enter into Contract

LOYOLA vs. COURT OF APPEALS

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

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

Issue: Is the deed of absolute sale invalid on the ground of Gaudencia’s

incapacity?

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

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

Unenforceable Contract
 VILLANUEVA-MIJARES vs. COURT OF APPEALS
G.R. No. 108921, April 12, 2000

Facts: Petitioners are the legitimate children of the late Leon

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

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

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

Simulation of Contracts

LOYOLA vs. COURT OF APPEALS

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

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

Issue: Is the deed of absolute sale simulated?

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

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

Laches; Prescription

VILLANUEVA-MIJARES vs. COURT OF APPEALS

G.R. No. 108921, April 12, 2000
Facts: Petitioners are the legitimate children of the late Leon
Villanueva. Leon was one of eight children of Felipe Villanueva,
predecessor-in-interest of the parties in the present case. During his
lifetime, Felipe, owned real property situated in Kalibo, Aklan. Upon
Felipe’s death, ownership of the land was passed on to his
children. Pedro, one of the children of Felipe got his share equivalent to
one-sixth (1/6) of the property and had it declared under his name. The
remaining undivided portion of the land was held in trust by Leon for his
co-heirs. During Leon’s lifetime, his co-heirs made several seasonable
and lawful demands upon him to subdivide and partition the property,
but for one reason or another, no subdivision took place.
After the death of Leon in August 1972, private respondents
discovered that the shares of four of the heirs of Felipe were purchased
by Leon as evidenced by a Deed of Sale executed on August 25, 1946
but registered only in 1971. It also came to light that Leonhad, sometime
in July 1970, executed a sale and partition of the property in favor of his
own children, herein petitioners.

Issue: Is the claim by private respondents to recover the property in

question barred by laches, estoppel, prescription and res judicata?

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

GASTON vs. COURT OF APPEALS

G.R. No. 116340, June 29, 2000.
Facts: In 1972, private respondent Gertrudes Medel filed a complaint
before the RTC of Silay City, against petitioner Cecilia Gaston's mother
Sofia de Oca vda. De Gaston and other defendants for recovery of her
share over certain parcels of land ofTalisay Cadastre, claiming that, as
her mother is the daughter of Mariano de Oca by his first marriage, she
(Gertrudes) is entitled to the properties left by Mariano de Oca. RTC
dismissed the same. On appeal, the CA reversed the TC’s decision.
The CA ordered the defendants, Sofia Gaston, et. al, to partition the
properties involved to include the share of private respondent Medel
within 60 days from the finality of the said decision. As the said
defendants had not complied with the said CA’s order, despite the lapse
of the period indicated therein and inspite of representations made by
Medel to the defendants to submit the project of partition, the private
respondent filed with the respondent RTC on November 27, 1991, a
motion to require the defendants to submit a project of partition. Acting
on the said motion, the respondent court in its order of December 3,
1991, required the defendants' counsel to comment thereon within 5
days from receipt thereof, with warning 'otherwise the court will
partition'. The defendants also ignored the said order of the respondent
court. Thus, the respondent court, in its order dated January 17, 1992,
acted on the ex-parte motion of the private respondent to partition the
properties.

Issue: Is the petition for nullification of the questioned order dated

Jan. 17, 1992 time-barred?

Held: YES.
The questioned order of the respondent court is dated January 17,
1992 but the petition was filed only on December 29, 1992 or almost a
year after the issuance of the questioned order. The yardstick to
measure the timeliness of a petition for certiorari is the reasonableness
of the length of time that had expired from the commission of the
actuation complained of up to the institution of the proceeding to amend
the same. Failure to file the certiorari petition within a reasonable time
renders the petitioner susceptible to the adverse legal consequences of
laches.
The essence of laches is the failure, or neglect, for an
unreasonable and unexplained length of time to do that which, by
exercising due diligence, could or should have been done earlier; it is
the negligence or omission to assert a right within a reasonable time,
warranting a presumption that the party entitled to assert it either has
abandoned it or declined to assert it. This Court has ruled that an
interval of seven (7) months after rendition of the last order sought to be
set aside is definitely barred by laches. A petition brought after 99 days
is also barred by laches. The special civil action for certiorari under Rule
65 of the Rules of Court must be filed within a reasonable period of only
3 months.

TRUSTS

Express Trust

SECUYA vs. VDA. DE SELMA

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

Facts: The present petition is rooted in an action for quieting of title

filed before the RTC by petitioners, all surnamed Secuya against
Gerarda De Selma.
The parcel of land subject of this case is a portion of Lot 5679 of the
Talisay-Minglanilla Friar Lands Estate. The lot was originally sold to
Maxima Caballero Vda. De Carino. During the lifetime of the latter, she
entered into an Agreement of Partition dated January 5, 1938 with
Paciencia Sabellona, whereby Maxima bound herself to part with 1/3
of Lot5679 in favor of Paciencia upon the approval of her application for
patent. Paciencia took possession and occupation of said portion
adjudicated to her. Later she sold the 3,000 sq. m. portion thereof to
Dalmacio Secuya on October 20,1953. After said purchase, Dalmacio
and his siblings took physical possession of the land and cultivated the
same. The petitioners herein are the heirs of Dalmacio. In 1975,
Gerarda bought a bulk of Lot 5679, which embraced and included the
land bought by Dalmacio.

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

Held: NO. Petitioners do not have the requisite title to pursue an

action for quieting of title. Petitioners anchor their claim of ownership on
the Agreement of Partition. Notwithstanding its nomenclature, the
Agreement is not one of partition, because there was no property to
partition and the parties were not co-owners. Rather, it is in the nature
of a trust agreement. Trust is the right to the beneficial enjoyment of
property, the legal title to which is vested in another. It is a fiduciary
relationship that obliges the trustee to deal with the property for the
benefit of the beneficiary. Trust relations between parties may either be
express or implied. An express trust is created by the intention of the
trustor or of the parties. An implied trust comes into being by operation
of law.
The present Agreement involves an express trust. Under Art. 1444
of the Civil Code, ‘no particular words are required for the creation of an
express trust, it being sufficient that a trust is clearly intended.’
While no time limit is imposed for the enforcement of rights under
express trusts, prescription may, however, bar a beneficiary’s action for
recovery, if a repudiation of the trust is proven by clear and convincing
evidence and made known to the beneficiary. There was a repudiation
of the express trust when the heirs of Maxima failed to deliver or transfer
the property to Paciencia, and instead sold the same to a 3rd person not
privy to the Agreement. The Agreement was not registered, thus, it
could not bind 3rd persons. Consequently, the subsequent sales
transactions involving the land in dispute, which ultimately led to its
purchase by Gerarda, and the titles covering it must be upheld, in the
absence of proof that the said transactions were fraudulent and irregular.

SALES AND LEASE

Elements of a Contract of Sale

SAN ANDRES vs. RODRIGUEZ

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

Facts: Juan San Andres sold a parcel of land with an area of 345
square meters to respondent Vicente Rodriguez. The sale is evidenced
by a Deed of Sale. When San Andres died, the judicial administrator of
the decedent's estate undertook a survey of the entire land owned by the
decedent including the land sold to Rodriguez. It was found that
respondent had enlarged the area which he purchased from San Andres
by 509 square meters. Accordingly, the judicial administrator demanded
that Rodriguez vacate the portion allegedly encroached by him. When
Rodriguez refused to leave, the judicial administrator thereafter brought
an action for the recovery of possession of the 509-square meter lot
Rodriguez claims the disputed portion was also subsequently the
subject of an absolute sale to him as shown by a receipt signed by the
late San Andres, which reads in full as follows: “Received from Vicente
Rodriguez the sum of Five Hundred (P500.00) Pesos representing an
advance payment for a residential lot adjoining his previously paid lot on
three sides excepting on the frontage with the agreed price of Fifteen
(15.00) Pesos per square meter and the payment of the full
consideration based on a survey shall be due and payable in five (5)
years period from the execution of the formal deed of sale.”

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

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

Option Money vs. Earnest Money

CAVITE DEVELOPMENT BANK VS. CYRUS LIM

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

Facts: A certain Rodolfo Guansing obtained a loan from Cavite

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

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

Held: Yes. The sum of P30,000.00, although denominated in the

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

Delivery in Contract of Sale

SERASPI vs. COURT OF APPEALS

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

Facts: Marcelino Recasa was the owner of two parcels of land.

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

Issue: Did the petitioners acquire ownership over the property in

question?

Held: NO. For while a contract of sale is perfected by the meeting of

minds upon the thing which is the object of the contract and upon the
price, the ownership of the thing sold is not transferred to the vendee
until actual or constructive delivery of the property. Hence, the maxim
non nudis pactis, sed traditione dominia dominica rerum
transferuntur (not mere agreements but tradition transfers the ownership
of things). Consequently, petitioners are not the owners of the property
since it has not been delivered to them. At the time they bought the
property from Rata in 1983, the property was in the possession of private
respondent.

LAO vs. COURT OF APPEALS

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

Facts: The Associated Anglo-American Tobacco Corporation

(Associated) entered into a “Contract of Sales Agent” with petitioner
Andres Lao where Lao would sell cigarettes manufactured and delivered
by Associated. Lao would in turn remit the sale proceeds to the
corporation. During the effectivity of the contract, Lao failed to
accomplish his monthly sales report despite a demand letter sent by
Associated. Associated stopped its shipments to Lao.
Lao filed a complaint for accounting and damages against
Associated. The CFI ruled in favor of Lao and ordered both parties to
undergo a court supervised accounting of their respective account with
the view of establishing the true and correct accountability of Lao to
Associated. The Audit Committee submitted its report to the court. The
committee excluded shipments by Associated covered by bill of lading
and factory invoices but without the corresponding delivery receipts.
Issue: Was the committee correct in excluding the shipments not
supported by delivery receipts although covered by bills of lading and
factory consignment invoices?

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

Sale with Right of Repurchase

ABAPO vs. COURT OF APPEALS

GR No. 128677, March 2, 2000

Facts: Crispula Abapo and Santiago Abapo executed in favor of

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

Issue: Should the Deed of Absolute Sale under Pacto de Retro be

considered an equitable mortgage due to the alleged inadequacy of
price?

Held: NO. The price of P500 is not unusually inadequate. The record
reveals that the assessed value of the land in dispute in 1970 was only
P400. Thus, at the time of sale in 1967, the price of P500 is inadequately
over and above the assessed value of P400. Besides, the mere fact that
the price is inadequate does not prove support the conclusion that the
contract was a loan or that the property was not at all sold to Teodulfo
Quimada. The price fixed in the sale with a right to repurchase is not
necessarily the true value of the land sold. The rationale is that the
vendor has the right to fix a relatively reduced price, although not a
grossly inadequate one, in order to afford the vendor a retro every
facility to redeem the land. Thus, inadequacy of the price is not sufficient
to set aside a sale unless it is grossly inadequate or purely shocking to
the conscience.
Consolidation of Title in Pacto de Retro Sale

CRUZ vs. LEIS

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

Facts: Gertrudes Isidro, mother or respondents Leis, et al. obtained a

loan from the petitioner-spouses Alexander and Adelaida Cruz. The loan
was secured by a mortgage over the property covered by TCT No.
43100. Unable to pay her outstanding obligation after the debt became
due and payable, Gertrudes executed two contracts in favor of
Alexander. The first is denominated as “Kasunduan” which the parties
concede is a Pacto de Retro sale granting Gertrudes one year to
repurchase the property. The second is a “Kasunduan ng Tuwirang
Bilihan”, a Deed of Absolute Sale covering the same property per the
price of P39,083.00, the same amount stipulated in the Kasunduan. For
failure of Gertrudes to repurchase the property, ownership was therefore
consolidated in the name of Alexander in whose name a new TCT was
issued. Gertrudes died. Thereafter, her heirs received demands to
vacate the premises from spouses Cruz, the new owners of the property.
The private respondents responded by filing a complaint for the
nullification of sale. The trial court court ruled that the "Kasunduan,"
providing for a sale con pacto de retro, had superseded the "Kasunduan
ng Tuwirang Bilihan," the deed of absolute sale. It was likewise found
that Gertrudes as well as private respondents failed to repurchase the
property within the period stipulated and has lost all their rights to it.
Nonetheless, the trial court and the CA found for private respondents. It
rationalized that spouses Cruz failed to comply with the provisions of
Article 1607 of the Civil Code requiring a judicial order for the
consolidation of the ownership in the vendee a retro to be recorded in
the Registry of Property.

Issue: Is the recording in the Registry of Property of the consolidation

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

DOUBLE SALE

BARICUATRO, JR. vs. COURT OF APPEALS

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

Facts: On October 16, 1968, petitioner Severino Baricuatro, Jr., bought

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

Issue: Who has better right over the lots in dispute?

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

DOUBLE SALE; INTERPRETATION OF CONTRACT

ANGEL BAUTISTA vs. COURT OF APPEALS

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

Facts: On April 13, 1977, respondents Atienzas sold to petitioner

Angel Bautista a parcel of land inTagaytay City, for P1.5M. At the time
of the sale, the lot was still registered in the names of the deceased
parents of the Atienzas. The sale is subject to the following terms and
conditions, to wit:
a. P10,000.00 upon signing of the contract;
b. P90,000.00 upon the Atienza’s presentation to Bautista of a new
certificate of title of the property subject of the sale, registered in their
name. However, the buyer may advance the necessary amount to the
sellers for payment of their taxes which might be required by the
Register of Deeds of Tagaytay City before the TCT from the registered
owners to the sellers can be effected but not exceeding P90,000.00. Any
and all cash advances made by the buyer to the sellers shall be
deducted from the second payment of P90,000.00. Bautista made the
initial payment of P10,000.00.
In July 1977, the Atienzas wrote a letter to Bautista, asking
P50,000.00 for the inheritance and realty taxes due on the subject
property and other incidental expenses to facilitate the transfer of the
title of the subject property in their names. Bautista refused to give the
additional money arguing that advance payment would be discretionary
on his part. Hence, the Atienzas cancelled the contract to sell the
subject land.
Meanwhile, Bautista discussed with the Chairman of the Board of
Realty Baron Corporation (RBC) the possible sale of the subject property
in favor of RBC which however, did not push through.
 In October, 1978 the Atienzas were able to secure title over
subject land. Thereafter, they sold a portion of the land to RBC. TCT
was issued in the name of RBC.

Issues: 1. Do the Atienzas have the right to rescind the contract of

sale because of Bautista's refusal to advance the payment intended to
pay for taxes and other fees?
2. Is the sale of a portion of the land by the Atienzas to RBC
valid?

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

The rule is that where the language of a contract is plain and
unambiguous, its meaning should be determined without reference to
extrinsic facts or aids. The intention of the parties must be gathered from
that language, and from that language alone unless some good reason
can be assigned to show that the words used should be understood in a
different sense. In the case at bar, the provision of the Contract of Sale
is plain and unambiguous that Bautista as buyer MAY advance to the
Atienzas as sellers the necessary amount (not exceeding P90,000.00)
for the payment of such taxes as may be required before the TCT in
favor of the sellers can be effected. The use of the word MAY meant
that Bautista has the discretion whether or not to advance the
P90,000.00. He has no duty to do it. It is purely optional on his part.
Thus, Bautista did not violate the contract when he refused to pay the
advance money.

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

VOID CONTRACT OF SALE AND ITS EFFECTS

CAVITE DEVELOPMENT BANK VS. CYRUS LIM

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

Facts: A certain Rodolfo Guansing obtained a loan from Cavite

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

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

Held: No. CDB does not have a valid title over the property sold.
Under Art. 1459 NCC, at the time of delivery or consummation stage of
the sale, it is required that the seller be the owner of the thing sold.
Otherwise, he will not be able to comply with his obligation to transfer
ownership to the buyer.
The foreclosure sale from which CDB derived its title over the
property cannot be given effect: 1) Rodolfo, the mortgagor did not have
a valid title over the property sold. Being a sale, the rule that the seller
must be the owner of the thing sold also applies in a foreclosure sale.
This is the reason Art. 2085 NCC, requires, among other things, that the
mortgagor or pledgor be the absolute owner of the thing pledged or
mortgaged, in anticipation of a possible foreclosure sale should the
mortgagor default in the payment of the loan; and 2) Neither can the
foreclosure sale be given effect based on the doctrine of “the mortgagee
in good faith” which provides the rule that all persons dealing with
property covered by a Torrens Certificate of Title, as buyers or
mortgagees, are not required to go beyond what appears on the face of
the title. CDB cannot be considered a mortgagee in good faith because
it failed to observe its duty of diligence in ascertaining the validity of
Rodolfo’s title, as is required of banking institutions. It appears that
Rodolfo obtained his fraudulent title by executing an Extra-Judicial
Settlement of the Estate With Waiver where he made it appear that he
and Perfecto were the only surviving heirs entitled to the property, and
that Perfecto had waived all his rights thereto. This self-executed deed
should have placed CDB on guard against any possible defect in or
question as to the mortgagor's title. Indeed, CDB and FEBTC admit that
they are aware that the subject land was being occupied by persons
other than Rodolfo and that said persons, who are the heirs of Perfecto,
contest the title of Rodolfo.
Pursuant to Article 1412(2) of the Civil Code, spouses Lim, being
the non-guilty parties, are entitled to recover the P30.000.00 option
money paid by them with interest at the legal rate to be computed from
the date of the filing of the complaint. However, under this provision,
prior demand is necessary in order that the obligation to return what was
given becomes legally demandable. The filing of the action for damages
against CDB and FEBTC amounted to a demand by respondents Lim for
the return of their money. Considering CDB's negligence, the latter is
liable to pay moral damages on the basis of Arts. 21 and 2219 of the
Civil Code and the SC’s ruling in Tan v. CA that moral damages may be
recovered even if a bank's negligence is not attended with malice and
bad faith. However, the sum of P250,000.00 awarded by the trial court is
excessive. Moral damages are only intended to alleviate the moral
suffering undergone by respondents Lim, not to enrich them at the
expense of CDB and FEBTC. Accordingly, the award of moral damages
must be reduced to P50,000.00. Likewise, the award of P50,000.00 as
exemplary damages and P30,000 as attorneys fees, although justified
under the Civil Code is reduced for being excessive.

Legal Redemption

FRANCISCO vs. BOISER

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

Facts: Petitioner Adalia Francisco, three of her sisters, and their

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

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

Held: NO. Art. 1623 of the Civil Code is clear in requiring that the
written notification should come from the vendor or prospective vendor,
not from any other person. There is, therefore, no room for construction.
Indeed, the principal difference between Art. 1524 of the former Civil
Code and Art. 1623 of the present one is that the former did not specify
who must give the notice, whereas the present one expressly says the
notice must be given by the vendor. Effect must be given to this change
in statutory language. In the second place, it makes sense to require
that the notice required in Art. 1623 be given by the vendor and by
nobody else. The vendor of an undivided interest is in the best position
to know who are his co-owners who under the law must be notified of
the sale. It is the notification from the seller, not from anyone else, which
can remove all doubts as to the fact of the sale, its perfection, and its
validity, for in a contract of sale, the seller is in the best position to
confirm whether consent to the essential obligation of selling the
property and transferring ownership thereof to the vendee has been
given.
Now, it is clear that by not immediately notifying the co-owner, the
vendor can effectively prevent the exercise of right of redemption. In the
present case, the sale took place in 1986 but kept secret until 1992. It is,
therefore, unjust when the subject sale has already been established
before both lower courts and now, before this Court, to further delay
petitioner's exercise of her right of legal redemption by requiring that
notice be given by the vendor before petitioner can exercise her right.
For this reason, we rule that the receipt by petitioner of summons on
August 5, 1992 constitutes actual knowledge on the basis of which
petitioner may now exercise her right of redemption within 30 days from
finality of this decision.

Validity of Stipulations in a Lease Contract

 CAMPO ASSETS CORP. vs. CLUB X. O. COMPANY
G.R. NO. 134986, MARCH 17, 2000

Facts: Alma Arambulo (Arambulo) used to operate a food and

entertainment business establishment inPasay City pursuant to a
Memorandum of Agreement (MOA) executed in 1991 between her
husband and Campo Assets which had a contract of lease with the
owner of the subject premises. The MOA was renewed in 1993. It
appears that sometime in June, 1994, Arambulo and Chan York Gui
(Allan) entered into a partnership registered as Club X.O. Company, for
the operation of the business. Club X. O. operated the business and
introduced improvements thereon. In 1996, Campo Assets took
possession of the club's premises, claiming that Arambulo had
abandoned the premises and that the re-taking was pursuant to
Paragraph VI of the MOA between Arambulo and Campo Assets, which
reads:
"VI. In case the premises shall be deserted or vacated before the
expiration of this Agreement, the FIRST PARTY shall have the right to
enter the same as the agent of the SECOND PARTY either by force or
otherwise, without being liable to any prosecution thereof, and the
FIRST PARTY shall furthermore have the option to retake and operate
the business itself or relet the same as agent of the SECOND PARTY
xxx.”
Consequently, Club X. O. represented by Allan filed a complaint
for forcible entry to recover possession of the premises and damages.
The case was dismissed for lack of merit. The court held that the
act of Campo Assets in taking possession is pursuant to Par. VI of the
MOA, which stipulation is valid, being in the nature of a resolutory
condition which is not proscribed by law.

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

Held: YES. The stipulation is void. Although Par. VI of the MOA

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

Nature of Lease of Chattels

JARDIN vs. NLRC

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

Facts: Petitioners were drivers of private respondent, Philjama

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

Issue: Is there a lessor-lessee relationship between petitioners and

PII?

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

Right of First Refusal of a Lessee

SEN PO EK MARKETING CORP. vs. MARTINEZ

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

Facts: Sofia Martinez was the registered owner of 2 parcels of land

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

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

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

Renewal of Term of Lease

BUCE vs. COURT OF APPEALS

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

Facts: Petitioner entered into a lease contract over a parcel of land

with private respondents Tiongcos for a period of 15 years to commence
on June 1979 and to end on June 1994 "subject to renewal for another
10 years, under the same terms and conditions." Petitioner then
constructed a building and paid the required monthly rentals. When
private respondents later demanded an increase in the rent, petitioner
offered to pay the previous lower rental which the former refused to
accept.
On August 1993, petitioner filed with the RTC a complaint for
specific performance praying that private respondents be ordered to
accept the rentals she tendered and to respect the lease of fifteen years,
which was renewable for another ten years.

Issue: Can it be reasonably inferred that the parties intended an

automatic renewal of the lease contract when they stipulated that the
lease shall be for a period of 15 years "subject to renewal for another 10
years"?

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

Extension of Lease
 UNIVERSITY PHYSICIANS SERVICES, INC. vs. COURT OF
APPEALS
G.R. No. 115045, January 31, 2000

Facts: Spouses Lourdes and Fausto Mabanta and University

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

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

Held: NO. The provisions of a contract should not be read in isolation

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

Concept of Implied New Lease

ROSELLO-BENTIR vs. LEANDA

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

Facts: Respondent Leyte Gulf Traders, Inc. (LGTI) entered into a

contract of lease of a parcel of land with Bentir for a period of 20 years
starting May 5, 1968, which was extended for another 4 years or until
May 31, 1992. In 1989, Bentir sold the leased premises to spouses
Pormada. LGTI questioned the sale alleging that it had a right of first
refusal. On May 15, 1992, LGTI filed a complaint for reformation of the
expired contract of lease to incorporate therein, the verbal agreement
between the parties that in the event Bentir leases or sells the lot after
the expiration of the lease, LGTI has the right of first refusal or the right
to equal the highest offer. The complaint was dismissed on the ground
of prescription. On LGTI’s motion for reconsideration, respondent judge
reversed the order of dismissal on the ground that the action for
reformation had not yet prescribed.
Bentir and Spouses Pormada filed a petition for certiorari to the CA
seeking the annulment of the order of respondent court. In holding that
the action for reformation has not prescribed, the CA upheld the ruling of
the trial court that the 10-year prescriptive period should be reckoned not
from the execution of the contract of lease in 1968, but from the date of
the alleged 4-year extension of the lease contract after it expired in
1988. Consequently, when the action for reformation of instrument was
filed in 1992 it was within 10 years from the extended period of the
lease. LGTI theorized, and the CA agreed, that the extended period of
lease was an "implied new lease" within the contemplation of Article
1670 of the Civil Code, under which provision, the other terms of the
original contract were deemed revived in the implied new lease.
Issue: Has the complaint for reformation of instrument filed by
respondent Leyte Gulf Traders, Inc. prescribed?

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

CREDIT TRANSACTIONS

Escalation Clause; Interest

BANCO FILIPINO SAVINGS & MORTGAGE BANK vs. COURT OF

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

Facts: Respondent-spouses Arcilla obtained loans secured by real

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

Issue: Is the unilateral increase in interest rate made by petitioner

based on an escalation clause in their contract valid?

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

Real Estate Mortgage

ROBLES vs. COURT OF APPEALS

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

Facts: The property subject of this case is originally owned by Leon

Robles. When he died, it passed to his son Silvino who declared the
property in his name and paid the taxes thereon. Upon the latter’s
death, his widow and children inherited the property. Petitioners Lucio
Robles, et al. were the children of Silvino, and Hilario Robles is their half-
brother. The task of cultivating was assigned to Lucio while the payment
of the land taxes was entrusted to Hilario. For unknown reason, the tax
declaration of the parcel of land in the name of Silvino was cancelled
and transferred to Exequiel Ballena. Ballena secured a loan from
Antipolo Rural Bank using the tax declaration as security. Somehow the
tax declaration was transferred to the name of Antipolo Rural Bank and
later was transferred to the name of respondent- spouses Hilario and
Andrea Robles. Andrea secured a loan from Cardona Rural Bank using
the tax declaration as security. For failure to pay the mortgage debt, the
property was foreclosed with Cardona Rural Bank emerging as the
highest bidder. The bank sold the property to spouses Vergel and Ruth
Santos. In Sept. 1987, petitioners discovered the mortgage and
attempted to redeem the property but was unsuccessful. In 1988, the
spouses Santostook possession of the propertry and was able to secure
a Free Patent. Petitioners then filed an action for quieting of title.
Respondents questioned their standing to sue for quieting of title,
contending that petitioners no longer have any interest to the property in
question due to the mortgage effected by Hilario and the consequent
foreclosure thereof by the Bank. Respondents argued that Hilario had
become the absolute owner of the property at the time he mortgaged the
same.

Issue: Is the real estate mortgage constituted by Hilario valid?

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

Rights of a Mortgagee

ISAGUIRRE vs. DE LARA

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

Facts: Petitioner Isaguirre and respondent De Lara were parties in a

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

Issue: Is Isaguirre, as mortgagee, entitled to retain possession of the

subject property until payment of the loan?

HELD: NO. A MORTGAGE IS A CONTRACT ENTERED INTO IN

ORDER TO SECURE THE FULFILLMENT OF A PRINCIPAL
OBLIGATION. IT IS CONSTITUTED BY RECORDING THE
DOCUMENT IN WHICH IT APPEARS WITH THE PROPER REGISTRY
OF PROPERTY, ALTHOUGH, EVEN IF IT IS NOT RECORDED, THE
MORTGAGE IS NEVERTHELESS BINDING BETWEEN THE PARTIES.
THUS, THE ONLY RIGHT GRANTED BY LAW IN FAVOR OF THE
MORTGAGEE IS TO DEMAND THE EXECUTION AND THE
RECORDING OF THE DOCUMENT IN WHICH THE MORTGAGE IS
FORMALIZED. AS A GENERAL RULE, THE MORTGAGOR RETAINS
POSSESSION OF THE MORTGAGED PROPERTY SINCE A
MORTGAGE IS MERELY A LIEN AND TITLE TO THE PROPERTY
DOES NOT PASS TO THE MORTGAGEE. HOWEVER, EVEN
THOUGH A MORTGAGEE DOES NOT HAVE POSSESSION OF THE
PROPERTY, THERE IS NO IMPAIRMENT OF HIS SECURITY SINCE
THE MORTGAGE DIRECTLY AND IMMEDIATELY SUBJECTS THE
PROPERTY UPON WHICH IT IS IMPOSED, WHOEVER THE
POSSESSOR MAY BE, TO THE FULFILLMENT OF THE OBLIGATION
FOR WHOSE SECURITY IT WAS CONSTITUTED. IF THE DEBTOR IS
UNABLE TO PAY HIS DEBT, THE MORTGAGE CREDITOR MAY
INSTITUTE AN ACTION TO FORECLOSE THE MORTGAGE,
WHETHER JUDICIALLY OR EXTRAJUDICIALLY, WHEREBY THE
MORTGAGED PROPERTY WILL THEN BE SOLD AT A PUBLIC
AUCTION AND THE PROCEEDS THEREFROM GIVEN TO THE
CREDITOR TO THE EXTENT NECESSARY TO DISCHARGE THE
MORTGAGE LOAN. REGARDLESS OF ITS POSSESSOR, THE
MORTGAGED PROPERTY MAY STILL BE SOLD, WITH THE
PRESCRIBED FORMALITIES, IN THE EVENT OF THE DEBTOR'S
DEFAULT IN THE PAYMENT OF HIS LOAN OBLIGATION.

Legal Redemption; Mortgage

PHILBANCOR FINANCE vs. COURT OF APPEALS

G.R. No. 129572, June 26, 2000
Facts: Petitioner Vicente Hizon, Jr. is the owner of agricultural lands
located in Balite, San Fernando, Pampanga and the private respondents
Alfredo Pare, Pablo Galang and Amado Vie are the legitimate and bona
fide tenants thereof. The said lands were mortgaged by Hizon to
petitioner Philbancor which were later on extrajudicially foreclosed upon
default of Hizon in the payment of his obligations. Subsequently, the
lands were sold at public auction to petitioner Philbancor. Seven years
after the registration of the sale with the Register of Deeds, private
respondents filed with the Provincial Agrarian Reform Adjudication Board
(PARAB) a complaint for maintenance of possession with redemption
and tenancy right of pre-emption against petitioners Philbancor and
Hizon. Petitioner Philbancor alleged, among others, that it has no
tenancy or agricultural relationship with private respondents considering
that it acquired ownership over the disputed lots by virtue of an
extrajudicial foreclosure sale & that private respondents’ right to redeem
the lots in question, if there is any, has already expired in accordance
with Section 12 of R. A. 3844. PARAB allowed legal redemption of the
subject lands in favor of private respondents. This decision was affirmed
by the Department of Agrarian Reform Adjudication Board (DARAB).
Petitioners appealed to the CA. The appeal was dismissed as well as
the MFR which was subsequently filed. Hence, this appeal.

Issue: Can the private respondents still exercise their legal right of
redemption over the subject lands considering that they invoked their
right to redeem only on July 14, 1992, seven years after the date of
registration of the certificate of sale with the Register of Deeds?

Held: NO. Private respondents can no longer redeem the subject

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

J.L. BERNARDO CONSTRUCTION vs. COURT OF APPEALS

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

Facts: The municipal government of San Antonio, Nueva Ecija,

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

Issue: May the contractor’s lien be enforced?

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

IV. TORTS AND DAMAGES

Damages

PEOPLE vs. TOREJOS

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

Facts: On April 25, 1997, accused Bonifacio Torejos was convicted

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

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

Held: Considering that the crime was committed under circumstances

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

PEOPLE vs. GONZALO PENASO

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

Facts: Gonzalo Penaso was found guilty by the RTC of Tagbilaran of

the crime of rape and sentenced to suffer an imprisonment of reclusion
perpetua and to pay the victim indemnity and moral damages in the
amount of P50,000.00 The victim was 15 years old at the time the
offense was committed.

Issue: Is the award of damages proper?

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

as civil indemnity is mandatory upon the finding of the fact of rape. In
addition, moral damages amounting to P50,000.00 at the least should be
imposed in rape cases involving young and immature girls between the
ages of 13 and 14, without need of further proof. Hence, the amount of
damages awarded should be P100,000.00.

PEOPLE vs. EREñO

G.R. 1224706, Feb. 22, 2000

Facts: On the night of June 21, 1995, an altercation over a flashlight

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

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

Held: As to actual damages, NO. In seeking recovery for actual

damages it is necessary that the claimant produce competent proof or
the best evidence obtainable such as receipts to justify an award
therefor. Actual or compensatory damages cannot be presumed but
must be proved with reasonable degree of certainty. Only substantiated
and proven expenses or those which appear to have been genuinely
incurred in connection with the death, wake or burial of the victim will be
recognized by the court. The list of expenses incurred for the wake,
funeral and burial of the victim amounting to P24, 700.00 submitted by
the victim’s mother is self-serving and not substantiated. The Supreme
Court cannot, therefore, affirm the trial court’s award of P24,000.00 as
actual expenses.
As to the civil indemnity, YES. In line with current jurisprudence
the award of P50,000.00 as civil indemnity (ex delicto) is sustained,
which requires no proof other than the fact of death of the victim and
assailant’s responsibility therefor.
As to the moral damages, YES. The award of P50,000.00 by way
of moral damages for the pain and sorrow suffered by the victim’s
family in connection with Rosanna’s death is sustained. Such award is
adequate reasonable and with sufficient basis taking into consideration
the pain and mental anguish suffered by the victim’s family.
As to denial of the award for loss of income, YES. The court a quo
correctly denied for lack of factual basis the claim of the victim’s mother
for an award for loss of income or earning capacity of the deceased
estimated by her at P600 per day or P15,600.00 a month or
P187,200.00 a year. This handwritten estimate of the deceased’s daily
income as a self- employed fish vendor during the past eight years prior
to her death submitted by the victim’s mother in the course of her
testimony in court is not supported by competent evidence like income
tax returns or receipts. It bears stress that compensation for lost income
is in the nature of damages and as such requires due proof of the
damages suffered; there must be unbiased proof of the deceased’s
average income. In the instant case the victim’s mother gave only a self-
serving hence unreliable statement of her deceased daughter’s income.
Moreover, the award for lost income refers to the net income of the
deceased, that is, her total income less her average expenses. No proof
of the victim’s average expenses was presented. Hence, there can be
no reliable estimate of the deceased’s lost income.

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

PEOPLE vs. DE GUZMAN

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

Facts: Accused Renato de Guzman, et al. were found guilty by the

RTC of Baguio City of the crime of robbery with homicide committed
against the person of Dr. Amadeo Belmonte and the house helper
Teresa Hape. On the civil aspect, they were ordered to restore or pay
the value of the stolen properties, to indemnify P50,000.00 each victim in
accordance with Art. 2206, NCC; P46,200,000.00 representing the lost
earnings of Dr. Belmonte for 25 years since he was only 35 years old
when killed and the life expectancy of an average Filipino is 60 years
old, P274,809 representing actual and compensatory damages,
P1,000,000 as moral damages and P100,000.00 as exemplary damages
to the heirs of Dr. Belmonte; and P100,000.00 exemplary damages to
the heirs of Hape.

Issue: Is the award of damages proper and correct under the

circumstances?

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

Net Life expectancy Gross Living

Earning = [(2/3) (80-35)] x annual _
expenses
Capacity at death income (GAI ) ( 50% of GAI)
=[(2/3) (80-35)] x P2,088,000.00 –
P1,044.000.00
=[(2/3) (45)] x P1,044,000.00
= 30 x P1,044,000.00
=P31,320,000.00

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

As regards the award for actual damages the same is reduced
from P274,809 to P113,709.75 since this is the amount that was proved
and duly receipted.
The award for moral damages to the legal heirs of Dr. Belmonte is
likewise reduced to P50,000.00 in line with prevailing jurisprudence.
The lower court should have awarded moral damages for the killing of
Teresa Hape considering its finding that aggravating circumstances
attended the robbery-killing, in accordance with Art. 2230 of the Civil
Code. Thus, the award of P50,000.00 as moral damages is warranted
under the circumstances. Likewise the award for exemplary damages is
reduced to P20,000.00 each for the heirs of Dr. Belmonte and Teresa
Hape.
 PEOPLE vs. MENDIONA
G.R. No. 129056, Feb. 21, 2000

Facts: Accused Liberato Mendiona was convicted of the crime of

rape, and sentenced to suffer the supreme penalty of death. He was
also ordered to pay the offended party, Maricel Capongcol, the amount
of P50,000.00 as moral damages.

Issue: Should the P50,000.00 awarded to the offended party be

classified as moral damages?

Held: NO. We correct the trial court’s erroneous classification of the

award of P50,000.00 as moral damages. The award authorized by
criminal law as civil indemnity (ex delicto) for the offended party is
mandatory upon the finding of the fact of rape; it is distinct from and
should not be denominated as moral damages which are based on
different jural foundation and assessed by the court in the exercise of
sound discretion. Further, our more recent rulings hold that the
indemnification for the victim shall be in the increased amount of
P75,000.00 if the crime of rape is committed or effectively qualified by
any of the circumstances under which the death penalty is authorized by
law. Applying the foregoing ruling, the civil indemnity to be awarded to
the complainant is P75,000.00.

CALALAS vs. COURT OF APPEALS

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

Facts: On the way to Poblacion Sibulan, Negros Occidental, petitioner

Vicente Calalas’ passenger jeepney was bumped by an Isuzu truck.
Private respondent Eliza Sunga, a passenger in the jeepney sustained
injuries. Eliza filed a complaint for damages against Vicente based on
breach of contract of carriage by the latter in failing to exercise the
diligence required of him as a common carrier. Vicente was adjudged
liable for damages to Eliza, including P50,000 as moral damages.

Issue: Is the award of moral damages proper?

Held: NO. As a general rule, moral damages are not recoverable in

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

PEOPLE vs. MAGAT

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

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

Issue: Is the award of damages proper?

Held: The sum awarded as compensatory damages should be

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

PEOPLE vs. BAUTISTA

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

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

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

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

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

PEOPLE VS. PASCUAL

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

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

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

Held: In view of the death of the victim, Dr. Maximino Picio, Jr., his
forced heirs are entitled to P50,000.00 representing civil indemnity ex
delicto. They are also entitled to P50,000.00 by way of moral damages
inasmuch as the widow of the victim, Rosalinda Picio, testified on how
she felt over the loss of her husband. Additionally, the accused is liable
to pay to the heirs of the victim damages for loss of earning capacity of
the deceased. However, actual damages may not be awarded in view of
the absence of competent evidence to support the same.
It appears that Dr. Picio was 64 years old at the time of his death
on March 14, 1995. Her widow testified that he used to receive a
monthly salary of P13,000.00 as Municipal Health Officer of San Manuel,
Isabela. In accordance with the American Expectancy Table of Mortality
which was adopted by the Court, the loss of earning capacity shall be
computed as follows:
Net Earning Capacity (X) = Life Expectancy x (Gross Annual Income –
Living Expenses e.g. 50% of annual gross income)
= 2 (80-64) x (156,000.00-78,000.00)
————
3
= 10.667 x 78,000.00
= P832,026.00

OROSA vs. COURT OF APPEALS

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

Facts: Petitioner Jose Orosa purchased a Ford Sedan on installment

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

Issue: Is Orosa entitled to moral damages, exemplary damages, and

attorney’s fees?

Held: NO. Orosa’s claim must be denied. As to the matter of moral

damages, the law clearly states that one may only recover moral
damages if they are the proximate result of the other party’s wrongful act
or omission. Two elements are required. First, the act or omission must
be the proximate result of the physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock,
social humiliation and similar injury. Second, the act must be wrongful.
According to Orosa, the car subject of this case was being used by
his daughter, married to Jose Concepcion III, a scion of a prominent
family. He maintains that when the complaint was filed against him, he
suffered untold embarrassment as he had to explain the suit to his
daughter’s in-laws. However, that could have been avoided had he not
assigned the car to his daughter and had he been faithful and prompt in
paying the installments required. Orosa brought the situation upon
himself and cannot now complain that FMSC is liable for the mental
anguish and humiliation he suffered. Further, FMSC brought the
complaint only to exercise a legal right, believing that it had a meritorious
cause of action clearly borne out by a mere perusal of the promissory
note and chattel mortgage. The rule has always been that moral
damages cannot be recovered from a person who has filed a complaint
against another in good faith.
Anent the award of exemplary damages, jurisprudence provides that
where a party is not entitled to actual or moral damages, an award of
exemplary damages is likewise baseless.
In the matter of attorney’s fees, it should likewise be denied. No
premium should be placed on the right to litigate and not every winning
party is entitled to an automatic grant of attorney’s fees. The party must
show that he falls under one of the instances enumerated in Article 2208
of the Civil Code. This, Orosa failed to do. Furthermore, where the
award of moral and exemplary damages is eliminated, so must the
award for attorney’s fees be deleted.

PEOPLE vs. CABANDE

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

Facts: Vicente Trinidad and Victor Trinidad and accused Cabande,

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

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

Held: In line with current jurisprudence, we affirm the award of

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

BAÑAS, JR. vs. COURT OF APPEALS

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

Facts: A sale of land and nonpayment of income tax thereon resulted

to the filing by BIR Regional Director Aquilino Larin of a criminal
complaint for tax evasion against petitioner Banas. Such filing of the
case against him was publicized in several newspapers. Reacting to
the complaint for tax evasion and the news reports, Banas filed with the
RTC of Manila an action for damages against respondents Larin, et al.
for extortion and malicious publication of the BIR's tax audit report. He
claimed that the filing of criminal complaints against him for violation of
tax laws were improper because he had already availed of the tax
amnesty laws.
The trial court decided in favor of the respondents and awarded
Larin P200,000.00 as actual damages.

Issue: Is the award of damages to Larin proper?

Held: NO. Any person who seeks to be awarded actual or

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

PEOPLE vs. ALAGON

G.R. Nos. 126536-37, February 10, 2000
Facts: The RTC of Pasig City found accused Alagon and Rafael guilty
of two counts of murder for the death of Magno and Barcelona and
ordered them to pay actual, moral and exemplary damages, as well as
indemnity for the deaths to the heirs of the two victims.

Issue: Is the award of damages and indemnity proper and correct

under the circumstances?

Held: As to actual damages, NO. We cannot sustain the award of

actual damages in favor of the heirs of Magno for failure to substantiate
the bare assertion of the widow with other corroborative evidence. The
Court can only grant such amount for expenses if they are supported by
receipts. In the absence thereof, no award for actual damages can be
granted. For the same reason, the award of actual damages to the heirs
of Isidro Barcelona should be reduced as the amount duly supported by
documentary evidence.
As to the award of P50,000.00 each to the heirs of the victims as
indemnity for the deaths of Magno and Barcelona, YES. We affirm such
award as this is in accord with prevailing jurisprudence.
As to moral and exemplary damages, NO. The trial court erred in
awarding to the heirs of the two victims lump sums of P100,000.00 each
for moral and exemplary damages. These are separate in nature and
require separate determination. Considering that the heirs of the victims
asked for it and testified that they experienced moral suffering, moral
damages in the amount of P50,000.00 is awarded to the heirs of the
victims to compensate them for the injuries to their feelings. The award
for exemplary damages must be deleted, considering the crime was
committed without any other aggravating circumstances.
Finally, we must also add the award for loss of earning capacity.
The sister of the deceasedBarcelona testified that the victim was earning
P145.00 a day or P4,350.00 per month and the records reveal that he
was 27 years old at the time of his death. On the other hand, it was
established that Magno was 31 years old at the time of his death and
earning P4,500.00 per month.

PEOPLE vs. DANDO

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

Facts: The RTC of Laguna found accused PO3 Apolinar Dando guilty
of murder for the killing of Cesar Castro and awarded to the heirs of the
victims civil indemnity for the death of Castro, reimbursement for actual
expenses incurred for the wake and burial, as well as indemnity for loss
of earning capacity in the amount of P1,620,000.00.

Issue: Is the award of damages and indemnity proper and correct

under the circumstances?

Held: As to the amount of P50,000 as indemnity for the death for

Castro, YES. Said amount is awarded, without need of further proof
other than the death of the victim. In addition, the heirs are also entitled
to receive a compensation for the loss of earning capacity of the victim.
The formula for computing the same as established in decided cases is
as follows:
Gross Necessary
Net Earning = Life x Annual - Living
Capacity Expectancy Income Expenses
The life expectancy is equivalent to two thirds (2/3) multiplied by
the difference of 80 and the age of the deceased. Since Castro was 47
years old at the time of his death, his life expectancy was 22 more
years. Celso, Castro’s son, testified that his father earned P3,000.00
monthly or P36,000.00 annually from the sash factory. In addition, the
victim's annual income from farming as found by the trial court was
P53,000.00. The gross annual income of the deceased was P89,000.00.
Allowing for necessary living expenses of fifty percent (50%) of his gross
earnings, his total net earning capacity amounts to P979,000.00. 39
As to the expenses actually incurred by the family of the victim for
the wake and burial, Celso was able to prove during trial that they
incurred the sum of P39,974.00. The amount of P35,974.00 awarded by
the trial court as reimbursement of funeral expenses is, accordingly,
increased to P39,974.00.

Attorney’s Fees in the Concept of Damages

INDUSTRIAL INSURANCE COMPANY vs. BONDAD

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

Facts: The present Petition finds its roots in an incident which

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

Issue: May attorney’s fees and other litigation expenses be awarded

if one who claims it is compelled to litigate with third persons?

Held: YES. Attorney's fees may be awarded if one who claims it is

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

LIABILITY FOR DAMAGES IN ACTION BASED ON MALICIOUS

PROSECUTION

BAYANI vs. PANAY ELECTRIC CO.

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

Facts: In March 1996, Panay Electric Company, Inc. (PECO)

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

Issue: Is the action for malicious prosecution premature?

Held: YES. The requisites for an action for damages based on

malicious prosecution are: (1) the fact of the prosecution and the further
fact that the defendant was himself the prosecutor, and that the action
was finally terminated with an acquittal; (2) that in bringing the action,
the prosecutor acted without probable cause; and (3) the prosecutor was
actuated or impelled by legal malice. Considering the facts in this case,
we agree with the appellate court that one of the elements for an action
based on malicious prosecution, the element of final termination of the
action resulting in an acquittal, was absent at the time petitioner filed civil
case. The records show that petitioner's action for injunction and
damages was filed on October 10, 1996, whereas the Secretary of
Justice dismissed with finality PECO's criminal complaints against herein
petitioner only on March 4, 1998. Hence, the civil case for malicious
prosecution was prematurely filed.

VILLANUEVA vs. UNITED COCONUT PLANTERS BANK

G.R. No. 138291, March 7, 2000
Facts: Herminigildo Villanueva, father of the petitioner, applied for
and was granted a loan by UCPB which at the time was managed by
Bobby Café. In the course of the bank audit, certain fraud, anomalies
and irregularities were discovered in the application, processing and
quantity of said amount which prompted UCPB to conduct investigation
on the matter. UCPB filed criminal complaints which resulted to the
acquittal of the defendants. In view of the acquittal, Hector Villanueva
filed an action for damages on the ground of alleged malicious
prosecution with RTC. In its answer, UCPB denied the allegation in the
complaint and asserted that there is no cause of action since the filling of
the criminal complaint was not tainted with malice.

Issue: Is UCPB liable for damages?

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

Recovery of Damages in Negligent Acts

CALALAS vs. COURT OF APPEALS

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

Facts: On the way to Poblacion Sibulan, Negros Occidental,

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

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

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

Negligence; Easement

REMMAN ENTERPRISES vs. COURT OF APPEALS

G. R. No. 125018, April 6, 2000

Facts: Petitioner REMMAN Enterprises, Inc. (REMMAN) and private

respondent Crispin Lat are owners of adjoining lots. Lat’s land is
agricultural and planted mostly with fruit tress, while REMMAN devotes
its land to its piggery business. REMMAN’s land is 1½ meters higher in
elevation than that of respondent Lat. Sometime in July 1984, Lat
noticed that REMMAN’s waste disposal lagoon was already overflowing
and inundating his plantation. He made several representations with
REMMAN but the latter fell on deaf ears. On March 14, 1985, after
almost one hectare of Lat’s plantation was already inundated with ankle-
deep water containing pig manure, as a result of which trees growing on
the flooded portion started to wither and die, Lat filed a complaint for
damages with preliminary mandatory injunction against REMMAN.
REMMAN denied the allegations and argued that additional measures
such as the construction of additional lagoons were already adopted to
contain the waste water coming from its piggery to prevent any damage
to the adjoining estates.
The trial court held REMMAN liable for damages. In this petition,
REMMAN contends that its negligence and liability for damages were
not sufficiently established. It also raises the defense of fortuitous event
(heavy rains) which caused the inundation of Lat’s plantation, and the
supposed natural easement imposed upon Lat’s property.

Issue: Is REMMAN negligent and should be held liable for damages?

Held: YES. REMMAN’s negligence was clearly established. Lat’s

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

Rule Against Double Recovery in Negligence Cases

RAFAEL REYES TRUCKING CORPORATION vs. PEOPLE

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

Facts: Petitioner Rafael Reyes Trucking Corporation is a domestic

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

Issue: May petitioner be held subsidiarily liable for the damages

awarded to the offended parties in the criminal action against the
accused despite the filing of a separate civil action against said
petitioner?

Held: NO. Petitioner cannot be held subsidiarily liable. In negligence

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

Liability of an Educational Institution

UNIVERSITY OF THE EAST V. JADER
G.R. NO. 132344, February 17, 2000

Facts: Respondent was enrolled in the plaintiff’sCollege of Law. In the

first semester of his senior year, he failed to take the regular final
examination inPractice Court I for which he was given an incomplete
grade. He enrolled for the second semester as senior student and on
February 1, 1988 he filed an application for the removal of the
incomplete grade given by Professor Carlos Ortega which was approved
by Dean Tiongson after payment of the required fee. He took the
examination on March 28, 1988. On May 30, 1988, Professor Ortega
flunked the respondent.

The respondent’s name appeared in the Tentative List of

Candidates for graduation. The respondent attended the investiture
ceremonies.

Respondent thereafter prepared himself for the bar examination. He

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

Issues: 1. May an educational institution be held liable for damages for

misleading a student into believing that the latter had satisfied all the
requirements for graduation?
2. May he be awarded moral damages?

Held: 1. Yes. It is the contractual obligation of the school to timely

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

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

VI. LAND TITLES AND DEEDS/AGRICULTURAL TENANCY LAWS

Registration of Land Under the TorrensSystem

DBP vs. COURT OF APPEALS

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

Facts: The land in dispute consisting of 19.4 hectares was originally

owned by Ulpiano Mumar, whose ownership since 1917 was evidenced
by Tax Declaration No. 3840. In 1950, Mumar sold the land to
respondent Cajes who was issued Tax Declaration No. R-1475 that
same year. Cajes occupied and cultivated the said land. In 1969,
unknown to Cajes, Jose Alvarez succeeded in obtaining the registration
of a parcel of land with an area of 1,512, 468.00 square meters, in his
name for which he was issued OCT No. 546 on June 16, 1969. The
parcel of land included the 19.4 hectares occupied by respondent.
Alvarez never occupied nor introduced improvements on said land.
In 1972, Alvarez sold the land to the spouses Gaudencio and Rosario
Beduya to whom TCT No. 10101 was issued. That same year, the
spouses Beduya obtained a loan from petitioner DBP for P526,000.00
and, as security, mortgaged the land covered by TCT No. 10101 to the
bank. In 1978, the SAAD Investment Corp., and the SAAD Agro-
Industries, Inc., represented by Gaudencio Beduya, and the spouses
Beduya personally executed another mortgage over the land in favor of
DBP to secure a loan of P1,430,000.00. The spouses Beduya later
failed to pay their loans, as a result of which, the mortgage on the
property was foreclosed and sold to DBP as the highest bidder. As the
spouses Beduya failed to redeem the property, DBP consolidated its
ownership. It appears that Cajes had also applied for a loan from DBP
in 1978, offering his 19.4 hectare property under Tax Declaration No. D-
2247 as security for the loan. Cajes’ loan application was later approved.
However, it was found that the land mortgaged by Cajes was included in
the land covered by TCT No. 10101 in the name of the spouses Beduya.
DBP, therefore, cancelled the loan and demanded immediate payment
of the amount. Cajes paid the loan to DBP for which the former was
issued a Cancellation of Mortgage releasing the property in question
from encumbrance. DBP asked Cajes to vacate the property. As the
latter refused to do so, DBP filed a complaint for recovery of possession
with damages against him. The RTC of Tagbilaran City declared DBP
the lawful owner of the entire land covered by TCT No. 10101 on the
ground that the decree of registration was binding upon the land.

Issue: Is registration of land under the Torrens System a mode of

acquiring ownership over an immovable?

Held: NO. Registration has never been a mode of acquiring

ownership over an immovable property. The purpose of the Land
Registration Act is not to create or vest title but to confirm and register
already created and already vested.

Proof required in land registration proceedings

MARIANO TURQUESA, ET AL. vs. ROSARIOVALERA

G.R. No. 76371 January 20, 2000

Facts: More than half a century ago, private respondent Rosario

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

Issue: Is private respondent Rosario Valera properly entitled to a writ

of possession of portions ofLot 1 occupied by Partolan and Baltar?

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

SANTIAGO vs. COURT OF APPEALS

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

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

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

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

Grant of Title/Confirmation of Imperfect Title on Lands

BRACEWELL vs. COURT OF APPEALS

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

Facts: In 1908, Maria Cailles acquired certain parcels of land in Las

Pinas, Metro Manila. In 1961, Cailles sold the same to her son,
petitioner James Bracewell, Jr. In 1963, Bracewell filed before the CFI
an action for confirmation of imperfect title under Sec 48(b) of CA No.
141. The Solicitor General opposed petitioner’s application on the
grounds that neither he nor his predecessors-in-interest possessed
sufficient title to the subject land nor have they been in open,
continuous, exclusive and notorious possession and occupation of the
same for at least thirty (30) years prior to the application, and that the
subject parcels of land were only classified as alienable or disposable on
March 27, 1972.

Issue: Are the lands in question alienable or disposable at the time of

the application for confirmation of imperfect title?

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

Remedies Available to Aggrieved Party in Registration

Proceedings

HEIRS OF PEDRO LOPEZ vs. DE CASTRO

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

Facts: Two applications for registration of the same parcel of land

were filed 12 years apart in different branches of the same CFI, but a
certificate of title was issued in one case while the other is still pending
appeal. The first application was filed in 1956 by Pedro Lopez, et. al.
with Branch III of the CFI ofCavite. An order for the issuance of decree
for registration was promulgated which became final in 1980. The
second application was filed by private respondents Honesto de Castro,
et. al. in 1967 before Branch IV of the same CFI in Tagaytay City. In
1981, the certificate of title in favor of the De Castro’s were discovered in
the course of the examination of the records for the purpose of the
issuance of the decree of registration in favor of Lopez, et. al.
Consequently, the trial court declared that it has lost jurisdiction over the
registration proceedings in view of the title issued by the Tagaytay
Branch in favor of the De Castros over the same land.
Seven (7) years later, or in 1988, the heirs of Pedro Lopez, et al.
filed a complaint for execution of judgment and cancellation of land titles
of De Castro, et. al. before the RTC of Cavite at Tagaytay City. They
alleged that the Tagaytay Branch could not have acquired jurisdiction
over the registration proceeding as the res is already within the
jurisdiction of the Cavite Branch. De Castro, et. al. interposed the
defenses of prescription, laches and/or estoppel and failure to state a
cause of action. The complaint was denied. On appeal, the CA
stressing the indefeasibility of title under the Torrens System of land
registration, echoed the lower court's ruling that the decree of
registration in favor of respondents cannot be reopened or set aside in a
"collateral proceeding such as the one in the case at bar which has for
its objective the execution of a judgment which apparently has become
dormant."

Issue: Should the Torrens Certificate of Title issued in favor of De

Castro be nullified?

Held: NO. First, the Court is not persuaded that the registration
proceedings instituted by De Castro, et. al. should be nullified by reason
of the fact that theCavite City branch of the same court was already
proceeding with another registration case for the same piece of land. In
land registration proceedings, the rule is that whoever first acquires title
to a piece of land shall prevail. This rule refers to the date of the
certificate of title and not to the date of filing of the application for
registration of title. Hence, even though an applicant precedes another,
he may not be deemed to have priority of right to register title. As such,
while his application is being processed, an applicant is duty-bound to
observe vigilance and to take care that his right or interest is duly
protected.
Second, Lopez, et. al. failed to exercise the due diligence required of
them as applicants for land registration. They let almost 7 years to pass
from discovery of the registration of the land in favor of De Castro, et. al.
before they acted to revive what already was a dormant judgment. They
were guilty of laches as they neglected or omitted to assert a right within
a reasonable time. An applicant for registration has but a one-year
period from the issuance of the decree of registration in favor of another
applicant, within which to question the validity of the certificate of title
issued pursuant to such decree. Once the one-year period has lapsed,
the title to the land becomes indefeasible. However the aggrieved party
is without a remedy at law. If the property has not yet passed to an
innocent purchaser for value, an action for reconveyance is still
available. If the property has passed into the hands of an innocent
purchaser for value, the remedy is an action for damages against those
who employed the fraud, and if the latter are insolvent, an action against
the Treasurer of thePhilippines for recovery against the Assurance
Fund. Recognizing the futility of these actions, aggrieved applicants
sought protection under the provisions of the Rules of Court by an action
for revival and execution of judgment. However, the provisions of the
Rules are merely suppletory to special laws governing land registration
proceedings and hence, cannot prevail over the latter.

GRANT/TRANSFER OF FRIAR LANDS

DELA TORRE vs. COURT OF APPEALS

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

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

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

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

ROBLES vs. COURT OF APPEALS

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

Facts: The property subject of this case is originally owned by Leon

Robles. When he died, it passed to his son Silvino who declared the
property in his name and paid the taxes thereon. Upon the latter’s
death, his widow and children inherited the property. Petitioners Lucio
Robles, et al. were the children of Silvino, and Hilario Robles is their half-
brother. The task of cultivating was assigned to Lucio while the payment
of the land taxes was entrusted to Hilario. For unknown reason, the tax
declaration of the parcel of land in the name of Silvino was cancelled
and transferred to Exequiel Ballena. Ballena secured a loan from
Antipolo Rural Bank using the tax declaration as security. Somehow the
tax declaration was transferred to the name of Antipolo Rural Bank and
later was transferred to the name of respondent- spouses Hilario and
Andrea Robles. Andrea secured a loan from Cardona Rural Bank using
the tax declaration as security. For failure to pay the mortgage debt, the
property was foreclosed with Cardona Rural Bank emerging as the
highest bidder. The bank sold the property to spouses Vergel and Ruth
Santos. In 1988, the spouses Santos took possession of the property
and was able to secure a Free Patent. Petitioners then filed an action
for quieting of title.

Issue: Is the free patent issued to the spousesSantos valid?

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

LIM vs. COURT OF APPEALS

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

Facts: Petitioner Rufina Lim is the surviving spouse of the late

Pastor Lim whose estate is the subject of estate proceedings. Private
respondents Auto Truck Corp., et al. are domestic corporations which
owned real properties covered under theTorrens system. These
properties were included in the inventory of the estate of Pastor.
Respondent corporations filed a motion for the lifting of the lis pendens
and the exclusion of said properties from the estate of the decedent.
Rufina, on the other hand, argued that said properties must be included
because the assets, capital, and equity of respondent corporations are
personally owned by Pastor.

Issue: Should the properties in question be included in the inventory

of the estate of Pastor?

Held: NO. If a property covered by Torrens title is involved, the

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

Tenancy

BAUTISTA vs. ARANETA

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

Facts: In 1978, petitioner Bayani Bautista allegedly entered into an

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

Issue: Is respondent Patricia Araneta bound by the alleged oral

leasehold agreement between Bayani and Gregorio Araneta II?

Held: NO. The requisites of a tenancy relationship are: (1) the

parties are the landowner and the tenant; (2) the subject is agricultural
land; (3) there is consent by the landowner; (4) there is personal
cultivation; and (5) there is sharing of harvest. Bayani is not a tenant of
the disputed land. Bayani admitted in his own testimony that he does
not even know the landowner as he was not introduced to the same.
Further, Bayani did not establish that Gregorio, whom he has known and
believed as the owner of the land, became or was ever, the landowner.
Since he hinges his right on his alleged agreement with Gregorio, it
follows that his position is untenable since it was never shown that
Gregorio has a right on the landholding. In Lastimosa vs. Blanco, the
SC has ruled that ‘tenancy relationship can only be created with the
consent of the true and lawful landholder who is either the owner,
lessee, usufructuary or legal possessor of the land, and not thru the acts
of the supposed landholder who has no right to the land subject of the
tenancy.’
 RUPA, SR. vs. COURT OF APPEALS
G.R. No. 80129, January 25, 2000

Facts: Claiming that he was the agricultural share tenant and

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

Issue: Is Rupa a share tenant so as to be entitled to the right of

redemption?

Held: YES. A tenant is defined under Section 5 (a) of Republic Act

No. 1199 as a person who himself and with the aid available from within
his immediate farm household cultivates the land belonging to or
possessed by another, with the latter's consent, for purposes of
production, sharing the produce with the landholder under the share
tenancy system, or paying to the landholder a price certain or
ascertainable in produce or in money or both under the leasehold
tenancy system. Briefly stated, for this relationship to exist, it is
necessary that:
1. The parties are the landowner and the tenant;
2. The subject is agricultural land;
3. There is consent;
4. The purpose is agricultural production;
5. There is personal cultivation; and
6. There is sharing of harvests.
Upon proof of the existence of the tenancy relationship, Rupa
could avail of the right of redemption under RA 3844. This right of
redemption is validly exercised upon compliance with the following
requirements: a) the redemptioner must be an agricultural lessee or
share tenant; b) the land must have been sold by the owner to a third
party without prior written notice of the sale given to the lessee or
lessees and the DAR in accordance with Sec. 11, RA 3844, as
amended; c) only the area cultivated by the agricultural lessee may be
redeemed; d) the right of redemption must be exercised within 180 days
from notice; and e) there must be an actual tender or valid consignation
of the entire amount which is the reasonable price of the land sought to
be redeemed.
The statements of Rupa in the criminal case that he is an
“administrator” of the landowners are not sufficient basis to overcome
the rights of the petitioner as provided in the Constitution and Agrarian
statutes. The essence of agricultural tenancy lies in the establishment of
owner-cultivatorship and the economic family-size farm as the basis of
Philippine agriculture, and as a consequence, divert landlord capital in
agriculture to industrial development. Rupa’s evidence to prove the
tenancy relationship consisted of his own testimony and those of his
witnesses from whose declarations it appears that the petitioner has
physically possessed the landholding continuously until he was ejected
from it. Rupa lives on the landholding and he has built a house next to
the copra kiln. It has also been established that Rupa has cultivated the
land from the time he has taken possession thereof, although there may
have already been existing coconut trees in the landholding. The fact
that Rupa has been planting coconut seedlings and minor crops in the
vacant portions of the subject land as well as cleaning and gathering
coconuts to process them into copra is borne out by the records. Further
indicating the tenancy relationship between the landlord and Rupa is
their agreement to share 50/50. The sharing arrangement taken together
with other factors characteristic of tenancy shown to be present in the
case at bar, strengthens the claim of Rupa that indeed, he is a tenant.

PHILBANCOR FINANCE vs. COURT OF APPEALS

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

Facts: Petitioner Vicente Hizon, Jr. is the owner of agricultural lands

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

Issue: Can the private respondents maintain their possession of the

subject lands?

Held: YES. Private respondents may continue in possession and

enjoyment of the land in question as legitimate tenants because the
right of tenancy attaches to the landholding by operation of law. The
leasehold relation is not extinguished by the alienation or transfer of the
legal possession of the landholding.

GREENFIELD REALTY CORP. vs. CARDAMA

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

Facts: Private respondents Loreto Cardama, et al. claim to have

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

Issue: Are the private respondents bona fide tenants of the subject
irrigated rice land?

Held: YES. The DARAB ruled that Loreto, et al. cannot

simultaneously claim the right to succeed since RA 3844 allows only one
heir to succeed to the tenancy of the deceased tenant in the order of
preference prescribed by Section 9 of the said law. In this case
however, the land is not cultivated by Hermogenes alone but with other
tenants who are likewise qualified and who are related to him. Thus, it
can be said that the entitlement of the other possessors is not by virtue
of succession to the rights of a predecessor-in-interest, but in their
individual capacity as tenants therein simultaneously with an ascendant.
 It is to be noted that the land herein involved is more than 10 hectares
which cannot be personally cultivated by Hermogenes alone.
Under Section 22 of RA 6657, the Comprehensive Agrarian
Reform Law, those entitled to the award of the land are: “Section 22.
Qualified Beneficiaries – the lands covered by the CARP shall be
distributed as much as possible to landless residents of the same
barangay or in the absence thereof, landless residents of the same
municipality in the following order of priority:
h.) agricultural lessees and share tenants
i.) regular farm workers
j.) seasonal farmworkers
k.) other farmworkers
l.) actual tillers or occupants of public lands
m.) collective or cooperatives of the above beneficiaries
n.) others directly working on the land
Being the agricultural lessees on the land, Loreto et al. are qualified
beneficiaries
absent any showing that they have been validly ejected or removed
therefrom.

Preferential Rights of Tenants under P.D. 1517

DEE v. COURT OF APPEALS

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

Facts: Petitioners are occupants of the lands that belonged to

Alejandro Castro. Upon Castro’s death, his wife and son sold the lands
for P500 per square meter to Cesar Gatdula, a tenant of the land.
Pending the transfer of the titles, Gatdula offered to sell the disputed lots
at P3,000 per square meter to each of the petitioners who were
occupants of the lands.. Petitioners did not buy at the price offered. They
filed a complaint against Gatdula for the exercise of their preferential
right to purchase the lands under Sec.6 of P.D. 1517, which grants pre-
emptive rights to (1) legitimate tenants who have resided on the land for
ten years or more who have built their homes on the land and (2)
residents who have legally occupied the land by contract, continuously
for the last ten years.

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

Jurisdictional Requirements for Reconstitution of Title

HEIRS OF EULALIO RAGUA vs. COURT OF APPEALS

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

Facts: A petition for reconstitution of title was filed by Eulalio Ragua in

1964 covering 439 hectares of land situated in QC. He averred that the
owner’s duplicate of the OCT was lost and destroyed in 1945 when his
personal effects and papers were eaten by termites. The petition was
opposed by several parties contending that there was failure to comply
with the jurisdictional requirements for judicial reconstitution under RA 26
Sec. 12 & 13. The lower court ordered the Register of Deeds to
reconstitute in the name of Eulalio. However, the CA reversed the
decision, holding that the TC had no jurisdiction because of Eulalio’s
failure to comply with the requirements of the said law and that the
latter’s action is also barred by laches.

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

Held: Petitioners admittedly did not comply with the requirements of

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

Posted by James Mamba at 12:38 AM